[Federal Register Volume 85, Number 162 (Thursday, August 20, 2020)]
[Notices]
[Pages 51457-51475]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-18242]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Docket No. FR-6218-N-01]


Notice of Program Rules, Waivers, and Alternative Requirements 
Under the CARES Act for Community Development Block Grant Program 
Coronavirus Response Grants, Fiscal Year 2019 and 2020 Community 
Development Block Grants, and for Other Formula Programs

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

ACTION: Notice.

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SUMMARY: This notice describes the program rules, statutory and 
regulatory waivers, and alternative requirements applicable to 
supplemental Community Development Block Grant (CDBG) funds made 
available to prevent, prepare for, and respond to coronavirus (CDBG-CV 
funds) and to annual formula CDBG grants awarded in fiscal years 2019 
and 2020. Except as otherwise described in this notice and the CARES 
Act, the statutory and regulatory provisions governing the CDBG program 
apply to CDBG-CV and CDBG grants. This notice also describes conforming 
waivers and alternative requirements for other formula programs 
included in the consolidated planning regulations in 24 CFR part 91.

DATES: Applicable: August 7, 2020.

FOR FURTHER INFORMATION CONTACT: Jessie Handforth Kome, Director, 
Office of Block Grant Assistance, Office of Community Planning and 
Development, Department of Housing and Urban Development, 451 7th 
Street SW, Room 7282, Washington, DC 20410, telephone number 202-708-
3587. 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. Kome at 202-708-0033. Except for the 
``800'' number, these telephone numbers are not toll-free. Questions 
regarding the CDBG-CV program may be submitted to 
hud.gov">CPDQuestionsAnswered@hud.gov. Interested parties may also visit HUD's 
website at https://www.hud.gov/program_offices/comm_planning for 
updated information and resources.

SUPPLEMENTARY INFORMATION:

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Table of Contents

I. Overview and Background
II. Summary of Special Authorities Under the CARES Act
    II.A. Program Modifications in the CARES Act
    II.B. Authority To Grant Waivers and Alternative Requirements
III. CDBG-CV Grants
    III.A. Allocations of CDBG-CV Funds
    III.A.1. First Allocation
    III.A.2. Additional Allocations
    III.A.3. Reallocation.
    III.B. CDBG-CV Grant Rules, Waivers, and Alternative 
Requirements
    III.B.1. General Grant Requirements
    III.B.2. Responsible Use of CARES Act Funds
    III.B.3. Overview of Process To Receive CDBG-CV Grants
    III.B.4. Application for Grant Funds and Citizen Participation
    III.B.5. Allowable Costs, Eligible Activities and National 
Objectives
    III.B.6. Other Program Requirements
    III.B.7. Period of Performance, Timeliness, and Closeout
    III.B.8. Reporting
    III.B.9. Duplication of Benefits
    III.B.10 Citizenship Requirements
IV. Fiscal Year 2019 and Fiscal Year 2020 CDBG Grants
    IV.A. General Requirements
    IV.B. Flexibilities, Waivers, and Alternative Requirements
    IV.B.1. Timeliness
    IV.B.2. Consolidated Plan, Citizen Participation, and CAPER
    IV.B.3. Flexibilities that Apply to Coronavirus-Related 
Activities.
    IV.B.4. Provisions That Do Not Apply to FY 19 and FY 20 Grants.

I. Overview and Background

    On January 21, 2020, the Centers for Disease Control and Prevention 
(CDC) confirmed the first case in the United States of a coronavirus 
known by several names, including novel coronavirus, and SARS-CoV-2, 
and which causes the disease commonly referred to as COVID-19. On March 
27, 2020, President Trump signed the Coronavirus Aid, Relief, and 
Economic Security Act (Pub. L. 116-136) (CARES Act). The CARES Act 
makes available $5 billion in CDBG coronavirus response (CDBG-CV) funds 
to prevent, prepare for, and respond to coronavirus. In the CARES Act 
and this notice, the term ``coronavirus'' means SARS-CoV-2 or another 
coronavirus with pandemic potential.
    The nation faces significant public health and economic challenges 
related to this respiratory disease. To address these challenges, CDBG-
CV and CDBG grants are a flexible source of funding that can be used to 
pay costs that are not covered by other sources of assistance, 
particularly to benefit persons of low and moderate income.
    This notice is broken into sections. Section II provides a general 
overview of the CDBG-CV and CDBG program flexibilities provided by the 
CARES Act. Section III describes the allocations, grant procedures, 
program flexibilities, waivers, and alternative requirements applicable 
to CDBG-CV grants. Section IV describes the program flexibilities, 
waivers, and alternative requirements that apply to fiscal years 2019 
and 2020 CDBG grants used to prevent, prepare for, and respond to 
coronavirus or that affect other aspects of program administration. 
Other sections contain administrative information related to this 
notice.

II. Summary of Special Authorities Under the CARES Act

    The CARES Act modifies some CDBG program rules and authorizes the 
Secretary of HUD to grant waivers and alternative requirements. 
Accordingly, this notice describes how requirements of the CDBG program 
are modified for CDBG-CV grants, fiscal year 2020 CDBG grants under the 
Department of Housing and Urban Development Appropriations Act, 2020 
(Pub. L. 116-94), and fiscal year 2019 CDBG grants under the Department 
of Housing and Urban Development Appropriations Act, 2019 (Pub. L. 116-
6). For ease of reference, citations in this notice include 
parentheticals indicating whether a CDBG program statute or regulation 
applies to entitlement grants, state grants, insular area grants, or 
grants to nonentitlement counties in Hawaii. Where citations do not 
include Hawaii counties or insular areas, the additional citation is 
not necessary because the cited entitlement CDBG regulation applies to 
insular areas and Hawaii counties in addition to entitlement grantees.

II.A. Program Modifications in the CARES Act

    The Community Development Fund heading in title XII of Division B 
of the CARES Act modifies some CDBG program requirements to provide 
immediate support for coronavirus efforts. The modifications are 
described in more detail in Section III, and are the following:
     Permits a public comment period of no less than 5 days 
when citizen participation is required.
     Permits grantees to develop expedited citizen 
participation procedures and to hold virtual public hearings when 
necessary for public health reasons.
     Eliminates the public services cap for coronavirus-related 
activities.
     Allows states and local governments to reimburse allowable 
costs of eligible activities regardless of the date the costs were 
incurred.

II.B. Authority To Grant Waivers and Alternative Requirements

    The CARES Act authorizes the Secretary to waive, or specify 
alternative requirements for, any provision of any statute or 
regulation that the Secretary administers in connection with the use of 
CDBG-CV grants, fiscal year 2020 CDBG grants, and fiscal year 2019 CDBG 
grants to prevent, prepare for, and respond to coronavirus or that 
affect other aspects of program administration for the fiscal year 2019 
and 2020 CDBG grants, except for requirements related to fair housing, 
nondiscrimination, labor standards, and the environment, upon a finding 
by the Secretary that any such waivers or alternative requirements are 
necessary to expedite or facilitate the use of such amounts to prevent, 
prepare for, and respond to coronavirus. Additional waiver authority is 
provided in 24 CFR 5.110 and 91.600. In accordance with these 
provisions, HUD may waive regulatory provisions (subject to statutory 
limitations) for good cause.
    As required by the CARES Act, the Secretary has considered the 
waivers and alternative requirements in this notice and finds that 
there is good cause for each and that each is necessary to expedite or 
facilitate the use of grant funds to prevent, prepare for, and respond 
to coronavirus.

III. CDBG-CV Grants

    This section describes the CDBG-CV allocations to states and units 
of general local government (including insular areas), the process to 
access grant funds, and the rules, waivers, and alternative 
requirements that apply to CDBG-CV grants.

III.A. Allocations of CDBG-CV Funds

    Of the $5 billion made available by the CARES Act, HUD will use 
$10,000,000 to make technical assistance awards to provide an immediate 
increase in capacity building and technical assistance to support the 
use of CDBG-CV grants and CDBG grants to prevent, prepare for, and 
respond to coronavirus.
    The remaining funds will be allocated as described in sections 
III.A.1. and III.A.2.
III.A.1. First Allocation
    The CARES Act requires HUD to allocate up to $2 billion in CDBG-CV 
funds using the same formula that it used to allocate fiscal year 2020 
CDBG

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grants pursuant to section 106 of the Housing and Community Development 
Act of 1974 (42 U.S.C. 5306). HUD made this first CDBG-CV allocation on 
April 2, 2020, 24 days before the 30-day allocation deadline in the 
CARES Act, in the amount of $2 billion. The allocations are available 
on HUD's website at https://www.hud.gov/program_offices/comm_planning/budget/fy20/.
III.A.2. Additional Allocations
    The CARES Act requires HUD to make a second round of CDBG-CV 
allocations within 45 days of enactment of the CARES Act. HUD is 
required to make this allocation in the amount of $1 billion directly 
to states and insular areas to prevent, prepare for, and respond to 
coronavirus within the state or insular area. HUD made this second 
round of CDBG-CV allocations on May 11, 2020, in the amount of $1 
billion. The allocations and methodology are available on HUD's website 
at: https://www.hud.gov/program_offices/comm_planning/budget/fy20/. The 
second CDBG-CV allocations were based on factors identified in the 
CARES Act: Public health needs, risk of transmission of coronavirus, 
number of coronavirus cases compared to the national average, economic 
and housing market disruptions, and other factors, as determined by the 
Secretary, using best available data.
    The CARES Act authorized HUD to allocate the remaining $2 billion 
in CDBG-CV funds, minus the $10 million set aside for technical 
assistance, on a rolling basis. The CARES Act provides that the 
remaining $2 billion shall be distributed directly to states or units 
of general local government, at the discretion of the Secretary, 
according to a formula based on factors to be determined by the 
Secretary, prioritizing risk of transmission of coronavirus, number of 
coronavirus cases compared to the national average, and economic and 
housing market disruptions resulting from coronavirus. The District of 
Columbia is defined as a metropolitan city under the Housing and 
Community Development Act of 1974 and not as a state or insular area. 
As such, it was not eligible for funding under the Round 2 $1 billion 
allocation. To ensure national geographic coverage in Round 2, HUD made 
an allocation from the third round of funding to the District of 
Columbia simultaneously with the second round because the District met 
the geographic criteria for the third round of allocations and was the 
only geographic area in the nation that was not covered by the second 
round of allocations.
    HUD will publish additional third round allocations and a 
description of the allocation formulas on HUD's website at https://www.hud.gov/program_offices/comm_planning/budget/fy20/ and will provide 
a link to this site in any press release announcing an allocation.
III.A.3. Reallocation
    Under Section 106 of the Housing and Community Development Act of 
1974 (HCD Act) (42 U.S.C. 5306), HUD reallocates annual formula CDBG 
funds that cannot be distributed to grantees when it allocates the next 
fiscal year's appropriation of annual formula CDBG funding. Given the 
immediate need for coronavirus assistance, the Department is specifying 
the following alternative requirement to sections 106I and (d)(3)I (42 
U.S.C. 5306I and 5306(d)(3)I), and the reallocation provisions of 24 
CFR 570.4(a), 570.420I, 570.429(d)(2), and 570.442(b), to expedite the 
use of any funds that may become available for reallocation.
    If a jurisdiction receiving an allocation of CDBG-CV funds fails to 
apply for funding in accordance with the requirements of this notice by 
August 16, 2021 (the deadline established by the CARES Act) or HUD is 
unable to distribute funds to a grantee for another reason, HUD may 
notify the jurisdiction of the cancellation of all or part of its 
allocation amount. Funds that are not awarded to jurisdictions under 
the formulas described in paragraphs III.A.1. and III.A.2. may be 
reallocated based on factors identified in the CARES Act, as determined 
by the Secretary. If made, reallocations will be published on HUD's 
website.

III.B. CDBG-CV Grant Rules, Waivers, and Alternative Requirements

    This section describes program flexibilities in the CARES Act and 
provides waivers and alternative requirements to expedite or facilitate 
the use of CDBG-CV funds. The rules, waivers, and alternative 
requirements described in this section only apply to CDBG-CV grants (as 
specified in this section) and in some cases to fiscal year 2019 and 
fiscal year 2020 CDBG grants (as specified in section IV) and program 
income (as specified in sections III.B.5.(f)(iv) and III.B.6.(a)). The 
CARES Act statutory flexibilities, waivers, and alternative 
requirements do not apply to other sources of CDBG funds (even if used 
in conjunction with CDBG-CV funds, fiscal year 2019 CDBG funds, or 
fiscal year 2020 CDBG funds) except as otherwise described in section 
IV.B.3.(b).
III.B.1. General Grant Requirements
    CDBG-CV grants are subject to the requirements of the CARES Act, 
the authorities and conditions imposed on fiscal year 2020 CDBG grants, 
and the mandatory provisions of this notice and waivers and alternative 
requirements. Except as otherwise described, grantees must comply with 
statutory and regulatory provisions governing the CDBG program. These 
include regulations at: 24 CFR part 570 subpart I (states); 24 CFR part 
570 subparts A, C, D, E, F, J, K, and O for CDBG (entitlements, 
nonentitlement Hawaii counties and insular areas).
    To facilitate the use of CDBG-CV funds in accordance with the grant 
requirements, HUD is imposing an alternative requirement that the 
definitions of CDBG funds in 24 CFR 570.3 (entitlements) and 24 CFR 
570.481(a)(2) (states) include CDBG-CV funds. This alternative 
requirement applies the requirements in 24 CFR part 570 to the use of 
CDBG-CV funds, except as modified by rules, waivers, and alternative 
requirements applicable to CDBG-CV grants.
    CDBG-CV grant agreements will impose requirements by incorporating 
program rules, waivers, and alternative requirements (including those 
published in memoranda, in this and any future notices).
    Grantees should not assume that their normal CDBG funding 
distribution procedures are adequate to swiftly distribute and use 
CDBG-CV grants. For example, if a grantee's existing policies mandate 
lengthy processes to select activities or complete procurements, 
grantees should try to expedite actions with local waiver authorities 
or emergency procedures that may be available without state or local 
rulemaking. In addition, urban counties that normally distribute CDBG 
funds on a proportional basis among all participating jurisdictions 
should consider whether their normal procedures would result in funding 
awards that are too small to be used expeditiously and productively by 
the participating jurisdictions.
III.B.2. Responsible Use of CARES Act Funds
    CDBG-CV funds are subject to additional measures designed to 
prevent fraud, waste, and abuse. HUD will conduct regular oversight and 
monitoring activities to determine that use of CDBG-CV funds is 
consistent with grant requirements and limited to the necessary and 
reasonable costs of activities to prevent, prepare for, and respond to 
coronavirus. Measures to

[[Page 51460]]

increase transparency and accountability include:
     Regular reporting on the use of CDBG-CV funds, including 
reporting that may be required by the CARES Act to conduct audits and 
reviews of programs, operations, and expenditures relating to funds 
under the CARES Act and the Coronavirus response (see section III.B.8. 
for information on reporting requirements); and
     a requirement that grantees prevent the duplication of 
benefits that is caused when a person, household, business, or other 
entity receives financial assistance from multiple sources for the same 
purpose, and the total assistance is more than the total need (see 
section III.B.9. for information on duplication of benefits).
III.B.3. Overview of Process To Receive CDBG-CV Grants
    On April 2, 2020, HUD published the first round of CDBG-CV 
allocations on the hud.gov website and notified jurisdictions of their 
allocation amounts. On April 9, 2020, John Gibbs, Acting Assistant 
Secretary for Community Planning and Development, issued a memorandum 
with the subject, ``CARES Act Flexibilities for CDBG Funds Used to 
Support Coronavirus Response and plan amendment waiver'' (``April 9 
memorandum''), available at https://www.hud.gov/sites/dfiles/CPD/documents/CARES-Act-Flexibilities-CDBG-Funds-Used-Support-Coronavirus-Response.pdf. The memorandum advised grantees to amend or prepare 
consolidated plan submissions for CDBG-CV grants as soon as possible. 
Grantees may have partially or fully completed the application process 
before HUD publishes this notice.
    The April 9 memorandum also granted waivers to expedite this 
process of applying for CDBG-CV funds by permitting application for a 
grantee's share of the first $2 billion through a substantial amendment 
to a grantee's most recent annual action plan (the most recent year may 
be the 2019 annual action plan). These waivers and alternative 
requirements describing the content of a substantial amendment to add 
CDBG-CV allocations to the most recent annual action plan are in 
section III.B.4.(b)(i).
    Submitting a substantial amendment may speed access to grant funds 
because consultation and public hearings are not required (although 24 
CFR 570.441I(2) requires insular areas to hold a public hearing for 
amendments, section III.B.4.(a)(iii) waives this requirement for CDBG-
CV substantial amendments). However, the April 9 memorandum does not 
preclude grantees from applying by submitting a FY 2020 Action Plan 
that includes the CDBG-CV funds. If the grantee chooses to include 
CDBG-CV grant funds in its annual action plan for FY 2020 funds, the 
grantee must comply with action plan submission procedures in 24 CFR 
part 91 (including consultation and a public hearing), as modified by 
the waiver and alternative requirements in paragraph III.B.4.(a)(iv), 
which apply the CARES Act citizen participation flexibilities to all 
consolidated plan formula grant programs.
    The following procedures apply regardless of whether the grantee 
applies for CDBG-CV funds through an action plan or action plan 
substantial amendment:
     Rather than wait to apply until HUD allocates all 
available CDBG-CV funds, HUD recommends that grantees apply as soon as 
possible for CDBG-CV funds that HUD has allocated. Grantees receiving 
subsequent allocations can make substantial amendments to apply for 
subsequent allocation amounts after they are announced.
     All grantees may adopt and use expedited procedures to 
draft, propose, modify, or amend consolidated plans for CDBG-CV and 
fiscal year 2019 and 2020 CDBG grants as described in section III.B.4. 
These expedited procedures amend the grantee's citizen participation 
plan and require it be published for no less than 5 calendar days to 
solicit public comment. Expedited procedures may include virtual 
hearings, as described in section III.B.4.(a)(ii).
     The grantee must publish its application for CDBG-CV funds 
(whether through a new action plan or action plan substantial 
amendment) for no less than 5 calendar days to solicit public comment. 
The comment period can run concurrently with the comment period on 
changes to add expedited procedures to the citizen participation plan. 
The grantee must respond to public comments.
     The grantee must submit its application for CDBG-CV funds 
to HUD for review in accordance with 24 CFR 91.500. To receive a CDBG-
CV grant, a grantee must also submit a SF-424, SF-424D and the 
certifications at 24 CFR 91.225(a) and (b) or 24 CFR 91.325(a) and (b) 
and 24 CFR 91.425.
     HUD and the grantee will enter a grant agreement and HUD 
will establish the grantee's line of credit.
     The grantee may draw funds from the line of credit after 
the Responsible Entity completes applicable environmental review(s) 
pursuant to 24 CFR part 58 and, as applicable, receives from HUD the 
Authority to Use Grant Funds (AUGF) form and certification.
III.B.4. Application for Grant Funds and Citizen Participation
    This section III.B.4. describes the CDBG program flexibilities in 
the CARES Act and additional waivers and alternative requirements that 
HUD granted to facilitate or expedite the process to amend consolidated 
plans and apply for CDBG-CV grants.
III.B.4.(a) Expedited Citizen Participation and Virtual Hearings
    The CARES Act permits grantees to adopt expedited citizen 
participation procedures and hold virtual hearings for consolidated 
plan submissions for CDBG-CV funds and for CDBG grants for fiscal years 
2019 and 2020. Section III.B.4.(a)(iii) includes a corollary waiver and 
alternative requirement to permit states to extend these flexibilities 
to units of general local government and insular areas. Section 
III.B.4.(a)(iv) includes a corollary waiver and alternative requirement 
extending these flexibilities to other consolidated plan formula 
programs.
    III.B.4.(a)(i) Citizen Participation, Public Notice and Comment 
Period. The CARES Act authorizes a CDBG-CV grantee to adopt and utilize 
expedited procedures to prepare, propose, modify, or amend its 
consolidated plan, notwithstanding sections 104(a)(2), (a)(3), and (c) 
of the HCD Act (42 U.S.C. 5304(a)(2), (a)(3), and (c)) and section 105 
of the Cranston-Gonzalez National Affordable Housing Act (NAHA, at 42 
U.S.C. 12705). The expedited procedures may permit virtual hearings, as 
described in section III.B.4.(a)(ii), whenever a public hearing is 
required by 24 CFR 91.105 (entitlements), 91.115 (states), 570.431 
(Hawaii counties), 570.441 (insular areas), or by the grantee's citizen 
participation plan. Expedited procedures adopted by the grantee shall 
provide citizens with notice and a reasonable opportunity to comment of 
no less than 5 days.
    Expedited procedures must be published for no less than 5 calendar 
days to solicit public comment, and once adopted, become part of the 
grantee's citizen participation plan. The public comment period for 
incorporating expedited procedures into the citizen participation plan 
may run concurrently with the public comment period on a proposed CDBG-
CV substantial amendment or other proposed consolidated plan 
submissions for CDBG-CV funds and fiscal year 2019 and 2020 CDBG 
grants. Consolidated plan submissions for other

[[Page 51461]]

programs are addressed in section III.B.4.(a)(iv).
    The CARES Act modifies the annual formula CDBG program requirement 
that a grantee must solicit comments from its citizens for a period of 
at least 30 days before it submits a substantial amendment or an annual 
action plan to HUD.
    III.B.4.(a)(ii) Virtual Hearings. For as long as national or local 
health authorities recommend social distancing and limiting public 
gatherings for public health reasons, the CARES Act authorizes the 
grantee to hold virtual hearings in lieu of in-person public hearings 
for CDBG-CV grants and for fiscal year 2019 and 2020 CDBG grants 
(virtual hearings for other consolidated plan formula programs are 
addressed in section III.B.4.(a)(iv)). All virtual hearings held under 
the authority provided by the CARES Act shall provide reasonable 
notification and access for citizens in accordance with the grantee's 
certifications, timely responses from local officials to all citizen 
questions and issues, and public access to all questions and responses.
    Therefore, grantees may use online platforms to hold virtual 
hearings that facilitate public access to all questions and responses 
and provide timely responses from local officials. Additionally, 
grantees must take appropriate actions to encourage the participation 
of all residents, including the elderly, minorities, persons with 
limited English proficiency, as well as persons with disabilities, 
consistent with the jurisdiction's citizen participation plan.
    The CARES Act does not modify nondiscrimination requirements. 
Consistent with 24 CFR 91.105 (entitlements) and 91.115 (states), and 
24 CFR 570.431 (Hawaii counties) and 570.441 (insular areas), a 
jurisdiction is expected to take whatever actions are appropriate to 
encourage the participation of all its citizens in virtual and in-
person hearings, including minorities and persons with limited English 
proficiency, as well as persons with disabilities. Whether hearings are 
in-person or virtual, grantees must take appropriate steps to ensure 
effective communication with persons with disabilities consistent with 
the requirements of accessibility laws, such as Section 504 of the 
Rehabilitation Act and the Americans with Disabilities Act. The grantee 
must provide appropriate auxiliary aides and services where necessary 
to afford individuals with hearing and vision impairments an equal 
opportunity to access and participate in such hearings. These may 
include effective methods that make aurally delivered information 
available to individuals who are deaf or hard or hearing, and visually 
delivered materials available to individuals who are blind or have low 
vision. The type of auxiliary aid or service necessary to ensure 
effective communication will vary in accordance with the method of 
communication used by the individual; the nature, length, and 
complexity of the communication involved; and the context in which the 
communication is taking place. In determining what types of auxiliary 
aids and services are necessary, a grantee shall give primary 
consideration to the requests of individuals with disabilities. In 
order to be effective, auxiliary aids and services should be provided 
in accessible formats, in a timely manner, and in such a way as to 
protect the privacy and independence of the individual with a 
disability. For virtual hearings, such steps should include ensuring 
that information is provided on an accessible website, that emails and 
other digital notifications are accessible, and that the application or 
platform used to host the hearing is also accessible. Additional 
services such as audio description or captioning may also be needed to 
provide effective communication in a digital context. Helpful 
guidelines for ensuring the accessibility of web-based and digital 
materials are available through the World Wide Web Consortium's Web 
Accessibility Initiative at https://www.w3.org/WAI/. Examples of 
auxiliary aids and services that may be necessary when conducting 
hearings online can be found at 28 CFR 35.104.
    Grantees must also take reasonable steps to provide meaningful 
access to persons with limited English proficiency consistent with 
Title VI of the Civil Rights Act. To ascertain their obligations, 
grantees should conduct the four-factor analysis set forth in HUD's 
limited English proficiency guidance found at https://www.hud.gov/sites/documents/FINALLEP2007.PDF, which may be covered by grantees' 
Language Assistance Plan, recognizing that the use of the internet to 
conduct such a hearing may change the analysis. For virtual or online 
hearings, such services may also include translation of documents and 
captioning or interpretation in the appropriate language(s). More 
information on the four-factor analysis and other requirements can be 
found at https://www.hud.gov/sites/documents/FINALLEP2007.PDF.
    III.B.4.(a)(iii) Modifications to citizen participation 
requirements for local governments that receive funds from States and 
for insular areas. HUD is clarifying that by authorizing states to 
adopt expedited citizen participation procedures, the CARES Act 
authorized expedited procedures and virtual public hearings for citizen 
participation by units of general local government that receive CDBG-CV 
funds from a state through a method of distribution. This is because 24 
CFR 91.115I requires states to include citizen participation 
requirements for units of general local government in its own citizen 
participation plan. Expedited procedures must still describe how units 
of local governments receiving funds from the state will meet the 
citizen participation requirements in 24 CFR 570.486.
    Additionally, HUD is waiving the requirement in 570.441I(2) that an 
insular area must hold a public hearing on a substantial amendment. 
Instead, HUD is imposing an alternative requirement to permit the 
insular area to adopt expedited requirements by modifying its citizen 
participation plan to replace the hearing if it provides community 
residents with reasonable notice and an opportunity to comment on 
substantial amendments to the consolidated plan or annual action plan.
    III.B.4.(a)(iv) Extension of CARES Act Flexibilities to All 
Consolidated Plan Formula Programs (CDBG, CDBG-CV, HOME, HOPWA, HTF, 
ESG) and Section 108 Loan Guarantees. The CARES Act altered 
consolidated plan citizen participation requirements for some CDBG-CV 
grants, fiscal year 2019 and 2020 annual formula CDBG grants, and 
Emergency Solutions Grant supplemental CARES Act (ESG-CV) grants. It 
did not modify citizen participation for other annual formula CDBG and 
ESG grants, Section 108 Loan Guarantees, or for HOME Investment 
Partnerships (HOME), Housing Trust Fund (HTF), and Housing 
Opportunities for Persons With AIDS (HOPWA) formula programs before 
fiscal year 2019.
    On April 1, 2020, HUD issued two waivers to modify citizen 
participation requirements for consolidated plan substantial amendments 
for CDBG, ESG, HOME, HTF, and HOPWA. The first eliminated the 30-day 
minimum for the required public comment period for substantial 
amendments, provided that no less than 5 days are provided for public 
comments on each substantial amendment concerning the proposed uses of 
CDBG, HOME, HTF, HOPWA, or ESG funds. The second allowed grantees to 
determine what constitutes reasonable notice and opportunity to 
comment, given their circumstances, for the 2020 program year. The 
waivers were published in a memorandum

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signed by Acting Assistant Secretary John Gibbs on March 31, 2020. It 
is available at: https://www.hud.gov/sites/dfiles/CPD/documents/Availability-of-Waivers-of-CPD-Grant-Program-and-Consolidated-Plan-Requirements-to-Prevent-the-Spread-of-COVID-19-and-Mitigate-Economic-Impacts-Caused-by-COVID-19.pdf.
    HUD is now issuing waivers and alternative requirements to expedite 
procedures to modify citizen participation plans for all 2020 fiscal 
year consolidated plan and annual action plan submissions that pertain 
to ESG, HOME, HTF, and HOPWA formula programs. The waivers are 
necessary to effectively implement the CARES Act flexibilities offered 
to CDBG grantees because planning and annual action plan consolidated 
plan submissions for CDBG-CV and CDBG grants are inextricably linked 
with the consolidated plan submissions for ESG, HOME, HTF, and HOPWA.
    In 1995, HUD published the consolidated plan regulation at 24 CFR 
part 91. The consolidated plan replaced the following separate 
application and planning submissions: The Comprehensive Housing 
Affordability Strategy (CHAS), enacted by NAHA at 42 U.S.C. 12701, the 
Community Development Plan requirements, added to the CDBG program by 
NAHA (42 U.S.C. 5304), the CDBG final statement, the HOME program 
description, and the ESG and HOPWA applications. In 2015, HUD published 
an interim rule that added HTF to the consolidated planning 
regulations. States and units of general local government (including 
insular areas) that apply for Section 108 loan guarantees pursuant to 
24 CFR 570.704 may also be required to include the use of guaranteed 
loan funds in their consolidated plans.
    Grantees that apply for CDBG-CV or CDBG funds as part of their 3-5 
year consolidated plan or annual action plan submissions cannot 
reasonably take advantage of the expedited CARES Act citizen 
participation requirements unless the other programs included in these 
submissions are subject to the same expedited requirements. Creating a 
separate application process for CDBG-CV and CDBG funds would add time 
and complications that are likely to delay the availability of funds 
and undermine the purpose of the CARES Act provisions to expedite 
assistance. Further, separating CDBG planning and applications would 
thwart several of the reasons cited for the consolidated planning rule, 
e.g., providing comprehensive information on the jurisdiction that is 
easy to understand and reducing paperwork and simplifying the process 
of requesting and obtaining federal funds available to the 
jurisdictions (60 FR 1878, published January 5, 1995).
    Therefore, HUD is waiving provisions at 24 CFR 91.105(b)(4), (c)(2) 
and (k), 24 CFR 91.115(b)(4), (c)(2) and (i), 24 CFR 91.401, 24 CFR 
570.431, 24 CFR 570.441, and 24 CFR 570.704 to the extent necessary to 
permit the following alternative requirement: CDBG, HOME, HTF, HOPWA, 
and ESG grantees may modify their citizen participation plans to adopt 
expedited procedures that apply when the grantees prepare, propose, 
modify, or amend any consolidated plan submissions that contain uses of 
CDBG-CV funds or uses of fiscal year 2019 or 2020 CDBG funds to 
prevent, prepare for, and respond to coronavirus. The expedited 
procedures must, at a minimum, provide citizens with notice and a 
reasonable opportunity to comment of no less than 5 days.
    Additionally, HUD is waiving provisions at 24 CFR 91.105(b) and I, 
24 CFR 91.115(b) and I, 24 CFR 91.401, and 24 CFR 570.431, 570.441, and 
570.486(a) to the extent necessary to establish the following 
alternative requirement. For as long as national or local health 
authorities recommend social distancing and limiting public gatherings 
for public health reasons, CDBG, ESG, HOME, HTF, and HOPWA grantees, 
and units of general local government receiving CDBG funds from state 
or insular area CDBG grantees, may hold virtual hearings in lieu of in-
person public hearings to fulfill public hearing requirements imposed 
by 42 U.S.C. 12707(a)(3) and the regulations at 24 CFR part 91 and 24 
CFR part 570, or by the grantee's citizen participation plan.
    For each virtual hearing, a grantee shall provide reasonable 
notification and access for citizens in accordance with the grantee's 
certifications, timely responses from local officials to all citizen 
questions and issues, and public access to all questions and responses. 
Therefore, grantees may use online platforms to hold virtual hearings 
that provide public access to questions and responses and provide 
timely responses from local officials. This alternative requirement is 
only applicable to consolidated planning submissions describing the use 
of fiscal year 2019 or 2020 annual formula funds for CDBG, ESG, HOME, 
HTF, and HOPWA, or for CDBG-CV or ESG-CV funds provided under the CARES 
Act.
    HUD cannot modify requirements for CDBG grantees to mirror the 
elimination of citizen participation for substantial amendments and new 
consolidated plan submissions for ESG-CV funds because HUD cannot waive 
the minimum requirements the CARES Act imposed on CDBG grantees. 
Therefore, this waiver and alternative requirement does not alter or 
expand the authority for ESG grantees to omit the citizen participation 
and consultation requirements for consolidated plan submissions that 
only pertain to ESG CARES Act (ESG-CV) funding.
III.B.4.(b) CDBG-CV Application Content and Submission
    III.B.4.(b)(i). CDBG-CV Application Content, Submission, 
Consistency with Other Portions of Consolidated Plan. In the April 9 
memorandum, HUD issued a waiver and alternative requirement that 
permits a grantee to apply for CDBG-CV funds by submitting a 
substantial amendment to its most recently approved annual action plan. 
Grantees may also apply for CDBG-CV funds in a future annual action 
plan submission.
    As part of the application submission, HUD is temporarily waiving 
the requirements (found at 42 U.S.C. 12706 and 24 CFR 91.325(a)(5) and 
91.225(a)(5)) that grantees certify that the housing activities to be 
undertaken with CDBG, HOME, ESG, and HOPWA funds are consistent with 
the strategic plan portion of the consolidated plan. HUD is imposing a 
related alternative requirement that allows grantees to submit those 
certifications when the grantee submits its next full (3-5 year) 
consolidated plan due after the 2020 program year. Grantees may not 
have considered the needs associated with CDBG-CV funds when developing 
their current consolidated plan strategic plan and needs assessment.
    In conjunction, HUD is temporarily waiving 42 U.S.C. 5304I to the 
extent that it requires HUD to annually review grantee performance 
under the consistency criteria. This waiver also only applies until the 
grantee submits its next full (3-5 year) consolidated plan due after 
the 2020 program year.
    Applying through a substantial amendment to the most recent action 
plan. If the CDBG-CV application is submitted as a substantial 
amendment to the most recent annual action plan, the substantial 
amendment must include the CDBG-CV allocation as an available resource 
for the year. The amendment must include the proposed use of all funds 
and how the funds will be used to prevent, prepare for, and respond to 
coronavirus. To permit this expedited application process, in the April 
9 memorandum HUD waived statutory provisions at 42 U.S.C. 12705(a)(2) 
to the extent they require

[[Page 51463]]

updates to the housing and homeless needs assessment, (24 CFR 91.205 
and 91.405), housing market analysis (24 CFR 91.210 and 91.410), and 
strategic plan (24 CFR 91.215 and 91.415. HUD also waived 24 CFR 91.220 
(entitlements) and 91.320 (states), to the extent those regulations 
limit the action plan to a specific program year, to permit grantees to 
prepare substantial amendments to their most recent annual action plan 
(including their 2019 annual action plan).
    In the April 9 memorandum, HUD also issued a waiver and alternative 
requirement to 24 CFR 91.505 to facilitate the use of the CDBG-CV funds 
to the extent necessary to require submission of the substantial 
amendment to HUD for review in accordance with 24 CFR 91.500, and 
required that, to receive a CDBG-CV grant, a grantee must also submit a 
SF-424, SF-424D, and the certifications at 24 CFR 91.225(a) and (b) 
(entitlements) or 24 CFR 91.325(a) and (b) (states).
    HUD is now adding to the waivers in the April 9 memorandum as 
follows. The abbreviated consolidated plan regulations for insular 
areas at 24 CFR 570.440(i) are waived to the extent necessary to impose 
the same alternative requirements in the April 9, 2020 waiver, so that 
if an insular area applies for CDBG-CV funds by submitting a 
substantial amendment to an abbreviated consolidated plan, the 
following requirements apply. The substantial amendment must include 
the CDBG-CV allocation as an available resource for the year. The 
amendment must include the proposed use of all funds and how the funds 
will be used to prevent, prepare for, and respond to coronavirus. The 
grantee must submit the substantial amendment to HUD for review in 
accordance with 24 CFR 91.500, and to receive a CDBG-CV grant, it must 
submit a SF-424, SF-424D and the certifications at 24 CFR 570.440I.
    If CDBG-CV funds are included in a substantial amendment to the 
most recently submitted annual action plan, existing cooperation 
agreements between a local government and an urban county governing 
other CDBG funds in the most recently submitted annual action plan (for 
purposes of either an urban county or a joint program) will 
automatically cover CDBG-CV funding as well. These cooperation 
agreements will continue to apply to the use of CDBG-CV funds for the 
duration of the CDBG-CV grant.
    Applying through a new annual action plan submission. The action 
plan submission procedures in 24 CFR part 91 (including consultation 
and a public hearing) apply to grantees that choose to submit CDBG-CV 
applications by including CDBG-CV funds in a new annual action plan 
submission. Content of action plans is described at 24 CFR 91.220 
(entitlements), 91.320 (states), and 24 CFR 570.440 (insular areas).
    Applying for additional CDBG-CV allocations. The waivers and 
alternative requirements in the April 9 memorandum apply to all 
allocations of CDBG-CV funds. HUD encourages grantees to apply for 
additional allocations of CDBG-CV funds as they are announced by 
submitting substantial amendments to their most recent annual action 
plan. Grantees are advised that an application for an additional 
allocation of CDBG-CV funds should be submitted as a substantial 
amendment to the annual action plan that describes the first CDBG-CV 
allocation.
    An application submitted as a substantial amendment must include 
the CDBG-CV allocation as an available resource for the year and 
include the proposed use of all funds and how the funds will be used to 
prevent, prepare for, and respond to coronavirus.
    HUD strongly encourages grantees to apply for allocations through 
substantial amendments as they are announced. However, grantees that 
have not submitted applications for CDBG-CV funds when additional 
allocations are announced may submit a single application for all 
allocations as a substantial amendment to the most recent annual action 
plan, or as part of a new annual action plan.
    III.B.4.(b)(ii). Content of CDBG-CV application for States Acting 
Directly. The waiver and alternative requirement in paragraph 
III.B.6.(b)(i) permit states to carry out activities directly. 
Therefore, HUD is granting the following waiver and alternative 
requirement to amend 24 CFR 91.320(d) and 24 CFR 91.320(k)(1)(i) to the 
extent necessary to require a state to submit a description of a method 
of distribution and include a list of the use of all funds for 
activities it will carry out directly, and how the use of the funds 
will prevent, prepare for, and respond to coronavirus. A state that has 
already submitted its application for CDBG-CV funds may amend its 
annual action plan that describes the use of CDBG-CV funds to modify 
its description of a method of distribution and include a list of the 
use of all funds for activities it will carry out directly, and how the 
use of the funds will prevent, prepare for, and respond to coronavirus.
    III.B.4.(b)(iii). Deadline to Apply for Assistance. Under the CARES 
Act, the deadline is August 16, 2021, for grantees to submit their 
CDBG-CV action plan and the annual Action Plan for fiscal year 2019 and 
2020 CDBG funds. This deadline supersedes the August 16, 2020 deadline 
established by 24 CFR 91.15 in accordance with section 116(b) of the 
HCD Act.
III.B.5. Allowable Costs, Eligible Activities and National Objectives
    This section describes modifications to the CDBG program 
requirements that address allowability of costs that can be charged to 
CDBG-CV grants.
III.B.5.(a) Use of Funds for CARES Act Purposes
    The grantee is required to use all CDBG-CV funds for CDBG-eligible 
activities that are carried out to prevent, prepare for, and respond to 
coronavirus. CDBG-CV grants cannot be used for any other purpose. This 
requirement is discussed more fully in section III.B.5.(f), which 
discusses eligible activities.
    Additionally, HUD weighed the purpose of the CARES Act to prevent, 
prepare for, and respond to coronavirus with the intent of Congress 
expressed in section 101I of the HCD Act (42 U.S.C. 5301I) that CDBG 
funds not be utilized to reduce substantially the amount of local 
financial support for community development activities below the level 
of such support prior to the availability of such assistance. Given the 
extreme and unexpected downturn in local and national economic 
conditions, local resources are strained. Jurisdictions must provide 
new and expanded support with fewer resources. Therefore, HUD has 
concluded that when CDBG funding is used for purposes of the CARES Act, 
it is not considered to substantially replace the amount of local 
financial support previously provided to community development 
activities.
III.B.5.(b) Reimbursements
    The CARES Act provides that CDBG-CV funds may be used to cover or 
reimburse allowable costs of activities to prevent, prepare for, and 
respond to coronavirus incurred by a state or locality regardless of 
the date on which such costs were incurred. This authority is broader 
than the authority to reimburse costs with other CDBG funds.
    The term ``locality'' is not defined by the CARES Act, the HCD Act, 
or the CDBG program regulations. For purposes of CDBG-CV grants, a 
``locality'' shall mean units of general local government, as defined 
in section 102 of the HCD Act.
    The CARES Act also requires that all costs reimbursed with CDBG-CV 
funds be allowable costs, meaning they comply with all grant 
requirements.

[[Page 51464]]

Therefore, HUD is adopting the following waivers and alternative 
requirements to 24 CFR 570.200(h) and 570.489(b) to facilitate the use 
of CDBG-CV funds to reimburse allowable costs by modifying current 
regulations that are inconsistent with CARES Act reimbursement 
authority and imposing safeguards to help ensure the allowability of 
all costs charged to the CDBG-CV grant:
    Grantees shall not reimburse costs incurred before January 21, 
2020, without written approval from HUD's Office of Block Grant 
Assistance (OBGA), by emailing the contact person listed at the 
beginning of this notice. HUD is imposing a presumption that costs of 
activities undertaken before January 21, 2020, the date the CDC 
confirmed the first case of coronavirus in the United States in the 
State of Washington,\1\ are highly unlikely to be eligible for 
reimbursement because they likely are not costs to prevent, prepare 
for, and respond to coronavirus. The need to pay for coronavirus-
related costs incurred after this date far exceeds the amount of CDBG-
CV funds available. HUD cautions that it will only consider granting 
written approval in extraordinary cases where the clear link to the 
purposes of the CARES Act is documented by substantial evidence 
provided to HUD by the grantee. Inquiries related to this requirement 
can be submitted to the contact identified above for this notice.
---------------------------------------------------------------------------

    \1\ See CDC Press Release at: https://www.cdc.gov/media/releases/2020/p0121-novel-coronavirus-travel-case.html.
---------------------------------------------------------------------------

    HUD is waiving the requirements of 570.200(h) and 570.489(b) to the 
extent necessary to authorize a grantee to permit reimbursement of pre-
application costs of subrecipients, units of general local government, 
and itself, in addition to pre-agreement and pre-award costs. However, 
an environmental review must be performed and a release of funds must 
be obtained in accordance with 24 CFR part 58 prior to committing CDBG-
CV funds to reimburse such costs. After the grantee signs a CDBG-CV 
agreement it may reimburse a unit of general local government or 
subrecipient for costs incurred before the unit of general local 
government or subrecipient applies to the grantee for assistance.
    For grantees subject to the entitlement CDBG regulation at 24 CFR 
570.200(h), the following waivers and alternative requirements apply: 
In lieu of the effective date described at 570.200(h), the grantee 
shall use the date in box 4 of form HUD-7082, Funding Approval/
Agreement. HUD is waiving the requirement at 570.200(h)(1)(i) and (ii) 
that the activity for which costs are incurred must be included in a 
consolidated plan action plan or amended consolidated plan action plan 
before incurring the costs. Instead, the activity for which costs were 
incurred must be included in the grantee's CDBG-CV application before 
CDBG-CV funds are used to reimburse those costs. Or, if the use of 
CDBG-CV funds for reimbursements is not included in the CDBG-CV 
application, this use may be included in a subsequent amendment to the 
annual action plan that describes the use of the CDBG-CV funds 
(following the grantee's citizen participation plan procedures for 
amendments). To facilitate the use of funds provided under a one-time 
grant rather than an annual appropriation, HUD is waiving the time 
limitation and the monetary limitation on reimbursements in 
570.200(h)(1)(v) and (vi) and related provisions at 570.200(h)(2). HUD 
is not waiving the requirement at 570.200(h)(1)(iii) to comply with the 
environmental review procedures stated in 24 CFR part 58.
    All grantees may authorize subrecipients to incur pre-award costs 
in accordance with pre-agreement cost authority under 24 CFR 570.489(b) 
(states) and pre-award cost authority under 24 CFR 570.200(h) 
(entitlements), as modified above. Consistent with the waiver and 
alternative requirement in paragraph III.B.6.(b)(i) that authorizes 
states to act directly, the provisions of 24 CFR 570.489(b) are waived 
to the extent necessary to authorize a state to charge to the grant 
pre-agreement costs of its subrecipients in addition to the pre-
agreement costs of units of general local government, in accordance 
with procedures established by the state and subject to the 
requirements that apply to pre-agreement costs of units of general 
local government in 24 CFR 570.489(b), and the requirements that apply 
to the use of CDBG-CV funds.
    While provisions of 24 CFR 570.489(b) requiring compliance with 24 
CFR part 58 do not apply prior to an application for CDBG-CV funds, a 
unit of general local government or state must document compliance with 
the environmental review requirements at 24 CFR part 58 following the 
application to the state or unit of general local government for 
funding and prior to reimbursement of pre-application costs, per 24 CFR 
570.200(h)(1)(iii) and 24 CFR 570.489(b). If a grantee cannot meet all 
requirements at 24 CFR part 58 and cannot demonstrate there was no 
environmental harm committed, the pre-application costs cannot be 
reimbursed with CDBG-CV or other HUD funds.
III.B.5.(c) Terms and Conditions Made Applicable by the CARES Act
    The CARES Act subjects CDBG-CV funds to the authorities and 
conditions applicable to annual CDBG grants for fiscal year 2020. 
Therefore, the following requirements apply to CDBG-CV grants:
    III.B.5.(c)(i). Limitations on Use of Funds for Eminent Domain. The 
grantee shall ensure that no CDBG-CV funds are used to support any 
Federal, state, or local projects that seek to use the power of eminent 
domain, unless eminent domain is employed only for a public use. For 
the purposes of this requirement, public use shall not be construed to 
include economic development that primarily benefits private entities. 
Any use of funds for mass transit, railroad, airport, seaport or 
highway projects as well as utility projects which benefit or serve the 
general public (including energy-related, communication-related, water-
related and wastewater-related infrastructure), other structures 
designated for use by the general public or which have other common-
carrier or public-utility functions that serve the general public and 
are subject to regulation and oversight by the government, and projects 
for the removal of an immediate threat to public health and safety or 
brownfield as defined in the Small Business Liability Relief and 
Brownfields Revitalization Act (Pub. L. 107-118) shall be considered a 
public use for purposes of eminent domain.
    III.B.5.(c)(ii). Prohibition on Certain Funds Transfers. The 
Grantee or unit of general local government that directly or indirectly 
receives CDBG-CV funds may not sell, trade, or otherwise transfer all 
or any such portion of such funds to another such entity in exchange 
for any other funds, credits or non-Federal considerations, but must 
use such funds for activities eligible under title I of the HCD Act or 
permitted by waiver and alternative requirements that apply to the use 
of CDBG-CV funds.
    III.B.5.(c)(iii). E.O. 12372--Special Contract Condition. 
Notwithstanding any other provision governing CDBG-CV funds, no funds 
may be obligated or expended for the planning or construction of water 
or sewer facilities until receipt of written notification from HUD of 
the release of funds on completion of the review procedures required 
under Executive Order (E.O.) 12372, Intergovernmental Review of Federal 
Programs, and HUD's implementing regulations at 24 CFR part

[[Page 51465]]

52. The recipient shall also complete the review procedures required 
under E.O. 12372 and 24 CFR part 52 and receive written notification 
from HUD of the release of funds before obligating or expending any 
funds for any new or revised activity for the planning or construction 
of water or sewer facilities not previously reviewed under E.O. 12372 
and implementing regulations.
    III.B.5.(c)(iv). Mandatory Evaluation of Special Economic 
Development Activities. CDBG-CV funds may not be provided to a for-
profit entity pursuant to section 105(a)(17) of the Act unless such 
activity or project has been evaluated and selected in accordance with 
Appendix A to 24 CFR 570--``Guidelines and Objectives for Evaluating 
Project Costs and Financial Requirements.'' Given the likelihood that 
CDBG-CV funds will be used to assist businesses needing working capital 
financing for everyday operations, such as payroll costs, HUD intends 
to provide advice or technical assistance on the application of the 
guidelines and objectives set forth in Appendix A to such assistance. 
HUD will consider providing advice or technical assistance in 
recognition of the differences in underwriting assistance for the wide 
range of economic development projects permitted under section 
105(a)(17) (as implemented at 24 CFR 570.203(b)).
III.B.5.(d) National Objectives
    III.B.5.(d)(i) Use of Urgent Need National Objective. HUD has 
received questions regarding the records necessary to document that a 
grantee's activities to prevent, prepare for, and respond to 
coronavirus satisfy the urgent need national objective. To meet the 
urgent need national objective criteria at 24 CFR 570.208I 
(entitlements) and 570.483(d) (states), a grantee (or in the case of 
the State CDBG program, a unit of general local government or a state, 
if the state is carrying out activities directly as authorized by 
section III.B.6.(b)(i)) must certify that: (1) The activity is designed 
to alleviate existing conditions; (2) those existing conditions pose a 
serious and immediate threat to the health or welfare of the community 
and are of recent origin or recently became urgent; and (3) that the 
grantee, state, or unit of general local government is unable to 
finance the activity on its own, and that other sources of funds are 
not available. The State CDBG regulation at 24 CFR 570.483(d) requires 
the state's determination of these elements in addition to the unit of 
general local government's certification.
    Entitlement grantees must maintain records required by 24 CFR 
570.506(b)(12) to document: (1) The nature and degree of seriousness of 
the condition requiring assistance and the timing of its development; 
(2) evidence that the recipient certified that the CDBG activity was 
designed to address the urgent need; and (3) evidence confirming that 
other financial resources to alleviate the need were not available. The 
State CDBG recordkeeping requirements at 24 CFR 570.490 require states 
and state recipients to maintain records to demonstrate compliance with 
the urgent need criteria.
    The following information provides guidance on how a grantee may 
satisfy existing recordkeeping requirements for the urgent need 
national objective criteria in addition to a grantee's or unit of 
general local government's certification and a state's determination 
(or state's certification, if the state is acting directly):
    Criteria 1: Is the activity designed to alleviate existing 
conditions? For CDBG-CV grants, the records the grantee maintains to 
demonstrate that the activity was designed to alleviate existing 
conditions can be the same records used to show that grant funds were 
used to prevent, prepare for, and respond to coronavirus, as required 
by the CARES Act.
    Criteria 2: Does the condition pose a serious and immediate threat 
to the health or welfare of the community that is of recent origin or 
that recently became urgent? In light of the severity of coronavirus 
and the urgency of the nation in addressing its impacts, pursuant to 24 
CFR 570.208I (entitlements) or 24 CFR 570.483(d) (states), a grantee 
may certify that the activity is designed to alleviate existing 
conditions which pose a serious and immediate threat to the health or 
welfare of the community within 18 months following a date determined 
by one of the following three methods:
     Referral to a U.S. Department of Health and Human Services 
issued press release declaring a public health emergency for the entire 
United States found at https://www.hhs.gov/about/news/2020/01/31/secretary-azar-declares-public-health-emergency-us-2019-novel-coronavirus.html. The declaration was retroactive to January 27, 2020;
     Referral to the President's declaration of the ongoing 
Coronavirus Disease 2019 (COVID-19) pandemic as an emergency of 
sufficient severity and magnitude to warrant an emergency declaration 
for all states, tribes, territories, and the District of Columbia 
pursuant to section 501(b) of the Robert T. Stafford Disaster Relief 
and Emergency Assistance Act, 42 U.S.C. 5121-5207 (the ``Stafford 
Act''). (The President subsequently approved additional major disaster 
declarations for states); or
     Referral to the effective date of a grantee's own local or 
state emergency declaration.
    Criteria 3: Is the grantee or unit of general local government 
unable to finance the activity on its own, and are other sources of 
funds are not available to carry out the activity? The extreme needs of 
local governments resulting from coronavirus in the United States 
outweigh available resources, despite the extraordinary level of 
assistance provided to states and units of general local government 
under the CARES Act. Therefore, documentation that the activity will 
prevent, prepare for, and respond to the coronavirus may be used to 
demonstrate that a grantee or unit of general local government is 
unable to finance the activity on its own.
    All CDBG-CV grantees are required to establish and maintain 
adequate procedures to prevent any duplication of benefits for assisted 
activities (as discussed in section III.B.9. of this notice). To 
demonstrate that no financial assistance has been received or is 
available to pay costs charged to a CDBG-CV grant, a grantee may 
demonstrate that no other funds are available for an activity by 
maintaining records of compliance with mandatory duplication of 
benefits requirements described in section III.B.9.
    All grantees are reminded to consider how the use of the urgent 
need national objective will affect their compliance with the CDBG 
``overall benefit'' requirements discussed in paragraph 
III.B.5.(d)(iv).
    III.B.5.(d)(ii) Modification of Location-Based Presumption of LMI 
Benefit for Job Creation and Retention National Objective Criteria. To 
facilitate the use of funds for economic development, HUD is removing 
the higher poverty rate required in some cases for central business 
districts, which is not required by statute. HUD is instituting an 
alternative requirement to modify the regulations at 24 CFR 
570.208(a)(4)(v) (entitlement) and 24 CFR 570.483(b)(4)(v) (state) by 
deleting the criteria at 24 CFR 570.208(a)(4)(v)(B) (entitlement) and 
24 CFR 570.483(b)(4)(v)(B) (state). Under this alternative requirement, 
for purposes of the LMI job creation/retention national objective at 24 
CFR 570.208(a)(4) and 24 CFR 570.483(b)(4), a census tract qualifies 
for the presumptions under the criteria established in regulations at 
24

[[Page 51466]]

CFR 570.208(a)(4)(v) and 24 CFR 570.483(b)(4)(v) if the poverty rate is 
at least 20 percent and if it evidences pervasive poverty and general 
distress using the criteria described in 24 CFR 570.208(a)(4)(v)(C) 
(entitlement) and 24 CFR 570.483(b)(4)(v)(C) (states).
    This alternative requirement eliminates a requirement that census 
tracts that contain at least a portion of a central business district 
must have a poverty rate of at least 30 percent before residents and 
businesses in the tract are entitled to a presumption of low- and 
moderate-income (LMI) benefit. HUD has determined that eliminating the 
30 percent requirement for tracts that contain central business 
districts will standardize the required poverty rate to meet the 
presumption regardless of where the persons or the business is located, 
which facilitates the use of grant funds to assist desperate 
businesses. Central business districts are hubs that contain many 
coronavirus-affected businesses and facilitating assistance to 
businesses that seek to retain jobs is consistent with the purposes of 
the CARES Act. Standardizing the poverty rate for the LMI benefit 
presumption may help to avoid wholesale collapse of central business 
districts at a when many businesses have closed or at risk of closing 
due to insufficient revenues.
    III.B.5.(d)(iii) LMI Job Creation and Retention Records. HUD is 
establishing the following waiver and alternative requirement to 
facilitate and expedite assistance to coronavirus-affected businesses 
by streamlining national objective criteria and recordkeeping 
requirements for activities that benefit LMI persons by retaining or 
creating jobs. The normal job creation and retention recordkeeping 
requirements consider family income when determining whether a 
beneficiary is a person of low or moderate income, but these 
requirements are likely to be burdensome during a time when 
unemployment has surged and family income is more difficult to 
document. Collection of income information directly from assisted 
businesses can streamline assistance. Therefore, notwithstanding that 
the definitions of low-income person and moderate-income person in 24 
CFR 570.3 are based on family income, for purposes of meeting the 
national objective criteria for job creation or retention at 24 CFR 
570.208(a)(4) and 24 CFR 570.483(b)(4), HUD is imposing the following 
waiver and alternative requirement: Grantees and employers may consider 
individuals that apply for or hold jobs to be members of one-person 
families for activities that prevent, prepare for, and respond to 
coronavirus. HUD is also modifying related recordkeeping requirements 
at 24 CFR 570.506(b)(7) (entitlement) and the jointly agreed upon 
requirements referenced in 24 CFR 570.490 (state) by adding the 
following additional presumption: The recipient may substitute records 
showing the type of job and the annual wages or salary of the job in 
lieu of maintaining records showing the person's family size and income 
to demonstrate that the person who filled or held/retained the job was 
a low- or moderate-income person, when required by paragraph 24 CFR 
570.506(b)(5)(i)(B), (b)(5)(ii)(C), (b)(6)(iii) or (b)(6)(v) 
(entitlement) or the requirements referenced in 24 CFR 570.490 (state). 
HUD will consider the person income-qualified if the annual wages or 
salary of the job is equal to or less than the Section 8 low-income 
limit established by HUD for a one-person family. Under this 
alternative requirement, a grantee will have substantially reduced 
documentation requirements because they will be working with assisted 
businesses rather than each person, and potentially their households, 
who received a job.
    III.B.5.(d)(iv) Overall Benefit to LMI Persons. HUD is establishing 
an alternative requirement to modify the calculation of overall LMI 
benefit, so that compliance with the requirement is separated from the 
annual formula CDBG program calculation of overall benefit. Overall LMI 
benefit for CDBG-CV grants will be calculated based on the percentage 
of the CDBG-CV grant that benefits LMI persons. This alternative 
requirement is consistent with the idea that one-time, supplemental 
funding should not skew the calculation of overall benefit for use of 
annual formula CDBG grants and guaranteed loan funds. This modification 
expedites and facilitates the use of funds in part by enabling grantees 
to best plan which activities will benefit LMI persons.
    Section 101I of the HCD Act (42 U.S.C. 5301I) establishes the 
primary objective of the HCD Act: the ``development of viable urban 
communities, by providing decent housing and a suitable living 
environment and expanding economic opportunities, principally for 
persons of low and moderate income.'' CDBG-CV grants are subject to the 
requirement that 70 percent of funds are for activities that benefit 
LMI persons. The requirements at 42 U.S.C. 5301I, 42 U.S.C. 
5304(b)(3)(A), 24 CFR 570.200(a)(3) (entitlements and nonentitlement 
counties in Hawaii), 24 CFR 570.420(d)(2)-(3) (insular areas), and 24 
CFR 570.484 (states) shall remain in place to the extent that they 
require the grantee to ensure that 70 percent of its CDBG-CV grant be 
expended for activities that benefit LMI persons. As an alternative 
requirement, however, HUD is requiring that grantees must demonstrate 
compliance with the overall benefit requirement separately for a 
grantee's total CDBG-CV grant allocation and not in combination with 
annual formula CDBG funding or commitments under the Section 108 Loan 
Guarantee program.
    Under this alternative requirement, there is no option for grantees 
to select the timeframe for compliance. HUD previously instructed 
grantees to submit certifications required by 24 CFR 91.225 
(entitlements) or 24 CFR 91.325 (states). The regulations at 24 CFR 
91.225(b)(4)(ii) and 24 CFR 91.325(b)(4)(ii) require grantees to 
certify that the aggregate use of CDBG funds will comply with the 
overall benefit requirement during a period specified by the 
jurisdiction, consisting of one, two, or three specific consecutive 
program years. Under this alternative requirement, grantees are not 
required to carry out the grant consistent with the mandatory overall 
benefit certification because HUD has changed the requirement related 
to overall benefit.
III.B.5.(e) Public Benefit
    III.B.5.(e)(i) Elimination of Aggregate Public Benefit Test. HUD is 
waiving the standard for aggregate public benefit that applies to 
economic development activities described in 24 CFR 570.209(b)(1)-(2) 
(entitlement) and in 24 CFR 570.482(f)(2)-(3) (state). The public 
benefit standards were designed to require that economic development 
activities, in the aggregate, provide an appropriate amount of public 
benefit based on the amount of CDBG funds used. Given the clear benefit 
derived from addressing economic disruptions due to coronavirus, CDBG-
CV grantees can adequately demonstrate public benefit based on the 
individual public benefit standards, as modified by waivers and 
alternative requirements in section III.B.5.(e)(ii).
    Therefore, to facilitate and expedite the use of CDBG-CV funds for 
coronavirus-related economic development activities, HUD is waiving the 
aggregate public benefit standards at 24 CFR 570.209(b)(1)-(2) 
(entitlement) and 24 CFR 570.482(f)(2)-(3) (state). In granting this 
waiver, HUD notes that based on the growing number of urgent requests 
for economic development assistance, particularly from small business, 
grantees are likely to have difficulty determining the appropriate

[[Page 51467]]

amount of CDBG assistance, in the aggregate, for their current and next 
program years.
    III.B.5.(e)(ii) Modification of Individual Public Benefit 
Standards. To facilitate the use of grant funds by providing greater 
leeway to grantees to identify the most advantageous means of providing 
economic development assistance, HUD is modifying the individual public 
benefit standards. HUD is imposing a waiver and alternative requirement 
to establish an alternative means by which grantees can demonstrate 
public benefit from the use of CDBG-CV funds for individual special 
economic development activities.
    Certain economic development activities described in 24 CFR 570.209 
(entitlement) and in 24 CFR 570.482(f)(1) (state) are subject to 
individual public benefit standards at 24 CFR 570.209(b)(3) 
(entitlement) and 24 CFR 570.482(f)(4) (state). Grantees must satisfy 
these public benefit standards to show that the amount of CDBG funds 
used for individual economic development activities is appropriate 
relative to the benefit to the public from those activities.
    HUD is waiving the individual standards at 24 CFR 570.209(b)(3) and 
24 CFR 570.482(f)(4) and imposing the following alternative 
requirement. For activities subject to the public benefit standards, 
grantees must document that: (a) The activity will create or retain at 
least one full-time equivalent, permanent job per $85,000 of CDBG funds 
used; (b) the activity will provide goods or services to residents of 
an area such that the number of LMI persons residing in the area served 
by the assisted businesses amounts to at least one LMI person per 
$1,700 of CDBG funds used; or (c) the assistance was provided due to 
business disruption related to coronavirus (in which case, no monetary 
standard applies because HUD has determined that there is sufficient 
public benefit derived from the provision of assistance to stabilize or 
sustain businesses in the grantee's jurisdiction that suffer disruption 
due to coronavirus, and that facilitation of business assistance for 
this purpose may help to avoid complete economic collapse within the 
grantee's jurisdiction). This alternative requirement does not modify 
the requirements related to eligible activities and national objectives 
criteria.
III.B.5.(f) Eligible Activities
    Grantees may use CDBG-CV funds only for those activities carried 
out to prevent, prepare for, and respond to coronavirus. By law, use of 
funds for any other purpose is unallowable. To satisfy these purposes, 
grantees may assist activities that respond to direct effects, such as 
the need to rehabilitate a building to add isolation rooms for 
recovering coronavirus patients. A grantee may also undertake 
activities to address indirect effects of the virus, such as the 
economic and housing market disruptions caused by social distancing 
measures and stay at home orders implemented to prevent the spread of 
coronavirus.
    Some activities clearly tie back to the purposes of the CARES Act, 
such as public services, economic development and microenterprise 
assistance, public facilities, and the rehabilitation of private 
buildings to provide housing. However, HUD is not prohibiting grantees 
from carrying out any particular CDBG eligible activity described in 
the HCD Act and the part 570 regulations, because other CDBG eligible 
activities, such as acquisition, can justifiably be used to fulfill the 
CARES Act purposes depending upon the circumstances.
    To remain consistent with the structure of a block grant program 
and the flexibility of CDBG to provide multiple avenues to achieve the 
purposes of the CARES Act, HUD is implementing the limitation that 
funds be used for the coronavirus-related purposes of the CARES Act by 
requiring grantees to document the use of funds to prevent, prepare 
for, and respond to coronavirus, rather than by expressly prohibiting 
grantees from undertaking any of the eligible activities described in 
the HCD Act. HUD cautions grantees that the recordkeeping requirements 
of this notice require clear documentation that all uses of funds 
satisfy the statutory purposes of the CARES Act.
    The current needs to prevent, prepare for, and respond to 
coronavirus may require use of CDBG-CV funds for uncommon activities. 
HUD is preparing a series of technical assistance products that 
describe opportunities to quickly deploy CDBG-CV funds to address 
immediate needs. As this technical assistance is developed, it will be 
posted on the CDBG-CV page on the https://www.hud.gov/program_offices/comm_planning/cdbg_programs_covid-19.
    When identifying eligible activities to be carried out with CDBG-CV 
funds, grantees can reduce the potential for duplication of benefits by 
designing activities that address needs not covered by other sources of 
financial assistance. More information on requirements to prevent the 
duplication of benefits is described in section III.B.9.
    III.B.5.(f)(i) Extension of Emergency Payments. HUD is providing an 
alternative requirement to extend the period that grantees can make 
emergency grant payments on behalf of individuals and families. 
Normally, CDBG funds may not be used for income payments, which are not 
included among eligible activities in section 105(a) of the HCD Act for 
states, and which are expressly prohibited by 24 CFR 570.207(b)(4) in 
the Entitlement CDBG regulations. The phrase income payments means a 
series of subsistence-type grant payments made to an individual or 
family for items such as food, clothing, housing (rent or mortgage) or 
utilities, but excludes emergency payments made over a period of up to 
three consecutive months to the provider of such items or services on 
behalf of an individual or family.
    Coronavirus has had a massive impact on families' ability to work 
for pay, make rent or mortgage payments, access or pay for food, 
clothing, and basic utilities, and access many other essential items 
and services. To help individuals and families address these 
challenges, HUD is waiving section 105(a)(8) of the HCD Act and 24 CFR 
570.207(b)(4) only to the extent necessary to establish the following 
alternative requirement: CDBG-CV funds may be used to provide emergency 
payments for individuals or families impacted by coronavirus for items 
such as food, clothing, housing (emergency rental assistance or 
mortgage assistance) or utilities for up to six consecutive months.
    Emergency payments must be made to the provider of such items or 
services on behalf of an individual or family, and not directly to an 
individual or family in the form of income payments, debit cards, or 
similar direct income payments. CDBG-CV grantees must ensure that 
proper documentation is maintained to ensure that all costs incurred 
are eligible. Grantees using this alternative requirement must 
document, in their policies and procedures, how they will determine the 
amount of assistance to be provided is necessary and reasonable.
    III.B.5.(f)(ii) Opportunity Zones and Related Flexibilities for 
Economic Development. To facilitate and expedite the use of grant funds 
for economic development during this time of extraordinary need, HUD is 
clarifying the existing requirements and adopting an alternative 
requirement that expands economic development activities that can be 
carried out with CDBG-CV funds. HUD is adopting this alternative 
requirement because the entitlement

[[Page 51468]]

regulations at 24 CFR 570.203(b) describe some financing mechanisms for 
economic development, but do not provide an exhaustive list of the 
forms of support grantees can provide to private, for-profit businesses 
and to nonprofits for special economic development activities. Many 
economic development activities are carried out in conjunction with 
other forms of assistance and Federal tax-based programs that help 
provide additional sources of financing for economic development, 
particularly in LMI areas. HUD wants to facilitate the ability for 
grantees to use CDBG-CV funds to fill financing gaps that cannot be met 
by other sources and quickly launch critical economic development 
projects, particularly in Opportunity Zones and other target areas, 
without taking the time to seek additional clarification from HUD on 
activity eligibility for individual projects.
    First, this notice clarifies an existing requirement of economic 
development activities that grantees may carry out pursuant to 24 CFR 
570.203(b) (entitlement) or section 105(a)(17) of the HCD Act (state). 
Grantees may provide assistance to an economic development project 
through a for-profit entity that passes the funds through a financing 
mechanism (e.g., Qualified Opportunity Funds and New Markets Tax Credit 
(NMTC) investment vehicles). The regulations at 24 CFR 570.203(b) 
already list forms of support by which grantees can provide assistance 
to private, for-profit businesses where the assistance is appropriate 
to carry out an economic development project. HUD has previously 
interpreted this provision to allow for CDBG assistance to NMTC 
investment vehicles. This clarification makes clear that such 
assistance through any financing mechanism (which is not limited to 
NMTC investment vehicles) is eligible under 24 CFR 570.203(b). The 
regulation also does not apply to states, but states may consider 24 
CFR 570.203(b), as clarified by the following alternative requirement, 
as guidance in the same way that they may consider other Entitlement 
CDBG regulations.
    HUD is not waiving 24 CFR 570.203(b) (entitlement) or section 
105(a)(17) (state), and other statutory and regulatory requirements 
remain in place.
    Second, this notice establishes an alternative requirement that 
expands the authority in section 105(a)(15) of the HCD Act and 24 CFR 
570.204 to permit grantees subject to entitlement CDBG regulations to 
assist nonprofit organizations serving the development needs of their 
jurisdiction by carrying out community economic development projects 
through a financing mechanism. The nonprofit may pass assistance 
through a financing mechanism to another entity based on the language 
in section 105(a)(15) of the HCD Act. Grantees subject to entitlement 
regulations must document that the assisted nonprofit is serving the 
development needs of the jurisdiction and that the assistance is used 
for a community economic development project that is necessary to 
prevent, prepare for, and respond to coronavirus.
    III.B.5.(f)(iii) Public Services Cap. The CARES Act provides that 
notwithstanding section 105(a)(8) of the HCD Act (42 U.S.C. 
5305(a)(8)), there shall be no per centum limitation for the use of 
funds for public services activities to prevent, prepare for, and 
respond to coronavirus. The CARES Act provides this flexibility for all 
CDBG-CV funds and CDBG funds appropriated in fiscal years 2019 and 2020 
to the extent that grantees use these funds to carry out public service 
activities to prevent, prepare for, and respond to coronavirus.
    Following enactment of the CARES Act, the public services cap 
described in section 105(a)(8) of the HCD Act and 24 CFR 570.201I has 
no effect on CDBG-CV grants. Program income generated by the use of 
CDBG-CV funds is given special treatment, as discussed in III.B.6.(a). 
Therefore, notwithstanding the provisions of section 105(a)(8) of the 
HCD Act, program income is not a consideration for purposes of 
determining the amount of CDBG-CV funds that can be expended on public 
services. The calculation of the public services cap for fiscal year 
2020 and 2019 annual formula CDBG grants is discussed in section 
IV.B.4.(a).
    III.B.5.(f)(iv) Other Public Services Considerations. HUD reminds 
grantees to comply with other requirements in section 105(a)(8) of the 
HCD Act, and for grantees subject to entitlement CDBG regulations, 24 
CFR 570.201I. Namely, CDBG-CV funds may only be used for those public 
service activities that are new or that represent a quantifiable 
increase above the level of an existing service that has been provided 
by or on behalf of the unit of general local government (through funds 
raised by the unit or received by the unit from the state in which it 
is located) in the 12 calendar months before the submission of the 
action plan, unless the Secretary finds that the discontinuation of 
such services was the result of events not within the control of the 
unit of general local government.
    Additionally, grantees are reminded that the purchase of personal 
property and equipment is generally ineligible. However, the 
entitlement CDBG regulation at 24 CFR 570.207(b)(1) (which may be used 
as guidance by state grantees), allows grantees to purchase or to pay 
depreciation in accordance with 2 CFR part 200, subpart E, for personal 
property, fixtures, and equipment when necessary when such items 
constitute all or part of a public service. Examples of use of 
equipment that constitute all or part of a public service include 
equipment and supplies owned by the grantee or subrecipient that 
provides the public service, e.g., ventilators or other medical 
equipment and supplies that will be used in providing health care at a 
field clinic, or a vehicle outfitted with medical equipment to provide 
mobile health care.
    III.B.5.(f)(v). Clarification on Application of Requirements in 2 
CFR part 200. In response to the coronavirus pandemic, the Office of 
Management and Budget (OMB) released two memoranda that allow Federal 
agencies to grant exceptions to some requirements under 2 CFR part 200, 
the Uniform Administrative Requirements, Cost Principles and Audit 
Requirements for Federal Awards. HUD reminds grantees that the 
flexibilities in these memoranda do not automatically apply to 
grantees. HUD has not approved class exceptions to 2 CFR part 200 for 
CDBG-CV grants or CDBG grants, so the requirements in 2 CFR part 200 
continue to apply.
    The OMB memoranda were for limited purposes and were not intended 
to cover all grantees and activities. The March 9, 2020 memorandum, M-
20-11, Administrative Relief for Recipients and Applicants of Federal 
Financial Assistance Directly Impacted by the Novel Coronavirus (COVID-
19) (available at https://www.whitehouse.gov/wp-content/uploads/2020/03/M-20-11.pdf), allows Federal agencies to grant class exceptions in 
instances where the agency has determined that the purpose of the 
Federal awards is to support the continued research and services 
necessary to carry out the emergency response related to COVID-19. The 
March 19, 2020 memorandum, M-20-17, Administrative Relief for 
Recipients and Applicants of Federal Financial Assistance Directly 
Impacted by the Novel Coronavirus (COVID-19) due to Loss of Operations 
(available at https://www.whitehouse.gov/wp-content/uploads/2020/03/M-20-17.pdf) allows HUD to make class exceptions for an expanded scope of 
recipients affected by the loss of operational capacity and increased 
costs due to the COVID-19 crisis. OMB indicated that it would

[[Page 51469]]

reassess the authority granted by these memoranda within 90 days.
III.B.6. Other Program Requirements
III.B.6.(a) Program Income
    To expedite use of grant funds, HUD is clarifying the requirements 
for CDBG-CV grants on the treatment of program income at 24 CFR 570.504 
(entitlement) and 24 CFR 570.489I-(f) (state) that is generated by the 
use of CDBG-CV funds. The receipt and expenditure of program income 
that is generated by the use of CDBG-CV funds shall be treated as 
annual formula CDBG program income and recorded as part of the 
financial transactions of the annual formula CDBG grant program. This 
clarification will facilitate expenditures of CDBG-CV grant funds for 
their intended purpose, while continuing to maintain appropriate 
controls on the use of program income.
    III.B.6(a)(i) Use of program income before annual formula CDBG 
grant funds. Any program income generated from the use of CDBG-CV funds 
will be receipted in HUD's Integrated Disbursement and Information 
System (IDIS) as program income to the annual formula CDBG grant 
program.
    III.B.6(a)(ii) Inapplicability of float-funded activities. Based on 
the treatment of income generated from the use of CDBG-CV funds as 
annual formula CDBG program income, HUD is waiving 24 CFR 570.301(b) 
and section 104(h) of the HCD Act for CDBG-CV grants. HUD is imposing 
the following alternative requirement: Grantees shall not use CDBG-CV 
funds for float-funded activities or guarantees.
    III.B.6(a)(iii) Retention of program income by subrecipients. A 
grantee may permit subrecipients (including units of general local 
government receiving funds from a state) to retain program income from 
the use of CDBG-CV funds under this paragraph if the amount held does 
not exceed the subrecipient's projected cash needs for CDBG activities 
including activities to prevent, prepare for, and respond to 
coronavirus.
III.B.6.(b) Rules Applicable to State CDBG-CV Grants
    The paragraphs in this section apply only to State CDBG-CV 
grantees.
    III.B.6.(b)(i) Direct Action by States. The waivers and alternative 
requirements in this section and in sections III.B.6.(b)(ii)-(iv) 
permit a state grantee to use a portion of its funds to act directly to 
carry out activities through employees, contractors, and subrecipients 
in all geographic areas within its jurisdiction, including entitlement 
areas and tribal populations. HUD is issuing the waivers and 
alternative requirements in this section based in part on information 
in requests from states and in part to implement provisions of the 
CARES Act that permit grant funds allocated to states to be used in 
entitlement areas.
    HUD has determined that this waiver and alternative requirement 
will facilitate and expedite the use of CDBG-CV funds by supporting 
states in their roles as significant coordinators of statewide and 
regional activities to prevent, prepare for, and respond to 
coronavirus. Additionally, these waivers and alternative requirements 
are designed to reduce administrative costs and streamline the delivery 
of assistance by maintaining a single set of grant requirements for all 
CDBG-CV allocations.
    These waivers and alternative requirements are only available to a 
state if it complies with the following alternative requirements in 
this paragraph and in III.B.6.(b)(ii)-(iv):
    Nonentitlement set aside: A state must set aside a portion of its 
grant for use by nonentitlement units of general local government. The 
nonentitlement set aside must be no less than an amount equal to the 
state's first CDBG-CV allocation and may be from any portion of the 
state's additional CDBG-CV allocation. This limitation is imposed for 
consistency with the CDBG-CV formulas, which include a direct 
allocation to entitlement areas and to states on behalf of 
nonentitlement areas to prevent, prepare for, and respond to 
coronavirus. The nonentitlement set aside fulfills the intent reflected 
by the formula to address needs in urban and rural areas, while giving 
states the flexibility to determine how to expend each allocation as it 
is made based on needs within its jurisdiction.
    Inclusion in CDBG-CV Application: A state's proposal to act 
directly and to distribute or use CDBG-CV funds in entitlement areas 
must be published for public comment in its application for CDBG-CV 
funds or in a subsequent substantial amendment to the annual action 
plan that includes the CDBG-CV funds.
    Activities carried out in tribal areas: A state grantee may carry 
out activities in tribal areas. States carrying out projects in tribal 
areas through employees, contractors, or subrecipients must obtain the 
consent of the Indian tribe with jurisdiction over the tribal area.
    Other conforming changes: Requirements at section 106(d) of the HCD 
Act (42 U.S.C. 5306(d)) and 24 CFR 570.480(g) are waived to the extent 
necessary to allow a state to use its CDBG-CV funds for eligible 
activities that the state carries out directly. The standard at 24 CFR 
570.480I and the provisions at section 104I(2) of the HCD Act (42 
U.S.C. 5304I(2)) are modified to also include activities that the state 
carries out directly. Section 106(d) of the HCD Act is not otherwise 
waived, except as provided in this notice.
    A state may carry out eligible activities directly, consistent with 
the entitlement program requirement of 24 CFR 570.200(f), through its 
employees, through procurement contracts, or through assistance 
provided under agreements with subrecipients. Pursuant to section 102I 
of the HCD Act, one or more public agencies may be designated by the 
chief executive officer of a state to undertake activities assisted 
under this chapter. A state is responsible for ensuring that CDBG-CV 
funds are used in accordance with all program requirements. The use of 
interagency agreements, subrecipient agreements (including agreements 
with Indian tribes and designated public agencies, as described in 
section III.B.6.(b)(ii)) or contracts does not relieve the state of 
this responsibility. States are responsible for determining the 
adequacy of performance under subrecipient agreements and procured 
contracts, and for taking appropriate action when performance problems 
arise. State grantees continue to be responsible for civil rights, 
labor standards, and environmental protection requirements, for 
compliance with all applicable requirements, including conflict of 
interest provisions in 24 CFR 570.489(g) and (h).
    The national objective criteria in 24 CFR 570.483 are modified by 
the following alternative requirement when states carry out activities 
directly: The state must fulfill all requirements that 570.483 imposes 
on units of general local government to demonstrate compliance with 
national objective criteria.
    The recordkeeping requirements at 24 CFR 570.490(b) are waived when 
states carry out activities directly, and the following alternative 
requirement shall apply: The state shall establish and maintain such 
records as may be necessary to facilitate review and audit by HUD of 
the state's administration of CDBG-CV funds, under 24 CFR 570.493. 
Consistent with applicable statutes, regulations, waivers and 
alternative requirements, and other Federal requirements, the content 
of records maintained by the state shall be sufficient to: (1) Enable 
HUD to make the applicable determinations described at 24 CFR 570.493; 
(2) make compliance

[[Page 51470]]

determinations for activities carried out directly; and (3) show how 
activities funded are consistent with the descriptions of activities 
proposed for funding in the CDBG-CV application. For fair housing and 
equal opportunity (FHEO) purposes, as applicable, such records shall 
include data on the race, ethnicity, and sex of persons who are 
applicants for, participants in, or beneficiaries of the activity.
    The change of use of real property rule at 24 CFR 570.489(j) is 
modified to include instances when a state carries out activities 
directly. All references to ``unit of general local government'' shall 
be read as ``state, unit of general local government (UGLG) or state 
subrecipient.''
    To include instances when a state carries out activities directly, 
24 CFR 570.492 is waived and the following alternative requirement 
applies: The state shall make reviews and audits, including on-site 
reviews of any subrecipients and local governments, as may be necessary 
or appropriate to meet the requirements of section 104I(2) of the HCD 
Act, as amended. In the case of noncompliance with these requirements, 
the state shall take such actions as may be appropriate to prevent a 
continuance of the deficiency, mitigate any adverse effects or 
consequences, and prevent a recurrence. The state shall establish 
remedies for noncompliance by any subrecipients or local governments.
    To include instances when a state carries out activities directly 
in accordance with the waiver in this paragraph, 24 CFR 570.489(g) is 
modified to revise the requirement that ``[t]he state shall establish 
requirements for procurement policies and procedures for units of 
general local government'' so that it applies to ``units of general 
local government and subrecipients.'' To facilitate grant 
administration by adopting state-wide procurement policies, a state 
agency designated to oversee the use of all its CDBG-CV funds pursuant 
to section 102I of the HCD Act may impose its procurement requirements 
on all uses of CDBG-CV funds by the state, including by other state 
agencies that administer a portion of the CDBG-CV grants, so long as 
those requirements comply with 24 CFR 570.489(g).
    III.B.6.(b)(ii) Use of Subrecipients by States (Including 
Nonprofits and Tribes). HUD is adopting the following alternative 
requirement that shall apply when states carry out activities directly: 
States carrying out activities through subrecipients must comply with 
24 CFR 570.489(m) relating to monitoring and management of 
subrecipients. The definition of subrecipient at 24 CFR 570.500(c) 
applies when states carry out activities through subrecipients, and the 
requirements of 24 CFR 570.489(g) (as modified by section 
III.B.6.(b)(i)) shall apply.
    For purposes of this alternative requirement, the definition of 
subrecipients at 24 CFR 570.500I is modified to expressly include 
Indian tribes. Indian tribes that receive CDBG-CV funding from a state 
grantee must comply with the Indian Civil Rights Act (Title II of the 
Civil Rights Act of 1968, 25 U.S.C. 1301 et seq.). This conforming 
requirement is necessary because the state CDBG regulations do not 
anticipate states distributing funds through means other than a method 
of distribution to units of general local government.
    III.B.6.(b)(iii) Activities Carried Out by States in Entitlement 
Areas. The provisions of 24 CFR 570.486(c) are waived to the extent 
that they allow States, either directly or through units of general 
local government, to use CDBG-CV funding for activities located in 
entitlement areas without contribution from the entitlement 
jurisdiction, consistent with the waiver and alternative requirements 
in sections III.B.6.(b)(i) and (ii). HUD is granting this waiver to 
facilitate and expedite the use of grant funds for consistency and ease 
of administration by granting the same geographic flexibilities to all 
allocations of CDBG-CV funds, since they will be administered under a 
single grant.
    III.B.6.(b)(iv) Use of the ``upper quartile'' or ``exception 
criteria'' for LMI area benefit activities. Section 105(c)(2)(A) of the 
HCD Act authorizes HUD to permit an exception to the LMI area benefit 
national objective criteria that are normally satisfied when at least 
51 percent of the population of an area are persons of low and moderate 
income. HUD is clarifying how this ``exception criteria'' applies when 
State CDBG-CV grantees carry out activities in entitlement 
jurisdictions as authorized by section III.B.6.(b)(iii). If the area in 
which the activity is carried out would benefit from the ``exception 
criteria'' that permit a grantee to use a percentage less than 51 
percent to qualify activities under the LMI area benefit criteria, 
those exception criteria apply to the use of CDBG-CV funds by a state 
the same way that they apply to the use of CDBG funds by the 
entitlement grantee in the same area. CDBG-CV grantees are required to 
use the most recent data available in implementing the exception 
criteria. For more information on the data set, please visit https://www.hudexchange.info/programs/acs-low-mod-summary-data/acs-low-mod-summary-data-exception-grantees/.
    III.B.6.(b)(v) Elimination of State Administrative Match. To 
expedite the use of CDBG-CV funds, HUD is waiving the requirement for 
matching state administrative funds, subject to the requirements of 
section III.B.6.(b)(vi) below. Requiring states to match administrative 
funds may considerably slow down the expenditure of CDBG-CV funds in 
states struggling to accurately project and adjust their budgets given 
the challenges caused by coronavirus. The requirements at 42 U.S.C. 
5306(d)(3)(A) and 24 CFR 570.489(a) are waived to the extent necessary 
to eliminate the state match requirement for general administrative 
costs.
    III.B.6.(b)(vi) Cap on State Administrative Costs and Technical 
Assistance. Pursuant to 24 CFR 570.489(a)(3)(iii), a state and its 
funded units of general local government and subrecipients are, in 
aggregate, permitted to expend no more than 20 percent of the CDBG-CV 
grant for planning, management, and administrative costs. Under 42 
U.S.C. 5306(d)(5) and (6) and 24 CFR 570.489(a)(1) a state may not 
directly use more than $100,000 plus 3 percent of its annual grant for 
administrative and technical assistance costs combined. HUD is waiving 
42 U.S.C. 5306(d)(5) and (6) and 24 CFR 570.489(a)(1) and establishing 
an alternative requirement that a state may use up to 7 percent of its 
CDBG-CV grant combined for general administration and technical 
assistance costs; of that 7 percent, a state may use up to 5 percent of 
CDBG-CV funds for general administration costs and up to 2 percent of 
the grant for technical assistance activities. The remainder of the 
amount may be used by units of general local government for 
administrative and technical assistance costs, provided that a state 
and its funded units of general local government and subrecipients 
expend no more than 20 percent of the CDBG-CV grant for planning, 
management, and administrative costs. A grantee must meet this 
alternative requirement over the life of its grant, as amended to 
incorporate additional allocations of CDBG-CV funds.
    CDBG-CV grant funds shall not be used to pay planning and program 
administrative costs allocable to another grant under the CDBG annual 
formula program; however, CDBG-CV funds may be used to pay costs that 
benefit both the CDBG-CV grant and another CDBG award and can be 
distributed

[[Page 51471]]

between the grants in proportions that may be reasonably approximated.
    III.B.6.(b)(vii) Procurement. Except as described in section 
III.B.6. to accommodate states acting directly, this notice does not 
modify procurement requirements at 24 CFR 570.489(g) for state 
grantees. As discussed above, the local procurement policies and 
procedures that apply to the use of annual formula CDBG grant funds may 
not be nimble enough to accommodate this urgent need to quickly procure 
goods and services necessary to carry out eligible activities. HUD 
recommends that CDBG-CV grantees review their existing procurement 
policies to explore the potential use of state or local waiver 
authority and emergency procedures that may expedite procurement 
processes.
    Additionally, if the grantee plans to use CDBG-CV grants to carry 
out eligible activities that satisfy non-Federal cost share 
requirements under section 105(a)(9) of the HCD Act, the grantee should 
consider modifying procurement policies to authorize grantees to use 
procurement policies and procedures of the agencies paying the Federal 
cost share of the activity, to the extent that those policies and 
procedures are consistent with the procurement requirements on the use 
of CDBG-CV funds. Modifying procurement policies to allow the use of 
procurement requirements imposed by other Federal grants is easier for 
state grantees, but entitlement grantees that anticipate use of a 
substantial amount of CDBG-CV funds to satisfy non-Federal cost share 
may also be able to adopt a similar provision where the other Federal 
granting agency imposes the procurement requirements in 2 CFR part 200.
III.B.6.(c) Rules for Entitlements, Insular Areas, and Nonentitlement 
Hawaii Counties
    III.B.6.(c)(i) Administrative and Planning Cost Caps. To expedite 
the use of grant funds, HUD is waiving requirements of 24 CFR 
570.200(g) that are inconsistent with the treatment of program income 
in section III.B.6.(a) and the treatment of CDBG-CV funds as a 
standalone grant. The following alternative requirement applies to 
grants subject to subpart D (entitlement grants and grants to the 
nonentitlement counties of the State of Hawaii): No more than 20 
percent of the total CDBG-CV grant shall be expended for planning and 
program administrative costs, as defined in 24 CFR 570.205 and 24 CFR 
570.206, respectively. There is no program year obligation test for 
planning and administrative costs of CDBG-CV grants. Additionally, 
CDBG-CV funds shall not be included in the compliance determination of 
the program year obligation test applicable to annual formula CDBG 
funds. Additionally, program income, regardless of the source funding 
of the activity that generated the income, shall be included in the 
compliance determination of the administrative and planning cost cap 
applicable to annual formula CDBG grants and program income, separately 
from CDBG-CV funds.
    CDBG-CV grant funds shall not be used to pay planning and program 
administrative costs allocable to another grant under the CDBG annual 
formula program; however, CDBG-CV funds may be used to pay costs that 
benefit both the CDBG-CV grant and another CDBG award and can be 
distributed between the grants in proportions that may be reasonably 
approximated.
III.B.6.(d) Compliance With Environmental Review Requirements
    III.B.6.(d)(i) Overview of Environmental Review Requirements. 
Environmental regulations at 24 CFR 58.22 prohibit CDBG grantees, a 
recipient, and any other participant in the development process from 
committing HUD or non-HUD funds to a project until the environmental 
compliance review process has been successfully completed or until 
receipt of the Authority to Use Grant Funds, if applicable. In 
addition, neither a recipient nor any participant in the development 
process may commit non-HUD funds on or undertake an activity or project 
if the activity or project would have an adverse environmental impact 
or limit the choice of reasonable alternatives. Therefore, it is very 
important for grantees to begin and complete any required environmental 
compliance review as soon as possible. Grantees are urged to contact 
their Field Environmental Officer for more information about 
environmental review requirements.
    III.B.6.(d)(ii) Clarifying note on the process for environmental 
release of funds when a State carries out activities directly. Usually, 
a state distributes CDBG funds to local governments and takes on HUD's 
role in receiving environmental certifications from the grant 
recipients and approving releases of funds. Under the waiver and 
alternative requirement in paragraph III.B.6.(b), HUD will allow a 
State CDBG-CV grantee to carry out activities directly in addition to 
distributing funds to subrecipients. Thus, per 24 CFR 58.4, when a 
state carries out activities directly, the state must submit the 
Certification and Request for Release of Funds to HUD for approval.
    III.B.6.(d)(iii) Clarifying note on emergency environmental review 
procedures. HUD's environmental review regulations in 24 CFR part 58 
include two provisions that may be relevant to environmental review 
procedures for activities to prevent, prepare for, and respond to 
coronavirus. The first is 24 CFR 58.34(a)(10), which provides an 
exemption for certain activities undertaken in response to a national 
or locally declared public health emergency. Except for the applicable 
requirements of 24 CFR 58.6, a responsible entity does not have to 
comply with the requirements of part 58 or undertake any environmental 
review, consultation or other action under NEPA and the other 
provisions of law or authorities cited in 24 CFR 58.5 for exempt 
activities or projects consisting solely of exempt activities. Exempt 
activities include assistance for temporary or permanent improvements 
that do not alter environmental conditions and are limited to 
protection, repair, or restoration activities necessary only to control 
or arrest the effects from imminent threats to public safety.
    The second is a streamlined public notice and comment period in the 
regulation at 24 CFR 58.33, which may apply in some cases for emergency 
activities undertaken to prevent, prepare for, and respond to 
coronavirus. The application of these two provisions following a 
presidentially-declared or locally-declared public health emergency is 
discussed in the Notice, Guidance on conducting environmental review 
pursuant to 24 Part 58 for activities undertaken in response to the 
public health emergency as a result of COVID-19 posted at https://www.hud.gov/sites/dfiles/OCHCO/documents/2020-07cpdn.pdf.
III.B.6.(e) Compliance With Labor Laws
    CDBG-CV grants are subject to the Davis-Bacon prevailing wage 
requirements imposed by section 110(a) of the HCD Act. HUD cannot waive 
this or other labor laws. Under regulations of the Department of Labor 
(DOL) at 29 CFR 1.6(g), where Federal assistance is not approved prior 
to contract award (or the beginning of construction if there is no 
contract award), Davis-Bacon wage rates apply retroactively to the 
beginning of construction and must be incorporated retroactively in the 
contract specifications. However, if there is no evidence that the 
owner intended to apply for the CDBG-CV assistance prior to the 
contract award or the start of the construction, HUD may request that 
DOL allow prospective,

[[Page 51472]]

rather than retroactive, application of the Davis-Bacon wage rates. DOL 
may allow prospective application of Davis-Bacon requirements where it 
finds that it is necessary and proper in the public interest to prevent 
injustice or undue hardship and it finds no intent to apply for the 
federal assistance before contract award or the start of construction. 
The CDBG-CV Grantee should contact a HUD Labor Relations Specialist if 
such a situation arises.
III.B.6.(f) Relationship to Section 108 Loan Guarantees
    Under the Section 108 Loan Guarantee Program, CDBG grantees can 
borrow up to five times their most recent CDBG grant by issuing 
federally guaranteed notes. To ensure that CDBG-CV funds are used for 
the purposes authorized by the CARES Act, HUD is issuing the following 
alternative requirement to sections 108(b) and (c) of the HCD Act (42 
U.S.C. 5308(c)): CDBG-CV funds shall not be factored into a grantee's 
Section 108 borrowing authority.
    A grantee may use CDBG-CV funds to make a direct payment of 
principal, interest, or any fees due under a Section 108 note only if 
the use of funds is to prevent, prepare for, and respond to 
coronavirus. The necessity of such use shall be documented by the 
grantee or the subrecipient that provided the assistance (e.g., if 
Section 108 funds were used by the grantee to provide assistance to a 
for-profit business in the form of a loan and the business is unable to 
make a payment due to the reduction in revenue caused by coronavirus, 
any restructuring of that loan must be supported by modification to 
loan documents that document the relationship to coronavirus). When 
CDBG-CV funds are used to subsidize or replace principal, interest, or 
fees due under a loan previously made with guaranteed loan funds as 
part of an activity to assist a for-profit or a subrecipient, and the 
CDBG-CV assistance is necessary to respond to the impact of coronavirus 
(e.g., a third-party business borrower whose loan is the intended 
source for repayment of a Section 108 loan is not collecting sufficient 
revenue due to local public health conditions), the documentation that 
the original assisted activity satisfies national objective criteria 
shall be sufficient to demonstrate that the use of the guaranteed loan 
funds and the additional CDBG-CV assistance meet a CDBG national 
objective.
    This alternative requirement does not limit the Secretary's 
authority under section 108I of the HCD Act.
III.B.7. Period of Performance, Timeliness, and Closeout
III.B.7.(a) Period of Performance
    CDBG-CV grantees must expend all CDBG-CV funds (including CDBG-CV 
funds from additional allocations that are obligated by HUD through 
amendments to the grant agreement) within the 6-year period of 
performance established by the CDBG-CV grant agreement. HUD is imposing 
this period of performance to ensure the use of CDBG-CV funds to 
prevent, prepare for, and respond to coronavirus. The CDBG regulations 
at 24 CFR 570.200(k) and 24 CFR 570.480(h) permit HUD to establish a 
period for expenditure and performance in a grant agreement that is 
shorter than the normal 8-year period. HUD is exercising its authority 
to establish a 6-year period of performance and expenditure deadline in 
the CDBG-CV grant agreement. Grant funds are not available for 
expenditure after the period of performance. In addition, to further 
ensure the expedited use of the funds, HUD is imposing an alternative 
requirement that each grantee must expend at least 80 percent of all 
CDBG-CV funds (including CDBG-CV funds from additional allocations that 
are obligated by HUD through amendments to the grant agreement) no 
later than the end of the third year of the period of performance 
established by the CDBG-CV grant agreement. If this three-year 
requirement is not met, and evidence meeting the criteria for extension 
described in section III.B.7.(c) below is not provided, an amount 
equivalent to the difference between the total amount expended at the 
end of the third year and 80 percent of all CDBG-CV funds will be 
recaptured from the CDBG-CV grant.
III.B.7.(b) Timeliness
    CDBG-CV grants are available for limited purposes under the CARES 
Act. They are subject to a shortened period of performance. Under 
section III.B.6.(a), program income generated by the use of CDBG-CV 
funds is treated as program income to a grantee's annual formula CDBG 
program. For these reasons, HUD is waiving to the extent necessary to 
allow HUD to determine that every grantee has circumstances beyond its 
reasonable control the timely performance enforcement actions found at 
24 CFR 570.902 (entitlement timely expenditure), and 24 CFR 570.494 
(state timely distribution). CDBG-CV funds will not be included in 
determining compliance with the requirements of 24 CFR 570.902 and 
570.494. However, as program income to the grantees' annual formula 
CDBG programs, income generated from CDBG-CV activities will be 
included in timely expenditure compliance determinations for each 
entitlement grantee's annual formula CDBG program. Grantees should 
consider the potential effects of additional program income to 
compliance with timeliness requirements applicable to their annual 
formula CDBG grant program when they select and design CDBG-CV assisted 
activities.
III.B.7.(c) Closeout
    To facilitate the use of grant funds in a timely manner, HUD is 
waiving the CDBG closeout regulations at 24 CFR 570.509 for grantees 
subject to entitlement regulations and imposing an alternative 
requirement that HUD will close out grants in accordance with grant 
closeout requirements of 2 CFR 200.343. This approach is consistent 
with the state regulation at 24 CFR 570.489(o). This will help all 
grantees to expend grant funds within a short timeframe designed to 
maximize the ability of CDBG-CV funds to prevent, prepare for, and 
respond to coronavirus. Grantees subject to this alternative 
requirement must submit all financial, performance, and other reports 
as required by 24 CFR 91.520.
    In general, HUD expects all grantees to comply with all grant 
requirements and fully close out a grant at the end of the period of 
performance. However, HUD recognizes that there are many things that 
could disrupt a grantee's intended timeline for activity completion: 
Litigation, disasters, limited construction seasons due to weather, or 
other extenuating circumstances. Therefore, HUD may authorize an 
extension of the three-year expenditure requirement or the overall 
period of performance if the grantee provides evidence of such 
extenuating circumstances that would warrant the extension and that 
they could demonstrate they would meet all program requirements within 
the extended expenditure period or period of performance.
    HUD may consider, in closing out CDBG-CV grants, any requirements 
that remain applicable after closeout. These may include authority for 
HUD to monitor the recipient's compliance and performance after the 
closeout of the award with respect to requirements that are applicable 
after closeout, and HUD may take findings of noncompliance into 
account, with the closeout process, as unsatisfactory performance of 
the recipient, in the consideration of any future grant made under 
title I of the HCD Act. Examples of requirements that may survive 
closeout include: (i)

[[Page 51473]]

Closeout costs (e.g., audit costs) and costs resulting from contingent 
liabilities described in the closeout agreement; (ii) use of real 
property assisted with CDBG funds in accordance with program 
regulations; (iii) taking measures that are adequate to enforce and 
implement mandatory flood insurance coverage requirements; and (iv) 
other provisions included in the grant closeout agreement.
III.B.8. Reporting
    The reporting requirements that apply to the use of annual formula 
CDBG grants also apply to CDBG-CV grants. Section 104I of the HCD Act 
requires that the Secretary shall, at least on an annual basis, make 
such reviews and audits as may be necessary or appropriate to determine 
whether the grantee has carried out its activities in a timely manner, 
whether the grantee's activities and certifications are carried out in 
accordance with the requirements and the primary objectives of the HCD 
Act and other applicable laws, and whether the grantee has the 
continuing capacity to carry out those activities in a timely manner.
III.B.8.(a) General Reporting Requirements
    Reporting requirements for CDBG-CV grantees can be found at 42 
U.S.C. 12708(a), 24 CFR 91.520, 24 CFR 570.507 (entitlement), 24 CFR 
570.440(j) (insular areas), and 24 CFR 570.491 (state).
III.B.8.(b) Additional CARES Act Reporting
    Section 15011 of the CARES Act requires that recipients of $150,000 
or more of CARES Act funding submit, not later than 10 days after the 
end of each calendar quarter, a report containing: Information 
regarding the amount of funds received; the amount of funds obligated 
or expended for each project or activity; a detailed list of all such 
projects or activities, including a description of the project or 
activity; and detailed information on any subcontracts or subgrants 
awarded by the recipient. As outlined in OMB memorandum M-20-21, 
Implementation Guidance for Supplement Funding in Response to the 
Coronavirus Disease (COVID-19) (available at https://www.whitehouse.gov/wp-content/uploads/2020/04/Implementation-Guidance-for-Supplemental-Funding-Provided-in-Response.pdf), existing reporting 
requirements are anticipated to meet the requirements of Section 15011, 
but the content and format for this reporting is still under 
development and will need to be reviewed against current program 
practices. The Department will work in coordination with OMB to ensure 
that this requirement can be fulfilled by recipients of CARES Act 
funding in a manner that utilizes to the greatest extent possible 
existing reporting streams, providing the necessary transparency and 
accountability with minimal additional burden. If additional reporting 
is necessary, further advice or technical assistance will be provided 
by the Department.
III.B.9. Duplication of Benefits
    The CARES Act requires HUD to ensure that there are adequate 
procedures in place to prevent any duplication of benefits as required 
by section 312 of the Stafford Act, as amended by section 1210 of the 
Disaster Recovery Reform Act of 2018 (division D of Public Law 115-254; 
42 U.S.C. 5121 et seq.).
    Duplication of benefits occurs when Federal financial assistance is 
provided to a person or entity through a program to address losses 
resulting from a Federally-declared emergency or disaster, and the 
person or entity has received (or would receive, by acting reasonably 
to obtain available assistance) financial assistance for the same costs 
from any other source (including insurance), and the total amount 
received exceeds the total need for those costs.
    A grantee is required to develop and maintain adequate procedures 
to prevent a duplication of benefits that address (individually or 
collectively) each activity or program. A grantee's policies and 
procedures are not adequate unless they include, at a minimum: (1) A 
requirement that any person or entity receiving CDBG-CV assistance 
(including subrecipients and direct beneficiaries) must agree to repay 
assistance that is determined to be duplicative; and (2) a method of 
assessing whether the use of CDBG-CV funds will duplicate financial 
assistance that is already received or is likely to be received by 
acting reasonably to evaluate need and the resources available to meet 
that need.
    Most CARES Act assistance programs have more limited durations for 
availability of assistance or a more limited scope of eligible 
activities or entities than does CDBG-CV. HUD strongly encourages each 
CDBG-CV grantee to become familiar with the range of available 
assistance and uses and apply its more flexible CDBG-CV assistance to 
unmet needs or to gaps, with special attention to the coronavirus 
response, prevention, or preparation needs of LMI persons.
    HUD will provide advice and technical assistance to grantees to 
facilitate compliance with this requirement.
III.B.10 Citizenship Requirements
    Please note that the U.S. Department of Homeland Security, U.S. 
Citizenship and Immigration Services provides that the Immigration 
Reform and Control Act, 8 U.S.C. 1324a et seq. prohibits employers from 
hiring and employing an individual for employment in the U.S. knowing 
that the individual is not authorized with respect to such employment. 
This generally applicable law also applies to CDBG grantees and their 
subrecipients and/or contractors/subcontractors (including relating to 
employees recruited under Section 3). For more information, please see 
https://www.uscis.gov/i-9-central/form-i-9-resources/handbook-for-employers-m-274/10-why-employers-must-verify-employment-authorization-and-identity-of-new-employees and https://www.uscis.gov/i-9-central/legal-requirements-and-enforcement.

IV. Fiscal Year 2019 and Fiscal Year 2020 CDBG Grants

IV.A. General Requirements

    Except as described in this notice or other applicable waivers and 
alternative requirements, the statutory and regulatory provisions 
governing the CDBG program apply to fiscal year 2019 and 2020 CDBG 
grants, including regulations at 24 CFR part 570 subpart I (states), 24 
CFR part 570 subparts A, C, D, E, J, K, and O (entitlements), and 24 
CFR subpart F (insular areas and Hawaii counties).

IV.B. Flexibilities, Waivers, and Alternative Requirements

    The following rules, waivers, and alternative requirements apply to 
fiscal year 2019 and 2020 CDBG grants. These include statutory 
authorities included in the CARES Act and other waivers and alternative 
requirements or clarifications that HUD is making for fiscal year 2019 
and 2020 grants.
IV.B.1. Timeliness
    Because of the coronavirus many local governments are operating 
under extenuating circumstances and may need additional time for 
certain administrative requirements, HUD is suspending for fiscal year 
2020 all corrective actions, sanctions, and informal consultations for 
timeliness effective January 21, 2020. Grantees are advised that this 
suspension does not eliminate the timely expenditure

[[Page 51474]]

requirements set forth in 24 CFR 570.902 (entitlements). HUD will 
continue to run expenditure reports and will continue to notify 
grantees of deficiencies.
    Based on government restrictions, closures, shelter-in-place 
orders, and social distancing guidance related to coronavirus, HUD has 
determined that all entitlement grantees have factors beyond their 
reasonable control that, to HUD's satisfaction, impact the carrying out 
of CDBG-assisted activities in a timely manner. As a result, HUD has 
determined that corrective actions related to timeliness are not 
appropriate at this time. HUD will monitor changing conditions. Before 
the end of the fiscal year, HUD will determine whether to extend this 
suspension for all or a portion of fiscal year 2021. HUD may consider 
regional and local conditions when determining when to begin scheduling 
informal consultations.
IV.B.2. Consolidated Plan, Citizen Participation, and CAPER
IV.B.2.(a) Expedited Citizen Participation and Virtual Hearings
    Section III.B.4.(a) of section III apply to all fiscal year 2019 
and 2020 annual formula CDBG grants, regardless of the use of funds. 
This section describes the program flexibilities provided by the CARES 
Act related to Expedited Citizen Participation and Virtual Hearings. 
Where this section refers to CDBG-CV funds, it shall apply equally to 
fiscal years 2019 and 2020 CDBG grants.
IV.B.2.(b). Deadline To Submit Consolidated Plans and FY 2020 Annual 
Action Plans
    The deadline for grantees to submit action plans and other updates 
to their consolidated plans submissions for fiscal years 2019 and 2020 
to include CDBG-CV funds is August 16, 2021.
IV.B.2.(c) CAPER Extension
    On May 7, 2020, Acting Assistant Secretary John Gibbs issued a 
memorandum to all Community Planning and Development Field Office 
Directors, Deputy Directors and Program Managers with the subject 
``Availability of a Waiver and Alternate Requirement for the 
Consolidated Annual Performance and Evaluation Report (Performance 
Report) for Community Planning and Development (CPD) Grant Programs in 
Response to the Spread of Coronavirus.'' This memorandum authorized a 
waiver of the regulatory requirement at 24 CFR 91.520(a) that grantees 
submit a performance report known as the Consolidated Annual 
Performance and Evaluation Report (CAPER) within 90 days of the end of 
a jurisdiction's program year. The waiver was granted under HUD's 
regulatory waiver authority at 24 CFR 5.110 and 24 CFR 91.600. Under 
this memorandum, for program year 2019 CAPERs, the requirement that 
grantees submit a performance report within 90 days after the close of 
a jurisdiction's program year is waived, subject to the condition that 
within 180 days after the close of a jurisdiction's program year the 
jurisdiction shall submit its performance report.
IV.B.2.(d) Other Consolidated Planning Waivers
    HUD is temporarily waiving the requirement for consistency with the 
consolidated plan (requirements at 42 U.S.C. 12706 and 24 CFR 
91.325(a)(5) and 91.225(a)(5)) when fiscal year 2019 and 2020 CDBG 
funds are used to prevent, prepare for, and respond to coronavirus, 
because grantees may not have considered the needs associated with this 
special purpose funding when developing their current consolidated plan 
strategic plan and needs assessment. In conjunction, HUD is temporarily 
waiving 42 U.S.C. 5304(e) to the extent that it would require HUD to 
annually review grantee performance under the consistency criteria. 
These waivers apply only until the grantee submits its next full (3-5 
year) consolidated plan due after the 2020 program year.
    HUD is imposing a related alternative requirement. The regulations 
at 24 CFR 91.225(b)(5) (entitlements) and 24 CFR 91.325(b)(5) (states) 
require grantees to certify that the housing activities to be 
undertaken with CDBG, HOME, ESG, and HOPWA funds are consistent with 
the strategic plan portion of the consolidated plan. Under this 
alternative requirement, grantees are not required to carry out the 
portions of their fiscal year 2019 and 2020 annual formula CDBG grants 
that are used to prevent, prepare for, and respond to coronavirus in a 
manner consistent with the certifications in 24 CFR 91.225(b)(5) and 24 
CFR 91.325(b)(5), because HUD has changed the requirement related to 
consistency.
IV.B.3. Flexibilities That Apply to Coronavirus-Related Activities
    The following flexibilities apply to all fiscal year 2019 and 2020 
CDBG grants when those grants are used for activities to prevent, 
prepare for, and respond to coronavirus.
    IV.B.3.(a) Calculation of the Public Services Cap. As described in 
paragraph III.B.5.(f)(iii), following enactment of the CARES Act, the 
public services cap described in section 105(a)(8) of the HCD Act and 
24 CFR 570.201(e) has no effect on assistance available to the grantee 
for fiscal years 2019 and 2020, including the program income that would 
normally be included in the grantee's calculation of the program income 
cap for fiscal years 2019 or 2020, when the grantee uses CDBG grant 
funds to prevent, prepare for, and respond to coronavirus. For fiscal 
years 2019 and 2020, the cap shall still be calculated and shall apply 
to public service activities carried out for activities that do not 
prevent, prepare for, and respond to coronavirus. Additionally, CDBG-CV 
grant funds shall not be included in the public service cap compliance 
determination which is applicable to annual formula CDBG funds used for 
activities not related to coronavirus.
    Program income generated by the use of CDBG-CV grants is considered 
program income to the grantee's annual formula CDBG program, as 
discussed in section III.B.6.(a).
    The public services cap imposed by section 105(a)(8) of the HCD Act 
applies to ``the amount of any assistance to a unit of general local 
government (or in the case of nonentitled communities not more than 15 
per centum statewide) under this title including program income'' 
(emphasis added). The CARES Act provision that removes the public 
services cap applies to all ``activities to prevent, prepare for, and 
respond to coronavirus'' for the CDBG-CV grants and fiscal year 2019 
and 2020 annual formula CDBG grants. The activities for grants are 
described in each grantee's annual action plan required by 24 CFR 
91.220 (entitlements), 24 CFR 91.320 (states), or 24 CFR 570.440 and 24 
CFR 91.235 (insular areas). In these regulations, the activities for 
grants include activities carried out with grant funds and program 
income expected to be made available. Therefore, removing the cap in 
section 105(a)(8) of the HCD Act for activities to prevent, prepare 
for, and respond to coronavirus also removes the public services cap on 
the use of the program income, and removes the corresponding regulatory 
cap in 24 CFR 570.201(e) (entitlements) for CDBG-CV funds and fiscal 
year 2019 and 2020 funds used to prevent, prepare for, and respond to 
coronavirus.
    Program income generated by the use of CDBG-CV grants is considered 
program income to the grantee's annual formula CDBG program, as 
discussed in section III.B.6.(a). Additionally, program income, 
regardless of the source funding of the activity that generated the 
income, shall be included in the compliance determination of the public 
service cap applicable to the annual

[[Page 51475]]

formula CDBG grants and program income, separately from CDBG-CV funds. 
For purposes of calculating the public services cap, the treatment of 
program income generated by the CDBG-CV grant and received (i.e., 
documented in IDIS) by the annual formula CDBG program shall be 
considered as any other program income received by the annual formula 
CDBG program.
    IV.B.3.(b) Provisions in Section III that apply to Coronavirus-
Related Activities. The following provisions in Section III apply to 
the use of fiscal year 2019 and 2020 CDBG funds for activities to 
prevent, prepare for, and respond to coronavirus; these provisions 
shall also apply to the use of Section 108 guaranteed loan funds when 
they are used together with fiscal year 2019 and 2020 CDBG funds for 
activities to prevent, prepare for, and respond to coronavirus. Where 
these paragraphs refer to CDBG-CV funds, they shall apply equally to 
fiscal years 2019 and 2020 CDBG grants.
     III.B.5.(d)(i) Use of Urgent Need National Objective.
     III.B.5.(d)(ii) Modification of Location-Based Presumption 
of LMI Benefit for Job Creation and Retention National Objective 
Criteria.
     III.B.5.(d)(iii) LMI Job Creation and Retention Records.
     III.B.5.(e)(i) Elimination of Aggregate Public Benefit 
Test.
     III.B.5.(e)(ii) Modification of Individual Public Benefit 
Standards.
     III.B.5.(f)(i) Extension of Emergency Payments.
     III.B.5.(f)(ii) Opportunity Zones and Related 
Flexibilities for Economic Development.
     III.B.5.(f)(iii) Public Services Cap.
     III.B.5.(f)(iv) Other Public Services Considerations.
     III.B.5.(f)(v) Clarification on Application of Cost 
Principles.
     III.B.6.(d)(iii) Clarifying note on emergency 
environmental review procedures.
     III.B.9. Duplication of Benefits (applies for programs and 
activities with annual formula CDBG funds when the grantee uses these 
funds to carry out programs to respond to losses caused by disasters 
and emergencies).
     III.B.10. Citizenship Requirements.
IV.B.4. Provisions That Do Not Apply to FY 19 and FY 20 Grants
    Waivers and alternative requirements and other provisions in the 
following paragraphs of Section III do not apply to fiscal year 2019 
CDBG Grants and fiscal year 2020 CDBG grants:
     III.A. Allocations of CDBG-CV Funds
     III.B.1. General Grant Requirements
     III.B.2. Responsible Use of CARES Act Funds
     III.B.3. Overview of Process to Receive CDBG-CV Grants
     III.B.4.(b) CDBG-CV Application Content and Submission
     III.B.5.(a) Use of Funds for CARES Act Purposes
     III.B.5.(b) Reimbursements
     III.B.5.(c) Terms and Conditions Made Applicable by the 
CARES Act
     III.B.5.(d)(iv) Overall Benefit to LMI Persons.
     III.B.6.(a) Program Income
     III.B.6.(b) Rules Applicable to State CDBG-CV Grants
     III.B.6.(c) Rules for Entitlements, Insular Areas, and 
Nonentitlement Hawaii Counties
     III.B.6.(d)(ii) Clarifying note on the process for 
environmental release of funds when a state carries out activities 
directly.
     III.B.6.(e) Compliance with Labor Laws
     III.B.6.(f) Relationship to Section 108 Loan Guarantees
     III.B.7. Period of Performance, Timeliness, and Closeout
     III.B.8. Reporting
    Paperwork Reduction Act: The information collection requirements in 
this notice have been approved by the Office of Management and Budget 
(OMB) under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520) 
and assigned OMB Control Number 2506-0085. In accordance with the 
Paperwork Reduction Act, HUD may not conduct or sponsor, and a person 
is not required to respond to, a collection of information unless the 
collection displays a currently valid OMB control number.
    Catalog of Federal Domestic Assistance: The Catalog of Federal 
Domestic Assistance numbers for the CDBG-CV grants under the CARES Act 
are: 14.218 (Community Development Block Grants/Entitlement Grants); 
14.225 (Community Development Block Grants/Special Purpose Grants/
Insular Areas); and 14.228 (Community Development Block Grants/State's 
Program and Non-Entitlement Grants in Hawaii) (formerly CDBG Grant/
Small Cities Program).
    Environmental 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(2)(C)). The 
FONSI is available for inspection at HUD's Funding Opportunities web 
page at: https://www.hud.gov/grants/. 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 Federal Relay Service at 800-877-8339 (this is a 
toll-free number).

John Gibbs,
Assistant Secretary for Community Planning and Development.
[FR Doc. 2020-18242 Filed 8-19-20; 8:45 am]
BILLING CODE 4210-67-P