[Federal Register Volume 72, Number 50 (Thursday, March 15, 2007)]
[Rules and Regulations]
[Pages 12534-12537]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-4681]



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Part III





Department of Housing and Urban Development





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24 CFR Parts 91 and 570



 Timeliness Expenditure Standards for the Insular Areas Program; Final 
Rule

  Federal Register / Vol. 72, No. 50 / Thursday, March 15, 2007 / Rules 
and Regulations  

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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Parts 91 and 570

[Docket No. FR-5012-F-02]
RIN 2501-AD15


Timeliness Expenditure Standards for the Insular Areas Program

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

ACTION: Final rule.

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SUMMARY: This final rule implements regulatory timeliness standards for 
the Insular Areas Program, as established by the Housing and Community 
Development Act of 1974. The expenditure standards will ensure that 
grantees carry out their programs in a timely manner. The standards 
take into consideration and reflect the unique circumstances faced by 
Insular Area grantees in their ability to expend CDBG allocations. The 
final rule provides that an Insular Area grantee may submit an 
abbreviated consolidated plan rather than a full consolidated plan. 
This final rule also makes technical and conforming changes to the 
Insular Areas program. The final rule follows publication of an August 
7, 2006, proposed rule on which HUD did not receive any public 
comments. Accordingly, HUD is adopting the August 7, 2006, proposed 
rule without change.

DATES: Effective Date: April 16, 2007.

FOR FURTHER INFORMATION CONTACT: Stephen 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

    On August 7, 2006, HUD published a proposed rule (71 FR 44860) for 
public comment to establish timeliness standards and procedures for the 
reallocation of funds for the Insular Areas Program. In addition, the 
August 7, 2006, rule proposed to provide that an Insular Area 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. The proposed rule also sought to make technical and 
conforming changes to the regulations.
    The Insular Areas program is a component of the Community 
Development Block Grant (CDBG) program, authorized by the Housing and 
Community Development Act of 1974 (HCD Act) (42 U.S.C. 5301, et seq.). 
Under the CDBG program, Insular Area grantees are provided flexible 
funding to develop and implement community and economic development 
strategies that primarily benefit low- and moderate-income individuals.
    The August 7, 2006, rule proposed timeliness standards for the 
Insular Areas Program. Under the proposed standards, the amount of 
grant funds available but undisbursed 60 days prior to the conclusion 
of the Insular Area grantee's most recent program year must be no more 
than two times the amount of the Insular Area 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 at that time, 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, which would take place on 
August 2, 2007, for Insular Area grantees that do not change their 
program year start dates. Failure to meet the standards may cause HUD 
to reduce the next grant by 100 percent of the amount in excess of 
twice the Insular Area grantee'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 final rule will be in Fiscal Year (FY) 2008, should an 
Insular Area grantee be untimely 60 days prior to the conclusion of its 
FY 2006 and FY 2007 program years.
    Additionally, HUD proposed to add a provision that would allow 
funds to be reallocated to the remaining eligible Insular Areas on a 
pro rata basis should an Insular Area grantee have its funding reduced 
for failing to submit a final statement for CDBG funds. The proposed 
rule also addressed the issue of Insular Area grantees' submission of 
abbreviated consolidated plans. Abbreviated consolidated plans 
submitted by Insular Areas grantees will be considered to be full 
consolidated plans, provided the Insular Area grantee complies with the 
submissions, certifications, amendments, and performance reports 
requirements of Sec.  570.440 and citizen participation requirements of 
Sec.  570.441. However, 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. Various technical changes were proposed to reflect 
statutory amendments, remove outdated cross-references, and delete 
provisions that are no longer required or applicable.
    For more detailed information regarding the regulatory changes, 
please refer to the preamble of the August 7, 2006, proposed rule.

II. This Final Rule

    This final rule follows the publication of the August 7, 2006, 
proposed rule. The public comment period on the proposed rule closed on 
October 6, 2006. HUD did not receive any public comments on the 
proposed rule. HUD, therefore, is issuing this final rule without 
change from the proposed rule.

III. Findings and Certifications

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 final 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

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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 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 because the 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 
final rule will not have a significant economic impact on a substantial 
number of small entities, and an initial regulatory flexibility 
analysis is not required.

Environmental Impact

    A Finding of No Significant Impact with respect to the environment 
was made at the proposed rule stage 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 remains applicable to this final rule and 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). Hearing or speech-challenged individuals may 
access this number through TTY by calling the toll-free Federal 
Information Relay Service at (800) 877-8339.

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.


0
Accordingly, HUD amends 24 CFR parts 91 and 570 as follows:

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

0
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.


0
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 or CDBG 
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 Area grantees that submit an abbreviated consolidated plan 
pursuant to 24 CFR 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 Area 
grantees pursuant to 24 CFR 570.440.
    (c) * * *
    (4) Submissions, Certifications, Amendments, and Performance 
Reports. An Insular Area grantee that submits an abbreviated 
consolidated plan under this section must comply with the submission, 
certification, amendment, and performance report requirements of 24 CFR 
570.440. This includes certification that the grantee will 
affirmatively further fair housing, which means it will conduct an 
analysis of impediments to fair housing choice and undertake other 
activities required for fair housing planning, in accordance with 24 
CFR 91.225(a)(1) and 570.601(a)(2).
* * * * *
    (e) Citizen Participation. An Insular Area grantee that submits an 
abbreviated consolidated plan under this section must comply with the 
citizen participation requirements of 24 CFR 570.441.
* * * * *

PART 570--COMMUNITY DEVELOPMENT BLOCK GRANTS

0
3. The authority citation for 24 CFR part 570 continues to read as 
follows:

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


0
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;

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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.
* * * * *

0
5. Add Sec.  570.442 to subpart F 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 Area 
grantees pro rata according to population.
    (b) Any Insular Area grant funds for a fiscal year reserved for an 
applicant that chooses not to submit a final 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 Area 
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 Area 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.

0
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.
* * * * *

0
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.
* * * * *

0
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 24 CFR 35.940;
* * * * *

0
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 Area 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 Area 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

[[Page 12537]]

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 standards 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 factors outside of the 
grantee's reasonable control.
    (5) The first review under paragraphs (c)(1) and (c)(2) of this 
section will take place 60 days prior to the conclusion of the Fiscal 
Year 2006 program year.

0
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 
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 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.
* * * * *

0
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.

0
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 or insular areas 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: March 7, 2007.
Pamela H. Patenaude,
Assistant Secretary for Community Planning and Development.
[FR Doc. E7-4681 Filed 3-14-07; 8:45 am]
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