[Federal Register Volume 71, Number 151 (Monday, August 7, 2006)]
[Proposed Rules]
[Pages 44860-44864]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 06-6702]



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Part IV





Department of Housing and Urban Development





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24 CFR Parts 91 and 570



Proposed Timeliness Expenditure Standards for the Insular Areas 
Program; Proposed Rule

  Federal Register / Vol. 71, No. 151 / Monday, August 7, 2006 / 
Proposed Rules  

[[Page 44860]]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Parts 91 and 570

[Docket No. FR-5012-P-01]
RIN 2501-AD15


Proposed Timeliness Expenditure Standards for the Insular Areas 
Program

AGENCY: Office of the Assistant Secretary for Community Planning and 
Development, HUD.

ACTION: Proposed rule.

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SUMMARY: This proposed rule would implement a regulatory timeliness 
standard for the Insular Areas Program, as established by the Housing 
and Community Development Act of 1974 (HCD Act). This proposed rule 
follows publication of a February 22, 2005, final rule implementing a 
2003 amendment to the HCD Act. This amendment moved the Community 
Development Block Grant (CDBG) program assistance for Insular Areas 
from section 107 to section 106 of the HCD Act. The expenditure 
standards proposed ensure that grantees carry out their programs in a 
timely manner. These standards take into consideration and reflect the 
unique circumstances faced by Insular Areas in their ability to expend 
CDBG allocations. This proposed rule would also establish provisions 
for the distribution of assistance made available either as a result of 
reductions or if an Insular Area fails to submit a final statement for 
CDBG funds. This proposed rule also makes technical and conforming 
changes to the Insular Areas Program.

DATES: Comment Due Date: October 6, 2006.

ADDRESSES: Interested persons are invited to submit comments regarding 
this proposed rule to the Office of the General Counsel, Rules Docket 
Clerk, Department of Housing and Urban Development, 451 Seventh Street, 
SW., Room 10276, Washington, DC 20410-0001. Communications should refer 
to the above docket number and title and should contain the information 
specified in the ``Request for Comments'' section.
    Electronic Submission of Comments. Interested persons may submit 
comments electronically through the Federal eRulemaking Portal at 
http://www.regulations.gov. HUD strongly encourages commenters to 
submit comments electronically. Electronic submission of comments 
allows the commenter maximum time to prepare and submit a comment, 
ensures timely receipt by HUD, and enables HUD to make them immediately 
available to the public. Comments submitted electronically through the 
www.regulations.gov Web site can be viewed by other commenters and 
interested members of the public. Commenters should follow the 
instructions provided on that site to submit comments electronically.
    No Facsimile Comments. Facsimile (FAX) comments are not acceptable. 
In all cases, communications must refer to the docket number and title.
    Public Inspection of Public Comments. All comments and 
communications submitted to HUD will be available, without charge, for 
public inspection and copying between 8 a.m. and 5 p.m. weekdays at the 
above address. Due to security measures at the HUD Headquarters 
building, an advance appointment to review the public comments must be 
scheduled by calling the Regulations Division at (202) 708-3055 (this 
is not a toll-free number). Copies of all comments submitted are 
available for inspection and downloading at http://www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: Steve Rhodeside, Senior Program 
Officer, State and Small Cities Division, Office of Block Grant 
Assistance, Office of Community Planning and Development, Department of 
Housing and Urban Development, 451 Seventh Street, SW., Room 7184, 
Washington, DC 20410-7000, telephone (202) 708-1322 (this is not a 
toll-free number). Individuals with speech or hearing impairments may 
access this number through TTY by calling the toll-free Federal 
Information Relay Service at (800) 877-8339.

SUPPLEMENTARY INFORMATION:

I. Background

    The CDBG program authorized by the Housing and Community 
Development Act of 1974 (HCD Act) (42 U.S.C. 5301, et seq.) provides 
flexible funding for communities across the nation, including Insular 
Areas, to develop and implement community and economic development 
strategies that primarily benefit low- and moderate-income individuals.
    Title V of the American Dream Downpayment Act (Pub. L. 108-186, 117 
Stat. 2685, approved December 16, 2003) (Title V) amended the HCD Act, 
moving the Insular Areas funding authorization from section 107(a) (42 
U.S.C. 5307(a)) to section 106(a) (42 U.S.C. 5306(a)). This amendment 
to the HCD Act provided for a specific portion of the CDBG allocation 
to be distributed to Insular Areas, separate from the distribution for 
special purpose grants as well as from the entitlement and state 
formula distribution. The change provides the Insular Areas of Guam, 
the Northern Mariana Islands, the Virgin Islands, and American Samoa 
with greater assurance of annual CDBG program funding. On June 10, 
2004, the Department published interim regulations (69 FR 32774) to 
implement the statutory change. The Department adopted the interim rule 
without change on February 22, 2005 (70 FR 8705).
    The preamble of the June 10, 2004, interim rule stated that ``HUD 
will establish timeliness standards for the Insular Areas Program under 
section 106 by regulation at a later date. Until then, Insular Area 
jurisdictions that will be funded under section 106 are encouraged to 
adopt and achieve the timeliness standards for Sec.  570.902(a) 
currently applicable to entitlement jurisdictions. In the meantime, HUD 
specifically invites comments on the idea of adopting the Sec.  
570.902(a) standards as the Insular Areas Program timeliness standards 
under section 106.'' In response to the interim rule, no comments were 
received concerning timeliness standards.

II. This Proposed Rule

    This proposed rule would establish a new Sec.  570.902(c), which 
would establish the timeliness standards for the Insular Areas Program. 
As of 60 days prior to the conclusion of the Insular Areas' most recent 
program years, the amount of grant funds available but undisbursed was 
3.39 times the amount of American Samoa's most recent grant, 1.63 times 
Guam's most recent grant, 1.63 times the Commonwealth of the Northern 
Mariana Islands' most recent grant, and 2.57 times the Virgin Islands' 
most recent grant. Although there is a clear need to improve the 
expenditure rate for the Insular Areas Program, the Department 
recognizes that Insular Areas Program grantees face unique geographic 
and administrative challenges in implementing their CDBG program. For 
example, due to the islands' remoteness, it takes much longer for 
supplies to reach the Insular Areas than other CDBG grantees. As a 
result, HUD believes that it should set a standard for the Insular 
Areas Program, but that the standard should be less stringent than that 
for the Entitlement Grant Program.
    HUD therefore proposes that the timeliness standard for the Insular 
Areas Program be that 60 days prior to the conclusion of an Insular 
Area's most recent program year, the amount of grant funds available 
but undisbursed

[[Page 44861]]

should be no more than two times the amount of the Insular Areas 
grantee's most recent grant. If the grantee fails to demonstrate to 
HUD's satisfaction that the lack of timeliness has resulted from 
factors beyond the grantee's reasonable control, the grantee shall be 
deemed to be untimely. A grantee that has less than two times its most 
recent grant in its CDBG line of credit 60 days prior to the conclusion 
of its most recent program year shall also be deemed to be untimely if 
the amount of CDBG program income the recipient has on hand 60 days 
prior to the end of the program year, together with the amount of funds 
in its CDBG line of credit, exceeds twice the amount of the grantee's 
most recent grant, unless the grantee is able to demonstrate to HUD's 
satisfaction that the lack of timeliness has resulted from factors 
beyond the grantee's reasonable control. In determining the corrective 
action for untimely expenditure, HUD will consider the likelihood that 
the recipient will expend a sufficient amount of funds over the next 
program year to bring the grantee into compliance with the timeliness 
requirements.
    The first timeliness review under these standards will take place 
60 days prior to the conclusion of the 2006 funding year. As a result, 
the first review would take place on August 2, 2007, for Insular Areas 
that do not change their program year start dates. This will give the 
Insular Areas transition time to adjust to the new policy. In keeping 
with the policy that is used for entitlement grantees, once a grantee 
is deemed to be untimely under the new standard, the grantee will be 
given 12 months, to the grantee's next 60-day test, to reach the 
timeliness standard. Failure to meet the standard may cause HUD to 
reduce the next grant by 100 percent of the amount in excess of twice 
the Insular Area's most recent CDBG grant, unless HUD determines that 
the untimeliness resulted from factors outside of the grantee's 
reasonable control. The earliest that HUD will reduce grants under this 
regulation will be in Fiscal Year (FY) 2008, should an Insular Areas 
grantee be untimely 60 days prior to the conclusion of its FY 2006 and 
2007 program years.
    A new Sec.  570.442 entitled ``Reallocations'' would be added to 
subpart F of part 570. This provision would provide that amounts that 
become available as a result of reductions under subpart O, or as a 
result of an Insular Area not submitting a final statement for CDBG 
funds, shall be reallocated to the remaining eligible Insular Areas on 
a pro rata basis.

III. Technical Corrections

    Subpart O of part 570 would be revised to reference the Insular 
Areas Program in Sec. Sec.  570.900, 570.901, 570.903, 570.910, and 
570.911. This revision would implement the changes enacted by Title V. 
In addition, the reference to Sec.  570.304(d) would be deleted from 
Sec.  570.910(b)(8), since Sec.  570.304(d) was previously removed from 
the regulations (60 FR 56891). In addition, the references to the 
Housing Assistance Plan would be deleted from Sec.  570.900, since the 
Housing Assistance Plan would no longer be required. Section 570.903(d) 
would also be deleted, since the Department is no longer funding new 
Small Cities grants in the State of New York.
    Section 570.600 would be revised to reflect the fact that Sec.  
570.612 does not apply to Insular Areas grants. Section 570.209(b)(2) 
would be revised to have Sec.  570.209(b)(2) apply to Insular Areas by 
program year for all Insular Areas grants that are made from section 
106 of the HCD Act.

IV. Consolidated Plan

    Section 570.440(a) of the interim regulation published on June 10, 
2004, permitted Insular Areas grantees to either submit an abbreviated 
consolidated plan under Sec.  91.235, or a complete consolidated plan 
in accordance with subpart C of part 91 of the regulations. HUD 
specifically requested comments on whether Insular Areas grantees 
should continue to have the choice of submitting an abbreviated 
consolidated plan or whether they should be required to submit a full 
consolidated plan. The Department has received no comments to date on 
this requirement. This proposed rule would revise Sec.  570.903 to 
state that an abbreviated consolidated plan would be considered to be a 
consolidated plan for the purposes of Sec.  570.903. This revision 
would specifically make the section applicable to Insular Areas 
grantees that choose to submit an abbreviated consolidated plan. 
Section 91.235(a) would be revised to permit Insular Areas receiving 
HOME funding to submit abbreviated consolidated plans. Section 
91.235(c)(4) would require Insular Areas that submit an abbreviated 
consolidated plan to follow the Submissions, Certifications, 
Amendments, and Performance Reports requirements of Sec.  570.440. 
Section 91.235(e) would be revised to require Insular Areas submitting 
an abbreviated consolidated plan to follow the citizen participation 
requirements of Sec.  570.441. If submission of a full consolidated 
plan would help a grantee integrate its CDBG, HOME and Emergency 
Shelter Grant programs, the grantee should strongly consider submitting 
a full consolidated plan.

V. Findings and Certifications

Regulatory Planning and Review

    The Office of Management and Budget (OMB) reviewed this rule under 
Executive Order 12866 (entitled ``Regulatory Planning and Review''). 
OMB determined that this rule is a ``significant regulatory action'' as 
defined in section 3(f) of the order (although not an economically 
significant regulatory action, as provided under section 3(f)(1) of the 
order). The docket file is available for public inspection in the 
Regulations Division, Office of General Counsel, Department of Housing 
and Urban Development, 451 Seventh Street, SW., Room 10276, Washington, 
DC 20410-0500. Due to security measures at the HUD Headquarters 
building, please schedule an appointment to review the docket file by 
calling the Regulations Division at (202) 708-3055 (this is not a toll-
free number).

Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (2 U.S.C. 
1531-1538) (UMRA) establishes requirements for federal agencies to 
assess the effects of their regulatory actions on state, local, and 
tribal governments and the private sector. This interim rule does not 
impose any federal mandates on any state, local, or tribal government 
or the private sector within the meaning of UMRA.

Executive Order 13132, Federalism

    Executive Order 13132 (entitled ``Federalism'') prohibits, to the 
extent practicable and permitted by law, an agency from promulgating a 
regulation that has federalism implications and either imposes 
substantial direct compliance costs on state and local governments and 
is not required by statute, or preempts state law, unless the relevant 
requirements of section 6 of the executive order are met. This rule 
does not have federalism implications and does not impose substantial 
direct compliance costs on state and local governments or preempt state 
law within the meaning of the executive order.

Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et seq.) 
generally requires an agency to conduct regulatory flexibility analysis 
of any rule subject to

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notice and comment rulemaking requirements, unless the agency certifies 
that the rule will not have a significant economic impact on a 
substantial number of small entities. This rule will not have a 
significant economic impact on a substantial number of small entities 
for the following reasons. This rule only codifies in HUD's regulations 
procedures that will enable the Department to enforce its timeliness 
policy for the Insular Areas Program. As such, the rule does not 
significantly differ from the current status in terms of the impact on 
the number of entities, the amount of funding, or the governing 
requirements applicable. Therefore, the undersigned certifies that this 
proposed rule will not have a significant economic impact on a 
substantial number of small entities, and an initial regulatory 
flexibility analysis is not required.
    Notwithstanding HUD's determination that this rule will not have a 
significant economic impact on a substantial number of small entities, 
HUD specifically invites comments regarding any less burdensome 
alternatives to this rule that will meet HUD's objectives as described 
in this preamble.

Environmental Impact

    A Finding of No Significant Impact with respect to the environment 
has been made in accordance with HUD regulations at 24 CFR part 50, 
which implement section 102(2)(C) of the National Environmental Policy 
Act of 1969 (42 U.S.C. 4332(2)(C)). The Finding of No Significant 
Impact is available for public inspection between the hours of 8 a.m. 
and 5 p.m. weekdays in the Regulations Division, Office of General 
Counsel, Department of Housing and Urban Development, 451 Seventh 
Street, SW., Room 10276, Washington, DC 20410-0500. Due to security 
measures at the HUD Headquarters building, please schedule an 
appointment to review the finding by calling the Regulations Division 
at (202) 708-3055 (this is not a toll-free number).

Catalog of Federal Domestic Assistance

    The Catalog of Federal Domestic Assistance number for the Insular 
Areas Program is 14.225.

List of Subjects

24 CFR Part 91

    Aged, Grant programs-housing and community development, Homeless, 
Individuals with disabilities, Low and moderate income housing, 
Reporting and recordkeeping requirements.

24 CFR Part 570

    Administrative practice and procedure, American Samoa, Community 
development block grants, Grant programs--education, Grant programs--
housing and community development, Guam, Indians, Lead poisoning, Loan 
programs--housing and community development, Low and moderate income 
housing, New communities, Northern Mariana Islands, Pacific Islands 
Trust Territory, Pockets of poverty, Puerto Rico, Reporting and 
recordkeeping requirements, Small cities, Student aid, Virgin Islands.

    Accordingly, HUD proposes to amend 24 CFR parts 91 and 570 as 
follows:

PART 91--CONSOLIDATED SUBMISSIONS FOR COMMUNITY PLANNING AND 
DEVELOPMENT PROGRAMS

    1. The authority citation for 24 CFR part 91 continues to read as 
follows:

    Authority: 42 U.S.C. 3535(d), 3601-3619, 5301-5315, 11331-11388, 
12701-12711, 12741-12756, and 12901-12912.

    2. In Sec.  91.235 revise paragraphs (a), (b)(3), and (e) and add 
paragraph (c)(4) to read as follows:


Sec.  91.235  Special case; abbreviated consolidated plan.

    (a) Who may submit an abbreviated plan? A jurisdiction that is not 
a CDBG entitlement community under 24 CFR part 570, subpart D, and is 
not expected to be a participating jurisdiction in the HOME program 
under 24 CFR part 92, as well as an Insular Area that is a HOME 
grantee, may submit an abbreviated consolidated plan that is 
appropriate to the types and amounts of assistance sought from HUD, 
instead of a full consolidated plan.
    (b) * * *
    (3) Limitation. For the HOME program, an abbreviated consolidated 
plan is permitted only with respect to reallocations to other than 
participating jurisdictions (see 24 CFR part 92, subpart J), and for 
Insular Areas that submit an abbreviated consolidated plan pursuant to 
24 CFR part 570.440. For the CDBG program, an abbreviated plan may be 
submitted for the HUD-administered Small Cities program (except that an 
abbreviated plan may not be submitted for the HUD-administered Small 
Cities program in the State of Hawaii), and for Insular Areas pursuant 
to 24 CFR 570.440.
    (c) * * *
    (4) Submissions, Certifications, Amendments and Performance 
Reports. An Insular Area that submits an abbreviated consolidated plan 
under this section must comply with the submission, certification 
amendment, and performance report requirements of Sec.  570.440.
* * * * *
    (e) Citizen Participation. An Insular Area that submits an 
abbreviated consolidated plan under this section must comply with the 
citizen participation requirements of Sec.  570.441.
* * * * *

PART 570--COMMUNITY DEVELOPMENT BLOCK GRANTS

    3. The authority citation for 24 CFR part 570 continues to read as 
follows:

    Authority: 42 U.S.C. 3535(d) and 5301-5320.

    4. Revise Sec.  570.209(b)(2)(i) to read as follows:


Sec.  570.209  Guidelines for evaluating and selecting economic 
development projects.

* * * * *
    (b) * * *
    (2) Applying the aggregate standards. (i) A metropolitan city, an 
urban county, or an Insular Area shall apply the aggregate standards 
under paragraph (b)(1) of this section to all applicable activities for 
which CDBG funds are first obligated within each single CDBG program 
year, without regard to the source year of the funds used for the 
activities. For Insular Areas, the preceding sentence applies to grants 
received in program years after Fiscal Year 2004. A grantee under the 
HUD-administered Small Cities program in New York, or Insular Areas 
CDBG programs grants prior to Fiscal Year 2005, shall apply the 
aggregate standards under paragraph (b)(1) of this section to all funds 
obligated for applicable activities from a given grant; program income 
obligated for applicable activities will, for these purposes, be 
aggregated with the most recent open grant. For any time period in 
which a community has no open HUD-administered grant, the aggregate 
standards shall be applied to all applicable activities for which 
program income is obligated during that period.
* * * * *
    5. Add Sec.  570.442 to read as follows:


Sec.  570.442  Reallocations--Insular Areas.

    (a) Any Insular Area funds that become available as a result of 
reductions under subpart O of this part, shall be reallocated in the 
same or future fiscal year to any remaining eligible Insular Areas 
grantees pro rata according to population.
    (b) Any Insular Areas grant funds for a fiscal year reserved for an 
applicant that chooses not to submit a final

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statement in accordance with Sec.  570.440 to receive such funds, shall 
be reallocated in the same or future fiscal year to any remaining 
eligible Insular Areas grantees pro rata according to population.
    (c) No amounts shall be reallocated under this section in any 
fiscal year to any applicant whose grant amount in such fiscal year was 
reduced under subpart O of this part or who did not submit a final 
statement in accordance with Sec.  570.440 for that fiscal year.
    (d) Insular Areas grantees receiving additional funds under this 
section will be evaluated for timeliness under Sec.  570.902 based upon 
the original grant amount plus the additional funds received. 
Accordingly, references in Sec.  570.902 to an Insular Area's grant 
amount for its current program year include such additional funds, and 
references to unexpended or undisbursed funds include such additional 
funds.
    6. Revise Sec.  570.600(a) to read as follows:


Sec.  570.600  General.

    (a) This subpart K enumerates laws that the Secretary will treat as 
applicable to grants made under section 106 of the Act, other than 
grants to States made pursuant to section 106(d) of the Act, for 
purposes of the Secretary's determinations under section 104(e)(1) of 
the Act, including statutes expressly made applicable by the Act and 
certain other statutes and Executive Orders for which the Secretary has 
enforcement responsibility. This subpart K applies to grants made under 
the Insular Areas Program in Sec.  570.405 and Sec.  570.440 with the 
exception of Sec.  570.612. The absence of mention herein of any other 
statute for which the Secretary does not have direct enforcement 
responsibility is not intended to be taken as an indication that, in 
the Secretary's opinion, such statute or Executive Order is not 
applicable to activities assisted under the Act. For laws that the 
Secretary will treat as applicable to grants made to States under 
section 106(d) of the Act for purposes of the determination required to 
be made by the Secretary pursuant to section 104(e)(2) of the Act, see 
Sec.  570.487.
* * * * *
    7. In Sec.  570.900, revise paragraphs (a)(1) and (b)(1) to read as 
follows:


Sec.  570.900  General.

    (a) Performance review authorities--(1) Entitlement, Insular Areas, 
and HUD-administered Small Cities performance reviews. Section 
104(e)(1) of the Act requires that the Secretary shall, at least on an 
annual basis, make such reviews and audits as may be necessary or 
appropriate to determine whether the recipient has carried out its 
activities in a timely manner, whether the recipient has carried out 
those activities and its certifications in accordance with the 
requirements and the primary objectives of the Act and with other 
applicable laws, and whether the recipient has a continuing capacity to 
carry out those activities in a timely manner.
* * * * *
    (b) * * *
    (1) The Department will determine the performance of each 
entitlement, Insular Areas, and HUD-administered small cities recipient 
in accordance with section 104(e)(1) of the Act by reviewing for 
compliance with the requirements described in Sec.  570.901 and by 
applying the performance criteria described in Sec. Sec.  570.902 and 
570.903 relative to carrying out activities in a timely manner. The 
review criteria in Sec.  570.904 will be used to assist in determining 
if the recipient's program is being carried out in compliance with 
civil rights requirements.
    8. In Sec.  570.901, revise the introductory paragraph, redesignate 
existing paragraphs (f), (g), and (h), as paragraphs (g), (h), and (i) 
respectively, and add a new paragraph (f) to read as follows:


Sec.  570.901  Review for compliance with the primary and national 
objectives and other program requirements.

    HUD will review each entitlement, Insular Areas, and HUD-
administered small cities recipient's program to determine if the 
recipient has carried out its activities and certifications in 
compliance with:
* * * * *
    (f) For Insular Areas Program grants only, the application and 
amendment requirements at Sec.  570.440, the citizen participation 
requirements at Sec.  570.441, the displacement policy requirements of 
Sec.  570.606, and the lead-based paint requirements of Sec.  35.940;
* * * * *
    9. In Sec.  570.902, revise the introductory paragraph, and add a 
new paragraph (c) to read as follows:


Sec.  570.902  Review to determine if CDBG-funded activities are being 
carried out in a timely manner.

    HUD will review the performance of each entitlement, HUD-
administered small cities, and Insular Areas recipient to determine 
whether each recipient is carrying out its CDBG-assisted activities in 
a timely manner.
* * * * *
    (c) Insular Areas recipients. (1) Before the funding of the next 
annual grant and absent contrary evidence satisfactory to HUD, HUD will 
consider an Insular Areas recipient to be failing to carry out its CDBG 
activities in a timely manner if:
    (i) Sixty days prior to the end of the grantee's current program 
year, the amount of Insular Areas grant funds available to the 
recipient under grant agreements but undisbursed by the U.S. Treasury 
is more than 2.0 times the Insular Area's grant amount for its current 
program year; and
    (ii) The grantee fails to demonstrate to HUD's satisfaction that 
the lack of timeliness has resulted from factors beyond the grantee's 
reasonable control.
    (2) Notwithstanding that the amount of funds in the line of credit 
indicates that the Insular Areas recipient is carrying out its 
activities in a timely manner pursuant to paragraph (c)(1) of this 
section, HUD may determine that the recipient is not carrying out its 
activities in a timely manner if:
    (i) The amount of CDBG program income the recipient has on hand 60 
days prior to the end of its current program year, together with the 
amount of funds in its CDBG line of credit, exceeds 2.0 times the 
Insular Area's grant amount for its current program year; and
    (ii) The grantee fails to demonstrate to HUD's satisfaction that 
the lack of timeliness has resulted from factors beyond the grantee's 
reasonable control.
    (3) In determining the appropriate corrective action to take with 
respect to a HUD determination that a recipient is not carrying out its 
activities in a timely manner pursuant to paragraphs (c)(1) or (c)(2) 
of this section, HUD will consider the likelihood that the recipient 
will expend a sufficient amount of funds over the next program year to 
reduce the amount of unexpended funds to a level that will fall within 
the standard described in paragraphs (c)(1) and (2) of this section 
when HUD next measures the grantee's timeliness performance. For these 
purposes, HUD will take into account the extent to which funds on hand 
have been obligated by the recipient and its sub-recipients for 
specific activities at the time the finding is made and other relevant 
information.
    (4) If a recipient is determined to be untimely pursuant to 
paragraphs (c)(1) or (c)(2) of this section in one year, and the 
recipient is again determined to be untimely in the following year, HUD 
may reduce the recipient's next grant by 100 percent of the amount in 
excess of twice the Insular Area's most recent CDBG grant, unless HUD 
determines that the untimeliness resulted from

[[Page 44864]]

factors outside of the grantee's reasonable control.
    (5) The first review under paragraphs (c)(1) and (c)(2) will take 
place 60 days prior to the conclusion of the Fiscal Year 2006 program 
year.
    10. In Sec.  570.903, revise the introductory paragraph, paragraph 
(a), and remove paragraph (d) to read as follows:


Sec.  570.903  Review to determine if the recipient is meeting its 
consolidated plan responsibilities.

    The consolidated plan, action plan, and amendment submission 
requirements referred to in this section are in 24 CFR part 91. For the 
purpose of this section, the term consolidated plan includes an 
abbreviated consolidated plan that is submitted pursuant to 24 CFR part 
91.235.
    (a) Review timing and purpose. HUD will review the consolidated 
plan performance of each entitlement, Insular Areas, and Hawaii HUD-
administered Small Cities grant recipient prior to acceptance of a 
grant recipient's annual certification under 24 CFR part 91.225(b)(3) 
to determine whether the recipient followed its HUD-approved 
consolidated plan for the most recently completed program year, and 
whether activities assisted with CDBG funds during that period were 
consistent with that consolidated plan, except that grantees are not 
bound by the consolidated plan with respect to the use or distribution 
of CDBG funds to meet non-housing community development needs.
* * * * *
    11. In Sec.  570.910, revise paragraphs (b)(2)(iii) and (b)(8) to 
read as follows:


Sec.  570.910  Corrective and remedial actions.

* * * * *
    (b) * * *
    (2) * * *
    (iii) For entitlement and Insular Areas recipients, canceling or 
revising affected activities that are no longer feasible to implement 
due to the deficiency and re-programming funds from such affected 
activities to other eligible activities (pursuant to the citizen 
participation requirements in 24 CFR part 91); or
* * * * *
    (8) In the case of an entitlement or Insular Areas recipient, 
condition the use of funds from a succeeding fiscal year's allocation 
upon appropriate corrective action by the recipient. The failure of the 
recipient to undertake the actions specified in the condition may 
result in a reduction, pursuant to Sec.  570.911, of the entitlement or 
Insular Areas recipient's annual grant by up to the amount 
conditionally granted.
    12. Revise Sec.  570.911(b) to read as follows:


Sec.  570.911  Reduction, withdrawal, or adjustment of a grant or other 
appropriate action.

* * * * *
    (b) Entitlement and Insular Areas grants. Consistent with the 
procedures described in Sec.  570.900(b), the Secretary may make a 
reduction in the entitlement grant amount either for the succeeding 
program year or, if the grant had been conditioned, up to the amount 
that had been conditioned. The amount of the reduction shall be based 
on the severity of the deficiency and may be for the entire grant 
amount.
* * * * *

    Dated: July 12, 2006.
Pamela H. Patenaude,
Assistant Secretary for Community Planning and Development.
[FR Doc. 06-6702 Filed 8-4-06; 8:45 am]
BILLING CODE 4210-67-P