[Federal Register Volume 84, Number 119 (Thursday, June 20, 2019)]
[Notices]
[Pages 28836-28848]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-13147]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Docket No. FR-6169-N-01]


Updates to Duplication of Benefits Requirements Under the 
Stafford Act for Community Development Block Grant (CDBG) Disaster 
Recovery Grantees

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

ACTION: Notice.

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SUMMARY: This notice describes the requirements to prevent duplication 
of benefits applicable to Community Development Block Grant disaster 
recovery (CDBG-DR) grants received in response to a disaster declared 
between 2015 and 2021. It updates existing duplication of benefits 
requirements to reflect recent CDBG-DR supplemental appropriations acts 
and amendments to the Robert T. Stafford Disaster Relief and Emergency 
Assistance Act impacting certain grantees. The notice also includes 
minor clarifications regarding the duplication of benefits calculation.

DATES: Applicability Date: June 25, 2019.

FOR FURTHER INFORMATION CONTACT: Claudette Fernandez, Director, Office 
of Block Grant Assistance, Department of Housing and Urban Development, 
451 7th Street SW, Room 10166, Washington, DC 20410, telephone number 
202-708-5287. Persons with hearing or speech impairments may access 
this number via TTY by calling the Federal Relay Service at 800-877-
8339. Facsimile inquiries may be sent to Ms. Fernandez at 202-708-0033. 
(Except for the ``800'' number, these telephone numbers are not toll-
free). Email inquiries may be sent to [email protected].

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Introduction
II. Applicability
III. Applicable Laws and Requirements
    A. Stafford Act
    B. CDBG-DR Appropriations Acts and Federal Register Notices
    C. Necessary and Reasonable Requirements
IV. Basic Duplication of Benefits Calculation Framework
    A. Assess Applicant Need
    B. Identify Total Assistance
    1. Types of Resources Included in Total Assistance
    2. Availability of Resources Included in Total Assistance
    C. Exclude Non-Duplicative Amounts
    1. Funds for a Different Purpose
    2. Funds for Same Purpose, Different Allowable Use
    D. Identify the DOB Amount and Calculate the Total CDBG-DR Award
    E. Reassess Unmet Need When Necessary
V. Special Considerations
    A. Programmatic Considerations Related to Each Type of 
Assistance
    B. Subsidized Loans
    1. Subsidized Loans
    2. Exceptions When Subsidized Loans Are Not a Duplication
    (i) Short-Term Subsidized Loans for Costs Later Reimbursed With 
CDBG-DR
    (ii) Declined or Cancelled Subsidized Loans.
(iii) The Subsidized Loan Meets the Requirements for a Statutory 
Exception Under the DRRA's Amendments to the Stafford Act
    3. Use of CDBG-DR for Costs Initially Paid by Subsidized Loans 
Following DRRA Qualifying Disasters

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    C. Order of Assistance
    D. Multiple Disasters
VI. Recordkeeping
VII. Agreement To Repay
VIII. Collecting a Duplication
IX. Catalog of Federal Domestic Assistance
X. Finding of No Significant Impact
Appendix A: Example DOB and CDBG-DR Award Calculations

I. Introduction

    Community Development Block Grant disaster recovery (CDBG-DR) 
grants are one of multiple Federal sources which assist disaster 
recovery. These sources of Federal assistance often can be used for the 
same purposes by grantees and disaster survivors. For this reason, the 
Robert T. Stafford Disaster Relief and Emergency Assistance Act (42 
U.S.C. 5121-5207) (Stafford Act) and CDBG-DR appropriations acts 
require HUD and its grantees to coordinate with other Federal agencies 
that provide disaster assistance to prevent the duplication of benefits 
(DOB). The Stafford Act's prohibition on DOB aims to ensure that 
federal assistance serves only to ``supplement insurance and other 
forms of disaster assistance.'' (42 U.S.C. 5170).
    CDBG-DR grantees must prevent DOB when carrying out eligible 
activities. A duplication occurs when a person, household, business, or 
other entity receives disaster assistance from multiple sources for the 
same recovery purpose, and the total assistance received for that 
purpose is more than the total need. The amount of the DOB is the 
amount received in excess of the total need for the same purpose. When 
total need for eligible activities is more than total assistance for 
the same purpose, the difference between these amounts is an ``unmet 
need.'' Grantees must limit their assistance to unmet needs for 
eligible activities to prevent a DOB. When reimbursement is permitted 
by the CDBG-DR grant requirements, unmet needs can include amounts 
needed for reimbursement.
    This notice has been developed in consultation with the Federal 
Emergency Management Agency (FEMA) and the Small Business 
Administration (SBA), which provide the most common forms of Federal 
disaster assistance to homeowners and businesses. As the agency that 
administers the Robert T. Stafford Disaster Relief and Emergency 
Assistance Act (42 U.S.C. 5121-5207) (Stafford Act), HUD looks to FEMA 
to ensure uniformity in the prevention of DOB across Federal agencies 
that provide disaster assistance.
    This notice implements a provision of the Disaster Recovery Reform 
Act of 2018 (DRRA) (division D of Pub. L. 115-254) that changes the 
treatment of loans under the Stafford Act for disasters declared 
between January 1, 2016 and December 31, 2021, so that when certain 
conditions are met, the loans are no longer a DOB. This notice also 
responds to pending requests from grantees to authorize the use of 
CDBG-DR funds to reimburse homeowners and businesses for the costs of 
eligible activities paid with subsidized loans provided by the U.S. 
Small Business Administration (SBA) or other sources.
    The DRRA amendment did not directly address the use of CDBG-DR 
funds to reimburse costs paid with subsidized loans. However, the 
corollary request from grantees to permit reimbursement presents a 
range of policy and fiscal implications. CDBG-DR funds are provided for 
long-term disaster recovery to assist activities under title I of the 
Housing and Community Development Act of 1974. The primary objective of 
title I is the development of viable communities by the provision of 
decent housing and a suitable living environment and expanding economic 
opportunities, principally for persons of low and moderate income. In 
authorizing the use of CDBG-DR funds for the reimbursement of costs 
paid with subsidized loans, the Department must ensure that a grantee's 
CDBG-DR resources will remain available principally to benefit low- and 
moderate-income persons, a group that often has difficulty qualifying 
for subsidized loan assistance. The Department notes that many CDBG-DR 
grantees face challenges in meeting this requirement. The Department 
recognizes, however, that CDBG-DR funds are provided as a federal block 
grant to States and local governments with an understanding that these 
grantees are best positioned to address the long-term disaster recovery 
needs of their communities by working within the requirements of the 
CDBG program, including the overall low- and moderate-income benefit 
requirement and the requirement that the use of all funds meet a 
national objective.
    Further, in determining the amount of CDBG-DR funding provided to a 
grantee, one of the key factors for HUD is an estimate of severe unmet 
housing need. This estimation deducts out SBA loan proceeds in a manner 
that is unaffected by the DRRA amendment. As a result, any CDBG-DR 
funds directed to reimburse eligible costs paid with subsidized loans 
are funds that are not directed to severe unmet housing needs or 
economic revitalization needs as estimated by HUD.
    This notice incorporates a range of safeguards to ensure that CDBG-
DR funds are used for reimbursement of eligible costs of meeting the 
housing rehabilitation needs or economic revitalization needs of 
applicants that applied for, were approved for, and borrowed SBA loans 
funds. The Department, in consultation with partner Federal agencies, 
has developed these safeguards to promote a responsible approach to 
requests to use CDBG-DR funds to reimburse for eligible recovery costs 
originally paid with subsidized loan funds.
    Accordingly, the Department has structured this notice and the 
companion Federal Register notice governing its implementation to: (i) 
Require CDBG-DR grantees to fully inform the public of the proposed use 
of CDBG-DR funds for reimbursement of costs paid with subsidized loans 
through its citizen participation process and through an amendment to 
the grantee's action plan; (ii) to preserve the primary mission of 
CDBG-DR funds to assist low- and moderate-income persons by maintaining 
a grantee's requirement to use its CDBG-DR funds principally to benefit 
low- and moderate-income persons; and (iii) to provide the Department 
with a means of evaluating the impact of this policy on the recovery of 
low- and moderate- income persons if it is used for DRRA Qualifying 
Disasters.

II. Applicability

    This notice describes DOB requirements for CDBG-DR grants received 
in response to a disaster declared between January 1, 2015 and December 
31, 2021. It includes information about preventing and collecting a 
DOB. The requirements of this notice will apply once it is made 
applicable to a grant by a Federal Register notice or grant agreement. 
This notice reflects the requirements of recent CDBG-DR supplemental 
appropriations acts and amendments to the Stafford Act, which impact 
DOB for certain grantees.
    This notice does not change the DOB requirements applicable to 
grantees receiving awards in response to disasters declared before 
2015.\1\
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    \1\ This notice does not amend the Federal Register notice 
requirements applicable to grantees that received funds under the 
Disaster Relief Appropriations Act, 2013 (Pub. L. 113-2) for 
disasters declared in 2011, 2012, or 2013, including requirements 
related to the July 25, 2013 memorandum ``HUD Guidance on 
Duplication of Benefit Requirements and Provision of CDBG-DR 
Assistance.''
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    This notice does not apply to grants under the State CDBG program, 
the Entitlement CDBG program, Insular Areas CDBG program, or the HUD

[[Page 28838]]

Administered Small Cities CDBG Program in Hawaii.

III. Applicable Law

    Section 312 of the Stafford Act and CDBG-DR appropriations acts 
require that CDBG-DR grantees prevent DOB when administering grants. 
Federal Register notices governing CDBG-DR awards impose these DOB 
requirements on grantees. The ``necessary and reasonable'' cost 
principles in the Uniform Administrative Requirements, Cost Principles, 
and Audit Requirements for Federal Awards in subpart E of 2 CFR part 
200 (the Cost Principles) similarly prohibit grantees from charging to 
the grant a cost paid by another source.

III.A. Stafford Act

    The Stafford Act is the primary legal authority establishing the 
framework for the Federal government to provide disaster and emergency 
assistance.
    Section 312 of the Stafford Act directs Federal agencies that 
provide disaster assistance to assure that people, businesses, or other 
entities do not receive financial assistance that duplicates any part 
of their disaster loss covered by insurance or another source (42 
U.S.C. 5155(a)). That section also makes recipients of Federal disaster 
assistance liable for repayment of the amount of Federal disaster 
assistance that duplicates benefits available for the same purpose from 
another source (42 U.S.C. 5155(c)).
    The Stafford Act also provides that when assistance covers only a 
part of the recipient's disaster needs, additional assistance to cover 
needs not met by other sources will not cause a DOB (42 U.S.C. 
5155(b)(3)). CDBG-DR assistance may only pay for eligible activities to 
address unmet needs. This notice advises grantees on the calculation of 
unmet needs through a duplication of benefits analysis.
    On October 5, 2018, the DOB provision in section 312 of the 
Stafford Act was amended by section 1210 of the DRRA. This notice 
describes corresponding changes in HUD's policies and grant 
requirements. Those changes are discussed in detail in section V.B.2. 
and V.B.3. of this notice.

III.B. CDBG-DR Appropriations Acts and Federal Register Notices

    CDBG-DR funds are made available for ``necessary expenses'' by 
appropriations acts that contain statutory requirements on the use of 
the grant funds.\2\ HUD allocates funds and publishes grant 
requirements in Federal Register notices. Grantees are subject to the 
requirements of the appropriations acts and the Federal Register 
notices.
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    \2\ Appropriations acts, Federal Register notices governing the 
use of CDBG-DR grants, and related checklists are available online: 
https://www.hudexchange.info/programs/CDBG-DR/CDBG-DR-laws-regulations-and-federal-register-notices/.
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    Since 2013, as a condition of making any CDBG-DR grant, the 
Secretary must certify that the grantee has established adequate 
procedures to prevent DOB. Grantees subject to this requirement must 
submit DOB policies to HUD for review before HUD signs the grant 
agreement. ``Adequate'' procedures meet the standards HUD publishes in 
a Federal Register notice and related checklists that are available 
online. They require grantees to establish DOB policies that 
incorporate certain steps before committing or awarding assistance. 
Typically, the steps include determining a total need, verifying total 
assistance available from all sources of disaster assistance (using 
recent data available from FEMA, SBA, and other sources), excluding 
non-duplicative assistance from total assistance to calculate DOB, 
reducing the total award by the amount of the DOB, and obtaining an 
agreement from applicants to repay duplicative assistance.
    The Federal Register notices that identify CDBG-DR grant 
requirements also require CDBG-DR grantees to consider projected 
sources of disaster assistance in the needs assessment that is part of 
an action plan for disaster recovery. Consideration of other potential 
sources of assistance when planning for the use of grant funds helps to 
limit the possibility of duplication between CDBG-DR and other 
assistance.

III.C. Necessary and Reasonable Requirements

    The Cost Principles applicable to all CDBG-DR grantees and their 
subrecipients require that costs are necessary and reasonable. The Cost 
Principles are made applicable to States by 24 CFR 570.489(p) and to 
local governments through 24 CFR 570.502. State grantees are also 
subject to 24 CFR 570.489(d), which requires that states shall have 
fiscal and administrative requirements to ensure that grant funds are 
used ``for reasonable and necessary costs of operating programs.''
    Under the Cost Principles, a cost assigned to a grant ``is 
reasonable if, in its nature and amount, it does not exceed that which 
would be incurred by a prudent person under the circumstances 
prevailing at the time the decision was made to incur the cost'' (2 CFR 
200.404).
    Grantees must consider factors described at 2 CFR 200.404(a) 
through (e) when determining which types and amounts of cost items are 
necessary and reasonable. Based on these factors, HUD generally 
presumes that if a cost has been paid by another source, charging it to 
the Federal award violates the necessary and reasonable standard unless 
grant requirements permit reimbursement.

IV. Basic Duplication of Benefits Calculation Framework

    The Stafford Act requires a fact specific inquiry into assistance 
received by each applicant. This notice refers to the subject of a DOB 
review as an ``applicant'' or ``CDBG-DR applicant'' and uses the term 
``applicant'' to include individuals, businesses, households, or other 
entities that apply to the grantee or a subrecipient for CDBG-DR 
assistance, as well as entities that use CDBG-DR assistance for an 
activity without submitting an application (e.g., the department or 
agency of the grantee administering the grant, other state or local 
departments or agencies, or local governments).
    A grantee is prohibited from making a blanket determination that 
CDBG-DR assistance under one of its programs or activities does not 
duplicate another category or source of assistance. The grantee must 
conduct an individualized review of each applicant to determine that 
the amount of assistance will not cause a DOB by exceeding the unmet 
needs of that applicant. A review specific to each applicant is 
necessary because assistance available to each applicant varies widely 
based on individual insurance coverage, eligibility for various sources 
of assistance, and other factors.
    This section establishes the primary considerations that must be 
part of a DOB analysis when providing CDBG-DR assistance, and a 
framework for analyzing need and avoiding DOB when calculating awards. 
CDBG-DR grantees have discretion to develop policies and procedures 
that tailor their DOB analyses to their own programs and activities so 
long as the grantee's policies and procedures are consistent with the 
requirements of this notice. If the Federal Register notices governing 
the CDBG-DR grant require the Secretary to certify that the grantee's 
DOB procedures are adequate, the grantee's procedures must meet 
standards HUD adopts to determine adequacy.

IV.A. Assess Applicant Need

    A grantee must determine an applicant's total need. Total need is

[[Page 28839]]

calculated based on need estimates at a point in time; total need is 
the current need. However, if the grantee's action plan permits CDBG-DR 
assistance to reimburse costs of CDBG-DR eligible activities undertaken 
by the applicant before submitting an application (see section V.B.3. 
for a discussion of reimbursement) the total need also includes these 
costs. Generally, total need is calculated without regard to the 
grantee's program-specific caps on the amount of assistance.
    For rehabilitation, reconstruction, or new construction activities, 
the need is relatively easy to determine from construction cost 
estimates.
    For recovery programs of the grantee that do not entail physical 
rebuilding, such as special economic development activities to provide 
an affected business with working capital, the total need will be 
determined by the requirements or parameters of the program or 
activity. For special economic development activities, total need 
should be guided by standard underwriting guidelines (some CDBG-DR 
grants require grantees and subrecipients to comply with the 
underwriting guidelines in Appendix A to 24 CFR part 570 when assisting 
a for-profit entity as part of a special economic development project).
    The grantee's assessment of total need must consider in-kind 
donations of materials or services that are known to the grantee at the 
time it calculates need and makes the award. In-kind donations are non-
cash contributions, such as donations of professional services, use of 
construction equipment, or contributions of building materials. In-kind 
donations are not ``financial assistance'' that creates a DOB under the 
Stafford Act, but they do reduce the amount of CDBG-DR assistance for 
unmet need because the donated goods or services reduce activity costs.

IV.B. Identify Total Assistance

    To calculate DOB, grantees are required to identify ``total 
assistance.'' For this notice, total assistance includes all reasonably 
identifiable financial assistance available to an applicant.
IV.B.1. Types of Resources Included in Total Assistance
    Total assistance includes resources such as cash awards, insurance 
proceeds, grants, and loans received by or available to each CDBG-DR 
applicant, including awards under local, state or federal programs, and 
from private or nonprofit charity organizations. At a minimum, the 
grantee's efforts to identify total assistance must include a review to 
determine whether the applicant received FEMA, SBA, insurance, and any 
other major forms of assistance (e.g., State disaster assistance 
programs) generally available to applicants.
    Total assistance does not include personal assets such as money in 
a checking or savings account (excluding insurance proceeds or disaster 
assistance deposited into the applicant's account); retirement 
accounts; credit cards and lines of credit; in-kind donations (although 
these non-cash contributions known to the grantee reduce total need); 
and private loans.
    For this notice, a private loan is a loan that is not provided by 
or guaranteed by a governmental entity, and that requires the CDBG-DR 
applicant (the borrower) to repay the full amount of the loan 
(principal and interest) under typical commercial lending terms, e.g., 
the loan is not forgivable. For DOB calculations, private loans are not 
financial assistance and need not be considered in the DOB calculation, 
regardless of whether the borrower is a person or entity.
    By contrast, subsidized loans for the same purpose are to be 
included in the DOB calculation unless an exception applies (see 
discussion below in section V.B.2.).
IV.B.2. Availability of Resources Included in Total Assistance
    Total assistance includes available assistance. Assistance is 
available if an applicant: (1) Would have received it by acting in a 
reasonable manner, or in other words, by taking the same practical 
steps toward funding recovery as would disaster survivors faced with 
the same situation but not eligible to receive CDBG-DR assistance; or 
(2) has received the assistance and has legal control over it. 
Available assistance includes reasonably anticipated assistance that 
has been awarded and accepted but has not yet been received. For 
example, if a local government seeks CDBG-DR assistance to fund part of 
a project that also has been awarded FEMA Hazard Mitigation Grant 
Program (HMGP) assistance, the entire HMGP award must be included in 
the calculation of total assistance even if FEMA obligates the first 
award increment for the project, but subsequent increments remain 
unfunded until certain project milestones are met.
    Applicants for CDBG-DR assistance are expected to seek insurance or 
other assistance to which they are legally entitled under existing 
policies and contracts, and to behave reasonably when negotiating 
payments to which they may be entitled. For example, it may be 
reasonable for an applicant to elect to receive an immediate lump sum 
insurance settlement based on estimated cost of rehabilitation instead 
of waiting for a longer period of time for the insurance company to 
calculate reimbursement based on actual replacement costs, even if the 
reimbursement based on actual costs would exceed the lump sum insurance 
settlement.
    HUD generally considers assistance to be available if it is awarded 
to the applicant but is administered by another party instead of being 
directly deposited with the applicant. For example, if an entity 
administering homeowner rehabilitation assistance pays a contractor 
directly to complete the rehabilitation, the assistance is still 
considered available to the applicant.
    By contrast, funds that are not available to an applicant must be 
excluded from the final CDBG-DR award calculation. For example, 
insurance or rehabilitation assistance received by a previous owner of 
a disaster damaged housing unit is not available to a current owner 
that acquired the unit by sale or transfer (including a current owner 
that inherited the unit as a result of the death of the previous owner) 
unless the current owner is a co-recipient of that assistance.
    Funds are not available to an applicant if the applicant does not 
have legal control of the funds when they are received. For example, if 
a homeowner's mortgage requires insurance proceeds to be applied to 
reduce the unpaid mortgage principal, then the lender/mortgage holder 
(not the homeowner) has legal control over those funds. The homeowner 
is legally obligated to use insurance proceeds for the purpose of 
reducing the unpaid mortgage principal and does not have a choice in 
using them for any other purpose, such as to rehabilitate the house. 
Under these circumstances, insurance proceeds do not reduce CDBG-DR 
rehabilitation assistance eligibility.
    Alternatively, if a lender requires use of insurance for 
rehabilitation, or a disaster-affected homeowner chooses to apply 
insurance proceeds received for damage to the building to reduce an 
unpaid mortgage principal, these insurance proceeds are treated as a 
DOB and reduce the amount of CDBG-DR funds the grantee may provide for 
rehabilitation.

IV.C. Exclude Non-Duplicative Amounts

    Once a grantee has determined the total need and the total 
assistance, it determines which sources it must exclude as non-
duplicative for the DOB calculation. Grantees must exclude amounts that 
are: (1) Provided for a

[[Page 28840]]

different purpose; or (2) provided for the same purpose (eligible 
activity), but for a different, allowable use (cost). Below, each of 
these categories is explained in greater detail.
IV.C. 1. Funds for a Different Purpose
    Any assistance provided for a different purpose than the CDBG-DR 
eligible activity, or a general, non-specific purpose (e.g., ``disaster 
relief/recovery'') and not used for the same purpose must be excluded 
from total assistance when calculating the amount of the DOB.
    Insurance proceeds for damage or destruction of a building are for 
the same purpose as CDBG-DR assistance to rehabilitate or reconstruct 
that building. On the other hand, grantees may exclude, as non-
duplicative, insurance provided for a different purpose (e.g., 
insurance proceeds for loss of contents and personal property, or 
insurance proceeds for loss of buildings (such as a detached garage) 
that the grantee has determined it will not assist with CDBG-DR funds). 
However, a grantee may treat all insurance proceeds as duplicative if 
it is impractical to identify the portion of insurance proceeds that 
are non-duplicative because they are for a different purpose than the 
CDBG-DR assistance.
    Similarly, CDBG-DR assistance paid to a homeowner as a housing 
incentive for the purpose of inducing the homeowner to sell the home to 
the grantee (e.g., in conjunction with a buyout) are for a different 
purpose than funds provided for interim housing (e.g., temporary 
assistance for rental housing during a period when a household is 
unable to reside in its home). In such a case, interim housing 
assistance may be excluded from the final DOB calculation as non-
duplicative of funds paid for the housing incentive.
IV.C.2. Funds for Same Purpose, Different Allowable Use
    Assistance provided for the same purpose as the CDBG-DR purpose 
(the CDBG-DR eligible activity) must be excluded when calculating the 
amount of the DOB if the applicant can document that actual specific 
use of the assistance was an allowable use of that assistance and was 
different than the use (cost) of the CDBG-DR assistance (e.g., the 
purpose is housing rehabilitation, the use of the other assistance was 
roof replacement and the use of the CDBG-DR assistance is 
rehabilitation of the interior of the house). Grantees are advised to 
consult with HUD to determine what documentation is appropriate in this 
circumstance. As a starting point, grantees should consider whether the 
source of the assistance requires beneficiaries to maintain 
documentation of how the assistance was used.
    Whether the use of the non-CDBG-DR assistance is an allowable use 
depends on the rules imposed by the source that provided the 
assistance. For example, assume that a CDBG-DR grantee is administering 
a homeowner rehabilitation program and an applicant to the program can 
document that he/she previously received and used FEMA funds for 
interim housing costs (i.e., rent). If FEMA permitted the applicant to 
use its assistance for the general purpose of meeting any housing need, 
the CDBG-DR grantee can exclude the FEMA assistance used for interim 
housing as non-duplicative of the CDBG-DR assistance for 
rehabilitation.
    If, on the other hand, FEMA limited the use of FEMA funds to 
housing rehabilitation, then the full amount of the FEMA assistance 
must be considered for the specific purpose of housing rehabilitation 
and cannot be excluded if the applicant used those funds for interim 
housing. If interim housing is not an allowable use, the amount of the 
FEMA housing rehabilitation assistance used for interim housing is 
considered a DOB. If the grantee thinks the actual use of the FEMA 
assistance may be allowable, the CDBG-DR grantee should contact FEMA 
for clarification.
    Assistance provided for the purpose of housing rehabilitation, 
including assistance provided for temporary or minor rehabilitation, is 
for the same purpose as CDBG-DR rehabilitation assistance. However, the 
grantee can exclude assistance used for different costs of the 
rehabilitation, which are a different allowable use (rehabilitation 
costs not assisted with CDBG-DR). For example, if the other assistance 
is used for minor or temporary rehabilitation which enabled the 
applicant family to live in their home instead of moving to temporary 
housing until rehabilitation can be completed, the grantee can 
undertake remaining work necessary to complete rehabilitation. The 
grantee's assessment of total need at the time of application may 
include the costs of replacing temporary materials with permanent 
construction and of completing mold remediation by removing drywall 
installed with other assistance. These types of costs to modify 
partially completed rehabilitation that the grantee determines are 
necessary to comply with the requirements of CDBG-DR assistance do not 
duplicate other assistance used for the partial rehabilitation.
    Grantees are encouraged to contact HUD for further guidance in 
cases when it is unclear whether non-CDBG-DR assistance for the same 
general purpose can be excluded from the DOB calculation because it was 
used for a different allowable use.

IV.D. Identify DOB Amount and Calculate the Total CDBG-DR Award

    The total DOB is calculated by subtracting non-duplicative 
exclusions from total assistance. Therefore, to calculate the total 
maximum amount of the CDBG-DR award, the grantee must: (1) Identify 
total need; (2) identify total assistance; (3) subtract exclusions from 
total assistance to determine the amount of the DOB; and (4) subtract 
the amount of the DOB from the amount of the total need to determine 
the maximum amount of the CDBG-DR award.
    Three considerations may change the maximum amount of the CDBG-DR 
award.
    First, the grantee may impose a program cap that limits the amount 
of assistance an applicant is eligible to receive, which may reduce the 
potential CDBG-DR assistance available to the applicant.
    Second, the grantee may increase the amount of an award if the 
applicant agrees to repay duplicative assistance it receives in the 
future (unless prohibited by a statutory order of assistance, as 
discussed in section V.C.). Section 312(b) of the Stafford Act permits 
a grantee to provide CDBG-DR assistance to an applicant who is or may 
be entitled to receive assistance that would be duplicative if: (1) The 
applicant has not received the other assistance at the time the CDBG-DR 
grantee makes its award; and (2) the applicant agrees to repay the 
CDBG-DR grantee for any duplicative assistance once it is received. The 
agreement to repay from future funds may enable a faster recovery in 
cases when other sources of assistance are delayed (e.g., due to 
insurance litigation). HUD requires all grantees to enter agreements 
with applicants that require applicants to repay duplicative assistance 
before receiving CDBG-DR assistance, as discussed in section VII of 
this notice.
    Third, the applicant's CDBG-DR award may increase if a reassessment 
shows that the applicant has additional unmet need, as discussed in 
section IV.E. of this notice.

IV.E. Reassess Unmet Need When Necessary

    Although long-term recovery is a process, disaster recovery needs 
are calculated at points in time. As a result, a subsequent change in 
an applicant's

[[Page 28841]]

circumstances can affect that applicant's remaining unmet need, meaning 
the need that was not met by CDBG-DR and other sources of assistance. 
Oftentimes, unmet need does not become apparent until after CDBG-DR 
assistance has been provided. Examples may include: A subsequent 
disaster that causes further damage to a partially rehabilitated home 
or business; an increase in the cost of construction materials; 
vandalism; contractor fraud; or theft of materials. Unmet need may also 
change if other resources become available to pay for costs of the 
activity (such as FEMA or Army Corps), and reduce the need for CDBG-DR.
    To the extent that an original disaster recovery need was not fully 
met or was exacerbated by factors beyond the control of the applicant, 
the grantee may provide additional CDBG-DR funds to meet the increased 
unmet need.
    Grantees must be able to identify and document additional unmet 
need, for example, by completing a professional inspection to verify 
the revised estimate of costs to rehabilitate or reconstruct damaged 
property.

V. Special Considerations

V.A. Programmatic Considerations Related to Each Type of Assistance

    The potential for DOB arises most frequently under homeowner 
rehabilitation programs but is not limited solely to that type of 
activity. The following examples do not form an exhaustive list of all 
CDBG-DR funded programs or activities. They are included to illustrate 
instances when duplicative assistance can occur when assisting other 
recovery activities:
    1. Assistance to businesses. Many grantees carry out economic 
revitalization programs that provide working capital assistance to 
businesses. Generally, working capital assistance is calculated after 
assessing a business's ability to use its current assets to pay its 
current liabilities. The grantee's DOB analysis must consider total 
assistance, which includes all sources of financial assistance 
available to the applicant to pay a portion of liabilities that will 
become due. For example, a downtown business alliance might award 
business recovery grants from its funds to cover some of the same 
liabilities. Even if the downtown business alliance does not call its 
assistance ``working capital'' assistance, the amount the business 
received from the downtown business alliance to pay the same costs as 
the CDBG-DR funds is a DOB. Therefore, a grantee's basis for 
calculating CDBG-DR economic development assistance and the purposes 
for which the applicant can use the assistance should be clearly 
identified so that grantees can prevent a DOB. As discussed above, 
assets such as cash and cash equivalents (excluding deposits of 
insurance proceeds or other disaster assistance), inventories, short-
term investments and securities, accounts receivable, and other assets 
of the business are not financial assistance, although those assets may 
be relevant to underwriting.
    2. Assistance for infrastructure. State grantees may assist state 
or local government entities by providing funding to restore 
infrastructure (public facilities and improvements) after a disaster. 
CDBG-DR funds used directly by state and local governments for public 
facilities and improvements or other purposes are also subject to the 
DOB requirements of the Stafford Act. For example, a wastewater 
treatment facility owned by a local government may need to be 
rehabilitated. In this instance, total assistance, for a DOB analysis, 
would not only include any other federal assistance available to 
rehabilitate the facility, but it must also include any local funds 
that are available for this activity. And if local funds were 
previously designated or planned for the activity, but are no longer 
available, the grantee should document that the local government 
recipient does not have funds set aside for the activity in any capital 
improvement plan (or similar document showing planned use of funds).
    3. Payments made under the Uniform Relocation Assistance and Real 
Property Acquisition Act (URA). Grantees may provide a displaced person 
(as defined under 24 CFR 570.606) with rental assistance payments under 
the URA. To comply with CDBG-DR DOB requirements, before issuance of 
rental assistance payments required by the URA, grantees must complete 
a DOB analysis. For example, a CDBG-DR grantee must check FEMA 
assistance data to determine that FEMA did not provide rental 
assistance payments during the same time period (under the URA or as 
part of a FEMA Individual Assistance Award). The URA also prohibits 
payments for the same ``purpose and effect'' as another payment to a 
displaced person (49 CFR 24.3).

V.B. Subsidized Loans

    This notice updates guidance on the treatment of subsidized loans 
in a DOB analysis as the result of recent statutory changes. Private 
loans are not ``assistance'' and therefore are not a duplication (see 
section IV.B.1 above for a discussion of private loans).
    The full amount of a subsidized loan available to the applicant for 
the same purpose as CDBG-DR assistance is assistance that must be 
included in the DOB calculation unless one of the exceptions in section 
V.B.2. applies, including the exception in V.B.2(iii) authorized in the 
DRRA amendments to section 312 of the Stafford Act (which applies to 
disasters occurring between January 1, 2016 and December 31, 2021, 
until the amendment sunsets October 5, 2023). A subsidized loan is 
available when it is accepted, meaning that the borrower has signed a 
note or other loan document that allows the lender to advance loan 
proceeds.
    CDBG-DR grantees are reminded that CDBG-DR supplemental 
appropriation acts typically provide that CDBG-DR funds ``may not be 
used for activities reimbursable by, or for which funds are made 
available by, the Federal Emergency Management Agency or the Army Corps 
of Engineers.'' This prohibition (or similar prohibitions) in CDBG-DR 
appropriations acts applies to loans even if the loans would not be 
treated as a DOB under the exceptions in V.B.2. below.
V.B.1. Subsidized Loans
    For this notice, subsidized loans (including forgivable loans) are 
loans other than private loans. Both SBA and FEMA provide subsidized 
loans for disaster recovery. Subsidized loans may also be available 
from other sources. Subsidized loans are assistance that must be 
included in the DOB analysis, unless an exception applies.
V.B.2 Exceptions When Subsidized Loans Are Not a Duplication
    (i) Short-term subsidized loans for costs later reimbursed with 
CDBG-DR. Federal Register notices governing CDBG-DR grants generally 
permit grantees to reimburse costs of the grantee or subrecipient for 
eligible activities on or after the date of the disaster. If the 
grantee or subrecipient obtained a subsidized short-term loan to pay 
for eligible costs before CDBG-DR funds became available (for example, 
a low-interest loan from a local tax increment financing fund), the 
reimbursement of the costs paid by the loan does not create a 
duplication.
    (ii) Declined or cancelled subsidized loans. The amount of a 
subsidized loan that is declined or cancelled is not a DOB. To exclude 
declined or cancelled loan amounts from the DOB calculation, the 
grantee must document that all or a portion of the subsidized loan is 
cancelled or declined unless the loan qualifies under the exclusion 
discussed in (iii) below.

[[Page 28842]]

    Declined SBA Loans: Declined loan amounts are loan amounts that 
were approved or offered by a lender in response to a loan application, 
but were turned down by the applicant, meaning the applicant never 
signed loan documents to receive the loan proceeds. The CDBG-DR 
supplemental appropriation for 2017 disasters \3\ provides ``the 
Secretary and any grantee . . . shall not take into consideration or 
reduce the amount provided to any applicant for assistance from the 
grantee where such applicant applied for and was approved, but declined 
assistance related to such major declared disasters that occurred in 
2014, 2015, 2016, and 2017 from the Small Business Administration under 
section 7(b) of the Small Business Act (15 U.S.C. 636(b)).''
---------------------------------------------------------------------------

    \3\ Further Additional Supplemental Appropriations for Disaster 
Relief Requirements Act, 2018 (Pub. L. 115-123, approved February 9, 
2018).
---------------------------------------------------------------------------

    CDBG-DR grantees shall not treat declined subsidized loans, 
including declined SBA loans, as a DOB (but are not prohibited from 
considering declined subsidized loans for other reasons, such as 
underwriting). If a grantee's DOB policies and procedures treat 
declined loans as a DOB, the grantee must update its policies and 
procedures.
    A grantee is only required to document declined loans if 
information available to the grantee (e.g., the data the grantee 
receives from FEMA, SBA, or other sources) indicates that the applicant 
received an offer for subsidized loan assistance, and the grantee is 
unable to determine from that available information that the applicant 
declined the loan. If the grantee is aware that the applicant received 
an offer of loan assistance and cannot ascertain from available data 
that the applicant declined the loan, the grantee must obtain a written 
certification from the applicant that the applicant did not accept the 
subsidized loan by signing loan documents and did not receive the loan.
    Cancelled Loans: Cancelled loans are loans (or portions of loans) 
that were initially accepted, but for a variety of reasons, all or a 
portion of the loan amount was not disbursed and is no longer available 
to the applicant. The cancelled loan amount is the amount that is no 
longer available. The loan cancellation may be due to default of the 
borrower, agreement by both parties to cancel the undisbursed portion 
of the loan, or expiration of the term for which the loan was available 
for disbursement.
    The following documentation is sufficient to demonstrate that any 
undisbursed portion of an accepted subsidized loan is cancelled and no 
longer available: (a) A written communication from the lender 
confirming that the loan has been cancelled and undisbursed amounts are 
no longer available to the applicant; or (b) a legally binding 
agreement between the CDBG-DR grantee (or local government or 
subrecipient administering the CDBG-DR assistance) and the applicant 
that indicates that the period of availability of the loan has passed 
and the applicant agrees not to take actions to reinstate the loan or 
draw any additional undisbursed loan amounts. The documentation 
described above must be maintained by the grantee. Without this 
documentation, any approved but undisbursed portion of a subsidized 
loan must be included in the grantee's calculation of the total 
assistance amount unless another exception applies.
    For cancelled SBA loans, the grantee must notify the SBA that the 
applicant has agreed to not take any actions to reinstate the cancelled 
loan or draw any additional undisbursed loan amounts.
    (iii) The subsidized loan meets the requirements for a statutory 
exception under the DRRA's amendments to the Stafford Act. The DRRA 
amendments apply only to major disasters or emergencies declared 
between January 1, 2016, and December 31, 2021 (DRRA Qualifying 
Disasters). However, the DRRA also provides that the amendment sunsets 
(i.e., the Stafford Act is amended to remove this provision) on the 
date that is 5 years after the date the DRRA's enactment, therefore, 
the exception for DRRA Qualifying disasters no longer applies after 
October 5, 2023. Grantees shall continue to treat loans accepted in 
response to disasters declared in 2015 as a duplication of benefits, 
unless another exception applies.
    For DRRA Qualifying Disasters, FEMA has advised that a loan is not 
a prohibited duplication of benefits under section 312(b)(4)(C) of the 
Stafford Act, as amended by section 1210 of the DRRA, provided that all 
Federal assistance is used toward a loss suffered as a result of a 
major disaster or emergency.\4\
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    \4\ https://www.fema.gov/media-library-data/1551126628749-68761acce84dda93f590eb91676ce63e/Section_1210_FactSheet_Final_Draft_2019.pdf.
---------------------------------------------------------------------------

a. Treatment of Disbursed Loans That Meet the Statutory Exception Under 
the DRRA Amendments
    FEMA also advised that the DRRA amendments do not automatically 
require or authorize repayment of existing loan amounts. Instead, FEMA 
advised ``whether particular federal grant funds are available for the 
purpose of paying down a loan provided for disaster losses is a 
determination reserved for the grant awarding agency, pursuant to its 
statutory program authorities and appropriations.'' HUD requirements on 
the reimbursement of costs paid with subsidized loans is provided in 
section V.B.3, below.
b. Treatment of Undisbursed Loans That Meet the Statutory Exception 
Under the DRRA Amendments
    For subsidized loans made in response to DRRA Qualifying Disasters, 
accepted but undisbursed loan amounts (e.g., accepted but undisbursed 
SBA loan amounts) are not considered a DOB. Grantees that received a 
CDBG-DR grant in response to a DRRA Qualifying Disaster may revise 
awards to applicants with undisbursed subsidized loan assistance from 
SBA or other sources to provide additional CDBG-DR assistance. The 
amount of additional CDBG-DR assistance must be based on a revised DOB 
analysis that excludes accepted but undisbursed loan amounts from total 
assistance when calculating the maximum CDBG-DR award. If the grantee 
provides additional CDBG-DR assistance, the grantee must notify the 
lender and must obtain a written agreement from the applicant that the 
applicant will not make additional draws from the subsidized loan 
without the grantee's approval. The grantee must review and approve any 
subsequent draws to determine whether all Federal assistance is used 
toward a loss suffered as a result of a major disaster or emergency, as 
required by the DRRA.
    If providing additional assistance in the amount of undisbursed 
loans would be inconsistent with the grantee's approved CDBG-DR action 
plan, the grantee must amend its action plan.
V.B.3 Use of CDBG-DR for Reimbursement of Costs Paid by Subsidized 
Loans Following DRRA Qualifying Disasters
    As a general rule, CDBG-DR grant funds are available only to pay 
for new activities. However, most Federal Register notices governing 
CDBG-DR grants permit payment of costs dating back to the date of the 
disaster that led to the CDBG-DR grant award. These Federal Register 
notices require grantees to adhere to reimbursement requirements 
previously established by HUD when reimbursing applicants'

[[Page 28843]]

costs.\5\ Reimbursement is not permitted if payment of the cost with 
CDBG-DR funds will cause a DOB because an exception does not apply or 
violate the requirement that CDBG-DR funds shall not be used for 
activities reimbursable by, or for which funds are made available by, 
FEMA or the Army Corps of Engineers.
---------------------------------------------------------------------------

    \5\ The most recent CPD notice made applicable by Federal 
Register notices governing CDBG-DR grants is CPD Notice 2015-07, 
``Guidance for Charging Pre-Application Costs of Homeowners, 
Businesses, and Other Qualifying Entities to CDBG Disaster Recovery 
Grants'' (https://files.hudexchange.info/resources/documents/Notice-CPD-15-07-Guidance-for-Charging-Pre-Application-Costs.pdf). HUD may 
update this notice and amend reimbursement requirements in Federal 
Register notices from time to time. This notice applies to 
reimbursement of applicants other than the grantee and subrecipient. 
The requirements on reimbursement of costs of the grantee or 
subrecipient are described in the Federal Register notices governing 
the grants.
---------------------------------------------------------------------------

    This notice establishes a new policy for grantees that received 
CDBG-DR grants made in response to DRRA Qualifying Disasters. Subject 
to conditions of this notice, grantees that received CDBG-DR grants in 
response to DRRA Qualifying Disasters may grant CDBG-DR funds to 
reimburse individuals and businesses (other than the grantee or 
subrecipients) for some costs of CDBG-DR eligible activities that were 
paid with subsidized loans. The conditions for payment of these costs 
are:
    (i) The grantee must document in the applicant's file that all 
federal assistance (including CDBG-DR and subsidized loan assistance) 
is used toward a loss suffered as a result of the major disaster or 
emergency. If the subsidized loan is used to carry out a CDBG-DR 
eligible activity that addresses a loss suffered as a result of a major 
disaster or emergency, HUD considers reimbursement of eligible costs 
paid with that loan to be used toward a loss suffered as a result of 
the major disaster or emergency. Under the terms of the DRRA amendments 
to the Stafford Act, if a federal loan is used for a purpose other than 
disaster losses, the subsidized loan still duplicates other sources 
provided for the same purpose.
    (ii) The grantee must meet all grant requirements for reimbursement 
of costs, which are imposed by Federal Register notices that govern 
CDBG-DR grants.
    (iii) If the grantee has already received the application and 
completed an initial DOB analysis, the grantee must complete a revised 
DOB analysis that updates the applicant's unmet needs and assistance 
from all sources, and excludes subsidized loans used for disaster 
losses and other nonduplicative assistance from the total assistance to 
calculate the revised DOB amount.
    (iv) The grantee must document that the reimbursed cost was for an 
activity that was a CDBG-DR eligible activity on the effective date of 
this notice, such as housing rehabilitation costs paid with SBA loan 
proceeds, or for an activity that is otherwise eligible pursuant to a 
waiver provided by the Department. Grantees are prohibited from 
reimbursing costs that are not otherwise eligible for CDBG-DR 
assistance, such as compensation for personal property loss or late 
fees. Payment of interest is not generally an eligible activity, but if 
permitted by an applicable Federal Register notice granting a waiver, 
grantees may pay interest due at the time of reimbursement for eligible 
activities (e.g., interest incurred by the applicant for the portion of 
an SBA loan used for a CDBG-DR eligible activity).
    (v) Statutes or loan documents governing subsidized loans may 
require the lender to receive payments that reimburse costs paid with 
subsidized loans. The reimbursement award to the applicant must require 
the applicant to comply with any requirements in the loan documents 
that the applicant use amounts received for reimbursement to repay the 
loan's outstanding principal and interest. When a grantee reimburses 
costs paid by SBA loans, SBA has determined that it is required to 
receive the payment. The grantee must notify the SBA of the 
reimbursement and issue a joint payment to the SBA and the applicant.
    (vi) Grantees must advise applicants (either collectively or 
individually) that submitting an application for CDBG-DR reimbursement 
assistance does not relieve the applicant of a duty to make payments on 
a subsidized loan, and that until a subsidized loan is satisfied in 
full, failure to make principal and interest payments when due could 
result in a referral to collection agencies, reporting to credit 
bureaus, or other significant consequences.
    (vii) The grantee must document compliance with environmental 
requirements at 24 CFR part 58 prior to reimbursement for a CDBG-DR 
eligible activity. Grantees are required to consult with the State 
Historic Preservation Officer, Fish and Wildlife Service and National 
Marine Fisheries Service, to obtain formal agreements for compliance 
with section 106 of the National Historic Preservation Act (54 U.S.C. 
306108) and section 7 of the Endangered Species Act (16 U.S.C. 1536) 
when designing a reimbursement program.
    (viii) CDBG-DR funds are provided principally to benefit low- and 
moderate-income persons. Therefore, as a condition of reimbursing costs 
paid with SBA loans, the grantee must submit a substantial action plan 
amendment to HUD describing the activity and must meet the following 
requirements:
    a. The needs analysis in the action plan must include an updated 
unmet housing needs assessment to reflect the remaining total number of 
housing units with damage
    b. The grantee's action plan must identify the number of eligible 
households yet to be served who have applied to the grantee's CDBG-DR 
housing assistance programs and identify how the grantee shall address 
all remaining unmet needs of its applicants for housing assistance;
    c. The grantee shall reimburse costs paid with subsidized loans for 
all low- and moderate-income applicants before reimbursing applicants 
with incomes greater than 80 percent of area median income (AMI) but 
less than or equal to 120 percent AMI;
    d. The total aggregate amount the grantee designates for 
reimbursement of costs paid with subsidized loans to applicants with 
incomes over 80 percent AMI shall not reduce the overall low- and 
moderate-income benefit applicable to the grant.
    e. The grantee shall only grant CDBG-DR funds to reimburse costs 
paid with subsidized loans for applicants with incomes that exceed 120 
percent of AMI when the grantee requests, and HUD approves, a hardship 
exception for the applicants.
    Before requesting a hardship exception, the grantee must specify in 
its action plan the criteria it will use to define a hardship for 
applicants with incomes that exceed 120 percent AMI and establish a 
policy that provides full or partial reimbursement to alleviate the 
hardship. The grantee's hardship criteria must include the following 
elements: (1) A demonstration of the applicant's financial necessity 
for full or partial reimbursement of costs paid with subsidized loans; 
(2) a definition of financial necessity that is sufficient to 
distinguish between applicants with significant need for full or 
partial reimbursement to enable the applicant to pay for basic 
household or business expenses, and applicants who are not eligible for 
a hardship exception because they seek reimbursement for reasons other 
than financial necessity; and (3) a requirement that the amount of the 
full or partial reimbursement shall not exceed the amount needed to 
address the applicant's financial necessity. The grantee must also 
develop policies and procedures that

[[Page 28844]]

identify the information the grantee will use to make the determination 
of financial necessity.
    HUD will consider requests for hardship exceptions for applicants 
based on HUD's determination that the grantee's hardship criteria in 
its action plan comply with this notice, and the hardship exception 
requests are consistent with the grantee's hardship criteria as 
provided for in its action plan. Hardship exceptions shall only be 
authorized until October 5, 2023, for applicants that received 
assistance in response to disasters declared between January 1, 2016, 
and December 31, 2021, consistent with the DRRA.
    (ix) Before October 5, 2023, HUD will evaluate the impact of 
policies provided in this Notice using data provided by its grantees. 
To conduct this evaluation, one year from the approval of the 
substantial action plan amendment required in paragraph (viii) above, 
the grantee shall submit to HUD an assessment and supporting data that 
provides: (1) The total amount of CDBG-DR funds used for the 
reimbursement of SBA and other subsidized loans; (2) the total number 
of households and the number of low-to moderate-income households that 
have been reimbursed; and (3) the SBA loan number and the FEMA 
Registrant ID of each individual household that was reimbursed for its 
SBA loan costs. HUD will also coordinate with FEMA on reports required 
by section 1210(a)(5) of Public Law 115-254, which will report on 
efforts to improve coordination between Federal agencies and clarify 
the sequence of delivery of disaster assistance to individuals.
    Any future grantee request for a waiver of the overall benefit 
requirement applicable to a CDBG-DR grant will be evaluated by HUD in 
light of the amount of assistance the grantee has or plans to use to 
reimburse applicants with incomes in excess of 80 percent AMI for costs 
paid by SBA and other subsidized loans.

V.C. Order of Assistance

    CDBG-DR appropriations acts generally include a statutory order of 
assistance for Federal agencies. Although the language may vary among 
appropriations, the statutory order of assistance typically provides 
that CDBG-DR funds may not be used for activities reimbursable by or 
for which funds are made available by FEMA or the Army Corps. This 
means that grantees must verify whether FEMA or Army Corps funds are 
available for an activity (i.e. the application period is open) or the 
costs are reimbursable by FEMA or Army Corps (i.e., the grantee will 
receive FEMA or Army Corps assistance to reimburse the costs of the 
activity) before awarding CDBG-DR assistance for costs of carrying out 
the same activity. If FEMA or Army Corps are accepting applications for 
the activity, the applicant must seek assistance from those sources 
before receiving CDBG-DR assistance. If the applicant's costs for the 
activity will be reimbursed by FEMA or the Army Corps, the grantee 
cannot provide the CDBG-DR assistance for those costs. In the event 
that FEMA or Army Corps assistance is awarded after the CDBG-DR to pay 
the same costs, it is the CDBG-DR grantee's responsibility to recapture 
CDBG-DR assistance that duplicates assistance from FEMA or the Army 
Corps.
    Under the Stafford Act, a federal agency that provides duplicative 
assistance must collect that assistance. For CDBG-DR grants, the CDBG-
DR grantee must collect duplicative assistance it provides.
    FEMA regulations at 44 CFR 206.191 set forth a delivery sequence 
that establishes which source of assistance is duplicative for certain 
programs. CDBG-DR assistance is not listed in FEMA's sequence, but as a 
practical matter, CDBG-DR assistance duplicates other sources received 
before the CDBG-DR for the same purpose and portion of need. Any amount 
received from other sources before the CDBG-DR assistance that is 
determined to be duplicative must be collected by the grantee. The 
mandatory agreement to repay (discussed in VII. below) can be used to 
prevent duplication by assistance that is available, but not yet 
received. If the duplicative assistance is received after CDBG-DR, the 
grantee must collect the DOB or contact HUD if it has questions about 
whether another Federal agency is responsible for collecting the 
duplication.

V.D. Multiple Disasters

    When multiple disasters occur in the same location, and the 
applicant has not recovered from the first disaster at the time of a 
second disaster, the assistance provided in response to the second 
disaster may duplicate assistance for the same purpose and need as 
assistance provided after the first disaster. HUD recognizes that in 
this scenario, DOB calculations can be complicated. Damage from a 
second disaster, for example, may destroy work funded and completed in 
response to the first disaster. The second disaster may also damage or 
destroy receipts and other documentation of how applicants expended 
assistance provided after the first disaster.
    Therefore, HUD is adopting the following policy that is applicable 
to circumstances when two disasters occur in the same area, and the 
applicant has not fully recovered from the first disaster before the 
second disaster occurs: Applicants are not required to maintain 
documentation related to the use of public disaster assistance 
(Federal, State, and local) beyond the period required by the agency 
that provided the assistance. If documentation cannot be provided, the 
grantee may accept a self-certification regarding how the applicant 
used the other agency's assistance, provided that the applicant is 
advised of the criminal and civil penalties that apply in cases of 
false claims and fraud, and the grantee determines that the applicant's 
total need is consistent with data the grantee has about the nature of 
damage caused by the disasters (e.g., flood inundation levels). For 
example, a second disaster strikes three years after an agency provided 
assistance in response to the first disaster, and that agency required 
applicants to maintain documentation for two years, the grantee may 
accept a self-certification regarding how the applicant used the other 
agency's assistance.
    Applicants must continue to follow all requirements to obtain and 
maintain flood insurance as a condition of receiving Federal flood 
disaster assistance. No Federal disaster relief assistance made 
available in a flood disaster area may be used to make a payment to a 
person for repair, replacement, or restoration for damage to any 
personal, residential, or commercial property if that person at any 
time has received flood disaster assistance that was conditional on the 
person first having obtained flood insurance under applicable Federal 
law and subsequently having failed to obtain and maintain flood 
insurance as required under applicable Federal law on such property. 
See 42 U.S.C. 5154a.

VI. Recordkeeping

    The Grantee must document compliance with DOB requirements. 
Policies and procedures for DOB should may be specific for each program 
funded by the CDBG-DR grantee and should be commensurate with risk. 
Grantees should be especially careful to sufficiently document the DOB 
analysis for activities they are carrying out directly. Insufficient 
documentation on DOB can lead to findings, which can be difficult to 
resolve if records are missing, inadequate, or inaccurate to 
demonstrate compliance with DOB requirements.

[[Page 28845]]

    When documenting its DOB analysis, grantees cannot rely on 
certification alone for proof of other sources of funds for the same 
purpose (unless authorized by this notice, see V.D. above). Any 
certification by an applicant must be based on supporting evidence that 
will be kept available for inspection by HUD. For example, if an 
applicant certifies that other sources of funds were received and 
expended for a different purpose than the CDBG-DR funds, grantees must 
substantiate this assertion with an additional source of information 
(e.g., physical inspections, credit card statements, work estimates, 
contractor invoices, flood inundation records, or receipts). For these 
reasons, HUD recommends that as soon as possible after a disaster, 
grantees advise the public and potential applicants to retain all 
receipts that document expenditures for recovery needs. Grantees should 
consult their CPD representative with questions about the sufficiency 
of documentation.

VII. Agreement To Repay

    The Stafford Act requires grantees to ensure that applicants agree 
to repay all duplicative assistance to the agency providing that 
Federal assistance. To address any potential DOB, each applicant must 
also enter into an agreement with the CDBG-DR grantee to repay any 
assistance later received for the same purpose for which the CDBG-DR 
funds were provided. This agreement can be in the form of a subrogation 
agreement or similar document and must be signed by every applicant 
before the grantee disburses any CDBG-DR assistance to the applicant.
    In its policies and procedures, the grantee must establish a method 
to monitor each applicant's compliance with the agreement for a 
reasonable period after project completion (i.e., a time period 
commensurate with risk). Additionally, if required by the Federal 
Register notice governing the use of the CDBG-DR grant funds, the 
grantee's agreement must also include the following language: 
``Warning: Any person who knowingly makes a false claim or statement to 
HUD may be subject to civil or criminal penalties under 18 U.S.C. 287, 
1001 and 31 U.S.C. 3729.'' If the Federal Register notice governing the 
use of a grantee's CDBG-DR grant does not require that language to be 
added, grantees may include this or similar language at their 
discretion.

VIII. Collecting a Duplication

    If a potential DOB is discovered after CDBG-DR assistance has been 
provided, the grantee must reassess the applicant's need at that time 
(see section IV.E.). If additional need is not demonstrated, CDBG-DR 
funds shall be recaptured to the extent they are in excess of the 
remaining need and duplicate other assistance received by the applicant 
for the same purpose. This determination, however, may depend on what 
sources of assistance were last received by the applicant.
    If a grantee fails to recapture funds from an applicant, HUD may 
impose corrective actions pursuant to 24 CFR 570.495, 24 CFR 570.910, 
and Federal Register notices, as applicable. Also, HUD reminds grantees 
that the Stafford Act states that ``A person receiving Federal 
assistance for a major disaster or emergency shall be liable to the 
United States to the extent that such assistance duplicates benefits 
available to the person for the same purpose from another source.'' If 
the grantee does not recapture the duplicative assistance, that 
individual applicant will still be liable to the United States 
government.
    The grantee may refer to any relevant guidance or the debt 
collection procedures in place for the state or local government. HUD 
is available to provide guidance to grantees in establishing or 
revising the grantee's duplication of benefits policies and procedures.

IX. Catalog of Federal Domestic Assistance

    The Catalog of Federal Domestic Assistance numbers for the disaster 
recovery grants under this Notice are as follows: 14.218 for Units of 
General Local Governments (UGLG); 14.228 for States.

X. Finding of No Significant Impact

    A Finding of No Significant Impact (FONSI) with respect to the 
environment has been made in accordance with HUD regulations at 24 CFR 
part 50, which implement section 102(2)(C) of the National 
Environmental Policy Act of 1969 (42 U.S.C. 4332). The FONSI is 
available for public inspection between 8 a.m. and 5 p.m. weekdays in 
the Regulations Division, Office of General Counsel, Department of 
Housing and Urban Development, 451 7th Street SW, Room 10276, 
Washington, DC 20410-0500. Due to security measures at the HUD 
Headquarters building, an advance appointment to review the docket file 
must be scheduled by calling the Regulations Division at 202-708-3055 
(this is not a toll-free number). Hearing or speech-impaired 
individuals may access this number through TTY by calling the toll-free 
Federal Relay Service at 800-877-8339.

    Dated: June 14, 2019.
Brian D. Montgomery,
Acting Deputy Secretary.

Appendix A: Example DOB and CDGB-DR Award Calculations

    Table 1 illustrates a basic way to complete a duplication of 
benefits analysis and apply a program cap to calculate a CDBG-DR 
housing rehabilitation award. In this example, the total unmet need 
is greater than the program cap set by the grantee.

 Table 1--Basic Framework for DOB Calculation--Homeowner Rehabilitation
                                 Example
------------------------------------------------------------------------
 
------------------------------------------------------------------------
1. Identify Applicant's Total Need Calculated at a              $100,000
 Point in Time........................................
    Grantee estimates $100,000 to rehabilitate a
     damaged home. This estimate was done after the
     removal of a tree but before any construction and
     represents current need for rehabilitation costs.
2. Identify Total Assistance Available................            30,000
    Homeowner received the following assistance:
        $20,000 from insurance for damage to the home.
        $10,000 from FEMA for rehabilitation of the
         home.
3. Identify the Amount to Exclude as Non-Duplicative               5,000
 (Amounts used for a different purpose, or same
 purpose, different allowable use)....................
    Homeowner can document that she used $5,000 to
     remove a large tree that fell on the home, and
     still has $25,000 of insurance and FEMA
     assistance unexpended.
        Total exclusions = $5,000. Exclude $5,000 used
         for the same purpose, different allowable
         use.
4. Identify Total DOB Amount (Total Assistance Minus              25,000
 Non-Duplicative Exclusions)..........................
    $30,000 in total assistance minus $5,000 for non-
     duplicative exclusions.
5. Calculate Maximum Award (Total Need Minus Total DOB            75,000
 Amount)..............................................
    $100,000 in total need based on estimate minus
     $25,000 identified as the total DOB in step 4.
6. Program Cap (if applicable)........................            50,000

[[Page 28846]]

 
    In this example, the grantee has a rehabilitation
     program cap in its policies and procedures of
     $50,000. Program caps are set by the grantee in
     its discretion.
7. Final Award (Program Cap = Final Award if Maximum              50,000
 Award is Greater than the Program Cap)...............
------------------------------------------------------------------------

    Table 2, below, uses the same basic framework to calculate a 
CDBG-DR homeowner rehabilitation award when the applicant received 
insurance, FEMA assistance, and an SBA loan for housing 
rehabilitation. In this example, the homeowner received the full SBA 
loan amount. The SBA loan amount is a DOB because the loan is for 
the same purpose as the CDBG-DR award, and no exception applies to 
exclude the SBA loan amount from the duplication (e.g., the loan was 
made in response to a disaster that occurred in 2015, so the DRRA 
exception does not apply):

 Table 2--Basic Framework for DOB Calculation--Homeowner Rehabilitation
       Example When Subsidized Loans Are a Duplication of Benefits
------------------------------------------------------------------------
 
------------------------------------------------------------------------
1. Identify Applicant's Total Need Calculated at a              $100,000
 Point in Time........................................
    Grantee estimates $100,000 to finish
     rehabilitating a damaged home. This estimate
     represents remaining rehabilitation costs after
     the homeowner used $40,000 of non-CDBG-DR
     assistance for partial rehabilitation and tree
     removal.
        Total need = $100,000 for rehabilitation not
         yet completed at the point in time that need
         was assessed.
2. Identify Total Assistance Available................            70,000
    Homeowner received the following assistance:......
        $5,000 from insurance for loss of contents.
        $25,000 from insurance for damage to the home.
        $15,000 from FEMA for rehabilitation of the
         home.
        $25,000 from SBA for rehabilitation. The DRRA
         exception does not apply, so the SBA amounts
         are included in total assistance.
3. Identify the Amount to Exclude as Non-Duplicative              45,000
 (Amounts used for a different purpose, or same
 purpose, different allowable use)....................
    Homeowner can show that $5,000 of insurance
     proceeds was a payment for loss of contents.
    Homeowner can document that she used $5,000 to
     remove a large tree that fell on the home.
    Homeowner can document that she paid a contractor
     $35,000 for partial rehabilitation so that she
     could live in her home until rehabilitation was
     completed.
        Total exclusions = $45,000. Exclude $5,000 for
         different purpose (insurance payment for
         contents) and exclude $40,000 used for the
         same purpose, different allowable use (tree
         removal and partial rehabilitation).
4. Identify Total DOB Amount (Total Assistance Minus              25,000
 Non-Duplicative Exclusions)..........................
    $70,000 in total assistance minus $45,000 for non-
     duplicative exclusions.
5. Calculate Maximum Award (Total Need Minus Total DOB            75,000
 Amount)..............................................
6. Program Cap (if applicable)........................           150,000
    In this example, the grantee has a rehabilitation
     program cap in its policies and procedures of
     $150,000. Program caps are set by the grantee in
     its discretion.
7. Final Award (Program Cap = Final Award if Maximum              75,000
 Award is equal to or greater than the Program Cap)...
    In this case, the program cap is greater than the
     maximum award, so the applicant can receive the
     maximum award.
------------------------------------------------------------------------

    Table 3 modifies the example in Table 2 to illustrate how the 
analysis would change if an exception applies to exempt the loan 
from treatment as a DOB, and if the maximum award is greater than 
the program cap. In this example, the applicant received a 
subsidized loan from SBA for the same purpose (housing 
rehabilitation) as the CDBG-DR assistance, and the assistance was 
provided in response to a DRRA Qualifying Disaster (a disaster 
occurring between January 1, 2016 and December 31, 2021). The loan 
is not a DOB because the applicant can document that all of the loan 
proceeds were used for a disaster-related loss and therefore the 
DRRA exception applies.

 Table 3--Basic Framework for DOB Calculation--Homeowner Rehabilitation
     Example When Subsidized Loans Are Not a Duplication of Benefits
------------------------------------------------------------------------
 
------------------------------------------------------------------------
1. Identify Applicant's Total Need Calculated at a             $ 125,000
 Point in Time........................................
    Grantee estimates $100,000 to finish
     rehabilitating a home damaged by a 2016 disaster.
     This estimate represents remaining rehabilitation
     costs after the homeowner completed $25,000 in
     partial rehabilitation with SBA loan proceeds,
     $5,000 in tree removal with insurance proceeds,
     and $35,000 in rehabilitation with FEMA and
     insurance ($65,000 total rehabilitation costs
     since the date of the disaster).
        Total need = $100,000 in rehabilitation not
         yet completed at the point in time that need
         was assessed + $25,000 in reimbursement for
         costs of CDBG-DR eligible activities paid
         with an SBA loan received in response to a
         DRRA Qualifying Disaster.
2. Identify Total Assistance Available................            50,000
    Homeowner received the following assistance:
        $5,000 from insurance for loss of contents.
        $30,000 from insurance for damage to the home.
        $15,000 from FEMA for rehabilitation of the
         home.
            Because the homeowner can document that
             the SBA loan proceeds of $25,000 were
             used for rehabilitation, the DRRA
             exception applies and the SBA loan funds
             are not included in total assistance and
             do not need to be considered in the DOB
             analysis. Even though the grantee does
             not need to consider the SBA loan in the
             DOB analysis, the grantee must follow the
             requirements of this notice before
             reimbursing costs paid with SBA loans for
             DRRA Qualifying Disasters (reimbursement
             is described section V.B.3.).

[[Page 28847]]

 
3. Identify the Amount of Total Assistance to Exclude             45,000
 as Non-Duplicative (Amounts used for a different
 purpose, or same purpose, different allowable use)...
    Homeowner can show that $5,000 of insurance
     proceeds was a payment for loss of contents.
    Homeowner can document that she used $5,000 to
     remove a large tree that fell on the home.
    Homeowner can document that she paid a contractor
     $35,000 for partial rehabilitation with FEMA and
     insurance funds so that she could live in her
     home until rehabilitation was completed (in
     addition to the $25,000 in rehabilitation
     completed with SBA loan proceeds, which is
     excluded from the DOB calculation because the
     DRRA exception applies).
        Total exclusions = $45,000. Exclude $5,000 for
         different purpose (insurance payment for
         contents) and $40,000 used for the same
         purpose, different allowable use ($35,000
         partial rehabilitation completed with
         insurance and FEMA assistance, and $5,000 for
         tree removal).
4. Identify Total DOB Amount (Total Assistance Minus               5,000
 Non-Duplicative Exclusions)..........................
    $50,000 in total assistance minus $45,000 for non-
     duplicative exclusions.
5. Calculate Maximum Award (Total Need Minus Total DOB           120,000
 Amount)..............................................
    If the grantee did not have a program cap, the
     maximum award would be less than total need by
     $5,000 (the amount of the DOB). Therefore, absent
     a program cap, the grantee would be able to
     complete the remaining $100,000 rehabilitation
     work and reimburse $20,000 in rehabilitation
     costs paid with SBA loan proceeds.
6. Program Cap (if applicable)........................           115,000
    In this example, the grantee has a rehabilitation
     program cap in its policies and procedures of
     $115,000. Program caps are set by the grantee in
     its discretion.
7. Final Award (Program Cap = Final Award if Maximum             115,000
 Award is equal to or greater than the Program Cap)...
    In this case, the program cap is less than the
     maximum award, so the applicant can receive only
     the amount of the program cap. The grantee can
     award the applicant $100,000 to complete the
     rehabilitation (so that the applicant can occupy
     the home and the rehabilitation activity can meet
     a national objective) and the grantee can also
     award the applicant $15,000 to reimburse
     rehabilitation costs paid with SBA loan proceeds
     if the grantee complies with the reimbursement
     requirements of this notice.
------------------------------------------------------------------------

    Table 4 provides an example of a DOB calculation when the 
applicant seeks rehabilitation assistance to recover from damage 
caused by two disasters that occurred within three years. The 
applicant has completed some rehabilitation, but still has remaining 
rehabilitation need.

 Table 4--Basic Framework for DOB Calculation--Homeowner Rehabilitation
         Example When a Homeowner Experiences Multiple Disasters
------------------------------------------------------------------------
 
------------------------------------------------------------------------
1. Identify Applicant's Total Need Calculated at a              $100,000
 Point in Time........................................
    Grantee estimates $100,000 to finish
     rehabilitating a home damaged by a 2018 disaster.
     This home was also damaged by a 2015 disaster. It
     is impossible to tell from the inspection if the
     damage was caused by the 2015 disaster or the
     2018 disaster. This is the first time the grantee
     has done an inspection on this home.
    This estimate represents remaining rehabilitation
     costs after the homeowner completed $50,000 in
     partial rehabilitation with other sources of
     assistance. $30,000 in rehabilitation was from
     sources in response to the 2018 disaster and
     $15,000 in rehabilitation was from sources in
     response to the 2015 disaster.
        Total need = $100,000 in rehabilitation not
         yet completed at the point in time that need
         was assessed.
2. Identify Total Assistance Available................            50,000
    Homeowner received the following assistance for
     the 2015 disaster:
        $5,000 from insurance for loss of contents.
        $15,000 from the State housing agency for
         rehabilitation of the home.
    Homeowner received the following assistance for
     the 2018 disaster:
        $30,000 from FEMA for rehabilitation of the
         home.
3. Identify the Amount to Exclude as Non-Duplicative              50,000
 (Amounts used for a different purpose, or same
 purpose, different allowable use)....................
    Homeowner can show that $5,000 of insurance
     proceeds was a payment for loss of contents
    Homeowner no longer has the documentation for the
     FEMA assistance given in response to the 2015
     disaster. Because the application for assistance
     was submitted more than two years after the
     homeowner received assistance from the State
     housing agency to recover from the 2015 disaster,
     and the State housing agency only required the
     homeowner to keep records for two years, the
     homeowner self-certifies that she paid a
     contractor $15,000 for rehabilitation after the
     2015 disaster but before the 2018 disaster
    Homeowner can document that she paid a contractor
     $30,000 for partial rehabilitation so that she
     could live in the home until rehabilitation was
     completed, in response to the 2018 disaster.
        Total exclusions = $50,000. Exclude $5,000 for
         different purpose (insurance payment for
         contents), $15,000 self-certification for
         rehabilitation completed for 2015 disasters
         that was also damaged by the 2018 disaster,
         $30,000 used for the same purpose, different
         allowable use (partial rehabilitation
         completed with FEMA assistance following the
         2018 disaster).
4. Identify Total DOB Amount (Total Assistance Minus                   0
 Non-Duplicative Exclusions)..........................
5. Calculate Maximum Award (Total Need Minus Total DOB           100,000
 Amount)..............................................
6. Program Cap (if applicable)........................
    In this example, the grantee has a rehabilitation            100,000
     program cap in its policies and procedures of
     $115,000. Program caps are set by the grantee in
     its discretion.
7. Final Award (Program Cap = Final Award if Maximum             100,000
 Award is equal to or greater than the Program Cap)...
------------------------------------------------------------------------


[[Page 28848]]

[FR Doc. 2019-13147 Filed 6-19-19; 8:45 am]
BILLING CODE 4210-67-P