[Federal Register Volume 73, Number 200 (Wednesday, October 15, 2008)]
[Proposed Rules]
[Pages 61198-61254]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-23286]



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Part II





Department of Agriculture





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Rural Utilities Service



Rural Business-Cooperative Service



Rural Housing Service



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7 CFR Parts 1703, 1780, 3570 et al.



Rural Development Grants; Proposed Rule

  Federal Register / Vol. 73, No. 200 / Wednesday, October 15, 2008 / 
Proposed Rules  

[[Page 61198]]


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DEPARTMENT OF AGRICULTURE

Rural Utilities Service

Rural Business-Cooperative Service

Rural Housing Service

7 CFR Parts 1703, 1780, 3570, 4280, 4284, and 5002

RIN 0570-AA68


Rural Development Grants

AGENCIES: Rural Business-Cooperative Service, Rural Housing Service, 
and Rural Utilities Service, USDA.

ACTION: Proposed rule.

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SUMMARY: Rural Development, a mission area within the U.S. Department 
of Agriculture, is proposing a unified grant platform for enhanced 
delivery of eight existing Rural Development grant programs--Community 
Facility; Distance Learning and Telemedicine; Economic Impact 
Initiatives; Renewable Energy Systems and Energy Efficiency Improvement 
Projects; Rural Cooperative Development; Tribal College; Value-Added 
Producer; and Water and Waste Disposal Facilities. This proposed rule 
would eliminate or revise the grant regulations for the eight existing 
programs and consolidate them under a new, single regulation.

DATES: Comments on the proposed rule must be received on or before 
December 15, 2008. The comment period for the information collection 
under the Paperwork Reduction Act of 1995 continues through December 
15, 2008.

ADDRESSES: You may submit comments to this rule by any of the following 
methods:
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     Mail: Submit written comments via the U.S. Postal Service 
to the Branch Chief, Regulations and Paperwork Management Branch, U.S. 
Department of Agriculture, STOP 0742, 1400 Independence Avenue, SW., 
Washington, DC 20250-0742.
     Hand Delivery/Courier: Submit written comments via Federal 
Express Mail or other courier service requiring a street address to the 
Branch Chief, Regulations and Paperwork Management Branch, U.S. 
Department of Agriculture, 300 7th Street, SW., 7th Floor, Washington, 
DC 20024.
    All written comments will be available for public inspection during 
regular work hours at the 300 7th Street, SW., 7th Floor address listed 
above.

FOR FURTHER INFORMATION CONTACT: Mr. Michael Foore, Rural Development, 
Business and Cooperative Programs, U.S. Department of Agriculture, 1400 
Independence Avenue, SW., Stop 3201, Washington, DC 20250-3201; e-mail: 
[email protected]; telephone (202) 690-4730.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

    This proposed rule has been reviewed under Executive Order (EO) 
12866 and has been determined to be significant by the Office of 
Management and Budget. The EO defines a ``significant regulatory 
action'' as one that is likely to result in a rule that may: (1) Have 
an annual effect on the economy of $100 million or more or adversely 
affect, in a material way, the economy, a sector of the economy, 
productivity, competition, jobs, the environment, public health or 
safety, or State, local, or tribal governments or communities; (2) 
Create a serious inconsistency or otherwise interfere with an action 
taken or planned by another agency; (3) Materially alter the budgetary 
impact of entitlements, grants, user fees, or loan programs or the 
rights and obligations of recipients thereof; or (4) Raise novel legal 
or policy issues arising out of legal mandates, the President's 
priorities, or the principles set forth in this EO.
    The Agency conducted a qualitative benefit-cost analysis to fulfill 
the requirements of Executive Order 12866. The Agency has identified 
potential benefits to the prospective grantee and to the Agency. These 
benefits are associated with the increase in program transparency, 
Administrative flexibility, and increased efficiency in delivering the 
programs. While unable to quantify any costs or benefits associated 
with this rulemaking, the agency believes that the overall effect of 
the rule may be beneficial.

Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act 1995 (UMRA) of Public 
Law 104-4 establishes requirements for Federal agencies to assess the 
effects of their regulatory actions on State, local, and tribal 
governments and the private sector. Under section 202 of the UMRA, 
Rural Development generally must prepare a written statement, including 
a cost-benefit analysis, for proposed and final rules with ``Federal 
mandates'' that may result in expenditures to State, local, or tribal 
governments, in the aggregate, or to the private sector of $100 million 
or more in any one year. When such a statement is needed for a rule, 
section 205 of UMRA generally requires Rural Development to identify 
and consider a reasonable number of regulatory alternatives and adopt 
the least costly, more cost-effective, or least burdensome alternative 
that achieves the objectives of the rule.
    This proposed rule contains no Federal mandates (under the 
regulatory provisions of Title II of the UMRA) for State, local, and 
tribal governments or the private sector. Thus, this rule is not 
subject to the requirements of sections 202 and 205 of the UMRA.

Environmental Impact Statement

    This document has been reviewed in accordance with 7 CFR part 1940, 
subpart G, ``Environmental Program.'' Rural Development has determined 
that this action does not constitute a major Federal action 
significantly affecting the quality of the human environment, and in 
accordance with the National Environmental Policy Act (NEPA) of 1969, 
42 U.S.C. 4321 et seq., an Environmental Impact Statement is not 
required. Grant applications will be reviewed individually to determine 
compliance with NEPA.

Executive Order 12988, Civil Justice Reform

    This proposed rule has been reviewed under Executive Order 12988, 
Civil Justice Reform. In accordance with this rule: (1) All State and 
local laws and regulations that are in conflict with this rule will be 
preempted; (2) no retroactive effect will be given this rule; and (3) 
administrative proceedings in accordance with the regulations of the 
Department of Agriculture's National Appeals Division (7 CFR part 11) 
must be exhausted before bringing suit in court challenging action 
taken under this rule unless those regulations specifically allow 
bringing suit at an earlier time.

Executive Order 13132, Federalism

    It has been determined, under Executive Order 13132, Federalism, 
that this proposed rule does not have sufficient federalism 
implications to warrant the preparation of a Federalism Assessment. The 
provisions contained in the proposed rule will not have a substantial 
direct effect on States or their political subdivisions or on the 
distribution of power and responsibilities among the various government 
levels.

Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 601-602) (RFA) generally 
requires an agency to prepare a regulatory flexibility analysis of any 
rule subject to notice and comment rulemaking requirements under the 
Administrative Procedure Act or any other statute unless the agency 
certifies

[[Page 61199]]

that the rule will not have a significant economic impact on a 
substantial number of small entities. Small entities include small 
businesses, small organizations, and small governmental jurisdictions.
    In compliance with the RFA, Rural Development has determined that 
this action will not have a significant economic impact on a 
substantial number of small entities. Rural Development made this 
determination based on the fact that this regulation only impacts those 
who choose to participate in the program. Small entity applicants will 
not be affected to a greater extent than large entity applicants.

Executive Order 12372, Intergovernmental Review of Federal Programs

    Rural Development grants are subject to the Provisions of Executive 
Order 12372, which require intergovernmental consultation with State 
and local officials. Rural Development will conduct intergovernmental 
consultation in the manner delineated in RD Instruction 1940-J, 
``Intergovernmental Review of Rural Development Programs and 
Activities,'' available in any Rural Development office, on the 
Internet at http://www.rurdev.usda.gov/regs, and in 7 CFR part 3015, 
subpart V.

Executive Order 13175, Consultation and Coordination With Indian Tribal 
Governments

    This executive order imposes requirements on Rural Development in 
the development of regulatory policies that have tribal implications or 
preempt tribal laws. Rural Development has determined that the proposed 
rule does not have a substantial direct effect on one or more Indian 
tribe(s) or on either the relationship or the distribution of powers 
and responsibilities between the Federal Government and the Indian 
tribes. Thus, the proposed rule is not subject to the requirements of 
Executive Order 13175.

Programs Affected

    The Catalog of Federal Domestic Assistance Program numbers assigned 
to this program are 10.766, Community Facilities Loans and Grants; 
10.855, Distance Learning and Telemedicine Loans and Grants; 10.766, 
Economic Impact Initiatives Grants; 10.775, Renewable Energy Systems 
and Energy Efficiency Improvements Program; 10.771, Rural Cooperative 
Development Grants; 10.352, Value-Added Producer Grants; and 10.760, 
Water and Waste Disposal Loans and Grants (Section 306a); and 10.221, 
Tribal College Educational Equity Grants.

Paperwork Reduction Act

    In accordance with the Paperwork Reduction Act of 1995, Rural 
Development will seek OMB approval of the reporting and recordkeeping 
requirements contained in this proposed rule and hereby opens a 60-day 
public comment period.
    Title: Rural Development Grants.
    Type of Request: New collection.
    Abstract: Rural Development is implementing a new consolidated 
grant platform. The new grant platform would combine the following 
existing grant regulations into a consolidate rule: (1) The Community 
Facility Program, (2) the Distance Learning and Telemedicine Program; 
(3) the Economic Impact Initiatives Program; (4) the Rural Cooperative 
Development Program, (5) the Tribal College Grant Program, (6) the 
Value-Added Producer Program, (7) the Water and Waste Disposal 
Facilities Program, and (8) the Renewable Energy Systems and Energy 
Efficiency Improvement Program (now known as the Rural Energy for 
America program). These programs provide grants for a variety of 
projects intended to assist and improve rural America.
    The information required under the proposed rule is similar to much 
of the information currently being required under the separate 
regulations. Under these separate regulations, the current information 
being collected is approved under OMB control numbers as follows:

0570-0006 (Rural Cooperative Development Grants).
0570-0039 (Value-Added Producer Grants).
0570-0050 (Renewable Energy Systems and Energy . Efficiency Improvement 
Grants).
0572-0096 (Distance Learning and Telemedicine).
0572-0121 (Water and Waste Loan and Grant Program).
0575-0173 (Community Facilities Grants).

    The proposed rule creates a single set of common forms that 
applicants can use across all eight programs, thereby creating 
efficiencies in reporting.
    The collection of information is vital to Rural Development to make 
wise decisions regarding the eligibility of projects and applicants in 
order to ensure compliance with the regulations and to ensure that the 
funds obtained from the Government are used appropriately (i.e., being 
used for the purposes for which the grant funds were awarded). In sum, 
this collection of information is necessary in order to implement the 
consolidated grant regulation being proposed.
    The following estimates are based on the average over the first 
three years the program is in place.
    Estimate of Burden: Public reporting burden for this collection of 
information is estimated to average 4.8 hours per response.
    Respondents: Rural developers, farmers and ranchers, rural 
businesses, public bodies, local governments, institutions of higher 
learning, hospitals and medical facilities, Indian tribes, agricultural 
producers groups, farmer and rancher cooperatives, independent 
producers, majority controlled producer-based businesses, private 
corporations, non-profit organizations, rural electric cooperatives, 
public power entities, faith-based organizations, and incorporated 
organizations and partnerships.
    Estimated Number of Respondents: 2.045.
    Estimated Number of Responses per Respondent: 4.8.
    Estimated Number of Responses: 24,650.
    Estimated Total Annual Burden (hours) on Respondents: 118,802.
    Copies of this information collection may be obtained from Cheryl 
Thompson, Regulations and Paperwork Management Branch, Support Services 
Division, U.S. Department of Agriculture, Rural Development, STOP 0742, 
1400 Independence Ave., SW., Washington, DC 20250-0742 or by calling 
(202) 692-0043.

Comments

    Comments are invited on: (a) Whether the proposed collection of 
information is necessary for the proper performance of the functions of 
Rural Development, including whether the information will have 
practical utility; (b) the accuracy of the new Rural Development 
estimate of the burden of the proposed collection of information, 
including the validity of the methodology and assumptions used; (c) 
ways to enhance the quality, utility, and clarity of the information to 
be collected; and (d) ways to minimize the burden of the collection of 
information on those who are to respond, including through the use of 
appropriate automated, electronic, mechanical, or other technological 
collection techniques or other forms of information technology. 
Comments may be sent to Cheryl Thompson, Regulations and Paperwork 
Management Branch, U.S. Department of Agriculture, Rural Development, 
STOP 0742, 1400 Independence Ave., SW., Washington, DC 20250. All 
responses to this proposed rule will be summarized and

[[Page 61200]]

included in the request for OMB approval. All comments will also become 
a matter of public record.

E-Government Act Compliance

    Rural Development is committed to complying with the E-Government 
Act, to promote the use of the Internet and other information 
technologies to provide increased opportunities for citizen access to 
Government information and services, and for other purposes.

I. Background

    Rural Development proposes a unified platform for delivery of eight 
existing Rural Development grant programs--Community Facility; Distance 
Learning and Telemedicine; Economic Impact Initiatives; Renewable 
Energy Systems and Energy Efficiency Improvement Projects (now known as 
the Rural Energy for America program); Rural Cooperative Development; 
Value-Added Producer; Water and Waste Disposal Facilities; and Tribal 
College. These programs are administered by the Rural Housing Service 
(Community Facilities, Economic Impact Initiatives, Tribal Grants), 
Rural Utilities Service (Distance Learning and Telemedicine, Water and 
Waste Disposal Facilities), and Rural Business-Cooperative Service 
(Rural Cooperative Development, Value-Added Producer, Rural Energy for 
America). Collectively, Rural Development's programs work together to 
assist in building and maintaining entire, sustainable rural 
communities.
    For the reasons cited below, the Agency is proposing to incorporate 
eight of its 39 existing grant programs into this proposed new 
platform.
    First. In selecting grant programs for inclusion in the proposed 
consolidated grant program, the Agency's two principal priorities are 
to include (1) grant programs associated with programs being included 
in the consolidated guaranteed loan rule and (2) grant programs that 
are representative of both State-allocated grant programs and 
nationally-competed grant programs, which are the two main types of 
grant programs administered by Rural Development.
    As such, three of the seven grant programs are being proposed for 
inclusion because their guaranteed loan programs are being included in 
the Agency's new guaranteed loan program consolidating four of the 
Agency's guaranteed loan programs. These three programs are: Community 
Facilities, Water and Waste Disposal, and Rural Energy for America.
    The Community Facilities and Water and Waste Disposal grant 
programs are both State-allocated grant programs, while the Rural 
Energy for America grant program is a nationally-competed grant 
program. To ``round these out,'' the Agency is proposing to add three 
additional nationally-competed grant programs--Rural Cooperative 
Development grants, Value-Added Producer grants, and Distance Learning 
and Telemedicine grants.
    The Agency is proposing to include the Economic Impact Initiative 
grant program because it is administered under the same regulation as 
Community Facilities.
    Second. The Agency is proposing to include Tribal College grants. 
As mentioned elsewhere in this preamble, the Tribal College grants 
program is neither a State-allocated or nationally-competed grant 
program. However, it does rely on portions of the Community Facilities 
grant program for its administration requirements. Because the proposed 
rule would eliminate the Community Facilities grant rule once the 
proposed rule is finalized, the Tribal College grant program would no 
longer have a grant regulation for its administration. Thus, the Agency 
was faced with two options--incorporate the Tribal College grant 
program into the proposed rule or develop a new regulation specific to 
Tribal College grants. The Agency believes that it makes more sense to 
include Tribal College grants in the new rule, then to develop a 
completely separate regulation for that one specific grant program.
    As noted later in this preamble, the Agency is seeking specific 
comment on the grant programs being proposed for inclusion in the 
consolidated grant rule. Please see section II.C of this preamble.
    The purpose of this proposed rule is to initiate the process of 
developing a single regulation covering all grant programs of the Rural 
Development Mission Area. Given the logistical and administrative 
challenges for the Agency and the stakeholders associated with such a 
consolidation, the Agency has decided to conduct this effort in stages. 
The proposed rule represents the first stage of this process. In this 
proposed rule stage the Agency selected grant programs to be included 
that: (1) Represented a cross section of the Agency's grant programs to 
ensure that the single regulatory platform being developed would be 
flexible enough the accommodate all of the Agency's grant programs; (2) 
corresponded to the loan guarantee programs that are covered by the 
regulatory consolidation taking place with respect to the Agency's loan 
guarantee programs (see 7 FR 52618, September 14, 2007); and (3) 
allowed whole regulatory parts of the current program regulations to be 
deleted.
    After the Agency has the opportunity to determine the success of 
this initial phase of this regulatory consolidation effort, the Agency 
will decide whether it would be appropriate to continue to the next 
phase of incorporating additional grant programs into this regulatory 
platform and the schedule for the next phase. A key assumption the 
Agency has made in deciding to initiate the process of consolidating 
these regulations is that the platform is flexible enough to 
accommodate all of the various grant programs of the Rural Development 
Mission Area. Therefore, the Agency's decision to move forward to the 
next phase of this effort and to add the regulations of new grant 
programs to this platform will hinge on the degree the rulemaking 
process of this proposed rule either supports or challenges this 
assumption.
    Under the unified grant platform, Rural Development will simplify, 
improve, and enhance the delivery of these grant programs across their 
service areas. The remainder of this section describes Rural 
Development's mission, the eight grant programs being aligned under the 
new platform, why the new platform is being proposed, and how the new 
platform will work.

A. Rural Development's Mission

    By statutory authority, Rural Development is the leading Federal 
advocate for rural America, administering a multitude of programs, 
ranging from housing and community facilities to infrastructure and 
business development. Its mission is to increase economic opportunity 
and improve the quality of life in rural communities by providing the 
leadership, infrastructure, venture capital, and technical support that 
enables rural communities to prosper and supports them in the dynamic 
global environment defined by the Internet revolution, and the rise of 
new technologies, products, and markets.
    To achieve its mission, Rural Development provides financial 
support (including direct loans, grants, and loan guarantees) and 
technical assistance to help enhance the quality of life and provide 
the foundation for economic development in rural areas. To improve the 
delivery of this financial support for all of its programs and thereby 
enhance its mission, Rural Development in February 2006 initiated the 
Delivery Enhancement Task Force (DET). The DET is working to develop 
consolidated program delivery platforms.
    This proposed rulemaking presents the Agency's proposed 
consolidated

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grant platform. The Agency has already published a proposed rule in 
support of its unified guaranteed loan platform, which was published in 
the Federal Register on September 14, 2007 (72 FR 52618).

B. Current Grant Programs

    The following paragraphs describe briefly the scope of each of the 
current programs with regard to eligible projects and applicants.
    Community Facilities Grant Program. The Community Facilities grant 
program provides grants to develop essential community facilities in 
rural areas. However, eligible utility-type service facilities, such as 
telecommunications and hydroelectric, that serve both rural and non-
rural areas can be located in either rural or non-rural areas. Grant 
funds may be used to construct, enlarge, or improve community 
facilities for health care, public safety, and public services. This 
can include costs to acquire land needed for a facility, pay necessary 
professional fees, and purchase equipment required for its operation.
    Eligible applicants for community facilities grants are public 
bodies, such as municipalities, counties, districts authorities, or 
other political subdivisions of a State; non-profit corporations and 
associations, and Federally-recognized tribes. Further, applicants must 
have the legal authority to own, construct, operate, and maintain the 
proposed facility.
    The amount of grant assistance provided under this program must be 
the minimum amount sufficient for feasibility which will provide for 
facility operation and maintenance, reasonable reserves, and debt 
repayment. As statutorily required, grants may be made up to 75 percent 
of the cost of developing essentially community facilities. Recently, 
these grants have averaged $29,916, which is approximately 7 percent of 
the average costs of the projects that the grants are funding.
    Economic Impact Initiatives Grant Program. This program is 
administered under the same regulations as the Community Facilities 
grant program, but provides grants to rural communities with extreme 
unemployment and severe economic depression. In addition, the essential 
community facility must be located in a rural community where the ``not 
employed rate'' is greater than the percentage specified in section 
306(a)(20) of the Consolidated Farm and Rural Development Act (7 U.S.C. 
1926(a)(20)(B)). (The ``not employed rate'' is the percentage of 
individuals over the age of 18 who reside within the community and who 
are ready, willing, and able to be employed but are unable to find 
employment, as determined by the department of labor of the State in 
which is the community is located.)
    Notwithstanding the above, eligible applicants are otherwise the 
same as under the Community Facilities grant program. Eligible projects 
are also the same as under the Community Facilities grant program.
    Under this program, the minimum grant amount awarded is that amount 
needed to achieve financial feasibility for the project. Recently, 
these grants have averaged $42,890, which is approximately 19 percent 
of the average costs of the projects that the grants are funding.
    Tribal College Grant Program. The Tribal College grant program is 
designed to enhance educational opportunities at the Tribal colleges 
and universities designated as the 1994 Land-Grant Institutions (1994 
Institutions) by strengthening their educational programs. The program 
provides funding for essential community facilities and equipment for 
the Tribal colleges and universities.
    To be eligible to receive a grant under this program, the applicant 
must be one of the Tribal colleges or universities designated as the 
1994 Institutions. Grant funds are disbursed in an attempt to provide 
an equal distribution of funds to each of the 1994 Institutions when 
possible. Recently, these grants have averaged $572,837, which is 
approximately 32 percent of the average costs of the projects that the 
grants are funding.
    Distance Learning and Telemedicine Grant Program. The purpose of 
the Distance Learning and Telemedicine (DLT) Loan and Grant program is 
to encourage and improve telemedicine services and distance learning 
services in rural areas through the use of telecommunications, computer 
networks, and related advanced technologies by students, teachers, 
medical professionals, and rural residents.
    To be eligible to receive a grant under this program, the applicant 
must be legally organized as an incorporated organization or 
partnership, an Indian tribe or tribal organization, as defined in 25 
U.S.C. 450b (b) and (c), a state or local unit of government, a 
consortium, as defined in Sec.  1703.102, or other legal entity, 
including a private corporation organized on a for profit or not-for 
profit basis. In addition, each applicant must provide written evidence 
of its legal capacity to contract with the Agency to obtain the grant, 
loan and grant combination, or the loan, and comply with all applicable 
requirements. If a consortium lacks the legal capacity to contract, 
each individual entity must contract with the Agency in its own behalf.
    As implemented by the program office, an applicant is responsible 
for providing at least 15 percent of the grant amount requested and the 
minimum amount of a grant under this program is $50,000. Recently, 
these grants have averaged $294,950, which is approximately 60 percent 
of the average costs of the projects that the grants are funding.
    Renewable Energy Systems and Energy Efficiency Improvement Grant 
Program. The current Renewable Energy Systems and Energy Efficiency 
Improvement grant program provides grants for the purchase and 
installation of renewable energy systems and energy efficiency 
improvements. Eligible applicants are farmers, ranchers, and rural 
small businesses who can demonstrate financial need, as determined by 
the Agency.
    The amount of the grant made available to an eligible project 
cannot exceed 25 percent of total eligible project costs, as required 
by the authorizing statute. Currently, the program office sets the 
minimum amount of a grant at $2,500 and the maximum amount at $500,000 
for renewable energy systems and $2,500 and $250,000, respectively, for 
energy efficiency improvement projects. Unlike the 25 percent 
limitation, these minimum and maximum grant amounts are not statutorily 
specified, but are set by the Agency in implementing the program. 
Recently, these grants have averaged $35,703, which is approximately 17 
percent of the average costs of the projects that the grants are 
funding.
    Rural Cooperative Development Grant Program. The Rural Cooperative 
Development grant program provides grants for the development or 
continuation of the cooperative development center concept. Grant funds 
and matching funds may be used for, but are not limited to, providing 
the following to individuals, cooperatives, small businesses and other 
similar entities in rural areas served by the Center:
     Applied research, feasibility, environmental and other 
studies that may be useful for the purpose of cooperative development.
     Collection, interpretation and dissemination of 
principles, facts, technical knowledge, or other information for the 
purpose of cooperative development.

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     Providing training and instruction for the purpose of 
cooperative development.
     Providing loans and grants for the purpose of cooperative 
development in accordance with the annual Notice of Solicitation of 
Applications and applicable regulations.
     Providing technical assistance, research services and 
advisory services for the purpose of cooperative development.
    Applicants eligible for rural cooperative development grants are 
non-profit organizations and institutions, including institutions of 
higher education. Public bodies are not eligible to receive grants.
    Under the current Rural Cooperative Development grant regulation, 
grant funds may be used to pay up to 75 percent (95 percent where the 
grantee is a 1994 Institution) of the cost of establishing and 
operating centers for rural cooperative development. Applicants must 
verify in their application that all matching funds are available for 
the time period of the grant. Recently, these grants have averaged 
$189,000, which is approximately 58 percent of the average costs of the 
projects that the grants are funding.
    Value-added Producer Grant Program. The purpose of this program is 
to provide grants to enable producers to develop businesses that 
produce and market value-added agricultural products, including the 
development of strategies, creation of marketing opportunities, and 
development of business plans. The program distinguishes between 
planning grants and working capital grants. Grant funds for planning 
grants may be used for such purposes as, but not necessarily limited 
to: Obtaining legal advice and assistance; conducting a feasibility 
study; developing a business plan; and developing a marketing plan. 
Grant funds for working capital grant may be used for such purposes as, 
but not necessarily limited to: Designing or purchasing an accounting 
system, paying for salaries, utilities, and rental office space; and 
purchasing inventory, office equipment, and office supplies.
    Applicants eligible for grants under this program are independent 
producers, agricultural producer groups, farmer or rancher 
cooperatives, and majority-controlled producer-based business ventures. 
Except for independent producers, all other applicants must be entering 
an emerging market in order to be eligible.
    As required by its authorizing statute, grant funds may be used to 
pay up to 50 percent of the costs for carrying out eligible projects. 
Recently, these grants have averaged $150,000, which is approximately 
50 percent of the average costs of the projects that the grants are 
funding.
    Water and Waste Disposal Facilities Grant Program. The Water and 
Waste Disposal Facilities grant program provides grants to develop 
water and wastewater systems, including solid waste disposal and storm 
drainage, in rural areas and to cities and towns with a population of 
10,000 or less. Example projects include construction of water lines, 
pumping stations, wells, storage tanks, and sewage treatment 
facilities.
    Eligible applicants for water and waste disposal facilities grants 
are public bodies, such as municipalities, counties, districts 
authorities, or other political subdivisions of a State, territory, or 
commonwealth; non-profit organizations, such as corporations and 
associations; Indian tribes on Federal and State reservations or other 
federally-recognized Indian tribes. Further, applicants must have the 
legal authority to own, construct, operate, and maintain the proposed 
facility.
    As required by its authorizing statute, grant funds are limited to 
no more than 75 percent of the Agency eligible project development 
costs. As implemented by the program office, grant funds are limited 
to: (1) No more than 75 percent of the Agency eligible project 
development costs when the median household income of the service area 
is below the higher of the poverty line or 80 percent of the state non-
metropolitan median income and the project is necessary to alleviate a 
health or sanitary problem and (2) no more than 45 percent of the 
Agency eligible project development costs when the median household 
income of the service area exceeds 80 percent of the state non-
metropolitan median income but is not more than 100 percent of the 
statewide non-metropolitan median household income. Recently, these 
grants have averaged $663,190, which is approximately 20 percent of the 
average costs of the projects that the grants are funding.
How the Current Programs Work
    The grant programs being included in today's proposed rulemaking 
have many similarities, with a few major differences. A major 
difference between seven of the eight grant programs is whether the 
grant program is administered as a Nationally-competed grant program or 
a State-allocated grant program. The eighth grant program, Tribal 
College grants, is a program with a small statutorily defined set of 
beneficiaries.
    The following paragraphs provide an overview of how the Nationally-
competed and State-allocated grant programs are currently implemented.
    Nationally-competed grant programs. The following paragraphs 
describe how the Agency currently administers its nationally-competed 
grant programs, four of which are being consolidated under this 
proposed rule--Distance Learning and Telemedicine, Renewable Energy 
Systems and Energy Efficiency Improvement (now known as the Rural 
Energy for America Program), Rural Cooperative Development, and Value-
added Producer.
    As it currently administers its nationally-competed grant programs, 
the Agency typically publishes a Federal Register notice announcing 
that it is accepting applications for the program, either as a Notice 
of Solicitation of Application (NOSA) or a Notice of Funding 
Availability (NOFA). The primary purpose of this notice is to alert the 
public to the opening of a period during which the Agency will accept 
applications for the program. This creates a ``window'' for submitting 
applications.
    The amount and type of information contained in these NOSAs and 
NOFAs varies from program to program and may vary greatly year to year. 
Most notices include information on applicant and project eligibility, 
application submittal and content requirements, minimum and/or maximum 
grant amounts, and project priority categories and scoring.
    Under the current administration of the nationally-competed grant 
programs, applications are either submitted to a Rural Development 
State Office or to the Rural Development National Office, depending on 
the program, for review, evaluation, and scoring. For most of the 
nationally-competed grant programs, the applicant will receive a letter 
from the Agency acknowledging receipt and confirmation that a full 
application was received. If an incomplete application is received, the 
Agency notifies, for some nationally-competed grant programs, the 
applicant as to what information is missing and the applicant has a set 
period of time in which to provide the missing information. For other 
nationally-competed grant programs, however, if an incomplete 
application is received, the Agency does not go back to the applicant 
for the missing information. This is done because some nationally-
competed grant programs receive a sufficient number of complete 
applications to use all of the funds in a fiscal year and, accordingly, 
the Agency does not pursue incomplete applications. If this is the 
situation, the

[[Page 61203]]

NOSA or NOFA indicates this to the public.
    As noted above, the nationally-competed grant programs provide a 
window for which applications are accepted. This results generally in a 
one time review and then scoring and ranking of applications. As 
currently implemented, the Agency reviews an application upon its 
receipt to determine whether the applicant and project are eligible for 
that program. If the Agency determines that the applicant and/or 
project are ineligible, the Agency notifies the applicant of such 
determination. Applications that are determined to be eligible are 
scored and ranked by National Office program staff. Depending on the 
nationally-competed grant program, independent reviewers may be used to 
evaluate and score applications. In addition, the nationally-competed 
grant programs currently limit the Administrator's discretionary points 
that can be included in the scoring of applications to 10 percent or 
less of the total potential points that an application can score.
    Based on this pool of applications, a nationally-competed grant 
program's National Office selects applications for funding. Applicants 
that are not selected due to a low priority rating are notified. The 
Agency then proceeds to work with the applicants selected for funding 
in order to make awards by the end of the Federal fiscal year.
    In currently administering its nationally-competed grant programs, 
the Agency begins the process of obligating funds and making awards 
(disburse the grant) by sending the applicant a letter of conditions 
that must be agreed to before the Agency and the grantee enter into a 
binding agreement, such as a grant agreement.
    Once the Agency has initiated funds disbursement, it monitors the 
grantee to ensure conformance with the terms and conditions of the 
grant agreement. Depending on the nationally-competed grant program, 
the grantee is currently required to submit reports to the Agency 
during the grant period. Once the project has been completed, the 
Agency closes out the grant. If a grantee violates the terms and 
conditions of the grant agreement, the Agency takes appropriate steps, 
including, depending on the severity of the violation, the suspension 
or termination of the agreement.
    State-allocated grant programs. These paragraphs describe how the 
Agency currently administers its State-allocated grant programs, three 
which are being consolidated under this proposed rule--Community 
Facilities, Economic Impact Initiatives, and Water and Waste Disposal 
Facilities. In contrast to the Nationally-competed grant programs, the 
Agency typically does not publish Federal Register (FR) notices for its 
State-allocated programs, but instead relies on other methods for 
alerting the public to the programs and the submittal of applications. 
In addition, the Agency tends to accept applications for State-
allocated grant programs at any point during the course of the year.
    Using Community Facilities (and the Economic Impact Initiatives) as 
an example of how the Agency currently implements a State-allocated 
grant program, applicants file a preapplication with requisite 
documentation and supporting information to the Rural Development field 
office. The Rural Development field office then reviews the package for 
completeness of the documentation and for applicant and project 
eligibility. If needed, the Rural Development field office will request 
the opinion of the Office of General Counsel on the applicant's legal 
existence and authority to perform the proposed project.
    As currently being administered, the Rural Development field office 
submits a copy of the application package to the Rural Development 
State Office with a letter of recommendation. The Rural Development 
State Office reviews the package and notifies the Rural Development 
field office of its findings. If an application is determined to be 
ineligible, the Rural Development field office notifies the applicant, 
who has the right of appeal.
    If an application is determined to be eligible, the Rural 
Development field office provides the applicant with the necessary 
forms and instructions for filing a complete application. For example, 
the Community Facilities program requires Form SF 424, a preliminary 
architecture report, a financial feasibility report, and environmental 
information. If the project is small, the architectural and financial 
feasibility reports may not be required.
    If there is a concern (e.g., incomplete, not properly assembled) 
with the application, the Rural Development field office will notify 
the applicant as to what information is needed. If the applicant fails 
to submit a complete application by the date specified by the Rural 
Development State Office or in an otherwise timely manner, the Agency 
may discontinue processing the application. If the application is 
complete, the Agency will notify the applicant as to eligibility and 
anticipated availability of funds.
    Completed applications returned to the Rural Development field 
office are evaluated. The Rural Development field office reviews the 
application package for the amount of grant funds allowed and scores 
the application for selection priority. As currently implemented, 
applications may also receive discretionary points from the State 
Director.
    Generally, the Rural Development State Office authorizes grant 
assistance to those eligible applicants with the highest priority 
score. Other factors, however, may enter into selecting applications 
for funding including the amount of funding being requested relative to 
available funds and whether the application is for the continuation of 
a project. Applicants who are eligible for funding, but cannot be 
funded due to lack of Agency funds are advised by the State Office that 
grant assistance is not available. If, based upon the application, it 
appears that funds will be available for the project within a feasible 
period of time, the Agency notifies the applicant that the application 
will be retained until funding becomes available. If, based upon the 
application, it is not likely that the project will be funded in the 
near future, the Agency returns the application to the applicant at the 
end of the fiscal year.
    As for nationally-competed grant programs, the process the Agency 
currently uses to obligate funds and make awards (disburse the grant) 
for State-allocated grant programs begins with the Agency sending the 
applicant a letter of conditions that must be agreed to before the 
Agency and the grantee enter into a binding agreement, such as a grant 
agreement.
    Once funds have been disbursed, the Agency monitors the grantee to 
ensure conformance with the terms and conditions of the grant 
agreement. Depending on the State-allocated grant program, the grantee 
is currently required to submit reports to the Agency during the grant 
period. Once the project has been completed, the Agency closes out the 
grant. If a grantee violates the terms and conditions of the grant 
agreement, the Agency takes appropriate steps, including, depending on 
the severity of the violation, the suspension or termination of the 
agreement.

C. Goals of the New Platform

    The grant programs that are being combined under the proposed new 
platform were developed separately, and are administered independently 
of each other. The platform being proposed seeks to achieve the 
following objectives:
     Reduce the burden to applicants;

[[Page 61204]]

     Increase the efficiency in delivering grant programs; and
     Improve the Agency's program monitoring and reporting 
capabilities.
    Reduce the burden to applicants. The new platform can potentially 
reduce the burden to applicants in several ways.
    First. When applicants seek grants under more than one of the 
programs, they are required to learn how to fill out multiple forms. 
This is inefficient and costly to the applicants and makes the programs 
less attractive to the applicants. By combining common elements into a 
single subpart, the new platform can reduce the burden to applicants 
applying to multiple grant programs covered in this regulation.
    Second. Many grant programs receive applications from applicants or 
projects that are ineligible. In some cases, the applicant spends a 
significant amount of resources in putting together such applications. 
To help reduce the number of such applications, the new platform 
incorporates a voluntary preapplication process that applicants can use 
to help assess whether they and their projects are eligible. By getting 
an early assessment of eligibility, the Agency believes that fewer 
``non-eligible'' applications will be submitted, thereby saving the 
applicant expenses in assembling and submitting a complete application.
    Third. Under the new platform, applicants would be allowed to 
submit applications, including preapplications, to any Rural 
Development office or on-line through grants.gov. Allowing applicants 
to submit applications to any Rural Development office, including Rural 
Development field offices, provides applicants with additional 
submittal options than under the current programs, which specify 
locations where applications are to be submitted. For some applicants, 
the ability to submit applications to their local Rural Development 
field office will be more convenient. In addition, to the extent that 
this platform can leverage and further promote the utilization of field 
offices, it will serve to improve communication between the Agency and 
the applicants.
    Increase efficiency in delivering grant programs. There are several 
ways in which the new platform will help the Agency improve the 
efficiency in delivering the grant programs.
    First. The new platform would improve the work flow for the 
National and State Rural Development office personnel. The current 
delivery platform creates significant processing peaks and valleys in 
the delivery of the grant programs. The new platform seeks to ``smooth 
out'' these peaks and valleys through an open application period. This 
will also allow the Agency to better manage staffing requirements and 
provide administrative consistency among the various grant programs.
    Second. The new platform improves program delivery efficiency by 
``separating'' the application process from the funding process. 
Currently, consideration of grants waits until funds are made available 
through the appropriations process. This creates uncertainty in work 
flow and, at times, compresses the effort and resources required to 
review applications and make decisions into a very short timeframe.
    The new platform incorporates two different application submittal 
schemes. Under the first scheme, applications are accepted at any time. 
Under the second scheme, applications are submitted once each year. 
These processes will occur regardless of when funds are available and 
under what mechanism they are made available. By separating the 
application submittal and review process from funding availability, the 
Agency is creating a process that will allow both applicants and Agency 
staff to better manage their resources.
    Third. The new platform would streamline the Agency's efforts in 
administering the grant programs. Maintaining separate sets of basic 
requirements creates complexity in administrative activities. For 
example, with each program administered under separate regulations, any 
change to basic requirements calls for multiple concurrences. 
Similarly, adding a new program requires the addition of a new set of 
basic requirements as these are not currently shared. The proposed 
combined platform will streamline basic grant requirements, allowing 
all the grant programs included in this regulation to reach a uniform 
functionality of process.
    Further, when new programs are implemented under the current 
delivery platform, a new regulation is developed that, in many 
respects, addresses or adopts many of the same requirements. Time and 
effort are wasted in readdressing issues during the development of new 
program regulations leading to inefficient rulemaking and a delay in 
program implementation. The structure of the new platform provides for 
the addition of other Agency, or newly authorized, grant programs as 
needed without the addition of new sets of basic requirements. The 
common elements (proposed subpart A) of the proposed rule are intended 
to remain unchanged, while additional programs would be added to 
proposed subpart B.
    Fourth. Having a common rule for multiple programs will be easier 
to administer, improve communication of basic program characteristics, 
and reduce confusion among both staff and the public. A common 
regulation will reduce the staff time, effort, and training necessary 
for issuing grants. Efficiencies will be realized as common program 
elements facilitate consolidation of information technology platforms 
and systems' maintenance cost. Internal management controls will 
improve with standardized servicing and oversight. Uniform processes 
will facilitate electronic commerce between Rural Development and its 
customers.
    Improve the Agency's program monitoring and reporting capabilities. 
Building on the efficiency improvements under a common grants platform, 
monitoring and reporting program performance of grant recipients will 
be conducted in conformance with uniform standards. With standardized 
servicing and oversight, Agency staff will be better able to monitor 
grant recipients to the extent necessary to ensure that facilities are 
functioning in accordance with project performance goals.
    Through the grantee's uniform standard semiannual performance 
reporting and a final performance report, the Agency will be able to 
compare actual accomplishments against the objectives and benchmarks 
stated in the project's performance plan. To account for the diversity 
in grant programs, additional grantee performance data may be needed 
for a thorough evaluation. Any special reporting requirements not 
specified in the rule or subsequent notices will be established in the 
Agency's letter of conditions provided to the grantee.
    Project monitoring and report data will be captured and retained 
through the Agency's management information systems and data warehouse. 
Drawing on standardized collected data, the Agency will be able to 
generate more comprehensive program performance reports both within a 
program and comparisons across several programs. This will be 
especially useful where programs with common or complementary 
performance measures may have a compounded impact on a community's 
social and economic development.

D. The New Platform

    By way of this rule, the Agency is initiating the process of 
developing a single regulation covering all 39 grant programs of the 
Rural Development Mission Area. For the grant programs listed in this 
regulation, the proposed

[[Page 61205]]

new platform simplifies, improves, and enhances the delivery of the 
grant programs. By applying the requirements shared among the eight 
grant programs included in this rule while maintaining required 
programmatic differences, this new structure will streamline the 
promulgation of regulations for new grant programs.
    As noted earlier, the Agency is proposing to include eight grant 
programs within this proposed rule. Under the new platform, the common 
features of the programs are incorporated into a single subpart 
(subpart A), with program-specific features provided in a separate 
subpart (subpart B). While key features (e.g., applicant and project 
eligibility, funding) of the existing programs remain under the new 
platform, key differences can be found in applying for a grant, in the 
process in which applications are submitted, evaluated, and selected 
for funding, and in the manner in which notifications will be used to 
provide information to the public on the grant programs.
    The following paragraphs address the new platform by examining the 
proposed delivery mechanisms, beginning with a discussion on the use of 
notifications under the new platform and concluding with grant close-
out. Figure 1 illustrates the overall application process for grant 
programs with an application deadline. Figure 2 illustrates the overall 
application process for grant programs with an open application period.
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BILLING CODE 3410-XY-C

[[Page 61208]]

    1. Notifications. Under the new platform, the Agency will use 
notifications to provide information on program funding and on 
programmatic changes relevant to applications and to program 
administration. The primary notification method used to disseminate 
this information depends on whether the program is a Nationally-
competed grant program or a State-allocated grant program. In addition, 
the timing of when the Agency issues a notification depends on the type 
of information the notification contains.
    Funding. The Agency will issue notifications identifying the level 
of funds are available for each program and their minimum and maximum 
grant amounts.
    The Agency may elect to provide additional funding information in 
these notifications. Such information may include, but would not be 
limited to:
     Type of award;
     Fiscal year funds;
     Approximate total funding;
     Approximate number of awards;
     Approximate average award;
     Floor of award range;
     Ceiling of award range;
     Budget period length; and
     Project period length.
    For Nationally-competed grant programs, the primary notification 
method that the Agency will use will be a Federal Register notice. One 
or more notices may be necessary to do this. For State-allocated grant 
programs, the primary notification method will be through a link found 
on Rural Development's Web site http://www.rurdev.usda.gov. Funding 
information for both types of grant programs would also be available at 
any Rural Development office. The Agency will provide funding 
information on each program every fiscal year.
    Programmatic changes. The Agency will also issue notifications that 
identify changes to a program that would affect the applicant or the 
applicant's application. These circumstances are discussed below.
     Administrator and State Director priority categories. 
Subpart A provides lists of Administrator and State Director priority 
categories. Administrator priority categories apply to both State-
allocated grant programs and nationally-competed grant programs, while 
State Director priority categories apply only to State-allocated grant 
programs. Individual programs may elect to use any or all of the 
priority categories identified in subpart A in scoring applications, 
but would not be able to add to these lists (unless done through a 
change to the rule). Subpart B specifies the specific sets of 
Administrator and State Director priority categories that each program 
can use each year to score applications.
    If a program office determines that a different set of priority 
categories (but still within the priority categories identified in 
subpart A) will be applicable for a given fiscal year, the Agency will 
issue a notification to announce the priority categories that will be 
used in scoring applications for that fiscal year.
     Administrator and State Director points. Subpart B 
identifies how points will be allocated for both Administrator and 
State Director priority categories for each of the grant programs. If a 
program office determines that a different allocation of these points 
is appropriate, whether or not in conjunction with a change in priority 
categories, then that program office would issue a notification, as 
applicable, to indicate the point allocation to be used in that fiscal 
year.
     Additional reports. A program office may determine that 
additional reports on project performance that are generally applicable 
across projects within the program are necessary in addition to those 
required under the proposed rule. In such instances, the Agency would 
issue a notification to the public.
     Ranking dates. A program office may elect to change one 
(or more) of the ranking dates specified in subpart B of the proposed 
rule. For example, a program office that has a specified ranking date 
(July 15) may determine that it is necessary to move the ranking date 
to earlier in the year because the program office has determined that 
additional time may be needed to rank the applications in order to 
ensure sufficient time to obligate funds. In such instances, the Agency 
would issue a notification to the public.
     Application deadline. For those programs with a specified 
application deadline, a program office may elect to change the 
application deadline date specified in subpart B of the proposed rule. 
For example, a program office that has a specified application deadline 
(March 1) may determine that it is necessary to move the application 
deadline to earlier in the year in order to better manage Agency 
resources and program funds. In such instances, the Agency would issue 
a notification to the public.
    For changes in Administrator and State Director priority categories 
and/or points, the program office would issue the notification(s) at 
least 30 days prior to the first ranking date in the upcoming fiscal 
year or the application deadline, as applicable, to allow sufficient 
time for applicants to finish their applications. If multiple program 
offices seek to make these types of changes, the Agency may issue, 
where feasible, a single notification covering all of the affected 
programs rather than individual notifications for each of the affected 
programs. For other programmatic changes, the Agency would issue 
notifications on an as needed basis.
    Finally, a program's eligibility requirements may change or the 
Agency may determine that certain types of projects are no longer 
eligible for grants or certain ineligible projects may become eligible. 
Such instances would require the Agency to change to the regulation. In 
order to help ensure the public is aware of such changes, the Agency 
may include such information in the programmatic change notifications 
discussed above.
    Administrator approval. Under the new platform, State Directors 
would propose to the Administrator each year the minimum and maximum 
grant amounts for each State-allocated grant program included in this 
part. Upon approval from the Administrator, the Agency would then 
notify the public of the minimum and maximum grant amounts approved by 
the Administrator. Similarly, each State Director may propose to the 
Administrator changes in State Director priority categories and 
associated points for State-allocated grant programs included in this 
part. Upon approval from the Administrator, the Agency would then 
notify the public of the priority categories and associated points 
approved by the Administrator for each affected State-allocated 
program.
    2. Acceptance of Applications. As noted above, Nationally-competed 
grant programs establish defined ``windows'' for when applications can 
be submitted and both types of programs (Nationally-competed and State-
allocated) frequently specify the Rural Development office (field, 
State, National) to which applications are to be submitted. Under the 
new platform, the Agency is proposing to implement two application 
submittal schemes, depending on the needs of the individual program:
     An open application period; and
     A specified application deadline.
    Under the open application period scheme, the Agency would accept 
applications at any time during the year. By accepting applications at 
any time, there would no longer be any ``window'' for when to submit an 
application. This feature eliminates the need for the public to wait on 
the Agency to publish Federal Register notices, or use other methods, 
to solicit applications. It is

[[Page 61209]]

important to note, however, that the Agency will still undertake 
activities to promote the various grant programs.
    The second scheme (a specified application deadline) is similar to 
current Nationally-competed grant programs, but the date for 
application submittal would be fixed in the regulation in subpart B. By 
providing a date, the public will not have to wait for the Agency to 
publish a notice identifying when applications are due. This will allow 
applicants to plan for the preparation of their applications with 
certainty.
    By accepting applications at any Rural Development office under 
either scheme, the Agency is seeking to make it more convenient for 
applicants to submit their applications. To the extent that this 
facilitates interaction between Rural Development staff and the 
applicants, the Agency expects better communication will occur. The 
Agency will implement internal procedures to ensure all applications 
are delivered to the appropriate Agency program office.
    3. Eligibility. Under the current programs, Rural Development 
offices (National and State offices, as appropriate) determine both 
applicant and project eligibility based on the individual grant 
program's requirements. As described below, the proposed rule continues 
this determination process mainly unchanged.
    Applicant eligibility is based on the applicant meeting the common 
requirements, which are citizenship and legal authority and 
responsibility, and program-specific criteria, which are contained in 
proposed subpart B. The proposed rule also identifies applicants who 
would be categorically ineligible. In terms of eligible and ineligible 
applicants, little has changed under the new platform compared to the 
current programs. In addition, these criteria cannot be voided under 
the exception authority provided in the proposed rule.
    Project eligibility is based on the proposed project meeting 
criteria found in Subparts A and B, as applicable. Subpart A requires 
each project to meet the following criteria, as applicable and unless 
otherwise modified by a specific provision in subpart B for a program:
     Being primarily for the benefit of a rural area;
     For those projects and purposes that acquire or improve 
real or personal property, the applicant must be the owner of the 
property or have leasehold interest acceptable to the Agency in the 
property and control the revenues and expenses of the project, 
including operation and maintenance; and
     For projects and purposes that are determined by a service 
area, on the boundaries of the proposed service area meeting a non-
discrimination criterion.
    Projects that do not meet the applicable proposed criteria (as 
found in Subparts A and B, as applicable) would be ineligible under the 
new platform. In addition, these criteria (as found in subpart A and as 
may be modified in subpart B) cannot be voided under the exception 
authority provided in the proposed rule.
    The applicable program-specific project eligibility requirements, 
which are located in subpart B, remain essentially unchanged for those 
of the current programs. Some differences are being proposed and these 
are discussed in section II of this preamble.
    In addition to identifying eligible projects, the proposed rule 
identifies specific projects and purposes that are ineligible under all 
circumstances from receiving a grant. The Agency assembled this list 
from the list of ineligible projects and purposes identified in the 
regulations and associated program notices for the programs being 
included in the proposed rule. In addition, the Agency added the 
following projects and purposes as ineligible:
     Investment or arbitrage, or speculative real estate 
investment;
     Prostitution or projects generating income from activities 
of a prurient sexual nature;
     Any project eligible for Rural Rental Housing and Rural 
Cooperative Housing loans under sections 515, 521, and 538 of the 
Housing Act of 1949, as amended;
     Any project generating income from the sale of illegal 
drugs, drug paraphernalia, or any other illegal product or activity;
     Any project located in a special flood or mudslide hazard 
area as designated by the Federal Emergency Management Agency in a 
community that is not participating in the National Flood Insurance 
Program unless the project is an integral part of a community's flood 
control plan; and
     Any other similar project or purpose that the Agency 
determines is ineligible for funding under this part and publishes in a 
Federal Register notice.
    4. Applying for a Grant. All applicants would be required to submit 
an application. For some applicants (i.e., a government that is 
proposing a project that is for construction, land acquisition, or land 
development and that would require more than $100,000 of Federal 
funding), a preapplication would be required (as is currently the 
situation). For all other applicants, however, the submittal of a 
preapplication would be optional. The following paragraphs discuss 
briefly preapplications and applications.
    Preapplications. The primary purpose of the preapplication is for 
the Agency to make an assessment as to both applicant eligibility and 
project eligibility. In addition, use of preapplications facilitates 
early communication between the Agency and the applicant. By reviewing 
preapplications, the Agency reduces the time and effort spent by 
applicants in preparing full applications where the applicant and/or 
project are clearly not eligible.
    Applications. Because of the varying nature of the projects that 
are associated with the grant programs, the Agency has determined that 
the information to be included in a grant application should be program 
specific, as it is currently. The contents of grant applications will 
be made available to applicants through any Rural Development office, 
the Agency's Web site, or National Headquarters. The information 
associated with a grant application will not be significantly different 
than currently required under the current programs.
    However, an applicant would be allowed to submit an application 
(including preapplications) to any Rural Development office. Under the 
current programs, applications are submitted to specified locations. As 
noted earlier, the Agency is proposing this change to make it more 
convenient for applicants to submit their applications and to foster 
communication between Rural Development staff and applicants.
    Rather than identifying the specific documents that must accompany 
each application for each program in the regulation, the Agency would 
provide all the necessary forms and instructions in program-specific 
application packages. This proposed process is similar to the current 
process for several existing grant programs, but represents a change 
for those Nationally-competed programs where the regulations and/or 
Federal Register notice identify specifically what is required in each 
application under each of those programs. The Agency believes that 
implementing the proposed process for all grant programs affected by 
this rule will provide administrative flexibility to each program as 
well as consistency in implementation.
    5. Processing Applications. The Agency would review each 
application for the determination of applicant and project eligibility 
and the likelihood of the project's feasibility. It is at this stage of 
the process that the Agency would

[[Page 61210]]

make the formal determination of eligibility, unless it has already 
been made.
    In order to determine eligibility, the application must contain 
sufficient and necessary information to allow the Agency to make the 
eligibility determination. The Agency will also review the application 
for assessing whether or not the project is likely to be feasible. To 
further process an application for a project or purpose that is likely 
to be unfeasible would be an inefficient use of Agency resources. At 
the same time, the amount of information that is needed to make this 
assessment varies between programs because of the differing complexity 
of projects and purposes. The information provided to the applicant for 
preparation of an application will assist the applicant in identifying 
the amount of information necessary to allow the Agency to make this 
feasibility assessment.
    When reviewing an application for applicant and project 
eligibility, if the Agency finds that there is insufficient 
information, including for example if a form has not been signed, to 
make an eligibility determination, the Agency will notify the 
applicant. Once an eligibility determination has been made, the Agency 
will notify the applicant. If the Agency determines that either the 
applicant or the project is ineligible, the applicant would have the 
right to appeal the decision to the National Appeals Division (NAD). 
The steps associated with eligibility under the new platform are 
essentially the same as under the current programs.
    Similarly, if the Agency makes an assessment that a project is not 
likely to be feasible, the Agency will notify the applicant of its 
concerns. The applicant will then have the opportunity to address those 
concerns before the Agency continues processing the application.
    For programs with open application periods, an application that is 
revised and resubmitted to the Agency will be processed at the next 
applicable ranking date for that program. For example, if a revised 
application is received on January 15, the Agency will consider it at 
the March 15 ranking date, which is the next applicable ranking date. 
For grant programs with a specified application deadline, each revised 
grant application will be processed by the Agency if it is received on 
or before the application deadline for that grant program. If such 
revised applications are not received by the specified application 
deadline for the grant program, the Agency will not process the 
application.
    6. Scoring Applications. For those applications for which the 
applicant and project are eligible and the project is feasible (or is 
likely to be feasible), the Agency will continue processing the 
application by scoring it. The Agency will score applications on the 
basis of the information provided when the Agency receives the 
application. Thus, it is the responsibility of the applicant to provide 
all information necessary at the time of application for the Agency to 
score the application.
    The Agency will score each application using a set of program-
specific priority categories, a set of State Director priority 
categories, and a set of Administrator priority categories and their 
associated points that are specific to each grant program. State 
Director priority categories and points are only applicable to State-
allocated grant programs. In addition, Administrator priority 
categories and points may be applied to State-allocated grant 
applications only when applications are submitted for the national pool 
of funds.
    These sets of priority categories are identified in subpart B of 
the proposed rule. As noted earlier (Section I. D. 1.), the Agency may 
use a revised set of Administrator and State Director priority 
categories and point allocations through the issuance of a 
notification.
    Priority Categories. As noted above, the Agency is distinguishing 
between program-specific priority categories and Administrator and 
State Director priority categories. Program-specific priority 
categories are those priority categories that the Agency must use in 
scoring each application for that grant program. In contrast, 
Administrator and State Director priority categories are not mandatory; 
that is, the Administrator and State Director are not obligated to use 
their specified priority categories in scoring applications. If the 
Administrator or State Director elects not to use their priority 
categories, then neither can affect the scoring of an application.
    The specification of priority categories for the Administrator and 
the State Directors is a major difference from the current process. 
Currently, the Administrator and State Directors have significant 
discretion to reflect their priorities. In contrast, the proposed rule 
eliminates this discretionary aspect by specifying the sets of 
Administrator and State Director priority categories for each program 
that will be considered each year. This change provides the public with 
a much greater understanding of how their applications can be evaluated 
by the Administrator and the State Directors. Furthermore, these 
priority categories would be used each year, unless otherwise specified 
in a notification issued under proposed Sec.  5002.15. Note that 
program-specific priority categories can only change, however, if the 
Agency subsequently revises subpart B of the regulation.
    Points. Currently, the total available points vary considerably 
between grant programs. The Agency is proposing to standardize the 
total points (to 100) that can be awarded to an application under any 
of the grant programs. Standardizing point totals is intended to help 
the Agency administer the grant programs.
    One difference from the current programs is the proposed 
Administrator and State Director points that could be awarded to an 
application. Except for the Community Facilities grant program, as 
discussed in the following paragraph, both State Director points and 
Administrator points would be each limited to 10 points (10 percent of 
the total potential points) and can only be awarded for the specific 
set of priority categories in effect for that program. In other words, 
the Administrator or State Director could not use discretionary 
categories to establish specific earmarks. Note that only State-
allocated grant programs would be allowed to award points for State 
Director priority categories.
    For the Community Facilities grant program, the Agency is proposing 
to limit Administrator points to 20 points (20 percent of the total 
potential points). The Community Facilities grant program applies to 
projects that are ``essential community facilities.'' The types of 
projects that may qualify as essential community facilities are very 
broad, much broader than any of the other grant programs being included 
in the new platform. This diversity of community facility projects 
presents unique challenges for meeting the overall goals of the 
program. The Agency believes, regarding these broad based programs, 
that it is appropriate to provide greater flexibility in order to meet 
the goals and objectives of the program. Therefore, the Administrator 
would be allowed to award up to 20 points for community facilities 
applications. As noted earlier, Administrator points may be applied to 
State-allocated programs only when the National Office makes the 
determination of which grant applications to fund from the national 
pool of funds.
    As with the sets of Administrator and State Director priority 
categories, the procedures used for awarding Administrator and State 
Director points each year would be as specified in subpart B, unless a 
notification is issued as specified in proposed Sec.  5002.15. The

[[Page 61211]]

maximum number of points that the Administrator and the State Director 
can award, however, can only be changed through a revision to the 
regulation.
    Changes in Administrator and State Director priority categories and 
points. As noted earlier in this preamble, if there is a change in 
Administrator or State Director priority categories and/or point 
allocation to be considered for a particular year, the proposed rule 
allows the Administrator or State Director to change the priority 
categories and/or point allocation (but not the Administrator's or 
State Director's point total) contained in the rule by issuing an 
appropriate notification in a timely fashion. To illustrate the award 
of Administrator and State Director priority categories and points 
under the new platform, consider the following examples.
    Examples. These examples are for State Director priority categories 
for community facility grants, which allow the State Director to award 
up to 10 points to an individual application. These examples are also 
illustrative of the award of State Director priority categories and 
points for other programs.
     Example 1. The Agency does not issue a notification for an 
upcoming fiscal year and an application meets each of the 10 priority 
categories listed in subpart A of Sec.  5002.42(b)(2). In this 
situation, the scoring procedure specified in subpart B for community 
facility grants (Sec.  5002.101(f)(3)) would be used to score the 
application for awarding State Director points. The Agency determines 
that the application can be awarded full points for all 10 priority 
categories. This would total 100 points. However, because the rule 
limits the total number of State Director points to 10 points for any 
one application, this application would receive 10 State Director 
points.
     Example 2. The Agency issues a notification indicating 
that only four of the 10 State Director priority categories in subpart 
A will receive consideration. In this case, the notification also 
identifies the specific points to be awarded to the four priority 
categories, such that the total points to be awarded do not exceed 10 
points. For example, Priority Category 6--up to 3 points; Priority 
Category 7--up to 3 points; Priority Category 8--up to 2 points; and 
Priority Category 9--up to 2 points. Note that in this example the 
point distribution totals 10. In evaluating this application, the 
Agency determines that the application should be awarded full points 
for Priority Categories 6, 7, and 8, but only one point for Priority 
Category 9. The application would, therefore, receive nine (9) State 
Director points.
    7. Award process for applications. The Agency is establishing a 
consistent process for selecting applications for funding. The two main 
areas of the proposed award process are:
     Ranking of applications; and
     Selection of applications for funding.
    In addition, the proposed rule addresses the disposition of 
applications not selected for funding.
    Ranking of applications. For those grant programs that have an open 
application period, which would receive applications on a continuous 
basis, the Agency is establishing a process for ranking applications 
that sufficiently demonstrates competition for grant funds. To 
accomplish this, the Agency is proposing that all scored applications 
for a program be ranked by the Agency four times per year. The four 
proposed ranking dates are, in order of occurrence during the fiscal 
year, December 15, March 15, July 15, and August 15. If any of these 
dates fall on a weekend or a Federally-observed holiday, the affected 
ranking date would move to the next Federal business day. Further, as 
noted earlier in this preamble, a program may change one or more 
ranking dates in a fiscal year if it publishes a notification as 
specified in proposed Sec.  5002.15.
    The first three ranking dates were selected to provide an even 
spacing of ranking dates to help even out the work flow. The first date 
was selected with enough time after the beginning of the fiscal year 
and after the publication of any applicable notification for the 
upcoming fiscal year to allow applicants to prepare and submit an 
application to be considered during the first ranking period. The last 
date, August 15, was included because some programs need to obligate 
funds prior to the end of the fiscal year and this date provides 
sufficient lead time to accommodate such obligations. While only a 
month after the July 15 date, the Agency is including it because it 
provides additional time for applicants to submit applications for 
consideration during the current fiscal year.
    Applications submitted after August 15 of a given fiscal year, 
however, will not be ranked until December 15 of the following fiscal 
year. In this situation, the Agency will retain these applications 
through the next ranking date (i.e., through December 15 of the 
following fiscal year). Such applications would be evaluated and scored 
based on that program's priority categories for the following fiscal 
year. Therefore, if a program's Administrator and/or State Director 
priority categories selected to score applications were to change 
between the current fiscal year and the next, applicants should 
consider whether their retained applications need to be resubmitted in 
order to better address the change in the program's selected 
Administrator and/or State Director priority categories.
    It is important to note that the ranking dates for programs with an 
open application period are not the same as application deadlines. 
Under the new platform, applicants can submit applications for such 
programs at any time. Once the application is determined to be 
eligible, the Agency will rank the application on or after the next 
ranking date. Consider the following examples for grant programs with 
an open application period.
    Example 1. Applicant A submits an application to the Agency on 
November 1, 2008. The Agency determines that the application is 
eligible for further processing on November 30, 2008. The Agency will 
rank the application on or after December 15, 2008.
    Example 2. Applicant B submits an application to the Agency on 
December 16, 2008. The Agency determines that the application eligible 
for further processing on January 5, 2009. The Agency will rank the 
application on or after March 15, 2009.
    Example 3. Applicant C submits an application to the Agency on 
August 17, 2009. The Agency determines that the application is eligible 
for further processing on September 23, 2009. The Agency will rank the 
application on or after December 15, 2009.
    Example 4. Applicant D submits an application to the Agency on 
November 15, 2009. The Agency determines that the application is 
eligible on December 20, 2009, after the December 15 ranking date has 
passed. The Agency will rank Applicant D's application at the next 
scheduled ranking date after December 15, which would be, in this 
example, on or after March 15, 2010.
    For grant programs that have a specified application deadline, such 
as the Distance Learning and Telemedicine grant program, either a 
single ranking date--July 15--or two ranking dates--March 15 and July 
15--is being proposed, depending on the needs of the specific program. 
The July 15 date was selected to ensure sufficient time for the Agency 
to obligate funds to those applications selected for funding. As noted 
earlier in this preamble, a program office may determine that it is 
necessary to move the application deadline to earlier in the year in 
order to better manage Agency resources and program funds. In such 
instances, the

[[Page 61212]]

Agency would provide notification to the public.
    Whether for a grant program with an open application period or for 
a grant program with a specified application deadline, applications 
that are ranked in a given fiscal year will be considered for selection 
for funding or for potential funding, as applicable, during that fiscal 
year. For grant programs with an open application period, this means 
that applications received early in the fiscal year will have a longer 
timeframe to be considered for selection for potential funding than 
those received later in the fiscal year.
    Selection of applications for funding or potential funding. For all 
grant programs, the Agency will create, on or after each ranking date, 
a priority list of ranked applications from which to select 
applications for consideration for (potential) funding. In considering 
which applications to select for (potential) funding, the Agency will 
consider three basic criteria, which are discussed below, and any 
program-specific criteria, as specified in subpart B. For each 
application that is selected for (potential) funding, the Agency will 
so notify the applicant.
    As noted in the previous paragraph, the Agency will consider three 
basic criteria selecting applications for (potential) funding. These 
criteria are: (1) Ranking, (2) availability of funds, and (3) other 
funding sources.
     Ranking. This refers to an application's place on the 
program's priority list, which is based on the score each application 
receives. Higher scoring applications would receive first consideration 
for (potential) funding. However, as discussed below for the two other 
basic criteria and as may be specified in subpart B for a specific 
program, a lower scoring application may be selected for (potential) 
funding ahead of a higher scoring application. For example, if there is 
insufficient funding for the higher scoring project, the Agency may 
pass over that project to fund a lower scoring project in order to 
fully expend the budget authority.
     Availability of funds. This refers to the size of the 
grant request relative to the program funds that remain available to 
the program during the fiscal year. In order for the Agency to better 
manage the availability of program funds, the Agency could select, 
under the new platform, a lower scoring application before an eligible, 
higher-scoring application when the higher scoring application:
     Would require grant assistance in an amount greater than 
the funds remaining in a particular funding period,
     Would require more than 25 percent of a State's allocated 
funds, or
     Would require more than 25 percent of a Nationally-
competed grant program's funds.
    In these situations, the Agency would notify the applicant 
associated with the higher scoring application and provide the 
applicant an opportunity to revise the amount of funds being requested 
in their application, provided the reduced funding request does not 
change the project's purposes and financial feasibility. The applicant 
would then be able to resubmit the application before the Agency 
selects the next highest scoring application for funding.
    The Agency is proposing the 25 percent threshold for nationally-
competed grant programs based on current practice in the Agency's water 
and waste disposal grant program. The Agency is willing to consider a 
different threshold. The Agency is concerned that too low of a 
threshold might create a situation, especially in smaller nationally-
competed grant programs, where this provision could be used to override 
the selection of applications based on their scores. The Agency is also 
concerned that too high of a threshold might not be effective at 
limiting applications that commit too high a percentage of a fiscal 
year's available funding for a particular program. As stated later in 
this preamble, the Agency is requesting comment on this threshold 
level.
     Availability of other funding sources. This refers to 
whether Rural Development loans and other, non-Rural Development 
funding sources should be available to an applicant. If an applicant 
with a higher scoring application can accomplish the project using 
Rural Development loans or other non-Rural Development funding sources, 
the Agency may consider the next highest scoring application ahead of 
the higher scoring application.
    Disposition of applications not selected for potential funding--
grant programs with an open application period. There are four 
scenarios in which a ranked application may not receive funding:
     Application selected for potential funding, but not funded 
due to the Agency's lack of funds;
     Application selected for potential funding, but not funded 
due to missing information;
     Application not selected for potential funding due to its 
ranking and the available level of funds to the Agency; and
     Application not selected for potential funding due to very 
low ranking.
    As summarized in Table 1 and described in the following paragraph, 
the process for handling these four situations would be slightly 
different.
BILLING CODE 3410-XY-P

[[Page 61213]]

[GRAPHIC] [TIFF OMITTED] TP15OC08.006

BILLING CODE 3410-XY-C

[[Page 61214]]

    An application that is selected for potential funding, but is not 
funded due to the Agency's lack of funds, will be carried forward in 
the fiscal year in which it was selected for potential funding until 
either it is funded or the end of the fiscal year in which it was 
selected, whichever occurs first. If the selected application is not 
funded by the end of the fiscal year in which it was selected for 
potential funding, the Agency will carry the application forward into 
the next fiscal year unless the applicant requests in writing the 
Agency to withdraw the application from further consideration. Unless 
there is a change to the regulation or authorizing statute that would 
affect this process, a selected application that is carried forward 
into the next fiscal year would not be subject to re-evaluation or re-
scoring, even if the priority categories applicable to that application 
change for the next fiscal year, because it has already been completed. 
However, the application may be required to be updated if information 
in it becomes outdated.
    If a ranked application has been selected for potential funding, 
but has not been funded because additional information is needed, the 
Agency will notify the applicant as to what information is needed, 
including a timeframe for the applicant to provide the information. If 
the applicant does not provide the information within the specified 
timeframe, the Agency will remove the application from further 
processing.
    If a ranked application has not been selected for potential funding 
because of its ranking and the available level of funds to the Agency, 
it will be included in the set of applications considered in each 
subsequent ranking date in the fiscal year in which it was ranked until 
it is either selected for potential funding, funded, or the end of the 
fiscal year in which the application was ranked is reached, whichever 
occurs first. The Agency will retain the application for consideration 
in the next fiscal year. All such retained applications must be updated 
by the applicant as required by the Agency (e.g., financial conditions, 
change in supporting documentation requirements). In this instance and 
in addition to satisfying Agency requirements, the applicant is 
afforded the opportunity to otherwise revise the application. The 
application will then be re-evaluated and re-scored along with new 
applications received for consideration for funding in the next fiscal 
year.
    If a ranked application has not been selected for potential funding 
because it is determined by the Agency to be non-competitive due to its 
very low score by the end of the fiscal year in which it was scored, 
the Agency will remove the application from further consideration and 
will notify the applicant that the Agency is no longer considering the 
application.
    Disposition of applications not selected for funding--grant 
programs with an application deadline. All ranked applications that are 
not funded in the fiscal year in which they were submitted will not be 
carried forward into the next fiscal year. The Agency will so notify 
the applicant in writing.
    If an application has been selected for funding, but has not been 
funded because additional information is needed, the Agency will notify 
the applicant as to what information is needed, including a timeframe 
for the applicant to provide the information. If the applicant does not 
provide the information within the specified timeframe, the Agency will 
remove the application for further consideration and will so notify the 
applicant. In this situation, the application is also not carried 
forward into the next fiscal year.
    8. Grant agreement and conditions. This section of the new platform 
addresses the mechanism the Agency will use an Agency-approved grant 
agreement to make awards to those applicants selected for funding. This 
section also identifies additional conditions that must be met by 
grantees both prior to the award being made and after the award is 
made. In general, the proposed requirements are the same as those for 
the grant programs currently in place. The proposed rule, though, 
provides a consistent structure for the administration of all of the 
grant programs covered by the proposed rule.
    9. Post-award activities and requirements. As for grant agreements 
and conditions, the proposed rule generally adopts current practices 
and provides a consistent structure for all of the grant programs 
covered by the proposed rule.
    10. Grant close out and related activities. As for the previous two 
sections, the requirements in this section generally adopt current 
practices and provide a consistent structure for all of the grant 
programs covered by the proposed rule.

II. Discussion of Proposed Rule

    In this section, the proposed rule is further described. First, an 
overall organization of the proposed rule is presented, followed by a 
section-by-section discussion of each part. Please note that the 
discussion in this section applies in its entirety to seven of the 
eight grant programs being included; it does not apply in its entirety 
to Tribal College grants. The provisions discussed in this section that 
apply to Tribal College grants are contained in proposed Sec. Sec.  
5002.1 through 5002.14 and in proposed Sec. Sec.  5002.60 through 
5002.80. The discussions in this section on eligibility, applying for a 
grant, processing applications, application scoring, and award process 
do not apply to Tribal College grants. A discussion of these aspects of 
the proposed rule for Tribal College grants is presented in section 
II.B.

A. Overall Organization of the Rule

    The proposed rule is divided into two main parts, subparts A and B. 
Subpart A, contains the provisions that apply to all of the grant 
programs, except for Tribal College grants as described in the previous 
paragraph, covered by the proposed rule. In addition, subpart A 
contains provisions applicable to cooperative agreements. These subpart 
A provisions would not become effective until cooperative agreements 
are provided and published in subpart B to this part.
    Subpart B, contains the provisions specific to the grant programs 
covered by the proposed rule. The Agency is not proposing to include 
cooperative agreements in subpart B at this time, but may consider 
adding cooperative agreements to subpart B at a future date.
    Subpart A. Subpart A is divided into nine major elements. The first 
element, General Provisions, covers general provisions associated with 
this part, and addresses the purpose of this part (Sec.  5002.1), the 
definitions and abbreviations used in this part (Sec.  5002.2), appeal 
rights (Sec.  5002.3), exception authority (Sec.  5002.4), compliance 
with other Federal laws (Sec.  5002.5) and with State and local laws 
(Sec.  5002.6), environmental requirements (Sec.  5002.7), and forms, 
regulations, and instructions (Sec.  5002.8).
    The second element, Funding and Programmatic Change Notifications, 
covers funding and programmatic change notifications (Sec.  5002.15).
    The third element, Eligibility, covers the basic eligibility 
requirements for eligible applicants (Sec.  5002.20), ineligible 
applicants (Sec.  5002.21), eligible projects and purposes (Sec.  
5002.22), and ineligible projects and purposes (Sec.  5002.23).
    The fourth element, Applying for a Grant, covers the basic 
requirements associated with applying for a grant (Sec.  5002.30), 
including preapplications (Sec.  5002.31) and applications (Sec.  
5002.32).
    The fifth element, Processing and Scoring Applications, addresses 
the steps that the Agency will use in

[[Page 61215]]

processing and scoring applications. The steps associated with 
processing applications (Sec.  5002.40) cover initial review of 
applications by the Agency, notifications to the applicants, 
resubmittal of applications by applicants, and applications that are 
subsequently found to be ineligible. This element also addresses the 
processes for dealing with application withdrawal (Sec.  5002.41) and 
the scoring of applications (Sec.  5002.42), including the priority 
categories that the Administrator and the State Directors may use in 
scoring applications. Specific priority categories and points to be 
used are found in subpart B for each individual program.
    The sixth element, Awarding Grants, covers the award process (Sec.  
5002.50). In this element, the process that the Agency will use in 
ranking and selecting applications for funding is presented. In 
addition, this element covers processes associated with applications 
that are not selected and those that are selected, but do not receive 
funding.
    The seventh element, Grant Agreements and Conditions, addresses the 
grant agreement and conditions for applications that are funded. This 
element covers actions that must occur prior to grant closing or start 
of construction (Sec.  5002.60), the process used in making the grant 
agreement (Sec.  5002.61), and the use of remaining funds (Sec.  
5002.62).
    The eighth element, Post Award Activities and Requirements, 
addresses activities and requirements once an award has been made. This 
element covers the following areas:
     Monitoring and reporting program performance (Sec.  
5002.70);
     Programmatic changes and budget revisions (Sec.  5002.71); 
and
     Transfer of obligations (Sec.  5002.72).
    The ninth element, Grant Close Out and Related Activities, covers 
grant close out, non-compliance, and termination (Sec.  5002.80).
    Subpart B. This subpart addresses provisions that are specific to 
the individual programs as follows:
     Provisions specific to the Community Facilities grant 
program are in found in Sec.  5002.101;
     Provisions specific to the Rural Energy for America grant 
program are found in Sec.  5002.102;
     Provisions specific to the Rural Cooperative Development 
grant program are found in Sec.  5002.103;
     Provisions specific to the Distance Learning and 
Telemedicine grant program are found in Sec.  5002.104;
     Provisions specific to the Value-Added Producer grant 
program are found in Sec.  5002.105;
     Provisions specific to the Water and Waste Disposal 
Facilities grant program are found in Sec.  5002.106;
     Provisions specific to the Economic Impact Initiatives 
grant program are found in Sec.  5002.107; and
     Provisions specific to the Tribal College grant program 
are found in Sec.  5002.108.
    The intent of subpart B is to identify all of the provisions 
specific to each of the eight programs. In this way, each program 
maintains its integrity under the new platform. Within subpart B, each 
program specific provisions are related back, where applicable, to a 
corresponding section in subpart A. For example, each section has 
subsections that address applicant and project eligibility. In 
addition, some program-specific requirements in subpart B supersede 
specific subpart A requirements. For example, there is a subpart B 
provision for value-added producer grants that indicates that the 
subpart A requirement for the project to primarily serve a rural area 
does not apply to value-added producer grants.

B. Discussion of Sections

Purpose and Scope (Sec.  5002.1)
    This section defines the purpose, scope, and applicability of this 
part (Sec.  5002.1(a), (b), and (c)), respectively.
    This rule applies to ``grant only'' applications and not to loan 
grant applications (Sec.  5002.1(c)(1)). A loan and grant combination 
application is one in which an entity is seeking both a loan and a 
grant in order to fund its project. This part would apply only to 
``grant only'' applications, unless another 7 CFR part incorporates 
provisions from the proposed rule. If an applicant is seeking a grant 
as part of a ``grant and loan'' application, this part would not apply 
to the grant portion of the grant and loan application, unless another 
7 CFR part incorporates provisions from the proposed rule.
    This section also includes the incorporation by reference (Sec.  
5002.1(d)) of all of the regulations of the Department of Agriculture's 
Office of Chief Financial Officer (or successor office) as codified in 
7 CFR parts 3000 through 3099, including, but not necessarily limited 
to, 7 CFR parts 3015 through 3019, 7 CFR part 3021, and 7 CFR part 
3052, and successor regulations. These parts are referred to in the 
preamble and the rule as the ``Departmental regulations,'' and 
constitute the existing Department's regulations affecting all grant 
programs. Note that this phrase is not used in all sections of the 
rule. The absence of this phrase from a section of the rule does not 
mean that the Departmental regulations do not apply to that section.
Definitions and Abbreviations (Sec.  5002.2)
    This section presents the definitions and abbreviations used in 
this part, including terms that may be specific to one of the eight 
programs found in subpart B. It also incorporates by reference terms 
used in the Departmental regulations.
    The proposed rule contains fewer definitions than found in the 
existing regulations, primarily because the deleted terms are not used. 
Some definitions have been added or revised.
    The proposed rule includes a definition for ``poverty line.'' 
Poverty line is used determining project eligibility under the 
Community Facilities program. The Agency determines the poverty line in 
a manner consistent with criteria established by the Department of 
Health and Human Services (DHHS) and the Department of Housing and 
Urban Development. Current poverty line information published by DHHS, 
however, does not cover Puerto Rico, the Western Pacific Islands, and 
the Virgin Islands. As it is possible for the Community Facilities 
grant program to award grants to applications from these locations, the 
Agency has established poverty lines for these locations, based on the 
level of income.
Appeal Rights (Sec.  5002.3)
    As currently provided, this paragraph provides the legal basis for 
a person to file an appeal of an adverse decision made by the Agency in 
implementing the proposed program. When the Agency makes an adverse 
decision, a person may file an appeal to the National Appeals Division 
in accordance with 7 CFR part 11.
Exception Authority (Sec.  5002.4)
    This section identifies the situations under which the 
Administrator may make exceptions to the requirements contained in the 
regulation.
    Unlike the current regulations, the proposed rule identifies three 
exceptions to this Exception Authority, where the Administrator would 
not be allowed to make exceptions. These three exceptions are:
     Applicant eligibility;
     Project eligibility; and
     Rural area definition.
    The Agency believes that applicant and project eligibility criteria 
must be maintained at all times in order to be consistent with 
statutory authority.

[[Page 61216]]

Compliance With Other Federal Laws (Sec.  5002.5)
    This section states that applicants must comply with other 
applicable Federal laws including, but not limited to, Equal Employment 
Opportunities, Americans with Disabilities Act, Equal Credit 
Opportunity Act, Fair Housing Act, and the Civil Rights Act of 1964.
State Laws, Local Laws, and Regulatory Commission Regulations (Sec.  
5002.6)
    This section states that the provisions of this part will be 
controlling in all cases where there are conflicts between the 
provisions of this part and State or local laws or regulatory 
commissions regulations.
Environmental Requirements (Sec.  5002.7)
    The applicant would be required to comply with Agency environmental 
requirements as found under subpart G of either 7 CFR part 1940 (for 
Rural Housing, Business-Cooperative, and Utilities Services) or 7 CFR 
part 1794 (for Rural Utilities Services), as appropriate. These 
requirements are consistent with those under the eight current 
programs.
    In addition, the applicant must not take any action or incur any 
obligation with respect to the proposed project that would either limit 
the range of alternatives to be considered during the Agency's 
environmental review process or which would have an adverse effect on 
the environment. If such actions or obligations have been incurred that 
would limit the range of alternatives, the project will be ineligible 
for a grant under this part.
Forms, Regulations, and Instructions (Sec.  5002.8)
    This section states that all forms, regulations, instructions, and 
other materials necessary to submit applications for each of the grant 
programs included in this part may be obtained through the Agency. This 
material, including application packages, will be available from Agency 
offices, including but not limited to Rural Development State Offices, 
and the Agency's Web site.
Funding and Programmatic Change Notifications
    This part of the proposed rule identifies the types of information 
to be included in the notifications, the methods that the Agency will 
use to disseminate this information, and when the notifications will be 
made.
Notifications (Sec.  5002.15)
    This section identifies the types of information the Agency will 
include in the notifications, which includes the level of available 
funds, the minimum and maximum grant amounts, and various programmatic 
changes (e.g., changes in Administrator and State Director priority 
categories and points, changes in ranking dates, changes in application 
deadlines for those programs with specified application deadlines). The 
primary notification methods that the Agency will use to make this 
information are Federal Register notices for Nationally-competed grant 
programs and Rural Development's Web site for State-allocated grant 
programs. All information contained in these notifications would also 
be available at any Rural Development office.
    Notifications involving funding will be made each fiscal year for 
each grant program. Notifications involving changes in Administrator 
and State Director priority categories and points will be made at least 
30 days prior to the first ranking date in the year or the application 
deadline, as applicable. Notifications involving all other programmatic 
changes will be made on an as needed basis.
Eligibility
    This section covers requirements associated with both applicant and 
project eligibility and is divided into four sections, which are 
described below. In order for a project to be considered for a grant, 
both the applicant and the project must be determined by the Agency to 
be eligible.
Applicant Eligibility (Sec.  5002.20)
    This section identifies the requirements for applicant eligibility. 
For an applicant to be eligible for a grant under this part, the 
applicant must meet the criteria in this section and the applicant 
eligibility criteria in subpart B for the applicable grant program. The 
program-specific applicant eligibility requirements found in subpart B 
for the program under which their project falls are discussed later in 
this preamble when the individual programs are presented.
    This section identifies two common applicant eligibility 
requirements that all applicants must meet. These two criteria address 
citizenship (Sec.  5002.20(a)) and legal authority and responsibility 
(Sec.  5002.20(b)).
    To be eligible, an applicant must either (1) be a citizen of the 
United States (U.S.), the Republic of Palau, the Federated States of 
Micronesia, the Republic of the Marshall Islands, or American Samoa or 
(2) reside in the U.S. after legal admittance for permanent residence. 
If the applicant is an entity other than an individual, the applicant 
must be at least 51 percent owned by persons who are either citizens of 
one of the countries identified above or legally admitted permanent 
residents residing in the U.S.
    In addition, the applicant must have, or be able to obtain, the 
legal authority to carry out the purposes of the grant.
Ineligible Applicants (Sec.  5002.21)
    This section identifies criteria that would make an applicant 
ineligible for a grant under this part. An applicant would be 
ineligible if the applicant (1) Is debarred, suspended, or otherwise 
excluded from or ineligible for participation in Federal assistance 
programs under Executive Order 12549, (2) has an outstanding judgment 
obtained by the U.S. in a Federal Court (other than U.S. Tax Court), 
(3) is delinquent on the payment of Federal income taxes, or (4) is 
delinquent on Federal debt. These conditions are generally consistent 
with those found in the current programs.
Project Eligibility (Sec.  5002.22)
    This section identifies three criteria required for a project to be 
eligible to receive a grant under this part. To be eligible, a project 
must meet the criteria in this section that are applicable to the 
project, unless otherwise specified in subpart B for a specific 
program. For most programs, additional project eligibility criteria are 
found in subpart B for specific programs. Thus, for a project to be 
eligible for a grant under this part, the project must meet both the 
applicable criteria in this section (unless otherwise specified in 
subpart B) and the criteria in subpart B for the applicable grant 
program.
    A grant application for a project that meets its applicable project 
eligibility criteria as specified in subparts A and B will not 
automatically receive grant funding. However, a project that fails to 
meet any one of its applicable project eligibility criteria would be 
automatically ineligible for consideration for a grant, regardless of 
the other attributes of the project.
    Primarily serve a rural area. The first criterion (Sec.  
5002.22(a)), which applies to all projects and purposes, except those 
under the Value-Added Producer grant program (Sec.  5002.105) and the 
Rural Energy for America grant program (Sec.  5002.102), addresses the 
purpose of the project--the project must primarily serve a rural area. 
This criterion is generally consistent with what the current programs 
require, but, unless otherwise specified in subpart B, does not require 
the project to be physically located within a rural area.

[[Page 61217]]

    For both the Value-Added Producer grant program and the Rural 
Energy for America grant program, the rule would require all projects 
to be located in a rural area. For the Rural Energy for America grant 
program, the Agency is proposing to continue the current requirement 
that the project must be located in a rural area. For the Value-Added 
Producer grant program, however, this is a new requirement from the 
current program.
    Ownership and control requirement. The second criterion (Sec.  
5002.22(b)) applies only to those projects and purposes that acquire or 
improve real or personal property, unless otherwise specified in 
subpart B. This criterion requires the applicant to be the owner of the 
property or have leasehold interest acceptable to the Agency in the 
project and control the revenues and expenses of the project, including 
operation and maintenance.
    Service area selection. The third criterion (Sec.  5002.22(c)) 
applies only to those projects and purposes that are determined by a 
service area. This criterion specifies that the proposed service area 
of the project must be chosen in a way that no user or area is excluded 
because of race, color, religion, sex, marital status, age, disability, 
or national origin. This criterion, where applicable, is the same as 
found under the current regulations of the Community Facilities and the 
Water and Waste Disposal Facilities grant programs.
    To reiterate, a project or purpose must meet each one of the 
project eligibility criteria applicable to it in order to be eligible 
for a grant. Meeting only some of the criteria is insufficient to be 
eligible. These criteria cannot be waived under the Exception Authority 
(Sec.  5002.4).
Ineligible Projects and Purposes (Sec.  5002.23)
    This section identifies projects and purposes that are ineligible 
for grants under this part regardless of whether the project meets the 
conditions specified in subpart B and Sec.  5002.22. These projects 
represent primarily an aggregation of projects and purposes already 
prohibited under the programs being included in today's proposed 
rulemaking. The Agency added to this aggregation a number of additional 
projects and purposes as ineligible, which are identified earlier in 
this preamble.
    As also noted earlier in this preamble, the Agency will provide a 
notification as needed to identify additional projects or purposes that 
the Agency has determined are ineligible for grants under this part.
Applying for a Grant
Applying for a Grant (Sec.  5002.30)
    This section discusses the submittal of preapplications and 
applications when applying for a grant. For most applicants, submitting 
a preapplication is optional, but is required by the Departmental 
regulation incorporated herein for certain government applicants based 
on criteria contained in the Departmental regulations. This section 
also points out that the submission of a preapplication, or the lack 
thereof, does not affect in any way the evaluation and scoring of the 
subsequent application, and applicants who submit a preapplication do 
not receive any priority for funding.
    This section also contains requirements for the filing of 
preapplications and applications, including:
     When they are to be submitted;
     Where to submit them; and
     Their format.
    Lastly, this section addresses incomplete applications. The Agency 
will reject incomplete applications. If the Agency receives an 
incomplete application, the Agency will notify the applicant of the 
elements that made the application incomplete. The Agency points out 
that applicants need to consider that applications must be submitted 
sufficiently ahead of the applicable application deadline to allow for 
Agency review, notification to the applicant of missing elements, and 
resubmittal of the application before the applicable application 
deadline. If a resubmitted application is received by the applicable 
application deadline, the Agency will reconsider the application.
Preapplications (Sec.  5002.31)
    This section presents the requirements associated for submitting 
preapplications, and applies to both Nationally-competed grants and to 
State-allocated grants. Submittal of a preapplication or, in lieu of a 
preapplication, a written request for an eligibility determination, is 
optional unless otherwise required under the Departmental regulations 
(as defined in Sec.  5002.2). In addition, all applicants (governmental 
and non-governmental) must comply with the provisions of the 
Departmental regulations when submitting a preapplication.
    This section also points out that, unless the preapplication is 
required by department regulations, the Agency's assessment of 
applicant and project eligibility based on a preapplication is advisory 
in nature and does not constitute a formal determination by the Agency 
of either applicant or project eligibility. The formal determination of 
eligibility would be made once the application is received. If the 
preapplication is submitted because it is required by the Departmental 
regulations, the Agency will assess it in accordance with the 
Departmental regulations.
Applications (Sec.  5002.32)
    This section identifies the application forms required for grant 
applications under this part and states that the Agency will make 
available to the public program-specific application packages, which 
will include the necessary forms and instructions for filing an 
application for the specific grant program. For some programs, 
additional application requirements are being proposed. These are found 
in subpart B and are discussed later in this preamble.
    Finally, all applications must be consistent with Departmental 
regulations and must be submitted with the appropriate standard form 
(i.e., forms in the SF 424 series).
Processing Applications
Processing Applications (Sec.  5002.40)
    This section identifies the process that the Agency will use to 
review and process applications including the initial review of 
application, notification to the applicants of the Agency's review 
results, the resubmittal of applications, and subsequent ineligibility 
determinations. The processing of applications was discussed earlier in 
the preamble (see Section D, Item 5).
Application Withdrawal (Sec.  5002.41)
    This section outlines actions to be performed by the applicant and 
the Agency if, during the period between the submission of an 
application and the execution of documents, the project is no longer 
viable or the applicant no longer is requesting financial assistance 
for the project. Upon such notification by the applicant, the Agency 
will either withdraw the application or, if it has already been 
selected for funding, rescind the selection of the application.
Application Scoring
Scoring Applications (Sec.  5002.42)
    This section identifies the process that the Agency will use to 
score applications. As noted earlier in this preamble, the Agency will 
only score applications for which it has determined that both the 
applicant and

[[Page 61218]]

project are eligible and the project is feasible or is likely to be 
feasible.
    As provided under Sec.  5002.42(a), for grant programs with an open 
application period, all such applications received in a Federal fiscal 
year will be scored in the fiscal year in which it was submitted unless 
it is received after the last ranking date of the fiscal year for that 
program. Unless a program issues a notification indicating otherwise, 
this would be August 15. If the application is received after the last 
ranking date of the fiscal year, the Agency will score the application 
no later than the first ranking date of the next fiscal year. Such 
applications will be scored against the priority categories and their 
point values effective for the next fiscal year.
    For grant programs with a specified application deadline, each such 
application received will be scored in the year it was received unless 
it is received after the applicable application deadline. Any 
application received after the application deadline for that program 
will not be considered by the Agency.
    As stated in Sec.  5002.42(b), the Agency will score applications 
for each grant program based on the priority categories and their 
associated points using the procedures specified in subpart B. This 
paragraph also states that the Agency will score applications based on 
the information supplied by the applicant at the time the applicant 
submits the application to the Agency.
    Paragraphs (b)(1) and (2) of this section present, respectively, 
the inclusive list of Administrator and State Director priority 
categories that each grant program may consider when awarding points 
for these priority categories. The specific set of priority categories 
that each program will consider in scoring applications, and the points 
that can be awarded for these priority categories, are found in subpart 
B for each grant program.
Awarding Grants
Award Process (Sec.  5002.50)
    This section describes the award process that will be used in 
selecting application for (potential) funding.
    As stated in Sec.  5002.50(a), the Agency will rank all scored 
applications for each program on or after each ranking date for that 
program to create a priority list of all scored applications for 
consideration for (potential) funding. (Note that the ranking dates for 
each program are found in subpart B.) If the ranking date falls on a 
weekend or a Federally-observed holiday, the next Federal business day 
will become the applicable ranking date. Finally, applications that are 
ranked in a given Federal fiscal year will be considered for selection 
for funding for the fiscal year in which the application was ranked.
    Paragraph (b) of this section describes the process the Agency will 
use in selecting applications for funding or for potential funding. 
From a program's priority list, the Agency will select applications for 
funding using criteria specified in Sec.  5002.50(b)(1)(i) through 
(iii) (which were discussed earlier in this preamble in Section D, Item 
7) and any additional program-specific criteria found in subpart B for 
the grant program. Selection of applications for funding will also be 
conducted in a manner consistent with the Departmental regulations. For 
each application selected for (potential) funding, the Agency will 
notify the applicant in writing.
    Paragraph (c) of this section identifies the process the Agency 
will use for applications that are selected for (potential) funding, 
but are not funded. This process was described earlier in this preamble 
in Section D, Item 7.
    Lastly, Sec.  5002.50(d) addresses the process the Agency will use 
if a State or local government raises objections to a proposed project 
under the intergovernmental review process and the objections are not 
resolved within 90 days of the Agency's selection of the application.
Grant Agreements and Conditions
    This section addresses the grant agreement and conditions that 
recipients (and subrecipients) of grants are required to satisfy in 
order to receive the grant funds and to be complied with once the grant 
agreement has been signed and funds awarded.
Actions Prior to Grant Closing or Start of Construction, Whichever 
Occurs First (Sec.  5002.60)
    This section addresses three areas--excess grant funds (Sec.  
5002.60(a)), evidence and disbursement of other funds (Sec.  
5002.60(b), and the acquisition of land, easements, water rights, and 
existing facilities (Sec.  5002.60(c)). The proposed requirements in 
this section are consistent with existing program implementation.
    As stated in Sec.  5002.60(a), which addresses excess grant funds, 
the Agency will reassess the applicant's funding needs whenever there 
is a significant reduction in project cost or a change in project 
scope. This paragraph identifies the factors and procedures that the 
Agency will use in making this reassessment and any attending decreases 
in funding needs. The Agency will deobligate any obligated grant funds 
not needed to complete the project.
    Under Sec.  5002.60(b), which addresses evidence of and 
disbursement of other funds, applicants expecting funds from other 
sources for use in completing projects being partially financed with 
Agency funds would be required to present evidence of the commitment of 
these funds from such other sources. An agreement should be reached 
with all funding sources on how funds are to be disbursed before the 
start of construction.
    Lastly, under Sec.  5002.60(c), which addresses acquisition of 
land, easements, water rights, and existing facilities, applicants 
would be responsible for acquiring all property rights necessary for 
the project and determining that prices paid are reasonable and fair. 
The Agency may require an appraisal by an independent appraiser or 
Agency employee. Requirements are specified for rights-of-way and 
easements (Sec.  5002.60(c)(1)), for title for land and for existing 
facilities (Sec.  5002.60(c)(2)), for water rights, and for lease 
agreements (Sec.  5002.60(c)(3)).
Grant Agreement (Sec.  5002.61)
    The section identifies the documents and steps that the Agency will 
use to enter into a grant agreement with the applicant.
    Section 5002.61(a) states that the Agency will notify each 
applicant whose application has been selected for funding using a 
letter of conditions. The letter of conditions will set out the 
conditions under which the grant will be made. After reviewing the 
conditions and requirements set forth in the letter of conditions, if 
the applicant agrees with those conditions, the applicant would be 
required to acknowledge, in writing, acceptance of the conditions. If, 
however, the applicant believes that certain conditions cannot be met, 
the applicant may propose alternate conditions to the Agency. The 
Agency must concur with any changes proposed to the letter of 
conditions by the applicant before the application will be further 
processed.
    As provided under Sec.  5002.61(b), the Agency will execute grant 
awards through the issuance of an Agency-approved grant agreement 
between the Agency and the grantee. In addition, other documents as 
identified by the Agency will be executed. The Agency notes that it 
will not advance any grant funds to the grantee until this agreement is 
signed by the grantee.
    As provided under Sec.  5002.61(c), the Agency will execute 
cooperative agreements through the issuance of an

[[Page 61219]]

Agency-approved cooperative agreement, or similar Agency-approved 
document, between the Agency and the recipient of the cooperative 
agreement. In addition, other documents as identified by the Agency 
will be executed. Finally, this paragraph states that there will be 
significant Agency involvement in cooperative agreements.
    Lastly, Sec.  5002.61(d) states that the Agency will disburse grant 
funds according to the letter of conditions or the grant agreement, as 
applicable.
Use of Remaining Funds (Sec.  5002.62)
    This section provides requirements on the handling of funds that 
remain after all costs incident to the basic project have been paid or 
provided for as follows:
     Remaining funds are not to include grantee contributions 
(Sec.  5002.62(a)).
     Remaining funds may be refunded to each source in direct 
proportion to the amounts obtained from each source (Sec.  5002.62(b)).
     Remaining funds may be used for eligible grant purposes, 
provided the use will not result in major changes to the project, the 
purpose of the grant remains the same, and the project remains within 
its original scope (Sec.  5002.62(c)).
    Under Sec.  5002.62(d), grant funds not expended after being used 
for eligible grant purposes will be canceled. Before the Agency cancels 
these unexpended grant funds, the Agency will provide written 
notification to the grantee of the Agency's intent to cancel the 
remaining funds.
Post Award Activities and Requirements
Monitoring and Reporting Program Performance (Sec.  5002.70)
    In Sec.  5002.70(a), the Agency will monitor grantees to the extent 
necessary to ensure that facilities are constructed in accordance with 
Agency-approved plans and specifications and to ensure that funds are 
expended for approved purposes.
    Section 5002.70(b) would require grantees to submit performance 
reports on a semiannual basis, unless otherwise specified in subpart B, 
and a final performance report. The semiannual performance reports are 
to include a comparison of accomplishments with the objectives stated 
in the application.
    The grantee would also be required to submit additional reports 
that may be specified in the grant agreement, in a notification issued 
under Sec.  5002.15, or as specified in subpart B.
    Finally, the Agency is reserving the right to collect additional 
project and/or performance data for projects that have received grant 
funds.
Programmatic Changes and Budget Revisions (Sec.  5002.71)
    In addition to the requirements specified in the Departmental 
regulations, this section would allow the Agency, at its sole 
discretion, to require an applicant to submit a new application if 
there is a change to the scope of the project whose application has 
been selected. If a new application is submitted, it would be re-ranked 
in accordance with this part.
Transfer of Obligations (Sec.  5002.72)
    This section addresses the conditions under which an obligation of 
funds established for an applicant can be transferred to a different 
(substituted) applicant. The two conditions are:
     The substituted applicant is eligible, has a close and 
genuine relationship with the original applicant, and has the authority 
to receive the assistance approved for the original applicant (Sec.  
5002.72(a)); and
     The need, purpose(s), and scope of the project for which 
the Agency funds will be used remain substantially unchanged (Sec.  
5002.72(b)).
Grant Close Out and Related Activities
Grant Close Out and Related Activities (Sec.  5002.80)
    This section addresses grant close out for all grants awarded under 
this part. In addition to requiring compliance with the Departmental 
regulations, this section allows the Agency to suspend or terminate a 
grant if the grantee fails to submit satisfactory reports on time under 
the provisions of Sec.  5002.70(b).
Subpart B--Program-Specific Provisions
    Subpart B presents the program-specific requirements for each of 
the programs covered by this subpart.
Community Facilities (Sec.  5002.101)
    This section identifies program-specific requirements for community 
facility projects. The prospective grantee must comply both with 
subpart A provisions and the provisions in this section when seeking a 
community facilities grant. The program-specific provisions for 
community facility projects follow.
Applicant Eligibility
    To be eligible for a community facilities grant, an applicant must 
not only meet the applicant eligibility criteria specified in subpart 
A, but also the applicant eligibility criteria specified in subpart B 
for this program. Specifically, the subpart B criteria (Sec.  
5002.101(a)), which are the same as for the current program, are:
     The applicant must be a public body, such as a 
municipality, county, district, authority, or other political 
subdivision of a State; a non-profit corporation or association; or a 
Federally recognized Indian tribe; and
     The applicant must have significant ties with the local 
rural community. Such ties are necessary to ensure to the greatest 
extent possible that a facility under private control will carry out a 
public purpose and continue to primarily serve rural areas.
    The proposed rule identifies two conditions under which ties with 
the local rural community can be evidenced. These conditions, which are 
not exclusive, are:
     Association with, or controlled by, a local public body or 
bodies or broadly based ownership and controlled by members of the 
community, and
     Substantial public funding through taxes, revenue bonds, 
or other local government sources, or substantial voluntary community 
funding such as would be obtained through a community-wide funding 
campaign.
    These community tie provisions are the same as found in the current 
Community Facilities regulation.
Project Eligibility
    To be eligible for community facilities grant funding, the project 
would have to meet the applicable project eligibility requirements 
specified in subpart A and be for an essential community facility 
(Sec.  5002.101(b)). Essential community facilities include, but are 
not limited to, fire, rescue, health and public safety facilities or 
equipment, telecommunications, supplemental and supporting structures 
for other rural electrification or telephone systems, the purchase of 
major equipment that in themselves provide an essential service to 
rural residents, and the purchase of facilities necessary to improve or 
prevent a loss of service.
    In addition, subpart B requires community facility projects to:
     Be located in a rural area (except for eligible utility-
type of facilities such as hydroelectric and telecommunication 
systems);
     Meet certain median household income and population 
requirements for those to be served by the project;
     Be based on satisfactory sources of revenue;
     Have an applicant who is responsible for operating, 
maintaining, and managing the facility and providing for its continued 
availability and use at reasonable rates and terms; and
     Be unable to finance the proposed project from their own 
resources or

[[Page 61220]]

through commercial credit at reasonable rates and terms.
    These conditions are the same as found in the current grant program 
for community facilities.
Uses of Grant Funds
    Subpart B for community facilities grants identifies additional 
eligible and ineligible uses of grant funds ((Sec.  5002.101(c) and 
(d), respectively). These uses are the same as found in the current 
implementation of the Community Facilities grant program, with the 
exception, as discussed below, of adding two additional eligible uses 
and identifying recreational facilities (except for community parks and 
community wellness centers) as an ineligible use. Eligible uses of 
grant funds (Sec.  5002.101(c)) include:
     Construction, enlargement, extension, or otherwise 
improvement of essential community facilities providing essential 
service primarily to rural residents and rural businesses;
     Construction or relocation of public buildings, roads, 
bridges, fences, or utilities and to make other public improvements 
necessary to the successful operation or protection of eligible 
facilities;
     Relocation of private buildings, roads, bridges, fences, 
or utilities, and other private improvements necessary to the 
successful operation or protection of eligible facilities;
     Facilities that have no more than 25 percent of the floor 
space occupied by Federal Agencies, State Agencies, or other ineligible 
entities or purposes, when these entities enhance the primary purpose 
of the facility; and
     Payment of certain expenses that are a necessary part of a 
project to finance eligible facilities.
    The proposed rule also adds the following eligible purpose:
     Facilities that house State funded organizations that are 
typically housed in community funded facilities and offering services 
provided by an essential community facility.
    Examples of ineligible uses of grant funds, which are listed in 
Sec.  5002.101(d), are:
     Payment of initial operating expenses or annual recurring 
costs, including purchases or rentals that are generally considered to 
be operating and maintenance expenses (unless a Community Facilities 
loan is part of the funding package, in which case the grant would be 
part of a grant-loan combination and would not be subject to this 
proposed rule);
     Construction or repair of electric generating plants, 
electric transmission lines, or gas distribution lines to provide 
services for commercial sale;
     Refinancing of existing indebtedness;
     Payment of interest;
     Payment of any costs when the median household income of 
the population to be served is higher than specified percentages of the 
State non-metropolitan median household income;
     Recreational facilities, except for community parks and 
community wellness centers; and
     Payment for any purposes restricted by the Community 
Facilities direct loan program (see 7 CFR 1942.17(d)(2)).
    One type of project that the Agency is adding to the list of 
ineligible projects under the Community Facilities grant program is 
recreational facilities, with two exceptions as discussed below. The 
Community Facilities grant program is, and has been, oversubscribed; 
that is, it receives more grant requests than it can fund. The Agency 
has found that the types of grant requests it receives are usually for 
projects that more directly address essential community needs, such as 
health and safety needs, than do most recreational facilities. Given 
this situation, it is highly unlikely that recreational facilities 
would be funded. Thus, the Agency is proposing to include recreational 
facilities, except as discussed below, in the list of ineligible 
projects. If the Agency does not explicitly exclude recreational 
facilities, except as indicated, applicants might be otherwise 
encouraged to submit applications with little chance of scoring high 
enough relative to other types of projects to be funded.
    As noted above, the Agency is proposing to allow grants to be used 
for two types of recreational facilities. These are community parks and 
community wellness centers. Community parks could include sport fields 
that would be used for citizen-based sports (e.g., youth soccer league 
fields, community softball fields), but would exclude professional and 
semi-professional sports venues. Many communities have found that 
providing community parks and community wellness centers allow them to 
attract and, equally important, retain citizens. The Agency believes 
that these two types of recreational facilities provide an essential 
service to such communities and should be eligible for grants under the 
Community Facilities grant program.
    Finally, with regard to recreational facilities that would be 
excluded from the Community Facilities grant program, the Agency 
recognizes that conditions may change in the future such that the 
Agency would accept applications for other types of recreational 
facilities. If this occurs, the Agency would propose to allow specific 
types of recreational facilities, through a proposed rulemaking change, 
to apply for a Community Facilities grant.
Funding Limitations and Matching Funds
    The proposed rule incorporates the current Community Facilities 
grant program's maximum grant assistance and funding limitations (Sec.  
5002.101(e)(1) and (e)(2), respectively). The proposed rule (Sec.  
5002.101(e)(3)), consistent with the current program, allows funding of 
the balance of project costs to consist of other Community Facilities 
financial assistance, applicant contributions, and loans and grants 
from other sources. However, other Federal grant funds cannot be used 
as matching funds unless provide by other authorizing legislation.
Scoring Applications
    The priority categories and points associated with those priority 
categories that would be used to score applications are identified in 
Sec.  5002.101(f)(1) through (3), and are divided into program-specific 
priority categories and points, Administrator priority categories and 
points, and State Director priority categories and points. The maximum 
number of points an application can receive would be 100 points.
    The program-specific priority categories and points are in Sec.  
5002.101(f)(1). These priority categories are the same as currently 
used in scoring community facilities grant applications, with two minor 
differences (i.e., the population levels for a couple of scoring 
criteria changed and under ``Other priorities,'' the proposed rule 
replaces conformance with State strategic plan with educational 
facility). The points associated with the priority categories, however, 
have been modified to total 70 points. The relative point values were 
not changed between priority categories.
    The Administrator and State Director priority categories and points 
are identified in Sec.  5002.101(f)(2) and (f)(3), respectively. With 
regard to Administrator priority categories and points, the Community 
Facilities grant program would allow the Administrator to award up to 
20 points (compared to 10 points for the other grant programs) to 
improve the geographic diversity of awardees in a fiscal year. The 
current Community Facilities grant program identifies additional 
Administrator priority categories, which are generally

[[Page 61221]]

covered in subpart A of the proposed rule.
    With regard to State Director priority categories, the Community 
Facilities grant program would use the State Director priority 
categories identified in Sec.  5002.42(b)(2)(i) through (x) under 
subpart A and could award up to 10 points for the State Director 
priority categories. The proposed State Director priority categories 
expand upon and repackage those found in the current regulation.
Ranking Applications
    Unless otherwise specified in a notification, the Agency will rank 
grant applications under this program four times per year (Sec.  
5002.101(g)). The proposed ranking dates are (in the order in which 
they occur each fiscal year): December 15, March 15, July 15, and 
August 15.
Additional Criteria for Selecting Applications
    Consistent with Departmental regulations, Sec.  5002.101(h) would 
allow the Agency to consider in selecting applications for funding 
whether an application is a subsequent request for a previously 
approved project. If the lower scoring application is for the 
continuation of an existing funded project, the Agency may give the 
lower scoring application consideration ahead of a higher scoring 
application. However, if the request for additional grant funds is due 
to cost overruns, the Agency will give consideration to the lower 
scoring application only if the cost overrun is due to certain causes. 
Specifically, the cost overruns must be due to either high bids or 
unexpected construction problems neither of which can be reduced by 
negotiations, redesign, use of bid alternatives, rebidding, or other 
means. However, if the cost overrun exceeds 20 percent of the 
development cost at time of grant approval or if the scope of the 
original purpose has changed, the Agency would not use this criterion 
as a factor in choosing a lower scoring application over a higher 
scoring application. Such an application could still be selected for 
funding, but it would need to compete based on its ranking and other 
award criteria.
Public Information Process
    This section (Sec.  5002.101(i)) would require all grants awarded 
under this section to comply with the public information process 
specified for community facilities direct loan program (see 7 CFR part 
1942.17(j)(9)), as is currently required for community facilities 
grants. This public information process, in part, requires the 
applicant to inform the general public regarding the development of any 
proposed project.
Rural Energy for America (Sec.  5002.102)
    This section identifies program-specific requirements for renewable 
energy system or energy efficiency improvement projects. The 
prospective grantee must comply both with subpart A provisions and the 
provisions in this section when seeking a Rural Energy for America 
grant. The program-specific provisions for renewable energy systems and 
energy efficiency improvement projects follow.
Applicant Eligibility
    To be eligible for a Rural Energy for America grant, an applicant 
must not only meet the applicant eligibility criteria specified in 
subpart A of the proposed rule, but also the applicant eligibility 
criteria specified in subpart B for this program. Specifically, the 
subpart B criteria (Sec.  5002.102(a)) require the applicant to be an 
agricultural producer or rural small business. This requirement is the 
same as in the current program for renewable energy systems and energy 
efficiency improvement grants. However, unlike the current program, the 
applicant would no longer be required to demonstrate financial need to 
be considered an eligible applicant. This change was made as a result 
of the 2008 Farm Bill. As noted below, the Agency, however, is 
incorporating financial need as a scoring criterion.
Project Eligibility
    To be eligible for a Rural Energy for America grant, a project 
would have to meet the applicable project eligibility requirements in 
subpart A and subpart B requirements (Sec.  5002.102(b)). Subpart B 
identifies two general types of projects--(1) those for renewable 
energy systems and energy efficiency improvements (Sec.  
5002.102(b)(1)) and (2) those for feasibility studies (Sec.  
5002.102(b)(2)).
    Under Sec.  5002.102(b)(1), the project must:
     Be for the purchase, installation, expansion, and/or other 
energy-related improvement of a renewable energy system or to make 
energy efficiency improvements;
     Be located in a rural area;
     Be for technology that is replicable and either pre-
commercial or commercially available; and
     Have technical merit as determined by the Agency. If the 
Agency determines that the project is without technical merit, the 
project would be ineligible for a grant.
    Under Sec.  5002.102(b)(2), feasibility studies are eligible 
projects provided they are for a project that meets the criteria 
specified in Sec.  5002.102(b)(1).
    The project eligibility provisions in Sec.  5002.102(b)(1), and 
those in subpart A for project eligibility, are found in the current 
regulations for this program. The project eligibility provisions in 
Sec.  5002.102(b)(2) are being included in response to section 9007 of 
the 2008 Farm Bill.
Additional Preapplication and Application Requirements
    In addition to the preapplication and application requirements 
specified in subpart A, subpart B for this program contains program-
specific provisions for the submittal of preapplications and 
applications (Sec.  5002.102(c)). If an applicant elects to submit a 
preapplication, it must be received by the Agency on or before January 
15 to be considered for funding by the Agency for that fiscal year.
    For applications, the proposed rule would require applications to 
be received by the Agency on or before June 15 each year to be 
considered for funding for that fiscal year. Applications received by 
the Agency after June 15 would not receive consideration for funding 
for that fiscal year.
    The proposed rule also allows for the submittal of lower 
documentation applications (referred to as ``simplified applications'' 
under the current program) for renewable energy systems and energy 
efficiency improvement projects. The proposed rule contains criteria to 
determine if an applicant is eligible to submit a lower documentation 
application. These criteria are:
     Total eligible project costs are $200,000 or less; and
     The proposed project uses either commercially available 
renewable energy systems or energy efficiency improvements.
    In addition, the applicant would be required to agree to grant 
reimbursement after the project is completed. Project completion would 
be demonstrated when the applicant has provided a written final project 
development, testing, and performance report acceptable to the Agency.
    The proposed criteria for submitting a lower documentation 
application are consistent with the current program. The current 
regulation, however, has additional criteria (e.g., addressing project 
construction, timeframe for project completion, and interim financing) 
that the Agency is not

[[Page 61222]]

including in this proposed rule. Such information would still be 
considered by the Agency in evaluating grant applications, but would 
use the application package for this program to ensure such information 
was included in the application.
    As under the current program, it is the Agency's intent to allow 
lower documentation applications to exclude certain financial 
information and the business-level study for renewable energy systems 
from the application. In addition, the technical reports associated 
with lower documentation applications can be less detailed than other 
applications submitted under this program. For example, the technical 
reports for lower documentation applications are not required to 
provide authoritative evidence that project service providers have the 
necessary professional credentials or relevant experience to perform 
the required services. Instead, such technical reports are to list all 
key service providers.
Eligible Project Costs
    Subpart B for Rural Energy for America grants identifies eligible 
project costs (Sec.  5002.102(d)(1) through (9)). These eligible 
project costs are the same as allowed under the current grant program 
for these types of projects.
    The proposed rule would allow eligible project costs in mixed 
business and residential projects under certain circumstances. Eligible 
project costs would apply to a mixed business and residential renewable 
energy system or energy efficiency improvement project if the applicant 
is an agricultural producer. However, if the mixed business and 
residential project is from an applicant who is a rural small business, 
the proposed rule would allow these eligible project costs to apply to 
the applicant's project only if the residential portion of the project 
is less than 25 percent of the square footage of the entire project.
Funding Limitations, Matching Funds, Availability of Other Funding, and 
Grant-Loan Guarantee Combinations
    The proposed funding limitation provisions (Sec.  5002.102(e)(1)), 
which are the same as in the current Renewable Energy Systems and 
Energy Efficiency Improvement regulation, would limit:
     The amount of grant assistance to an eligible project 
under this program to 25 percent of total eligible project costs, which 
are identified in Sec.  5002.102(e); and
     The maximum amount of grant assistance to one individual 
or entity to no more than $750,000 in any one Federal fiscal year.
    In meeting the applicant share of costs (Sec.  5002.102(e)(2)), 
other Federal grant funds and applicant in-kind contributions would not 
be allowed. Third-party, in-kind contributions, however, would be 
allowed, provided they do not exceed 10 percent of the matching fund 
requirement. Passive investor contributions would be acceptable.
    Finally, the Agency seeks to leverage the amount of funds available 
to grantees by requiring certain applicants seeking grants of over 
$50,000 to seek loan guarantees before being considered for grant funds 
(Sec.  5002.102(e)(3)). In addition, the 2008 Farm Bill encourages the 
Agency to fund smaller grant requests. The Agency, therefore, is 
proposing provisions to make the program more available to those 
seeking smaller grants.
    Specifically, if the size of the grant amount being requested in 
the application is $50,000 or less, the Agency will consider funding 
the application on its own merit, without consideration of other 
sources of funding. However, if the size of the grant amount being 
requested in the application is more than $50,000, the Agency will 
consider funding the application only to the extent that:
    1. The applicant cannot obtain a loan guaranteed by the Agency for 
any portion of the project; or
    2. The amount being requested in the grant application is necessary 
for the bank to make a guaranteed loan to the applicant.
    If neither of the two situations described above exist, then the 
Agency will not consider the application under this rule.
    As noted in this preamble, the proposed rule is specific to ``grant 
only'' projects. However, there is an associated issue with projects 
seeking a grant-loan guarantee combination under this program. In 
fiscal year 2008, the Agency began funding the grant portion of a 
grant-loan guarantee combination from the monies administratively 
allocated for loan guarantees. The Agency intends to continue this 
practice subject to future appropriations.
Grant Award Amount
    As under the current grant program, the Agency will take into 
account certain criteria when determining the amount of a grant to be 
awarded (Sec.  5002.102(f)). The eight criteria being proposed are:
     The type of renewable energy system to be purchased;
     The estimated quantity of energy to be generated by the 
renewable energy system;
     The expected environmental benefits of the renewable 
energy system;
     The extent to which the renewable energy system will be 
replicable;
     The amount of energy savings expected to be derived from 
the activity, as demonstrated by an energy audit comparable to an 
energy audit under 7 U.S.C. 8105;
     The estimated length of time it would take for the energy 
savings generated by the activity to equal the cost of the activity;
     The expected energy efficiency of the renewable energy 
system; and
     The amount of energy output per amount of grant award.
    Six of these eight criteria are in the current regulation. The 
seventh criterion, expected energy efficiency of the renewable energy 
system, is required under section 9007 of the Food, Conservation, and 
Energy Act of 2008 (2008 Farm Bill). The eighth criterion, energy 
output per amount of grant award, is being proposed as part of the 
results on an Office of Inspector General audit that recommended 
considering such a criterion for this program.
Scoring Applications
    The priority categories and points associated with those priority 
categories that would be used to score applications are identified in 
Sec.  5002.102(g)(1) and (g)(2), and are divided into program-specific 
priority categories and points and Administrator priority categories 
and points. The maximum number of points an application can receive 
would be 100 points.
    The program-specific priority categories and points are in Sec.  
5002.102(g)(1). With two exceptions, these priority categories are the 
same as currently used in scoring renewable energy systems and energy 
efficiency improvement grant applications. One exception is the award 
of points for ``hybrid technology'' projects (i.e., a combination of 
two or more renewable energy technologies incorporated into a single 
project), which replaces the ``previous grantee/borrowers'' priority 
category. The other exception is the award of points for demonstrated 
financial need. Demonstrated financial need is being proposed as a 
scoring criterion because it is no longer an eligibility criterion and 
the Agency has determined that an applicant's financial need is an 
appropriate criterion for receiving a grant under this program.
    The points associated with the priority categories, however, have 
been modified to total 90 points. The relative point values between 
priority categories have been modified slightly, with the

[[Page 61223]]

largest change associated with environmental benefits.
    The Administrator priority categories and points are identified in 
Sec.  5002.102(g)(2). The current program regulation does not address 
Administrator priority categories. The Rural Energy for America grant 
program would allow the Administrator to award an application up to 10 
points in the following priority categories:
     Unserved or underserved areas;
     Geographic diversity;
     Emergency conditions;
     Public health and safety; and
     Presidential initiatives.
Ranking Applications
    Unless otherwise specified in a notification, the Agency will rank 
grant applications under this program twice each year, on or after 
March 15 and on or after July 15 (Sec.  5002.102(h)).
Rural Cooperative Development Grants (Sec.  5002.103)
    This section identifies program-specific requirements for rural 
cooperative development projects. The prospective grantee must comply 
both with subpart A provisions and the provisions in this section when 
seeking a rural cooperative development grant. The program-specific 
provisions for rural cooperative development projects follow.
Definition
    The proposed rule provides a specific definition (Sec.  
5002.103(a)) for the word ``Center,'' because this term has a unique 
meaning when used in the context of rural cooperative grants.
Applicant Eligibility
    To be eligible for a rural development cooperative grant, an 
applicant must not only meet the applicant eligibility criteria 
specified in subpart A of the proposed rule, but also the applicant 
eligibility criterion specified in subpart B for this program. 
Specifically, this subpart B criterion (Sec.  5002.103(b)), which is 
the same as in the current Rural Cooperative Development grant 
regulation, requires that the applicant to be a non-profit organization 
or institution, including an accredited institution of higher 
education. Public bodies would not be eligible to receive grants under 
this section.
Project Eligibility
    To be eligible for a rural cooperative development grant, a project 
would have to meet the applicable project eligibility requirements in 
subpart A and the following subpart B requirements (Sec.  5002.103(c)):
     Applications that focus on only one cooperative will not 
be considered for funding;
     Except for 1994 Institutions, the applicant must provide 
25 percent of total project cost; and
     Applications that provide for the sharing of information 
among centers will not be considered for funding if more than 10 
percent of the funding request is for the provision of sharing of 
information among centers.
    The first and third project eligibility criteria are consistent 
with the current implementation of this program. The second criterion 
is being added as a result of the 2008 Farm Bill.
    The Agency notes that it is proposing to include specifically in 
the regulation the ``sharing of information among centers'' as an 
eligible project purpose (Sec.  5002.103(c)(3)), but to limit the 
amount of funds that can be awarded to this purpose. The Agency is 
proposing to include sharing of information as an eligible project 
purpose because such sharing can assist other centers with proven 
strategies in cooperative development that could possibly be 
transferred to other areas of the nation. However, the goal of the 
Rural Community Development grant program is to facilitate the creation 
of jobs in rural areas through development of new rural cooperative, 
value added processing, and rural businesses. With a historically-
limited funded program, the sharing of information among centers is not 
necessarily the highest priority for funding at the current time. 
Therefore, the Agency is proposing the 10 percent limit on the amount 
of grant funds that can be awarded to this purpose.
Additional Application Requirements
    In addition to the application requirements specified in subpart A, 
subpart B for this program (Sec.  5002.103(d)) would require the 
applicant to include in the application a plan for the establishment 
and operation by the institution of a center or centers for cooperative 
development. This plan, which is required under the current regulations 
for rural cooperative development grants, must contain specific 
elements, which are statutorily required (Sec.  5002.103(d)(1) through 
(5)).
Uses of Grant Funds
    Subpart B for rural cooperative development grants identifies 
eligible and ineligible uses of grant funds (Sec.  5002.103(e) and (f), 
respectively). These uses are generally consistent with those allowed 
under the current grant program (7 CFR 4284, subpart A) for these types 
of projects.
Grant Agreement and Conditions
    Under paragraph Sec.  5002.103(g), three conditions would affect 
the term of the grant agreement. The first two of the conditions (Sec.  
5002.103(g)(1) and (2)) are required under section 6013 of the 2008 
Farm Bill, while the third condition (Sec.  5002.103(g)(3)) is part of 
the current implementation of this program. These three conditions are:
     A grant awarded to a center that has received no prior 
funding under this section shall be made for a period of one year;
     If the Agency determines that it is in the best interest 
of the program, grants will be awarded for a period of more than one 
year, but not more than three years, to a center that has successfully 
met the parameters described in Sec.  5002.103(i)(1)(i) through (v), as 
determined by the Agency; and
     The Agency will not approve requests to extend the grant 
period for more than 12 months.
Funding Limitations and Matching Funds
    Under paragraph Sec.  5002.103(h)(1), the maximum amount of a grant 
awarded under this section for 1994 Institutions would be no more than 
95 percent of the total cost of the Center. The Agency would be 
prohibited from requiring a match of more than 5 percent of the total 
cost of the Center. This is consistent with current program 
requirements.
    Paragraph Sec.  5002.103(h)(2) addresses requirements associated 
with matching funds. The proposed matching fund requirements are the 
same as under the current program and address, in general, the form of 
the matching funds, the acceptable sources for matching funds, and the 
use of the matching funds.
Scoring Applications
    The priority categories and points associated with those priority 
categories that would be used to score applications are identified in 
proposed Sec.  5002.103(i)(1) and (i)(2), and are divided into program-
specific priority categories and points and Administrator priority 
categories and points. The maximum number of points an application can 
receive would be 100 points.
    The program-specific priority categories and points are in Sec.  
5002.103(i)(1). These priority categories are similar to those 
currently used in scoring rural community development grant 
applications, with some modification as required under section 6013 of 
the 2008 Farm Bill. Specifically, the priority categories of

[[Page 61224]]

``linkages'' and ``matching funds'' have been removed, and a priority 
category for ``networking and regional focus'' has been added. In 
addition, the points associated with the priority categories have been 
modified to total 90 points. The relative point values were not changed 
between priority categories.
    The Administrator priority categories and points are identified in 
Sec.  5002.103(i)(2). The Administrator may award an application up to 
10 points to improve the geographic diversity of awardees in a fiscal 
year.
Ranking Applications
    Unless otherwise specified in a notification, the Agency will rank 
grant applications under this program once each year, on or after July 
15 (Sec.  5002.103(j)).
Additional Criteria for Selecting Applications for Funding
    If two projects obtain the same score, the Agency will select the 
project whose score for the five criteria identified in the authorizing 
statute for this program (Sec.  5002.103(i)(1)(i) through (v)) is 
higher (Sec.  5002.103(k)).
Distance Learning and Telemedicine Grants (Sec.  5002.104)
    This section identifies program-specific requirements for distance 
learning and telemedicine projects. The prospective grantee must comply 
both with subpart A provisions and the provisions in this section when 
seeking a distance learning and telemedicine grant. The program-
specific provisions for distance learning and telemedicine projects 
follow.
Definition
    The proposed rule provides a specific definition (Sec.  
5002.104(a)) for the term ``Telecommunications or electric borrower,'' 
because this term has a unique meaning when used in the context of the 
Distance Learning and Telemedicine grant program.
Applicant Eligibility
    To be eligible for a distance learning or telemedicine grant, an 
applicant must not only meet the applicant eligibility criteria 
specified in subpart A of the proposed rule, but also the applicant 
eligibility criteria specified in subpart B for this program. 
Specifically, these subpart B criteria (Sec.  5002.104(b)), which are 
in the current Distance Learning and Telemedicine grant regulation, 
require that:
     The applicant be legally organized as an incorporated 
organization or partnership; be an Indian tribe or tribal organization, 
as defined in 25 U.S.C. 450b (b) and (c); be a state or local unit of 
government or a consortium; or be an other legal entity, including a 
private corporation organized on a for profit or not-for profit basis; 
and
     The applicant have the legal capacity to contract with the 
Agency to obtain the grant, and comply with all applicable 
requirements. If a consortium lacks the legal capacity to contract, 
each individual entity must contract with the Agency on its own behalf.
    Individuals would not be eligible for grants under this program 
directly. Further, entities that are electric or telecommunication 
borrowers under the Rural Electrification Act of 1936 would not be 
eligible for grants under this program provided, however, that such 
borrowers are eligible for funding under the Distance Learning 
Telemedicine Combination Loan and Grant Program (7 CFR 1703, subpart D) 
and the Distance Learning Telemedicine Loan Program (7 CFR 1703, 
subpart G). These eligibility requirements and conditions are in the 
current Distance Learning and Telemedicine grant program.
Project Eligibility
    To be eligible for a grant under this program, a project would have 
to meet the applicable project eligibility requirements in subpart A 
and the following subpart B program-specific requirements (Sec.  
5002.104(c)):
     The project must deliver distance learning or telemedicine 
services to entities that operate a rural community facility, including 
libraries, or to residents of rural areas at rates calculated to ensure 
that the benefit of the financial assistance is passed through to such 
entities or to residents of rural areas; and
     DLT end-user sites must be located in one of the four 
rural areas identified in Sec.  5002.104(h)(1)(ii)(A), although the DLT 
hub site may be located in either a rural or non-rural area. DLT end-
user facilities not within one of these four defined rural areas are 
not eligible for grant funding under this section.
    The first of these two criteria is in the current Distance Learning 
and Telemedicine grant regulation. The second criterion, however, is 
new, as discussed in the following paragraph.
    Under the current DLT regulation, each application must apply 
certain population criteria to each of its end-user sites, and hubs 
that are also proposed as end-user sites, in order to determine a 
rurality score. The rurality score is the average of all end-user 
sites' rurality scores. For the project to be eligible, the average 
score of the end user sites must meet a specified minimum threshold 
score. Under the current scheme for determining the project's 
eligibility, non-rural end user sites are eligible as long as the 
minimum rurality score is met. This was not a desired outcome by the 
Agency. Therefore, all end user sites in each application would be 
required to be in a rural area in order to be eligible, and, thus, the 
current minimum rurality score criterion is unnecessary.
Additional Preapplication and Application Requirements
    In addition to the preapplication and application requirements 
specified in subpart A, subpart B for this program contains program-
specific provisions for preapplications and applications (Sec.  
5002.104(d)).
    If an applicant submits a preapplication (either as required or 
voluntarily), the proposed rule would require the preapplication to be 
received on or before January 1 each year in order to be considered for 
funding in that fiscal year. If the Agency receives a preapplication 
after January 1, it will not consider the preapplication.
    For applications, the proposed rule would require an original and 
two copies of the application to be submitted. In addition, all 
applications must be received on or before March 31 of each year to be 
considered for funding for that fiscal year. If the Agency receives the 
application after March 31, it will not be considered for funding. 
Lastly, the applicant must include with the application evidence from 
the Agency State Director, Rural Development that the application 
conforms with the State strategic plan as prepared under section 381D 
of the Consolidated Farm and Rural Development Act (7 U.S.C. 1921 et 
seq.). If a State strategic plan does not exist, the applicant should 
so indicate in its application.
Uses of Grant Funds
    Subpart B for this program identifies additional eligible and 
ineligible uses of grant funds (Sec.  5002.104(e) and (f), 
respectively). These uses are the same as found in the current program 
for these types of projects.
Funding Considerations and Matching Funds
    Consistent with the implementation of the current program, Sec.  
5002.104(g)(1) limits the amount of funds (to 10 percent) that can be 
used when an application includes any of the three purposes identified 
in Sec.  5002.104(e)(3), (e)(4), or (e)(5). This limit applies whether 
the application contains one, two, or all three of these eligible uses.

[[Page 61225]]

    The provisions for matching funds (Sec.  5002.104(g)(2)) are 
consistent with the current Distance Learning and Telemedicine grant 
regulation. Applicants would be required to provide at least 15 percent 
of the grant amount requested (i.e., grant funds can be used to pay up 
to 85 percent of the cost of the project). Matching funds must 
generally be in the form of cash. In-kind contributions may be 
substituted for cash if they are used solely for the purposes specified 
in Sec.  5002.104(e). Additional in-kind contribution requirements are 
specified in Sec.  5002.104(g)(2)(ii) through (iv). Lastly, any 
financial assistance from Federal sources would not be considered as 
matching contributions for this program unless there is a Federal 
statutory exception specifically authorizing the Federal financial 
assistance to be considered as a matching contribution, and that 
exception is documented in the application.
Scoring Applications
    The priority categories and points associated with those priority 
categories that would be used to score applications are identified in 
Sec.  5002.104(h)(1) and (2), and are divided into program-specific 
priority categories and points and Administrator priority categories 
and points. The maximum number of points an application can receive 
would be 100 points.
    The program-specific priority categories and points are in Sec.  
5002.104(h)(1). While covering the same areas as the program-specific 
priority categories used in grant applications under the current 
program, the proposed rule greatly consolidates the scoring into three 
priority categories, which are:
     Critical need for the project;
     Comparative population sparsity of the service area; and
     The economic need of the applicant's service area.
    The points associated with these priority categories have been 
modified to total 90 points, with points being assigned as 35 for 
critical need, 30 for population sparsity, and 25 for economic need of 
the applicant's service area.
    Under the current program, the Administrator may select a lower 
scoring application for funding in order to improve geographic 
diversity without including Administrator points in the application's 
scoring. Under the proposed rule, the Agency would retain the ability 
of the Administrator to consider geographic diversity in selecting 
applications for funding, but would require the actual awarding of 
points to applications. As provided for in Sec.  5002.104(h)(2), the 
Distance Learning and Telemedicine grant program would allow the 
Administrator to award an application up to 10 points to improve the 
geographic diversity of awardees in a fiscal year.
Ranking Applications
    Unless otherwise specified in a notification, the Agency will rank 
grant applications under this program once each year, on or after July 
15 (Sec.  5002.104(i)).
Value-Added Producer Grants (Sec.  5002.105)
    This section identifies program-specific requirements for value-
added producer projects. The prospective grantee must comply both with 
subpart A provisions and the provisions in this section when seeking a 
value-added producer grant. The program-specific provisions for value-
added producer projects follow.
Definitions
    Several terms are being defined in Sec.  5002.105(a) because the 
terms have a unique meaning when used in the context of the Value-added 
producer grant program. The terms being defined are: ``agricultural 
producer,'' ``beginning farmer or rancher,'' ``family farm,'' ``special 
purpose equipment,'' and ``socially disadvantaged farmer or rancher.''
Applicant Eligibility
    To be eligible for a value-added producer grant, an applicant must 
not only meet the applicant eligibility criteria specified in subpart A 
of the proposed rule, but also the applicant eligibility criteria 
specified in subpart B for this program. Specifically, the subpart B 
criteria (Sec.  5002.105(b)), which are in the current Value-Added 
Producer grant regulation, require that:
     The applicant be an independent producer, an agricultural 
producer group, a farmer or rancher cooperative, or a majority-
controlled, producer-based business; and
     If the applicant is a farmer or rancher cooperative, an 
agriculture producer group, or a majority-controlled producer-based 
business venture, the applicant must be entering into an emerging 
market as a result of the proposed project. This requirement does not 
apply to an independent producer because the authorizing statute does 
not require it.
    Examples of agricultural producers include: A logger who has a 
majority interest in the logs harvested that are then converted to 
boards, a fisherman that has a majority interest in the fish caught 
that are then smoked, a wild herb gatherer that has a majority interest 
in the gathered herbs that are then converted into essential oils, a 
cattle feeder that has a majority interest in the cattle that are fed, 
slaughtered and sold as boxed beef, and a corn grower that has a 
majority interest in the corn produced that is then converted into corn 
meal.
Venture Eligibility
    To be eligible for a value-added producer grant, a venture would 
have to meet the eligibility requirements found in Sec.  5002.105(c) in 
subpart B, which requires the venture to evidence a high likelihood of 
creating value-added for an agricultural product by meeting at least 
one of the following categories: (1) A change in its physical state, 
(2) differentiated production or marketing, as demonstrated in a 
business plan, or (3) product segregation. The project eligibility 
requirements in Sec.  5002.22 in subpart A would not apply in 
determining venture eligibility.
    Other program-specific considerations that the Agency will use in 
determining whether an application for a venture under this program 
will be considered are:
     The venture must be located in a rural area;
     Working capital grants must have a feasibility study and 
business plan completed specifically for the proposed venture before 
the application is submitted. The feasibility study and business plan 
must be submitted when requested by the Agency during application 
processing;
     Applicants who have already received a planning grant for 
the proposed venture would be ineligible to receive another planning 
grant for the same venture. Applicants who have already received a 
working capital grant for a venture would be ineligible to receive any 
additional grants for that venture;
     No venture may be the subject of more than one planning 
grant or more than one working capital grant under this section. The 
same venture may, however, be awarded one planning grant and 
subsequently apply for and receive a working capital grant;
     Not more than one venture per funding cycle per applicant 
may receive grant funding under this program; and
     If the agricultural product is a value-added product, 
agricultural producers must have a majority ownership interest in the 
agricultural product to which value-added is to accrue.

[[Page 61226]]

    These requirements and considerations are currently being used in 
implementing the Value-Added Producer grant program.
Uses of Grant Funds
    Subpart B for value-added producer grants identifies additional 
eligible and ineligible uses of grant funds (Sec.  5002.105(d) and (e), 
respectively). The eligible uses, which depend on whether the grant is 
a planning grant or a working capital grant, and ineligible uses, which 
are the same for both types of grants, are general consistent with the 
current grant program for these projects (7 CFR 4284, subparts A and 
J).
Additional Preapplication and Application Requirements
    In addition to the preapplication and application requirements 
specified in subpart A, subpart B for this program contains program-
specific provisions for preapplications and applications (Sec.  
5002.105(f)).
    For preapplications, if submitted, they must be received by the 
Agency on or before January 15 each year to be considered for funding 
in that fiscal year. If the Agency receives a preapplication after 
January 15, it will not consider the preapplication. In addition, all 
preapplications must be submitted to the program's National Office.
    For applications, all applications must be received by the Agency 
on or before March 1 of each year to be considered for funding for that 
fiscal year. If the Agency receives the application after March 1, it 
will not be considered for funding. The proposed rule also contains 
program-specific application requirements for business plans and 
feasibility studies. Business plans must include at least three years 
of pro forma financial statements. Feasibility studies should show how 
the venture would operate under a set of assumptions, the technology 
used, the qualifications of the management team, and the financial 
aspects of the venture.
    Lastly, in response to section 6013 of the 2008 Farm Bill, 
applicants with ventures requesting less than $50,000 would be allowed 
to submit applications with less documentation (referred to as 
``simplified applications'').
Grant Agreement and Conditions
    As required by the 2008 Farm Bill, the length of grant agreements 
made under this section would not be allowed to not exceed three years 
(Sec.  5002.105(g)).
Funding Limitation and Matching Funds
    Consistent with the current Value-Added Producer grant regulation, 
grant funds can be used to pay up to 50 percent of the cost of the 
venture and the aggregate amount of awards to majority controlled 
producer-based business ventures may not exceed ten percent of the 
total funds obligated under this program during any fiscal year (Sec.  
5002.105(h)(1)). The proposed rule would also limit the total amount of 
grant funds awarded to a recipient in any one year to $500,000.
    The provisions for matching funds (Sec.  5002.105(h)(2)) are also 
consistent with those being used for the current Value-Added Producer 
grant program. Specifically,
     Applicants must verify in their applications that matching 
funds are available for the time period of the grant;
     Matching funds must be at least equal to the amount of 
grant funds requested;
     Unless provided by other authorizing legislation, other 
Federal grant funds cannot be used as matching funds;
     Matching funds must be spent at a rate equal to or greater 
than the rate at which grant funds are expended; and
     Matching funds must be provided by either the applicant or 
by a third party in the form of cash or in-kind contributions.
Scoring Applications
    The priority categories and points associated with those priority 
categories that would be used to score applications are identified in 
Sec.  5002.105(i), and are divided into program-specific priority 
categories and points and Administrator priority categories and points. 
The maximum number of points an application can receive would be 100 
points.
    The program-specific priority categories and points are in Sec.  
5002.105(i)(1). While covering the same areas as these priority 
categories used in grant applications under the current program, the 
proposed rule greatly consolidates the scoring into four priority 
categories, and adds a fifth category (type of applicant), in response 
to section 6202 of the 2008 Farm Bill. These priority categories, which 
apply to both planning grants and working capital grants, are:
     Nature of the proposed venture;
     Personnel qualifications;
     Commitments and support;
     Work plan/budget; and
     Type of applicant.
    The points associated with these priority categories have been 
modified to total 90 points, with up to 25 points available for the 
first two criteria (nature of the proposed venture and personnel 
qualifications) and up to 20 points available for the last two criteria 
(commitments and support and work plan/budget).
    The Administrator priority categories and points are identified in 
Sec.  5002.105(i)(2). The Value-Added Producer grant program would 
allow the Administrator to award an application up to 10 points to 
improve the geographic diversity of awardees in a fiscal year.
Ranking Applications
    Unless otherwise specified in a notification, the Agency will rank 
grant applications under this program once each year, on or after July 
15 (Sec.  5002.105(j)).
Water and Waste Disposal Facilities (Sec.  5002.106)
    This section identifies program specific requirements for water and 
waste disposal facilities projects. The prospective grantee must comply 
both with subpart A provisions and the provisions in this section when 
seeking a water or waste disposal facilities grant. The program-
specific provisions for water and waste disposal facilities projects 
follow.
General
    Consistent with the current Water and Waste Disposal Facilities 
grant regulations, Sec.  5002.106(a) discusses the Agency's general 
expectations of the experience and expertise of all applicants for 
water and waste disposal facilities projects.
Applicant Eligibility
    To be eligible for a water and waste disposal facilities grant, a 
prospective grantee must not only meet the eligibility criteria 
specified in subpart A of the proposed rule, but also the applicant 
eligibility criterion specified in subpart B for this program. This 
program-specific criterion (Sec.  5002.106(b)) requires the applicant 
to be one of the following:
     A public body, such as a municipality, county, district, 
authority, or other political subdivision of a State located in a rural 
area;
     An organization operated on a not-for-profit basis, such 
as an association, cooperative, or private corporation. The 
organization must be an association controlled by a local public body 
or bodies, or have a broadly based

[[Page 61227]]

ownership by or membership of people of the local community; or
     An Indian tribe on a Federal or State reservation or any 
other Federally-recognized Indian tribe.
    This criterion is found in the current Water and Waste Disposal 
Facilities grant program.
Project Eligibility
    To be eligible for a water and waste disposal facilities grant, the 
project would have to meet the applicable project eligibility 
requirements specified in subpart A and program-specific project 
eligibility criteria found in subpart B for this program. The project 
eligibility criteria in subpart B require, in summary (Sec.  
5002.105(c)(1) through (6)), that the project:
     Serve a rural area that, if such project is completed, is 
not likely to decline in population below that for which the project 
was designed;
     Be designed and constructed so that adequate capacity will 
or can be made available to serve the present population of the area to 
the extent feasible and to serve the reasonably foreseeable growth 
needs of the area to the extent practicable;
     Must be necessary for orderly community development and 
consistent with a current comprehensive community water, waste 
disposal, or other current development plan for the rural area;
     Must be based on taxes, assessments, income, fees, or 
other satisfactory sources of revenues in an amount sufficient to 
provide for facility operation and maintenance, reasonable reserves, 
and debt payment;
     Must be for public use and installed so as to serve any 
potential user within the service area who desires service and can be 
feasibly and legally served; and
     Be unable to finance the proposed project from their own 
resources or through commercial credit at reasonable rates and terms.
    These criteria are the same as found in the current Water and Waste 
Disposal Facilities grant program.
Notice of Intent To Apply for Grant
    Consistent with its statutory authority and the current program, 
subpart B for this program (Sec.  5002.106(d)) would require an 
applicant to provide public notice of its intent to apply for a grant 
under this program at not more than 60 days before the applicant files 
its application with the Agency.
Uses of Grant Funds
    Subpart B for water and waste disposal facilities grants identifies 
additional eligible and ineligible uses of grant funds (Sec.  
5002.106(e) and (f), respectively). The proposed eligible and 
ineligible uses in the current grant program for these types of 
projects.
Funding Considerations and Matching Funds
    Proposed subpart B identifies additional funding considerations 
that the Agency will use in determining whether or not to fund an 
application. These considerations, which are found in Sec.  
5002.106(g)(1) and are consistent with the current provisions for 
grants for this program, are, in summary:
     If the grant results in an annual equivalent dwelling unit 
(EDU) cost that is not comparable with similar systems, the Agency will 
determine a grant amount based on achieving EDU costs that are not 
below similar system user costs;
     The amount of grant needed to achieve a reasonable 
wholesale user cost if the applicant provides wholesale sales or 
services on a contract basis to another system or entity; and
     The amount necessary to reduce delivery cost to a 
reasonable level when the annual cost for delivery of service is 
subsidized.
    The provisions for matching funds (Sec.  5002.106(g)(2)) are 
consistent with the current Water and Waste Disposal Facilities grant 
regulation--either 75 percent or 45 percent, depending on the median 
household income of the service area relative to the poverty line or 
state nonmetropolitan median income.
Scoring Applications
    The priority categories and points associated with those priority 
categories that would be used to score applications are identified in 
Sec.  5002.106(h)(1) through (3), and are divided into program-specific 
priority categories and points, Administrator priority categories and 
points, and State Director priority categories and points. The maximum 
number of points an application can receive would be 100 points.
    The program-specific priority categories and points are in Sec.  
5002.106(h)(1). These priority categories are the same as currently 
used in scoring water and waste disposal facilities grant applications. 
The points associated with the priority categories, however, have been 
modified to total 80 points. The relative point values were not changed 
between priority categories.
    The Administrator and State Director priority categories and points 
are identified in Sec.  5002.106(h)(2) and (h)(3), respectively. With 
regard to Administrator priority categories and points, the Water and 
Waste Disposal Facilities grant program would allow the Administrator 
to award up to 10 points based on grant size and to improve the 
geographic diversity of awardees in a fiscal year. No more than 10 
Administrator points would be awarded to an application.
    With regard to State Director priority categories, the Water and 
Waste Disposal Facilities grant program would use the State Director 
priority categories identified in subpart A (Sec.  5002.42(b)(2)(i) 
through (x)) plus two additional priority categories. These two 
priority categories are:
     Arsenic (as specified in a memorandum of understanding 
with the USEPA); and
     Areas located within 100 miles of New York City's ``ground 
zero'' as the result of the September 11, 2001, attacks.
    Each application under this program is eligible for up to 10 points 
for the State Director priority categories.
Ranking Applications
    Unless otherwise specified in a notification, the Agency will rank 
grant applications under this program four times per year (Sec.  
5002.106(i)). The proposed ranking dates are (in the order in which 
they occur each fiscal year): December 15, March 15, July 15, and 
August 15.
Selecting Applications for Funding--Continuing Projects
    Consistent with Departmental regulations, the Agency will, in 
selecting applications for funding, consider whether an application is 
for a project that has previously received grant funding from the 
Agency (Sec.  5002.106(j)). In this situation, the Agency may give a 
lower scoring application consideration ahead of a higher scoring 
application if the lower scoring application is for the continuation of 
an existing funded project. However, if the request for additional 
grant funds is due to cost overruns, the Agency will give consideration 
to the lower scoring application only if the cost overrun is due to 
certain causes. Specifically, the cost overruns must be due to either 
high bids or unexpected construction problems neither of which can be 
reduced by negotiations, redesign, use of bid alternatives, rebidding, 
or other means. However, if the cost overrun exceeds 20 percent of the 
development cost at time of grant approval or if the scope of the 
original purpose has changed, the Agency would not use this criterion 
as a factor in choosing a lower scoring application over a higher 
scoring application. Such an application

[[Page 61228]]

could still be selected for funding, but it would need to compete based 
on its ranking and other award criteria.
User Charges
    Consistent with the current program, Sec.  5002.106(k) identifies 
expectations for user charges. Specifically, user charges should be 
reasonable and produce enough revenue to provide for all costs of the 
facility after the project is complete. In addition, the planned 
revenue should be sufficient to provide for all debt service, debt 
reserve, operation and maintenance, and, if appropriate, additional 
revenue for facility replacement of short-lived assets without building 
a substantial surplus.
Professional Services and Contracts Related to the Facility
    Consistent with the current program, Sec.  5002.106(l) identifies 
specific requirements for the Water and Waste Disposal Facilities grant 
program related to professional services and contracts for these types 
of projects. Areas specifically covered, which are part of the current 
grant program for water and waster disposal projects, are:
     Fees provided in contracts and agreements;
     Engineering and architectural services;
     Other professional services; and
     Contracts for other services.
User Estimates
    Consistent with the current Water and Waste Disposal Facilities 
grant program, Sec.  5002.106(m) would require applicants who are 
dependent on users' fees for operation and maintenance expenses to base 
their income forecast on realistic base estimates. If users are not 
currently receiving service, the number of maximum users should not be 
used in making this estimate and the amount of cash contributions 
required must be set by the applicant and concurred with by the Agency. 
For most applicants, an enforceable user agreement with a penalty 
clause would be required. All applicants would be required to provide a 
positive program to encourage connection by all users as soon as 
service is available.
Water Rights
    Consistent with the current program, Sec.  5002.106(n) would 
require the applicant to provide the Agency with, as applicable:
     A statement by the applicant's attorney regarding the 
nature of the water rights owned or to be acquired by the applicant 
(such as conveyance of title, appropriation and decree, application and 
permit, public notice and appropriation and use) and
     A copy of a contract with another company or municipality 
to supply water; or stock certificates in another company which 
represents the right to receive water.
Economic Impact Initiatives Grants (Sec.  5002.107)
    The Economic Impact Initiatives grant program is currently being 
administered under the Community Facilities grant program. The Agency 
is proposing to continue the current relationship of the Economic 
Impact Initiative grant program with the Community Facilities grant 
program. Except for changes that would occur under subpart A of the 
proposed rule, the Agency is not proposing any changes to the 
requirements specific to the Economic Impact Initiatives grant program.
Tribal College Grants (Sec.  5002.108)
    As noted earlier, the Tribal College grant program is distinctly 
different than the other existing grant programs in that it is a very 
small grant program with a small, statutorily defined set of eligible 
applicants. Certain provisions in subpart A would apply to this program 
and certain provisions would not. The provisions that would apply are 
contained in Sec. Sec.  5002.1 through 5002.14 and Sec. Sec.  5002.60 
through 5002.80. These provisions generally deal with general 
requirements of the grant programs and with provisions affecting the 
actual award of the grants (grant agreement) through grant close-out.
    The provisions in subpart A that do not apply to Tribal College 
grants generally address program notifications, preapplications and 
applications, applicant eligibility, and processing, scoring, ranking, 
and selecting applications for funding. These aspects are found in the 
subpart B program-specific provisions for Tribal College grants in 
Sec.  5002.108.
Program Notification
    Consistent with current program implementation, the Agency will 
issue a notice each year to the eligible Tribal colleges and 
universities, identifying the maximum grant size and the date that 
preapplications are due (Sec.  5002.108(a)).
Applicant Eligibility
    To be eligible for a Tribal College grant, the applicant must be 
one of the tribal colleges or universities that are identified as 1994 
Institutions (Sec.  5002.108(b)).
Project Eligibility
    Grant funds can only be used to develop facilities provided by the 
Tribal college or university (Sec.  5002.108(c)). Project eligibility 
requirements for Tribal College grants are the same as for the 
Community Facilities grant program, except that a Tribal College grant 
project does not need to demonstrate economic feasibility (Sec.  
5002.101(b)(3)).
Preapplications and Applications
    Both preapplications and applications would have dates by which 
each should be received by the Agency at the State Office in the State 
in which the Tribal college or university is located (Sec.  
5002.108(d)). For preapplications, the submittal date will be 
identified in the annual notification the Agency sends to the Tribal 
colleges and universities. For applications, the proposed rule would 
establish March 31 as the application submittal date. The Agency will 
give priority to preapplications and applications that are received on 
or before their respective submittal dates over those preapplications 
and applications that are received after their respective submittal 
dates.
    The proposed rule also requires applicants submitting more than one 
application in a year to provide a priority listing for the grants it 
is seeking that year.
Funding Limitations
    The maximum amount of a grant awarded under this section would be 
limited to no more than 95 percent of the total cost of the facility. 
Further, the Agency would be prohibited from requiring a match of more 
than 5 percent of the total cost of the facility. (Sec.  5002.108(e)). 
These requirements are in response to section 6007 of the 2008 Farm 
Bill and are different from the current program.
Award Process
    In selecting applications for funding, the Agency will use a 
graduated scale, which is found in Sec.  5002.101(e)(2). In addition, 
in selecting applications for funding (Sec.  5002.108(f)), the Agency 
may:
     Choose to fund only one grant per round from a single 
applicant;
     Reduce the grant amount for all applicants to a maximum 
level that will fund at least one application per Tribal college or 
university that applied during that round; and
     Negotiate to increase the scope of Tribal College projects 
and grants if funds remain available after the grant selection round.

[[Page 61229]]

III. Request for Comments

    The Agency is interested in receiving comments on all aspects of 
the proposed rule. In particular, the Agency is seeking comments in the 
areas listed below. All comments should be submitted as indicated in 
the ADDRESSES section of this preamble.

A. Criteria for Determining Grant Award Amount for the Rural Energy for 
America Grant Program (Sec.  5002.102(f))

    The Rural Energy for America program is an evolving area. 
Therefore, the Agency is seeking comment on whether there are any other 
criteria that the Agency should consider when awarding funding to 
grants under this program. Please be sure to provide sufficient detail 
on each criterion, how it would be measured, and any limitations in its 
applicability to the various technologies for which grants could be 
awarded under this program.

B. Project Scoring Criteria for the Rural Energy for America Grant 
Program (Sec.  5002.102(g)(1))

    In scoring applications under the Rural Energy for America grant 
program, the proposed rule would apply the same program-specific 
criteria to feasibility studies as to the actual renewable energy 
system project or the energy efficiency improvement project. Because 
the program-specific priority categories and points were developed 
under the current program for renewable energy systems and energy 
efficiency improvement projects, the Agency is seeking comment on 
whether these criteria are appropriate for scoring feasibility studies. 
The Agency is also seeking comment on alternative scoring criteria for 
feasibility studies if the ones in the proposed rule are not 
appropriate. Please be sure to be specific on what criteria you 
propose, how they would be applied, and your rationale.

C. Minimum Funding Requirements for the Rural Energy for America Grant 
Program

    In the current Renewable Energy System and Energy Efficiency 
Improvement program, a minimum grant size of $1,500 is specified for 
energy efficiency improvement projects and $2,500 for renewable energy 
system projects. In this proposed rule, the Agency is not proposing a 
minimum grant size for this program. The Agency seeks comment on 
whether there should be a minimum grant size for either or both types 
of projects under this program and, if so, what that level should be 
and why. If the Agency decides to implement a minimum grant size for 
either type of project, the Agency wants to make sure that it is a 
``meaningful'' level; that is, that the minimum level is not so low 
that potential applicants would not consider applying for the grant.

D. The Grant Programs Being Included in the Proposed Rule

    Earlier in this notice, the Agency provided an explanation as to 
how the eight grant programs were selected for inclusion in the 
proposed rule. The Agency is seeking comment on whether it is 
appropriate to include these specific grant programs and, if not, which 
of the grant programs should be removed and why.

E. Grant Request Relative to Remaining Available Program Funds

    As proposed, the Agency would be able to select the next highest 
scoring application if the higher scoring application requests grant 
funds in excess of 25% of the remaining available funds for a 
nationally competed grant program. The Agency is seeking specific 
comment on whether the proposed threshold of 25% is appropriate and why 
or why not. The Agency is also seeking comment on alternative 
thresholds and on the applicability of such thresholds (i.e., should 
they be program-specific or applied to all nationally competed grant 
programs). Please be sure to provide the rationale for the suggested 
thresholds and their applicability.

F. Minimum Score for Determining Applications To Be Eligible

    The Agency is seeking comment as to whether applications must 
obtain a minimum score in order to be considered eligible for funding 
and, if so, what that minimum score should be. At this stage, the 
Agency has considered a minimum score in the vicinity of 40 points, but 
has decided at this point not to include a specific number in the 
proposed rule. By including such a minimum score, applicants would be 
given an understanding of how an application must score to receive 
consideration. However, the Agency is also concerned about the merits 
of establishing such a uniform score upfront without consideration of 
the availability of funds as well as the size and quality of the 
applicant pool.
    If the Agency were to establish a minimum score, the Agency would 
consider including a provision that would allow it to adjust the 
minimum score each year through the issuance of a notification (e.g., a 
Federal Register notice).

List of Subjects

7 CFR Part 1703

    Community development, Grant programs--education, Grant programs--
health care, Grant programs--housing and community development, 
Reporting and recordkeeping requirements, Rural areas.

7 CFR Part 1780

    Business and industry, Community development, Community facilities, 
Grant programs--housing and community development, Reporting and 
recordkeeping requirements, Rural areas, Waste treatment and disposal, 
Water supply, Watersheds.

7 CFR Part 3570

    Accounting, Administrative practice and procedure, Conflicts of 
interests, Environmental impact statements, Fair housing, Grant 
programs--housing and community development, Loan programs--housing and 
community development, Rural areas, Subsidies.

7 CFR Part 4280

    Rural development assistance, Economic development, Energy, Grant 
programs, Renewable energy systems, Energy efficiency improvements, 
Rural areas.

7 CFR Part 4284

    Agricultural commodities, Agriculture innovation centers, 
Agricultural marketing research, Business and Industry, Grant 
programs--housing and community development, Rural areas, Rural 
development, Value-added.

7 CFR Part 5002

    Accounting, Agriculture innovation centers, Community development, 
Economics, Energy efficiency improvements, Environmental impact 
statements, Renewable energy systems, Rural areas, Rural development, 
Value-added, Waste treatment and disposal, Water supply.
    For the reasons set forth in the preamble, under the authority at 5 
U.S.C. 301 and 7 U.S.C. 1989, Chapters XVII, XXXV, and XLII of title 7 
of the Code of Federal Regulations are proposed to be amended and 
Chapter L is proposed to be amended as follows:

CHAPTER XVII--RURAL UTILITIES SERVICE, DEPARTMENT OF AGRICULTURE

PART 1703--Rural Development

    1. The authority citation for part 1703 continues to read as 
follows:

    Authority: 7 U.S.C. 901 et seq. and 950aaa et seq.

[[Page 61230]]

Subpart E of Part 1703 [Removed and reserved]

    2. Subpart E of part 1703 is removed and reserved.

CHAPTER XVII--RURAL UTILITIES SERVICE, DEPARTMENT OF AGRICULTURE

PART 1780--Rural Development

    3. The authority citation for part 1780 continues to read as 
follows:

    Authority: U.S.C. 301; 7 U.S.C. 1989; 16 U.S.C. 1005.

Subpart A of Part 1780 [Amended]

    4. Section 1780.10 is amended by removing paragraph (b)(4) and 
revising paragraphs (b)(2) and (b)(3) to read as follows:


Sec.  1780.10  Limitations.

    (a) * * *
    (b) * * *
    (1) * * *
    (2) Pay any costs of a project when the median household income of 
the service area is more than 100 percent of the nonmetropolitan median 
household income of the State; and
    (3) Pay project costs when other loan funding for the project is 
not at reasonable rates and terms.
* * * * *

CHAPTER XXXV--RURAL HOUSING SERVICE, DEPARTMENT OF AGRICULTURE

PART 3570--Community Programs

    5. The authority citation for part 3570 continues to read as 
follows:

    Authority: 5 U.S.C. 301; 7 U.S.C. 1989.

Subpart B of Part 3570 [Amended]

    6. Section 3570.51 is amended by adding paragraphs (a)(1) and 
(a)(2) to read as follows:


Sec.  3570.51  General.

    (a) * * *
    (1) The provisions of 7 CFR part 3570, subpart B, do not apply to 
grants made under 7 CFR part 5002.
    (2) Grants made in combination with loans that are issued under 
either 7 CFR part 1942, subpart A or 7 CFR part 5001 shall be subject 
to the requirements of 7 CFR part 3570, subpart B.
* * * * *

CHAPTER XLII--RURAL BUSINESS--COOPERATIVE SERVICE AND RURAL UTILITIES 
SERVICE, DEPARTMENT OF AGRICULTURE

PART 4280--LOANS AND GRANTS

    7. The authority citation for part 4280 continues to read as 
follows:

    Authority: 7 U.S.C. 8106.

Subpart B of Part 4280 [Amended]

    8. Section 4280.101 is amended by adding paragraphs (a)(1) and 
(a)(2) to read as follows:


Sec.  4280.101  Purpose.

    (a) * * *
    (1) The provisions of 7 CFR part 4280 ,subpart A, do not apply to 
grants made under 7 CFR part 5002.
    (2) Grants made in combination with loans that are issued under 7 
CFR part 4280, subpart D, shall be subject to the requirements of 7 CFR 
part 4280, subpart A.
* * * * *

PART 4284--GRANTS

    9. The authority citation for part 4284 continues to read as 
follows:

    Authority: 5 U.S.C. 301 and 7 U.S.C. 1989.
    Subpart F also issued under 7 U.S.C. 1932(e).
    Subpart G also issued under 7 U.S.C. 1926(a)(11).
    Subpart J also issued under 7 U.S.C. 1621 note.
    Subpart K also issued under 7 U.S.C. 1621 note.

Subpart F of Part 4284 [Removed and Reserved]

    10. Subpart F of part 4284 is removed and reserved.

Subpart J of Part 4284 [Removed and Reserved]

    11. Subpart J of part 4284 is removed and reserved.
    12. Chapter L consisting of parts 5000 through 5099 is established 
and a new part 5002 is added to read as follows:

CHAPTER L--RURAL DEVELOPMENT, DEPARTMENT OF AGRICULTURE

PART 5002--GRANTS

Subpart A--General Provisions

Sec.
5002.1 Purpose and scope.
5002.2 Definitions and abbreviations.
5002.3 Appeal rights.
5002.4 Exception authority.
5002.5 Compliance with other Federal laws.
5002.6 State laws, local laws, and regulatory commission 
regulations.
5002.7 Environmental requirements.
5002.8 Forms, regulations, and instructions.
5002.9--5002.14 [Reserved]

Funding and Programmatic Change Notifications

5002.15 Notifications.
5002.16--5002.19 [Reserved]

Eligibility

5002.20 Applicant eligibility.
5002.21 Ineligible applicants.
5002.22 Project eligibility.
5002.23 Ineligible projects and purposes.
5002.24--5002.29 [Reserved]

Applying for a Grant

5002.30 Applying for a grant.
5002.31 Preapplications.
5002.32 Applications.
5002.33--5002.39 [Reserved]

Processing and Scoring Applications

5002.40 Processing applications.
5002.41 Application withdrawal.
5002.42 Scoring applications.
5002.43--5002.49 [Reserved]

Awarding Grants

5002.50 Award process.
5002.51--5002.59 [Reserved]

Grant Agreements and Conditions

5002.60 Actions prior to grant closing or start of construction, 
whichever comes first.
5002.61 Grant agreement.
5002.62 Use of remaining funds.
5002.63--5002.69 [Reserved]

Post Award Activities and Requirements

5002.70 Monitoring and reporting program performance.
5002.71 Programmatic changes and budget revisions.
5002.72 Transfer of obligations.
5002.73--5002.79 [Reserved]

Grant Close Out and Related Activities

5002.80 Grant close out and related activities.
5002.81--5002.100 [Reserved]

Subpart B--Program Specific Provisions

5002.101 Community Facilities.
5002.102 Rural Energy for America Grants.
5002.103 Rural Cooperative Development Grants.
5002.104 Distance Learning and Telemedicine Grants.
5002.105 Value-Added Producer Grants.
5002.106 Water and Waste Disposal Facilities Grants.
5002.107 Economic Impact Initiatives Grants.
5002.108 Tribal College Grants.
5002.109--5002.200 [Reserved]

    Authority: 5 U.S.C. 301; 7 U.S.C. 1926(a)(1); 7 U.S.C. 1932(a); 
7 U.S.C. 8106.

Subpart A--General Provisions


Sec.  5002.1.  Purpose and scope.

    (a) General. The purpose and scope of this part is to simplify, 
standardize, and improve the administration and implementation of 
grants and cooperative agreements made by Rural Development. This part 
applies to those grant and cooperative agreement programs specified in 
subpart B of this part.
    (b) Terminology applicable to subpart A. This subpart's substantive 
rules are the same for grants and cooperative agreements. Therefore, 
certain

[[Page 61231]]

simplified terminology is used in the text. Specifically in all 
portions of this subpart:
    (1) Each provision that applies to ``grants'' also applies to 
``cooperative agreements,'' even if the latter term does not appear in 
the provisions unless the context otherwise means specifically 
cooperative agreement.
    (2) Each provision that applies to ``applicants'' for grants or 
``grantees'' applies to ``applicants'' for cooperative agreements or 
``recipients of cooperative agreements,'' even if the latter terms do 
not appear in the provision unless the context otherwise means 
specifically a cooperative agreement applicant or recipient.
    (3) The term ``grantee'' or ``applicant'' refers equally to 
recipients or applicants of grants and recipients or applicants of 
cooperative agreements.
    (4) The term ``Agency'' refers equally to a Rural Development 
agency that awards a grant and to one that awards a cooperative 
agreement.
    (5) The term ``subgrant'' refers equally to certain awards under 
grants and to the same kinds of awards under cooperative agreements.
    (c) Applicability. (1) ``Grant only'' applications. Unless 
otherwise specified in another part, the requirements of this part 
apply only to applicants submitting a ``grant only'' application. Any 
grant that is requested in combination with a loan (a loan and grant 
combination) will be determined based on the process associated with 
loan selection.
    (2) Tribal College Grants. Unless otherwise specified in Sec.  
5002.108, the provisions in Sec.  5002.15 through Sec.  5002.59 do not 
apply to Tribal College grants.
    (d) Incorporation by reference. Unless specifically stated, this 
part incorporates by reference the regulations of the Department of 
Agriculture's Office of Chief Financial Officer (or successor office) 
as codified in 7 CFR parts 3000 through 3099, including but not 
necessarily limited to 7 CFR parts 3015 through 3019, 7 CFR part 3021, 
and 7 CFR part 3052, and successor regulations to these parts.
    (e) Relationship between subpart A and subpart B requirements. All 
grant programs subject to this part are subject to the requirements and 
definitions specified in subpart A, unless there is a program specific 
provision or definition in subpart B that overrides the corresponding 
subpart A provision. Such a subpart B provision may modify the scope of 
or replace entirely the corresponding subpart A provision.


Sec.  5002.2  Definitions and abbreviations.

    Each term used in this part shall have the meaning as found in the 
Departmental regulations and in this part. If a term is defined in this 
part and in the Departmental regulations, such term shall have the 
meaning as found in this part. If there is a conflict in how a term is 
defined in this part and in how it is defined in the Departmental 
regulations, it shall have the meaning as defined in this part.
    (a) Definitions.
    1994 Institution. A college identified as such for purposes of the 
Equity in Educational Land-Grant Status Act of 1994 (7 U.S.C. 301 
note).
    Administrator. Each of the Administrators of the Rural Utilities 
Service, the Rural Business-Cooperative Service, the Rural Housing 
Service or their respective designees or successors, as appropriate.
    Agency identified target areas. An identified area in the State 
strategic plan or other plans developed by the Rural Development State 
Director.
    Agency. The Rural Housing Service or successor for the programs it 
administers; the Rural Utilities Service or successor for the programs 
it administers; and the Rural Business-Cooperative Service or successor 
for the programs it administers.
    Agricultural commodity. An unprocessed product of farms, ranches, 
nurseries, and forests. Agricultural commodities include: Livestock, 
poultry, and fish; fruits and vegetables; grains, such as wheat, 
barley, oats, rye, triticale, rice, corn, and sorghum; legumes, such as 
field beans and peas; animal feed and forage crops; seed crops; fiber 
crops, such as cotton; oil crops, such as safflower, sunflower, corn, 
and cottonseed; trees grown for lumber and wood products; nursery stock 
grown commercially; Christmas trees; ornamentals and cut flowers; and 
turf grown commercially for sod. Agricultural commodities do not 
include horses or animals raised as pets, such as cats, dogs, and 
ferrets.
    Agricultural producer. An individual or entity directly engaged in 
the production of agricultural products, including crops (including 
farming); livestock (including ranching); forestry products; 
hydroponics; nursery stock; or aquaculture, whereby 50 percent or 
greater of their gross income is derived from the operations.
    Agricultural producer group. An organization that represents 
independent producers, whose mission includes working on behalf of 
independent producers and the majority of whose membership and board of 
directors are comprised of independent producers.
    Agricultural product. Plant and animal products and their by-
products to include crops (including farming); livestock (including 
ranching); forestry products, hydroponics; nursery stock; aquaculture; 
fish and seafood products.
    Annual receipts. The total income or gross income (sole 
proprietorship) plus cost of goods sold.
    Biomass. Any organic material that is available on a renewable or 
recurring basis, including agricultural crops; trees grown for energy 
production; wood waste and wood residues; plants, including aquatic 
plants and grasses; fibers; animal waste and other waste materials; and 
fats, oils, and greases, including recycled fats, oils, and greases. It 
does not include paper that is commonly recycled or un-segregated solid 
waste.
    Commercially available. A system that has a proven operating 
history of viability of at least one year, specific to the proposed 
application. Such a system is based on established design, and 
installation procedures and practices. Professional service providers, 
trades, large construction equipment providers, and labor are familiar 
with installation procedures and practices. Proprietary and balance of 
system equipment and spare parts are readily available. Service is 
readily available to properly maintain and operate the system. An 
established warranty exists for parts, labor, and performance.
    Cooperative agreement. A legal instrument reflecting a relationship 
between the Agency and a State, a local government, or other recipient 
when:
    (i) The principal purpose of the relationship is to transfer a 
thing of value to the State, local government, or other recipient to 
carry out a public purpose of support or stimulation authorized by a 
law of the United States instead of acquiring (by purchase, lease, or 
barter) property or services for the direct benefit or use of the 
Agency; and
    (ii) Substantial involvement is expected between the Agency and the 
State, local government, or other recipient when carrying out the 
activity contemplated in this agreement.
    Cooperative development. The startup, expansion or operational 
improvement of a cooperative to promote development in rural areas of 
services and products, processes that can be used in the marketing of 
products, or enterprises that add value to farm products through 
processing or marketing activities. Development activities may include, 
but are not limited to, technical assistance, research services, 
educational services and

[[Page 61232]]

advisory services. Operational improvement includes making the 
cooperative more efficient or better managed.
    Data terminal equipment. Equipment that converts user information 
into data signals for transmission, or reconverts the received data 
signals into user information, and is normally found on the terminal of 
a circuit and on the premises of the DLT end user.
    Day. Calendar day, unless otherwise stated.
    Departmental regulations. The regulations of the Department of 
Agriculture's Office of Chief Financial Officer (or successor office) 
as codified in 7 CFR parts 3000 through 3099, including but not 
necessarily limited to 7 CFR parts 3015 through 3019, 7 CFR part 3021, 
and 7 CFR part 3052, and successor regulations to these parts.
    Distance learning. A telecommunications link to a DLT end user 
through the use of eligible equipment to:
    (i) Provide educational programs, instruction, or information 
originating in one area, whether rural or not, to students and teachers 
who are located in a rural area; or
    (ii) Connect teachers and students, located in one area, whether 
rural or not, with teachers and students that are located in a rural 
area.
    DLT end user. One or more of the following:
    (i) Rural elementary, secondary schools, and other educational 
institutions, such as institutions of higher education, vocational and 
adult training and education centers, libraries, and teacher training 
centers, and students, teachers and instructors using such rural 
educational facilities, that participate in a rural distance learning 
telecommunications program through a project funded under this subpart;
    (ii) Rural hospitals, primary care centers or facilities, such as 
medical centers, nursing homes, and clinics, and physicians and staff 
using such rural medical facilities, that participate in a rural 
telemedicine program through a project funded under this subpart; or
    (iii) Other rural community facilities, institutions, or entities 
that receive distance learning or telemedicine services.
    DLT end-user site. A facility that is part of a network or 
telecommunications system that is utilized by DLT end users.
    Eligible project costs. The total project costs that are eligible 
to be paid with program funds.
    Emerging market. A new or developing market.
    Energy assessment. An assessment conducted by an experienced energy 
assessor, certified energy manager or professional engineer assessing 
energy cost and efficiency by analyzing energy bills and briefly 
surveying the target building, machinery, or system. The assessment 
identifies and provides a savings and cost analysis of low-cost/no-cost 
measures. The assessment will estimate the overall costs and expected 
energy savings from these improvements, and dollars saved per year. The 
assessment will estimate weighted-average payback period in years.
    Energy audit. An audit conducted by a certified energy manager or 
professional engineer that focuses on potential capital-intensive 
projects and involves detailed gathering of field data and engineering 
analysis. The audit will provide detailed project costs and savings 
information with a high level of confidence sufficient for major 
capital investment decisions similar to but in more detail than an 
energy assessment.
    Energy efficiency improvement. Improvements to a facility, 
building, or process that reduces energy consumption, or reduces energy 
consumed per square foot.
    Equivalent dwelling unit. The level of service provided to a 
typical rural residential dwelling.
    Essential community facilities. The physical structure financed or 
the resulting service provided to primarily rural residents that is 
operated on a non-profit basis and that combined or severally must:
    (i) Perform or fulfill a function customarily provided by a local 
unit of government;
    (ii) Be a public improvement needed for the orderly development of 
a rural community;
    (iii) Not include a project that benefits a single individual or 
group of single individuals as opposed to a class within a community;
    (iv) Not include private affairs or commercial or business 
undertakings (except for limited authority for industrial parks, 
agricultural exposition centers, fair grounds, farmers markets, 
assisted living facilities, adult day care facilities, and child care 
facilities) unless it is a minor part of the total facility; and
    (v) Be within the area of jurisdiction or operation for eligible 
public bodies or a similar local rural service area of a non-profit 
corporation.
    Facility. The physical structure financed by the Agency or the 
resulting service provided to rural residents.
    Farm or ranch. Any place from which $1,000 or more of agricultural 
products (crops and livestock) were raised and sold or would have been 
raised and sold during the previous year, but for an event beyond the 
control of the farmer or rancher.
    Farmer or rancher cooperative. A farmer or rancher owned and 
controlled business from which benefits are derived and distributed 
equitably on the basis of use by each of the farmer or rancher owners.
    Feasibility study. An analysis by a qualified consultant of the 
economic, market, technical, financial, and management capabilities of 
a proposed project, venture, or business in terms of its expectation 
for success.
    Financial feasibility. The ability of a project or business to 
achieve the income, credit, and cash flows to financially sustain a 
project over the long term.
    Fiscal year. Means the Federal government's fiscal year.
    Grant. A legal instrument reflecting a relationship between the 
Agency and a State, a local government, or other recipient when the 
principal purpose of the relationship is to transfer a thing of value 
to the State, local government, or other recipient to carry out a 
public purpose of support or stimulation authorized by a law of the 
United States instead of acquiring (by purchase, lease, or barter) 
property or services for the direct benefit or use of the Agency.
    Hub. A facility that is part of a network or telecommunications 
system that provides educational or medical services to DLT end-user 
sites.
    In-kind contributions. Applicant or third-party real or personal 
property or services benefiting the Federally assisted project or 
program that are provided by the applicant or a third-party entity 
consistent with this part. The identifiable value of goods and services 
must be considered eligible expenditures, must be used for eligible 
purposes of the grant program, and must directly benefit the project.
    Independent producers. Agricultural producers, individuals or 
entities (including for-profit and non-profit corporations, limited 
liability companies (LLCs), partnerships, or limited liability 
partnerships (LLPs), where the entities are solely owned or controlled 
by agricultural producers who own a majority ownership interest in the 
agricultural product that is produced. Independent producers must 
produce and own the agricultural product to which value is being added. 
Producers who produce the agricultural product under contract for 
another entity but do not own the product produced are not independent 
producers. Independent producers must

[[Page 61233]]

supply product they produce and own the value-added venture.
    Indian tribe. This term has the meaning given it in section 4 of 
the Indian Self-Determination and Education Assistance Act (25 U.S.C. 
450b).
    Institution of higher education. This term has the meaning given it 
in section 102(a) of the Higher Education Act of 1965 (20 U.S.C. 
1002(a)).
    Instructional programming. Educational material, including computer 
software, that would be used for educational purposes in connection 
with eligible equipment but does not include salaries, benefits, and 
overhead of medical or educational personnel.
    Interactive video equipment. Equipment used to produce and prepare 
for transmission audio and visual signals from at least two distant 
locations so that individuals at such locations can orally and visually 
communicate with each other. Such equipment includes monitors, other 
display devices, cameras or other recording devices, audio pickup 
devices, and other related equipment.
    Local exchange carrier. A commercial, cooperative or mutual-type 
association, or public body that is engaged in the provision of 
telephone exchange service or exchange access.
    Majority-controlled producer-based business venture. A venture 
where more than 50 percent of the ownership and control is held by 
independent producers, or, partnerships, LLCs, LLPs, corporations, or 
cooperatives that are themselves 100 percent owned and controlled by 
independent producers.
    Matching funds. The applicant's contribution for approved purposes 
in accordance with the Departmental regulations.
    Non-profit. Any entity or organization no part of the net earnings 
of which inures or may lawfully inure to the benefit of any private 
shareholder or individual.
    Passive investor. A third-party equity investor that does not 
actively participate in management and operation decisions of the 
business entity as evidenced by a contractual arrangement.
    Planning grants. Grants to facilitate the development of a defined 
program of economic activities to determine the viability of a 
potential value-added venture, including feasibility studies, marketing 
strategies, business plans and legal evaluations.
    Post-application. The period of time after the Agency has received 
an essentially completed application. An ``essentially completed'' 
application is an application that contains all parts necessary for the 
Agency to determine applicant and project eligibility, to score the 
application, and to conduct the technical evaluation.
    Poverty line. The level of income for a family of four, as 
determined consistent with criteria established by the Department of 
Health and Human Services or the Department of Housing and Urban 
Development, as determined by the Agency.
    Pre-commercial technology. Technology that has emerged through the 
research and development process and has technical and economic 
potential for commercial application, but is not yet commercially 
available.
    Product segregation. Physical separation of a product or commodity 
from similar products. Physical separation requires a barrier to 
prevent mixing with the similar product.
    Public body. A municipality, county, or other political subdivision 
of a State; a special purpose district; or an Indian tribe on a Federal 
or State reservation or other Federally-recognized Indian tribe or an 
organization controlled by any of the above.
    Qualified consultant. An independent, third-party possessing the 
knowledge, expertise, and experience to perform in an efficient, 
effective, and authoritative manner the specific task required.
    Ranking date. A specified date on or after which the Agency will 
rank all scored applications for a specific grant program to create a 
priority list of applications. Grant programs may have more than one 
ranking date.
    Renewable biomass.
    (i) Materials, pre-commercial thinnings, or invasive species from 
National Forest System land and public lands (as defined in section 103 
of the Federal Land Policy and Management Act of 1976 (43 U.S.C. 1702)) 
that:
    (A) Are byproducts of preventive treatments that are removed to 
reduce hazardous fuels; to reduce or contain disease or insect 
infestation; or to restore ecosystem health;
    (B) would not otherwise be used for higher-value products; and
    (C) are harvested in accordance with applicable law and land 
management plans and the requirements for old-growth maintenance, 
restoration, and management direction of paragraphs (2), (3), and (4) 
of subsection (e) of section 102 of the Healthy Forests Restoration Act 
of 2003 (16 U.S.C. 6512) and large-tree retention of subsection (f) of 
that section; or
    (ii) any organic matter that is available on a renewable or 
recurring basis from non-Federal land or land belonging to an Indian or 
Indian tribe that is held in trust by the United States or subject to a 
restriction against alienation imposed by the United States, including:
    (A) renewable plant material, including feed grains; other 
agricultural commodities; other plants and trees; and algae; and
    (B) waste material, including crop residue; other vegetative waste 
material (including wood waste and wood residues); animal waste and 
byproducts (including fats, oils, greases, and manure); and food waste 
and yard waste.
    Renewable energy.
    (i) Energy derived from a wind, solar, renewable biomass, ocean 
(including tidal, wave, current, and thermal), geothermal, or 
hydroelectric source;
    (ii) Hydrogen derived from renewable biomass or water using an 
energy source described in paragraph (i) of this definition.
    Renewable energy system. A system that produces or produces and 
delivers usable energy from a renewable energy source.
    Rural or rural area.
    (i) For purposes of providing Renewable Energy/Energy Efficiency 
and Rural Cooperative Development grants, rural and rural area are 
defined as any area of a State not in a city or town that has a 
population of more than 50,000 inhabitants, according to the latest 
decennial census of the United States, and the contiguous and adjacent 
urbanized area.
    (ii) For the purpose of providing Community Facilities and Economic 
Impact Initiatives grants, rural and rural area are defined as any area 
not in a city, town, or Census Designated Place with a population of 
more than 20,000 inhabitants according to the latest decennial census 
of the United States.
    (iii) For the purpose of providing Distance Learning and 
Telemedicine grants, rural and rural area are defined as any area not 
within the boundary of (A) an urbanized area or (B) an urban cluster in 
excess of 20,000 inhabitants according to the latest decennial census 
of the United States.
    (iv) For the purpose of providing Water and Waste Disposal 
facilities grants, rural and rural area are defined as any area not in 
a city, town, or Census Designated Place with a population in excess of 
10,000 inhabitants, according to the latest decennial census of the 
United States.
    (v) For cooperative agreements, the definition of rural or rural 
area is the definition for the program which provides the source of 
funds for the cooperative agreement.
    (vi) For the purposes of this definition, cities and towns are

[[Page 61234]]

incorporated population centers with definite boundaries, local self-
government, and legal powers set forth in a charter granted by the 
State. For Puerto Rico, Census Designated Place (CDP), as defined by 
the U.S. Census Bureau, will be used as the equivalent to city or town. 
For the purpose of defining a rural area in the Republic of Palau, the 
Federated States of Micronesia, and the Republic of the Marshall 
Islands, the Agency shall determine what constitutes rural and rural 
area based on available population data.
    Rural community facility. A facility such as a school, library, 
learning center, training facility, hospital, or medical facility that 
provides educational or health care benefits primarily to residents of 
rural areas.
    Rural Development. A mission area of the Under Secretary for Rural 
Development within the U.S. Department of Agriculture (USDA), which 
includes Rural Housing Service, Rural Utilities Service, and Rural 
Business-Cooperative Service and their successors.
    Service area. The area reasonably expected to be served by the 
project/facility.
    Small business. An entity is considered a small business in 
accordance with the Small Business Administration's (SBA) small 
business size standards by the North American Industry Classification 
System found in Title 13 CFR part 121. A private entity, including a 
sole proprietorship, partnership, corporation, cooperative (including a 
cooperative qualified under section 501(c)(12) of the Internal Revenue 
Code), and an electric utility, including a Tribal or governmental 
electric utility, that provides service to rural consumers on a cost-
of-service basis without support from public funds or subsidy from the 
Government authority establishing the district, provided such utilities 
meet SBA's definition of small business. These entities must operate 
independent of direct Government control. With the exception of the 
entities described above, all other non-profit entities are excluded.
    State. Any of the 50 States of the United States, the Commonwealth 
of Puerto Rico, the District of Columbia, the U.S. Virgin Islands, 
Guam, American Samoa, the Commonwealth of the Northern Mariana Islands, 
the Republic of Palau, the Federated States of Micronesia, and the 
Republic of the Marshall Islands.
    State director. The term ``State Director'' means, with respect to 
a State, the Director of the Rural Development State Office.
    State office. USDA Rural Development offices located in each state.
    State program official. The Agency official at the State level who 
has been delegated the responsibility of administering the water and 
waste disposal facilities programs under this regulation for a 
particular State or States.
    State strategic plan. A plan developed by each State for Rural 
Development initiatives and the type of assistance required. Plans 
shall identify goals, methods, and benchmarks for measuring success.
    Statewide nonmetropolitan median household income. The median 
household income of the State's nonmetropolitan counties and portions 
of metropolitan counties outside of cities, towns or places of 50,000 
or more population.
    Technical assistance. Assistance in learning to manage, operate, or 
use equipment or systems; and studies, analyses, designs, reports, 
manuals, guides, literature, or other forms of creating, acquiring, or 
disseminating information.
    Telecommunications systems plan. The plan submitted by an applicant 
in accordance with Sec.  1703.125 for grants.
    Telecommunications terminal equipment. The assemblage of 
telecommunications equipment at the end of a circuit or path of a 
signal, including but not limited to facilities that receive or 
transmit over the air broadcast, satellite, and microwave, normally 
located on the premises of the DLT end user, that interfaces with 
telecommunications transmission facilities, and that is used to modify, 
convert, encode, or otherwise prepare signals to be transmitted via 
such telecommunications facilities, or that is used to modify, 
reconvert, or carry signals received from such facilities, the purpose 
of which is to accomplish the goal for which the circuit or signal was 
established.
    Telecommunications transmission facilities. Facilities that 
transmit, receive, or carry voice, video, or data between the 
telecommunications terminal equipment at each end of the 
telecommunications circuit or path. Such facilities include microwave 
antennae, relay stations and towers, other telecommunications antennae, 
fiber-optic cables and repeaters, coaxial cables, communication 
satellite ground station complexes, copper cable electronic equipment 
associated with telecommunications transmissions, and similar items.
    Telemedicine. A telecommunications link to a DLT end user through 
the use of eligible equipment that electronically links medical 
professionals at separate sites in order to exchange health care 
information in audio, video, graphic, or other formats for the purpose 
of providing improved health care services primarily to residents of 
rural areas.
    Total project cost. The sum of all costs associated with a 
completed project.
    Tribal college or university. An institution of higher education 
that is formally controlled, or has been formally sanctioned, or 
chartered, by the governing body of an Indian tribe or tribes, except 
that no more than one such institution shall be recognized with respect 
to any such tribe, and includes an institution listed in the Equity in 
Educational Land Grant Status Act of 1994.
    Used equipment. Any equipment that has been used in any previous 
application and is provided in an ``as is'' condition.
    Value-added. The incremental value that is realized by the producer 
from an agricultural commodity or product as the result of (i) A change 
in its physical state, (ii) differentiated production or marketing, as 
demonstrated in a business plan, (iii) product segregation, or (iv) is 
aggregated and marketed as a locally-produced agricultural food 
product. Also, the economic benefit realized from the production of 
farm or ranch-based renewable energy, including E-85 fuel. Incremental 
value may be realized by the producer as a result of either an increase 
in value to buyers or the expansion of the overall market for the 
product. Examples include milling wheat into flour, slaughtering 
livestock or poultry, making strawberries into jam, the marketing of 
organic products, an identity-preserved marketing system, wind or hydro 
power produced on land that is farmed and collecting and converting 
methane from animal waste to generate energy. Identity-preserved 
marketing systems include labeling that identifies how the product was 
produced and by whom.
    Very small business. A business with fewer than 15 employees and 
less than $1 million in annual receipts.
    Working capital grants. Grants to provide funds to operate ventures 
and pay the normal expenses of the venture that are eligible uses of 
grant funds.
    (b) Abbreviations:

    CDP--Census Designated Place.
    DLT--Distance Learning and Telemedicine.
    EDU--Equivalent Dwelling Unit.
    LLC--Limited liability company.

[[Page 61235]]

    LLP--Limited liability partnership.
    NSLP--National School Lunch Program.
    RUS--The Rural Utilities Service or a successor agency, an agency 
within USDA established pursuant to section 232 of the Department of 
Agriculture Reorganization Act of 1994 (Pub. L. 103-354, 108 Stat. 
3178), successor to the Rural Electrification Administration and 
successor to the Farmer's Home Administration and the Rural Development 
Administration with respect to certain water and waste disposal loan 
and grant programs.
    SBA--Small Business Administration.
    USDA--United States Department of Agriculture.


Sec.  5002.3  Appeal rights.

    A person may seek a review of an Agency decision under this part 
from the appropriate Agency official that oversees the program in 
question or appeal to the National Appeals Division in accordance with 
7 CFR part 11 of this title.


Sec.  5002.4  Exception authority.

    Except as specified in paragraphs (a) through (c) of this section, 
the applicable Administrator may make exceptions to any requirement or 
provision of this part, if such exception is necessary to implement the 
intent of the authorizing statute in a time of national emergency or in 
accordance with a Presidentially-declared disaster, or, on a case-by-
case basis, when such an exception is in the best financial interests 
of the Federal Government and is otherwise not in conflict with 
applicable laws.
    (a) Applicant eligibility. No exception to applicant eligibility 
can be made.
    (b) Project eligibility. No exception to project eligibility can be 
made.
    (c) Rural area definition. No exception to the definition of rural 
area can be made.


Sec.  5002.5  Compliance with other Federal laws.

    Applicants must comply with other applicable Federal laws including 
Equal Employment Opportunities, Americans with Disabilities Act, Equal 
Credit Opportunity Act, Fair Housing Act, and the Civil Rights Act of 
1964.


Sec.  5002.6  State laws, local laws, regulatory commission 
regulations.

    If there are conflicts between this part and State or local laws or 
regulatory commission regulations, the provisions of this part will 
control.


Sec.  5002.7  Environmental requirements.

    (a) All grants awarded under this part are subject to the 
environmental requirements in subpart G of 7 CFR part 1940 or 7 CFR 
1794, as applicable, or successor regulations.
    (b) The applicant must not take any action or incur any obligations 
during the time of application or application review and processing 
that would either limit the range of alternatives to be considered or 
that would have an adverse effect on the environment, such as the 
initiation of construction. If the applicant takes such adverse 
actions, the project will be ineligible for funding under this part.


Sec.  5002.8  Forms, regulations, and instructions.

    Copies of all forms, regulations, instructions, and other materials 
related to programs referenced in this part may be obtained through the 
Agency.


Sec. Sec.  5002.9--5002.14  [Reserved]

Funding and Programmatic Change Notifications


Sec.  5002.15  Notifications.

    In implementing this part, the Agency will issue notifications 
addressing funding and programmatic changes, as specified in paragraphs 
(a) and (b) of this section, respectively, for each grant program under 
this part. The methods that the Agency will use in making these 
notifications is specified in paragraph (c) of this section, and the 
timing of these notifications is specified in paragraph (d) of this 
section.
    (a) Funding. The Agency will issue notifications concerning funding 
for each program as described in paragraphs (a)(1) through (3) of this 
section.
    (1) For each Nationally-competed grant program, the funding level 
and the minimum and maximum grant amount.
    (2) For each State-allocated grant program, the funding level and 
minimum and maximum grant amount, as proposed by State Directors and as 
approved by the Agency.
    (3) Any additional funding information associated with an 
individual grant program as determined by the Agency.
    (b) Programmatic changes. For each program, as applicable, the 
Agency will issue notifications of the programmatic changes specified 
in paragraphs (b)(1) through (5) of this section.
    (1) The set of Administrator priority categories or their point 
allocation, if the provisions specified in subparts A and B are not to 
be used for awarding Administrator points.
    (2) The set of State Director priority categories or their point 
allocation, if the provisions specified in subparts A and B are not to 
be used for awarding State Director points, as proposed by State 
Directors and as approved by the Agency.
    (3) Additional reports that are generally applicable across 
projects within a program associated with the monitoring of and 
reporting on project performance.
    (4) Any change in a program's ranking dates.
    (5) For programs with a specified application date, any change in 
the application date.
    (c) Notification methods. The Agency will issue the information 
specified in paragraphs (a) and (b) of this section as specified in 
paragraphs (c)(1) through (3) of this section.
    (1) For Nationally-competed grant programs covered by this part, 
the Agency will issue one or more Federal Register notices.
    (2) For State-allocated grant programs covered by this part, the 
Agency will make the information available on the Agency's Web site.
    (3) For both Nationally-competed grant programs and State-allocated 
grant programs, all information will be available at any Rural 
Development office.
    (d) Timing. The Agency will make the information specified in 
paragraphs (a) and (b) of this section available as specified in 
paragraphs (d)(1) through (3) of this section.
    (1) The Agency will make the information specified in paragraph (a) 
of this section available each fiscal year.
    (2) The Agency will make the information specified in paragraphs 
(b)(1) and (b)(2) of this section available at least 30 days prior to 
the first ranking date in the year or the application deadline, as 
applicable.
    (3) The Agency will make the information specified in paragraphs 
(b)(3) through (b)(5) of this section available on an as needed basis.


Sec.  5002.16--5002.19  [Reserved]

Eligibility


Sec.  5002.20  Applicant eligibility.

    To be eligible for a grant under this part, an applicant must meet 
the applicant eligibility requirements for the applicable grant program 
as specified in subpart B of this part and the requirements specified 
in paragraphs (a) and (b) of this section.
    (a) Citizenship.
    (1) Individual applicants must:
    (i) be citizens of the United States (U.S.), the Republic of Palau, 
the Federated States of Micronesia, the Republic of the Marshall 
Islands, or American Samoa, or
    (ii) reside in the U.S. after legal admittance for permanent 
residence.

[[Page 61236]]

    (2) Entities other than individuals must be at least 51 percent 
owned by persons who are either citizens as identified under paragraph 
(a)(1)(i) of this section or legally admitted permanent residents 
residing in the U.S.
    (b) Legal authority and responsibility. Each applicant must have, 
or obtain, the legal authority necessary to carry out the purpose of 
the grant.


Sec.  5002.21  Ineligible applicants.

    (a) Consistent with the department regulations, an applicant is 
ineligible if the applicant is debarred or suspended or is otherwise 
excluded from or ineligible for participation in Federal assistance 
programs under Executive Order 12549, ``Debarment and Suspension.''
    (b) An applicant will be considered ineligible for a grant due to 
an outstanding judgment obtained by the U.S. in a Federal Court (other 
than U.S. Tax Court), is delinquent on the payment of Federal income 
taxes, or is delinquent on Federal debt.


Sec.  5002.22  Project eligibility.

    To be eligible for a grant under this part, a project or purpose 
must, at a minimum, meet the project or purposes eligibility 
requirements for the applicable grant program as specified in subpart B 
of this part. In addition, the project or purpose must meet each of the 
requirements specified in paragraphs (a) through (c) of this section, 
as applicable.
    (a) The project or purpose must primarily serve a rural area.
    (b) For those projects and purposes that acquire or improve real or 
personal property, the applicant must be the owner of the property or 
have leasehold interest acceptable to the Agency in the property and 
control the revenues and expenses of the project, including operation 
and maintenance.
    (c) For projects and purposes that are determined by a service 
area, boundaries for the proposed service area must be chosen in such a 
way that no user or area will be excluded because of race, color, 
religion, sex, marital status, age, disability, or national origin. 
This does not preclude:
    (1) Financing or constructing projects in phases when it is not 
practical to finance or construct the entire project at one time, and
    (2) Financing or constructing facilities where it is not 
economically feasible to serve the entire area, provided economic 
feasibility is determined on the basis of the entire system or facility 
and not by considering the cost of separate extensions to, or parts 
thereof. Additionally, the applicant must publicly announce a plan for 
extending service to areas not initially receiving service and must 
provide written notice to potential users located in such areas.


Sec.  5002.23  Ineligible projects and purposes.

    Grants under this part must not be used for:
    (a) Investment or arbitrage, or speculative real estate investment.
    (b) Prostitution or projects generating income from activities of a 
prurient sexual nature.
    (c) Any project eligible for Rural Rental Housing and Rural 
Cooperative Housing loans under sections 515, 521, and 538 of the 
Housing Act of 1949, as amended.
    (d) Any facility used primarily for the purpose of housing Federal 
or State agencies.
    (e) Finders', packagers', or loan brokers' fees. Pay costs of 
preparing the application package for funding under this program.
    (f) Any project deriving income from illegal drugs, drug 
paraphernalia, or any other illegal product or activity.
    (g) To pay the applicant for the rental of equipment or machinery 
owned by the applicant.
    (h) The payment of either a judgment or a debt owed to the United 
States.
    (i) Any project that creates, directly or indirectly, a conflict of 
interest or an appearance of a conflict of interest.
    (j) Properties to be used for commercial rent when the grantee has 
no control over tenants and services offered except for industrial-site 
infrastructure development and limited sections of essential community 
facilities when the activity in the leased space is related to and 
enhances the primary purpose for which the facility is being 
established by the grantee.
    (k) Any project located within the Coastal Barriers Resource System 
that does not qualify for an exception as defined in section 6 of the 
Coastal Barriers Resource Act, 16 U.S.C. 3501 et seq.
    (l) Any project located in a special flood or mudslide hazard area 
as designated by the Federal Emergency Management Agency in a community 
that is not participating in the National Flood Insurance Program 
unless the project is an integral part of a community's flood control 
plan.
    (m) Fund political activity.
    (n) Any other similar project or purpose that the Agency determines 
is ineligible for funding under this part and publishes in a Federal 
Register notice.


Sec. Sec.  5002.24--5002.29  [Reserved]

Applying for a Grant


Sec.  5002.30  Applying for a grant.

    (a) Preapplications. Unless required under the Departmental 
regulations, the public has the option of submitting a preapplication 
as specified in Sec.  5002.31. The submission of a preapplication, or 
the lack thereof, does not affect in any way the scoring of the 
subsequent application. In addition, applicants who submit a 
preapplication do not receive any priority for funding under this part.
    (b) Conformance with Sec.  5002.32. All applicants are required to 
submit an application, as specified in Sec.  5002.32.
    (c) Filing instructions. Unless otherwise specified in a 
notification issued under Sec.  5002.15, the following requirements 
apply to all grant preapplications and applications submitted under 
this part.
    (1) When to submit.
    (i) Preapplications. For grant programs with an open application 
period, preapplications for all programs may be submitted at any time. 
For grant programs with an application deadline, preapplications must 
be submitted at least 90 days before the application deadline.
    (ii) Applications. For grant programs with an open application 
period, applications may be submitted at any time. For grant programs 
with an application deadline, applications must be received on or 
before the application deadline to receive consideration for funding 
for that fiscal year.
    (iii) Incomplete applications. Incomplete applications will be 
rejected. Applicants will be informed of the elements that made the 
application incomplete. If a resubmitted application is received by the 
applicable application deadline, the Agency will reconsider the 
application.
    (2) Where to submit. All preapplications and applications may be 
submitted to any Rural Development office or on line through 
grants.gov.
    (3) Format. Preapplications and applications may be submitted as 
hard copy or electronically via grants.gov. If submitted as hard copy, 
an original and one hard copy of the entire application and supporting 
documentation must be submitted.


Sec.  5002.31  Preapplications.

    Unless otherwise excepted, the provisions of this section apply to 
all programs under this part.
    (a) Submittal of a preapplication is optional under this part 
unless it is otherwise required under the Departmental regulations.

[[Page 61237]]

    (1) When submitting a preapplication, all applicants must comply 
with the Departmental regulations, except as provided in paragraph 
(a)(2) of this section.
    (2) In lieu of filing SF 424, ``Application for Federal 
Assistance,'' a member of the public may instead submit a written 
request for an eligibility determination alone. Members of the public 
should contact a Rural Development office to obtain a list of the items 
needed to make an eligibility assessment for the specific grant program 
in which the member is interested.
    (b) The Agency will review all preapplications to make an 
assessment as to applicant and project eligibility. If the 
preapplication is submitted by a government applicant as required under 
the Departmental regulations, the Agency will make its assessment in 
accordance with the Departmental regulations. If the preapplication is 
submitted on a voluntary basis, the Agency will make an informal 
assessment of both the applicant's eligibility and the project's 
eligibility. In all instances, the Agency will then provide a written 
response to the applicant on its assessment.


Sec.  5002.32  Applications.

    (a) Application forms. The following application forms, as 
applicable, must be used in applying for a grant under this part.
    (1) Form SF-424, ``Application for Federal Assistance.''
    (2) Form SF-424A, ``Budget Information--Non-Construction 
Programs.''
    (3) Form SF-424B, ``Assurances--Non-Construction Programs.''
    (4) Form SF-424C, ``Budget Information--Construction Programs.''
    (5) Form SF-424D, ``Assurances--Construction Programs.''
    (b) Other forms and instructions. The Agency will make available to 
the public the necessary forms and instructions for filing an 
application on a program-specific basis. These forms and instructions 
may be obtained from any Rural Development office, Rural Development 
National Headquarters, and the Agency's Web site.


Sec. Sec.  5002.33--5002.39  [Reserved]

Processing and Scoring Applications


Sec.  5002.40  Processing applications.

    (a) Initial review. Upon receipt of an application, the Agency will 
conduct a review to determine if the applicant and project are eligible 
and if the project is feasible or is likely to be feasible with regard 
to financial, technical, and environmental feasibility and 
sustainability of the project. If applicant or project eligibility has 
already been determined through the submittal of a required 
preapplication, the Agency will review the application to ensure no 
changes have occurred that would affect eligibility.
    (b) Notifications. After the review in paragraph (a) of this 
section has been conducted, the Agency will notify the applicant in 
writing of the Agency's findings. If the Agency has determined that 
either the applicant or project is ineligible or that the project is 
not likely to be feasible, it will include in the notification the 
reason(s) for its determination(s).
    (c) Resubmittal by applicants. Applicants may submit revised 
applications to the Agency in response to the notification received 
under paragraph (b) of this section. For grant programs with an open 
application period, each revised grant application will be processed by 
the Agency at the next applicable ranking date for the applicable grant 
program. For grant programs with a specified application deadline, each 
revised grant application will be processed by the Agency if it is 
received on or before the application deadline for that grant program. 
If such revised applications are not received by the specified 
application deadline for the grant program, the Agency will not process 
the application.
    (d) Subsequent ineligibility determinations. If at any time an 
application is determined to be ineligible, the Agency will notify the 
applicant in writing of its determination.


Sec.  5002.41  Application withdrawal.

    During the period between the submission of an application and the 
execution of documents, the applicant must notify, in writing, the 
Agency if the project is no longer viable or the applicant no longer is 
requesting financial assistance for the project. When the applicant so 
notifies the Agency, the selection will be rescinded or the application 
withdrawn.


Sec.  5002.42  Scoring applications.

    (a) General. The Agency will only score applications for which it 
has determined that the applicant and project are eligible and that the 
project is feasible or is likely to be feasible.
    (1) For grant programs with an open application period, each such 
application the Agency receives in a Federal fiscal year will be scored 
in the fiscal year in which it was submitted, unless it is received 
after the last ranking date in the fiscal year for that program. If an 
application is received after the last ranking date of the fiscal year, 
the Agency will score the application no later than the first ranking 
date of the next fiscal year. Such applications will be scored based on 
the priority categories and points effective for that next fiscal year.
    (2) For grant programs with an application deadline, each such 
application the Agency receives on or before the application deadline 
in a fiscal year will be scored in the fiscal year in which it was 
received. All applications received after a program's application 
deadline will not be considered.
    (b) Scoring. The Agency will score applications for each grant 
program based on the priority categories and their associated points 
using the procedures specified in subpart B. All applications for 
grants under this part will be scored based on the information supplied 
by the applicant at the time the applicant submits the application to 
the Agency.
    (1) Administrator priority categories. Paragraphs (b)(1)(i) through 
(vi) of this section present the list of Administrator priority 
categories that a grant program may consider in awarding Administrator 
points to applications. The specific set of Administrator priority 
categories that each program will use is specified in subpart B. The 
Agency may elect to use a different set of Administrator priority 
categories than specified in subpart B, if it issues a notification in 
accordance with Sec.  5002.15. However, the Agency cannot add to the 
list of priority categories specified in this paragraph.
    (i) Unserved or underserved areas.
    (ii) Geographic diversity.
    (iii) Emergency conditions.
    (iv) To accomplish the mission area's plans, goals, and objectives.
    (v) Public health and safety.
    (vi) Presidential initiatives.
    (2) State Director priority categories. Paragraphs (b)(2)(i) 
through (x) of this section present the list of State Director priority 
categories that a grant program may consider in awarding State Director 
points to applications. The specific set of State Director priority 
categories that each program will use is specified in subpart B. The 
Agency may elect to use a different set of State Director priority 
categories than specified in subpart B, if it issues a notification in 
accordance with Sec.  5002.15. However, the Agency cannot add to the 
list of priority categories specified in this paragraph.
    (i) Persistent poverty counties and out-migration counties.
    (ii) Unserved or underserved areas.
    (iii) Geographic diversity.

[[Page 61238]]

    (iv) Emergency conditions.
    (v) State, local, or regional governmental, and Tribal strategic 
plans and goals (must be consistent with program goals and objectives).
    (vi) To accomplish the mission area's plans, goals, and objectives.
    (vii) Leveraging.
    (viii) Loss of essential services.
    (ix) Public health and safety.
    (x) Presidential initiatives.


Sec. Sec.  5002.43--5002.49  [Reserved]

Awarding Grants


Sec.  5002.50  Award process.

    (a) Ranking of applications. All scored applications for a program 
will be ranked by the Agency on or after each ranking date, as 
specified in subpart B, to create a priority list of scored 
applications for that program.
    (1) If a ranking date falls on a weekend or Federally-observed 
holiday, the ranking date will be the next Federal business day.
    (2) All applications that are ranked in a given fiscal year will be 
considered for selection for funding or potential funding, as 
applicable, for that entire fiscal year.
    (b) Selection of applications for funding and for potential 
funding.
    (1) Using the priority list created under paragraph (a) of this 
section for each grant program, the Agency will select applications for 
funding or for potential funding based on the criteria specified in 
paragraphs (b)(1)(i) through (iii) of this section and any additional 
criteria specified in subpart B for a specific program. The Agency will 
notify, in writing, applicants whose applications have been selected 
for funding or for potential funding.
    (i) Ranking. The Agency will consider the score an application has 
received compared to the scores of other applications in the priority 
list, with higher scoring applications receiving first consideration 
for funding.
    (ii) Availability of funds. The Agency will consider the size of 
the request relative to the funds that remain available to the program 
during the fiscal year.
    (A) If there are insufficient funds during a particular funding 
period to select a higher scoring application, the Agency may elect to 
select the next highest scoring application for further processing. 
Before this occurs, the Administrator or State Director, as applicable, 
will provide the applicant of the higher scoring application the 
opportunity to reduce the amount of its grant request to the amount of 
funds available. If the applicant agrees to lower its grant request, it 
must certify that the purposes of the project can be met, and the 
Administrator or State Director, as applicable, must determine the 
project is financially feasible at the lower amount.
    (B) If the amount of funding required is greater than 25 percent of 
a State's allocated funds for a State-allocated grant program, or is 
greater than 25 percent of a program's funds for a Nationally-competed 
grant program, then the Agency may elect to select the next highest 
scoring application for further processing, provided the higher scoring 
applicant is notified of this action and given an opportunity to revise 
their application and resubmit it.
    (iii) Availability of other funding sources. If other financial 
assistance is needed for the project, the Agency will consider the 
availability of Rural Development loans and of other non-Rural 
Development funding sources. If funds for these other sources are not 
available at the time of selecting applications for funding or 
potential funding, the Agency may instead select the next highest 
scoring application for further processing ahead of the higher scoring 
application.
    (2) [Reserved]
    (c) Ranked applications not funded. The disposition of ranked 
applications not funded depends on whether the program has an open 
application period or an application deadline, and on the reason for 
which the application was not funded.
    (1) Grant programs with an open application period.
    (i) If a ranked application has been selected for potential 
funding, but has not been funded due to the Agency's lack of funds by 
the next ranking date or by the end of the fiscal year in which it was 
selected for potential funding, the Agency will carry the application 
forward into the next fiscal year unless the applicant otherwise 
notifies the Agency in writing to withdraw the application from further 
consideration. Such applications are not subject to re-evaluation or 
re-scoring, but information in the application may need to be updated.
    (ii) If a ranked application has been selected for potential 
funding, but has not been funded because additional information is 
needed, the Agency will notify the applicant of what information is 
needed, including a timeframe for the applicant to provide the 
information. If the applicant does not provide the information within 
the specified timeframe, the Agency will remove the application for 
further processing.
    (iii) If a ranked application has not been selected for potential 
funding because of its ranking and the available level of funds to the 
Agency, it will be included in the set of applications considered in 
each subsequent ranking date in the fiscal year in which it was ranked 
until it is either selected for potential funding, funded, or the end 
of the fiscal year in which the application was ranked is reached, 
whichever occurs first. The Agency will retain the application for 
consideration in the next fiscal year. The Agency will provide 
applicants the opportunity to update their application accordingly. At 
a minimum, all such retained applications must be updated by the 
applicant as required by the Agency (e.g., financial conditions, change 
in supporting documentation requirements). The application will then be 
re-evaluated and re-scored along with new applications received for 
consideration for funding in the next fiscal year.
    (iv) If a ranked application has not been selected for potential 
funding because the Agency has determined the application is non-
competitive due to a very low score, the Agency will remove the 
application from further consideration and will so notify the 
applicant.
    (2) Grant programs with an application deadline. (i) A ranked 
application that is not funded in the fiscal year in which it was 
submitted will not be carried forward into the next fiscal year. The 
Agency will notify the applicant in writing.
    (ii) If an application has been selected for funding, but has not 
been funded because additional information is needed, the Agency will 
notify the applicant of what information is needed, including a 
timeframe for the applicant to provide the information. If the 
applicant does not provide the information within the specified 
timeframe, the Agency will remove the application from further 
consideration and will so notify the applicant.
    (d) Intergovernmental review. If State or local governments raise 
objections to a proposed project under the intergovernmental review 
process that are not resolved within 90 days of the Agency's selection 
of the application, the Agency will rescind the selection and will 
provide the applicant with a written notice to that effect. The Agency, 
in its sole discretion, may extend the 90-day period if it appears 
resolution is imminent.

[[Page 61239]]

Sec. Sec.  5002.51-5002.59  [Reserved]

Grant Agreements and Conditions


Sec.  5002.60  Actions prior to grant closing or start of construction, 
whichever occurs first.

    (a) Excess grant funds. If there is a significant reduction in 
project cost or changes in project scope, the applicant's funding needs 
will be reassessed. Decreases in Agency funds will be based on revised 
project costs and current number of users. However, other factors 
including Agency regulations used at the time of grant approval will 
remain the same. Obligated grant funds not needed to complete the 
project will be de-obligated.
    (b) Evidence of and disbursement of other funds. Applicants 
expecting funds from other sources for use in completing projects being 
partially financed with Agency funds will present evidence of the 
commitment of these funds from such other sources. Agency funds will 
not be used to pre-finance funds committed to the project from other 
sources without prior Agency approval.
    (c) Acquisition of land, easements, water rights, and existing 
facilities. Applicants are responsible for acquiring all property 
rights necessary for the project and determining that prices paid are 
reasonable and fair. The Agency may require an appraisal by an 
independent appraiser or Agency employee.
    (1) Rights-of-way and easements. Where applicable, applicants will 
obtain valid, continuous, and adequate rights-of-way and easements 
needed for the construction, operation, and maintenance of the 
facility. For user connections funded by the Agency, applicants will 
obtain adequate rights to construct and maintain the connection line or 
other facilities located on the user's property.
    (2) Title for land or existing facilities. Title to land essential 
to the successful operation of facilities or title to facilities being 
purchased must not contain any restrictions that will adversely affect 
the suitability, successful operation, security value, or 
transferability of the facility. The Agency may waive title defects or 
restrictions, such as utility easements, that do not adversely affect 
the suitability, successful operation, security value, or 
transferability of the facility.
    (3) Lease agreements. Where the right of use or control of real 
property not owned by the applicant is essential to the successful 
operation of the facility, such right will be evidenced by written 
agreements or contracts, acceptable to the Agency, between the owner of 
the property and the applicant.


Sec.  5002.61  Grant agreement.

    (a) Letter of conditions. When a grant is obligated subject to 
conditions established by the Agency, the Agency will notify, in 
writing, each applicant whose application has been selected for funding 
using a letter of conditions, which will set out the conditions under 
which the grant will be made. If the applicant agrees with the 
conditions, the applicant must acknowledge, in writing, acceptance of 
the conditions. If the applicant believes that certain conditions 
cannot be met, the applicant may propose alternate conditions to the 
Agency. The Agency must concur with any changes proposed to the letter 
of conditions by the applicant before the application will be further 
processed.
    (b) Grant agreement. Each grant awarded under this part must be 
executed through an Agency-approved grant agreement between the Agency 
and the grantee and through any other documents as identified by the 
Agency.
    (c) Cooperative agreement. Each cooperative agreement made under 
this part must be executed through an Agency-approved cooperative 
agreement, or similar Agency-approved document, between the Agency and 
the grantee and through any other documents as identified by the 
Agency. Cooperative Agreements must provide for significant Agency 
involvement.
    (d) Grant disbursements. Grant disbursement will be made in 
accordance with the letter of conditions or the grant agreement as 
applicable.


Sec.  5002.62  Use of remaining funds.

    Funds remaining after all costs incident to the basic project have 
been paid or provided for are to be handled as specified in this 
section.
    (a) Remaining funds are not to include grantee contributions.
    (b) Remaining funds may be refunded to each source in direct 
proportion to the amounts obtained from each source.
    (c) Remaining funds may be used based on prior approval by the 
Agency for eligible grant purposes, provided:
    (1) The use will not result in major changes to the project;
    (2) The purpose of the grant remains the same; and
    (3) The project remains within its original scope.
    (d) Grant funds not expended after being used for eligible grant 
purposes will be cancelled by the Agency. Prior to the actual 
cancellation, the Agency will notify, in writing, the grantee of the 
Agency's intent to cancel the remaining funds.


Sec. Sec.  5002.63-5002.69  [Reserved]

Post Award Activities and Requirements


Sec.  5002.70  Monitoring and reporting program performance.

    The requirements specified in this section shall apply to grants 
made under this part.
    (a) Grantees will be monitored to the extent necessary to ensure 
that facilities are constructed in accordance with Agency-approved 
plans and specifications and to ensure that funds are expended for 
approved purposes.
    (b) Grantees shall submit performance reports that include a 
comparison of accomplishments with the objectives stated in the 
application.
    (1) Performance reports shall be submitted on a semiannual basis. A 
final performance report is required.
    (2) Additional reports shall be submitted as specified in the grant 
agreement, as otherwise provided in a notification issued under Sec.  
5002.15, or as specified in subpart B.
    (3) The Agency may request any additional project and/or 
performance data for the project for which grant funds have been 
received.


Sec.  5002.71  Programmatic changes and budget revisions.

    In addition to the requirements specified in the Departmental 
regulations, if an application has been selected and the scope of the 
project changes, the Agency, at its sole discretion, may require the 
applicant to submit a new application. A new application will be re-
ranked in accordance with this part.


Sec.  5002.72  Transfer of obligations.

    An obligation of funds established for an applicant may be 
transferred to a different (substituted) applicant provided:
    (a) The substituted applicant
    (1) Is eligible;
    (2) Has a close and genuine relationship with the original 
applicant; and
    (3) Has the authority to receive the assistance approved for the 
original applicant; and
    (b) The need, purpose(s), and scope of the project for which the 
Agency funds will be used remain substantially unchanged.


Sec. Sec.  5002.73-5002.79  [Reserved]

Grant Close Out and Related Activities


Sec.  5002.80  Grant close out and related activities.

    In addition to the requirements specified in the Departmental

[[Page 61240]]

regulations, failure to submit satisfactory reports on time under the 
provisions of Sec.  5002.70(b) may result in the suspension or 
termination of a grant. The provisions of this section apply to grants 
and sub-grants.


Sec. Sec.  5002.81-5002.100  [Reserved]

Subpart B--Program-Specific Provisions


Sec.  5002.101  Community Facilities.

    The Community Facilities grant program is a State-allocated grant 
program with an open application period.
    (a) Applicant eligibility. In addition to the requirements 
specified in Sec.  5002.20 in subpart A of this part, as appropriate, 
the following requirements also apply where applicable:
    (1) Type of applicant. The applicant must be one of the following:
    (i) A public body, such as a municipality, county, district, 
authority, or other political subdivision of a State;
    (ii) Non-profit corporation or association; or
    (iii) Federally recognized Indian tribe.
    (2) Local community ties. Applicants must have significant ties 
with the local rural community. Ties may be evidenced by items such as:
    (i) Association with, or controlled by, a local public body or 
bodies or broadly based ownership and controlled by members of the 
community; or
    (ii) Substantial public funding through taxes, revenue bonds, or 
other local government sources, or substantial voluntary community 
funding such as would be obtained through a community-wide funding 
campaign.
    (b) Project eligibility. In addition to the requirements specified 
in Sec.  5002.22 in subpart A of this part, the project must be an 
essential community facility primarily serving rural areas. In 
addition, the project must meet the conditions specified in paragraphs 
(b)(1) through (5) of this section.
    (1) Located in rural area. Except for eligible utility-type 
services, such as telecommunications or hydroelectric, serving both 
rural and non-rural areas, the project must be located in a rural area. 
In the case of an eligible utility-type service project serving both 
rural and non-rural areas, grant funds issued under this section may be 
used to fund only that portion serving rural areas, regardless of the 
facility's location.
    (2) Household income. The median household income of the population 
to be served by the proposed facility must be below the higher of the 
poverty line or the eligible percentage (60, 70, 80, or 90) of the 
State non-metropolitan median household income (paragraph (e)(2) of 
this section).
    (3) Economic feasibility. All projects funded under the provisions 
of this section must be based on satisfactory sources of revenues as 
outlined in the economic feasibility requirements for the Community 
Facility direct loan program. The amount of grant assistance must be 
the minimum amount sufficient for feasibility that will provide for 
facility operation and maintenance, reasonable reserves, and debt 
repayment. The applicant's available excess funds must be used to 
supplement eligible project costs.
    (4) Facility operation and maintenance. The applicant shall be 
responsible for operating, maintaining, and managing the facility and 
providing for its continued availability and use at reasonable rates 
and terms. This responsibility shall be the applicant's even though the 
facility may be operated, maintained, or managed by a third party under 
contract or management agreement.
    (5) Credit elsewhere. Applicants must certify in writing and the 
Agency shall determine and document that the applicant is unable to 
finance the proposed project from their own resources or through 
commercial credit at reasonable rates and terms.
    (c) Eligible uses of grant funds. Grant funds made under this 
section may be used for the purposes listed in paragraphs (c)(1)through 
(6) of this section.
    (1) Construct, enlarge, extend, or otherwise improve essential 
community facilities providing essential service primarily to rural 
residents and rural businesses. ``Otherwise improve'' includes, but is 
not limited to, the following:
    (i) The purchase of major equipment that will in themselves provide 
an essential service to rural residents; and
    (ii) The purchase of existing facilities when it is necessary 
either to improve or to prevent a loss of service.
    (2) Construct or relocate public buildings, roads, bridges, fences, 
or utilities and to make other public improvements necessary to the 
successful operation or protection of facilities authorized in 
paragraph (c)(1) of this section.
    (3) Relocate private buildings, roads, bridges, fences, or 
utilities, and other private improvements necessary to the successful 
operation or protection of facilities authorized in paragraph (c)(1) of 
this section.
    (4) Facilities that have no more than 25 percent of the floor space 
occupied by Federal Agencies, State Agencies, or other ineligible 
entities or purposes, when these entities enhance the primary purpose 
of the facility;
    (5) Facilities that house State funded organizations that are 
typically housed in community funded facilities and offering services 
provided by an essential community facility;
    (6) Pay the following expenses, but only when such expenses are a 
necessary part of a project to fund facilities authorized in paragraphs 
(c)(1) through (5) of this section:
    (i) Reasonable fees and costs such as legal, engineering, 
architectural, accounting, environmental, archeological, and appraisal.
    (ii) Costs of acquiring interest in land; rights, such as water 
rights, leases, permits, and rights-of-way; and other evidence of land 
or water control necessary for development of the facility.
    (iii) Purchasing or renting equipment necessary to install, 
maintain, extend, protect, operate, or utilize facilities.
    (iv) Obligations for construction incurred before grant approval. 
Construction work should not be started and obligations for such work 
or materials should not be incurred before the grant is approved. 
However, if there are compelling reasons for proceeding with 
construction before grant approval, applicants may request Agency 
approval to pay such obligations. Such requests may be approved if the 
Agency determines that:
    (A) Compelling reasons exist for incurring obligations before grant 
approval;
    (B) The obligations will be incurred for authorized grant purposes;
    (C) Contract documents have been approved by the Agency;
    (D) All environmental requirements applicable to the Agency and the 
applicant have been met; and
    (E) The applicant has the legal authority to incur the obligations 
at the time proposed, and payment of the debts will remove any basis 
for any mechanic's, material, or other liens that may attach to the 
security property.
    (7) The Agency may authorize payment of such obligations at the 
time of grant closing. The Agency's authorization to pay such 
obligations, however, is on the condition that it is not committed to 
make the grant; it assumes no responsibility for any obligations 
incurred by the applicant; and the applicant must subsequently meet all 
grant approval requirements. The applicant's request and the Agency's 
authorization for paying such obligations shall be in writing.
    (d) Ineligible uses of grant funds. Grant funds under this section 
may not be used to fund:

[[Page 61241]]

    (1) Initial operating expenses or annual recurring costs, including 
purchases or rentals that are generally considered to be operating and 
maintenance expenses;
    (2) Construction or repair of electric generating plants, electric 
transmission lines, or gas distribution lines to provide services for 
commercial sale;
    (3) Refinancing of existing indebtedness;
    (4) Interest;
    (5) Any cost of a project when the median household income of the 
population to be served by the proposed facility is above the higher of 
the poverty line or eligible percent (60, 70, 80, or 90) of the State 
non-metropolitan median household income (paragraph (e)(2) of this 
section);
    (6) Recreational facilities, except for community parks and 
community wellness centers; or
    (7) Any purposes restricted under the Community Facilities direct 
loan program.
    (e) Funding limitations and matching funds. Grant assistance cannot 
exceed the applicable percentages contained in this paragraph and may 
be further limited due to availability of funds or by the maximum grant 
assistance allowable determined in accordance with paragraph (e)(1) of 
this section.
    (1) Maximum grant assistance. Grant assistance cannot exceed the 
lower of:
    (i) Qualifying percentage of eligible project cost determined in 
accordance with paragraph (e)(2) of this section;
    (ii) Minimum amount sufficient to provide for economic feasibility 
as determined in accordance with paragraph (b)(3) of this section; or
    (iii) Either 50 percent of the annual State allocation or $50,000, 
whichever is greater, unless otherwise concurred with Agency approval.
    (2) Funding limitations. Not more than 75 percent Federal grant 
funds, including CF grant funds, may be used to fund a project funded 
with CF grant funds. Grant assistance will be provided on a graduated 
scale with smaller communities with the lowest median household incomes 
being eligible for projects with a higher proportion of grant funds. 
Grant assistance is limited to the following percentages of eligible 
project costs:
    (i) 75 percent when the proposed project is:
    (A) Located in a rural community having a population of 5,000 or 
less; and
    (B) The median household income of the population to be served by 
the proposed facility is below the higher of the poverty line or 60 
percent of the statewide non-metropolitan median household income.
    (ii) 55 percent when the proposed project is:
    (A) Located in a rural community having a population of 12,000 or 
less; and
    (B) The median household income of the population to be served by 
the proposed facility is below the higher of the poverty line or 70 
percent of the statewide non-metropolitan median household income.
    (iii) 35 percent when the proposed project is:
    (A) Located in a rural community having a population of 20,000 or 
less; and
    (B) The median household income of the population to be served by 
the proposed facility is below the higher of the poverty line or 80 
percent of the statewide non-metropolitan median household income.
    (iv) 15 percent when the proposed project is:
    (A) Located in a rural community having a population of 20,000 or 
less; and
    (B) The median household income of the population to be served by 
the proposed facility is below the higher of the poverty line or 90 
percent of the statewide non-metropolitan median household income.
    (v) 60 percent when the proposed project is:
    (A) Located in a rural community having a population of 20,000 or 
less; and
    (B) The median household income of the population to be served by 
the proposed facility is below the higher of the poverty line or 90 
percent of the State non-metropolitan median household income. The 60 
percent grants are only available to communities affected by a 
catastrophic natural disaster that has resulted in a loss of 60 percent 
of the community's population and is located in a county designated as 
a major disaster area by the President.
    (3) Matching. Funding for the balance of the project may consist of 
other Community Facility financial assistance, applicant contributions, 
or loans and grants from other sources. However, other Federal grant 
funds cannot be used as matching funds unless provided by other 
authorizing legislation. Matching funds may not be made up of in-kind 
contributions other than real estate donated to the project from any 
entity other than the grantee.
    (f) Scoring applications. Each application for a grant under this 
section will be scored based on the priority categories and points 
specified in paragraphs (f)(1) through (3) of this section. The maximum 
number of points that will be awarded to an application is 100.
    (1) Program-specific priority categories and points. The Agency 
will award program-specific points for the priority categories 
described in paragraphs (f)(1)(i) through (iii) of this section.
    (i) Population priorities. The proposed project is located in a 
rural community having a population of:
    (A) 5,000 or less--25 points;
    (B) Between 5,001 and 12,000, inclusive--15 points; and
    (C) Between 12,001 and 20,000, inclusive--10 points;
    (ii) Income priorities. The median household income of the 
population to be served by the proposed project is below the higher of 
the poverty line or:
    (A) 60 percent of the statewide non-metropolitan median household 
income--25 points;
    (B) 70 percent of the statewide non-metropolitan median household 
income--15 points;
    (C) 80 percent of the statewide non-metropolitan median household 
income--10 points; or
    (D) 90 percent of the statewide non-metropolitan median household 
income--5 points.
    (iii) Other priorities. If the project is for health care, for 
public safety, or for an educational facility, 20 points will be 
awarded.
    (2) Administrator priority categories and points. Unless otherwise 
specified in a notification issued under Sec.  5002.15 of subpart A of 
this part, the Administrator may award up to 20 points to an 
application under this section to improve the geographic diversity of 
awardees in a fiscal year.
    (3) State director priority categories and points. Unless otherwise 
specified in a notification issued under Sec.  5002.15 of subpart A of 
this part, a State Director may award up to 10 points to an application 
that meets any of the State Director priority categories to specified 
in Sec.  5002.42(b)(2)(i) through (x). No more than a total of 10 State 
Director points may be awarded under this paragraph to an application.
    (g) Ranking applications. Unless otherwise specified in a 
notification issued under Sec.  5002.15 of subpart A of this part, the 
Agency will rank applications on or after the following dates each 
fiscal year: December 15, March 15, July 15, and August 15.
    (h) Additional criteria for selecting applications for funding. The 
Agency may select the next highest scoring application for funding 
before a higher scoring application when the application is a 
subsequent request for a previously approved project. If the

[[Page 61242]]

request is due to cost overruns, the cost overruns must be due to high 
bids or unexpected construction problems that cannot be reduced by 
negotiations, redesign, use of bid alternatives, rebidding, or other 
means. Cost overruns exceeding 20 percent of the development cost at 
time of grant approval or where the scope of the original purpose has 
changed will not be considered in selecting the next highest scoring 
application over the higher scoring application.
    (i) Public Information Process. All grants awarded under this 
section are subject to the public information process required under 
the Community Facility direct loan program.


Sec.  5002.102  Rural Energy for America Grants.

    The Rural Energy for America grant program is a Nationally-competed 
grant program with a specified application deadline.
    (a) Applicant eligibility. In addition to the requirements 
specified in Sec.  5002.20 in subpart A of this part, an applicant must 
be an agricultural producer or rural small business.
    (b) Project eligibility. In addition to the requirements specified 
in Sec.  5002.22(b) and (c) in subpart A of this part, the project must 
also meet the criteria specified in paragraphs (b)(1) or (2) of this 
section. The requirement specified in Sec.  5002.22(a) in subpart A 
does not apply to projects seeking a grant under this section.
    (1) The project must:
    (i) Be for the purchase, installation, expansion and/or other 
energy-related improvement of a renewable energy system or to make 
energy efficiency improvements;
    (ii) Be located in a rural area;
    (iii) Be for technology that is:
    (A) Pre-commercial or commercially available, and
    (B) Replicable; and
    (iv) Have technical merit as determined by the Agency. Projects 
that the Agency determines are without technical merit are ineligible 
for grants.
    (2) The project must be for a feasibility study for a project that 
meets the criteria specified in paragraph (b)(1) of this section.
    (c) Additional preapplication and application considerations. In 
addition to the requirements specified in Sec. Sec.  5002.30, 5002.31, 
and 5002.32, the following requirements apply to preapplications and 
applications submitted under this section.
    (1) Preapplications. If an applicant elects to submit a 
preapplication, the preapplication must be received by the Agency on or 
before January 15 of each year to be considered. Preapplications 
received after January 15 will not be considered by the Agency.
    (2) Applications--(i) Application deadline. Applications must be 
received on or before June 15 of each year to be considered for funding 
for that fiscal year. Applications received by the Agency after June 15 
will not be considered.
    (ii) Business plans. The business plan submitted with the 
application must include at least three years of pro forma financial 
statements.
    (iii) Simplified applications. Applicants with projects that meet 
both criteria specified in paragraphs (c)(2)(iii)(A) and (B) of this 
section and agree to the terms specified in paragraph (c)(2)(iii)(C) of 
this section will be allowed to submit an application under this 
section that has less documentation than for applications that do not 
meet these two criteria. The requirements for simplified applications 
are available at any Rural Development office and on the Agency Web 
site.
    (A) The total eligible project costs are $200,000 or less.
    (B) The proposed project uses either commercially available 
renewable energy systems or energy efficiency improvements.
    (C) The project is complete when the applicant has provided a 
written final project development, testing, and performance report 
acceptable to the Agency. Upon notification of receipt of an acceptable 
project completion report, the applicant may request grant 
reimbursement. The Agency reserves the right to observe the testing.
    (d) Eligible project costs. Grant funds under this section may only 
be used for those costs associated with the items listed in paragraphs 
(d)(1) through (9) of this section, as long as the items are an 
integral and necessary part of the renewable energy system or energy 
efficiency improvement. The eligible project costs also apply to a 
mixed business and residential project if the applicant is an 
agricultural producer. If the mixed business and residential project, 
however, is from an applicant who is a rural small business, these 
eligible project costs apply to the applicant's mixed business and 
residential project only if the residential portion of the project is 
less than 25 percent of the square footage of the entire project.
    (1) Post-application purchase and installation of equipment (new, 
refurbished, or remanufactured), except agricultural tillage equipment, 
used equipment, and vehicles.
    (2) Post-application construction or improvements.
    (3) Energy audits or assessments.
    (4) Permit and license fees.
    (5) Professional service fees, except for application preparation.
    (6) Feasibility studies and technical reports.
    (7) Business plans.
    (8) Retrofitting.
    (9) Construction of a new energy efficient facility only when the 
facility is used for the same purpose, is approximately the same size, 
and based on the energy audit will provide more energy savings than 
improving an existing facility. Only costs identified in the energy 
audit for energy efficiency improvements are allowed.
    (e) Funding limitations, matching funds, and availability of other 
funds--(1) Funding limitations. (i) The amount of grant funds that will 
be made available to an eligible project under this section must not 
exceed 25 percent of total eligible project costs. Eligible project 
costs are specified in paragraph (d) of this section.
    (ii) The maximum amount of grant assistance to one individual or 
entity will not exceed $750,000 per Federal fiscal year.
    (2) Matching funds. (i) Without specific statutory authority, other 
Federal grant funds and applicant in-kind contributions cannot be used 
to meet the matching fund requirement. Third-party, in-kind 
contributions are limited to 10 percent of the matching fund 
requirement of the grant.
    (ii) Passive investor equity contributions are acceptable for 
renewable energy system projects, including those that are eligible for 
Federal production tax credits, provided the passive investor meets the 
requirements of paragraph (a) of this section.
    (3) Availability of other funds. In determining funding grant 
applications, the Agency will consider the following:
    (i) If the size of the grant amount being requested in the 
application is $50,000 or less, the Agency will consider funding the 
application on its own merit, without consideration of other sources of 
funding.
    (ii) If the size of the grant amount being requested in the 
application is more than $50,000, the Agency will consider funding the 
application only to the extent that:
    (A) The applicant cannot obtain a loan guaranteed by the Agency for 
any portion of the project; or
    (B) the amount being requested in the grant application is 
necessary for the bank to make a guaranteed loan to the applicant.
    (C) If neither of the two situations described in paragraphs 
(e)(3)(ii)(A) or

[[Page 61243]]

(B) of this section apply, then the Agency will not consider the 
application under this rule.
    (f) Grant award amount. In determining the amount of a grant 
awarded, the Agency will take into consideration the following eight 
criteria:
    (1) The type of renewable energy system to be purchased;
    (2) The estimated quantity of energy to be generated by the 
renewable energy system;
    (3) The expected environmental benefits of the renewable energy 
system;
    (4) The extent to which the renewable energy system will be 
replicable;
    (5) The amount of energy savings expected to be derived from the 
activity, as demonstrated by an energy audit comparable to an energy 
audit under 7 U.S.C. 8105;
    (6) The estimated length of time it would take for the energy 
savings generated by the activity to equal the cost of the activity;
    (7) The expected energy efficiency of the renewable energy system; 
and
    (8) The amount of energy produced per amount of grant award.
    (g) Scoring applications. Each application for a grant under this 
section will be scored based on the priority categories and points 
specified in paragraphs (g)(1) and (2) of this section. The maximum 
number of points that will be awarded to an application is 100.
    (1) Program-specific priority categories and points. The Agency 
will award program-specific points for the priority categories 
described in paragraphs (g)(1)(i) through (x) of this section.
    (i) Quantity of energy replaced, produced, or saved (maximum score 
of 13 points). Points may only be awarded for energy replacement, 
energy savings, or energy generation. Points will not be awarded for 
more than one category. Renewable energy projects are eligible for 
points under either paragraph (g)(1)(i)(A) or (g)(1)(i)(C). Energy 
efficiency improvement projects are eligible for points under paragraph 
(g)(1)(i)(B) only.
    (A) Energy replacement (maximum score of 13 points). If the 
proposed renewable energy system is intended primarily for self-use by 
the agricultural producer or rural small business and will provide 
energy replacement of greater than zero, but equal to or less than 25 
percent, 6 points will be awarded; greater than 25 percent, but equal 
to or less than 50 percent, 9 points will be awarded; or greater than 
50 percent, 13 points will be awarded. Energy replacement is to be 
determined by dividing the estimated quantity of renewable energy to be 
generated over a 12-month period by the estimated quantity of energy 
consumed over the same 12-month period during the previous year by the 
applicable energy application. The estimated quantities of energy must 
be converted to either British thermal units, Watts, or similar energy 
equivalents to facilitate scoring. If the estimated energy produced 
equals more than 150 percent of the energy requirements of the 
applicable process(es), the project will be scored as an energy 
generation project.
    (B) Energy savings (maximum score of 13 points). If the estimated 
energy expected to be saved by the installation of the energy 
efficiency improvements will be from 20 percent up to, but not 
including 30 percent, 6 points will be awarded; 30 percent up to, but 
not including 35 percent, 9 points will be awarded; or, 35 percent or 
greater, 13 points will be awarded. Energy savings will be determined 
by the projections in an energy assessment or audit. Projects with 
total eligible project costs of $50,000 or less that opt to obtain a 
professional energy audit will be awarded an additional 3 points.
    (C) Energy generation (maximum score of 13 points). If the proposed 
renewable energy system is intended primarily for production of energy 
for sale, 13 points will be awarded.
    (ii) Environmental benefits (maximum score of 3 points). If the 
purpose of the proposed system contributes to the environmental goals 
and objectives of other Federal, State, or local programs, 3 points 
will be awarded. Points will only be awarded for this paragraph if the 
applicant is able to provide documentation from an appropriate 
authority supporting this claim.
    (iii) Commercial availability (maximum score of 9 points). If the 
proposed system or improvement is currently commercially available and 
replicable, 5 points will be awarded. If the proposed system or 
improvement is commercially available and replicable and is also 
provided with a 5-year or longer warranty providing the purchaser 
protection against system degradation or breakdown or component 
breakdown, 9 points will be awarded.
    (iv) Technical merit score (maximum score of 30 points). The 
Technical Merit of each project will be determined using the procedures 
specified in paragraphs (g)(1)(iv)(A) and (B) of this section. The 
procedures specified in paragraph (g)(1)(iv)(A) will be used to score 
paragraphs (g)(1)(iv)(A)(1) through (10) of this section. The final 
score awarded will be calculated using the procedures described in 
paragraph (g)(1)(iv)(B) of this section.
    (A) Technical merit. Paragraphs (g)(1)(iv)(A)(1) through (10) of 
this section have their own maximum possible score and will be scored 
according to the following criteria: If the description in the 
subparagraph has no significant weaknesses and exceeds the requirements 
of the subparagraph, 100 percent of the total possible score for the 
subparagraph will be awarded. If the description has one or more 
significant strengths and meets the requirements of the subparagraph, 
80 percent of the total possible score will be awarded for the 
subparagraph. If the description meets the basic requirements of the 
subparagraph, but also has several weaknesses, 60 percent of the points 
will be awarded. If the description is lacking in one or more critical 
aspects, key issues have not been addressed, but the description 
demonstrates some merit or strengths, 40 percent of the total possible 
score will be awarded. If the description has serious deficiencies, 
internal inconsistencies, or is missing information, 20 percent of the 
total possible score will be awarded. If the description has no merit 
in this area, 0 percent of the total possible score will be awarded. 
The total possible points for Technical Merit is 30 points.
    (1) Qualifications of the project team (maximum score of 10 
points). The applicant has described the project team service 
providers, their professional credentials, and relevant experience. The 
description supports that the project team service, equipment, and 
installation providers have the necessary professional credentials, 
licenses, certifications, or relevant experience to develop the 
proposed project.
    (2) Agreements and permits (maximum score of 5 points). The 
applicant has described the necessary agreements and permits required 
for the project and the schedule for securing those agreements and 
permits.
    (3) Energy or resource assessment (maximum score of 10 points). The 
applicant has described the quality and availability of a suitable 
renewable resource or an assessment of expected energy savings for the 
proposed system.
    (4) Design and engineering (maximum score of 30 points). The 
applicant has described the design, engineering, and testing needed for 
the proposed project. The description supports that the system will be 
designed, engineered, and tested so as to meet its intended purpose, 
ensure public safety, and comply with applicable laws, regulations, 
agreements, permits, codes, and standards.

[[Page 61244]]

    (5) Project development schedule (maximum score of 5 points). The 
applicant has described the development method, including the key 
project development activities and the proposed schedule for each 
activity. The description identifies each significant task, its 
beginning and end, and its relationship to the time needed to initiate 
and carry the project through to successful completion. The description 
addresses grantee or borrower project development cash flow 
requirements.
    (6) Project economic assessment (maximum score of 20 points). The 
applicant has described the financial performance of the proposed 
project, including the calculation of simple payback. The description 
addresses project costs and revenues, such as applicable investment and 
production incentives, and other information to allow the assessment of 
the project's cost effectiveness.
    (7) Equipment procurement (maximum score of 5 points). The 
applicant has described the availability of the equipment required by 
the system. The description supports that the required equipment is 
available, and can be procured and delivered within the proposed 
project development schedule.
    (8) Equipment installation (maximum score of 5 points). The 
applicant has described the plan for site development and system 
installation.
    (9) Operation and maintenance (maximum score of 5 points). The 
applicant has described the operations and maintenance requirements of 
the system necessary for the system to operate as designed over the 
design life.
    (10) Dismantling and disposal of project components (maximum score 
of 5 points). The applicant has described the requirements for 
dismantling and disposing of project components at the end of their 
useful life and associated wastes.
    (B) Calculation of Technical Merit Score (maximum score of 30 
points). To determine the actual points awarded a project for Technical 
Merit, the following procedure will be used: The scores awarded for 
paragraphs (g)(1)(iv)(A)(1) through (10) of this section will be added 
together and then divided by 100, the maximum possible score, to 
achieve a percentage. This percentage will then be multiplied by the 
total possible points of 30 to achieve the points awarded for the 
proposed project for Technical Merit.
    (v) Readiness (maximum score of 10 points). If the applicant has 
written commitments from the source(s) confirming commitment of 50 
percent up to but not including 75 percent of the matching funds prior 
to the Agency receiving the complete application, 3 points will be 
awarded. If the applicant has written commitments from the source(s) 
confirming commitment of 75 percent up to but not including 100 percent 
of the matching funds prior to the Agency receiving the complete 
application, 6 points will be awarded. If the applicant has written 
commitments from the source(s) of matching funds confirming commitment 
of 100 percent of the matching funds prior to the Agency receiving the 
complete application, 10 points will be awarded.
    (vi) Small agricultural producer/very small business (maximum score 
of 8 points). If the applicant is an agricultural producer producing 
agricultural products with a gross market value of less than $600,000 
in the preceding year, 4 points will be awarded. If the applicant is an 
agricultural producer producing agricultural products with a gross 
market value of less than $200,000 in the preceding year or is a very 
small business, 8 points will be awarded.
    (vii) Simplified application/low cost project (maximum score of 3 
points). If the applicant is eligible for and uses the simplified 
application process or the project has total eligible project costs of 
$200,000 or less, 3 points will be awarded.
    (viii) Hybrid technology (maximum score of 3 points). If the 
application is for a combination of two or more renewable energy 
technologies incorporated into a single project, 3 points will be 
awarded.
    (ix) Return on investment (maximum score of 6 points). If the 
proposed project will return the cost of the investment in less than 4 
years, 6 points will be awarded; 4 years up to but not including 8 
years, 4 points will be awarded; or 8 years up to 11 years, 2 points 
will be awarded.
    (x) Financial need (maximum score of 5 points). If the applicant 
can demonstrate either that the applicant is unable to finance the 
project from its own and commercially available resources without grant 
assistance or that the project proposed by the applicant cannot achieve 
the income and cash flows to sustain it financially over the long term 
without grant assistance, 5 points will be awarded.
    (2) Administrator priority categories and points. Unless otherwise 
specified in a notification issued under Sec.  5002.15 of subpart A of 
this part, the Administrator may award up to 10 points to an 
application under this section in the priority categories specified in 
paragraphs (g)(2)(i) through (v) of this section. No more than 10 
Administrator points will be awarded to an application.
    (i) Unserved or underserved areas;
    (ii) Geographic diversity;
    (iii) Emergency conditions;
    (iv) Public health and safety; and
    (v) Presidential initiatives.
    (h) Ranking applications. Unless otherwise specified in a 
notification issued under Sec.  5002.15 of subpart A of this part, the 
Agency will rank applications on or after March 15 and July 15 each 
year.


Sec.  5002.103  Rural Cooperative Development Grants

    The Rural Cooperative Development grant program is a Nationally-
competed grant program with a specified application deadline.
    (a) Definition. For the purpose of this section, ``Center'' is 
defined as the entity established or operated by the grantee for rural 
cooperative development. It may or may not be an independent legal 
entity separate from the grantee.
    (b) Applicant eligibility. In addition to the requirements 
specified in Sec.  5002.20 in subpart A of this part, as appropriate, 
the applicant must be a non-profit organization or institution, 
including an accredited institution of higher education. Public bodies 
are not eligible to receive grants under this section.
    (c) Project eligibility. In addition to the requirements specified 
in Sec.  5002.22 in subpart A of this part, the project must be for the 
establishment and operation or the continuation of a rural cooperative 
development center (Center).
    (1) Applications that focus on only one cooperative will not be 
considered for funding.
    (2) Except for 1994 Institutions, applicants must provide 25 
percent of total project cost.
    (3) Applications for providing for the sharing of information among 
Centers will not be considered for funding if more than 10 percent of 
the funding request is for the provision of sharing of information 
among Centers.
    (d) Additional application requirements. In addition to the 
application requirements specified in Sec.  5002.32, all applications 
under this section must include a plan for the establishment and 
operation by the institution of a Center or Centers for cooperative 
development. This plan must contain the following elements:
    (1) A provision that substantiates that the Center will effectively 
serve rural areas in the United States;
    (2) A provision that the primary objective of the Center will be to 
improve the economic condition of rural areas through cooperative 
development;

[[Page 61245]]

    (3) A description of the contributions that the proposed activities 
are likely to make to the improvement of the economic conditions of the 
rural areas for which the Center will provide services.
    (4) Provisions that the Center, in carrying out the activities, 
will seek, where appropriate, the advice, participation, expertise, and 
assistance of representatives of business, industry, educational 
institutions, the Federal Government, and State and local governments.
    (5) Provisions that the applicant will:
    (i) Take all practicable steps to develop continuing sources of 
financial support for the Center, particularly from sources in the 
private sector;
    (ii) Make arrangements for the activities by the non-profit 
operating the Center to be monitored and evaluated; and
    (iii) Provide an accounting for the money received by the grantee 
under this section.
    (e) Eligible uses of grant funds. Grant funds may be used for, but 
are not limited to, providing the following to individuals, 
cooperatives, small businesses and other similar entities in rural 
areas served by the Center:
    (1) Applied research, feasibility, environmental and other studies 
that may be useful for the purpose of cooperative development.
    (2) Collection, interpretation and dissemination of principles, 
facts, technical knowledge, or other information for the purpose of 
cooperative development.
    (3) Providing training and instruction for the purpose of 
cooperative development.
    (4) Providing loans and grants for the purpose of cooperative 
development in accordance with this section.
    (5) Providing technical assistance, research services and advisory 
services for the purpose of cooperative development.
    (6) Providing for the coordination or services and the sharing of 
information among Centers.
    (f) Ineligible uses. Grant funds under this section will not be 
provided and cannot be used to:
    (1) Duplicate current services or replace or substitute support 
previously provided. If the current service is inadequate, however, 
grant funds may be used to expand the level of effort or services 
beyond that which is currently being provided;
    (2) pay costs of the project incurred prior to the date of grant 
approval;
    (3) plan, repair, rehabilitate, acquire, or construct a building or 
facility, including a processing facility;
    (4) purchase, rent, or install fixed equipment. Fixed equipment 
means nonexpendable, tangible personal property having a useful life of 
more than one year and an acquisition cost of greater than or equal to 
$5,000.
    (5) Pay for the repair of privately owned vehicles; or
    (6) Fund research and development.
    (g) Grant agreement and conditions. The length of grant agreements 
made under this section are subject to the conditions specified in 
paragraphs (g)(1) through (3) of this section.
    (1) A grant awarded to a center that has received no prior funding 
under this section shall be made for a period of one year.
    (2) If the Agency determines that it is in the best interest of the 
program, grants will be awarded for a period of more than one year, but 
not more than three years, to a center that has successfully met the 
parameters described in paragraphs (i)(1)(i) through (v) of this 
section, as determined by the Agency.
    (3) The Agency will not approve requests to extend the grant period 
for more than 12 months.
    (h) Funding limitations and matching funds.
    (1) Funding limitations. For 1994 Institutions, the maximum amount 
of a grant awarded under this section will be no more than 95 percent 
of the total cost of the Center. The Agency shall not require a match 
of more than 5 percent of the total cost of the Center.
    (2) Matching funds.
    (i) Applicants must verify in their application that all matching 
funds are available for the time period of the grant.
    (ii) Matching funds must be spent in advance of, or as a pro rata 
portion of, grant funds being expended.
    (iii) All matching funds must be spent on eligible expenses and 
must be from eligible sources.
    (iv) All matching funds must be provided by either the applicant or 
a third party in the form of cash or in-kind contributions.
    (A) Matching funds contributed by the applicant may include a loan 
from another federal source. However, other Federal grant funds cannot 
be used as matching funds unless provided by other authorizing 
legislation.
    (B) Any in-kind contributions must be performed for the benefit of 
the Center. The Center must be able to document and verify the number 
of hours worked and the value associated with the contribution. In-kind 
contributions provided by individuals, businesses, or cooperatives who 
are being assisted by the Center cannot be provided for the benefit of 
their own projects because the Agency considers this a conflict of 
interest or the appearance of a conflict of interest.
    (i) Scoring applications. Each application for a grant under this 
section will be scored based on the priority categories and points 
specified in paragraphs (i)(1) and (2) of this section. The maximum 
number of points that will be awarded to an application is 100.
    (1) Program-specific priority categories and points. The Agency 
will award program-specific points for the priority categories 
described in paragraphs (i)(1)(i) through (viii) of this section.
    (i) Administrative capabilities (maximum score of 10 points). The 
Agency will evaluate the application to determine whether the applicant 
has a proven track record of carrying out activities to promote and 
assist the development of cooperatively and mutually owned businesses. 
The applicant must also discuss their financial systems and audit 
controls, personnel and program administration performance measures and 
rules of governance. Applicants that evidence capable systems and 
controls and clear rules of governance will receive more points.
    (ii) Technical assistance and other services (maximum score of 15 
points). The Agency will evaluate the applicant's demonstrated 
expertise in providing technical assistance and accomplishing effective 
outcomes in cooperative development in rural areas to promote and 
assist the development of cooperatively and mutually owned businesses. 
The applicant should also discuss their potential for delivering 
effective technical assistance, the expected effects of that 
assistance, and the sustainability of organizations receiving the 
assistance. Applicants that evidence effective delivery systems for 
cooperative development will receive more points.
    (iii) Economic development (maximum score of 15 points). The Agency 
will evaluate the applicant's demonstrated ability to assist in the 
retention of businesses, facilitate the establishment of cooperatives 
and new cooperative approaches and generate employment opportunities 
that will improve the economic conditions of rural areas. Applicants 
that provide statistics and identify their role in the economic 
development outcomes will receive more points.
    (iv) Networking and regional focus (maximum score of 10 points). 
The Agency will evaluate the applicant's demonstrated commitment to:

[[Page 61246]]

    (A) networking with and sharing the results of the efforts of the 
center with other cooperative development centers and other 
organizations involved in rural economic development efforts (maximum 
score of 5 points); and
    (B) developing multiorganization and multistate approaches to 
addressing the economic development and cooperative needs of rural 
areas (maximum score of 5 points).
    (v) Commitment (maximum score of 10 points). The Agency will 
evaluate the applicant's commitment to providing technical assistance 
and other services to underserved and economically distressed areas in 
rural areas of the United States. Applicants that provide statistics 
and tie their service area and projects to the underserved and the 
economically distressed areas as appropriate will receive more points.
    (vi) Qualifications of those performing the tasks (maximum score of 
10 points). The Agency will evaluate the application to determine if 
the personnel expected to perform key Center tasks have a track record 
of positive solutions for complex cooperative development and/or 
marketing problems, or a successful record of conducting accurate 
feasibility studies, business plans, marketing analysis, or other 
activities relevant to cooperative development Center success as 
determined by the tasks identified in applicant's work plan. Applicants 
that evidence commitment/availability of qualified personnel expected 
to perform the tasks will receive more points.
    (vii) Local support (maximum score of 10 points). The Agency will 
evaluate the applications for previous and expected local support for 
the Center and plans for coordinating with other developmental 
organizations (including state and local institutions) in the proposed 
service area. Applicants that evidence strong support from potential 
beneficiaries and formal evidence of intent to coordinate with other 
developmental organizations will receive more points.
    (viii) Future support (maximum score of 10 points). The Agency will 
evaluate the applicant's vision for funding Center operations for 
future years. Discussion should include issues such as sources and uses 
of alternative funding; reliance on Federal, State, and local grants; 
and the use of in-house personnel for providing services versus 
contracting out for that expertise. Applicants that evidence vision of 
long-term sustainability with diversification of funding sources and 
building in-house technical assistance capacity will receive more 
points.
    (2) Administrator priority categories and points. Unless otherwise 
specified in a notification issued under Sec.  5002.15 of subpart A of 
this part, the Administrator may award up to 10 points to an 
application under this section to improve the geographic diversity of 
awardees in a fiscal year.
    (j) Ranking applications. Unless otherwise specified in a 
notification issued under Sec.  5002.15 of subpart A of this part, the 
Agency will rank applications on or after July 15 each year.
    (k) Additional criteria for selecting applications for funding. If 
two projects obtain the same total score, the Agency will select the 
project whose aggregate score for the criteria specified in paragraphs 
(i)(1)(i) through (v) of this section is higher.


Sec.  5002.104  Distance Learning and Telemedicine Grants.

    The Distance Learning and Telemedicine (DLT) grant program is a 
Nationally-competed grant program with a specified application 
deadline.
    (a) Definition. For the purpose of this section, 
``Telecommunications or electric borrower'' is defined as an entity 
that has outstanding RUS or Rural Telephone Bank electric or 
telecommunications loans or loan guarantees under the provisions of the 
Rural Electrification Act of 1936.
    (b) Applicant eligibility. In addition to the requirements 
specified in Sec.  5002.20, except for Sec.  5002.20(c), in subpart A 
of this part:
    (1) The applicant must be:
    (i) Legally organized as an incorporated organization or 
partnership;
    (ii) An Indian tribe or tribal organization, as defined in 25 
U.S.C. 450b (b) and (c);
    (iii) A state or local unit of government or a consortium; or
    (iv) Other legal entity, including a private corporation organized 
on a profit or non-profit basis.
    (v) If the applicant is a consortium, at least one member of the 
consortium must meet the requirements of paragraphs (b)(1)(i) through 
(iv) of this section. If a consortium lacks the legal capacity to 
contract, each individual entity must contract with the Agency in its 
own behalf.
    (2) Each applicant must provide written evidence of its legal 
capacity to contract with the Agency to obtain the grant, and comply 
with all applicable requirements. If a consortium lacks the legal 
capacity to contract, each individual entity must contract with the 
Agency on its own behalf.
    (3) Individuals are not eligible for program financial assistance 
under this program directly.
    (4) Telecommunications or electric borrowers under the Rural 
Electrification Act of 1936 ((7 U.S.C. 950aaa et seq.) are not eligible 
for grants, provided, however, that such borrowers are eligible for 
funding under the Distance Learning Telemedicine Combination Loan and 
Grant Program (7 CFR 1703, subpart D) and the Distance Learning 
Telemedicine Loan Program (7 CFR 1703, subpart G).
    (c) Project eligibility. In addition to the requirements specified 
in Sec.  5002.22 in subpart A of this part:
    (1) The project must be to deliver distance learning or 
telemedicine services to entities that operate a rural community 
facility, including libraries, or to residents of rural areas at rates 
calculated to ensure that the benefit of the financial assistance is 
passed through to such entities or to residents of rural areas; and
    (2) DLT end-user sites must be located in a rural area described in 
one of the four rural areas described in paragraph (h)(1)(ii)(A) of 
this section, although the DLT hub site may be located in either a 
rural or non-rural area. DLT end-user facilities not within one of 
these four defined rural areas are not eligible for grant funding under 
this section.
    (d) Additional preapplication and application requirements. In 
addition to, or in lieu of, as applicable, the requirements specified 
in Sec. Sec.  5002.30, 5002.31, and 5002.32, the following requirements 
apply to preapplications and applications submitted under this section.
    (1) Preapplications. If an applicant elects to submit a 
preapplication, the preapplication must be received by the Agency on or 
before January 1 of the year in which a related application is 
received. Preapplications received after January 1 will not be 
considered by the Agency.
    (2) Applications--(i) Application submittal. When submitting 
applications, the applicant shall submit one original and two copies of 
the application to the Agency.
    (ii) Application deadline. Applications must be received on or 
before March 31 of each year to be considered for funding for that 
fiscal year. Applications received by the Agency after March 31 will 
not be considered for funding that fiscal year.
    (iii) State strategic plan. The application must contain evidence 
from the Agency State Director, Rural Development, that the application 
conforms with the State strategic plan as prepared under section 381D 
of the

[[Page 61247]]

Consolidated Farm and Rural Development Act (7 U.S.C. 1921). The 
applicant should indicate if such a plan does not exist.
    (e) Eligible uses of grant funds. Grant funds under this section 
must be used to fund only the costs for approved purposes as defined in 
paragraphs (e)(1) through (5) of this section. Grants shall be expended 
only for the costs associated with the initial capital assets 
associated with the project.
    (1) Acquiring, by lease or purchase, constructing, or installing 
eligible equipment, which is computer hardware and software, audio or 
video equipment, computer network components, telecommunications 
terminal equipment, data terminal equipment, inside wiring, interactive 
video equipment, or similar equipment, or other facilities that would 
further telemedicine services or distance learning services.
    (2) Acquiring or installing instructional programming.
    (3) Providing technical assistance and instruction for using 
eligible equipment, including any related software.
    (4) Developing instructional programming.
    (5) Providing engineering or environmental studies relating to the 
establishment or expansion of the phase of the project that is being 
funded with the grant.
    (f) Ineligible uses of grant funds. Grant funds under this section 
will not be provided and cannot be used:
    (1) To cover the costs of acquiring, installing or constructing 
telecommunications transmission facilities;
    (2) To pay for medical equipment not having telemedicine as its 
essential function;
    (3) To pay salaries, wages, or employee benefits to medical or 
educational personnel;
    (4) To pay for the salaries or administrative expenses of the 
applicant or the project;
    (5) To purchase equipment that will be owned by the local exchange 
carrier or another telecommunications service provider unless that 
service provider is the applicant;
    (6) To duplicate facilities providing distance learning or 
telemedicine services in place or to reimburse the applicant or others 
for costs incurred prior to the Agency's receipt of the completed 
application;
    (7) To pay costs of preparing the application package for financial 
assistance under this program;
    (8) For projects whose primary objective is to provide links 
between teachers and students or between medical professionals who are 
located at the same facility;
    (9) For site development and the destruction or alteration of 
buildings;
    (10) For the purchase of land, buildings, or building construction;
    (11) For any purpose that the Administrator has not specifically 
approved; or
    (12) Except for leases provided for in paragraph (e)(1) of this 
section, to pay the cost of recurring or operating expenses for the 
project.
    (g) Funding considerations and matching funds--(1) Limitation on 
funding certain purposes. No more than 10 percent of the funds for a 
grant under this section can be used for any one of the purposes listed 
in paragraphs (e)(3) through (5) of this section, or for any 
combination thereof.
    (2) Matching funds. The grant applicant's minimum matching 
contribution must equal 15 percent of the grant amount requested and 
shall be used for approved purposes for grant funds listed in paragraph 
(e) of this section.
    (i) Matching contributions generally must be in the form of cash. 
However, in-kind contributions solely for the purposes listed in 
paragraph (e) of this section may be substituted for cash.
    (ii) In-kind items listed in paragraph (e) of this section must be 
non-depreciated, new assets with established monetary values. 
Manufacturers', vendors', or service providers' discounts are not 
considered in-kind matching.
    (iii) Costs incurred by the applicant, or others on behalf of the 
applicant, for facilities or equipment installed, or other services 
rendered prior to submission of a completed application, shall not be 
considered as an eligible in-kind matching contribution.
    (iv) Costs incurred for non-approved purposes identified in 
paragraph (f) of this section shall not be used as an in-kind matching 
contribution.
    (v) Any financial assistance from Federal sources will not be 
considered as matching contributions under this section unless there is 
a Federal statutory exception specifically authorizing the Federal 
financial assistance to be considered as a matching contribution, and 
that exception is documented in the application.
    (h) Scoring applications. Each application for a grant under this 
section will be scored based on the priority categories and points 
specified in paragraphs (h)(1) and (2) of this section. The maximum 
number of points that will be awarded to an application is 100.
    (1) Program-specific priority categories and points. The Agency 
will award program-specific points for the priority categories 
described in paragraphs (h)(1)(i) through (iii) of this section.
    (i) The critical need for the project (maximum score of 35 points). 
(A) This criterion will be used to score applications based on the 
documentation in support of the need for services, the benefits derived 
from the services proposed by the project, the local community 
involvement in planning and implementing the project, the local 
participation in financing the project, the financial need of the 
applicant, and the technical and functional quality of the project. 
Technical and functional quality is determined in part by the 
utilization of existing or non-project telecommunications resources in 
an area, the integration of the project into other networks, and the 
ability of the project to serve the greatest practical number of 
residents in the project's area. This determination will be made by the 
Agency based on information submitted by the applicant under paragraph 
(d)(2) of this section.
    (B) The Agency will consider the extent of the applicant's 
documentation explaining the economic, education, or health care 
challenges facing the community; the applicant's proposed plan to 
address these challenges; how the grant can help; and why the applicant 
cannot complete the project without a grant. The Agency will also 
consider the extent to which the applicant provides evidence that 
economic, education, or health care challenges could not be addressed 
without employing the specific technology proposed. The Agency will 
also consider any support by recognized experts in the related 
educational or health care field, any documentation substantiating the 
educational or health care underserved nature of the applicant's 
proposed service area, and any justification for specific educational 
or medical services that are needed and will provide direct benefits to 
rural residents. The Agency will consider the extent to which the 
applicant demonstrates that the project most efficiently provides the 
needed services. The Agency will also consider evidence of local 
support of the project, including demonstrations of local (applicant 
and community) financial contributions for eligible and ineligible 
grant purposes, planning and administrative support for the project, 
and support from community and institutional leaders. When an applicant 
believes a project area's or beneficiaries' financial need is

[[Page 61248]]

greater than the need expressed by the project's National School Lunch 
Program (NSLP) eligibility score, the Agency will consider evidence of 
this unusual need.
    (ii) The comparative population sparsity of the service area 
(maximum score of 30 points). This criterion will be used to evaluate 
the relative rurality of service areas for various projects. Under this 
system, the DLT end-user sites contained within the service area are 
identified and given a score according to the population of the area 
where the DLT end-user sites are located.
    (A) The following definitions are used in the evaluation of 
sparsity:
    (1) Most Rural Area means any area of the United States not 
included within the boundaries of any Census-defined urban cluster or 
urbanized area having a population of 2,500 or more inhabitants.
    (2) Extremely Rural Area means any area of the United States not 
included within the boundaries of any Census-defined urbanized area but 
which is included in an urban cluster of from 2,501 to 5,000 
inhabitants.
    (3) Mid-Rural Area means any area of the United States not included 
within the boundaries of any Census-defined urbanized area but which is 
included within the boundaries of an urban cluster having a population 
of from 5,001 to 10,000 inhabitants.
    (4) Rural Area means any area of the United States not included 
within the boundaries of any Census-defined urbanized area but which is 
included in an urban cluster of from 10,001 to 20,000 inhabitants.
    (B) There are a total of 30 possible points for this criterion. 
Each end-user site will receive points based on its location in 
accordance with paragraphs (h)(1)(ii)(B)(1) through (4) of this 
section. If a hub is utilized as an end-user site, the hub will be 
considered as an end-user site. The applicant will receive points as 
follows:
    (1) If the end-user site is located in a Most Rural Area, it will 
receive 30 points.
    (2) If the end-user site is located in an Extremely Rural Area, it 
will receive 25 points.
    (3) If the end-user site is located in a Mid-Rural Area, it will 
receive 15 points.
    (4) If the end-user site is located in a Rural Area, it will 
receive 0 points.
    (C) The total score for this criterion will be based on the average 
score for all the end-user sites included in the project.
    (iii) The economic need of the applicant's service area as 
estimated by the NSLP (maximum score of 25 points). This criterion will 
be used to evaluate the relative financial need of the applicant, 
community, and project. All applicants are required to provide the 
applicable percentage of students eligible to participate in the NSLP 
for each area to be served by the end-user site. The appropriate State 
or local organization administering the program must certify the 
percentages as being correct. The applicant must provide a listing of 
the location of each end-user site (city, town, village, borough or 
rural area) discussing how the appropriate NSLP percentage was 
determined in accordance with this section. These percentages may be 
obtained from the State or local organization that administers the 
program and must be certified by that organization as being correct by 
such entity. For purposes of this section, the NSLP percentage will 
reflect the percentage of eligibility rather than the percentage of 
actual participation.
    (A) The following guidelines will be used to determine the 
applicable NSLP percent for a particular application:
    (1) The eligibility percentage for each end-user site is the 
eligibility percentage of the school district where the end-user will 
be located.
    (2) Percentage ratios will be rounded up to the next highest or 
rounded down to the next lowest whole number for fraction of 
percentages at or greater than 0.5 or less than 0.5, respectively.
    (3) The project NSLP percentage will be determined by the average 
of the NSLP percentages of the end-user sites. If end-user sites fall 
within different percentile categories, the eligibility percentages 
associated with each end-user site will be averaged to determine the 
percentile category. For purposes of averaging, if a hub is also 
utilized as an end-user site, the hub will be considered as an end-user 
site.
    (B) The applicant will receive economic need points based on the 
project NSLP percentage, as follows:
    (1) NSLP percentage greater than or equal to 74 percent receives 25 
points.
    (2) NSLP percentage less than 25 percent receives zero points.
    (3) One point is scored for each two percentage point increase in 
project NSLP percentage. For example, if the project NSLP percentage is 
25 percent or 26 percent, the economic need score is 1 point. If the 
project NSLP percentage is 47 percent or 48 percent, the economic need 
score is 12 points.
    (2) Administrator priority categories and points. Unless otherwise 
specified in a notification issued under Sec.  5002.15 of subpart A of 
this part, the Administrator may award up to 10 points to an 
application under this section to improve the geographic diversity of 
awardees in a fiscal year.
    (i) Ranking applications. Unless otherwise specified in a 
notification issued under Sec.  5002.15 of subpart A of this part, the 
Agency will rank applications on or after July 15 each year.


Sec.  5002.105  Value-Added Producer Grants.

    The Value-Added Producer grant program is a Nationally-competed 
grant program with a specified application deadline. For the purposes 
of the application of the requirements in subpart A, in the case of 
this section the term ``venture'' means ``project'' as that term is 
used in subpart A and includes the project and any other activities 
related to the production, processing, and marketing of the value-added 
product that is the subject of the value-added producer grant request.
    (a) Definitions.
    Agricultural producer. Persons or entities, including farmers, 
ranchers, loggers, agricultural harvesters, and fishermen, that engage 
in the production or harvesting of an agricultural product. Producers 
may or may not own the land or other production resources, but must 
have majority ownership interest in the agricultural product to which 
value-added is to accrue as a result of the venture. Examples of 
agricultural producers include: a logger who has a majority interest in 
the logs harvested that are then converted to boards, a fisherman that 
has a majority interest in the fish caught that are then smoked, a wild 
herb gatherer that has a majority interest in the gathered herbs that 
are then converted into essential oils, a cattle feeder that has a 
majority interest in the cattle that are fed, slaughtered and sold as 
boxed beef, and a corn grower that has a majority interest in the corn 
produced that is then converted into corn meal.
    Beginning farmer or rancher. The term ``beginning farmer or 
rancher'' has the meaning given the term in section 343(a) of the 
Consolidated Farm and Rural Development Act (7 U.S.C. 1991(a)).
    Family farm. The term ``family farm'' has the meaning given the 
term in section 761.2 of title 7, Code of Federal Regulations (as in 
effect on December 30, 2007).
    Special purpose equipment. Equipment that is used only for 
research, medical, scientific, or other technical activities.
    Socially disadvantaged farmer or rancher. The term ``socially 
disadvantaged farmer or rancher'' has the meaning given the term in 
section 355(e) of the Consolidated Farm and

[[Page 61249]]

Rural Development Act (7 U.S.C. 2003(e)).
    (b) Applicant eligibility. In addition to the requirements 
specified in Sec.  5002.20 in subpart A of this part:
    (1) The applicant must be:
    (i) An independent producer;
    (ii) Agricultural producer group;
    (iii) Farmer or rancher cooperative; or
    (iv) A majority-controlled producer-based business venture.
    (2) An applicant that is a farmer or rancher cooperative, an 
agriculture producer group, or a majority-controlled producer-based 
business venture must be entering into an emerging market as a result 
of the proposed venture.
    (3) An applicant that is an independent producer does not have to 
be entering into an emerging market.
    (c) Venture eligibility. In order for a venture to be eligible for 
grant funding under this section, the venture must evidence a high 
likelihood of creating value-added for an agricultural product by 
meeting at least one of the categories in the definition of value-
added. The project eligibility requirements specified in Sec.  5002.22 
in subpart A of this part do not apply to ventures seeking a grant 
under this section.
    (1) The venture must be located in a rural area.
    (2) Working capital grants must have a feasibility study and 
business plan completed specifically for the proposed venture before 
the application is submitted. The feasibility study and business plan 
must be submitted when requested by the Agency during application 
processing.
    (3) Applicants who have already received a planning grant for the 
proposed venture cannot receive another planning grant for the same 
venture. Applicants who have already received a working capital grant 
for a venture cannot receive any additional grants for that venture.
    (4) No venture may be the subject of more than one planning grant 
or more than one working capital grant under this section. The same 
venture may, however, be awarded one planning grant and subsequently 
apply for and receive a working capital grant.
    (5) Not more than one venture per funding cycle per applicant may 
receive grant funding under this section.
    (6) If the agricultural product is a value-added product, 
agricultural producers must have a majority ownership interest in the 
agricultural product to which value-added is to accrue.
    (d) Eligible uses of grant funds. Grant funds under this section 
must be used to fund only the costs for approved purposes as defined in 
paragraphs (d)(1) and (2) of this section.
    (1) Planning grant funds may be used to develop a business plan or 
perform a feasibility study to establish a viable marketing opportunity 
for a value-added producer. These uses include, but are not limited to, 
the following:
    (i) Conduct, or hire a qualified consultant to conduct, a 
feasibility analysis of the proposed value added venture to help 
determine the potential success of the venture;
    (ii) Develop, or hire a qualified consultant to develop, a business 
operations plan that provides comprehensive detail on the management, 
planning and other operational aspects of the proposed venture;
    (iii) Develop, or hire a qualified consultant to develop, a 
marketing plan for the proposed value-added product(s) including the 
identification of a market window, potential buyers, a description of 
the distribution system and possible promotional campaigns; and
    (iv) Hire counsel to provide legal advice and to draft 
organizational and other legal documents related to the proposed 
venture.
    (2) Working capital grant funds may be used to provide capital to 
establish alliances or business ventures that allow the producer of the 
value-added agricultural product to better compete in domestic or 
international markets. These uses include, but are not limited to, the 
following:
    (i) Establish a working capital account to fund operations prior to 
obtaining sufficient cash flow from operations;
    (ii) Hire counsel to provide legal advice and to draft legal 
documents related to the proposed venture;
    (iii) Hire a certified public accountant or other qualified 
individual to design an accounting system for the proposed venture; and
    (iv) Pay salaries, utilities and other operating costs such as 
inventory financing, the purchase of office equipment, computers and 
supplies and finance other related activities.
    (v) Conduct a marketing campaign for a proposed value-added 
product.
    (e) Ineligible uses of grant funds. Grant funds under this section 
may not be used to:
    (1) Duplicate current services or replace or substitute support 
previously provided. If the current service is inadequate, however, 
grant funds may be used to expand the level of effort or services 
beyond what is currently being provided;
    (2) Pay costs of the venture incurred prior to the date of grant 
approval;
    (3) Plan, repair, rehabilitate, acquire, or construct a building or 
facility (including a processing facility);
    (4) Purchase, rent, or install fixed equipment. Fixed equipment 
means nonexpendable, tangible personal property having a useful life of 
more than one year and an acquisition cost of greater than or equal to 
$5,000. Rental or purchase of special purpose equipment for specific, 
limited applications related to planning grants may be approved at the 
discretion of the Agency;
    (5) Pay for the repair of privately owned vehicles;
    (6) Fund research and development;
    (7) Purchase real property and/or vehicles, including boats;
    (8) Pay expenses not directly related to the funded venture;
    (9) Fund architectural or engineering design work for a specific 
physical facility;
    (10) Fund any expenses related to the production of any commodity 
or product to which value will be added, including seed, rootstock, 
labor for harvesting the crop, and delivery of the commodity to a 
processing facility. The Agency considers these expenses to be 
ineligible because the intent of the program is to assist producers 
with marketing value-added products rather than producing agricultural 
commodities; or
    (11) Conduct activities on behalf of anyone other than a specific 
independent producer or group of independent producers. The Agency 
considers conducting industry-level feasibility studies and business 
plans that are also known as feasibility study templates or guides or 
business plan templates or guides to be ineligible because the 
assistance is not provided to a specific group of independent 
producers.
    (f) Additional preapplication and application requirements. In 
addition to the requirements specified in Sec. Sec.  5002.30, 5002.31, 
and 5002.32, the following requirements apply to preapplications and 
applications submitted under this section.
    (1) Preapplications. If an applicant elects to submit a 
preapplication, the preapplication must be received by the Agency on or 
before January 15 of each year to be considered. Preapplications 
received after January 15 will not be considered by the Agency.
    (2) Applications--(i) Deadline. Unless otherwise specified in a 
notification issued under Sec.  5002.15, applications must be received 
on or before March 1 of each year to be considered for funding for that 
fiscal year. Applications received by the Agency after March 1 will not 
be considered.

[[Page 61250]]

    (ii) Business plan. The business plan must include at least three 
years of pro forma financial statements.
    (iii) Feasibility study. The feasibility study should show how the 
venture would operate under a set of assumptions, the technology used 
(the facilities, equipment, production process, etc.), the 
qualifications of the management team, and the financial aspects 
(capital needs, volume, cost of goods, wages, etc.) of the venture. The 
analysis should answer the following questions about the venture.
    (A) Where is it now?
    (B) Where does the group want to go?
    (C) Why does the group want to go forward with the venture?
    (D) How will the group accomplish the venture?
    (E) What resources are needed?
    (F) Who will provide assistance?
    (G) When will the venture be completed?
    (H) How much will the venture cost?
    (I) What are the risks?
    (3) Simplified application. Applicants with ventures requesting 
less than $50,000 will be allowed to submit an application under this 
section that has less documentation than for applicants with ventures 
requesting $50,000 or more. The requirements for simplified 
applications are available at any Rural Development office and on the 
Agency Web site.
    (g) Grant agreement and conditions. The length of grant agreements 
made under this section shall not exceed three years.
    (h) Funding limitations and matching funds--(1) Funding 
Limitations. (i) Grant funds may be used to pay up to 50 percent of the 
costs for carrying out relevant ventures.
    (ii) The aggregate amount of awards to majority controlled 
producer-based business ventures may not exceed ten percent of the 
total funds obligated under this program during any fiscal year.
    (iii) The total amount provided to a grantee in any one year shall 
not exceed $500,000.
    (2) Matching funds. (i) Applicants must verify in their 
applications that matching funds are available for the time period of 
the grant.
    (ii) Matching funds must be at least equal to the amount of grant 
funds requested.
    (iii) Unless provided by other authorizing legislation, other 
Federal grant funds cannot be used as matching funds.
    (iv) Matching funds must be spent at a rate equal to or greater 
than the rate at which grant funds are expended.
    (v) Matching funds must be provided by either the applicant or by a 
third party in the form of cash or in-kind contributions.
    (vi) Matching funds must be spent on eligible expenses and must be 
from eligible sources.
    (i) Scoring applications. Each application for a grant under this 
section will be scored based on the priority categories and points 
specified in paragraphs (i)(1) and (2) of this section. The maximum 
number of points that will be awarded to an application is 100.
    (1) Program-specific priority categories and points. The Agency 
will award program-specific points for the priority categories 
described in paragraphs (i)(1)(i) through (v) of this section, as 
applicable.
    (i) Nature of the proposed venture (maximum score of 25 points). 
Ventures will be evaluated for technological feasibility, operational 
efficiency, profitability, sustainability and the likely improvement to 
the local rural economy. Also considered will be the potential for 
expanding the customer base for the Value-Added product and the 
expected increase in returns to the producer-owners of the venture.
    (ii) Personnel qualifications (maximum score of 20 points). 
Ventures will be evaluated for whether the personnel who are 
responsible for completing the proposed tasks, including those leading 
or managing the venture and those leading the venture, have the 
necessary qualifications.
    (iii) Commitments and support (maximum score of 20 points). 
Commitment to the venture will be evaluated on the basis of the number 
of independent producers currently involved as well as how many may 
potentially be involved, and the nature, level, and quality of their 
contributions. End-user commitments will be evaluated on the basis of 
potential markets and the potential amount of output to be purchased. 
Applications will also be reviewed for evidence that the venture has 
significant third party support, with financial support being most 
important, followed by in-kind support and finally general support.
    (iv) Work plan/budget (maximum score of 20 points). The work plan 
will be evaluated based on whether it provides specific and detailed 
task descriptions, reasonable and specific timeframes for the tasks, 
and the key personnel responsible for the tasks that will accomplish 
the venture's goals. The budget will be evaluated based on whether it 
provides a detailed breakdown of all estimated costs (both grant and 
matching) associated with the proposed activities, allocates these 
costs among the listed tasks, and is reasonable.
    (v) Type of applicant (maximum score of 5 points). If an 
application is from an applicant that is a beginning farmer or rancher, 
a socially disadvantaged farmer or rancher, or an operator of a small- 
or medium-sized farm or ranch that is structured as a family farm, 3 
points will be awarded. If the application is from an applicant that 
meets any two of these three applicant types, 4 points will be awarded. 
If the application is from an applicant that meets all three applicant 
types, 5 points will be awarded.
    (2) Administrator priority categories and points. Unless otherwise 
specified in a notification issued under Sec.  5002.15 of subpart A of 
this part, the Administrator may award up to 10 points to an 
application under this section to improve the geographic diversity of 
awardees in a fiscal year.
    (j) Ranking applications. Unless otherwise specified in a 
notification issued under Sec.  5002.15 of subpart A of this part, the 
Agency will rank applications on or after July 15 each year.


Sec.  5002.106  Water and Waste Disposal Facilities Grants.

    The Water and Waste Disposal Facilities grant program is a State-
allocated grant program with an open application period.
    (a) General. Water and waste applicants must demonstrate that they 
possess the financial, technical, and managerial capability necessary 
to consistently comply with pertinent Federal and State laws and 
requirements. In developing water and waste systems, applicants must 
consider alternatives of ownership, system design, and the sharing of 
services.
    (b) Applicant eligibility. In addition to the requirements 
specified in Sec.  5002.20 in subpart A of this part, as appropriate, 
an applicant must be:
    (1) A public body, such as a municipality, county, district, 
authority, or other political subdivision of a State, territory or 
commonwealth;
    (2) An organization operated on a non-profit basis, such as an 
association, cooperative, or private corporation. The organization must 
be an association controlled by a local public body or bodies, or have 
a broadly based ownership by or membership of people of the local 
community; or
    (3) An Indian tribe on Federal and State reservations and other 
Federally-recognized Indian tribe.
    (c) Project eligibility. In addition to the requirements specified 
in Sec.  5002.22

[[Page 61251]]

in subpart A of this part, the project must meet the following 
requirements:
    (1) Rural area. The project must serve a rural area that, if such 
project is completed, is not likely to decline in population below that 
for which the project was designed. Facilities funded by the Agency may 
be located in non-rural areas. However, loan and grant funds may be 
used to fund only that portion of the facility serving rural areas, 
regardless of facility location.
    (2) Capacity. The project must be designed and constructed so that 
adequate capacity will or can be made available to serve the present 
population of the area to the extent feasible and to serve the 
reasonably foreseeable growth needs of the area to the extent 
practicable.
    (3) Community development and plan. The project must be necessary 
for orderly community development and consistent with a current 
comprehensive community water, waste disposal, or other current 
development plan for the rural area.
    (4) Revenue sources. All projects funded under the provisions of 
this section must be based on taxes, assessments, income, fees, or 
other satisfactory sources of revenues in an amount sufficient to 
provide for facility operation and maintenance, reasonable reserves, 
and debt payment. If the primary use of the facility is by business and 
the success or failure of the facility is dependent on the business, 
then the economic viability of that business must be assessed.
    (5) Public use. All facilities funded under the provisions of this 
section shall be for public use. The facilities will be installed so as 
to serve any potential user within the service area who desires service 
and can be feasibly and legally served.
    (i) This does not preclude:
    (A) Financing or constructing projects in phases when it is not 
practical to finance or construct the entire project at one time; and
    (B) Financing or constructing facilities where it is not 
economically feasible to serve the entire area, provided economic 
feasibility is determined on the basis of the entire system or facility 
and not by considering the cost of separate extensions to or parts 
thereof. Additionally, the applicant must publicly announce a plan for 
extending service to areas not initially receiving service. 
Additionally, the applicant must provide written notice to potential 
users located in the areas not to be initially served.
    (ii) Should the Agency determine that inequities exist within the 
applicant's service area for the same type service proposed (i.e., 
water or waste disposal) such inequities will be remedied by the 
applicant prior to grant approval or included as part of the project. 
Inequities are defined as unjustified variations in availability, 
adequacy or quality of service. User rate schedules for portions of 
existing systems that were developed under different funding, rates, 
terms or conditions do not necessarily constitute inequities.
    (iii) Developers are expected to provide utility-type facilities in 
new or developing areas in compliance with appropriate State statutes.
    (6) Credit elsewhere. Applicants must certify in writing and the 
Agency shall determine and document that the applicant is unable to 
finance the proposed project from their own resources or through 
commercial credit at reasonable rates and terms.
    (d) Notice of intent to apply for grant. An applicant must publish 
a notice of intent to apply for a grant under this program not more 
than 60 days before filing the application with the Agency. The notice 
of intent must be published in a newspaper of general circulation in 
the proposed area to be served.
    (e) Eligible uses of grant funds. Grant funds under this section 
may be used only for the following purposes:
    (1) To construct, enlarge, extend, or otherwise improve rural 
water, sanitary sewage, solid waste disposal, and storm wastewater 
disposal facilities.
    (2) To construct or relocate public buildings, roads, bridges, 
fences, or utilities, and to make other public improvements necessary 
for the successful operation or protection of facilities authorized in 
paragraph (e)(1) of this section.
    (3) To relocate private buildings, roads, bridges, fences, or 
utilities, and other private improvements necessary for the successful 
operation or protection of facilities authorized in paragraph (e)(1) of 
this section.
    (4) For payment of other utility connection charges as provided in 
service contracts between utility systems.
    (5) When a necessary part of the project relates to those 
facilities authorized in paragraphs (e)(1) through (4), grant funds may 
be used for:
    (i) Reasonable fees and costs such as legal, engineering, 
architectural, accounting, environmental, archeological, and appraisal;
    (ii) Costs of acquiring interest in land; rights, such as water 
rights, leases, permits, rights-of-way; and other evidence of land or 
water control or protection necessary for development of the facility;
    (iii) Purchasing or renting equipment necessary to install, 
maintain, extend, protect, operate, or utilize facilities;
    (iv) Cost of additional applicant labor and other expenses 
necessary to install and extend service; and
    (v) In unusual cases, the cost for connecting the user to the main 
service line.
    (vi) To restore loan funds used to prepay grant obligated costs.
    (6) Construction incurred before grant approval.
    (i) Funds may be used to pay obligations for eligible project costs 
incurred before grant approval if such requests are made in writing by 
the applicant and the Agency determines that:
    (A) Compelling reasons exist for incurring obligations before grant 
approval;
    (B) The obligations will be incurred for authorized grant purposes; 
and
    (C) The Agency's authorization to pay such obligations is on the 
condition that it is not committed to make the grant; it assumes no 
responsibility for any obligations incurred by the applicant; and the 
applicant must subsequently meet all grant approval requirements, 
including environmental and contracting requirements.
    (ii) If construction is started without Agency approval, post-
approval in accordance with this section may be considered, provided 
the construction meets applicable requirements including those 
regarding approval and environmental matters.
    (f) Ineligible uses of grant funds. Grant funds under this section 
may not be used to fund:
    (1) Facilities that are not modest in size, design, and cost;
    (2) Loan or grant finder's fees;
    (3) The construction of any new combined storm and sanitary sewer 
facilities;
    (4) Any portion of the cost of a facility that does not serve a 
rural area;
    (5) That portion of project costs normally provided by a business 
or industrial user, such as wastewater pretreatment, etc.;
    (6) For other purposes not directly related to operating and 
maintenance of the facility being installed or improved;
    (7) Reduce equivalent dwelling unit (EDU) costs to a level less 
than similar system cost;
    (8) Pay any costs of a project when the median household income of 
the service area is more than 100 percent of the nonmetropolitan median 
household income of the State;
    (9) Pay project costs when other loan funding for the project is 
not at reasonable rates and terms; or

[[Page 61252]]

    (10) Pay project costs when other funding is a guaranteed loan 
obtained in accordance with the guaranteed loan program for water and 
waste disposal facilities.
    (g) Funding considerations and matching funds--(1) Funding 
considerations. Grants will be determined by the Agency in accordance 
with the provisions of this paragraph.
    (i) Similar system cost. If the grant results in an annual EDU cost 
that is not comparable with similar systems, the Agency will determine 
a grant amount based on achieving EDU costs that are not below similar 
system user costs.
    (ii) Wholesale service. When an applicant provides wholesale sales 
or services on a contract basis to another system or entity, similar 
wholesale system cost will be used in determining the amount of grant 
needed to achieve a reasonable wholesale user cost.
    (iii) Subsidized cost. When annual cost to the applicant for 
delivery of service is subsidized by the state, commonwealth, or 
territory, and uniform flat user charges regardless of usage are 
imposed for similar classes of service throughout the service area, the 
Agency may proceed with a grant in an amount necessary to reduce such 
delivery cost to a reasonable level.
    (2) Matching funds. Grants may not be made in excess of the 
percentages specified in paragraphs (g)(2)(i) and (ii) of this section. 
These percentages are based on Agency eligible project development 
costs. Facilities previously installed will not be considered in 
determining the development costs. Applicants are advised that the 
percentages contained in paragraphs (g)(2)(i) and (ii) of this section 
are maximum amounts and may be further limited due to availability of 
funds or the grant determination procedures contained in paragraph 
(g)(1) of this section.
    (i) When the median household income of the service area is below 
the higher of the poverty line or 80 percent of the state 
nonmetropolitan median income and the project is necessary to alleviate 
a public health and safety or security problem, the maximum amount of 
the grant will not exceed 75 percent of Agency eligible project 
development costs.
    (ii) When the median household income of the service area exceeds 
the 80 percent, but is not more than 100 percent of the statewide 
nonmetropolitan median household income, the maximum amount of the 
grant will not exceed 45 percent of Agency eligible project development 
costs.
    (h) Scoring applications. Each application for a grant under this 
section will be scored based on the priority categories and points 
specified in paragraphs (h)(1) and (2) of this section. The maximum 
number of points that will be awarded to an application is 100.
    (1) Program-specific priority categories and points. The Agency 
will award program-specific points for the priority categories 
described in paragraphs (h)(1)(i) through (iv) of this section.
    (i) Population priorities (maximum score of 10 points).
    (A) 10 points will be awarded if the proposed project will 
primarily serve a rural area having a population not in excess of 
1,000;
    (B) 7 points will be awarded if the proposed project primarily 
serves a rural area having a population between 1,001 and 2,500;
    (C) 2 points will be awarded if the proposed project primarily 
serves a rural area having a population between 2,501 and 5,500.
    (ii) Health priorities (maximum score of 30 points). (A) 12 points 
will be awarded if the proposed project is needed to alleviate an 
emergency situation, correct unanticipated diminution or deterioration 
of a water supply, or to meet Safe Drinking Water Act requirements that 
pertain to a water system;
    (B) 12 points will be awarded if the proposed project is required 
to correct inadequacies of a wastewater disposal system, or to meet 
health standards that pertain to a wastewater disposal system;
    (C) 6 points will be awarded if the proposed project is required to 
meet administrative orders issued to correct local, State, or Federal 
solid waste violations.
    (iii) Median household income priorities (maximum score of 10 
points). If the median household income of the population to be served 
by the proposed project is:
    (A) Less than the poverty line if the poverty line is less than 80 
percent of the statewide non-metropolitan median household income, 10 
points will be awarded;
    (B) Less than 80 percent of the statewide non-metropolitan median 
household income, 8 points will be awarded;
    (C) Equal to or more than the poverty line and between 80 percent 
and 100 percent, inclusive, of the statewide non-metropolitan median 
household income, 6 points will be awarded.
    (iv) Other priorities (maximum score of 30 points). (A) 7 points 
will be awarded if the proposed project will merge ownership, 
management, and operation of smaller facilities providing for more 
efficient management and economical service;
    (B) 5 points will be awarded if the proposed project will enlarge, 
extend, or otherwise modify existing facilities to provide service to 
additional rural areas;
    (C) 2 points will be awarded if the applicant is a public body or 
Indian tribe;
    (D) If the amount of other than Agency funds committed to the 
proposed project is:
    (1) 50 percent or more, 6 points will be awarded;
    (2) 20 percent to 49 percent, 4 points will be awarded;
    (3) 5 percent to 19 percent, 2 points will awarded;
    (E) 4 points will be awarded if the proposed project will serve 
Agency identified target areas;
    (F) 2 points will be awarded if the proposed project primarily will 
recycle solid waste products thereby limiting the need for solid waste 
disposal;
    (G) 4 points will be awarded if the proposed project will serve an 
area that has an unreliable quality or supply of drinking water.
    (2) Administrator priority categories and points. Unless otherwise 
specified in a notification issued under Sec.  5002.15 of subpart A of 
this part, the Administrator may award up to 10 points to an 
application under this section for grant size and to improve the 
geographic diversity of awardees in a fiscal year. No more than 10 
Administrator points will be awarded to an application.
    (3) State director priority categories and points. Unless otherwise 
specified in a notification issued under Sec.  5002.15 of subpart A of 
this part, a State Director may award up to 10 points to an application 
that meets any of the State Director priority categories specified in 
Sec.  5002.42(b)(2)(i) through (x) and paragraphs (h)(3)(i) and (ii) of 
this section. No more than a total of 10 State Director points may be 
awarded under this paragraph to an application.
    (i) Arsenic (as specified in a memorandum of understanding with the 
U.S. Environmental Protection Agency).
    (ii) Areas located within 100 miles of New York City's ``ground 
zero'' as the result of the September 11, 2001, attacks.
    (i) Ranking applications. Unless otherwise specified in a 
notification issued under Sec.  5002.15 of subpart A of this part, the 
Agency will rank applications on or after the following dates each 
fiscal year: December 15, March 15, July 15, and August 15.

[[Page 61253]]

    (j) Additional criteria for selecting applications for funding. The 
Agency may select the next highest scoring application for funding 
before a higher scoring application when the application is a 
subsequent request for a previously approved project. If the request is 
due to cost overruns, the cost overruns must be due to high bids or 
unexpected construction problems that cannot be reduced by 
negotiations, redesign, use of bid alternatives, rebidding, or other 
means. Cost overruns exceeding 20 percent of the development cost at 
time of grant approval or where the scope of the original purpose has 
changed will not be considered in selecting the next highest scoring 
application over the higher scoring application.
    (k) User charges. The user charges should be reasonable and produce 
enough revenue to provide for all costs of the facility after the 
project is complete. The planned revenue should be sufficient to 
provide for all debt service, debt reserve, operation and maintenance, 
and, if appropriate, additional revenue for facility replacement of 
short-lived assets without building a substantial surplus.
    (l) Professional services and contracts related to the facility. 
Fees provided for in contracts or agreements shall be reasonable. The 
Agency shall consider fees to be reasonable if they are not in excess 
of those ordinarily charged by the profession as a whole for similar 
work when Agency funding is not involved. Applicants will be 
responsible for providing the services necessary to plan projects 
including design of facilities, environmental review and documentation 
requirements (in accordance with the environmental policies and 
procedures of the Rural Utilities Service), preparation of cost and 
income estimates, development of proposals for organization and 
funding, and overall operation and maintenance of the facility. 
Applicants should negotiate for procurement of professional services, 
whereby competitors' qualifications are evaluated and the most 
qualified competitor is selected, subject to negotiations of fair and 
reasonable compensation. Contracts or other forms of agreement between 
the applicant and its professional and technical representatives are 
required and are subject to Agency concurrence.
    (1) Engineering and architectural services. (i) Applicants shall 
publicly announce all requirements for engineering and architectural 
services, and negotiate contracts for engineering and architectural 
services on the basis of demonstrated competence and qualifications for 
the type of professional services required and at a fair and reasonable 
price.
    (ii) When project design services are procured separately, the 
selection of the engineer or architect shall be done by requesting 
qualification-based proposals and in accordance with this section.
    (iii) Applicants may procure engineering and architectural services 
in accordance with applicable State statutes or local requirements 
provided the State Director determines that such procurement meets the 
intent of this section.
    (2) Other professional services. Professional services of the 
following may be necessary: Attorney, bond counsel, accountant, 
auditor, appraiser, and environmental professionals (if desired by 
applicant).
    (3) Contracts for other services. Contracts or other forms of 
agreements for other services including management, operation, and 
maintenance will be developed by the applicant and presented to the 
Agency for review and concurrence.
    (m) User estimates. Applicants dependent on users' fees for 
operation and maintenance expenses shall base their income and expense 
forecast on realistic user estimates. For users presently not receiving 
service, consideration must be given to the following:
    (1) An estimated number of maximum users should not be used when 
setting user fees and rates since it may be several years before all 
residents will need service by the system. In establishing rates, a 
realistic number of users should be employed.
    (2) The amount of cash contributions required will be set by the 
applicant and concurred in by the Agency. A new user cash contribution 
is not required when:
    (i) The Agency determines that the potential users as a whole in 
the applicant's service area cannot make cash contributions; or
    (ii) State statutes or local ordinances require mandatory use of 
the system and the applicant or legal entity having such authority 
agrees in writing to enforce such statutes, or ordinances.
    (n) Water rights. The following will be furnished as applicable:
    (1) A statement by the applicant's attorney regarding the nature of 
the water rights owned or to be acquired by the applicant (such as 
conveyance of title, appropriation and decree, application and permit, 
public notice and appropriation and use).
    (2) A copy of a contract with another company or municipality to 
supply water; or stock certificates in another company that represents 
the right to receive water.


Sec.  5002.107  Economic Impact Initiatives Grants.

    (a) The Economic Impact Initiatives grant program is a State-
allocated grant program with an open application period.
    (b) The Economic Impact Initiatives grant program will be 
implemented according the requirements of subpart A and the 
requirements of Sec.  5002.101, except that the essential community 
facility must be located in a rural community where the ``not employed 
rate'' is greater than the percentage established under section 
306(a)(2) of the Consolidated Farm and Rural Development Act (7 U.S.C. 
1926(a)(20)(B)). The ``not employed rate'' is the percentage of 
individuals over the age of 18 who reside within the community and are 
ready, willing, and able to be employed but are unable to find 
employment, as determined by the Department of Labor of the State in 
which the community is located.


Sec.  5002.108  Tribal College Grants.

    The requirements specified in Sec. Sec.  5002.1 through 5002.14 and 
Sec. Sec.  5002.60 through 5002.80 of this part apply to Tribal College 
grants. In addition, the requirements specified in paragraphs (a) 
through (f) of this section apply to Tribal College grants.
    (a) Notifications. The Agency will issue each year a notice to 
Tribal colleges and universities that identifies:
    (1) maximum grant size and
    (2) the date that preapplications are to be submitted.
    (b) Applicant eligibility. Only applicants that are 1994 
Institutions are eligible for grants under this section.
    (c) Eligible projects and purposes. Grant funds can only be used to 
develop facilities provided by the Tribal college or university.
    (1) Eligible projects are those projects that meet the requirements 
specified in Sec.  5002.101(b), except that Sec.  5002.101(b)(3) does 
not apply to projects under this section.
    (2) Eligible purposes are identified in Sec.  5002.101(c) of this 
part.
    (d) Preapplications and applications. All preapplications and 
applications must be submitted to the State Office in the State in 
which the Tribal college or university is located.
    (1) Preapplications. Preapplications received by the Agency on or 
before the date specified in the notification issued under paragraph 
(a) of this section will receive priority consideration over 
preapplications received after the specified preapplication date.
    (2) Applications. (i) Applications received on or before March 31 
of each year will receive priority consideration

[[Page 61254]]

for funding over applications received by the Agency after March 31 for 
that fiscal year.
    (ii) An applicant submitting more than one application in a year 
must provide a priority listing for the grants it is seeking.
    (e) Funding limitations. The maximum amount of a grant awarded 
under this section will be no more than 95 percent of the total cost of 
the facility. The Agency shall not require a match of more than 5 
percent of the total cost of the facility.
    (f) Award process. The Agency will use a graduated scale, as 
specified in Sec.  5002.101(e)(2), in selecting applications for 
funding. In addition, the Agency may:
    (1) Choose to fund only one grant per round from a single 
applicant;
    (2) reduce the grant amount for all applicants to a maximum level 
that will fund at least one application per Tribal college or 
university that applied during that round; and
    (3) negotiate to increase the scope of Tribal College projects and 
grants if funds remain available after the grant selection round.


Sec. Sec.  5002.109-5002.200  [Reserved.]

    Dated: September 25, 2008.
Thomas C. Dorr,
Under Secretary for Rural Development.
 [FR Doc. E8-23286 Filed 10-14-08; 8:45 am]
BILLING CODE 3410-XY-P