[Federal Register Volume 88, Number 226 (Monday, November 27, 2023)]
[Notices]
[Pages 82982-83017]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-25875]



[[Page 82981]]

Vol. 88

Monday,

No. 226

November 27, 2023

Part III





Department of Housing and Urban Development





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Allocations for Community Development Block Grant Disaster Recovery and 
Implementation of the CDBG-DR Consolidated Waivers and Alternative 
Requirements Notice; Notice

  Federal Register / Vol. 88 , No. 226 / Monday, November 27, 2023 / 
Notices  

[[Page 82982]]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Docket No. FR-6428-N-01]


Allocations for Community Development Block Grant Disaster 
Recovery and Implementation of the CDBG-DR Consolidated Waivers and 
Alternative Requirements Notice

AGENCY: Office of the Assistant Secretary for Community Planning and 
Development, U.S. Department of Housing and Urban Development (HUD).

ACTION: Notice.

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SUMMARY: This Allocation Announcement Notice allocates $142 million of 
CDBG-DR funds appropriated by the Disaster Relief Supplemental 
Appropriations Act, 2023 for major disasters occurring in 2022 and 
2023. This notice identifies grant requirements for these funds, 
including requirements in HUD's CDBG-DR Consolidated Notice 
(``Consolidated Notice'') found in appendix B, and a limited number of 
amendments to the Consolidated Notice that apply to CDBG-DR grants for 
disasters occurring in 2022 and January 2023. The Consolidated Notice, 
as amended by this Allocation Announcement Notice, includes waivers and 
alternative requirements, relevant regulatory requirements, the grant 
award process, criteria for action plan approval, and eligible disaster 
recovery activities.

DATES: Applicability Date: December 4, 2023.

FOR FURTHER INFORMATION CONTACT: Tennille Smith Parker, Director, 
Office of Disaster Recovery, Department of Housing and Urban 
Development, 451 7th Street SW, Room 7282, Washington, DC 20410, 
telephone number 202-708-3587 (this is not a toll-free number). HUD 
welcomes and is prepared to receive calls from individuals who are deaf 
or hard of hearing, as well as individuals with speech or communication 
disabilities. To learn more about how to make an accessible telephone 
call, please visit: https://www.fcc.gov/consumers/guides/telecommunications-relay-service-trs. Facsimile inquiries may be sent 
to Ms. Parker at 202-708-0033 (this is not a toll-free number). Email 
inquiries may be sent to [email protected].

SUPPLEMENTARY INFORMATION: 

Table of Contents

I. Allocations
II. Use of Funds
    A. Allocations of CDBG-DR Funds for Smaller Grants
III. Overview of Grant Process
    A. Requirements Related to Administrative Funds
IV. Applicable Rules, Statutes, Waivers, and Alternative 
Requirements
    A. Grant Administration
    B. Clarifications to the Consolidated Notice
V. Duration of Funding
VI. Assistance Listing Numbers (Formerly Known as the CFDA Number)
VII. Finding of No Significant Impact
Appendix A: Allocation Methodology
Appendix B: CDBG-DR Consolidated Notice

I. Allocations

    The Disaster Relief Supplemental Appropriations Act, 2023 (Pub. L. 
117-328, Division N, Title X) approved December 29, 2022, makes 
available $3,000,000,000 in CDBG-DR funds. These CDBG-DR funds are for 
necessary expenses for activities authorized under title I of the 
Housing and Community Development Act of 1974 (42 U.S.C. 5301 et seq.) 
(HCDA) related to disaster relief, long-term recovery, restoration of 
infrastructure and housing, economic revitalization, and mitigation in 
the ``most impacted and distressed'' (MID) areas resulting from a 
qualifying major disaster that occurred in 2022 or later until such 
funds are fully allocated. The Federal Register notice published on May 
18, 2023 (88 FR 32046) announced $2,837,849,000 from Public Law 117-328 
to address recovery needs and mitigation activities for major disasters 
that occurred in 2022. Based on the unmet needs allocation methodology 
outlined in appendix A, this notice announces the remaining allocations 
of $142,151,000 from Public Law 117-328 (the ``Appropriations Act'') 
for disasters occurring in 2022 and January 2023. The Appropriations 
Act requires HUD to include with any final allocation for the total 
estimate of unmet need an additional amount of 15 percent of that 
estimate for mitigation activities that reduce risk in the MID areas 
(see table 1).
    The Appropriations Act provides that grants shall be awarded 
directly to a state, local government, or Indian tribe at the 
discretion of the Secretary.
    Pursuant to the Appropriations Act, HUD has identified MID areas 
based on the best available data for all eligible affected areas. A 
detailed explanation of HUD's allocation methodology is provided in 
appendix A of this notice. All of the grantees within this notice must 
use at least 80 percent of their allocations to address unmet disaster 
needs or mitigation activities in the HUD-identified MID areas, as 
identified in the last column of table 2. These grantees may use the 
remaining 20 percent of their allocation to address unmet disaster 
needs or mitigation activities in those areas that the grantee 
determines are ``most impacted and distressed'' within an area that 
received a Presidential major disaster declaration identified by the 
Federal Emergency Management Agency (FEMA) disaster numbers listed in 
column two of table 1. However, these grantees are not precluded from 
spending 100 percent of their allocation in the HUD-identified MID 
areas if they choose to do so. Detailed requirements related to MID 
areas are provided in section II.A.3. of the Consolidated Notice.
    Based on a review of the impacts from the eligible disasters, and 
estimates of unmet need, HUD made the following allocations for 
disasters occurring in 2022 and January 2023:
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    \1\ Total Unmet Needs for DR 4652 were calculated at $16,961,434 
before adjusting for the special Congressional appropriations for 
the Hermits Creek/Calf Canyon Fire (the ``Hermit's Peak/Calf Canyon 
Fire Assistance Act,'' Public Law 117-180, 136 Stat. 2114 (2022)). 
As such, HUD has calculated the mitigation for this disaster as 15 
percent of those total unmet needs. The allocation for unmet needs 
is reduced to $1,587,000 to reflect that the special appropriation 
is anticipated to address many of the calculated unmet needs.

            Table 1--Allocations for Unmet Needs and Mitigation Activities Under Public Law 117-328 for Disasters Occurring in 2022 and 2023
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                                                                                                                                               Total
                                                                                                          Allocation for      CDBG-DR        allocated
                                            FEMA                                                            unmet needs   mitigation set-   under this
                 Year                     disaster             State                     Grantee            from Public    aside amounts    notice from
                                            No.                                                             Law 117-328     from Public   Public Law 117-
                                                                                                                            Law 117-328         328
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2022..................................         4652  New Mexico...............  State of New Mexico.....  \1\ $1,587,000      $2,544,000      $4,131,000
2023..................................         4684  Alabama..................  State of Alabama........       9,046,000       1,357,000      10,403,000
2023..................................         4683  California...............  State of California.....     100,019,000      15,003,000     115,022,000
2023..................................         4685  Georgia..................  State of Georgia........      10,952,000       1,643,000      12,595,000
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    Totals............................  ...........  .........................  ........................     120,017,000      18,003,000     142,151,000
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              Table 2--Most Impacted and Distressed Areas for Disasters Occurring in 2022 and 2023
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                                                Minimum amount from Public
                                                 Law 117-328 that must be
                                                   expended in the HUD-       ``Most impacted and distressed''
                   Grantee                     identified ``most  impacted                  areas
                                                and distressed''  areas in
                                                         column 3
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State of New Mexico..........................                   $3,304,800  87742 and 87745 (San Miguel County).
State of Alabama.............................                    8,322,400  36703 (Dallas County).
State of California..........................                   92,017,600  Merced, Santa Cruz, San Luis Obispo
                                                                             Counties; 95220 (San Joaquin
                                                                             County), 93001 (Ventura County).
State of Georgia.............................                   10,076,000  30223 (Spalding County).
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II. Use of Funds

    This Allocation Announcement Notice outlines requirements that 
apply to grantees receiving funds under this notice. Funds for 
disasters occurring in 2022 and 2023 announced in this notice are 
subject to the requirements of this Allocation Announcement Notice and 
the Consolidated Notice, included as appendix B, as amended. HUD makes 
amendments to the Consolidated Notice in this Allocation Announcement 
Notice to reflect the terms of the Appropriations Act. However, the 
Consolidated Notice in appendix B is the same Consolidated Notice 
included as appendix B in previous Allocation Announcements Notices 
published in the Federal Register (87 FR 6364, 87 FR 31636, 88 FR 3198, 
and 88 FR 32046). Sections III.A.1, III.A.1.a, and III.A.1.b of this 
Allocation Announcement Notice include instructions for a grantee 
submitting an early action plan for program administrative costs and 
will replace the alternative requirement in the Consolidated Notice at 
III.C.1 for purposes of accessing funds for program administrative 
costs prior to the Secretary's certification.
    To comply with the statutory requirement in the Appropriations Act, 
grantees shall not use CDBG-DR funds for activities reimbursable by or 
for which funds are made available by FEMA or the U.S. USACE of 
Engineers (USACE). Grantees must verify whether FEMA or USACE funds are 
available prior to awarding CDBG-DR funds to specific activities or 
beneficiaries. Grantees may use CDBG-DR funds as the non-Federal match 
as described in section II.C.3 of the Consolidated Notice.

II.A. Allocations of CDBG-DR Funds for Smaller Grants

    Paragraph III.C.1.b of the Consolidated Notice requires that CDBG-
DR action plans ``demonstrate a reasonably proportionate allocation of 
resources relative to areas and categories (i.e., housing, economic 
revitalization, and infrastructure) of greatest needs identified in the 
grantee's impact and unmet needs assessment or provide an acceptable 
justification for a disproportional allocation.'' Additionally, 
paragraph III.C.1.g of the Consolidated Notice requires grantees to 
``provide a budget for the full amount of the allocation that is 
reasonably proportionate to its unmet needs (or provide an acceptable 
justification for disproportional allocation) and is consistent with 
the requirements to integrate hazard mitigation measures into all its 
programs and projects.''
    HUD recognizes that grantees receiving a relatively small 
allocation of funds for 2022 and 2023 disasters in this notice may most 
effectively advance recovery by more narrowly targeting these limited 
recovery and mitigation resources. Accordingly, for grantees receiving 
an allocation of less than $20 million for 2022 and 2023 disaster(s) 
announced in this notice, HUD will consider the small size of the grant 
and HUD's allocation methodology as acceptable justification for a 
grantee to propose a disproportional allocation when the grantee is 
allocating funds to address unmet affordable rental housing needs 
caused by or exacerbated by the disaster(s). Grantees exercising this 
option must continue to comply with the applicable requirements of this 
notice and the Consolidated Notice, including the CDBG-DR mitigation 
set-aside requirement in section IV.A.2 of this notice.

III. Overview of Grant Process

III.A. Requirements Related to Administrative Funds

    III.A.1. Action plan submittal for program administrative costs. 
The Appropriations Act allows grantees receiving an award under this 
notice to access funding for program administrative costs prior to the 
Secretary's certification of financial controls and procurement 
processes, and adequate procedures for proper grant management. To 
implement this authority, the following alternative requirement will 
replace the alternative requirement in the Consolidated Notice at 
III.C.1.
    If a grantee chooses to access funds for program administrative 
costs prior to the Secretary's certification, it must first prepare an 
action plan describing its use of funds for program administrative 
costs, subject to the five percent cap on the use of grant funds for 
such costs. Instead of following requirements in section III.C.1 of the 
Consolidated Notice, which require grantees to use the Public Action 
Plan in HUD's DRGR system to submit their action plans, grantees will 
follow a different process to access funds for program administrative 
costs prior to the Secretary's certification.
    As part of the process of accessing funds for these costs, grantees 
must submit to HUD an action plan describing their use of funds for 
program administrative costs. The action plan will be developed outside 
of DRGR and must include all proposed

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uses of funds for program administrative costs incurred prior to a 
final action plan being submitted and approved. The action plan for 
program administrative costs must also include the criteria for 
eligibility and the amount to be budgeted for that activity. If a 
grantee chooses to submit the action plan for program administrative 
costs, the grantee should calculate its need to cover program 
administrative costs over the life of the grant and consider how much 
of its available program administrative funds may be reasonably 
budgeted at this very early stage of its grant lifecycle.
    III.A.1.a. Publication of the action plan for program 
administrative costs and opportunity for public comment. The grantee 
must publish the proposed action plan for program administrative costs, 
and substantial amendments to the plan, for public comment. To permit a 
more streamlined process and ensure that grants for program 
administrative costs are awarded in a timely manner in order to allow 
grantees to more rapidly design and launch recovery activities, 
provisions of 42 U.S.C. 5304(a)(2) and (3), 42 U.S.C. 12707, 24 CFR 
570.486, 24 CFR 1003.604, 24 CFR 91.105(b) through (d), and 24 CFR 
91.115(b) through (d), with respect to citizen participation 
requirements, are waived and replaced by the alternative requirements 
in section III.A.1 that apply only to action plans for program 
administrative costs and substantial amendments to these plans. 
Additionally, for these action plans only, grantees are not subject to 
the Consolidated Notice action plan requirements in sections III.B.2.i, 
III.C.2, III.C.3, III.C.6, and III.D.1.a-c.
    The manner of publication of the action plan for program 
administrative costs must include prominent posting on the grantee's 
official disaster recovery website and must afford residents, affected 
local governments, and other interested parties a reasonable 
opportunity to review the contents of the plan or substantial 
amendment. Subsequent to publication of the action plan or substantial 
amendment to that plan, the grantee must provide a reasonable time 
frame (no less than seven days) and multiple methods (including 
electronic submission) for receiving comments on the action plan or 
substantial amendment for program administrative costs. At a minimum, 
the topic of disaster recovery on the grantee's website, including the 
posted action plan or substantial amendment, must be navigable by 
interested parties from the grantee homepage and must link to the 
disaster recovery website as required by section III.D.1.e of the 
Consolidated Notice. The grantee's records must demonstrate that it has 
notified affected parties through electronic mailings, press releases, 
statements by public officials, media advertisements, public service 
announcements, and/or contacts with neighborhood organizations. 
Grantees are not required to hold any public hearings on the proposed 
action plan or substantial amendment for program administrative costs.
    The grantee must consider all oral and written comments on the 
action plan or any substantial amendment. Any updates or changes made 
to the action plan in response to public comments should be clearly 
identified in the action plan. A summary of comments on the plan or 
amendment, and the grantee's response to each, must be included with 
the action plan or substantial amendment. Grantee responses shall 
address the substance of the comment rather than merely acknowledge 
that the comment was received.
    After the grantee responds to public comments, it will then submit 
its action plan or substantial amendment for program administrative 
costs (which includes Standard Form 424 (SF-424)) to HUD for approval. 
There is no due date for this plan as it may be submitted any time 
prior to the grantee's Public Action Plan. HUD will review the action 
plan or substantial amendment for program administrative costs within 
15 days from date of receipt and determine whether to approve the 
action plan or substantial amendment to that plan per the criteria 
identified in this notice.
    III.A.1.b. Certifications waiver and alternative requirement. 
Sections 104(b)(4), (c), and (m) of the HCDA (42 U.S.C. 5304(b)(4), 
(c), and (m)), sections 106(d)(2)(C) and (D) of the HCDA (42 U.S.C. 
5306(d)(2)(C) and (D)), and section 106 of the Cranston-Gonzalez 
National Affordable Housing Act (42 U.S.C. 12706), and regulations at 
24 CFR 91.225 and 91.325 are waived and replaced with the following 
alternative. Each grantee choosing to submit an action plan for program 
administrative costs must make the following certifications listed in 
section III.F.7 of the Consolidated Notice and include them with the 
submission of this plan: paragraphs b, c, d, g, i, j, k, l, p, and q. 
Additionally, HUD is waiving section 104(a)-(c) and (d)(1) of the HCDA 
(42 U.S.C. 5304), section 106(c)(1) and (d) of the HCDA (42 U.S.C. 
5306), section 210 of the Uniform Relocation Assistance and Real 
Property Acquisition Policies Act of 1970 (URA) (42 U.S.C. 4630), 
section 305 of the URA (42 U.S.C. 4655), and regulations at 24 CFR 
91.225(a)(2), (6), and (7), 91.225(b)(7), 91.325(a)(2), (6), and (7), 
49 CFR 24.4(a), and 24 CFR 42.325 only to the extent necessary to allow 
grantees to receive a portion of their allocation as a grant for 
program administrative costs before submitting other statutorily 
required certifications. Each grantee must make all certifications 
included in section III.F.7 of the Consolidated Notice and submit them 
to HUD when it submits its Public Action Plan in DRGR described in 
III.C.1.
    III.A.1.c. Submission of the action plan for program administrative 
costs in DRGR. After HUD's approval of the action plan for program 
administrative costs, the grantee enters the activities from its 
approved action plan into the DRGR system if it has not previously done 
so and submits its DRGR action plan to HUD (funds can be drawn from the 
line of credit only for activities that are established in the DRGR 
system). HUD has previously provided additional guidance (``Fact 
Sheet'') with screenshots and step-by-step instructions describing the 
submittal process for this DRGR action plan for program administrative 
costs.\2\ This process will allow a grantee to access funds for program 
administrative costs while the grantee begins developing its Public 
Action Plan in DRGR as provided in section III.C.1 of the Consolidated 
Notice.
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    \2\ The Fact Sheet describing the process to submit an action 
plan for program administrative costs in DRGR can be viewed at 
https://files.hudexchange.info/resources/documents/DRGR-Fact-Sheet-PL117-43-Appropriation-Grantees.pdf.
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    III.A.1.d. Incorporation of the action plan for program 
administrative costs into the Public Action Plan. The grantee shall 
describe the use of all grant funds for administrative costs in the 
Public Action Plan required by section III.C.1. Use of grant funds for 
administrative costs before approval of the Public Action Plan must be 
consistent with the action plan for administrative costs. Once the 
Public Action Plan is approved, the use of all grant funds must be 
consistent with the Public Action Plan. Upon HUD's approval of the 
Public Action Plan, the action plan for administrative costs shall only 
be relevant to administrative costs charged to the grant before the 
date of approval of the Public Action Plan.
    III.A.2. Use of administrative funds across multiple grants. The 
Appropriations Act authorize special treatment of grant administrative 
funds. Grantees that are receiving awards under this notice, and that 
have received CDBG-DR or Community Development Block Grant mitigation 
(CDBG-MIT) grants in the past or in any

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future acts, may use eligible administrative funds (up to five percent 
of each grant award plus up to five percent of program income generated 
by the grant) appropriated by this act for the cost of administering 
any CDBG-DR or CDBG-MIT grant without regard to the particular disaster 
appropriation from which such funds originated. If the grantee chooses 
to exercise this authority, the grantee must have appropriate financial 
controls to comply with the requirement that the amount of grant 
administration expenditures for each CDBG-DR or CDBG-MIT grant will not 
exceed five percent of the total grant award for each grant (plus five 
percent of program income generated by each grant), review and modify 
its financial management policies and procedures regarding the tracking 
and accounting of administration costs, as necessary, and address the 
adoption of this treatment of administrative costs in the applicable 
portions of its Financial Management and Grant Compliance submissions 
as referenced in section III.A.1 of the Consolidated Notice. Grantees 
are reminded that all uses of funds for program administrative 
activities must qualify as an eligible administration cost.

IV. Applicable Rules, Statutes, Waivers, and Alternative Requirements

    The Appropriations 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 obligation by the 
Secretary, or use by the recipient, of these funds, except for 
requirements related to fair housing, nondiscrimination, labor 
standards, and the environment. This section of the notice and the 
Consolidated Notice describe rules, statutes, waivers, and alternative 
requirements that apply to allocations under this notice. For each 
waiver and alternative requirement in this notice and incorporated 
through the Consolidated Notice, the Secretary has determined that good 
cause exists, and the waiver or alternative requirement is not 
inconsistent with the overall purpose of title I of the HCDA. The 
waivers and alternative requirements provide flexibility in program 
design and implementation to support full and swift recovery following 
eligible disasters, while ensuring that statutory requirements are met.
    Grantees may request additional waivers and alternative 
requirements from the Department as needed to address specific needs 
related to their recovery and mitigation activities. Grantees should 
work with the assigned CPD representative to request any additional 
waivers or alternative requirements from HUD headquarters. The waivers 
and alternative requirements described below apply to all grantees 
under this notice. Under the requirements of the Appropriations Act, 
waivers and alternative requirements are effective five days after they 
are published in the Federal Register or on the website of the 
Department.

IV.A. Grant Administration

    IV.A.1. Duplication of Benefits (DOB). Grantees that received funds 
for disasters occurring in 2022 and 2023 must follow the requirements 
located in section IV.A. of the Consolidated Notice and the DOB 
requirements described in this section. The Federal Register notice 
published on June 2019, titled ``Updates to Duplication of Benefits 
Requirements Under the Stafford Act for Community Development Block 
Grant (CDBG) Disaster Recovery Grantees'' (84 FR 28836) (``2019 DOB 
Notice''), revised the DOB requirements that apply to CDBG-DR grants 
for disasters declared between January 1, 2016, and December 31, 2021. 
For these disasters, the 2019 DOB Notice also implemented temporary 
changes to the treatment of loans made by the Disaster Recovery Reform 
Act of 2018 (DRRA) (division D of Pub. L. 115-254), which sunsets on 
October 5, 2023.
    This DRRA loan exception does not apply to disasters occurring in 
2022 and 2023, therefore, subsidized loans may be a duplication of 
benefits for CDBG-DR grants announced in this notice (depending on a 
grantee's DOB analysis). Without the DRRA loan exception, most 
subsidized loans duplicate CDBG-DR funds for the same purpose (there 
are limited exceptions for declined, cancelled, or subsidized short-
term loans to pay for eligible costs before CDBG-DR funds became 
available, as described in section IV.A.1. of the Consolidated Notice). 
Therefore, HUD's time-limited policy in the 2019 DOB Notice to permit 
reimbursement of costs paid with the proceeds of subsidized loans does 
not apply after the DRRA loan exception sunsets. Additionally, because 
the DRRA loan exception never applied to disasters occurring in 2022 or 
later, grantees receiving CDBG-DR funds for those disasters are not 
able to reimburse the costs paid by subsidized loans, including SBA 
loans, unless the exceptions in section IV.A.1.a. of the Consolidated 
Notice applies. These grantees must follow the duplication of benefits 
requirements described below and in section IV.A. of the Consolidated 
Notice.
    This section of the notice describes the applicable laws and 
requirements related to DOB, including the general framework to 
calculate DOB. Section IV.A. of the Consolidated Notice describes the 
exceptions for when a subsidized loan that is cancelled or declined is 
not considered a duplication of benefits.
    IV.A.1.(a). The Stafford Act. The Robert T. Stafford Disaster 
Relief and Emergency Assistance Act (42 U.S.C. 5121-5207) (Stafford 
Act) is the primary legal authority establishing the framework for the 
Federal government to provide disaster and emergency assistance.
    Section 312 of the Stafford Act directs Federal agencies that 
provide disaster assistance to assure that people, businesses, or other 
entities do not receive financial assistance that duplicates any part 
of their disaster loss covered by insurance or another source (42 
U.S.C. 5155(a)). Section 312 also makes recipients of Federal disaster 
assistance liable for repayment of the amount of Federal disaster 
assistance that duplicates benefits available for the same purpose from 
another source (42 U.S.C. 5155(c)).
    The Stafford Act also provides that when assistance covers only a 
part of the recipient's disaster needs, additional assistance to cover 
needs not met by other sources will not cause a DOB (42 U.S.C. 
5155(b)(3)). CDBG-DR assistance may only pay for eligible activities to 
address unmet needs. This section advises grantees on the calculation 
of unmet needs through a duplication of benefits analysis.
    IV.A.1.(b). CDBG-DR Appropriations Act and Federal Register 
Notices. CDBG-DR funds are made available for ``necessary expenses'' by 
the Appropriations Act that contain statutory requirements on the use 
of the grant funds. Grantees are subject to the requirements of the 
Appropriations Act, this notice, and the Consolidated Notice.
    Since 2013, as a condition of making any CDBG-DR grant, the 
Secretary must certify that the grantee has established adequate 
procedures to prevent DOB. To meet this requirement, grantees must 
submit DOB policies to HUD for review before HUD will award non-
administrative funds. ``Adequate'' procedures are those that meet the 
requirements that HUD established in this notice, in the Consolidated 
Notice, and as reflected in the related checklists that are available 
online. HUD requires grantees to establish DOB policies that 
incorporate certain steps before committing or awarding assistance. 
Typically, the steps include determining

[[Page 82986]]

the total need for assistance, verifying the total assistance available 
from all sources of disaster assistance (using recent data available 
from FEMA, SBA, and other sources), excluding non-duplicative 
assistance from total assistance to calculate DOB, reducing the total 
award by the amount of the DOB, and obtaining an agreement from 
applicants to repay duplicative assistance.
    This notice and the Consolidated Notice also require CDBG-DR 
grantees to consider projected sources of disaster assistance in the 
needs assessment that is part of an action plan for disaster recovery. 
Consideration of other potential sources of assistance when planning 
for the use of grant funds helps to limit the possibility of 
duplication between CDBG-DR and other assistance.
    IV.A.1.(c). Necessary and Reasonable Requirements. The Uniform 
Administrative Requirements, Cost Principles, and Audit Requirements 
for Federal Awards in subpart E of 2 CFR part 200 (the Cost Principles) 
applicable to all CDBG-DR grantees and their subrecipients require that 
costs are necessary and reasonable. The Cost Principles are made 
applicable to states by 24 CFR 570.489(p) and to local governments 
through 24 CFR 570.502. State grantees are also subject to 24 CFR 
570.489(d), which requires that states shall have fiscal and 
administrative requirements to ensure that grant funds are used ``for 
reasonable and necessary costs of operating programs.''
    Under the Cost Principles, a cost assigned to a grant ``is 
reasonable if, in its nature and amount, it does not exceed that which 
would be incurred by a prudent person under the circumstances 
prevailing at the time the decision was made to incur the cost'' (2 CFR 
200.404).
    Grantees must consider factors described at 2 CFR 200.404(a) 
through (e) when determining which types and amounts of cost items are 
necessary and reasonable. Based on these factors, HUD generally 
presumes that if a cost has been paid by another source, charging it to 
the Federal award violates the necessary and reasonable standard unless 
grant requirements permit reimbursement.
    IV.A.1.(d). Basic Duplication of Benefits Calculation Framework. 
The Stafford Act requires a fact specific inquiry into assistance 
received by each applicant. This notice refers to the subject of a DOB 
review as an ``applicant'' or ``CDBG-DR applicant'' and uses the term 
``applicant'' to include individuals, businesses, households, or other 
entities that apply to the grantee or a subrecipient for CDBG-DR 
assistance, as well as entities that use CDBG-DR assistance for an 
activity without submitting an application (e.g., the department or 
agency of the grantee administering the grant, other state or local 
departments or agencies, or local governments).
    A grantee is prohibited from making a blanket determination that 
CDBG-DR assistance under one of its programs or activities does not 
duplicate another category or source of assistance. The grantee must 
conduct an individualized review of each applicant to determine that 
the amount of assistance will not cause a DOB by exceeding the unmet 
needs of that applicant. A review specific to each applicant is 
necessary because assistance available to each applicant varies widely 
based on individual insurance coverage, eligibility for various sources 
of assistance, and other factors.
    This section establishes the primary considerations that must be 
part of a DOB analysis when providing CDBG-DR assistance, and a 
framework for analyzing need and avoiding DOB when calculating awards. 
CDBG-DR grantees have discretion to develop policies and procedures 
that tailor their DOB analyses to their own programs and activities so 
long as the grantee's policies and procedures are consistent with the 
requirements of this notice. If the grantee modifies its DOB procedures 
after the Secretary certifies that the grantee's DOB procedures are 
adequate, the grantee's modified procedures must meet standards HUD 
adopts to determine adequacy.
    IV.A.1.(d)(i). Assess Applicant Need. A grantee must determine an 
applicant's total need. Total need is calculated based on need 
estimates at a point in time; total need is the current need. However, 
if the grantee's action plan permits CDBG-DR assistance to reimburse 
costs of CDBG-DR eligible activities undertaken by the applicant before 
submitting an application the total need also includes these costs. 
Generally, total need is calculated without regard to the grantee's 
program-specific caps on the amount of assistance.
    For rehabilitation, reconstruction, or new construction activities, 
the need can be reasonably documented using construction cost 
estimates.
    For recovery programs of the grantee that do not entail physical 
rebuilding, such as special economic development activities to provide 
an affected business with working capital, the total need will be 
determined by the requirements or parameters of the program or 
activity. For special economic development activities, total need 
should be guided by standard underwriting guidelines (when required by 
section II.D.6. of the Consolidated Notice, CDBG-DR grantees and 
subrecipients must comply with the underwriting guidelines in appendix 
A to 24 CFR part 570 when assisting a for-profit entity as part of a 
special economic development project).
    The grantee's assessment of total need must consider in-kind 
donations of materials or services that are known to the grantee at the 
time it calculates need and makes the award. In-kind donations are non-
cash contributions, such as donations of professional services, use of 
construction equipment, or contributions of building materials. In-kind 
donations are not ``financial assistance'' that creates a DOB under the 
Stafford Act, but they do reduce the amount of CDBG-DR assistance for 
unmet need because the donated goods or services reduce activity costs.
    IV.A.1.(d)(ii). Identify Total Assistance. To calculate DOB, 
grantees are required to identify ``total assistance.'' For this 
notice, total assistance includes all reasonably identifiable financial 
assistance available to an applicant.
    Total assistance includes resources such as cash awards, insurance 
proceeds, grants, and loans received by or available to each CDBG-DR 
applicant, including awards under local, state, or Federal programs, 
and from private or nonprofit charity organizations. At a minimum, the 
grantee's efforts to identify total assistance must include a review to 
determine whether the applicant received FEMA, SBA, insurance, and any 
other major forms of assistance (e.g., state disaster assistance 
programs) generally available to applicants.
    Total assistance does not include personal assets such as money in 
a checking or savings account (excluding insurance proceeds or disaster 
assistance deposited into the applicant's account); retirement 
accounts; credit cards and lines of credit; in-kind donations (although 
these non-cash contributions known to the grantee reduce total need); 
and private loans.
    For this notice, a private loan is a loan that is not provided by 
or guaranteed by a governmental entity, and that requires the CDBG-DR 
applicant (the borrower) to repay the full amount of the loan 
(principal and interest) under typical commercial lending terms, e.g., 
the loan is not forgivable. For DOB calculations, private loans are not 
financial assistance and need not be considered in the DOB calculation, 
regardless of whether the borrower is a person or entity.
    By contrast, subsidized loans for the same purpose are to be 
included in the

[[Page 82987]]

DOB calculation unless an exception applies (see sections IV.A.1.a. or 
IV.A.1.b. of the Consolidated Notice).
    Total assistance includes available assistance. Assistance is 
available if an applicant: (1) would have received it by acting in a 
reasonable manner, or in other words, by taking the same practical 
steps toward funding recovery as would disaster survivors faced with 
the same situation but not eligible to receive CDBG-DR assistance; or 
(2) has received the assistance and has legal control over it. 
Available assistance includes reasonably anticipated assistance that 
has been awarded and accepted but has not yet been received. For 
example, if a local government seeks CDBG-DR assistance to fund part of 
a project that also has been awarded FEMA Hazard Mitigation Grant 
Program (HMGP) assistance, the entire HMGP award must be included in 
the calculation of total assistance even if FEMA obligates the first 
award increment for the project, but subsequent increments remain 
unfunded until certain project milestones are met.
    Applicants for CDBG-DR assistance are expected to seek insurance or 
other assistance to which they are legally entitled under existing 
policies and contracts, and to behave reasonably when negotiating 
payments to which they may be entitled. For example, it may be 
reasonable for an applicant to elect to receive an immediate lump sum 
insurance settlement based on estimated cost of rehabilitation instead 
of waiting for a longer period of time for the insurance company to 
calculate reimbursement based on actual replacement costs, even if the 
reimbursement based on actual costs would exceed the lump sum insurance 
settlement.
    HUD generally considers assistance to be available if it is awarded 
to the applicant but is administered by another party instead of being 
directly deposited with the applicant. For example, if an entity 
administering homeowner rehabilitation assistance pays a contractor 
directly to complete the rehabilitation, the assistance is still 
considered available to the applicant.
    By contrast, funds that are not available to an applicant must be 
excluded from the final CDBG-DR award calculation. For example, 
insurance or rehabilitation assistance received by a previous owner of 
a disaster damaged housing unit is not available to a current owner 
that acquired the unit by sale or transfer (including a current owner 
that inherited the unit as a result of the death of the previous owner) 
unless the current owner is a co-recipient of that assistance.
    Funds are not available to an applicant if the applicant does not 
have legal control of the funds when they are received. For example, if 
a homeowner's mortgage requires insurance proceeds to be applied to 
reduce the unpaid mortgage principal, then the lender/mortgage holder 
(not the homeowner) has legal control over those funds. The homeowner 
is legally obligated to use insurance proceeds for the purpose of 
reducing the unpaid mortgage principal and does not have a choice in 
using them for any other purpose, such as to rehabilitate the house. 
Under these circumstances, insurance proceeds do not reduce CDBG-DR 
rehabilitation assistance eligibility.
    Alternatively, if a lender requires use of insurance for 
rehabilitation, or a disaster-affected homeowner chooses to apply 
insurance proceeds received for damage to the building to reduce an 
unpaid mortgage principal, these insurance proceeds are treated as a 
DOB and reduce the amount of CDBG-DR funds the grantee may provide for 
rehabilitation.
    IV.A.1.(d)(iii). Exclude Non-Duplicative Amounts. Once a grantee 
has determined the total need and the total assistance, it determines 
which sources it must exclude as non-duplicative for the DOB 
calculation. Grantees must exclude amounts that are: (1) provided for a 
different purpose; or (2) provided for the same purpose (eligible 
activity), but for a different, allowable use (cost). Below, each of 
these categories is explained in greater detail.
    IV.A.1.(d)(iii)(1). Funds for a Different Purpose. Any assistance 
provided for a different purpose than the CDBG-DR eligible activity, or 
a general, non-specific purpose (e.g., ``disaster relief/recovery'') 
and not used for the same purpose must be excluded from total 
assistance when calculating the amount of the DOB.
    Insurance proceeds for damage or destruction of a building are for 
the same purpose as CDBG-DR assistance to rehabilitate or reconstruct 
that building. On the other hand, grantees may exclude, as non-
duplicative, insurance provided for a different purpose (e.g., 
insurance proceeds for loss of contents and personal property, or 
insurance proceeds for loss of buildings (such as a detached garage) 
that the grantee has determined it will not assist with CDBG-DR funds). 
However, a grantee may treat all insurance proceeds as duplicative if 
it is impractical to identify the portion of insurance proceeds that 
are non-duplicative because they are for a different purpose than the 
CDBG-DR assistance.
    Similarly, CDBG-DR assistance paid to a homeowner as a housing 
incentive for the purpose of inducing the homeowner to sell the home to 
the grantee (e.g., in conjunction with a buyout) are for a different 
purpose than funds provided for interim housing (e.g., temporary 
assistance for rental housing during a period when a household is 
unable to reside in its home). In such a case, interim housing 
assistance may be excluded from the final DOB calculation as non-
duplicative of funds paid for the housing incentive.
    IV.A.1.(d)(iii)(2). Funds for Same Purpose, Different Allowable 
Use. Assistance provided for the same purpose as the CDBG-DR purpose 
(the CDBG-DR eligible activity) must be excluded when calculating the 
amount of the DOB if the applicant can document that actual specific 
use of the assistance was an allowable use of that assistance and was 
different than the use (cost) of the CDBG-DR assistance (e.g., the 
purpose is housing rehabilitation, the use of the other assistance was 
roof replacement and the use of the CDBG-DR assistance is 
rehabilitation of the interior of the house). Grantees are advised to 
consult with HUD to determine what documentation is appropriate in this 
circumstance. As a starting point, grantees should consider whether the 
source of the assistance requires beneficiaries to maintain 
documentation of how the assistance was used.
    Whether the use of the non-CDBG-DR assistance is an allowable use 
depends on the rules imposed by the source that provided the 
assistance. For example, assume that a CDBG-DR grantee is administering 
a homeowner rehabilitation program and an applicant to the program can 
document that he/she previously received and used FEMA funds for 
interim housing costs (i.e., rent). If FEMA permitted the applicant to 
use its assistance for the general purpose of meeting any housing need, 
the CDBG-DR grantee can exclude the FEMA assistance used for interim 
housing as non-duplicative of the CDBG-DR assistance for 
rehabilitation.
    If, on the other hand, FEMA limited the use of FEMA funds to 
housing rehabilitation, then the full amount of the FEMA assistance 
must be considered for the specific purpose of housing rehabilitation 
and cannot be excluded if the applicant used those funds for interim 
housing. If interim housing is not an allowable use, the amount of the 
FEMA housing rehabilitation assistance used for interim housing is 
considered a DOB. If

[[Page 82988]]

the grantee thinks the actual use of the FEMA assistance may be 
allowable, the CDBG-DR grantee should contact FEMA for clarification.
    Assistance provided for the purpose of housing rehabilitation, 
including assistance provided for temporary or minor rehabilitation, is 
for the same purpose as CDBG-DR rehabilitation assistance. However, the 
grantee can exclude assistance used for different costs of the 
rehabilitation, which are a different allowable use (rehabilitation 
costs not assisted with CDBG-DR). For example, if the other assistance 
is used for minor or temporary rehabilitation which enabled the 
applicant family to live in their home instead of moving to temporary 
housing until rehabilitation can be completed, the grantee can 
undertake remaining work necessary to complete rehabilitation. The 
grantee's assessment of total need at the time of application may 
include the costs of replacing temporary materials with permanent 
construction and of completing mold remediation by removing drywall 
installed with other assistance. These types of costs to modify 
partially completed rehabilitation that the grantee determines are 
necessary to comply with the requirements of CDBG-DR assistance do not 
duplicate other assistance used for the partial rehabilitation.
    Grantees are encouraged to contact HUD for further guidance in 
cases when it is unclear whether non-CDBG-DR assistance for the same 
general purpose can be excluded from the DOB calculation because it was 
used for a different allowable use.
    IV.A.1.(d)(iv). Identify DOB Amount and Calculate the Total CDBG-DR 
Award. The total DOB is calculated by subtracting non-duplicative 
exclusions from total assistance. Therefore, to calculate the total 
maximum amount of the CDBG-DR award, the grantee must: (1) identify 
total need; (2) identify total assistance; (3) subtract exclusions from 
total assistance to determine the amount of the DOB; and (4) subtract 
the amount of the DOB from the amount of the total need to determine 
the maximum amount of the CDBG-DR award.
    Three considerations may change the maximum amount of the CDBG-DR 
award.
    First, the grantee may impose a program cap that limits the amount 
of assistance an applicant is eligible to receive, which may reduce the 
potential CDBG-DR assistance available to the applicant.
    Second, the grantee may increase the amount of an award if the 
applicant agrees to repay duplicative assistance it receives in the 
future (unless prohibited by a statutory order of assistance, as in the 
requirement to use FEMA or USACE assistance before CDBG-DR assistance 
discussed in sections II. and. IV.A.1.(f)). Section 312(b) of the 
Stafford Act permits a grantee to provide CDBG-DR assistance to an 
applicant who is or may be entitled to receive assistance that would be 
duplicative if: (1) the applicant has not received the other assistance 
at the time the CDBG-DR grantee makes its award; and (2) the applicant 
agrees to repay the CDBG-DR grantee for any duplicative assistance once 
it is received. The agreement to repay from future funds may enable a 
faster recovery in cases when other sources of assistance are delayed 
(e.g., due to insurance litigation). HUD requires all grantees to enter 
into agreements with applicants before the applicant receives CDBG-DR 
assistance.
    Third, the applicant's CDBG-DR award may increase if a reassessment 
shows that the applicant has additional unmet need.
    IV.A.1.(d)(v). Reassess Unmet Need When Necessary. Although long-
term recovery is a process, disaster recovery needs are calculated at 
points in time. As a result, a subsequent change in an applicant's 
circumstances can affect that applicant's remaining unmet need, meaning 
the need that was not met by CDBG-DR and other sources of assistance. 
Oftentimes, unmet need does not become apparent until after CDBG-DR 
assistance has been provided. Examples may include: a subsequent 
disaster that causes further damage to a partially rehabilitated home 
or business; an increase in the cost of construction materials; 
vandalism; contractor fraud; or theft of materials. Unmet need may also 
change if other resources become available to pay for costs of the 
activity (such as FEMA or USACE), and reduce the need for CDBG-DR.
    To the extent that an original disaster recovery need was not fully 
met or was exacerbated by factors beyond the control of the applicant, 
the grantee may provide additional CDBG-DR funds to meet the increased 
unmet need.
    Grantees must be able to identify and document additional unmet 
need, for example, by completing a professional inspection to verify 
the revised estimate of costs to rehabilitate or reconstruct damaged 
property.
    IV.A.1.(e). Special Considerations. The potential for DOB arises 
most frequently under homeowner rehabilitation programs but is not 
limited solely to that type of activity. The following examples do not 
form an exhaustive list of all CDBG-DR funded programs or activities. 
They are included to illustrate instances when duplicative assistance 
can occur when assisting other recovery activities:
    1. Assistance to businesses. Many grantees carry out economic 
revitalization programs that provide working capital assistance to 
businesses. Generally, working capital assistance is calculated after 
assessing a business's ability to use its current assets to pay its 
current liabilities. The grantee's DOB analysis must consider total 
assistance, which includes all sources of financial assistance 
available to the applicant to pay a portion of liabilities that will 
become due. For example, a downtown business alliance might award 
business recovery grants from its funds to cover some of the same 
liabilities. Even if the downtown business alliance does not call its 
assistance ``working capital'' assistance, the amount the business 
received from the downtown business alliance to pay the same costs as 
the CDBG-DR funds is a DOB. Therefore, a grantee's basis for 
calculating CDBG-DR economic development assistance and the purposes 
for which the applicant can use the assistance should be clearly 
identified so that grantees can prevent a DOB. As discussed above, 
assets such as cash and cash equivalents (excluding deposits of 
insurance proceeds or other disaster assistance), inventories, short-
term investments and securities, accounts receivable, and other assets 
of the business are not financial assistance, although those assets may 
be relevant to underwriting.
    2. Assistance for infrastructure. State grantees may assist state 
or local government entities by providing funding to restore 
infrastructure (public facilities and improvements) after a disaster. 
CDBG-DR funds used directly by state and local governments for public 
facilities and improvements, or other purposes are also subject to the 
DOB requirements of the Stafford Act. For example, a wastewater 
treatment facility owned by a local government may need to be 
rehabilitated. In this instance, total assistance, for a DOB analysis, 
would not only include any other Federal assistance available to 
rehabilitate the facility, but it must also include any local funds 
that are available for this activity. And if local funds were 
previously designated or planned for the activity, but are no longer 
available, the grantee should document that the local government 
recipient does not have funds set aside for the activity in any capital 
improvement plan (or similar document showing planned use of funds).
    3. Payments made under the Uniform Relocation Assistance and Real 
Property Acquisition Policies Act (URA).

[[Page 82989]]

Grantees may provide a displaced person (as defined under 24 CFR 
570.606) with rental assistance payments under the URA or provide 
temporary relocation assistance (as described in 49 CFR part 24, 
appendix A, 49 CFR 24.2(a)(9)(ii)(D)) to persons temporary relocated as 
a result of a project. Relocation payments made under the URA, as well 
as under CDBG's optional relocation assistance provisions of 24 CFR 
570.606(d), are subject to DOB requirements in this notice and the 
Consolidated Notice, as well as DOB requirements under the URA that 
prohibit payments for the same ``purpose and effect'' as another 
payment to a displaced person (49 CFR 24.3). To comply with CDBG-DR DOB 
requirements, before issuance of rental assistance payments required by 
the URA, grantees must complete a DOB analysis. For example, a CDBG-DR 
grantee must check FEMA assistance data to determine that FEMA did not 
provide rental assistance payments during the same time period (under 
the URA or as part of a FEMA Individual Assistance Award). Please note 
that while you cannot duplicate assistance for the same purpose, 
advisory services and the provision of notices required under the URA 
are not subject to this analysis because they are not financial 
assistance to the person, and therefore must be provided in accordance 
with the URA.
    Subsidized Loans. For this notice, subsidized loans (including 
forgivable loans) are loans other than private loans. Subsidized loans 
are assistance that must be included in the DOB analysis unless an 
exception applies. Section IV.A. of the Consolidated Notice discusses 
these exceptions and related requirements for the treatment of 
subsidized loans in a duplication of benefits analysis. The full amount 
of a subsidized loan available to the applicant for the same purpose as 
CDBG-DR assistance is assistance that must be included in the DOB 
calculation unless one of the exceptions in IV.A.1. of the Consolidated 
Notice applies. A subsidized loan is available when it is accepted, 
meaning that the borrower has signed a note or other loan document that 
allows the lender to advance loan proceeds. Both SBA and FEMA provide 
subsidized loans for disaster recovery. Note that the statutory order 
of assistance provision pertaining to assistance from FEMA and USACE 
applies to grants and subsidized loans made by these agencies. 
Subsidized loans may also be available from other sources.
    IV.A.1.(f). Order of Assistance. CDBG-DR appropriations acts 
generally include a statutory order of assistance for Federal agencies. 
Although the language may vary among appropriations, the statutory 
order of assistance typically provides that CDBG-DR funds may not be 
used for activities reimbursable by or for which funds are made 
available by FEMA or USACE. This means that grantees must verify 
whether FEMA or USACE funds are available for an activity (i.e., the 
application period is open) or the costs are reimbursable by FEMA or 
USACE (i.e., the grantee will receive FEMA or USACE assistance to 
reimburse the costs of the activity) before awarding CDBG-DR assistance 
for costs of carrying out the same activity. If FEMA or USACE are 
accepting applications for the activity, the applicant must seek 
assistance from those sources before receiving CDBG-DR assistance. If 
the applicant's costs for the activity will be reimbursed by FEMA or 
USACE, the grantee cannot provide the CDBG-DR assistance for those 
costs. In the event that FEMA or USACE assistance is awarded after 
CDBG-DR to pay the same costs, it is the CDBG-DR grantee's 
responsibility to recapture CDBG-DR assistance that duplicates 
assistance from FEMA or USACE.
    Under the Stafford Act, a Federal agency that provides duplicative 
assistance must collect that assistance. For CDBG-DR grants, the 
grantee is required to collect duplicative assistance it provides. A 
grantee that does not collect duplicative CDBG-DR assistance that it 
provides may resolve this noncompliance by reimbursing its program 
account with non-Federal funds in the amount of the duplication and 
reprograming the use of the funds in accordance with applicable 
requirements to avoid other corrective or remedial actions.
    FEMA regulations at 44 CFR 206.191 set forth a delivery sequence 
that establishes which source of assistance is duplicative for certain 
programs. CDBG-DR assistance is not listed in FEMA's sequence, but as a 
practical matter, CDBG-DR assistance duplicates other sources received 
before CDBG-DR assistance for the same purpose and portion of need. Any 
amount received from other sources before the CDBG-DR assistance that 
is determined to be duplicative must be collected by the grantee. The 
mandatory agreement to repay (discussed in section IV.A.1.(i)below) can 
be used to prevent duplication by assistance that is available, but not 
yet received. If the duplicative assistance is received after CDBG-DR, 
the grantee must collect the DOB or contact HUD if it has questions 
about whether another Federal agency is responsible for collecting the 
duplication.
    IV.A.1.(g). Multiple Disasters. When multiple disasters occur in 
the same location, and the applicant has not recovered from the first 
disaster at the time of a second disaster, the assistance provided in 
response to the second disaster may duplicate assistance for the same 
purpose and need as assistance provided after the first disaster. HUD 
recognizes that in this scenario, DOB calculations can be complicated. 
Damage from a second disaster, for example, may destroy work funded and 
completed in response to the first disaster. The second disaster may 
also damage or destroy receipts and other documentation of how 
applicants expended assistance provided after the first disaster.
    Therefore, HUD is adopting the following policy that is applicable 
to circumstances when two disasters occur in the same area, and the 
applicant has not fully recovered from the first disaster before the 
second disaster occurs: Applicants are not required to maintain 
documentation related to the use of public disaster assistance 
(Federal, state, and local) beyond the period required by the agency 
that provided the assistance. If documentation cannot be provided, the 
grantee may accept a self-certification regarding how the applicant 
used the other agency's assistance, provided that the applicant is 
advised of the criminal and civil penalties that apply in cases of 
false claims and fraud, and the grantee determines that the applicant's 
total need is consistent with data the grantee has about the nature of 
damage caused by the disasters (e.g., flood inundation levels). For 
example, a second disaster strikes three years after an agency provided 
assistance in response to the first disaster, and that agency required 
applicants to maintain documentation for two years, the grantee may 
accept a self-certification regarding how the applicant used the other 
agency's assistance.
    IV.A.1.(h). Recordkeeping. The grantee must document compliance 
with DOB requirements. Policies and procedures for DOB may be specific 
for each program funded by the CDBG-DR grantee and should be 
commensurate with risk. Grantees should be especially careful to 
sufficiently document the DOB analysis for activities they are carrying 
out directly. Insufficient documentation on DOB can lead to findings, 
which can be difficult to resolve if records are missing, inadequate, 
or inaccurate to demonstrate compliance with DOB requirements.

[[Page 82990]]

    When documenting its DOB analysis, grantees cannot rely on 
certification alone for proof of other sources of funds for the same 
purpose (unless authorized by this notice, see section IV.A.1.(g). 
above). Any certification by an applicant must be based on supporting 
evidence that will be kept available for inspection by HUD. For 
example, if an applicant certifies that other sources of funds were 
received and expended for a different purpose than the CDBG-DR funds, 
grantees must substantiate this assertion with an additional source of 
information (e.g., physical inspections, credit card statements, work 
estimates, contractor invoices, flood inundation records, or receipts). 
For these reasons, HUD recommends that as soon as possible after a 
disaster, grantees advise the public and potential applicants to retain 
all receipts that document expenditures for recovery needs. Grantees 
should consult their CPD specialist or CPD representative with 
questions about the sufficiency of documentation.
    IV.A.1.(i). Agreement to Repay. The Stafford Act requires grantees 
to ensure that applicants agree to repay all duplicative assistance to 
the agency providing that Federal assistance. To address any potential 
DOB, each applicant must also enter into an agreement with the CDBG-DR 
grantee to repay any assistance later received for the same purpose for 
which the CDBG-DR funds were provided. This agreement can be in the 
form of a subrogation agreement or similar document and must be signed 
by every applicant before the grantee disburses any CDBG-DR assistance 
to the applicant.
    In its policies and procedures, the grantee must establish a method 
to monitor each applicant's compliance with the agreement for a 
reasonable period after project completion (i.e., a time period 
commensurate with risk). Additionally, section III.A.1. of the 
Consolidated Notice requires a grantee's agreement to also include the 
following language: ``Warning: Any person who knowingly makes a false 
claim or statement to HUD may be subject to civil or criminal penalties 
under 18 U.S.C. 287, 1001 and 31 U.S.C. 3729.''
    IV.A.1.(j). Collecting a Duplication. If a potential DOB is 
discovered after CDBG-DR assistance has been provided, the grantee must 
reassess the applicant's need at that time (see section IV.A.1.(d)(v) 
above). If additional need is not demonstrated, CDBG-DR funds shall be 
recaptured to the extent they are in excess of the remaining need and 
duplicate other assistance received by the applicant for the same 
purpose. However, this determination may depend on what sources of 
assistance were last received by the applicant.
    If a grantee fails to recapture funds from an applicant, HUD may 
impose corrective actions pursuant to 24 CFR 570.495 and 570.910, and 
Federal Register notices, as applicable. Also, HUD reminds grantees 
that the Stafford Act states that ``A person receiving Federal 
assistance for a major disaster or emergency shall be liable to the 
United States to the extent that such assistance duplicates benefits 
available to the person for the same purpose from another source.'' A 
grantee's failure to collect duplication of benefits does not remove an 
applicant's potential liability to the United States. A grantee that 
does not collect duplicative CDBG-DR assistance that it provides, 
should review HUD's guidance in the second paragraph of section 
IV.A.1.(f). above.
    The grantee may refer to any relevant guidance or the debt 
collection procedures in place for the state or local government. HUD 
is available to provide guidance to grantees in establishing or 
revising the grantee's duplication of benefits policies and procedures.
    CDBG-DR grantees awarded funds for disasters occurring in 2022 or 
later can find the additional DOB requirements in Section IV.A. of the 
Consolidated Notice.
    IV.A.2. CDBG-DR mitigation set-aside. The Appropriations Act 
requires HUD to include in any allocation of CDBG-DR funds for unmet 
needs an additional amount of 15 percent for mitigation activities 
(``CDBG-DR mitigation set-aside''). Grantees should consult table 1 for 
the amount allocated specifically for the CDBG-DR mitigation set-aside. 
For purposes of grants under this notice, mitigation activities are 
defined as those activities that increase resilience to disasters and 
reduce or eliminate the long-term risk of loss of life, injury, damage 
to and loss of property, and suffering and hardship, by lessening the 
impact of future disasters.
    In the grantee's action plan, it must identify how the proposed use 
of the CDBG-DR mitigation set-aside will: (1) meet the definition of 
mitigation activities; (2) address the current and future risks as 
identified in the grantee's mitigation needs assessment in the MID 
areas; (3) be CDBG-eligible activities under title I of the HCDA or 
otherwise eligible pursuant to a waiver or alternative requirement; and 
(4) meet a national objective.
    Unlike recovery activities where grantees must demonstrate that 
their activities ``tie-back'' to the specific disaster and address a 
specific unmet recovery need for which the CDBG-DR funds were 
appropriated, activities funded by the CDBG-DR mitigation set-aside do 
not require such a ``tie-back'' to the specific qualified disaster that 
has served as the basis for the grantee's allocation. Instead, grantees 
must demonstrate that activities funded by the CDBG-DR mitigation set-
aside meet the provisions included as (1) through (4) in the prior 
paragraph, to be eligible. Grantees must report activities as a ``MIT'' 
activity type in DRGR so that HUD and the public can determine that the 
grantee has fulfilled the requirement for the CDBG-DR mitigation set-
aside.
    Grantees may also meet the requirement of the CDBG-DR mitigation 
set-aside by including eligible recovery activities that both address 
the impacts of the disaster (i.e., have ``tie-back'' to the specific 
qualified disaster) and incorporate mitigation measures into the 
recovery activities. In section II.A.2.b of the Consolidated Notice, 
grantees are instructed to incorporate mitigation measures when 
carrying out activities to construct, reconstruct, or rehabilitate 
residential or non-residential structures with CDBG-DR funds as part of 
activities eligible under 42 U.S.C. 5305(a) (including activities 
authorized by waiver and alternative requirement). Additionally, in 
section II.A.2.c of the Consolidated Notice, grantees are required to 
establish resilience performance metrics for those activities.
    If grantees wish to count those activities towards the grantee's 
CDBG-DR mitigation set-aside, grantees must: (1) Document how those 
activities and the incorporated mitigation measures will meet the 
definition of mitigation, as provided above; and (2) Report those 
activities as a ``MIT'' activity type in DRGR so they are easily 
tracked.
    IV.A.2.a. Mitigation needs assessment. In addition to the 
requirements prescribed in section III.C.1.a of the Consolidated Notice 
that grantees must develop an impact and unmet needs assessment, 
grantees receiving an award under this Allocation Announcement Notice 
must also include in their action plan a mitigation needs assessment to 
inform the activities funded by the CDBG-DR mitigation set-aside. Each 
grantee must assess the characteristics and impacts of current and 
future hazards identified through its recovery from the qualified 
disaster and any other Presidentially declared disaster. Mitigation 
solutions designed to be resilient only for threats and hazards related 
to a prior disaster can leave a community vulnerable to negative 
effects from future extreme events related to other threats or hazards. 
When risks are identified

[[Page 82991]]

among other vulnerabilities during the framing and design of mitigation 
projects, implementation of those projects can enhance protection and 
save lives, maximize the utility of scarce resources, and benefit the 
community long after the projects are complete.
    Accordingly, each grantee receiving a CDBG-DR allocation under this 
notice must conduct a risk-based assessment to inform the use of its 
CDBG-DR mitigation set-aside considering identified current and future 
hazards. Grantees must assess their mitigation needs in a manner that 
effectively addresses risks to indispensable services that enable 
continuous operation of critical business and government functions and 
are critical to human health and safety or economic security. In the 
mitigation needs assessment, each grantee must cite data sources and 
must, at a minimum, use the risks identified in the current FEMA-
approved state or local Hazard Mitigation Plan (HMP). If a jurisdiction 
is currently updating an expired HMP, the grantee's agency 
administering the CDBG-DR funds must consult with the agency 
administering the HMP update to identify the risks that will be 
included in the assessment. Mitigation needs evolve over time and 
grantees are to amend the mitigation needs assessment and action plan 
as conditions change, additional mitigation needs are identified, and 
additional resources become available.
    IV.A.2.b. Connection of programs and projects to the mitigation 
needs assessment. Grantees are required by section III.C.1.b of the 
Consolidated Notice to describe the connection between identified unmet 
needs and the allocation of CDBG-DR resources. In a similar fashion, 
the plan must provide a clear connection between a grantee's mitigation 
needs assessment and its proposed activities in the MID areas funded by 
the CDBG-DR mitigation set-aside (or outside in connection to the MID 
areas as described in section II.A.3 of the Consolidated Notice). To 
maximize the impact of all available funds, grantees are encouraged to 
coordinate and align these funds with other projects funded with CDBG-
DR and CDBG-MIT funds, as well as other disaster recovery activities 
funded by FEMA, USACE, the U.S. Forest Service, and other agencies as 
appropriate. Grantees are encouraged to fund planning activities that 
complement FEMA's Building Resilient Infrastructure and Communities 
(BRIC) program and to upgrade mapping, data, and other capabilities to 
better understand evolving disaster risks.
    IV.A.3. Interchangeability of disaster funds. The Appropriations 
Act gives the Secretary authority to authorize grantees that receive an 
award in this Allocation Announcement Notice and under prior or future 
appropriations to use those funds interchangeably and without 
limitation for the same activities related to unmet recovery needs in 
the MID areas resulting from a major disaster in the Appropriations Act 
or in prior or future appropriation acts, when the MID areas overlap 
and when the use of the funds will address unmet recovery needs of 
major disasters in the Appropriations Act or in any prior or future 
appropriation acts.
    Based on this authority, the Secretary authorizes grantees 
receiving a CDBG-DR grant under the Appropriations Act and prior or 
future appropriation acts for activities authorized under title I of 
the HCDA for a specific qualifying disaster(s) to use these funds 
interchangeably and without limitation for the same activities in MID 
areas resulting from a major disaster in prior or future appropriation 
acts, as long as the MID areas overlap and the activities address unmet 
needs of both disasters.
    Grantees are reminded that expanding the eligible beneficiaries of 
activities in an action plan funded by any prior or future acts to 
include those impacted by the specific qualifying disaster(s) in this 
notice requires the submission of a substantial action plan amendment 
in accordance with section III.C.6 of the Consolidated Notice. 
Additionally, all waivers and alternative requirements associated with 
a CDBG-DR grant apply to the use of the funds provided by that grant, 
regardless of which disaster the funded activity will address.
    For example, if a grantee is receiving funds under this notice for 
a disaster occurring in 2023 and the MID areas for the 2023 disaster 
overlap with the MID areas for a disaster that occurred in 2017, the 
grantee may choose to use the funds allocated under this notice to 
address unmet needs of both the 2017 disaster and the 2023 disaster. In 
doing so, the grantee must follow the rules and requirements outlined 
in this notice. However, if the grantee chooses to use its CDBG-DR 
grant awarded due to a disaster that occurred in 2017 to address unmet 
needs of both that disaster and the 2023 disaster, the grantee must 
follow the rules and requirements outlined in the Federal Register 
notices applicable to its CDBG-DR grant for 2017 disasters.
    IV.A.4. Assistance to utilities. The Appropriations Act provides 
that funds ``may be used by a grantee to assist utilities as part of a 
disaster-related eligible activity under section 105(a) of the Housing 
and Community Development Act of 1974 (42 U.S.C. 5305(a)).''
    Accordingly, paragraph III.G.3 of the Consolidated Notice does not 
apply to funds under the Appropriations Act, and HUD is adding a 
modified alternative requirement that applies in lieu of paragraph 
III.G.3.
    While it is possible that not every CDBG-DR assisted utility will 
serve predominantly low- and moderate-income (LMI) populations, HUD 
recognizes that LMI populations would benefit especially from the 
increased resilience and recovery of private utilities. HUD also 
recognizes that privately-owned, for-profit utilities have a means of 
obtaining private investment or otherwise recapturing costs from 
ratepayers. Therefore, HUD's alternative requirement below includes 
basic safeguards that HUD has determined are necessary to ensure that 
costs comply with the certification to give maximum feasible priority 
to activities that benefit LMI persons and that costs are necessary and 
reasonable and do not duplicate other financial assistance. The 
modified alternative requirement also makes clear that assistance to 
utilities is subject to all other requirements that apply to the use of 
funds, consistent with the requirement in the Appropriations Act that 
funds must be for an ``eligible activity under section 105(a).'' If a 
grantee needs to submit a substantial amendment to add any activity 
based on these new alternative requirements, they must follow section 
III.C.6.a in the Consolidated Notice.
    For grants made in response to 2022 and 2023 disasters under the 
Appropriations Act, the following alternative requirement applies:
    A grantee may assist private for-profit, non-profit, or publicly 
owned utilities as part of disaster-related activities that are 
eligible under section 105(a) of the HCDA, or otherwise made eligible 
through a waiver or alternative requirement, provided that the grantee 
complies with the following:
    1. The funded activity must comply with applicable CDBG-DR 
requirements, including the requirements that the assisted activity 
will meet a national objective, the activity will address an unmet 
recovery need or a risk identified in the grantee's mitigation needs 
assessment, and if the assistance is provided to a for-profit entity 
for an economic development project under section 105(a)(17), the 
grantee must first comply with the underwriting requirements in section 
II.D.6 of the Consolidated Notice.
    2. Each grantee must carry out the grant consistent with the 
grantee's certification that:

[[Page 82992]]

    ``With respect to activities expected to be assisted with CDBG-DR 
funds, the action plan has been developed so as to give the maximum 
feasible priority to activities that will benefit low- and moderate-
income families.''
    To fortify compliance with the existing certification, if the 
grantee carries out activities that assist privately-owned, for-profit 
utilities, the grantee must prioritize assistance to for-profit 
utilities that will benefit areas where at least 51 percent of the 
residents are LMI persons and demonstrate how assisting the private, 
for-profit utility will benefit those areas.
    3. The grantee must determine that the costs of the activity to 
assist a utility are necessary and reasonable and that they do not 
duplicate other financial assistance. To fortify these requirements and 
achieve a targeted use of funds and to safeguard against the potential 
over-subsidization when assistance is used to carry out activities that 
benefit private, for-profit utilities, the grantee must document that 
the level of assistance provided to a private, for-profit utility 
addresses only the actual identified needs of the utility. 
Additionally, the grantee must establish policies and procedures to 
ensure that the CDBG-DR funds that assist private, for-profit utilities 
reflect the actual identified financing needs of the assisted 
businesses by establishing a mix of financing terms (loan, forgivable 
loan, and/or grant) for each assisted private, for-profit utility, 
based on the business's financial capacity, in order to ensure that 
assistance is based on actual identified need.

IV.B. Clarifications to the Consolidated Notice

    IV.B.1. Reimbursement Requirements for Grants Under the 
Appropriations Act. This section sets out requirements for 2022 and 
2023 disasters under the Appropriations Act. In paragraph III.F.5 of 
the Consolidated Notice, HUD permits grantees to charge to grants the 
pre-award and pre-application costs of homeowners, renters, businesses, 
and other qualifying entities for eligible costs these applicants have 
incurred in response to an eligible disaster covered under a grantee's 
applicable Allocation Announcement Notice. In addition to other 
requirements, paragraph III.F.5 stipulates that grantees may charge the 
eligible pre-application costs to the grant only if (1) the person or 
private entity incurred the expenses within one year after the 
applicability date of the grantee's Allocation Announcement Notice (or 
within one year after the date of the disaster, whichever is later); 
and (2) the person or entity pays for the cost before the date on which 
the person or entity applies for CDBG-DR assistance.
    Congress may enact multiple supplemental appropriations of CDBG-DR 
funds for disasters occurring in the same year and HUD may then publish 
multiple notices announcing CDBG-DR grants for the same disaster. For 
example, HUD announced CDBG-DR grants for disasters occurring in 2022 
and 2023 in this notice. If Congress appropriates additional funds for 
2022 and 2023 disasters in a future appropriations act, grantees may 
find it difficult to track expenses incurred within one year after the 
applicability date of this notice and another Allocation Announcement 
Notice, given that funds for disasters occurring in 2022 and 2023 would 
be announced in different notices. To avoid confusion and to apply a 
uniform time frame to reimbursement of all pre-application costs for 
2022 and 2023 disasters, the requirement in III.F.5.(1) in the 
Consolidated Notice that states, ``The person or private entity 
incurred the expenses within one year after the applicability date of 
the grantee's Allocation Announcement Notice (or within one year after 
the date of the disaster, whichever is later)'' shall not apply, and 
instead, grantees shall comply with the following alternative to that 
requirement in III.F.5.(1): ``The person or private entity incurred the 
expenses within one year after the applicability date of the notice 
that announced the initial allocation of CDBG-DR funds (or within one 
year after the date of the disaster, whichever is later).'' For 
grantees receiving an allocation for a 2022 and 2023 disaster, the 
notice that announced the initial allocation of CDBG-DR funds is this 
notice.
    IV.B.2. Clarification of the green and resilient building standard. 
Paragraph II.B.2.a. of the Consolidated Notice requires that all 
covered construction (new construction, reconstruction, and 
rehabilitation) that is assisted with CDBG-DR funds meet an industry-
recognized standard that has achieved certain certifications described 
in the notice. In the Consolidated Notice, HUD updated its building 
standards to support the adoption and enforcement of modern and 
resilient codes and inadvertently omitted a standard.
    Accordingly, HUD clarifies that paragraph II.B.2.a. in the 
Consolidated Notice allows a grantee to use either the ICC-700 National 
Green Building Standard (NGBS) Green or NGBS Green+ Resilience 
standard, among other industry-recognized standards. For grants made in 
response to disasters occurring in 2022 and 2023, this notice replaces 
paragraph II.B.2.a. in the Consolidated Notice with the following text:
    II.B.2.a. Green and resilient building standard for new 
construction and reconstruction of housing. Grantees must meet the 
Green and Resilient Building Standard, as defined in this subparagraph, 
for: (i) all new construction and reconstruction (i.e., demolishing a 
housing unit and rebuilding it on the same lot in substantially the 
same manner) of residential buildings and (ii) all rehabilitation 
activities of substantially damaged residential buildings, including 
changes to structural elements such as flooring systems, columns, or 
load-bearing interior or exterior walls.
    The Green and Resilient Building Standard requires that all 
construction covered by the paragraph above and assisted with CDBG-DR 
funds meet an industry-recognized standard that has achieved 
certification under (i) Enterprise Green Communities; (ii) LEED (New 
Construction, Homes, Midrise, Existing Buildings Operations and 
Maintenance, or Neighborhood Development); (iii) ICC-700 National Green 
Building Standard (NGBS) Green or NGBS Green+ Resilience; (iv) Living 
Building Challenge; or (v) any other equivalent comprehensive green 
building program acceptable to HUD.
    IV.B.3. Clarification of the Use of ``Uncapped'' Income Limits. The 
Quality Housing and Work Responsibility Act of 1998 (Title V of Pub. L. 
105-276) enacted a provision that directs the Department to grant 
exceptions to at least 10 jurisdictions that are currently ``capped' 
under HUD's low and moderate-income limits. Under this exception, 
several CDBG entitlement grantees may use ``uncapped'' income limits 
that reflect 80 percent of the actual median income for the area. Each 
year, HUD publishes guidance on its website identifying which grantees 
may use uncapped limits.
    Accordingly, HUD clarifies that, the annual uncapped income limits 
published by HUD applies to CDBG-DR funded activities in jurisdictions 
covered by the uncapped limits, including jurisdictions that receive 
disaster recovery funds from a state CDBG-DR grantee. This alternative 
requirement applies to grants made in response to disasters occurring 
in 2022 and 2023 that are subject to this notice (including 
requirements identified as a ``Consolidated Notice'' incorporated in 
this notice as appendix B).

[[Page 82993]]

V. Duration of Funding

    The Appropriations Act made the funds available for obligation by 
HUD until expended. HUD waives the provisions at 24 CFR 570.494 and 
570.902 regarding timely distribution and expenditure of funds and 
establishes an alternative requirement providing that each grantee must 
expend 100 percent of its allocation within six years of the date HUD 
signs the grant agreement. HUD may extend the time period in this 
alternative requirement and associated grant period of performance 
administratively, if good cause for such an extension exists at that 
time, as requested by the grantee, and approved by HUD. When the period 
of performance has ended, HUD will close out the grant and any 
remaining funds not expended by the grantee on appropriate programmatic 
purposes will be recaptured by HUD.

VI. Assistance Listing Numbers (Formerly Known as the CFDA Number).

    The Assistance Listing Numbers (formerly known as the Catalog of 
Federal Domestic Assistance numbers) for the disaster recovery grants 
under this notice are as follows: 14.218; 14.228.

VII. Finding of No Significant Impact

    A Finding of No Significant Impact (FONSI) with respect to the 
environment has been made in accordance with HUD regulations at 24 CFR 
part 50, which implement section 102(2)(C) of the National 
Environmental Policy Act of 1969 (42 U.S.C. 4332(2)(C)). The FONSI is 
available online on HUD's CDBG-DR website at https://www.hud.gov/program_offices/comm_planning/cdbg-dr. 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). HUD welcomes and is prepared to 
receive calls from individuals who are deaf or hard of hearing, as well 
as individuals with speech or communication disabilities. To learn more 
about how to make an accessible telephone call, please visit https://www.fcc.gov/consumers/guides/telecommunications-relay-service-trs.

Adrianne Todman,
Deputy Secretary.

Appendix A

Allocation of CDBG-DR Funds to Most Impacted and Distressed Areas Due 
to Presidentially Declared Disasters Occurring in 2022 and 2023

Background

    The Disaster Relief Supplemental Appropriations Act, 2023 (Pub. 
L. 117-328, Division N, Title X) (approved on December 29, 2022) 
appropriated $3 billion of CDBG-DR for disasters ``that occurred in 
2022 or later until such funds are fully allocated''. The law 
instruct HUD that the funds are ``for the same purposes and under 
the same terms and conditions as funds appropriated under such 
heading in title VIII of the Disaster Relief Supplemental 
Appropriations Act, 2022 (division B of Pub. L. 117-43)'' except 
that such amounts shall be for major disasters that occurred in 2022 
or later until such funds are fully allocated and the fourth, 
twentieth, and twenty-first provisos under such heading in the 
Disaster Relief Supplemental Appropriations Act, 2022 shall not 
apply.
    The statutory text related to the allocation in Public Law 117-
43 is as follows:
    ``. . . for necessary expenses for activities authorized under 
title I of the Housing and Community Development Act of 1974 (42 
U.S.C. 5301 et seq.) related to disaster relief, long-term recovery, 
restoration of infrastructure and housing, economic revitalization, 
and mitigation, in the most impacted and distressed areas resulting 
from a major disaster . . . Provided, That amounts made available 
under this heading in this Act shall be awarded directly to the 
State, unit of general local government, or Indian tribe (as such 
term is defined in section 102 of the Housing and Community 
Development Act of 1974 (42 U.S.C. 5302)) at the discretion of the 
Secretary: Provided further, That the Secretary shall allocate, 
using the best available data, an amount equal to the total estimate 
for unmet needs for qualifying disasters under this heading in this 
Act: Provided further, That any final allocation for the total 
estimate for unmet need made available under the preceding proviso 
shall include an additional amount of 15 percent of such estimate 
for additional mitigation: ''
    Under a prior Notice, $2,837,849,000 of the funds allocated 
under Public Law 117-328 had been awarded. Of the remaining 
$162,151,000, $20 million is set aside for capacity building, HUD 
Administration, and Inspector General expenses, leaving $142,151,000 
for allocations to additional disasters. Total unmet needs and 
mitigation needs for one disaster in 2022 (New Mexico) is calculated 
as discussed in a special section below at $4.131 million. In 
addition, for three disasters (California, Alabama, and Georgia)--
all declared in January 2023--unmet needs and additional mitigation 
amounts were calculated at $241.728 million. HUD chose to allocate 
57.10 percent of the unmet needs and additional mitigation amounts 
of each 2023 disaster to stay within the $138.020 million available 
after taking into account the $4.131 million for the 2022 New Mexico 
disaster ($138.020 million/$241.728 million = 57.10%).

Most Impacted and Distressed Areas

    As with prior CDBG-DR appropriations, HUD is not obligated to 
allocate funds for all major disasters occurring in the statutory 
timeframes. HUD is directed to use the funds ``in the most impacted 
and distressed areas.'' HUD has implemented this directive by 
limiting CDBG-DR formula allocations to grantees with major 
disasters that meet these standards:
    (1) Individual and Households Program (IHP) designation. HUD has 
limited allocations to those disasters where the Federal Emergency 
Management Agency (FEMA) had determined the damage was sufficient to 
declare the disaster as eligible to receive IHP funding.
    (2) Concentrated damage. HUD has limited its estimate of serious 
unmet housing need to counties and/or counties with zip codes with 
high levels of damage, collectively referred to as ``most impacted 
areas.'' For this allocation, HUD is defining most impacted areas as 
either most impacted counties--counties exceeding $10 million in 
serious unmet housing needs--and most impacted Zip Codes--Zip Codes 
with $2 million or more of serious unmet housing needs. The 
calculation of serious unmet housing needs is described below.
    For disasters that meet the most impacted threshold described 
above, the unmet need allocations are based on the following factors 
summed together:
    (1) Repair estimates for seriously damaged owner-occupied units 
without insurance (with some exceptions) in most impacted areas 
after FEMA and Small Business Administration (SBA) repair grants or 
loans;
    (2) Repair estimates for seriously damaged rental units occupied 
by very low-income renters in most impacted areas;
    (3) Repair and content loss estimates for small businesses with 
serious damage denied by SBA; and
    (4) The estimated local cost share for Public Assistance 
Category C to G projects.

Methods for Estimating Serious Unmet Needs for Housing

    The data HUD uses to calculate unmet needs for qualifying 
disasters declared between November 1, 2022 and January 30, 2023 
come from the FEMA IHP data on housing-unit damage as of April 6, 
2023 and reflect disasters occurring in 2022 and/or 2023 and 
declared after October 30, 2022 and before January 30, 2023. The New 
Mexico (DR 4652) estimates uses the same data as discussed in the 
prior Federal Register Notice for 2022 disasters (88 FR 32046).
    The core data on housing damage for both the unmet housing needs 
calculation and the concentrated damage are based on home inspection 
data for FEMA's IHP and SBA's disaster loan program. HUD calculates 
``unmet housing needs'' as the number of housing units with unmet 
needs times the estimated cost to repair those units less repair 
funds estimated to be provided by FEMA and SBA.

[[Page 82994]]

    Each of the FEMA IHP inspected owner units are categorized by 
HUD into one of five categories:
     Minor-Low: Less than $3,000 of FEMA inspected real 
property damage.
     Minor-High: $3,000 to $7,999 of FEMA inspected real 
property damage.
     Major-Low: $8,000 to $14,999 of FEMA inspected real 
property damage and/or 1 to 3.9 feet of flooding on the first floor.
     Major-High: $15,000 to $28,800 of FEMA inspected real 
property damage and/or 4 to 5.9 feet of flooding on the first floor.
     Severe: Greater than $28,800 of FEMA inspected real 
property damage or determined destroyed and/or six or more feet of 
flooding on the first floor.
    When owner-occupied properties also have a personal property 
inspection or only have a personal property inspection, HUD reviews 
the personal property damage amounts such that if the personal 
property damage places the home into a higher need category over the 
real property assessment, the personal property amount is used. The 
personal property-based need categories for owner-occupied units are 
defined as follows:
     Minor-Low: Less than $2,500 of FEMA inspected personal 
property damage.
     Minor-High: $2,500 to $3,499 of FEMA inspected personal 
property damage.
     Major-Low: $3,500 to $4,999 of FEMA inspected personal 
property damage or 1 to 3.9 feet of flooding on the first floor.
     Major-High: $5,000 to $9,000 of FEMA inspected personal 
property damage or 4 to 5.9 feet of flooding on the first floor.
     Severe: Greater than $9,000 of FEMA inspected personal 
property damage or determined destroyed and/or 6 or more feet of 
flooding on the first floor.
    To meet the statutory requirement of ``most impacted'' in this 
legislative language, homes are determined to have a high level of 
damage if they have damage of ``major-low'' or higher. That is, they 
have a FEMA inspected real property damage of $8,000 or above, 
personal property damage $3,500 or above, or flooding 1 foot or 
above on the first floor.
    Furthermore, a homeowner with flooding outside the one percent 
risk flood hazard area is determined to have unmet needs if they 
reported damage and no flood insurance to cover that damage. For 
homeowners inside the one percent risk flood hazard area, homeowners 
without flood insurance with flood damage below the greater of 
national median or 120 percent of Area Median Income are determined 
to have unmet needs. For non-flood damage, homeowners without hazard 
insurance with incomes below the greater of national median or 120 
percent of Area Median Income are included as having unmet needs. 
The unmet need categories for these types of homeowners are defined 
as above for real and personal property damage.
    FEMA IHP does not inspect rental units for real property damage 
so personal property damage is used as a proxy for unit damage. Each 
of the FEMA-inspected renter units are categorized by HUD into one 
of five categories:
     Minor-Low: Less than $1,000 of FEMA inspected personal 
property damage.
     Minor-High: $1,000 to $1,999 of FEMA inspected personal 
property damage or determination of ``Moderate'' damage by the FEMA 
inspector.
     Major-Low: $2,000 to $3,499 of FEMA inspected personal 
property damage or 1 to 3.9 feet of flooding on the first floor or 
determination of ``Major'' damage by the FEMA inspector.
     Major-High: $3,500 to $7,500 of FEMA inspected personal 
property damage or 4 to 5.9 feet of flooding on the first floor.
     Severe: Greater than $7,500 of FEMA inspected personal 
property damage or determined destroyed and/or 6 or more feet of 
flooding on the first floor or determination of ``Destroyed'' by the 
FEMA inspector.
    To meet the statutory requirement of ``most impacted'' for 
rental properties, homes are determined to have a high level of 
damage if they have damage of ``major-low'' or higher. That is, they 
have a FEMA personal property damage assessment of $2,000 or greater 
or flooding 1 foot or above on the first floor.
    Furthermore, landlords are presumed to have adequate insurance 
coverage unless the unit is occupied by a renter with income less 
than the greater of the Federal poverty level or 50 percent of the 
area median income. Units occupied by a tenant with income less than 
the greater of the poverty level or 50 percent of the area median 
income are used to calculate likely unmet needs for affordable 
rental housing.
    The average cost to fully repair a home for a specific disaster 
to code within each of the damage categories noted above is 
calculated using the median real property damage repair costs 
determined by the SBA for its disaster loan program based on a match 
comparing FEMA and SBA inspections by each of the FEMA damage 
categories described above.
    If there is a match of 20 or more SBA inspections to FEMA 
inspections for any damage category, the median damage estimate for 
the SBA properties is used less the estimated average FEMA IHP 
repair grant and average SBA disaster loan grant weighted on take-up 
rates, which are generally high for IHP and low and for SBA. Except 
that no matched multiplier can be less than the 25th percentile for 
all IHP eligible disasters combined in eligible disaster years at 
the time of the allocation calculation or more than the 75th 
percentile for all IHP eligible disasters combined with data 
available as of the allocation.
    If there is a match of fewer than 20 SBA inspections to FEMA 
inspections within individual damage categories, these multipliers 
are used which are based on the 2020 and 2021 disaster years:

------------------------------------------------------------------------
                                          Multipliers by disaster type
             Disaster type             ---------------------------------
                                        Major-low  Major-high    Severe
------------------------------------------------------------------------
Dam/Levee Break.......................    $33,007     $47,078    $47,078
Earthquake............................     27,141      33,714    134,503
Fire..................................     22,971      82,582    134,503
Flood.................................     47,074      57,856     64,513
Hurricane.............................     36,800      45,952     45,952
Severe Ice Storm......................     33,528      33,714     36,592
Severe Storm(s).......................     22,971      37,299     37,299
Tornado...............................     52,961      82,582    134,503
------------------------------------------------------------------------

    A separate multiplier is applied to mobile homes for all 
disaster types. Where there are fewer than 20 mobile homes for a 
match for a disaster, the mobile home multipliers are $49,571 for 
major-low, $60,189 for major-high, and $67,594 for severe. If there 
are 20 or more matches for a specific disaster's mobile homes, that 
specific disaster multiplier is used.

Methods for Estimating Serious Unmet Economic Revitalization Needs

    Based on SBA disaster loans to businesses using data from as of 
April 5, 2023, HUD calculates the median real estate and content 
loss by the following damage categories for each disaster:

 Category 1: real estate + content loss = below $12,000
 Category 2: real estate + content loss = $12,000-$29,999
 Category 3: real estate + content loss = $30,000-$64,999
 Category 4: real estate + content loss = $65,000-$149,999
 Category 5: real estate + content loss = $150,000 and above

    For properties with real estate and content loss of $30,000 or 
more, HUD calculates the estimated amount of unmet needs for small 
businesses by multiplying the median damage estimates for the 
categories above by the number of small businesses denied an SBA 
loan, including those denied a loan prior to inspection due to 
inadequate credit or income (or a decision had not been made), under 
the assumption that damage among those denied at pre-inspection have 
the same distribution of damage as those denied after inspection.

[[Page 82995]]

Methods for Estimating Unmet Infrastructure Needs

    To calculate unmet needs for infrastructure projects, HUD 
received FEMA cost estimates on April 6, 2023, of the expected local 
cost share to repair the permanent public infrastructure (Categories 
C to G) to their pre-storm condition.

Allocation Calculation

    Once eligible entities are identified using the above criteria, 
the allocation to individual grantees represents their proportional 
share of the estimated unmet needs. For the formula allocation, HUD 
calculates total unmet recovery needs for eligible disasters as the 
aggregate of:

 Serious unmet housing needs in most impacted and distressed 
areas;
 Serious unmet business needs; and
 Unmet infrastructure need.

    Mitigation is calculated as 15 percent of the unmet need 
calculation, and then rounded to the nearest $1,000.\3\
---------------------------------------------------------------------------

    \3\ Correction. In the Federal Register notice published on 
Thursday, May 18, 2023, at 88 FR 32046, HUD makes the following 
correction: On page 32059, in the Sub-Disaster Allocations for Local 
Governments section of appendix A, for DR 4673 FL the unmet need 
value reads as ``$100 million'' but should read as ``$125 million.''
---------------------------------------------------------------------------

Adjustments for 2022 Disaster--DR 4652 (New Mexico)

    When HUD made its March 2023 announcement for 2022 disasters, we 
had not made an allocation for the 2022 wildfires in New Mexico (DR 
4652) because of separate appropriations ($3.95 billion appropriated 
in the ``Continuing Appropriations Act, 2023,'' Public Law 117-180, 
136 Stat. 2114 (2022), and the ``Disaster Relief Supplemental 
Appropriations Act, 2023'' Public Law 117-328, 136 STAT. 4459 
(2022)) to a claims fund (the ``Hermit's Peak/Calf Canyon Fire 
Assistance Act,'' Public Law 117-180, 136 Stat. 2114 (2022)) 
administered by FEMA for the Hermit's Peak/Calf Canyon Fire which 
was the larger fire covered by DR 4652. At the time we were seeking 
more information from the state and FEMA on how those claims funds 
could be used.
    Absent the special appropriation, HUD had determined for this 
disaster $16.961 million in total unmet needs and $2.544 million in 
mitigation (15% of the unmet needs). A great deal of what HUD 
calculates for unmet needs would be covered by the claims fund.
    According to FEMA,\4\ ``covered losses will include but are not 
limited to uninsured and uncompensated property loss; business and 
financial loss; and some heightened risk reduction to minimize 
impacts from heightened risks caused by the wildfires.'' 
Individuals, businesses, non-federal government, Indian Tribes, and 
Not-for-Profit entities are eligible. (See 44 CFR part 296).
---------------------------------------------------------------------------

    \4\ https://www.fema.gov/disaster/current/hermits-peak/
frequently-asked-
questions#:~:text=An%20additional%20%241.45%20billion%20was,business 
%20loss%20or%20financial%20loss.
---------------------------------------------------------------------------

    According to 44 CFR 296.21, claims can be made for:

 Loss of property (examples: property loss, decrease in 
value of real property, damage to physical infrastructure, lost 
subsistence, cost reforestation, other.)
 Business loss (examples: damage to tangible assets or 
inventory, business interruption loss, overhead, employee wages, 
loss of business net income, other.)
 Financial loss (examples: increased mortgage interest cost, 
insurance deductible, temporary living or relocation expenses, lost 
wages or personal income, emergency staffing, debris removal and 
clean-up, other.)
 Personal injury (examples: general damages, medical 
expenses, injury-related lost wages/personal income

    But there are items that are not eligible under the claims fund, 
including replacing lost affordable rental housing, business and 
infrastructure needs outside of the Hermits Peak/Calf Canyon fire 
claims fund area, and mitigation. As such, HUD has calculated this 
grant as the total unmet needs $16.961 million, plus mitigation 
based on the total unmet needs (15% of $16.961 million = $2.544 
million), less the amount expected to be covered by the claims fund 
$15.374 million, resulting in an allocation of $4.131 million.

Pro-Rata Allocation for January 2023 Disasters

    Consistent with long-standing practice when unmet needs for 
CDBG-DR exceed funding available, the allocation among eligible 
grantees is made proportionally. That is, the overall amount 
available--$138.020 million in funding--is divided by the total 
estimated unmet need and mitigation for the three disasters--
$241.728 million to arrive at 57.1%. Each of the three grantees is 
being allocated 57.1 percent of their unmet needs and mitigation 
rounded to the nearest $1,000.

Appendix B--The Consolidated Notice

CDBG-DR Consolidated Notice Waivers and Alternative Requirements

Table of Contents

I. Waivers and Alternative Requirements
II. Eligible Activities
    A. Clarification of Disaster-Related Activities
    B. Housing and Related Floodplain Issues
    C. Infrastructure (Public Facilities, Public Improvements)
    D. Economic Revitalization
III. Grant Administration
    A. Pre-Award Evaluation of Management and Oversight of Funds
    B. Administration, Planning, and Financial Management
    C. Action Plan for Disaster Recovery Waiver and Alternative 
Requirement
    D. Citizen Participation Requirements
    E. Program Income
    F. Other General Waivers and Alternative Requirements
    G. Ineligible Activities in CDBG-DR
IV. Other Program Requirements
    A. Duplication of Benefits
    B. Procurement
    C. Use of the ``Upper Quartile'' or ``Exception Criteria''
    D. Environmental Requirements
    E. Flood Insurance Requirements
    F. URA, Section 104(d) and Related CDBG Program Requirements
V. Performance Reviews
    A. Timely Distribution and Expenditure of Funds
    B. HUD's Review of Continuing Capacity
    C. Grantee Reporting Requirements in the DRGR System

I. Waivers and Alternative Requirements

    CDBG-DR grantees that are subject to this Consolidated Notice, 
as indicated in each Federal Register notice that announces 
allocations of the appropriated CDBG-DR funds (``Allocation 
Announcement Notice''), must comply with all waivers and alternative 
requirements in the Consolidated Notice, unless expressly made 
inapplicable (e.g., a waiver that applies to states only does not 
apply to units of general local governments and Indian tribes). 
Except as described in applicable waivers and alternative 
requirements, the statutory and regulatory provisions governing the 
CDBG program (and for Indian tribes, the Indian CDBG program) shall 
apply to grantees receiving a CDBG-DR allocation. Statutory 
provisions (title I of the HCDA) that apply to all grantees can be 
found at 42 U.S.C. 5301 et seq. and regulatory requirements, which 
differ for each type of grantee, are described in each of the three 
paragraphs below.
    Except as modified, the State CDBG program rules shall apply to 
state grantees receiving a CDBG-DR allocation. Applicable State CDBG 
program regulations are found at 24 CFR part 570, subpart I. For 
insular areas, HUD waives the provisions of 24 CFR part 570, subpart 
F and imposes the following alternative requirement: Insular areas 
shall administer their CDBG-DR allocations in accordance with the 
regulatory and statutory provisions governing the State CDBG 
program, as modified by the Consolidated Notice.
    Except as modified, statutory and regulatory provisions 
governing the Entitlement CDBG Program shall apply to unit of 
general local government grantees (often referred to as local 
government grantees in appropriations acts). Applicable Entitlement 
CDBG Program regulations are found at 24 CFR part 570, as described 
in Sec.  570.1(a).
    Except as modified, CDBG-DR grants made by HUD to Indian tribes 
shall be subject to the statutory provisions in title I of the HCDA 
that apply to Indian tribes and the regulations in 24 CFR part 1003 
governing the Indian CDBG program, except those requirements in part 
1003 related to the funding application and selection process.
    References to the action plan in the above regulations shall 
refer to the action plan required by the Consolidated Notice and not 
to the consolidated plan action plan required by 24 CFR part 91. All 
references pertaining to timelines and/or deadlines are in terms of 
calendar days unless otherwise noted.

II. Eligible Activities

II.A. Clarification of Disaster-Related Activities

    CDBG-DR funds are provided for necessary expenses for activities 
authorized under title I of the HCDA related to disaster relief, 
long-term recovery, restoration of infrastructure and housing, 
economic revitalization, and

[[Page 82996]]

mitigation of risk associated with activities carried out for these 
purposes, in the ``most impacted and distressed'' areas (identified 
by HUD or the grantee) resulting from a major disaster. All CDBG-DR 
funded activities must address an impact of the disaster for which 
funding was allocated. Accordingly, each activity must: (1) address 
a direct or indirect impact from the disaster in a most impacted and 
distressed area; (2) be a CDBG-eligible activity (or be eligible 
under a waiver or alternative requirement); and (3) meet a national 
objective. When appropriations acts provide an additional allocation 
amount for mitigation of hazard risks that does not require a 
connection to the qualifying major disaster, requirements for the 
use of those funds will be included in the Allocation Announcement 
Notice.
    II.A.1. Documenting a Connection to the Disaster. Grantees must 
maintain records that document how each funded activity addresses a 
direct or indirect impact from the disaster. Grantees may do this by 
linking activities to a disaster recovery need that is described in 
the impact and unmet needs assessment in the action plan 
(requirements for the assessment are addressed in section 
III.C.1.a.). Sufficient documentation of physical loss must include 
damage or rebuilding estimates, insurance loss reports, images, or 
similar information that documents damage caused by the disaster. 
Sufficient documentation for non-physical disaster-related impacts 
must clearly show how the activity addresses the disaster impact, 
e.g., for economic development activities, data about job loss or 
businesses closing after the disaster or data showing how pre-
disaster economic stressors were aggravated by the disaster; or for 
housing activities, a post-disaster housing analysis that describes 
the activities that are necessary to address the post-disaster 
housing needs.
    II.A.2. Resilience and hazard mitigation. The Consolidated 
Notice will help to improve long-term community resilience by 
requiring grantees to fully incorporate mitigation measures that 
will protect the public, including members of protected classes, 
vulnerable populations, and underserved communities, from the risks 
identified by the grantee among other vulnerabilities. This approach 
will better ensure the revitalization of the community long after 
the recovery projects are complete.
    Accordingly, HUD is adopting the following alternative 
requirement to section 105(a): Grantees may carry out the activities 
described in section 105(a), as modified by waivers and alternative 
requirements, to the extent that the activities comply with the 
following:
    II.A.2.a. Alignment with mitigation plans. Grantees must ensure 
that the mitigation measures identified in their action plan will 
align with existing hazard mitigation plans submitted to the Federal 
Emergency Management Agency (FEMA) under section 322 of the Robert 
T. Stafford Disaster Relief and Emergency Assistance Act (42 U.S.C. 
5165) or other state, local, or tribal hazard mitigation plans.
    II.A.2.b. Mitigation measures. Grantees must incorporate 
mitigation measures when carrying out activities to construct, 
reconstruct, or rehabilitate residential or non-residential 
structures with CDBG-DR funds as part of activities eligible under 
42 U.S.C. 5305(a) (including activities authorized by waiver and 
alternative requirement). To meet this alternative requirement, 
grantees must demonstrate that they have incorporated mitigation 
measures into CDBG-DR activities as a construction standard to 
create communities that are more resilient to the impacts of 
recurring natural disasters and the impacts of climate change. When 
determining which mitigation measures to incorporate, grantees 
should design and construct structures to withstand existing and 
future climate impacts expected to occur over the service life of 
the project.
    II.A.2.c. Resilience performance metrics. Before carrying out 
CDBG-DR funded activities to construct, reconstruct, or rehabilitate 
residential or non-residential structures, the grantee must 
establish resilience performance metrics for the activity, 
including: (1) an estimate of the projected risk to the completed 
activity from natural hazards, including those hazards that are 
influenced by climate change (e.g., high winds destroying newly 
built homes), (2) identification of the mitigation measures that 
will address the projected risks (e.g., using building materials 
that are able to withstand high winds), and (3) an assessment of the 
benefit of the grantee's measures through verifiable data (e.g., 10 
newly built homes will withstand high winds up to 100 mph).
    II.A.3. Most impacted and distressed (MID) areas. Funds must be 
used for costs related to unmet needs in the MID areas resulting 
from qualifying disasters. HUD allocates funds using the best 
available data that cover the eligible affected areas and identifies 
MID areas. Grantees are required to use 80 percent of all CDBG-DR 
funds to benefit the HUD-identified MID areas. The HUD-identified 
MID areas and the minimum dollar amount that must be spent to 
benefit those areas will be identified for each grantee in the 
applicable Allocation Announcement Notice. If a grantee seeks to add 
other areas to the HUD-identified MID area, the grantee must contact 
its CPD Representative or CPD Specialist and submit the request with 
a data-driven analysis that illustrates the basis for designating 
the additional area as most impacted and distressed as a result of 
the qualifying disaster.
    Grantees may use up to five percent of the total grant award for 
grant administration. Therefore, HUD will include 80 percent of a 
grantee's expenditures for grant administration in its determination 
that 80 percent of the total award has benefited the HUD-identified 
MID area. Expenditures for planning activities may also be counted 
towards the HUD-identified MID area requirement, if the grantee 
describes in its action plan how those planning activities benefit 
those areas.
    HUD may identify an entire jurisdiction or a ZIP code as a MID 
area. If HUD designates a ZIP code as a MID area for the purposes of 
allocating funds, the grantee may expand program operations to the 
whole county or counties that overlap with the HUD designated ZIP 
code. A grantee must indicate the decision to expand eligibility to 
the whole county or counties in its action plan.
    Grantees must determine where to use the remaining amount of the 
CDBG-DR grant, but that portion of the allocation may only be used 
to address unmet needs and that benefit those areas that the grantee 
determines are most impacted and distressed (``grantee-identified 
MID areas'') within areas that received a presidential major 
disaster declaration identified by the disaster numbers listed in 
the applicable Allocation Announcement Notice. The grantee must use 
quantifiable and verifiable data in its analysis, as referenced in 
its action plan, to identify the MID areas where it will use the 
remaining amount of CDBG-DR funds.
    Grantee expenditures for eligible unmet needs outside of the 
HUD-identified or grantee-identified MID areas are allowable, 
provided that the grantee can demonstrate how the expenditure of 
CDBG-DR funds outside of the MID areas will address unmet needs 
identified within the HUD-identified or grantee-identified MID area 
(e.g., upstream water retention projects to reduce downstream 
flooding in the HUD-identified MID area).

II.B. Housing Activities and Related Floodplain Issues

    Grantees may use CDBG-DR funds for activities that may include, 
but are not limited to, new construction, reconstruction, and 
rehabilitation of single-family or multifamily housing, 
homeownership assistance, buyouts, and rental assistance. The 
broadening of eligible CDBG-DR activities related to housing under 
the HCDA is necessary following major disasters in which housing, 
including large numbers of affordable housing units, have been 
damaged or destroyed. The following waivers and alternative 
requirements will assist grantees in addressing the full range of 
unmet housing needs arising from a disaster.
    II.B.1. New housing construction waiver and alternative 
requirement. 42 U.S.C. 5305(a) and 24 CFR 570.207(b)(3) are waived 
to the extent necessary to permit new housing construction, subject 
to the following alternative requirement. When a CDBG-DR grantee 
carries out a new housing construction activity, 24 CFR 570.202 
shall apply and shall be read to extend to new construction in 
addition to rehabilitation assistance. Private individuals and 
entities must remain compliant with federal accessibility 
requirements as well as with the applicable site selection 
requirements of 24 CFR 1.4(b)(3) and 8.4(b)(5).
    II.B.2. Construction standards for new construction, 
reconstruction, and rehabilitation. HUD is adopting an alternative 
requirement to require grantees to adhere to the applicable 
construction standards in II.B.2.a. through II.B.2.d. when carrying 
out activities to construct, reconstruct, or rehabilitate 
residential structures with CDBG-DR funds as part of activities 
eligible under 42 U.S.C. 5305(a) (including activities authorized by 
waiver and alternative requirement). For purposes of the 
Consolidated Notice, the terms ``substantial damage'' and 
``substantial improvement'' shall be as defined in 44 CFR 59.1 
unless otherwise noted.
    II.B.2.a. Green and resilient building standard for new 
construction and

[[Page 82997]]

reconstruction of housing. Grantees must meet the Green and 
Resilient Building Standard, as defined in this subparagraph, for: 
(i) all new construction and reconstruction (i.e., demolishing a 
housing unit and rebuilding it on the same lot in substantially the 
same manner) of residential buildings and (ii) all rehabilitation 
activities of substantially damaged residential buildings, including 
changes to structural elements such as flooring systems, columns, or 
load-bearing interior or exterior walls.
    The Green and Resilient Building Standard requires that all 
construction covered by the paragraph above and assisted with CDBG-
DR funds meet an industry-recognized standard that has achieved 
certification under (i) Enterprise Green Communities; (ii) LEED (New 
Construction, Homes, Midrise, Existing Buildings Operations and 
Maintenance, or Neighborhood Development); (iii) ICC-700 National 
Green Building Standard Green+ Resilience; (iv) Living Building 
Challenge; or (v) any other equivalent comprehensive green building 
program acceptable to HUD. Additionally, all such covered 
construction must achieve a minimum energy efficiency standard, such 
as (i) ENERGY STAR (Certified Homes or Multifamily High-Rise); (ii) 
DOE Zero Energy Ready Home; (iii) EarthCraft House, EarthCraft 
Multifamily; (iv) Passive House Institute Passive Building or 
EnerPHit certification from the Passive House Institute US (PHIUS), 
International Passive House Association; (v) Greenpoint Rated New 
Home, Greenpoint Rated Existing Home (Whole House or Whole Building 
label); (vi) Earth Advantage New Homes; or (vii) any other 
equivalent energy efficiency standard acceptable to HUD. Grantees 
must identify, in each project file, which of these Green and 
Resilient Building Standards will be used for any building subject 
to this paragraph. However, grantees are not required to use the 
same standards for each project or building.
    II.B.2.b. Standards for rehabilitation of nonsubstantially 
damaged residential buildings. For rehabilitation other than the 
rehabilitation of substantially damaged residential buildings 
described in section II.B.2.a. above, grantees must follow the 
guidelines specified in the HUD CPD Green Building Retrofit 
Checklist.
    Grantees must apply these guidelines to the extent applicable 
for the rehabilitation work undertaken, for example, the use of mold 
resistant products when replacing surfaces such as drywall. Products 
and appliances replaced as part of the rehabilitation work, must be 
ENERGY STAR-labeled, WaterSense-labeled, or Federal Energy 
Management Program (FEMP)-designated products or appliances.
    II.B.2.c. Elevation standards for new construction, 
reconstruction, and rehabilitation of substantial damage, or 
rehabilitation resulting in substantial improvements. The following 
elevation standards apply to new construction, rehabilitation of 
substantial damage, or rehabilitation resulting in substantial 
improvement of residential structures located in an area delineated 
as a special flood hazard area or equivalent in FEMA's data sources. 
24 CFR 55.2(b)(1) provides additional information on data sources, 
which apply to all floodplain designations. All structures, defined 
at 44 CFR 59.1, designed principally for residential use, and 
located in the one percent annual chance (or 100-year) floodplain, 
that receive assistance for new construction, reconstruction, 
rehabilitation of substantial damage, or rehabilitation that results 
in substantial improvement, as defined at 24 CFR 55.2(b)(10), must 
be elevated with the lowest floor, including the basement, at least 
two feet above the one percent annual chance floodplain elevation 
(base flood elevation). Mixed-use structures with no dwelling units 
and no residents below two feet above base flood elevation, must be 
elevated or floodproofed, in accordance with FEMA floodproofing 
standards at 44 CFR 60.3(c)(3)(ii) or successor standard, up to at 
least two feet above base flood elevation.
    All Critical Actions, as defined at 24 CFR 55.2(b)(3), within 
the 500-year (or 0.2 percent annual chance) floodplain must be 
elevated or floodproofed (in accordance with FEMA floodproofing 
standards at 44 CFR 60.3(c)(2) and (3) or successor standard) to the 
higher of the 500-year floodplain elevation or three feet above the 
100-year floodplain elevation. If the 500-year floodplain is 
unavailable, and the Critical Action is in the 100-year floodplain, 
then the structure must be elevated or floodproofed (in accordance 
with FEMA floodproofing standards at 44 CFR 60.3(c)(2) and (3) or 
successor standard) at least three feet above the 100-year 
floodplain elevation. Critical Actions are defined as ``any activity 
for which even a slight chance of flooding would be too great, 
because such flooding might result in loss of life, injury to 
persons or damage to property.'' For example, Critical Actions 
include hospitals, nursing homes, emergency shelters, police 
stations, fire stations, and principal utility lines.
    In addition to other requirements in this section, grantees must 
comply with applicable state, local, and tribal codes and standards 
for floodplain management, including elevation, setbacks, and 
cumulative substantial damage requirements. Grantees using CDBG-DR 
funds as the non-Federal match in a FEMA-funded project may apply 
the alternative requirement for the elevation of structures 
described in section III.F.6. Structures that are elevated must meet 
federal accessibility standards.
    II.B.2.d. Broadband infrastructure in housing. Any substantial 
rehabilitation, as defined by 24 CFR 5.100, reconstruction, or new 
construction of a building with more than four rental units must 
include installation of broadband infrastructure, except where the 
grantee documents that: (i) the location of the new construction or 
substantial rehabilitation makes installation of broadband 
infrastructure infeasible; (ii) the cost of installing broadband 
infrastructure would result in a fundamental alteration in the 
nature of its program or activity, or in an undue financial burden; 
or (iii) the structure of the housing to be substantially 
rehabilitated makes installation of broadband infrastructure 
infeasible.
    II.B.3. Applicable affordability periods for new construction of 
affordable rental housing. To meet the low- and moderate-income 
housing national objective, rental housing assisted with CDBG-DR 
funds must be rented to low- and moderate-income (LMI) households at 
affordable rents, and a grantee must define ``affordable rents'' in 
its action plan. Because the waiver and alternative requirement in 
II.B.1. authorizes the use of grant funds for new housing 
construction, HUD is imposing the following alternative requirement 
to modify the low- and moderate-income housing national objective 
criteria in 24 CFR 570.208(a)(3) and 570.483(b)(3) for activities 
involving the new construction of affordable rental housing of five 
or more units. For activities that will construct five or more 
units, in addition to other applicable criteria in 24 CFR 
570.208(a)(3) and 570.483(b)(3), in its action plan, a grantee must 
define the affordability standards, including ``affordable rents,'' 
the enforcement mechanisms, and applicable timeframes, that will 
apply to the new construction of affordable rental housing, i.e., 
when the activity will result in construction of five or more units, 
the affordability requirements described in the action plan apply to 
the units that will be occupied by LMI households. The minimum 
timeframes and other related requirements acceptable for compliance 
with this alternative requirement are the HOME Investment 
Partnerships Program (HOME) requirements at 24 CFR 92.252(e), 
including the table listing the affordability periods at the end of 
24 CFR 92.252(e). Therefore, the grantee must adopt and implement 
enforceable affordability standards that comply with or exceed 
requirements at 24 CFR 92.252(e)(1) for the new construction of 
affordable rental housing in structures containing five or more 
units.
    II.B.4. Affordability period for new construction of homes built 
for LMI households. In addition to alternative requirements in 
II.B.1., the following alternative requirement applies to activities 
to construct new single-family units for homeownership that will 
meet the LMI housing national objective criteria. Grantees must 
establish affordability restrictions on all newly constructed 
single-family housing (for purposes of the Consolidated Notice, 
single-family housing is defined as four units or less), that, upon 
completion, will be purchased and occupied by LMI homeowners. The 
minimum affordability period acceptable for compliance are the HOME 
requirements at 24 CFR 92.254(a)(4). If a grantee applies other 
standards, the periods of affordability applied by a grantee must 
meet or exceed the applicable HOME requirements in 24 CFR 
92.254(a)(4) and the table of affordability periods directly 
following that provision. Grantees shall establish resale or 
recapture requirements for housing funded pursuant to this paragraph 
and shall describe those requirements in the action plan or 
substantial amendment in which the activity is proposed. The resale 
or recapture requirements must clearly describe the terms of resale 
or recapture and the specific circumstances under which resale or 
recapture will be used. Affordability restrictions must be 
enforceable and imposed by recorded deed restrictions, covenants, or 
other similar mechanisms. The affordability restrictions, including 
the affordability

[[Page 82998]]

period requirements in this paragraph do not apply to housing units 
newly constructed or reconstructed for an owner-occupant to replace 
the owner-occupant's home that was damaged by the disaster.
    II.B.5. Homeownership assistance waiver and alternative 
requirement. 42 U.S.C. 5305(a)(24) is waived and replaced with the 
following alternative requirement:
    ``Provision of direct assistance to facilitate and expand 
homeownership among persons at or below 120 percent of area median 
income (except that such assistance shall not be considered a public 
service for purposes of 42 U.S.C. 5305(a)(8)) by using such 
assistance to--
    (A) subsidize interest rates and mortgage principal amounts for 
homebuyers with incomes at or below 120 percent of area median 
income;
    (B) finance the acquisition of housing by homebuyers with 
incomes at or below 120 percent of area median income that is 
occupied by the homebuyers;
    (C) acquire guarantees for mortgage financing obtained by 
homebuyers with incomes at or below 120 percent of area median 
income from private lenders, meaning that if a private lender 
selected by the homebuyer offers a guarantee of the mortgage 
financing, the grantee may purchase the guarantee to ensure 
repayment in case of default by the homebuyer. This subparagraph 
allows the purchase of mortgage insurance by the household but not 
the direct issuance of mortgage insurance by the grantee;
    (D) provide up to 100 percent of any down payment required from 
homebuyers with incomes at or below 120 percent of area median 
income; or
    (E) pay reasonable closing costs (normally associated with the 
purchase of a home) incurred by homebuyers with incomes at or below 
120 percent of area median income.''
    While homeownership assistance, as described above, may be 
provided to households with incomes at or below 120 percent of the 
area median income, HUD will only consider those funds used for 
households with incomes at or below 80 percent of the area median 
income to qualify as meeting the LMI person benefit national 
objective.
    II.B.6. Limitation on emergency grant payments--interim mortgage 
assistance. 42 U.S.C. 5305(a)(8), 24 CFR 570.201(e), 24 CFR 
570.207(b)(4), and 24 CFR 1003.207(b)(4) are modified to extend 
interim mortgage assistance (IMA) to qualified individuals from 
three months to up to twenty months. IMA must be used in conjunction 
with a buyout program, or the rehabilitation or reconstruction of 
single-family housing, during which mortgage payments may be due but 
the home is not habitable. A grantee using this alternative 
requirement must document, in its policies and procedures, how it 
will determine that the amount of assistance to be provided is 
necessary and reasonable.
    II.B.7. Buyout activities. CDBG-DR grantees may carry out 
property acquisition for a variety of purposes, but buyouts are a 
type of acquisition for the specific purpose of reducing the risk of 
property damage. HUD has determined that creating a new activity and 
alternative requirement for buyouts is necessary for consistency 
with the application of other Federal resources commonly used for 
this type of activity. Therefore, HUD is waiving 42 U.S.C. 5305(a) 
and establishing an alternative requirement only to the extent 
necessary to create a new eligible activity for buyouts. The term 
``buyouts'' means the acquisition of properties located in a 
floodway, floodplain, or other Disaster Risk Reduction Area that is 
intended to reduce risk from future hazards. Grantees can designate 
a Disaster Risk Reduction Area, as defined below.
    Grantees carrying out buyout activities must establish an open 
space management plan or equivalent, if one has not already been 
established, before implementation. The plan must establish full 
transparency about the planned use of acquired properties post-
buyout, or the process by which the planned use will be determined 
and enforced.
    Buyout activities are subject to all requirements that apply to 
acquisition activities generally including but not limited to, the 
Uniform Relocation Assistance and Real Property Acquisition Policies 
Act of 1970 (URA) (42 U.S.C. 4601, et seq.) and its implementing 
regulations at 49 CFR part 24, subpart B, unless waived or modified 
by alternative requirements. Only acquisitions that meet the 
definition of a ``buyout'' are subject to the post-acquisition land 
use restrictions imposed by the alternative requirement (II.B.7.a. 
below). The key factor in determining whether the acquisition is a 
buyout is whether the intent of the purchase is to reduce risk of 
property damage from future flooding or other hazards in a floodway, 
floodplain, or a Disaster Risk Reduction Area. A grantee that will 
buyout properties in a Disaster Risk Reduction Area must establish 
criteria in its policies and procedures to designate an area as a 
Disaster Risk Reduction Area for the buyout, pursuant to the 
following requirements:
    (1) the area has been impacted by the hazard that has been 
caused or exacerbated by the disaster for which the grantee received 
its CDBG-DR allocation;
    (2) the hazard identified must be a predictable environmental 
threat to the safety and well-being of program beneficiaries, 
including members of protected classes, vulnerable populations, and 
underserved communities, as evidenced by the best available data 
(e.g., FEMA Repetitive Loss Data, EPA's Environmental Justice 
Screening and Mapping Tool, HHS's climate change related guidance 
and data, etc.) and science (such as engineering and structural 
solutions propounded by FEMA, USACE, other federal agencies, etc.); 
and
    (3) the area must be clearly delineated so that HUD and the 
public may easily determine which properties are located within the 
designated area.
    Grantees may only redevelop an acquired property if the property 
is not acquired through a buyout program (i.e., the purpose of 
acquisition was something other than risk reduction). When 
acquisitions are not acquired through a buyout program, the purchase 
price must be consistent with 2 CFR part 200, subpart E--Cost 
Principles (``cost principles'') and the pre-disaster fair market 
value may not be used.
    II.B.7.a. Buyout requirements:
    (i) Property to be acquired or accepted must be located within a 
floodway, floodplain, or Disaster Risk Reduction Area.
    (ii) Any property acquired or accepted must be dedicated and 
maintained in perpetuity for a use that is compatible with open 
space, recreational, floodplain and wetlands management practices, 
or other disaster-risk reduction practices.
    (iii) No new structure will be erected on property acquired or 
accepted under the buyout program other than:
    (a) a public facility that is open on all sides and functionally 
related to a designated open space (e.g., a park, campground, or 
outdoor recreation area);
    (b) a restroom; or
    (c) a flood control structure, provided that:
    (1) the structure does not reduce valley storage, increase 
erosive velocities, or increase flood heights on the opposite bank, 
upstream, or downstream; and
    (2) the local floodplain manager approves the structure, in 
writing, before commencement of construction of the structure.
    (iv) After the purchase of a buyout property with CDBG-DR funds, 
the owner of the buyout property (including subsequent owners) is 
prohibited from making any applications to any Federal entity in 
perpetuity for additional disaster assistance for any purpose 
related to the property acquired through the CDBG-DR funded buyout, 
unless the assistance is for an allowed use as described in 
paragraph (ii) above. The entity acquiring the property may lease or 
sell it to adjacent property owners or other parties for compatible 
uses that comply with buyout requirements in return for a 
maintenance agreement.
    (v) A deed restriction or covenant running with the property 
must require that the buyout property be dedicated and maintained 
for compatible uses that comply with buyout requirements in 
perpetuity.
    (vi) Grantees must choose from one of two valuation methods 
(pre-disaster value or post-disaster value) for a buyout program (or 
a single buyout activity). The grantee must apply its valuation 
method for all buyouts carried out under the program. If the grantee 
determines the post-disaster value of a property is higher than the 
pre-disaster value, a grantee may provide exceptions to its 
established valuation method on a case-by-case basis. The grantee 
must describe the process for such exceptions and how it will 
analyze the circumstances to permit an exception in its buyout 
policies and procedures. Each grantee must adopt policies and 
procedures on how it will demonstrate that the amount of assistance 
for a buyout is necessary and reasonable.
    (vii) All buyout activities must be classified using the 
``buyout'' activity type in the Disaster Recovery and Grant 
Reporting (DRGR) system.
    (viii) Any state grantee implementing a buyout program or 
activity must consult with local or tribal governments within the 
areas in which buyouts will occur.
    II.B.8. Safe housing incentives in disaster-affected 
communities.

[[Page 82999]]

    The limitation on eligible activities in section 42 U.S.C. 
5305(a) is waived and HUD is establishing the following alternative 
requirement to establish safe housing incentives as an eligible 
activity. A safe housing incentive is any incentive provided to 
encourage households to relocate to suitable housing in a lower risk 
area or in an area promoted by the community's comprehensive 
recovery plan. Displaced persons must receive any relocation 
assistance to which they are entitled under other legal authorities, 
such as the URA, section 104(d) of the HCDA, or those described in 
the Consolidated Notice. The grantee may offer safe housing 
incentives in addition to the relocation assistance that is legally 
required.
    Grantees must maintain documentation, at least at a programmatic 
level, describing how the grantee determined the amount of 
assistance for the incentive was necessary and reasonable, how the 
incentive meets a national objective, and that the incentives are in 
accordance with the grantee's approved action plan and published 
program design(s). A grantee may require the safe housing incentive 
to be used for a particular purpose by the household receiving the 
assistance. However, this waiver does not permit a compensation 
program meaning that funds may not be provided to a beneficiary to 
compensate the beneficiary for an estimated or actual amount of loss 
from the declared disaster. Grantees are prohibited from offering 
housing incentives to a homeowner as an incentive to induce the 
homeowner to sell a second home, consistent with the prohibition and 
definition of second home in section II.B.12.
    II.B.9. National objectives for buyouts and safe housing 
incentives.
    Activities that assist LMI persons and meet the criteria for the 
national objectives described below, including in II.B.10., will be 
considered to benefit LMI persons unless there is substantial 
evidence to the contrary and will count towards the calculation of a 
grantee's overall LMI benefit requirement as described in section 
III.F.2. The grantee shall appropriately ensure that activities that 
meet the criteria for any of the national objectives below do not 
benefit moderate-income persons to the exclusion of low-income 
persons.
    When undertaking buyout activities, to demonstrate that a buyout 
meets the low- and moderate-income housing (LMH) national objective, 
grantees must meet all requirements of the HCDA, and applicable 
regulatory criteria described below. 42 U.S.C. 5305(c)(3) provides 
that any assisted activity that involves the acquisition of property 
to provide housing shall be considered to benefit LMI persons only 
to the extent such housing will, upon completion, be occupied by 
such persons. In addition, 24 CFR 570.483(b)(3), 24 CFR 
570.208(a)(3), and 24 CFR 1003.208(c) apply the LMH national 
objective to an eligible activity carried out for the purpose of 
providing or improving permanent residential structures that, upon 
completion, will be occupied by LMI households.
    A buyout program that merely pays homeowners to leave their 
existing homes does not guarantee that those homeowners will occupy 
a new residential structure. Therefore, acquisition-only buyout 
programs cannot satisfy the LMH national objective criteria.
    To meet a national objective that benefits a LMI person, buyout 
programs can be structured in one of the following ways:
    (1) The buyout activity combines the acquisition of properties 
with another direct benefit--LMI housing activity, such as down 
payment assistance--that results in occupancy and otherwise meets 
the applicable LMH national objective criteria;
    (2) The activity meets the low- and moderate-income area (LMA) 
benefit criteria and documents that the acquired properties will 
have a use that benefits all the residents in a particular area that 
is primarily residential, where at least 51 percent of the residents 
are LMI persons. Grantees covered by the ``exception criteria'' as 
described in section IV.C. of the Consolidated Notice may apply it 
to these activities. To satisfy LMA criteria, grantees must define 
the service area based on the end use of the buyout properties; or
    (3) The program meets the criteria for the low- and moderate-
income limited clientele (LMC) national objective by restricting 
buyout program eligibility to exclusively LMI persons and benefiting 
LMI sellers by acquiring their properties for more than current fair 
market value (in accordance with the valuation requirements in 
section II.B.7.a.(vi)).
    II.B.10. For LMI Safe Housing Incentive (LMHI). The following 
alternative requirement establishes new LMI national objective 
criteria that apply to safe housing incentive (LMHI) activities that 
benefit LMI households. HUD has determined that providing CDBG-DR 
grantees with an additional method to demonstrate how safe housing 
incentive activities benefit LMI households will ensure that 
grantees and HUD can account for and assess the benefit that CDBG-DR 
assistance for these activities has on LMI households.
    The LMHI national objective may be used when a grantee uses 
CDBG-DR funds to carry out a safe housing incentive activity that 
benefits one or more LMI persons. To meet the LMHI national 
objective, the incentive must be a.) tied to the voluntary 
acquisition of housing (including buyouts) owned by a qualifying LMI 
household and made to induce a move outside of the affected 
floodplain or disaster risk reduction area to a lower-risk area or 
structure; or b.) for the purpose of providing or improving 
residential structures that, upon completion, will be occupied by a 
qualifying LMI household and will be in a lower risk area.
    II.B.11. Redevelopment of acquired properties. Although 
properties acquired through a buyout program may not be redeveloped, 
grantees may redevelop other acquired properties. For non-buyout 
acquisitions, HUD has not permitted the grantee to base acquisition 
cost on pre-disaster fair market value. The acquisition cost must 
comply with applicable cost principles and with the acquisition 
requirements at 49 CFR part 24, subpart B, as revised by the 
Consolidated Notice waivers and alternative requirements. In 
addition to the purchase price, grantees may opt to provide optional 
relocation assistance, as allowable under Section 104 and 105 of the 
HCDA (42 U.S.C. 5304 and 42 U.S.C. 5305) and 24 CFR 570.606(d), and 
as expanded by section IV.F.5. of the Consolidated Notice, to the 
owner of a property that will be redeveloped if: a.) the property is 
purchased by the grantee or subrecipient through voluntary 
acquisition; and b.) the owner's need for additional assistance is 
documented. Any optional relocation assistance must provide equal 
relocation assistance within each class of displaced persons, 
including but not limited to providing reasonable accommodation 
exceptions to persons with disabilities. See 24 CFR 570.606(d) for 
more information on optional relocation assistance. In addition, 
tenants displaced by these voluntary acquisitions may be eligible 
for URA relocation assistance. In carrying out acquisition 
activities, grantees must ensure they are in compliance with the 
long-term redevelopment plans of the community in which the 
acquisition and redevelopment is to occur.
    II.B.12. Alternative requirement for housing rehabilitation--
assistance for second homes. HUD is instituting an alternative 
requirement to the rehabilitation provisions at 42 U.S.C. 5305(a)(4) 
as follows: properties that served as second homes at the time of 
the disaster, or following the disaster, are not eligible for 
rehabilitation assistance or safe housing incentives. This 
prohibition does not apply to acquisitions that meet the definition 
of a buyout. A second home is defined for purposes of the 
Consolidated Notice as a home that is not the primary residence of 
the owner, a tenant, or any occupant at the time of the disaster or 
at the time of application for CDBG-DR assistance. Grantees can 
verify a primary residence using a variety of documentation 
including, but not limited to, voter registration cards, tax 
returns, homestead exemptions, driver's licenses, and rental 
agreements. Acquisition of second homes at post-disaster fair market 
value is not prohibited.

II.C. Infrastructure (Public Facilities, Public Improvements), 
Match, and Elevation of Non-Residential Structures

    HUD is adopting an alternative requirement to require grantees 
to adhere to the applicable construction standards and requirements 
in II.C.1., II.C.2. and II.C.4., which apply only to those eligible 
activities described in those paragraphs.
    II.C.1. Infrastructure planning and design. All newly 
constructed infrastructure that is assisted with CDBG-DR funds must 
be designed and constructed to withstand extreme weather events and 
the impacts of climate change. To satisfy this requirement, the 
grantee must identify and implement resilience performance metrics 
as described in section II.A.2.
    For purposes of this requirement, an infrastructure activity 
includes any activity or group of activities (including acquisition 
or site or other improvements), whether carried out on public or 
private land, that assists the development of the physical assets

[[Page 83000]]

that are designed to provide or support services to the general 
public in the following sectors: Surface transportation, including 
roadways, bridges, railroads, and transit; aviation; ports, 
including navigational channels; water resources projects; energy 
production and generation, including from renewable, nuclear, and 
hydro sources; electricity transmission; broadband; pipelines; 
stormwater and sewer infrastructure; drinking water infrastructure; 
schools, hospitals, and housing shelters; and other sectors as may 
be determined by the Federal Permitting Improvement Steering 
Council. For purposes of this requirement, an activity that falls 
within this definition is an infrastructure activity regardless of 
whether it is carried out under sections 105(a)(2), 105(a)(4), 
105(a)(14), another section of the HCDA, or a waiver or alternative 
requirement established by HUD. Action plan requirements related to 
infrastructure activities are found in section III.C.1.e. of the 
Consolidated Notice.
    II.C.2. Elevation of nonresidential structure. Nonresidential 
structures, including infrastructure, assisted with CDBG-DR funds 
must be elevated to the standards described in this paragraph or 
floodproofed, in accordance with FEMA floodproofing standards at 44 
CFR 60.3(c)(3)(ii) or successor standard, up to at least two feet 
above the 100-year (or one percent annual chance) floodplain. All 
Critical Actions, as defined at 24 CFR 55.2(b)(3), within the 500-
year (or 0.2 percent annual chance) floodplain must be elevated or 
floodproofed (in accordance with FEMA floodproofing standards at 44 
CFR 60.3(c)(2) and (3) or successor standard) to the higher of the 
500-year floodplain elevation or three feet above the 100-year 
floodplain elevation. If the 500-year floodplain or elevation is 
unavailable, and the Critical Action is in the 100-year floodplain, 
then the structure must be elevated or floodproofed at least three 
feet above the 100-year floodplain elevation. Activities subject to 
elevation requirements must comply with applicable federal 
accessibility mandates.
    In addition to the other requirements in this section, the 
grantee must comply with applicable state, local, and tribal codes 
and standards for floodplain management, including elevation, 
setbacks, and cumulative substantial damage requirements. Grantees 
using CDBG-DR funds as the non-Federal match in a FEMA-funded 
project may apply the alternative requirement for the elevation of 
structures described in section IV.D.5.
    II.C.3. CDBG-DR funds as match. As provided by the HCDA, grant 
funds may be used to satisfy a match requirement, share, or 
contribution for any other Federal program when used to carry out an 
eligible CDBG-DR activity. This includes programs or activities 
administered by the FEMA or the U.S. Army Corps of Engineers 
(USACE). By law, (codified in the HCDA as a note to section 105(a)) 
only $250,000 or less of CDBG-DR funds may be used for the non-
Federal cost-share of any project funded by USACE. Appropriations 
acts prohibit the use of CDBG-DR funds for any activity reimbursable 
by, or for which funds are also made available by FEMA or USACE.
    In response to a disaster, FEMA may implement, and grantees may 
elect to follow, alternative procedures for FEMA's Public Assistance 
Program, as authorized pursuant to Section 428 of the Robert T. 
Stafford Disaster Relief and Emergency Assistance Act (``Stafford 
Act''). Like other projects, grantees may use CDBG-DR funds as a 
matching requirement, share, or contribution for Section 428 Public 
Assistance Projects. For all match activities, grantees must 
document that CDBG-DR funds have been used for the actual costs 
incurred for the assisted project and for costs that are eligible, 
meet a national objective, and meet other applicable CDBG 
requirements.
    II.C.4. Requirements for flood control structures. Grantees that 
use CDBG-DR funds to assist flood control structures (i.e., dams and 
levees) are prohibited from using CDBG-DR funds to enlarge a dam or 
levee beyond the original footprint of the structure that existed 
before the disaster event, without obtaining pre-approval from HUD 
and any Federal agencies that HUD determines are necessary based on 
their involvement or potential involvement with the levee or dam. 
Grantees that use CDBG-DR funds for levees and dams are required to: 
(1) register and maintain entries regarding such structures with the 
USACE National Levee Database or National Inventory of Dams; (2) 
ensure that the structure is admitted in the USACE PL 84-99 Program 
(Levee Rehabilitation and Inspection Program); (3) ensure the 
structure is accredited under the FEMA National Flood Insurance 
Program; (4) enter the exact location of the structure and the area 
served and protected by the structure into the DRGR system; and (5) 
maintain file documentation demonstrating that the grantee has 
conducted a risk assessment before funding the flood control 
structure and documentation that the investment includes risk 
reduction measures.

II.D. Economic Revitalization and Section 3 Requirements on 
Economic Opportunities

    CDBG-DR funds can be used for CDBG-DR eligible activities 
related to economic revitalization. The attraction, retention, and 
return of businesses and jobs to a disaster-impacted area is 
critical to long-term recovery. Accordingly, for CDBG-DR purposes, 
economic revitalization may include any CDBG-DR eligible activity 
that demonstrably restores and improves the local economy through 
job creation and retention or by expanding access to goods and 
services. The most common CDBG-DR eligible activities to support 
economic revitalization are outlined in 24 CFR 570.203 and 570.204 
and sections 105(a)(14), (15), and (17) of the HCDA.
    Based on the U.S. Change Research Program's Fourth National 
Climate Assessment, climate-related natural hazards, extreme events, 
and natural disasters disproportionately affect LMI individuals who 
belong to underserved communities because they are less able to 
prepare for, respond to, and recover from the impacts of extreme 
events and natural hazards, or are members of communities that have 
experienced significant disinvestment and historic discrimination. 
Therefore, HUD is imposing the following alternative requirement: 
When funding activities under section 105(a) of the HCDA that 
support economic revitalization, grantees must prioritize those 
underserved communities that have been impacted by the disaster and 
that were economically distressed before the disaster, as described 
further below in II.D.1.
    The term ``underserved communities'' refers to populations 
sharing a particular characteristic, as well as geographic 
communities, that have been systematically denied a full opportunity 
to participate in aspects of economic, social, and civic life. 
Underserved communities that were economically distressed before the 
disaster include, but are not limited to, those areas that were 
designated as a Promise Zone, Opportunity Zone, a Neighborhood 
Revitalization Strategy Area, a tribal area, or those areas that 
meet at least one of the distress criteria established for the 
designation of an investment area of Community Development Financial 
Institution at 12 CFR 1805.201(b)(3)(ii)(D).
    Grantees undertaking an economic revitalization activity must 
maintain supporting documentation to demonstrate how the grantee has 
prioritized underserved communities for purposes of its activities 
that support economic revitalization, as described below in II.D.1.
    II.D.1. Prioritizing economic revitalization assistance--
alternative requirement. When funding activities outlined in 24 CFR 
570.203 and 570.204 and sections 105(a)(14), (15), and (17) of the 
HCDA, HUD is instituting an alternative requirement in addition to 
the other requirements in these provisions to require grantees to 
prioritize assistance to disaster-impacted businesses that serve 
underserved communities and spur economic opportunity for 
underserved communities that were economically distressed before the 
disaster.
    II.D.2. National objective documentation for activities that 
support economic revitalization. 24 CFR 570.208(a)(4)(i) and (ii), 
24 CFR 570.483(b)(4)(i) and (ii), 24 CFR 570.506(b)(5) and (6), and 
24 CFR 1003.208(d) are waived to allow the grantees under the 
Consolidated Notice to identify the LMI jobs benefit by documenting, 
for each person employed, the name of the business, type of job, and 
the annual wages or salary of the job. HUD will consider the person 
income-qualified if the annual wages or salary of the job is at or 
under the HUD-established income limit for a one-person family. This 
method replaces the standard CDBG requirement--in which grantees 
must review the annual wages or salary of a job in comparison to the 
person's total household income and size (i.e., the number of 
persons). Thus, this method streamlines the documentation process by 
allowing the collection of wage data for each position created or 
retained from the assisted businesses, rather than from each 
individual household.
    II.D.3. Public benefit for activities that support economic 
revitalization. When applicable, the public benefit provisions set 
standards for individual economic development activities (such as a 
single loan to a business) and for the aggregate of all economic 
development activities. Economic

[[Page 83001]]

development activities support economic revitalization. Currently, 
public benefit standards limit the amount of CDBG assistance per job 
retained or created, or the amount of CDBG assistance per LMI person 
to whom goods or services are provided by the activity. These dollar 
thresholds can impede recovery by limiting the amount of assistance 
the grantee may provide to a critical activity.
    HUD waives the public benefit standards at 42 U.S.C. 5305(e)(3), 
24 CFR 570.482(f)(1), (2), (3), (4)(i), (5), and (6), and 
570.209(b)(1), (2), (3)(i), (4), and 24 CFR 1003.302(c) for all 
economic development activities. Paragraph (g) of 24 CFR 570.482 and 
paragraph (c) and (d) under Sec.  570.209 are also waived to the 
extent these provisions are related to public benefit. However, 
grantees that choose to take advantage of this waiver in lieu of 
complying with public benefit standards under the existing 
regulatory requirements shall be subject to the following condition: 
grantees shall collect and maintain documentation in the project 
file on the creation and retention of total jobs; the number of jobs 
within appropriate salary ranges, as determined by the grantee; the 
average amount of assistance provided per job, by activity or 
program; and the types of jobs. Additionally, grantees shall report 
the total number of jobs created and retained and the applicable 
national objective in the DRGR system.
    II.D.4. Clarifying note on Section 3 worker eligibility and 
documentation requirements. Section 3 of the Housing and Urban 
Development Act of 1968 (12 U.S.C. 1701u) (Section 3) applies to 
CDBG-DR activities that are Section 3 projects, as defined at 24 CFR 
75.3(a)(2). The purpose of Section 3 is to ensure that economic 
opportunities, most importantly employment, generated by certain HUD 
financial assistance shall be directed to low- and very low-income 
persons, particularly those who are recipients of government 
assistance for housing or residents of the community in which the 
Federal assistance is spent. CDBG-DR grantees are directed to HUD's 
guidance published in CPD Notice 2021-09, ``Section 3 of the Housing 
and Urban Development Act of 1968, as amended by the Housing and 
Community Development Act of 1992, final rule requirements for CDBG, 
CDBG-CV, CDBG-DR, CDBG-Mitigation (CDBG-MIT), NSP, Section 108, and 
RHP projects,'' as amended (https://www.hud.gov/sites/dfiles/OCHCO/documents/2021-09cpdn.pdf). All direct recipients of CDBG-DR funding 
must report Section 3 information through the DRGR system.
    II.D.5. Waiver and modification of the job relocation clause to 
permit assistance to help a business return. CDBG requirements 
prevent program participants from providing assistance to a business 
to relocate from one labor market area to another if the relocation 
is likely to result in a significant loss of jobs in the labor 
market from which the business moved. This prohibition can be a 
critical barrier to reestablishing and rebuilding a displaced 
employment base after a major disaster. Therefore, 42 U.S.C. 
5305(h), 24 CFR 570.210, 24 CFR 570.482(h), and 24 CFR 1003.209, are 
waived to allow a grantee to provide assistance to any business that 
was operating in the disaster-declared labor market area before the 
incident date of the applicable disaster and has since moved, in 
whole or in part, from the affected area to another state or to 
another labor market area within the same state to continue 
business.
    II.D.6. Underwriting. Notwithstanding section 105(e)(1) of the 
HCDA, no CDBG-DR funds may be provided to a for-profit entity for an 
economic development project under section 105(a)(17) of the HCDA 
unless such project has been evaluated and selected in accordance 
with guidelines developed by HUD pursuant to section 105(e)(2) of 
the HCDA for evaluating and selecting economic development projects. 
Grantees and their subrecipients are required to comply with the 
underwriting guidelines in appendix A to 24 CFR part 570 if they are 
using grant funds to provide assistance to a for-profit entity for 
an economic development project under section 105(a)(17) of the 
HCDA. The underwriting guidelines are found at appendix A of 24 CFR 
part 570.
    II.D.7. Limitation on use of funds for eminent domain. CDBG-DR 
funds may not be 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 purposes of 
this paragraph, public use shall not be construed to include 
economic development that primarily benefits private entities. The 
following shall be considered a public use for the purposes of 
eminent domain: any use of funds for (1) mass transit, railroad, 
airport, seaport, or highway projects; (2) utility projects that 
benefit or serve the general public, including energy related, 
communication-related, water related, and wastewater-related 
infrastructure; (3) 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 (4) projects for the 
removal of an immediate threat to public health and safety, 
including the removal of a brownfield as defined in the Small 
Business Liability Relief and Brownfields Revitalization Act (Pub. 
L. 107-118).

III. Grant Administration

III.A. Pre-Award Evaluation of Management and Oversight of Funds

    III.A.1. Certification of financial controls and procurement 
processes, and adequate procedures for proper grant management. 
Appropriations acts require that the Secretary certify that the 
grantee has in place proficient financial controls and procurement 
processes and has established adequate procedures to prevent any 
duplication of benefits as defined by section 312 of the Stafford 
Act, 42 U.S.C. 5155, to ensure timely expenditure of funds, to 
maintain a comprehensive website regarding all disaster recovery 
activities assisted with these funds, and to detect and prevent 
waste, fraud, and abuse of funds.
    III.A.1.a. Documentation requirements. To enable the Secretary 
to make this certification, each grantee must submit to HUD the 
certification documentation listed below. This information must be 
submitted within 60 days of the applicability date of the Allocation 
Announcement Notice, or with the grantee's submission of its action 
plan in DRGR as described in section III.C.1, whichever date is 
earlier. If required by appropriations acts, grant agreements will 
not be executed until the Secretary has issued a certification for 
the grantee. For each of the items (1) through (6) below 
(collectively referred to as the ``Financial Management and Grant 
Compliance Certification Requirements'') the grantee must certify to 
the accuracy of its submission when submitting the Financial 
Management and Grant Compliance Certification Checklist (the 
``Certification Checklist''). The Certification Checklist is a 
document that incorporates all of the Financial Management and Grant 
Compliance Certification Requirements. Not all of the requirements 
in (1) through (6) below are appropriate or applicable to Indian 
tribes. Therefore, Indian tribes that receive an allocation directly 
from HUD may request an alternative method to document support for 
the Secretary's certification.
    (1) Proficient financial management controls. A grantee has 
proficient financial management controls if each of the following 
criteria is satisfied:
    (a) The grantee agency administering this grant submits its most 
recent single audit and consolidated annual financial report (CAFR), 
which in HUD's determination indicates that the grantee has no 
material weaknesses, deficiencies, or concerns that HUD considers to 
be relevant to the financial management of CDBG, CDBG-DR, or CDBG-
MIT funds. If the single audit or CAFR identified weaknesses or 
deficiencies, the grantee must provide documentation satisfactory to 
HUD showing how those weaknesses have been removed or are being 
addressed. (b) The grantee has completed and submitted the 
certification documentation required in the applicable Certification 
Checklist. The grantee's documentation must demonstrate that the 
standards meet the requirements in the Consolidated Notice and the 
Certification Checklist.
    (2) Each grantee must provide HUD its procurement processes for 
review, so HUD may evaluate the grantee's processes to determine 
that they are based on principles of full and open competition. A 
grantee's procurement processes must comply with the procurement 
requirements at section IV.B.
    (a) A state grantee has proficient procurement processes if HUD 
determines that its processes uphold the principles of full and open 
competition and include an evaluation of the cost or price of the 
product or service, and if its procurement processes reflect that 
it:
    (i) Adopted 2 CFR 200.318 through 200.327;
    (ii) Follows its own state procurement policies and procedures 
and establishes requirements for procurement processes for local 
governments and subrecipients based on full and open competition 
pursuant to 24 CFR 570.489(g), and the requirements for the state, 
its local governments, and subrecipients include evaluation of the 
cost or price of the product or service; or
    (iii) Adopted 2 CFR 200.317, meaning that it will follow its own 
state procurement

[[Page 83002]]

processes and evaluate the cost or price of the product or service, 
but impose 2 CFR 200.318 through 200.327 on its subrecipients.
    (b) A local government grantee has proficient procurement 
processes if the processes are consistent with the specific 
applicable procurement standards identified in 2 CFR 200.318 through 
200.327. When the grantee provides a copy of its procurement 
processes, it must indicate the sections that incorporate these 
provisions.
    (c) An Indian tribe grantee has proficient procurement processes 
if its procurement standards are consistent with procurement 
requirements in 2 CFR part 200 imposed by 24 CFR 1003.501, and 
additional procurement requirements in 1003.509(e) and 1003.510.
    (3) Duplication of benefits. A grantee has adequate policies and 
procedures to prevent the duplication of benefits (DOB) if the 
grantee submits and identifies a uniform process that reflects the 
requirements in section IV.A of the Consolidated Notice, including:
    (a) Determining all disaster assistance received by the grantee 
or applicant and all reasonably identifiable financial assistance 
available to the grantee or applicant, as applicable, before 
committing funds or awarding assistance;
    (b) Determining a grantee's or an applicant's unmet need(s) for 
CDBG-DR assistance before committing funds or awarding assistance; 
and
    (c) Requiring beneficiaries to enter into a signed agreement to 
repay any duplicative assistance if they later receive additional 
assistance for the same purpose for which the CDBG-DR award was 
provided. The grantee must identify a method to monitor compliance 
with the agreement for a reasonable period (i.e., a time period 
commensurate with risk) and must articulate this method in its 
policies and procedures, including the basis for the period during 
which the grantee will monitor compliance. This agreement must also 
include the following language: ``Warning: Any person who knowingly 
makes a false claim or statement to HUD or causes another to do so 
may be subject to civil or criminal penalties under 18 U.S.C. 2, 
287, 1001 and 31 U.S.C. 3729.''
    Policies and procedures of the grantee submitted to support the 
certification must provide that before the award of assistance, the 
grantee will use the best, most recent available data from FEMA, the 
Small Business Administration (SBA), insurers, and any other sources 
of local, state, and Federal sources of funding to prevent the 
duplication of benefits.
    (4) Timely expenditures. A grantee has adequate policies and 
procedures to determine timely expenditures if it submits policies 
and procedures that indicate the following to HUD: how it will track 
and document expenditures of the grantee and its subrecipients (both 
actual and projected reported in performance reports); how it will 
account for and manage program income; how it will reprogram funds 
in a timely manner for activities that are stalled; and how it will 
project expenditures of all CDBG-DR funds within the period provided 
for in section V.A.
    (5) Comprehensive disaster recovery website. A grantee has 
adequate policies and procedures to maintain a comprehensive 
accessible website if it submits policies and procedures indicating 
to HUD that the grantee will have a separate web page dedicated to 
its disaster recovery activities assisted with CDBG-DR funds that 
includes the information described at section III.D.1.d.-e. The 
procedures must also indicate the frequency of website updates. At 
minimum, grantees must update their website quarterly.
    (6) Procedures to detect and prevent fraud, waste, and abuse. A 
grantee has adequate procedures to detect and prevent fraud, waste, 
and abuse if it submits procedures that indicate:
    (a) How the grantee will verify the accuracy of information 
provided by applicants;
    (b) The criteria to be used to evaluate the capacity of 
potential subrecipients;
    (c) The frequency with which the grantee will monitor other 
agencies of the grantee that will administer CDBG-DR funds, and how 
it will monitor subrecipients, contractors, and other program 
participants, and why monitoring is to be conducted and which items 
are to be monitored;
    (d) It has or will hire an internal auditor that provides both 
programmatic and financial oversight of grantee activities, and has 
adopted policies that describes the auditor's role in detecting 
fraud, waste, and abuse, which policies must be submitted to HUD;
    (e)(i) For states or grantees subject to the same requirements 
as states, a written standard of conduct and conflicts of interest 
policy that complies with the requirements of 24 CFR 570.489(g) and 
(h) and subparagraph III.A.1.a(2)(a) of the Consolidated Notice, 
which policy includes the process for promptly identifying and 
addressing such conflicts;
    (ii) For units of general local government or grantees subject 
to the same requirements as units of general local government, a 
written standard of conduct and conflicts of interest policy that 
complies with 24 CFR 570.611 and 2 CFR 200.318, as applicable, which 
includes the process for promptly identifying and addressing such 
conflicts;
    (iii) For Indian tribes, a written standard of conduct and 
conflicts of interest policy that complies with 24 CFR 1003.606, as 
applicable; and
    (f) It assists in investigating and taking action when fraud 
occurs within the grantee's CDBG-DR activities and/or programs. All 
grantees receiving CDBG-DR funds for the first time shall attend and 
require subrecipients to attend fraud related training provided by 
HUD OIG, when offered, to assist in the proper management of CDBG-DR 
grant funds. Instances of fraud, waste, and abuse should be referred 
to the HUD OIG Fraud Hotline (phone: 1-800-347-3735 or email: 
[email protected]).
    Following a disaster, property owners and renters are frequently 
the targets of persons fraudulently posing as government employees, 
creditors, mortgage servicers, insurance adjusters, and contractors. 
The grantee's procedures must address how the grantee will make 
CDBG-DR beneficiaries aware of the risks of contractor fraud and 
other potentially fraudulent activity that can occur in communities 
recovering from a disaster. Grantees must provide CDBG-DR 
beneficiaries with information that raises awareness of possible 
fraudulent activity, how the fraud can be avoided, and what local or 
state agencies to contact to take action and protect the grantee and 
beneficiary investment. The grantee's procedures must address the 
steps it will take to assist a CDBG-DR beneficiary if the 
beneficiary experiences contractor or other fraud. If the 
beneficiary is eligible for additional assistance as a result of the 
fraudulent activity and the creation of remaining unmet need, the 
procedures must also address what steps the grantee will follow to 
provide the additional assistance.
    III.A.1.b. Relying on prior submissions--financial management 
and grant compliance certification requirements. This section only 
applies once a grantee has received a CDBG-DR grant through an 
Allocation Announcement Notice that makes the Consolidated Notice 
applicable. After that original grant, if a CDBG-DR grantee is 
awarded a subsequent CDBG-DR grant, HUD will rely on the grantee's 
prior submissions provided in response to the Financial Management 
and Grant Compliance Certification Requirements in the Consolidated 
Notice. HUD will continue to monitor the grantee's submissions and 
updates made to policies and procedures during the normal course of 
business. The grantee must notify HUD of any substantial changes 
made to these submissions.
    If a CDBG-DR grantee is awarded a subsequent CDBG-DR grant, and 
it has been more than three years since the executed grant agreement 
for the original CDBG-DR grant or a subsequent grant is equal to or 
greater than ten times the amount of the original CDBG-DR grant, 
grantees must update and resubmit the documentation required by 
paragraph III.A.1.a. with the completed Certification Checklist to 
enable the Secretary to certify that the grantee has in place 
proficient financial controls and procurement processes, and 
adequate procedures for proper grant management. However, the 
Secretary may require any CDBG-DR grantee to update and resubmit the 
documentation required by paragraph III.A.1.a., if there is good 
cause to require it.
    III.A.2. Implementation plan. HUD requires each grantee to 
demonstrate that it has sufficient capacity to manage the CDBG-DR 
funds and the associated risks. Grantees must evidence their 
management capacity through their implementation plan submissions. 
These submissions must meet the criteria below and must be submitted 
within 120 days of the applicability date of the governing 
Allocation Announcement Notice or with the grantee's submission of 
its action plan, whichever is earlier, unless the grantee has 
requested, and HUD has approved an extension of the submission 
deadline.
    III.A.2.a. To enable HUD to assess risk as described in 2 CFR 
200.206, the grantee will submit an implementation plan to HUD. The 
implementation plan must describe the grantee's capacity to carry 
out the recovery

[[Page 83003]]

and how it will address any capacity gaps. HUD will determine that 
the grantee has sufficient management capacity to adequately reduce 
risk if the grantee submits implementation plan documentation that 
addresses (1) through (3) below:
    (1) Capacity assessment. The grantee identifies the lead agency 
responsible for implementation of the CDBG-DR award and indicates 
that the head of that agency will report directly to the chief 
executive officer of the jurisdiction. The grantee has conducted an 
assessment of its capacity to carry out CDBG-DR recovery efforts and 
has developed a timeline with milestones describing when and how the 
grantee will address all capacity gaps that are identified. The 
assessment must include a list of any open CDBG-DR findings and an 
update on the corrective actions undertaken to address each finding.
    (2) Staffing. The grantee must submit an organizational chart of 
its department or division and must also provide a table that 
clearly indicates which personnel or organizational unit will be 
responsible for each of the Financial Management and Grant 
Compliance Certification Requirements identified in section 
III.A.1.a. along with staff contact information, if available (i.e., 
personnel responsible for conducting DOB analysis, timely 
expenditure, website management, monitoring and compliance, and 
financial management). The grantee must also submit documentation 
demonstrating that it has assessed staff capacity and identified 
positions for the purpose of: case management in proportion to the 
applicant population; program managers who will be assigned 
responsibility for each primary recovery area; staff who have 
demonstrated experience in housing, infrastructure (as applicable), 
and economic revitalization (as applicable); staff responsible for 
procurement/contract management, regulations implementing Section 3 
of the Housing and Urban Development Act of 1968, as amended (24 CFR 
part 75) (Section 3), fair housing compliance, and environmental 
compliance. An adequate plan must also demonstrate that the internal 
auditor and responsible audit staff report independently to the 
chief elected or executive officer or board of the governing body of 
any designated administering entity.
    The grantee's implementation plan must describe how it will 
provide technical assistance for any personnel that are not employed 
by the grantee at the time of action plan submission, and to fill 
gaps in knowledge or technical expertise required for successful and 
timely recovery. State grantees must also include how it plans to 
provide technical assistance to subgrantees and subrecipients, 
including units of general local government.
    (3) Internal and interagency coordination. The grantee's plan 
must describe how it will ensure effective communication between 
different departments and divisions within the grantee's 
organizational structure that are involved in CDBG-DR-funded 
recovery efforts, mitigation efforts, and environmental review 
requirements, as appropriate; between its lead agency and 
subrecipients responsible for implementing the grantee's action 
plan; and with other local and regional planning efforts to ensure 
consistency. The grantee's submissions must demonstrate how it will 
consult with other relevant government agencies, including the State 
Hazard Mitigation Officer (SHMO), State or local Disaster Recovery 
Coordinator, floodplain administrator, and any other state and local 
emergency management agencies, such as public health and 
environmental protection agencies, that have primary responsibility 
for the administration of FEMA or USACE funds.
    III.A.2.b. Relying on prior submissions--Implementation plan. 
This section only applies once a grantee has received a CDBG-DR 
grant through an Allocation Announcement Notice that makes the 
Consolidated Notice applicable. After that original grant, if a 
CDBG-DR grantee is awarded a subsequent CDBG-DR grant, HUD will rely 
on the grantee's implementation plan submitted for its original 
CDBG-DR grant unless it has been more than three years since the 
executed grant agreement for the original CDBG-DR grant or the 
subsequent grant is equal to or greater than ten times the amount of 
its original CDBG-DR grant.
    If a CDBG-DR grantee is awarded a subsequent CDBG-DR grant, and 
it has been more than three years since the executed grant agreement 
for its original CDBG-DR grant or a subsequent grant is equal to or 
greater than ten times the amount of the original CDBG-DR grant, the 
grantee is to update and resubmit its implementation plan to reflect 
any changes to its capacity, staffing, and coordination.

III.B. Administration, Planning, and Financial Management

    III.B.1. Grant administration and planning.
    III.B.1.a. Grantee responsibilities. Each grantee shall 
administer its award in compliance with all applicable laws and 
regulations and shall be financially accountable for the use of all 
awarded funds. CDBG-DR grantees must comply with the recordkeeping 
requirements of 24 CFR 570.506 and 24 CFR 570.490, as amended by the 
Consolidated Notice waivers and alternative requirements. All 
grantees must maintain records of performance in DRGR, as described 
elsewhere in the Consolidated Notice.
    III.B.1.b. Grant administration cap. Up to five percent of the 
grant (plus five percent of program income generated by the grant) 
can be used for administrative costs by the grantee, units of 
general local government, or subrecipients. Thus, the total of all 
costs classified as administrative for a CDBG-DR grant must be less 
than or equal to the five percent cap (plus five percent of program 
income generated by the grant). The cap for administrative costs is 
subject to the combined technical assistance and administrative cap 
for state grantees as discussed in section III.B.2.a.
    III.B.1.c. Use of funds for administrative costs across multiple 
grants. The Additional Supplemental Appropriations for Disaster 
Relief Act, 2019 (Pub. L. 116-20) authorized special treatment for 
eligible administrative costs for grantees that received awards 
under Public Laws 114-113, 114-223, 114-254, 115-31, 115-56, 115-
123, 115-254, 116-20, or any future act. The Consolidated Notice 
permits grantees to use eligible administrative funds (up to five 
percent of each grant award plus up to five percent of program 
income generated by the grant) for the cost of administering any of 
these grants awarded under the identified Public Laws (including 
future Acts) without regard to the particular disaster appropriation 
from which such funds originated. To exercise this authority, the 
grantee must ensure that it has appropriate financial controls to 
guarantee that the amount of grant administration expenditures for 
each of the aforementioned grants will not exceed five percent of 
the total grant award for each grant (plus five percent of program 
income generated by the grant). The grantee must review and modify 
any financial management policies and procedures regarding the 
tracking and accounting of administration costs as necessary.
    III.B.1.d. Planning expenditures cap. Both state and local 
government grantees are limited to spending a maximum of fifteen 
percent of their total grant amount on planning costs. Planning 
costs subject to the 15 percent cap are those defined in 42 U.S.C. 
5305(a)(12) and more broadly in 24 CFR 570.205.
    III.B.2. State grantees only.
    III.B.2.a. Combined technical assistance and administrative cap 
(state grantees only). The provisions of 42 U.S.C. 5306(d) and 24 
CFR 570.489(a)(1)(i) and (iii), and 24 CFR 570.489(a)(2) shall not 
apply to the extent that they cap administration and technical 
assistance expenditures, limit a state's ability to charge a nominal 
application fee for grant applications for activities the state 
carries out directly, and require a dollar-for-dollar match of state 
funds for administrative costs exceeding $100,000. 42 U.S.C. 
5306(d)(5) and (6) are waived and replaced with the alternative 
requirement that the aggregate total for administrative and 
technical assistance expenditures must not exceed five percent of 
the grant, plus five percent of program income generated by the 
grant.
    III.B.2.b. Planning-only activities (state grantees only). The 
State CDBG Program requires that, for planning-only grants, local 
government grant recipients must document that the use of funds 
meets a national objective. In the CDBG Entitlement Program, these 
more general planning activities are presumed to meet a national 
objective under the requirements at 24 CFR 570.208(d)(4). HUD notes 
that almost all effective recoveries in the past have relied on some 
form of area-wide or comprehensive planning activity to guide 
overall redevelopment independent of the ultimate source of 
implementation funds. To assist state grantees, HUD is waiving the 
requirements at 24 CFR 570.483(b)(5) and (c)(3), which limit the 
circumstances under which the planning activity can meet a low- and 
moderate-income or slum-and-blight national objective. Instead, as 
an alternative requirement, 24 CFR 570.208(d)(4) applies to states 
when funding disaster recovery-assisted, planning-only grants, or 
when directly administering planning activities that guide disaster 
recovery. In addition, 42 U.S.C. 5305(a)(12) is waived to the extent 
necessary so the types of planning activities

[[Page 83004]]

that states may fund or undertake are expanded to be consistent with 
those of CDBG Entitlement grantees identified at 24 CFR 570.205.
    III.B.2.c. Direct grant administration and means of carrying out 
eligible activities (state grantees only). Requirements at 42 U.S.C. 
5306(d) are waived to allow a state to use its disaster recovery 
grant allocation directly to carry out state-administered activities 
eligible under the Consolidated Notice, rather than distribute all 
funds to local governments. Pursuant to this waiver and alternative 
requirement, the standard at 24 CFR 570.480(c) and the provisions at 
42 U.S.C. 5304(e)(2) will also include activities that the state 
carries out directly. Activities eligible under the Consolidated 
Notice may be carried out by a state, subject to state law and 
consistent with the requirement of 24 CFR 570.200(f), through its 
employees, through procurement contracts, or through assistance 
provided under agreements with subrecipients. State grantees 
continue to be responsible for civil rights, labor standards, and 
environmental protection requirements, for compliance with 24 CFR 
570.489(g) and (h), and subparagraph III.A.1.a.(2)(a) of the 
Consolidated Notice relating to conflicts of interest, and for 
compliance with 24 CFR 570.489(m) relating to monitoring and 
management of subrecipients.
    A state grantee may also carry out activities in tribal areas. A 
state must coordinate with the Indian tribe with jurisdiction over 
the tribal area when providing CDBG-DR assistance to beneficiaries 
in tribal areas. State grantees carrying out projects in tribal 
areas, either directly or through its employees, through procurement 
contracts, or through assistance provided under agreements with 
subrecipients, must obtain the consent of the Indian tribe with 
jurisdiction over the tribal area to allow the state grantee to 
carry out or to fund CDBG-DR projects in the area.
    III.B.2.d. Waiver and alternative requirement for distribution 
to CDBG metropolitan cities and urban counties (state grantees 
only). 42 U.S.C. 5302(a)(7) (definition of ``nonentitlement area'') 
and related provisions of 24 CFR part 570, including 24 CFR 570.480, 
are waived to permit state grantees to distribute CDBG-DR funds to 
units of local government and Indian tribes.
    III.B.2.e. Use of subrecipients (state grantees only). Paragraph 
III.B.2.c. provides a waiver and alternative requirement that a 
state may carry out activities directly, including through 
assistance provided under agreements with subrecipients. Therefore, 
when states carry out activities directly through subrecipients, the 
following alternative requirements apply: the state is subject to 
the definition of subrecipients at 24 CFR 570.500(c) and must adhere 
to the requirements for agreements with subrecipients at 24 CFR 
570.503. Additionally, 24 CFR 570.503(b)(4) is modified to require 
the subrecipient to comply with applicable uniform requirements, as 
described in 24 CFR 570.502, except that the subrecipient shall 
follow procurement requirements imposed by the state in accordance 
with subparagraph III.A.1.a.(2) of the Consolidated Notice. When 24 
CFR 570.503 applies, notwithstanding 24 CFR 570.503(b)(5)(i), units 
of general local government that are subrecipients are defined as 
recipients under 24 CFR part 58 and are therefore responsible 
entities that assume environmental review responsibilities, as 
described in III.F.5. Grantees are reminded that they are 
responsible for providing on-going oversight and monitoring of 
subrecipients and are ultimately responsible for subrecipient 
compliance with all CDBG-DR requirements.
    III.B.2.f. Recordkeeping (state grantees only). When a state 
carries out activities directly, 24 CFR 570.490(b) is waived and the 
following alternative provision shall apply: a state grantee shall 
establish and maintain such records as may be necessary to 
facilitate review and audit by HUD of the state's administration of 
CDBG-DR funds, under 24 CFR 570.493 and reviews and audits by the 
state under III.B.2.h. 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: (a) enable HUD to make the applicable 
determinations described at 24 CFR 570.493; (b) make compliance 
determinations for activities carried out directly by the state; and 
(c) show how activities funded are consistent with the descriptions 
of activities proposed for funding in the action plan and/or DRGR 
system. For fair housing and equal opportunity purposes, and as 
applicable, such records shall include data on the racial, ethnic, 
and gender characteristics of persons who are applicants for, 
participants in, or beneficiaries of the program.
    III.B.2.g. Change of use of real property (state grantees only). 
This alternative requirement conforms the change of use of real 
property rule to the waiver allowing a state to carry out activities 
directly. For purposes of these grants, all references to ``unit of 
general local government'' in 24 CFR 570.489(j), shall be read as 
``state, local governments, or Indian tribes (either as 
subrecipients or through a method of distribution), or other state 
subrecipient.''
    III.B.2.h. Responsibility for review and handling of 
noncompliance (state grantees only). This change is in conformance 
with the waiver allowing a state to carry out activities directly. 
24 CFR 570.492 is waived, and the following alternative requirement 
applies for any state receiving a direct award: the state shall make 
reviews and audits, including on-site reviews of any local 
governments or Indian tribes (either as subrecipients or through a 
method of distribution) designated public agencies, and other 
subrecipients, as may be necessary or appropriate to meet the 
requirements of section 104(e)(2) of the HCDA, as amended, and as 
modified by the Consolidated Notice. 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, 
designated public agencies, or local governments.
    III.B.2.i. Consultation (state grantees only). Currently, the 
HCDA and regulations require a state grantee to consult with 
affected local governments in nonentitlement areas of the state in 
determining the state's proposed method of distribution. HUD is 
waiving 42 U.S.C. 5306(d)(2)(C)(iv), 42 U.S.C. 5306(d)(2)(D), 24 CFR 
91.325(b)(2), and 24 CFR 91.110, and imposing an alternative 
requirement that states receiving an allocation of CDBG-DR funds 
consult with all disaster-affected local governments (including any 
CDBG-entitlement grantees), Indian tribes, and any public housing 
authorities in determining the use of funds. This approach ensures 
that a state grantee sufficiently assesses the recovery needs of all 
areas affected by the disaster.

III.C. Action Plan for Disaster Recovery Waiver and Alternative 
Requirement

    Requirements for CDBG actions plans, located at 42 U.S.C. 
5304(a)(1), 42 U.S.C. 5304(m), 42 U.S.C. 5306(a)(1), 42 U.S.C. 
5306(d)(2)(C)(iii), 42 U.S.C. 12705(a)(2), and 24 CFR 91.220 and 
91.320, are waived for CDBG-DR grants. Instead, grantees must submit 
to HUD an action plan for disaster recovery which will describe 
programs and activities that conform to applicable requirements as 
specified in the Consolidated Notice and the applicable Allocation 
Announcement Notice. HUD will monitor the grantee's actions and use 
of funds for consistency with the plan, as well as meeting the 
performance and timeliness objectives therein. The Secretary will 
disapprove all action plans that are substantially incomplete if it 
is determined that the plan does not satisfy all of the required 
elements identified in the Consolidated Notice and the applicable 
Allocation Announcement Notice.
    III.C.1. Action plan. The grantee's action plan must identify 
the use of all funds--including criteria for eligibility and how the 
uses address long-term recovery needs, restoration of infrastructure 
and housing, economic revitalization, and the incorporation of 
mitigation measures in the MID areas. HUD created the Public Action 
Plan in DRGR which is a function that allows grantees to develop and 
submit their action plans for disaster recovery directly into DRGR. 
Grantees must use HUD's Public Action Plan in DRGR to develop all 
CDBG-DR action plans and substantial amendments submitted to HUD for 
approval. The Public Action Plan is different from the DRGR Action 
Plan, which is a comprehensive description of projects and 
activities in DRGR.
    The grantee must describe the steps it will follow to make the 
action plan, substantial amendments, performance reports, and other 
relevant program materials available in a form accessible to persons 
with disabilities and those with limited English proficiency (LEP). 
All grantees must include sufficient information in its action plan 
so that all interested parties will be able to understand and 
comment on the action plan. The action plan (and subsequent 
amendments) must include a single chart or table that illustrates, 
at the most practical level, how all funds are budgeted (e.g., by 
program, subrecipient, grantee-administered activity, or other

[[Page 83005]]

category). The grantee must certify, as required by section 
III.F.7., that activities to be undertaken with CDBG-DR funds are 
consistent with its action plan.
    The action plan must contain:
    III.C.1.a. An impact and unmet needs assessment. Each grantee 
must develop an impact and unmet needs assessment to understand the 
type and location of community needs and to target limited resources 
to those areas with the greatest need. CDBG-DR grantees must conduct 
an impact and unmet needs assessment to inform the use of the grant. 
Grantees must cite data sources in the impact and unmet needs 
assessment. At a minimum, the impact and unmet needs assessment 
must:
     Evaluate all aspects of recovery including housing 
(interim and permanent, owner and rental, single family and 
multifamily, affordable and market rate, and housing to meet the 
needs of persons who were experiencing homelessness pre-disaster), 
infrastructure, and economic revitalization needs, while also 
incorporating mitigation needs into activities that support recovery 
as required in section II.A.2.;
     Estimate unmet needs to ensure CDBG-DR funds meet needs 
that are not likely to be addressed by other sources of funds by 
accounting for the various forms of assistance available to, or 
likely to be available to, affected communities (e.g., projected 
FEMA funds) and individuals (e.g., estimated insurance) and, using 
the most recent available data, estimating the portion of need 
unlikely to be addressed by insurance proceeds, other Federal 
assistance, or any other funding sources;
     Assess whether public services (e.g., housing 
counseling, legal advice and representation, job training, mental 
health, and general health services) are necessary to complement 
activities intended to address housing, infrastructure, and economic 
revitalization and how those services would need to be made 
accessible to individuals with disabilities including, but not 
limited to, mobility, sensory, developmental, emotional, cognitive, 
and other impairments;
     Describe the extent to which expenditures for planning 
activities, including the determination of land use goals and 
policies, will benefit the HUD-identified MID areas, as described in 
section II.A.3.;
     Describe disaster impacts geographically by type at the 
lowest level practicable (e.g., county/parish level or lower if 
available for states, and neighborhood or census tract level for 
cities); and
     Take into account the costs and benefits of 
incorporating hazard mitigation measures to protect against the 
specific identified impacts of future extreme weather events and 
other natural hazards. This analysis should factor in historical and 
projected data on risk that incorporates best available science 
(e.g., the most recent National Climate Assessment).
    Disaster recovery needs evolve over time and grantees must amend 
the impact and unmet needs assessment and action plan as additional 
needs are identified and additional resources become available. At a 
minimum, grantees must revisit and update the impact and unmet needs 
assessment when moving funds from one program to another through a 
substantial amendment.
    III.C.1.b. Connection of programs and projects to unmet needs. 
The grantee must describe the connection between identified unmet 
needs and the allocation of CDBG-DR resources. The plan must provide 
a clear connection between a grantee's impact and unmet needs 
assessment and its proposed programs and projects in the MID areas 
(or outside in connection to the MID areas as described in section 
II.A.3). Such description must demonstrate a reasonably 
proportionate allocation of resources relative to areas and 
categories (i.e., housing, economic revitalization, and 
infrastructure) of greatest needs identified in the grantee's impact 
and unmet needs assessment or provide an acceptable justification 
for a disproportional allocation, while also incorporating hazard 
mitigation measures to reduce the impacts of recurring natural 
disasters and the long-term impacts of climate change. Grantee 
action plans may provide for the allocation of funds for 
administration and planning activities and for public service 
activities, subject to the caps on such activities as described in 
the Consolidated Notice.
    III.C.1.c. Public housing, affordable rental housing, and 
housing for vulnerable populations. Each grantee must include a 
description of how it has analyzed, identified, and will address 
(with CDBG-DR or other sources) the disaster-related rehabilitation, 
reconstruction, and new construction needs in the MID-area of the 
types of housing described below. Specifically, a grantee must 
assess and describe how it will address unmet needs in the following 
types of housing, subject to the applicable HUD program 
requirements: public housing, affordable rental housing (including 
both subsidized and market rate affordable housing), and housing for 
vulnerable populations (See Section III.C.1.c.iii below), including 
emergency shelters and permanent housing for persons experiencing 
homelessness, in the areas affected by the disaster. Grantees must 
coordinate with local public housing authorities (PHA) in the MID 
areas to ensure that the grantee's representation in the action plan 
reflects the input of those entities as well as coordinating with 
State Housing Finance agencies to make sure that all funding sources 
that are available and opportunities for leverage are noted in the 
action plan.
    (i) Public housing: Describe unmet public housing needs of each 
disaster-impacted PHA within its jurisdiction, if applicable. The 
grantee must work directly with impacted PHAs in identifying 
necessary and reasonable costs and ensuring that adequate funding 
from all available sources is dedicated to addressing the unmet 
needs of damaged public housing (e.g., FEMA, insurance, and funds 
available from programs administered by HUD's Office of Public and 
Indian Housing).
    (ii) Affordable rental housing: Describe unmet affordable rental 
housing needs for LMI households as a result of the disaster or 
exacerbated by the disaster, including private market units 
receiving project-based rental assistance or with tenants that 
participate in the Section 8 Housing Choice Voucher Program, and any 
other housing that is assisted under a HUD program in the MID areas. 
Identify funding to specifically address these unmet needs for 
affordable rental housing to LMI households. If a grantee is 
proposing an allocation of CDBG-DR funds for affordable rental 
housing needs, the action plan must, at a minimum, meet the 
requirements described in II.B.3.
    (iii) Housing for vulnerable populations: Describe how CDBG-DR 
or other funding sources available will promote housing for 
vulnerable populations, as defined in section III.C.1.d., in the MID 
area, including how it plans to address: (1) transitional housing, 
including emergency shelters and housing for persons experiencing 
homelessness, permanent supportive housing, and permanent housing 
needs of individuals and families (including subpopulations) that 
are experiencing or at risk of experiencing homelessness; (2) the 
prevention of low-income individuals and families with children 
(especially those with incomes below thirty percent of the area 
median) from becoming homeless; (3) the special needs of persons who 
are not experiencing homelessness but require supportive housing 
(i.e., elderly, frail elderly, persons with disabilities (mental, 
physical, developmental, etc.), victims of domestic violence, 
persons with alcohol or other substance-use disorder, persons with 
HIV/AIDS and their families, and public housing residents, as 
identified in 24 CFR 91.315(e)).
    III.C.1.d. Fair housing, civil rights data, and advancing 
equity.
    The grantee must use its CDBG-DR funds in a manner that complies 
with its fair housing and nondiscrimination obligations, including 
title VI of the Civil Rights Act of 1964, 42 U.S.C. 2000d et seq., 
the Fair Housing Act, 42 U.S.C. 3601-19, Section 504 of the 
Rehabilitation Act of 1973, 29 U.S.C. 794, the Americans with 
Disabilities Act of 1990, 42 U.S.C. 12131 et seq., and Section 109 
of the HCDA, 42 U.S.C. 5309. To ensure that the activities performed 
in connection with the action plan will comply with these 
requirements, the grantee must provide an assessment of whether its 
planned use of CDBG-DR funds will have an unjustified discriminatory 
effect on or failure to benefit racial and ethnic minorities in 
proportion to their communities' needs, particularly in racially and 
ethnically concentrated areas of poverty, and how it will address 
the recovery needs of impacted individuals with disabilities.
    Grantees should also consider the impact of their planned use of 
CDBG-DR funds on other protected class groups under fair housing and 
civil rights laws, vulnerable populations, and other historically 
underserved communities. For purposes of the Consolidated Notice, 
HUD defines vulnerable populations as a group or community whose 
circumstances present barriers to obtaining or understanding 
information or accessing resources. In the action plan, grantees 
should identify those populations (i.e., which protected class, 
vulnerable population, and historically underserved groups were 
considered) and how those groups can be expected to benefit

[[Page 83006]]

from the activities set forth in the plan consistent with the civil 
rights requirements set forth above.
    To perform such an assessment, grantees must include data for 
the HUD-identified and grantee-identified MID areas that identifies 
the following information, as it is available:
     Racial and ethnic make-up of the population, including 
relevant sub-populations depending on activities and programs 
outlined in the plan (this would include renters and homeowners if 
eligibility is dependent on housing tenure) and the specific sub- 
geographies in the MID areas in which those programs and activities 
will be carried out;
     LEP populations, including number and percentage of 
each identified group;
     Number and percentage of persons with disabilities;
     Number and percentage of persons belonging to Federally 
protected classes under the Fair Housing Act (race, color, national 
origin, religion, sex--which includes sexual orientation and gender 
identity--familial status, and disability) and other vulnerable 
populations as determined by the grantee;
     Indigenous populations and tribal communities, 
including number and percentage of each identified group;
     Racially and ethnically concentrated areas and 
concentrated areas of poverty; and
     Historically distressed and underserved communities;
    Grantees must explain how the use of funds will reduce barriers 
that individuals may face when enrolling in and accessing CDBG-DR 
assistance, for example, barriers imposed by a lack of outreach to 
their community or by the lack of information in non-English 
languages or accessible formats for individuals with different types 
of disabilities.
    Grantees are strongly encouraged to include examples of how 
their proposed allocations, selection criteria, and other actions 
can be expected to advance equity for protected class groups. 
Grantees are strongly encouraged to explain and provide examples of 
how their actions can be expected to advance the following 
objectives:
     Equitably benefit protected class groups in the MID 
areas, including racial and ethnic minorities, and sub geographies 
in the MID areas in which residents belonging to such groups are 
concentrated;
     To the extent consistent with purposes and uses of 
CDBG-DR funds, overcome prior disinvestment in infrastructure and 
public services for protected class groups, and areas in which 
residents belonging to such groups are concentrated, when addressing 
unmet needs;
     Enhance for individuals with disabilities in the MID 
areas (a) the accessibility of disaster preparedness, resilience, or 
recovery services, including the accessibility of evacuation 
services and shelters; (b) the provision of critical disaster-
related information in accessible formats; and/or (c) the 
availability of integrated, accessible housing and supportive 
services.
    Grantees must identify the proximity of natural and 
environmental hazards (e.g., industrial corridors, sewage treatment 
facilities, waterways, EPA superfund sites, brownfields, etc.) to 
affected populations in the MID area, including members of protected 
classes, vulnerable populations, and underserved communities and 
explore how CDBG-DR activities may mitigate environmental concerns 
and increase resilience among these populations to protect against 
the effects of extreme weather events and other natural hazards.
    Grantees must also describe how their use of CDBG-DR funds is 
consistent with their obligation to affirmatively further fair 
housing. HUD regulations at 24 CFR 5.151 provide that affirmatively 
furthering fair housing means taking meaningful actions, in addition 
to combating discrimination, that overcome patterns of segregation 
and foster inclusive communities free from barriers that restrict 
access to opportunity based on protected characteristics. 
Specifically, affirmatively furthering fair housing means taking 
meaningful actions that, taken together, address significant 
disparities in housing needs and in access to opportunity, replacing 
segregated living patterns with truly integrated and balanced living 
patterns, transforming racially or ethnically concentrated areas of 
poverty into areas of opportunity, and fostering and maintaining 
compliance with civil rights and fair housing laws.
    State and local government grantees must submit a certification 
to AFFH in accordance with 24 CFR 5.150, et seq. CDBG-DR grantees 
must also comply with the recordkeeping requirements of 24 CFR 
570.506 and 570.490(b), as amended by the Consolidated Notice.
    III.C.1.e. Infrastructure. In its action plan, each grantee must 
include a description of how it plans to meet the requirements of 
the Consolidated Notice, including how it will: promote sound, 
sustainable long-term recovery planning as described in this 
section; adhere to the elevation requirements established in section 
II.C.2.; and coordinate with local and regional planning efforts as 
described in section III.B.2.i and III.D.1.a. All infrastructure 
investments must be designed and constructed to withstand chronic 
stresses and extreme events by identifying and implementing 
resilience performance metrics as described in section II.A.2.c.
    If a grantee is allocating funds for infrastructure, its 
description must include:
    (1) How it will address the construction or rehabilitation of 
disaster-related systems (e.g., storm water management systems) or 
other disaster-related community-based mitigation systems (e.g., 
using FEMA's community lifelines). State grantees carrying out 
infrastructure activities must work with units of general local 
government and Indian tribes in the MID areas to identify the unmet 
needs and associated costs of needed disaster-related infrastructure 
improvements;
    (2) How mitigation measures and strategies to reduce natural 
hazard risks, including climate-related risks, will be integrated 
into rebuilding activities;
    (3) The extent to which CDBG-DR funded infrastructure activities 
will achieve objectives outlined in regionally or locally 
established plans and policies that are designed to reduce future 
risk to the jurisdiction;
    (4) How the grantee will evaluate the costs and benefits in 
selecting infrastructure projects to assist with CDBG-DR funds;
    (5) How the grantee will align infrastructure investments with 
other planned federal, state, or local capital improvements and 
infrastructure development efforts, and will work to foster the 
potential for additional infrastructure funding from multiple 
sources, including state and local capital improvement projects in 
planning, and the potential for private investment;
    (6) How the grantee will employ adaptable and reliable 
technologies to prevent premature obsolescence of infrastructure; 
and
    (7) How the grantee will invest in restoration of infrastructure 
and related long-term recovery needs within historically underserved 
communities that lacked adequate investments in housing, 
transportation, water, and wastewater infrastructure prior to the 
disaster.
    III.C.1.f. Minimize Displacement. A description of how the 
grantee plans to minimize displacement of persons or entities, and 
assist any persons or entities displaced, and ensure accessibility 
needs of displaced persons with disabilities. Specifically, grantees 
must detail how they will meet the Residential Anti-displacement and 
Relocation Assistance Plan (RARAP) requirements in section IV.F.7. 
Grantees must indicate to HUD whether they will be amending an 
existing RARAP or creating a new RARAP specific to CDBG-DR. Grantees 
must meet the requirements related to the RARAP prior to 
implementing any activity with CDBG-DR grant funds, such as buyouts 
and other disaster recovery activities. Grantees must seek to 
minimize displacement or adverse impacts from displacement, 
consistent with the requirements of Section IV.F of the Consolidated 
Notice, Section 104(d) of the HCDA (42 U.S.C. 5304(d)) and 
implementing regulations at 24 CFR part 42, and 24 CFR 570.488 or 24 
CFR 570.606, as applicable. Grantees must describe how they will 
plan and budget for relocation activities in the action plan.
    III.C.1.g. Allocation and award caps. The grantee must provide a 
budget for the full amount of the allocation that is reasonably 
proportionate to its unmet needs (or provide an acceptable 
justification for disproportional allocation) and is consistent with 
the requirements to integrate hazard mitigation measures into all 
its programs and projects. The grantee shall provide a description 
of each disaster recovery program or activity to be funded, 
including the CDBG-DR eligible activities and national objectives 
associated with each program and the eligibility criteria for 
assistance. The grantee shall also describe the maximum amount of 
assistance (i.e., award cap) available to a beneficiary under each 
of the grantee's disaster recovery programs. A grantee may find it 
necessary to provide exceptions on a case-by-case basis to the 
maximum amount of assistance and must describe the process it will 
use to make such exceptions in its action plan. At a minimum, each 
grantee must adopt policies and procedures that communicate how it 
will analyze the circumstances under which an

[[Page 83007]]

exception is needed and how it will demonstrate that the amount of 
assistance is necessary and reasonable. Each grantee must also 
indicate in its action plan that it will make exceptions to the 
maximum award amounts when necessary, to comply with federal 
accessibility standards or to reasonably accommodate a person with 
disabilities.
    III.C.1.h. Cost controls and warranties. The grantee must 
provide a description of the standards to be established for 
construction contractors performing work in the jurisdiction and the 
mechanisms to be used by the grantee to assist beneficiaries in 
responding to contractor fraud, poor quality work, and associated 
issues. Grantees must require a warranty period post-construction 
with a formal notification to beneficiaries on a periodic basis 
(e.g., 6 months and one month before expiration date of the 
warranty). Each grantee must also describe its controls for assuring 
that construction costs are reasonable and consistent with market 
costs at the time and place of construction.
    III.C.1.i. Resilience planning. Resilience is defined as a 
community's ability to minimize damage and recover quickly from 
extreme events and changing conditions, including natural hazard 
risks. At a minimum, the grantee's action plan must contain a 
description of how the grantee will: (a) emphasize high quality 
design, durability, energy efficiency, sustainability, and mold 
resistance; (b) support adoption and enforcement of modern and/or 
resilient building codes that mitigate against natural hazard risks, 
including climate-related risks (e.g., sea level rise, high winds, 
storm surge, flooding, volcanic eruption, and wildfire risk, where 
appropriate and as may be identified in the jurisdiction's rating 
and identified weaknesses (if any) in building code adoption using 
FEMA's Nationwide Building Code Adoption Tracking (BCAT) portal), 
and provide for accessible building codes and standards, as 
applicable; (c) establish and support recovery efforts by funding 
feasible, cost-effective measures that will make communities more 
resilient against a future disaster; (d) make land-use decisions 
that reflect responsible and safe standards to reduce future natural 
hazard risks, e.g., by adopting or amending an open space management 
plan that reflects responsible floodplain and wetland management and 
takes into account continued sea level rise, if applicable, and (e) 
increase awareness of the hazards in their communities (including 
for members of protected classes, vulnerable populations, and 
underserved communities) through outreach to the MID areas.
    While the purpose of CDBG-DR funds is to recover from a 
Presidentially declared disaster, integrating hazard mitigation and 
resilience planning with recovery efforts will promote a more 
resilient and sustainable long-term recovery. The action plan must 
include a description of how the grantee will promote sound, 
sustainable long-term recovery planning informed by a post-disaster 
evaluation of hazard risk, including climate-related natural hazards 
and the creation of resilience performance metrics as described in 
paragraph II.A.2.c. of the Consolidated Notice. This information 
should be based on the history of FEMA and other federally-funded 
disaster mitigation efforts and, as appropriate, take into account 
projected increases in sea level, the frequency and intensity of 
extreme weather events, and worsening wildfires. Grantees must use 
the FEMA-approved Hazard Mitigation Plan (HMP), Community Wildfire 
Protection Plan (CWPP), or other resilience plans to inform the 
evaluation, and it should be referenced in the action plan.
    III.C.2. Additional action plan requirements for states. For 
state grantees, the action plan must describe how the grantee will 
distribute grant funds, either through specific programs and 
projects the grantee will carry out directly (through employees, 
contractors, or through subrecipients), or through a method of 
distribution of funds to local governments and Indian tribes (as 
permitted by III.B.2.d.). The grantee shall describe how the method 
of distribution to local governments or Indian tribes, or programs/
projects carried out directly, will result in long-term recovery 
from specific impacts of the disaster.
    All states must include in their action plan the information 
outlined in (1) through (7) below (in addition to other information 
required by section III.C.). For states using a method of 
distribution, if some required information is unknown when the 
grantee is submitting its action plan to HUD (e.g., the list of 
programs or activities required by III.C.1.g. or the projected use 
of CDBG-DR funds by responsible entity as required by subparagraph 
(5) below), the grantee must update the action plan through a 
substantial amendment once the information is known. If necessary to 
comply with a statutory requirement that a grantee shall submit a 
plan detailing the proposed use of all funds prior to HUD's 
obligation of grant funds, HUD may obligate only a portion of grant 
funds until the substantial amendment providing the required 
information is submitted and approved by HUD.
    (1) How the impact and unmet needs assessment informs funding 
determinations, including the rationale behind the decision(s) to 
provide funds to most impacted and distressed areas.
    (2) When funds are subgranted to local governments or Indian 
tribes (either as subrecipients or through a method of 
distribution), all criteria used to allocate and award the funds 
including the relative importance of each criterion (including any 
priorities). If the criteria are unknown when the grantee is 
submitting the initial action plan to HUD, the grantee must update 
the action plan through a substantial amendment once the information 
is known. The substantial amendment must be submitted and approved 
before distributing the funds to a local government or Indian tribe.
    (3) How the distribution and selection criteria will address 
disaster-related unmet needs in a manner that does not have an 
unjustified discriminatory effect based on race or other protected 
class and ensure the participation of minority residents and those 
belonging to other protected class groups in the MID areas. Such 
description should include an assessment of who may be expected to 
benefit, the timing of who will be prioritized, and the amount or 
proportion of benefits expected to be received by different 
communities or groups (e.g., the proportion of benefits going to 
different locations within the MID or to homeowners versus renters).
    (4) The threshold factors and recipient or beneficiary grant 
size limits that are to be applied.
    (5) The projected uses for the CDBG-DR funds, by responsible 
entity, activity, and geographic area.
    (6) For each proposed program and/or activity, its respective 
CDBG activity eligibility category (or categories), national 
objective(s), and what disaster-related impact is addressed, as 
described in section II.A.1.
    (7) When applications are solicited for programs carried out 
directly, all criteria used to select applications for funding, 
including the relative importance of each criterion, and any 
eligibility requirements. If the criteria are unknown when the 
grantee is submitting the initial action plan to HUD, the grantee 
must update the action plan through a substantial amendment once the 
information is known. The substantial amendment must be submitted 
and approved before selecting applications.
    III.C.3. Additional action plan requirements for local 
governments. For local governments grantees, the action plan shall 
describe specific programs and/or activities they will carry out. 
The action plan must also describe:
    (1) How the impact and unmet needs assessment informs funding 
determinations, including the rationale behind the decision(s) to 
provide funds to most impacted and distressed areas.
    (2) All criteria used to select applications (including any 
priorities), including the relative importance of each criterion, 
and any eligibility requirements. If the criteria are unknown when 
the grantee is submitting the initial action plan to HUD, the 
grantee must update the action plan through a substantial amendment 
once the information is known. The substantial amendment must be 
submitted and approved before selecting applications.
    (3) How the distribution and selection criteria will address 
disaster-related unmet needs in a manner that does not have an 
unjustified discriminatory effect and ensures the participation of 
minority residents and those belonging to other protected class 
groups in the MID areas, including with regards to who may benefit, 
the timing of who will be prioritized, and the amount or proportion 
of benefits expected to be received by different communities or 
groups (e.g., the proportion of benefits going to different 
locations within the MID or to homeowners versus renters).
    (4) The threshold factors and grant size limits that are to be 
applied.
    (5) The projected uses for the CDBG-DR funds, by responsible 
entity, activity, and geographic area.
    (6) For each proposed program and/or activity, its respective 
CDBG activity eligibility category (or categories), national 
objective(s), and what disaster-related impact is addressed, as 
described in section II.A.1. of the Consolidated Notice.

[[Page 83008]]

    III.C.4. Waiver of 45-day review period for CDBG-DR action plans 
to 60 days. HUD may disapprove an action plan or substantial action 
plan amendment if it is incomplete. HUD works with grantees to 
resolve or provide additional information during the review period 
to avoid the need to disapprove an action plan or substantial action 
plan amendments. There are several issues related to the action plan 
as submitted that can be fully resolved via further discussion and 
revision during an extended review period, rather than through HUD 
disapproval of the plan, which in turn would require grantees to 
take additional time to revise and resubmit their respective plan. 
Therefore, the Secretary has determined that good cause exists and 
waives 24 CFR 91.500(a) to extend HUD's action plan review period 
from 45 days to 60 days.
    The action plan (including SF-424 and certifications) must be 
submitted to HUD for review and approval using DRGR. By submitting 
required standard forms (that must be submitted with the action 
plan), the grantee is providing assurances that it will comply with 
statutory requirements, including, but not limited to civil rights 
requirements. Applicants and recipients are required to submit 
assurances of compliance with federal civil rights requirements. A 
grantee will use DRGR's upload function to include the SF 424 
(including SF 424B and SF 424D, as applicable) and certifications 
with its action plan. Grantees receiving an allocation are required 
to submit an action plan within 120 days of the applicability date 
of the Allocation Announcement Notice, unless the grantee has 
requested, and HUD has approved an extension of the submission 
deadline. HUD will then review each action plan within 60 days from 
the date of receipt.
    During its review, HUD typically provides grantees with comments 
on the submitted plan to avoid the need to disapprove an action plan 
and offers a grantee the opportunity to make updates to the action 
plan during the first forty-five days of HUD's initial sixty-day 
review period. If a grantee wants to make updates to the action 
plan, HUD will reject the Public Action Plan in DRGR to return the 
plan to the grantee. Then, once the grantee resubmits the plan, HUD 
reviews the revised plan within the initial sixty-day period. HUD is 
establishing an alternative process that offers a grantee the option 
to voluntarily provide a revised action plan, updated to respond to 
HUD's comments, no later than day forty-five in HUD's sixty-day 
review. A grantee is not required to participate in the revisions of 
the action plan during this time, but with the understanding that an 
action plan may be determined to be substantially incomplete. The 
Secretary may disapprove an action plan as substantially incomplete 
if HUD determines that the action plan does not meet the 
requirements of the Consolidated Notice and the applicable 
Allocation Announcement Notice.
    III.C.5. Obligation and expenditure of funds. Once HUD approves 
the action plan and approves certifications if required by 
appropriations acts, it will then sign a grant agreement obligating 
allocated funds to the grantee. The grantee will continue the action 
plan process in DRGR to draw funds (see section V.C.1.).
    The grantee must meet the applicable environmental requirements 
before the use or commitment of funds for each activity. After the 
Responsible Entity (1) completes environmental review(s) pursuant to 
24 CFR part 58 and receives from HUD an approved Request for Release 
of Funds and certification (as applicable), or (2) adopts another 
Federal agency's environmental review, approval, or permit and 
receives from HUD (or the state) an approved Request for Release of 
Funds and certification (as applicable), the grantee may draw down 
funds from the line of credit for an activity. The disbursement of 
grant funds must begin no later than 180 calendar days after HUD 
executes a grant agreement with the grantee. Failure to draw funds 
within this timeframe may result in HUD's review of the grantee's 
certification of its financial controls, procurement processes, and 
capacity, and may result in the imposition of any corrective actions 
deemed appropriate by HUD pursuant to 24 CFR 570.495, 24 CFR 
570.910, or 24 CFR 1003.701.
    III.C.6. Amending the action plan. The grantee must amend its 
action plan to update its needs assessment, modify or create new 
activities, or reprogram funds, as necessary, in the DRGR system. 
Each amendment must be published on the grantee's official website 
and describe the changes within the context of the entire action 
plan. A grantee's current version of its entire action plan must be 
accessible for viewing as a single document at any given point in 
time, rather than require the public or HUD to view and cross-
reference changes among multiple amendments. HUD's DRGR system will 
include the capabilities necessary for a grantee to sufficiently 
identify the changes for each amendment. When a grantee has finished 
amending the content in the Public Action Plan, the grantee will 
click ``Submit Plan'' in the DRGR system. The DRGR system will 
prompt the grantee to select the ``Public Action Plan'' and identify 
the amendment type (substantial or nonsubstantial). The grantee will 
complete this cover page to describe each amendment. At a minimum, 
the grantee must: (1) identify exactly what content is being added, 
deleted, or changed; (2) clearly illustrate where funds are coming 
from and where they are moving to; and (3) include a revised budget 
allocation table that reflects the entirety of all funds, as 
amended.
    III.C.6.a. Substantial amendment. In its action plan, each 
grantee must specify criteria for determining what changes in the 
grantee's plan constitute a substantial amendment to the plan. At a 
minimum, the following modifications will constitute a substantial 
amendment: a change in program benefit or eligibility criteria; the 
addition or deletion of an activity; a proposed reduction in the 
overall benefit requirement, as outlined in III.F.2.; or the 
allocation or reallocation of a monetary threshold specified by the 
grantee in their action plan. For all substantial amendments, the 
grantee must follow the same procedures required for the preparation 
and submission of an action plan for disaster recovery, with the 
exception of the public hearing requirements described in section 
III.D.1.b. and the consultation requirements described in section 
III.D.1.a., which are not required for substantial amendments. A 
substantial action plan amendment shall require a 30-day public 
comment period.
    III.C.6.b Nonsubstantial amendment. The grantee must notify HUD, 
but is not required to seek public comment, when it makes any plan 
amendment that is not substantial. Although nonsubstantial 
amendments do not require HUD's approval to become effective, the 
DRGR system must approve the amendment to change the status of the 
Public Action Plan to ``reviewed and approved.'' The DRGR system 
will automatically approve the amendment by the fifth day, if not 
completed by HUD sooner.
    III.C.7. Projection of expenditures and outcomes. Each grantee 
must submit projected expenditures and outcomes with the action 
plan. The projections must be based on each quarter's expected 
performance--beginning with the first quarter funds are available to 
the grantee and continuing each quarter until all funds are 
expended. The grantee will use DRGR's upload feature to include 
projections and accomplishments for each program created.

III.D. Citizen Participation Requirements

    III.D.1. Citizen participation waiver and alternative 
requirement. To permit a more streamlined process and ensure 
disaster recovery grants are awarded in a timely manner, provisions 
of 42 U.S.C. 5304(a)(2) and (3), 42 U.S.C. 12707, 24 CFR 570.486, 24 
CFR 1003.604, 24 CFR 91.105(b) through (d), and 24 CFR 91.115(b) 
through (d), with respect to citizen participation requirements, are 
waived and replaced by the alternative requirements in this section. 
The streamlined requirements require the grantee to include public 
hearings on the proposed action plan and provide a reasonable 
opportunity (at least 30 days) for citizen comment.
    The grantee must follow a detailed citizen participation plan 
that satisfies the requirements of 24 CFR 91.115 or 91.105 (except 
as provided for in notices providing waivers and alternative 
requirements). Each local government receiving assistance from a 
state grantee must follow a detailed citizen participation plan that 
satisfies the requirements of 24 CFR 570.486 (except as provided for 
in notices providing waivers and alternative requirements).
    In addition to the requirements above, the streamlined citizen 
participation alternative requirements for CDBG-DR grants are as 
follows:
    III.D.1.a. Requirement for consultation during plan preparation. 
All grantees must consult with states, Indian tribes, local 
governments, Federal partners, nongovernmental organizations, the 
private sector, and other stakeholders and affected parties in the 
surrounding geographic area, including organizations that advocate 
on behalf of members of protected classes, vulnerable populations, 
and underserved communities impacted by the disaster, to ensure 
consistency of the action plan with applicable regional 
redevelopment plans. A grantee must consult with other relevant 
government agencies, including state and

[[Page 83009]]

local emergency management agencies that have primary responsibility 
for the administration of FEMA funds, if applicable.
    III.D.1.b. Publication of the action plan and opportunity for 
public comment. Following the creation of the action plan or 
substantial amendment in DRGR and before the grantee submits the 
action plan or substantial amendment to HUD, the grantee must 
publish the proposed plan or amendment for public comment. The 
manner of publication must include prominent posting on the 
grantee's official disaster recovery website and must afford 
citizens, affected local governments, and other interested parties a 
reasonable opportunity to review the plan or substantial amendment. 
Grantees shall consider if there are potential barriers that may 
limit or prohibit vulnerable populations or underserved communities 
and individuals affected by the disaster from providing public 
comment on the grantee's action plan or substantial amendment. If 
the grantee identifies barriers that may limit or prohibit equitable 
participation, the grantee must take reasonable measures to increase 
coordination, communication, affirmative marketing, targeted 
outreach, and engagement with underserved communities and 
individuals, including persons with disabilities and persons with 
LEP.
    At a minimum, the topic of disaster recovery on the grantee's 
website must be navigable by all interested parties from the grantee 
homepage and must link to the disaster recovery website required by 
section III.D.1.e. The grantee's records must demonstrate that it 
has notified affected citizens through electronic mailings, press 
releases, statements by public officials, media advertisements, 
public service announcements, and/or contacts with neighborhood 
organizations.
    Additionally, the CDBG-DR grantee must convene at least one 
public hearing on the proposed action plan after it has published on 
its website to solicit public comment and before submittal of the 
action plan to HUD. If the grantee holds more than one public 
hearing, it must hold each hearing in a different location within 
the MID area in locations that the grantee determines will promote 
geographic balance and maximum accessibility. The minimum number of 
public hearings a grantee must convene on the action plan to obtain 
interested parties' views and to respond to comments and questions 
shall be determined by the amount of the grantee's CDBG-DR 
allocation: (1) CDBG-DR grantees with allocations under $500 million 
are required to hold at least one public hearing in a HUD-identified 
MID area; and (2) CDBG-DR grantees with allocations over $500 
million or more shall convene at least two public hearings in HUD-
identified MID areas.
    Grantees may convene public hearings virtually (alone, or in 
concert with an in-person hearing). All in-person hearings must be 
held in facilities that are physically accessible to persons with 
disabilities. HUD's implementing regulations for Section 504 of the 
Rehabilitation Act (24 CFR part 8, subpart C) provide that where 
physical accessibility is not achievable, grantees must give 
priority to alternative methods of product or information delivery 
that offer programs and activities to qualified individuals with 
disabilities in the most integrated setting appropriate. When 
conducting a virtual hearing, the grantee must allow questions in 
real time, with answers coming directly from the grantee 
representatives to all ``attendees.''
    For both virtual and in person hearings, grantees must update 
their citizen participation plans to provide that hearings be held 
at times and locations convenient to potential and actual 
beneficiaries, with accommodation for persons with disabilities and 
appropriate auxiliary aids and services to ensure effective 
communication, and specify how they will meet these requirements. 
See 24 CFR 8.6 for HUD's regulations about effective communication. 
Grantees must also provide meaningful access for individuals with 
LEP at both in-person and virtual hearings. In their citizen 
participation plan, state and local government grantees shall 
identify how the needs of non-English speaking residents will be met 
in the case of virtual and in-person public hearings where a 
significant number of non-English speaking residents can be 
reasonably expected to participate. In addition, for both virtual or 
in-person hearings, the grantee shall provide reasonable 
notification and access for citizens in accordance with the 
grantee's certifications at III.F.7.g., timely responses to all 
citizen questions and issues, and public access to all questions and 
responses.
    III.D.1.c. Consideration of public comments. The grantee must 
provide a reasonable time frame (no less than 30 days) and method(s) 
(including electronic submission) for receiving comments on the 
action plan or substantial amendment. The grantee must consider all 
oral and written comments on the action plan or any substantial 
amendment. Any updates or changes made to the action plan in 
response to public comments should be clearly identified in the 
action plan. A summary of comments on the plan or amendment, and the 
grantee's response to each, must be included (e.g., uploaded) in 
DRGR with the action plan or substantial amendment. Grantee 
responses shall address the substance of the comment rather than 
merely acknowledge that the comment was received.
    III.D.1.d. Availability and accessibility of documents. The 
grantee must make the action plan, any substantial amendments, vital 
documents, and all performance reports available to the public on 
its website. See the following guidance for more information on 
vital documents: https://www.lep.gov/guidance/HUD_guidance_Jan07.pdf. In addition, the grantee must make these 
documents available in a form accessible to persons with 
disabilities and those with LEP. Grantees must take reasonable steps 
to ensure meaningful access to their programs and activities by LEP 
persons, including members of protected classes, vulnerable 
populations, and individuals from underserved communities. In their 
citizen participation plan, state and local government grantees 
shall describe their procedures for assessing their language needs 
and identify any need for translation of notices and other vital 
documents. At a minimum, the citizen participation plan shall 
require that the state or local government grantee take reasonable 
steps to provide language assistance to ensure meaningful access to 
participation by non-English-speaking residents of the grantee's 
jurisdiction.
    III.D.1.e. Public website. The grantee must maintain a public 
website that permits individuals and entities awaiting assistance 
and the general public to see how all grant funds are used and 
administered. The website must include copies of all relevant 
procurement documents and, except as noted in the next paragraph, 
all grantee administrative contracts, details of ongoing procurement 
processes, and action plans and amendments. The public website must 
be accessible to persons with disabilities and individuals with LEP.
    To meet this requirement, each grantee must make the following 
items available on its website: the action plan created using DRGR 
(including all amendments); each performance report (as created 
using the DRGR system); citizen participation plan; procurement 
policies and procedures; all contracts, as defined in 2 CFR 200.22, 
that will be paid with CDBG-DR funds (including, but not limited to, 
subrecipients' contracts); and a summary including the description 
and status of services or goods currently being procured by the 
grantee or the subrecipient (e.g., phase of the procurement, 
requirements for proposals, etc.). Contracts and procurement actions 
that do not exceed the micro-purchase threshold, as defined in 2 CFR 
200.1, are not required to be posted to a grantee's website.
    III.D.1.f. Application status. The grantee must provide multiple 
methods of communication, such as websites, toll-free numbers, TTY 
and relay services, email address, fax number, or other means to 
provide applicants for recovery assistance with timely information 
to determine the status of their application.
    III.D.1.g. Citizen complaints. The grantee will provide a timely 
written response to every citizen complaint. The grantee response 
must be provided within fifteen working days of the receipt of the 
complaint, or the grantee must document why additional time for the 
response was required. Complaints regarding fraud, waste, or abuse 
of government funds should be forwarded to the HUD OIG Fraud Hotline 
(phone: 1-800-347-3735 or email: [email protected]).
    III.D.1.h. General requirements. For plan publication, the 
comprehensive disaster recovery website and vital documents must 
ensure effective communication for individuals with disabilities, as 
required by 24 CFR 8.6 and the Americans with Disabilities Act, as 
applicable. In addition to ensuring the accessibility of the 
comprehensive disaster recovery website and vital documents, this 
obligation includes the requirement to provide auxiliary aids and 
services where necessary to ensure effective communication with 
individuals with disabilities, which may take the form of the 
furnishing of the above referenced materials in alternative formats 
(24 CFR 8.6(a)(1)). When required by III.D.1.d., grantees must take 
reasonable steps to ensure meaningful access for individuals with 
LEP.

[[Page 83010]]

III.E. Program Income

    III.E.1. Program income waiver and alternative requirement. For 
state and unit of general local government grantees, HUD is waiving 
all applicable program income rules at 42 U.S.C. 5304(j), 24 CFR 
570.489(e), 24 CFR 570.500, and 24 CFR 570.504 and providing the 
alternative requirement described below. Program income earned by 
Indian tribes that receive an allocation from HUD will be governed 
by the regulations at 24 CFR 1003.503 until grant closeout and not 
by the waivers and alternative requirements in this Consolidated 
Notice. Program income earned by Indian tribes that are 
subrecipients of state grantees or local government grantees will be 
subject to the program income requirements for subrecipients of 
those grantees.
    III.E.1.a. Definition of program income. ``Program income'' is 
defined as gross income generated from the use of CDBG-DR funds, 
except as provided in III.E.1.b., and received by a state, local 
government, Indian tribe receiving funds from a grantee, or their 
subrecipients. When income is generated by an activity that is only 
partially assisted with CDBG-DR funds, the income shall be prorated 
to reflect the percentage of CDBG-DR funds used (e.g., a single loan 
supported by CDBG-DR funds and other funds, or a single parcel of 
land purchased with CDBG-DR funds and other funds). If CDBG funds 
are used with CDBG-DR funds on an activity, any income earned on the 
CDBG portion would not be subject to the waiver and alternative 
requirement in the Consolidated Notice.
    Program income includes, but is not limited to, the following:
    (i) Proceeds from the disposition by sale or long-term lease of 
real property purchased or improved with CDBG-DR funds.
    (ii) Proceeds from the disposition of equipment purchased with 
CDBG-DR funds.
    (iii) Gross income from the use or rental of real or personal 
property acquired by a state, local government, or subrecipient 
thereof with CDBG-DR funds, less costs incidental to generation of 
the income.
    (iv) Gross income from the use or rental of real property owned 
by a state, local government, or subrecipient thereof, that was 
constructed or improved with CDBG-DR funds, less costs incidental to 
generation of the income.
    (v) Payments of principal and interest on loans made using CDBG-
DR funds.
    (vi) Proceeds from the sale of loans made with CDBG-DR funds.
    (vii) Proceeds from the sale of obligations secured by loans 
made with CDBG-DR funds.
    (viii) Interest earned on program income pending disposition of 
the income, including interest earned on funds held in a revolving 
fund account.
    (ix) Funds collected through special assessments made against 
nonresidential properties and properties owned and occupied by non-
LMI households, where the special assessments are used to recover 
all or part of the CDBG-DR portion of a public improvement.
    (x) Gross income paid to a state, local government, or 
subrecipient thereof, from the ownership interest in a for-profit 
entity in which the income is in return for the provision of CDBG-DR 
assistance.
    III.E.1.b. Program income--does not include:
    (i) The total amount of funds that is less than $35,000 received 
in a single year and retained by a state, local government, or a 
subrecipient thereof.
    (ii) Amounts generated by activities eligible under section 
105(a)(15) of the HCDA and carried out by an entity under the 
authority of section 105(a)(15) of the HCDA.
    III.E.1.c. Retention of program income. State grantees may 
permit a local government that receives or will receive program 
income to retain the program income but are not required to do so.
    III.E.1.d. Program income--use, close out, and transfer.
    (i) Program income received (and retained, if applicable) before 
or after closeout of the grant that generated the program income, 
and used to continue disaster recovery activities, is treated as 
additional CDBG-DR funds subject to the requirements of the 
Consolidated Notice and must be used in accordance with the 
grantee's action plan for disaster recovery. To the maximum extent 
feasible, program income shall be used or distributed before 
additional withdrawals from the U.S. Treasury are made, except as 
provided in III.E.1.e. below.
    (ii) In addition to the alternative requirements dealing with 
program income required above, the following rules apply:
    (1) a state or local government grantee may transfer program 
income to its annual CDBG program before closeout of the grant that 
generated the program income. In addition, state grantees may 
transfer program income before closeout to any annual CDBG-funded 
activities carried out by a local government within the state.
    (2) Program income received by a grantee, or received and 
retained by a subrecipient, after closeout of the grant that 
generated the program income, may also be transferred to a grantee's 
annual CDBG award.
    (3) In all cases, any program income received that is not used 
to continue the disaster recovery activity will not be subject to 
the waivers and alternative requirements of the Consolidated Notice. 
Rather, those funds will be subject to the state or local government 
grantee's regular CDBG program rules. Any other transfer of program 
income not specifically addressed in the Consolidated Notice may be 
carried out if the grantee first seeks and then receives HUD's 
approval.
    III.E.1.e. Revolving funds. State and local government grantees 
may establish revolving funds to carry out specific, identified 
activities. State grantees may also establish a revolving fund to 
distribute funds to local governments or tribes to carry out 
specific, identified activities. A revolving fund, for this purpose, 
is a separate fund (with a set of accounts that are independent of 
other program accounts) established to carry out specific 
activities. These activities must generate payments used to support 
similar activities going forward. These payments to the revolving 
fund are program income and must be substantially disbursed from the 
revolving fund before additional grant funds are drawn from the U.S. 
Treasury for payments that could be funded from the revolving fund. 
Such program income is not required to be disbursed for nonrevolving 
fund activities. A revolving fund established by a CDBG-DR grantee 
shall not be directly funded or capitalized with CDBG-DR grant 
funds, pursuant to 24 CFR 570.489(f)(3).

III.F. Other General Waivers and Alternative Requirements

    III.F.1. Consolidated Plan waiver. HUD is temporarily waiving 
the requirement for consistency with the consolidated plan 
(requirements at 42 U.S.C. 12706, 24 CFR 91.225(a)(5), and 24 CFR 
91.325(a)(5)), because the effects of a major disaster alter a 
grantee's priorities for meeting housing, employment, and 
infrastructure needs. In conjunction, 42 U.S.C. 5304(e) is also 
waived, to the extent that it would require HUD to annually review 
grantee performance under the consistency criteria. These waivers 
apply only for 24 months after the applicability date of the 
grantee's applicable Allocation Announcement Notice. If the grantee 
is not scheduled to submit a new three-to five-year consolidated 
plan within the next two years, the grantee must update its existing 
three-to five-year consolidated plan to reflect disaster-related 
needs no later than 24 months after the applicability date of the 
grantee's applicable Allocation Announcement Notice.
    III.F.2. Overall benefit requirement. The primary objective of 
the HCDA is 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'' (42 U.S.C. 5301(c)). Consistent with the HCDA, 
this notice requires grantees to comply with the overall benefit 
requirements in the HCDA and 24 CFR 570.484, 570.200(a)(3), and 
1003.208, which require that 70 percent of funds be used for 
activities that benefit LMI persons. For purposes of a CDBG-DR 
grant, HUD is establishing an alternative requirement that the 
overall benefit test shall apply only to the grant of CDBG-DR funds 
described in the Allocation Announcement Notice and related program 
income.
    A grantee may seek to reduce the overall benefit requirement 
below 70 percent of the total grant, but must submit a substantial 
amendment as provided in section III.C.6.a. in the Consolidated 
Notice, and provide a justification that, at a minimum: (a) 
identifies the planned activities that meet the needs of its LMI 
population; (b) describes proposed activities and programs that will 
be affected by the alternative requirement, including their proposed 
location(s) and role(s) in the grantee's long-term disaster recovery 
plan; (c) describes how the activities/programs identified in (b) 
prevent the grantee from meeting the 70 percent requirement; (d) 
demonstrates that LMI persons' disaster-related needs have been 
sufficiently met and that the needs of non-LMI persons or areas are 
disproportionately greater, and that the jurisdiction lacks other 
resources to serve non-LMI persons; and (e) demonstrates a 
compelling need for HUD to lower the percentage of the grant that 
must benefit low- and moderate-income persons.

[[Page 83011]]

    III.F.3. Use of the urgent need national objective. Because HUD 
provides CDBG-DR funds only to grantees with documented disaster-
related impacts and each grantee is limited to spending funds only 
for the benefit of areas that received a Presidential disaster 
declaration, the Secretary finds good cause to waive the urgent need 
national objective criteria in section 104(b)(3) of the HCDA and to 
establish the following alternative requirement for any CDBG-DR 
grantee using the urgent need national objective for a period of 36 
months after the applicability date of the grantee's Allocation 
Announcement Notice.
    Pursuant to this alternative requirement, grantees that use the 
urgent need national objective must: (1) describe in the impact and 
unmet needs assessment why specific needs have a particular urgency, 
including how the existing conditions pose a serious and immediate 
threat to the health or welfare of the community; (2) identify each 
program or activity in the action plan that will use the urgent need 
national objective--either through its initial action plan 
submission or through a substantial amendment submitted by the 
grantee within 36 months of the applicability date of the grantee's 
Allocation Announcement Notice; and (3) document how each program 
and/or activity funded under the urgent need national objective in 
the action plan responds to the urgency, type, scale, and location 
of the disaster-related impact as described in the grantee's impact 
and unmet needs assessment.
    The grantee's action plan must address all three criteria 
described above to use the alternative urgent need national 
objective for the program and/or activity. This alternative urgent 
need national objective is in effect for a period of 36 months 
following the applicability date of the grantee's Allocation 
Announcement Notice. After 36 months, the grantee will be required 
to follow the criteria established in section 104(b)(3) of the HCDA 
and its implementing regulations in 24 CFR part 570 when using the 
urgent need national objective for any new programs and/or 
activities added to an action plan.
    III.F.4. Reimbursement of disaster recovery expenses by a 
grantee or subrecipient. The provisions of 24 CFR 570.489(b) are 
applied to permit a state grantee to charge to the grant otherwise 
allowable costs incurred by the grantee, its recipients or 
subrecipients (including Indian tribes and PHAs) on or after the 
incident date of the covered disaster. A local government grantee is 
subject to the provisions of 24 CFR 570.200(h) but may reimburse 
itself or its subrecipients for otherwise allowable costs incurred 
on or after the incident date of the covered disaster. Section 
570.200(h)(1)(i) is waived to the extent that it requires pre-
agreement activities to be included in the local government's 
consolidated plan. As an alternative requirement, grantees must 
include any pre-agreement activities in their action plans, 
including any costs of eligible activities that were funded with 
short-term loans (e.g., bridge loans) and that the grantee intends 
to reimburse or otherwise charge to the grant, consistent with 
applicable program requirements.
    III.F.5. Reimbursement of pre-application costs of homeowners, 
renters, businesses, and other qualifying entities. Grantees are 
permitted to charge to grants the pre-award and pre-application 
costs of homeowners, renters, businesses, and other qualifying 
entities for eligible costs these applicants have incurred in 
response to an eligible disaster covered under a grantees' 
applicable Allocation Announcement Notice. For purposes of the 
Consolidated Notice, pre-application costs are costs incurred by an 
applicant to CDBG-DR funded programs before the time of application 
to a grantee or subrecipient, which may be before (pre-award) or 
after the grantee signs its CDBG-DR grant agreement. In addition to 
the terms described in the remainder of the Consolidated Notice, 
grantees may only charge costs to the grant that meet the following 
requirements:
     Grantees may only charge the costs for rehabilitation, 
demolition, and reconstruction of single family, multifamily, and 
nonresidential buildings, including commercial properties, owned by 
private individuals and entities, incurred before the owner applies 
to a CDBG-DR grantee, recipient, or subrecipient for CDBG-DR 
assistance;
     For rehabilitation and reconstruction costs, grantees 
may only charge costs for activities completed within the same 
footprint of the damaged structure, sidewalk, driveway, parking lot, 
or other developed area;
     As required by 2 CFR 200.403(g), costs must be 
adequately documented; and
     Grantees must complete a duplication of benefits check 
before providing assistance pursuant to section IV.A. in the 
Consolidated Notice.
    Grantees are required to ensure that all costs charged to a 
CDBG-DR grant are necessary expenses related to authorized recovery 
purposes. Grantees may charge to CDBG-DR grants the eligible pre-
application costs of individuals and private entities related to 
single family, multifamily, and nonresidential buildings, only if: 
1) the person or private entity incurred the expenses within one 
year after the applicability date of the grantee's Allocation 
Announcement Notice (or within one year after the date of the 
disaster, whichever is later); and 2) the person or entity pays for 
the cost before the date on which the person or entity applies for 
CDBG-DR assistance. Exempt activities as defined at 24 CFR 58.34, 
but not including 24 CFR 58.34(a)(12), and categorical exclusions as 
defined at 24 CFR 58.35(b) are not subject to the time limit on pre-
application costs outlined above. Actions that convert or 
potentially convert to exempt under 24 CFR 58.34(a)(12) remain 
subject to the reimbursement requirements provided herein. If a 
grantee cannot meet all requirements at 24 CFR part 58, the pre-
application costs cannot be reimbursed with CDBG-DR or other HUD 
funds.
    Grantees must comply with the necessary and reasonable cost 
principles for state, local, and Indian tribal governments 
(described at 2 CFR 200.403). Grantees must incorporate into their 
policies and procedures the basis for determining that the 
assistance provided under the terms of this provision is necessary 
and reasonable.
    A grantee may not charge such pre-award or pre-application costs 
to grants if the grantee cannot meet all requirements at 24 CFR part 
58. Under CDBG-DR authorizing legislation and HUD's environmental 
regulations in 24 CFR part 58, the CDBG-DR ``recipient'' (as defined 
in 24 CFR part 58.2(a)(5), which differs from the definition in 2 
CFR part 200) is the responsible entity that assumes the 
responsibility for completing environmental reviews under Federal 
laws and authorities. The responsible entity assumes all legal 
liability for the application, compliance, and enforcement of these 
requirements. Pre-award costs are also allowable when CDBG-DR 
assistance is provided for the rehabilitation, demolition, or 
reconstruction of government buildings, public facilities, and 
infrastructure. However, in such instances, the environmental review 
must occur before the underlying activity (e.g., rehabilitation of a 
government building) begins.
    Grantees are also required to consult with the State Historic 
Preservation Officer, Fish and Wildlife Service, and National Marine 
Fisheries Service, to obtain formal agreements for compliance with 
section 106 of the National Historic Preservation Act (54 U.S.C. 
306108) and section 7 of the Endangered Species Act of 1973 (16 
U.S.C. 1536) when designing a reimbursement program.
    All grantees must follow all cross-cutting requirements, as 
applicable, for all CDBG-DR funded activities including but not 
limited to the environmental requirements above, the Davis Bacon 
Act, Civil Rights Requirements, HUD's Lead Safe Housing Rule, and 
the URA.
    III.F.6. Alternative requirement for the elevation of structures 
when using CDBG-DR funds as the non-Federal match in a FEMA-funded 
project. Currently, CDBG-DR grantees using FEMA and CDBG-DR funds on 
the same activity have encountered challenges in certain 
circumstances in reconciling CDBG-DR elevation requirements and 
those established by FEMA. FEMA regulations at 44 CFR 9.11(d)(3)(i) 
and (ii) prohibit new construction or substantial improvements to a 
structure unless the lowest floor of the structure is at or above 
the level of the base flood and, for Critical Actions, at or above 
the level of the 500-year flood. However, 44 CFR 9.11(d)(3)(iii) 
allows for an alternative to elevation to the 100- or 500-year flood 
level, subject to FEMA approval, which would provide for 
improvements that would ensure the substantial impermeability of the 
structure below flood level. While FEMA may change its standards for 
elevation in the future, as long as the CDBG-DR grantee is following 
a FEMA-approved flood standard this waiver and alternative 
requirement will continue to apply.
    FEMA funded projects generally commence well in advance of the 
availability of CDBG-DR funds and when CDBG-DR funds are used as 
match for a FEMA project that is underway, the alignment of HUD's 
elevation standards with any alternative standard allowed by FEMA 
may not be feasible and may not be cost reasonable. For these 
reasons, the Secretary finds good cause to establish an alternative 
requirement for the use of an alternative, FEMA-approved flood

[[Page 83012]]

standard instead of the elevation requirements established in 
section II.B.2.c. and II.C.2. of the Consolidated Notice.
    The alternative requirements apply when: (a) CDBG-DR funds are 
used as the non-Federal match for FEMA assistance; (b) the FEMA-
assisted activity, for which CDBG-DR funds will be used as match, 
commenced before HUD's obligation of CDBG-DR funds to the grantee; 
and (c) the grantee has determined and demonstrated with records in 
the activity file that implementation costs of the required CDBG-DR 
elevation or flood proofing requirements are not reasonable costs, 
as that term is defined in the applicable cost principles at 2 CFR 
200.404.
    III.F.7. Certifications waiver and alternative requirement. 
Sections 104(b)(4), (c), and (m) of the HCDA (42 U.S.C. 5304(b)(4), 
(c) & (m)), sections 106(d)(2)(C) & (D) of the HCDA (42 U.S.C. 
5306(d)(2)(C) & (D)), and section 106 of the Cranston-Gonzalez 
National Affordable Housing Act (42 U.S.C. 12706), and regulations 
at 24 CFR 91.225 and 91.325 are waived and replaced with the 
following alternative. Each grantee receiving an allocation under an 
Allocation Announcement Notice must make the following 
certifications with its action plan:
    a. The grantee certifies that it has in effect and is following 
a residential anti-displacement and relocation assistance plan 
(RARAP) in connection with any activity assisted with CDBG-DR grant 
funds that fulfills the requirements of Section 104(d), 24 CFR part 
42, and 24 CFR part 570, as amended by waivers and alternative 
requirements.
    b. The grantee certifies its compliance with restrictions on 
lobbying required by 24 CFR part 87, together with disclosure forms, 
if required by part 87.
    c. The grantee certifies that the action plan for disaster 
recovery is authorized under state and local law (as applicable) and 
that the grantee, and any entity or entities designated by the 
grantee, and any contractor, subrecipient, or designated public 
agency carrying out an activity with CDBG-DR funds, possess(es) the 
legal authority to carry out the program for which it is seeking 
funding, in accordance with applicable HUD regulations as modified 
by waivers and alternative requirements.
    d. The grantee certifies that activities to be undertaken with 
CDBG-DR funds are consistent with its action plan.
    e. The grantee certifies that it will comply with the 
acquisition and relocation requirements of the URA, as amended, and 
implementing regulations at 49 CFR part 24, as such requirements may 
be modified by waivers or alternative requirements.
    f. The grantee certifies that it will comply with section 3 of 
the Housing and Urban Development Act of 1968 (12 U.S.C. 1701u) and 
implementing regulations at 24 CFR part 75.
    g. The grantee certifies that it is following a detailed citizen 
participation plan that satisfies the requirements of 24 CFR 91.115 
or 91.105 (except as provided for in waivers and alternative 
requirements). Also, each local government receiving assistance from 
a state grantee must follow a detailed citizen participation plan 
that satisfies the requirements of 24 CFR 570.486 (except as 
provided for in waivers and alternative requirements).
    h. State grantee certifies that it has consulted with all 
disaster-affected local governments (including any CDBG-entitlement 
grantees), Indian tribes, and any local public housing authorities 
in determining the use of funds, including the method of 
distribution of funding, or activities carried out directly by the 
state.
    i. The grantee certifies that it is complying with each of the 
following criteria:
    (1) Funds will be used solely for necessary expenses related to 
disaster relief, long-term recovery, restoration of infrastructure 
and housing, economic revitalization, and mitigation in the most 
impacted and distressed areas for which the President declared a 
major disaster pursuant to the Robert T. Stafford Disaster Relief 
and Emergency Assistance Act of 1974 (42 U.S.C. 5121 et seq.).
    (2) With respect to activities expected to be assisted with 
CDBG-DR funds, the action plan has been developed so as to give the 
maximum feasible priority to activities that will benefit low- and 
moderate-income families.
    (3) The aggregate use of CDBG-DR funds shall principally benefit 
low- and moderate-income families in a manner that ensures that at 
least 70 percent (or another percentage permitted by HUD in a 
waiver) of the grant amount is expended for activities that benefit 
such persons.
    (4) The grantee will not attempt to recover any capital costs of 
public improvements assisted with CDBG-DR grant funds, by assessing 
any amount against properties owned and occupied by persons of low- 
and moderate-income, including any fee charged or assessment made as 
a condition of obtaining access to such public improvements, unless: 
(a) disaster recovery grant funds are used to pay the proportion of 
such fee or assessment that relates to the capital costs of such 
public improvements that are financed from revenue sources other 
than under this title; or (b) for purposes of assessing any amount 
against properties owned and occupied by persons of moderate income, 
the grantee certifies to the Secretary that it lacks sufficient CDBG 
funds (in any form) to comply with the requirements of clause (a).
    j. State and local government grantees certify that the grant 
will be conducted and administered in conformity with title VI of 
the Civil Rights Act of 1964 (42 U.S.C. 2000d), the Fair Housing Act 
(42 U.S.C. 3601-3619), and implementing regulations, and that it 
will affirmatively further fair housing. An Indian tribe grantee 
certifies that the grant will be conducted and administered in 
conformity with the Indian Civil Rights Act.
    k. The grantee certifies that it has adopted and is enforcing 
the following policies, and, in addition, state grantees must 
certify that they will require local governments that receive their 
grant funds to certify that they have adopted and are enforcing:
    (1) A policy prohibiting the use of excessive force by law 
enforcement agencies within its jurisdiction against any individuals 
engaged in nonviolent civil rights demonstrations; and
    (2) A policy of enforcing applicable state and local laws 
against physically barring entrance to or exit from a facility or 
location that is the subject of such nonviolent civil rights 
demonstrations within its jurisdiction.
    l. The grantee certifies that it (and any subrecipient or 
administering entity) currently has or will develop and maintain the 
capacity to carry out disaster recovery activities in a timely 
manner and that the grantee has reviewed the requirements applicable 
to the use of grant funds.
    m. The grantee certifies to the accuracy of its Financial 
Management and Grant Compliance Certification Requirements, or other 
recent certification submission, if approved by HUD, and related 
supporting documentation as provided in section III.A.1. of the 
Consolidated Notice and the grantee's implementation plan and 
related submissions to HUD as provided in section III.A.2. of the 
Consolidated Notice.
    n. The grantee certifies that it will not use CDBG-DR funds for 
any activity in an area identified as flood prone for land use or 
hazard mitigation planning purposes by the state, local, or tribal 
government or delineated as a Special Flood Hazard Area (or 100-year 
floodplain) in FEMA's most current flood advisory maps, unless it 
also ensures that the action is designed or modified to minimize 
harm to or within the floodplain, in accordance with Executive Order 
11988 and 24 CFR part 55. The relevant data source for this 
provision is the state, local, and tribal government land use 
regulations and hazard mitigation plans and the latest-issued FEMA 
data or guidance, which includes advisory data (such as Advisory 
Base Flood Elevations) or preliminary and final Flood Insurance Rate 
Maps.
    o. The grantee certifies that its activities concerning lead-
based paint will comply with the requirements of 24 CFR part 35, 
subparts A, B, J, K, and R.
    p. The grantee certifies that it will comply with environmental 
requirements at 24 CFR part 58.
    q. The grantee certifies that it will comply with the provisions 
of title I of the HCDA and with other applicable laws.
    Warning: Any person who knowingly makes a false claim or 
statement to HUD may be subject to civil or criminal penalties under 
18 U.S.C. 287, 1001, and 31 U.S.C. 3729.

III.G. Ineligible Activities in CDBG-DR

    Any activity that is not authorized under Section 105(a) of the 
HCDA is ineligible to be assisted with CDBG-DR funds, unless 
explicitly allowed by waiver and alternative requirement in the 
Consolidated Notice. Additionally, the uses described below are 
explicitly prohibited.
    III.G.1. Prohibition on compensation. Grantees shall not use 
CDBG-DR funds to provide compensation to beneficiaries for losses 
stemming from disaster related impacts. Grantees may, however, 
reimburse disaster-impacted beneficiaries based on the pre-
application costs incurred by the beneficiary to complete an 
eligible activity. Reimbursement of beneficiaries for eligible 
activity costs are subject to the requirements

[[Page 83013]]

established in section III.F.5. of the Consolidated Notice.
    III.G.2. Prohibition on forced mortgage payoff. A forced 
mortgage payoff occurs when homeowners with an outstanding mortgage 
balance are required, under the terms of their loan agreement, to 
repay the balance of the mortgage loan before using assistance to 
rehabilitate or reconstruct their homes. CDBG-DR funds, however, 
shall not be used for a forced mortgage payoff. The ineligibility of 
a forced mortgage payoff with CDBG-DR funds does not affect HUD's 
longstanding guidance that when other non-CDBG disaster assistance 
is taken by lenders for a forced mortgage payoff, those funds are 
not considered to be available to the homeowner and do not 
constitute a duplication of benefits for the purpose of housing 
rehabilitation or reconstruction.
    III.G.3. Prohibiting assistance to private utilities. HUD is 
adopting the following alternative requirement to section 105(a) and 
prohibiting the use of CDBG-DR funds to assist a privately-owned 
utility for any purpose.

IV. Other Program Requirements

IV.A. Duplication of Benefits

    The grantee must comply with section 312 of the Stafford Act, as 
amended, which prohibits any person, business concern, or other 
entity from receiving financial assistance with respect to any part 
of a loss resulting from a major disaster for which such person, 
business concern, or other entity has received financial assistance 
under any other program or from insurance or any other source. To 
comply with section 312, a person or entity may receive financial 
assistance only to the extent that the person or entity has a 
disaster recovery need that has not been fully met. Grantees must 
also establish policies and procedures to provide for the repayment 
of a CDBG-DR award when assistance is subsequently provided for that 
same purpose from any other source. Grantees may be subject to 
additional DOB requirements described in a separate notice. The 
applicable Allocation Announcement Notice will describe any 
additional requirements, as applicable.
    Subsidized loans are financial assistance and therefore can 
duplicate financial assistance provided from another source unless 
an exception in IV.A.1. applies.
    IV.A.1. Exceptions when subsidized loans are not a duplication. 
When an exception described in paragraphs IV.A.1.a. or IV.A.1.b. 
applies, documentation required by those paragraphs must be 
maintained by the grantee. Without this documentation, any approved 
but undisbursed portion of a subsidized loan must be included in the 
grantee's calculation of the total assistance amount unless another 
exception applies. For cancelled SBA loans, the grantee must notify 
the SBA that the applicant has agreed to not take any actions to 
reinstate the cancelled loan or draw any additional undisbursed loan 
amounts.
    IV.A.1.a. Short-term subsidized loans for costs later reimbursed 
with CDBG-DR. CDBG-DR funds may be used to reimburse pre-award costs 
of the grantee or subrecipient for eligible activities on or after 
the date of the disaster. If the grantee or subrecipient obtained a 
subsidized short-term loan to pay for eligible costs before CDBG-DR 
funds became available (for example, a low-interest loan from a 
local tax increment financing fund), the reimbursement of the costs 
paid by the loan does not create a duplication.
    IV.A.1.b. Declined or cancelled subsidized loans. The amount of 
a subsidized loan that is declined or cancelled is not a DOB. To 
exclude declined or cancelled loan amounts from the DOB calculation, 
the grantee must document that all or a portion of the subsidized 
loan is cancelled or declined.
    (i) Declined SBA Loans: Declined loan amounts are loan amounts 
that were approved or offered by a lender in response to a loan 
application, but were turned down by the applicant, meaning the 
applicant never signed loan documents to receive the loan proceeds.
    CDBG-DR grantees shall not treat declined subsidized loans, 
including declined SBA loans, as a DOB (but are not prohibited from 
considering declined subsidized loans for other reasons, such as 
underwriting). A grantee is only required to document declined loans 
if information available to the grantee (e.g., the data the grantee 
receives from FEMA, SBA, or other sources) indicates that the 
applicant received an offer for subsidized loan assistance, and the 
grantee is unable to determine from that available information that 
the applicant declined the loan. If the grantee is aware that the 
applicant received an offer of loan assistance and cannot ascertain 
from available data that the applicant declined the loan, the 
grantee must obtain a written certification from the applicant that 
the applicant did not accept the subsidized loan by signing loan 
documents and did not receive the loan.
    (ii) Cancelled Loans: Cancelled loans are loans (or portions of 
loans) that were initially accepted, but for a variety of reasons, 
all or a portion of the loan amount was not disbursed and is no 
longer available to the applicant.
    The cancelled loan amount is the amount that is no longer 
available. The loan cancellation may be due to default of the 
borrower, agreement by both parties to cancel the undisbursed 
portion of the loan, or expiration of the term for which the loan 
was available for disbursement. The following documentation is 
sufficient to demonstrate that any undisbursed portion of an 
accepted subsidized loan is cancelled and no longer available: (a) A 
written communication from the lender confirming that the loan has 
been cancelled and undisbursed amounts are no longer available to 
the applicant; or (b) a legally binding agreement between the CDBG-
DR grantee (or local government, Indian tribe, or subrecipient 
administering the CDBG-DR assistance) and the applicant that 
indicates that the period of availability of the loan has passed and 
the applicant agrees not to take actions to reinstate the loan or 
draw any additional undisbursed loan amounts.

IV.B. Procurement

    For a grantee to have proficient procurement processes, a 
grantee must: indicate the procurement standards that apply to its 
use of CDBG-DR funds; indicate the procurement standards for 
subrecipients or local governments as applicable; comply with the 
standards it certified to HUD that it follows (and update the 
certification submissions when substantial changes are made); post 
the required documentation to the official website as described 
below; and include periods of performance and date of completion in 
all CDBG-DR contracts.
    State grantees must comply with the procurement requirements at 
24 CFR 570.489(g) and the following alternative requirements: The 
grantee must evaluate the cost or price of the product or service 
being procured. State grantees shall establish requirements for 
procurement processes for local governments and subrecipients based 
on full and open competition consistent with the requirements of 24 
CFR 570.489(g), and shall require a local government or subrecipient 
to evaluate the cost or price of the product or service being 
procured with CDBG-DR funds. Additionally, if the state agency 
designated as the administering agency chooses to provide funding to 
another state agency, the administering agency must specify in its 
procurement processes whether the agency implementing the CDBG-DR 
activity must follow the procurement processes that the 
administering agency is subject to, or whether the agency must 
follow the same processes to which other local governments and 
subrecipients are subject, or its own procurement processes.
    A grantee shall administer CDBG-DR grant funds in accordance 
with all applicable laws and regulations. As an alternative 
requirement, grantees may not delegate, by contract, or otherwise, 
the responsibility for administering such grant funds.
    HUD is establishing an additional alternative requirement for 
all contracts with contractors used to provide goods and services, 
as follows:
    1. The grantee (or procuring entity) is required to clearly 
state the period of performance or date of completion in all 
contracts;
    2. The grantee (or procuring entity) must incorporate 
performance requirements and liquidated damages into each procured 
contract. Contracts that describe work performed by general 
management consulting services need not adhere to the requirement on 
liquidated damages but must incorporate performance requirements; 
and
    3. The grantee (or procuring entity) may contract for 
administrative support, in compliance with 2 CFR 200.459, but may 
not delegate or contract to any other party any inherently 
governmental responsibilities related to oversight of the grant, 
including policy development, fair housing and civil rights 
compliance, and financial management.

IV.C. Use of the ``Upper Quartile'' or ``Exception Criteria''

    The LMA benefit requirement is modified when fewer than one 
quarter of the populated-block groups in its jurisdictions contain 
51 percent or more LMI persons. In such a community, activities must 
serve an area that contains a percentage of LMI residents that is 
within the upper quartile of

[[Page 83014]]

all census-block groups within its jurisdiction in terms of the 
degree of concentration of LMI residents. HUD determines the lowest 
proportion a grantee may use to qualify an area for this purpose and 
advises the grantee, accordingly. The ``exception criteria'' applies 
to CDBG-DR funded activities in jurisdictions covered by such 
criteria, including jurisdictions that receive disaster recovery 
funds from a state. Disaster recovery grantees are required to use 
the most recent data available in implementing the exception 
criteria (https://www.hudexchange.info/programs/acs-low-mod-summary-data/acs-low-mod-summary-data-exception-grantees/).

IV.D. Environmental Requirements

    IV.D.1. Clarifying note on the process for environmental release 
of funds when a state carries out activities directly. For CDBG-DR 
grants, HUD allows state grantees to carry out activities directly 
and to distribute funds to subrecipients. Per 24 CFR 58.4(b)(1), 
when a state carries out activities directly (including through 
subrecipients that are not units of general local government), the 
state must submit the Certification and Request for Release of Funds 
to HUD for approval.
    IV.D.2. Adoption of another agency's environmental review. 
Appropriations acts allow recipients of funds that use such funds to 
supplement Federal assistance provided under section 402, 403, 404, 
406, 407, 408(c)(4), or 502 of the Stafford Act to adopt, without 
review or public comment, any environmental review, approval, or 
permit performed by a Federal agency. Such adoption shall satisfy 
the responsibilities of the recipient with respect to such 
environmental review, approval, or permit.
    This provision allows the recipient of supplemental assistance 
to adopt another Federal agency's review where the HUD assistance 
supplements the Stafford Act, and the other Federal agency performed 
an environmental review for assistance under section 402, 403, 404, 
406, 407, or 502 of the Stafford Act.
    The other agency's environmental review must cover all project 
activities funded by the HUD recipient for each project. The grantee 
is only required to supplement the other agency's environmental 
review to comply with HUD regulations (e.g., publication or posting 
requirements for Notice of Finding of No Significant Impact (FONSI), 
Notice of Intent to Request Release of Funds (NOI-RROF), concurrent 
or combined notices, or HUD approval period for objections) if the 
activity is modified so the other agency's environmental review no 
longer covers the activity. The recipient's environmental review 
obligations are considered complete when adopting another agency's 
environmental review. To be adequate:
    1. The grantee must obtain a completed electronic or paper copy 
of the Federal agency's review and retain a copy in its 
environmental records.
    2. The grantee must notify HUD on the Request for Release of 
Funds (RROF) Form 7015.15 (or the state, if the state is acting as 
HUD under 24 CFR 58.18) that another agency review is being used. 
The grantee must include the name of the other Federal agency, the 
name of the project, and the date of the project's review as 
prepared by the other Federal agency.
    When permitted by the applicable appropriations acts, and 
notwithstanding 42 U.S.C. 5304(g)(2), the Secretary or a state may, 
upon receipt of a Request for Release of Funds and Certification, 
immediately approve the release of funds for an activity or project 
assisted with CDBG-DR funds if the recipient has adopted an 
environmental review, approval, or permit under this section, or if 
the activity or project is categorically excluded from review under 
the National Environmental Policy Act of 1969 (42 U.S.C. 4321 et 
seq.) (NEPA).
    IV.D.3. Historic preservation reviews. The responsible entity 
must comply with section 106 of the National Historic Preservation 
Act of 1966 (54 U.S.C. 306108). Early coordination under section 106 
is important to the recovery process and required by 24 CFR 58.5(a).
    IV.D.4. Tiered environmental reviews. Tiering, as described at 
40 CFR 1508.1(ff) and 24 CFR 58.15, is a means of making the 
environmental review process more efficient by allowing parties to 
``eliminate repetitive discussions of the same issues, focus on the 
actual issues ripe for decision, and exclude from consideration 
issues already decided or not yet ripe at each level of 
environmental review'' (40 CFR 1501.11(a)). Tiering is appropriate 
when a responsible entity is evaluating a single-family housing 
program with similar activities within a defined local geographic 
area and timeframe (e.g., rehabilitating single-family homes within 
a city district or county over the course of one to five years) but 
where the specific sites and activities are not yet known. Public 
notice and the Request for Release of Funds (HUD-Form 7015.15) are 
processed at a broad-level, eliminating the need for publication at 
the site-specific level. However, funds cannot be spent or committed 
on a specific site or activity until the site-specific review has 
been completed and approved.

IV.E. Flood Insurance Requirements

    Grantees, recipients, and subrecipients must implement 
procedures and mechanisms to ensure that assisted property owners 
comply with all flood insurance requirements, including the purchase 
and notification requirements described below, before providing 
assistance.
    IV.E.1. Flood insurance purchase requirements. When grantees use 
CDBG-DR funds to rehabilitate or reconstruct existing residential 
buildings in a Special Flood Hazard Area (or 100-year floodplain), 
the grantee must comply with applicable Federal, state, local, and 
tribal laws and regulations related to both flood insurance and 
floodplain management. The grantee must comply with section 102(a) 
of the Flood Disaster Protection Act of 1973 (42 U.S.C. 4012a) which 
mandates the purchase of flood insurance protection for any HUD-
assisted property within a Special Flood Hazard Area. Therefore, a 
HUD-assisted homeowner for a property located in a Special Flood 
Hazard Area must obtain and maintain flood insurance in the amount 
and duration prescribed by FEMA's National Flood Insurance Program.
    IV.E.2. Federal assistance to owners remaining in a floodplain.
    IV.E.2.a. Prohibition on flood disaster assistance for failure 
to obtain and maintain flood insurance. Grantees must comply with 
section 582 of the National Flood Insurance Reform Act of 1994, as 
amended, (42 U.S.C. 5154a), which prohibits flood disaster 
assistance in certain circumstances. No Federal disaster relief 
assistance made available in a flood disaster area may be used to 
make a payment (including any loan assistance payment) to a person 
for ``repair, replacement, or restoration'' for damage to any 
personal, residential, or commercial property if that person at any 
time has received Federal flood disaster assistance that was 
conditioned on the person first having obtained flood insurance 
under applicable Federal law and the person has subsequently failed 
to obtain and maintain flood insurance as required under applicable 
Federal law on such property.
    A grantee may not provide disaster assistance for the repair, 
replacement, or restoration of a property to a person who has failed 
to satisfy the Federal requirement to obtain and maintain flood 
insurance and must implement a process to verify and monitor for 
compliance with section 582 and the requirement to obtain and 
maintain flood insurance. Grantees are reminded that CDBG-DR funds 
may be used to assist beneficiaries in the purchase of flood 
insurance to comply with this requirement, subject to the 
requirements of cost reasonableness and other federal cost 
principles.
    IV.E.2.b. Prohibition on flood disaster assistance for 
households above 120 percent of AMI for failure to obtain flood 
insurance. When a homeowner located in the floodplain allows their 
flood insurance policy to lapse, it is assumed that the homeowner is 
unable to afford insurance and/or is accepting responsibility for 
future flood damage to the home. Higher income homeowners who reside 
in a floodplain, but who failed to secure or decided to not maintain 
their flood insurance, should not be assisted at the expense of 
lower income households. To ensure that adequate recovery resources 
are available to assist lower income homeowners who reside in a 
floodplain but who are unlikely to be able to afford flood 
insurance, the Secretary finds good cause to establish an 
alternative requirement.
    The alternative requirement to 42 U.S.C. 5305(a)(4) is as 
follows: Grantees receiving CDBG-DR funds are prohibited from 
providing CDBG-DR assistance for the rehabilitation/reconstruction 
of a house, if (i) the combined household income is greater than 
either 120 percent of AMI or the national median, (ii) the property 
was located in a floodplain at the time of the disaster, and (iii) 
the property owner did not obtain flood insurance on the damaged 
property, even when the property owner was not required to obtain 
and maintain such insurance.
    IV.E.2.c. Responsibility to inform property owners to obtain and 
maintain flood insurance. Section 582 of the National Flood 
Insurance Reform Act of 1994, as amended,

[[Page 83015]]

(42 U.S.C. 5154a) is a statutory requirement that property owners 
receiving disaster assistance that triggers the flood insurance 
purchase requirement have a statutory responsibility to notify any 
transferee of the requirement to obtain and maintain flood insurance 
and to maintain such written notification in the documents 
evidencing the transfer of the property, and that the transferring 
owner may be liable if he or she fails to do so. A grantee or 
subrecipient receiving CDBG-DR funds must notify property owners of 
their responsibilities under section 582.

IV.F. URA, Section 104(d), and Related CDBG Program Requirements

    Activities and projects undertaken with CDBG-DR funds may be 
subject to the URA, section 104(d) of the HCDA (42 U.S.C. 5304(d)), 
and CDBG program requirements related to displacement, relocation, 
acquisition, and replacement of housing, except as modified by 
waivers and alternative requirements provided in this notice. The 
implementing regulations for the URA are at 49 CFR part 24. The 
regulations implementing section 104(d) are at 24 CFR part 42. The 
regulations for applicable CDBG program requirements are at 24 CFR 
570.488 and 24 CFR 570.606. HUD is waiving or providing alternative 
requirements in this section for the purpose of promoting the 
availability of decent, safe, and sanitary housing with respect to 
the use of CDBG-DR funds allocated under the Consolidated Notice.
    IV.F.1. Section 104(d) one-for-one replacement of lower-income 
dwelling units. One-for-one replacement requirements at section 
104(d)(2)(A)(i) and (ii) and 104(d)(3) of the HCDA and 24 CFR 42.375 
are waived for owner-occupied lower-income dwelling units that are 
damaged by the disaster and not suitable for rehabilitation. The 
section 104(d) one-for-one replacement housing requirements apply to 
occupied and vacant occupiable lower-income dwelling units 
demolished or converted in connection with a CDBG assisted activity. 
This waiver exempts all disaster-damaged owner-occupied lower-income 
dwelling units that meet the grantee's definition of ``not suitable 
for rehabilitation,'' from the one-for-one replacement housing 
requirements of 24 CFR 42.375. Before carrying out activities that 
may be subject to the one-for-one replacement housing requirements, 
the grantee must define ``not suitable for rehabilitation'' in its 
action plan or in policies/procedures governing these activities. 
Grantees are reminded that tenant-occupied and vacant occupiable 
lower-income dwelling units demolished or converted to another use 
other than lower-income housing in connection with a CDBG-DR 
assisted activity are generally subject to one-for-one replacement 
requirements at 24 CFR 42.375 and that these provisions are not 
waived.
    HUD is waiving the section 104(d) one-for-one replacement 
requirement for owner-occupied lower-income dwelling units that are 
damaged by the disaster and not suitable for rehabilitation because 
the one-for-one replacement requirements do not account for the 
large, sudden changes that a major disaster may cause to the local 
housing stock, population, or economy. Disaster-damaged housing 
structures that are not suitable for rehabilitation can pose a 
threat to public health and safety and to economic revitalization. 
Prior to the implementation of this waiver and alternative 
requirement, grantees must reassess post-disaster population and 
housing needs to determine the appropriate type and amount of lower-
income dwelling units (both rental and owner-occupied units) to 
rehabilitate and/or reconstruct. Grantees should note that the 
demolition and/or disposition of public housing units continue to be 
subject to section 18 of the United States Housing Act of 1937, as 
amended, and 24 CFR part 970.
    IV.F.2. Section 104(d) relocation assistance. The relocation 
assistance requirements at section 104(d)(2)(A)(iii) and (B) of the 
HCDA and 24 CFR 42.350, are waived to the extent that an eligible 
displaced person, as defined under 24 CFR 42.305 of the section 
104(d) implementing regulations, may choose to receive either 
assistance under the URA and implementing regulations at 49 CFR part 
24, or assistance under section 104(d) and implementing regulations 
at 24 CFR 42.350. This waiver does not impact a person's eligibility 
as a displaced person under section 104(d), it merely limits the 
amounts and types of relocation assistance that a section 104(d) 
eligible displaced person is eligible to receive. A section 104(d) 
eligible displaced person is eligible to receive the amounts and 
types of assistance for displaced persons under the URA, as may be 
modified by the waivers and alternative requirements in this notice 
for activities related to disaster recovery. Without this waiver, 
disparities exist in relocation assistance associated with 
activities typically funded by HUD and FEMA (e.g., buyouts and 
relocation). Both FEMA and CDBG funds are subject to the 
requirements of the URA; however, CDBG funds are subject to section 
104(d), while FEMA funds are not. This limited waiver of the section 
104(d) relocation assistance requirements assures uniform and 
equitable treatment for individuals eligible to receive benefits 
under Section 104(d) by establishing that all forms of relocation 
assistance to those individuals must be in the amounts and for the 
types of assistance provided to displaced persons under URA 
requirements.
    IV.F.3. URA replacement housing payments for tenants. The 
requirements of sections 204 and 205 of the URA (42 U.S.C. 4624 and 
42 U.S.C. 4625), and 49 CFR 24.2(a)(6)(vii), 24.2(a)(6)(ix), and 
24.402(b) are waived to the extent necessary to permit a grantee to 
meet all or a portion of a grantee's replacement housing payment 
obligation to a displaced tenant by offering rental housing through 
a rental housing program subsidy (to include, but not limited to, a 
housing choice voucher), provided that comparable replacement 
dwellings are made available to the tenant in accordance with 49 CFR 
24.204(a) where the owner is willing to participate in the program 
and the period of authorized assistance is at least 42 months. This 
waiver and alternative requirement is subject to the following: if 
assistance is provided through a HUD program, it is subject to the 
applicable HUD program requirements, including the requirement that 
the tenant must be eligible for the rental housing program. Failure 
to grant this waiver would impede disaster recovery whenever rental 
program subsidies are available but funds for cash replacement 
housing payments are limited and such payments are required by the 
URA to be based on a 42-month term.
    IV.F.4. URA voluntary acquisition--homebuyer primary residence 
purchase. Grantees may implement disaster recovery program 
activities that provide financial assistance to eligible homebuyers 
to purchase and occupy residential properties as their primary 
residence. Such purchases are generally considered voluntary 
acquisitions under the URA and subject to the URA regulatory 
requirements at 49 CFR 24.101(b)(2). For CDBG-DR, 49 CFR 
24.101(b)(2) is waived to the extent that it applies to a homebuyer, 
who does not have the power of eminent domain, and uses CDBG-DR 
funds in connection with the voluntary purchase and occupancy of a 
home the homebuyer intends to make their primary residence. This 
waiver is necessary to reduce burdensome administrative requirements 
for homebuyers following a disaster. Tenants displaced by these 
voluntary acquisitions may be eligible for relocation assistance.
    IV.F.5. CDBG displacement, relocation, acquisition, and 
replacement housing program regulations--Optional relocation 
assistance. The regulations at 24 CFR 570.606(d) are waived to the 
extent that they require optional relocation policies to be 
established at the grantee level. Unlike with the regular CDBG 
program, states may carry out disaster recovery activities directly 
or through subrecipients, but 24 CFR 570.606(d) does not account for 
this distinction. This waiver makes clear that grantees receiving 
CDBG-DR funds may establish optional relocation policies or permit 
their subrecipients to establish separate optional relocation 
policies. The written policy must: be available to the public, 
describe the relocation assistance that the grantee, state recipient 
(i.e., a local government receiving a subgrant from the state 
through a method of distribution), or subrecipient (as applicable) 
has elected to provide, and provide for equal relocation assistance 
within each class of displaced persons according to 24 CFR 
570.606(d). This waiver is intended to provide states with maximum 
flexibility in developing optional relocation policies with CDBG-DR 
funds.
    IV.F.6. Waiver of Section 414 of the Stafford Act. Section 414 
of the Stafford Act (42 U.S.C. 5181) provides that ``Notwithstanding 
any other provision of law, no person otherwise eligible for any 
kind of replacement housing payment under the Uniform Relocation 
Assistance and Real Property Acquisition Policies Act of 1970 (Pub. 
L. 91-646) [42 U.S.C. 4601 et seq.] [``URA''] shall be denied such 
eligibility as a result of his being unable, because of a major 
disaster as determined by the President, to meet the occupancy 
requirements set by [the URA].'' Accordingly, homeowner occupants 
and tenants displaced from their homes as a

[[Page 83016]]

result of the identified disasters and who would have otherwise been 
displaced as a direct result of any acquisition, rehabilitation, or 
demolition of real property for a federally funded program or 
project may become eligible for a replacement housing payment 
notwithstanding their inability to meet occupancy requirements 
prescribed in the URA. Section 414 of the Stafford Act and its 
implementing regulation at 49 CFR 24.403(d)(1) are waived to the 
extent that they would apply to real property acquisition, 
rehabilitation, or demolition of real property for a CDBG-DR funded 
project commencing more than one year after the date of the latest 
applicable Presidentially declared disaster undertaken by the 
grantees, or subrecipients, provided that the project was not 
planned, approved, or otherwise underway before the disaster.
    For purposes of this waiver, a CDBG-DR funded project shall be 
determined to have commenced on the earliest of: (1) the date of an 
approved Request for Release of Funds and certification; (2) the 
date of completion of the site-specific review when a program 
utilizes Tiering; or (3) the date of sign-off by the approving 
official when a project converts to exempt under 24 CFR 
58.34(a)(12).
    The waiver will simplify the administration of the disaster 
recovery process and reduce the administrative burden associated 
with the implementation of Stafford Act Section 414 requirements for 
projects commencing more than one year after the date of the 
Presidentially declared disaster considering most of such persons 
displaced by the disaster will have returned to their dwellings or 
found another place of permanent residence.
    This waiver does not apply with respect to persons that meet the 
occupancy requirements to receive a replacement housing payment 
under the URA nor does it apply to persons displaced or relocated 
temporarily by other HUD-funded programs or projects. Such persons' 
eligibility for relocation assistance and payments under the URA is 
not impacted by this waiver.
    IV.F.7. RARAP Section 104(d). CDBG-DR grantees must certify that 
they have in effect and are following a RARAP as required by section 
104(d)(1) and (2) of the HCDA and 24 CFR 42.325. In addition to the 
requirements in 24 CFR 42.325 and 24 CFR 570.488 or 24 CFR 
570.606(c), as applicable, HUD is specifying the following 
alternative requirements:
    Grantees who are following an existing RARAP for CDBG purposes 
must either: (1) amend their existing RARAP; or (2) create a 
separate RARAP for CDBG-DR purposes, to reflect the following 
requirements and applicable waivers and alternative requirements as 
modified by the Consolidated Notice.
    Grantees who do not have an existing RARAP in place because they 
do not manage CDBG programs must create a separate RARAP for CDBG-DR 
purposes, to reflect the following CDBG-DR requirements and 
applicable waivers and alternative requirements as modified by the 
Consolidated Notice.
    (1) RARAP requirements for CDBG-DR. As each grantee establishes 
and supports feasible and cost-effective recovery efforts to make 
communities more resilient against future disasters, the CDBG-DR 
RARAP must describe how the grantee plans to minimize displacement 
of members of families and individuals from their homes and 
neighborhoods as a result of any CDBG-DR assisted activities, 
including disaster recovery activities where displacement can be 
prevented (e.g., housing rehabilitation programs). Across disaster 
recovery activities--such as buyouts and other eligible acquisition 
activities, where minimizing displacement is not reasonable, 
feasible, or cost-efficient and would not help prevent future or 
repetitive loss--the grantee must describe how it plans to minimize 
the adverse impacts of displacement.
    The description shall focus on proposed disaster recovery 
activities that may directly or indirectly result in displacement 
and the assistance that shall be required for those displaced. This 
description must focus on relocation assistance under the URA and 
its implementing regulations at 49 CFR part 24.104(d) and 
implementing regulations at 24 CFR part 42 (to the extent 
applicable), 24 CFR 570.488 and/or 24 CFR 570.606, and relocation 
assistance pursuant to this section of the Consolidated Notice, as 
well as any other assistance being made available to displaced 
persons. The CDBG-DR RARAP must include a description of how the 
grantee will plan programs or projects in such a manner that 
recognizes the substantial challenges experienced by displaced 
individuals, families, businesses, farms, and nonprofit 
organizations and develop solutions to minimize displacement or the 
adverse impacts of displacement especially among vulnerable 
populations. The description must be scoped to the complexity and 
nature of the anticipated displacing activities, including the 
evaluation of the grantee's available resources to carry out timely 
and orderly relocations in compliance with all applicable relocation 
requirements.

V. Performance Reviews

    Under 42 U.S.C. 5304(e) and 24 CFR 1003.506(a), 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 (consistent process to 
meet its expenditure requirement), whether the grantee's activities 
and certifications are carried out in accordance with the 
requirements and the primary objectives of the HCDA and other 
applicable laws, and whether the grantee has the continuing capacity 
to carry out those activities in a timely manner.

V.A. Timely Distribution and Expenditure of Funds

    HUD waives the provisions at 24 CFR 570.494 and 570.902 
regarding timely distribution and expenditure of funds, and 
establishes an alternative requirement providing that each grantee 
must expend 100 percent of its allocation within six years of the 
date HUD signs the grant agreement. HUD may extend the period of 
performance administratively, if good cause for such an extension 
exists at that time, as requested by the grantee, and approved by 
HUD. When the period of performance has ended, HUD will close out 
the grant and any remaining funds not expended by the grantee on 
appropriate programmatic purposes will be recaptured by HUD.

V.B. Review of Continuing Capacity

    Upon a determination by HUD that the grantee has not carried out 
its CDBG-DR activities and certifications in accordance with the 
requirements in the Consolidated Notice, HUD will undertake a 
further review to determine if the grantee has the continuing 
capacity to carry out its activities in a timely manner. In making 
this determination, HUD will consider the nature and extent of the 
recipient's performance deficiencies, the actions taken by the 
recipient to address the deficiencies, and the success or likely 
success of such actions. HUD may then apply the following corrective 
and remedial actions as appropriate:
    V.B.1. Corrective and remedial actions. To effectively 
administer the CDBG-DR program in a manner that facilitates 
recovery, particularly the alternative requirements permitting 
states to act directly to carry out eligible activities, HUD is 
waiving 42 U.S.C. 5304(e) to the extent necessary to establish the 
following alternative requirement: HUD may undertake corrective and 
remedial actions for states in accordance with the authorities for 
CDBG Entitlement grantees in subpart O (including corrective and 
remedial actions in 24 CFR 570.910, 570.911, and 570.913) or under 
subpart I of the CDBG regulations at 24 CFR part 570. In response to 
a deficiency, HUD may issue a warning letter followed by a 
corrective action plan that may include a management plan which 
assigns responsibility for further administration of the grant to 
specific entities or persons. Failure to comply with a corrective 
action may result in the termination, reduction, or limitation of 
payments to grantees receiving CDBG-DR funds.
    V.B.2. Reduction, withdrawal, or adjustment of a grant, or other 
appropriate action. Before a reduction, withdrawal, or adjustment of 
a CDBG-DR grant, or other actions taken pursuant to this section, 
the recipient shall be notified of the proposed action and be given 
an opportunity for an informal consultation. Consistent with the 
procedures described in the Consolidated Notice, HUD may adjust, 
reduce, or withdraw the CDBG-DR grant (except funds that have been 
expended for eligible, approved activities) or take other actions as 
appropriate.
    V.B.3. Additional criteria and specific conditions to mitigate 
risk. To ensure effective grantee implementation of the financial 
controls, procurement processes, and other procedures that are the 
subject of the certification by the Secretary, HUD has and may 
continue to establish specific criteria and conditions for each 
grant award as provided for at 2 CFR 200.206 and 200.208, 
respectively, to mitigate the risk of the grant. The Secretary shall 
specify any such criteria and the resulting conditions in the grant 
conditions governing the award. These criteria may include, but need 
not be

[[Page 83017]]

limited to, a consideration of the internal control framework 
established by the grantee to ensure compliant implementation of its 
financial controls, procurement processes and payment of funds to 
eligible entities, as well as the grantee's risk management strategy 
for information technology systems established to implement CDBG-DR 
funded programs. Additionally, the Secretary may amend the grant 
conditions to mitigate risk of a grant award at any point at which 
the Secretary determines a condition to be required to protect the 
Federal financial interest or to advance recovery.

V.C. Grantee Reporting Requirements in the DRGR System

    V.C.1. DRGR-related waivers and alternative requirements. The 
Consolidated Notice waives the requirements for submission of a 
performance report pursuant to 42 U.S.C. 12708(a), 24 CFR 91.520, 
and annual status and evaluation reports that are due each fiscal 
year under 24 CFR 1003.506(a). Alternatively, HUD is requiring that 
grantees enter information in the DRGR system on a quarterly basis 
through the performance reports. The information in DRGR and the 
performance reports must contain sufficient detail to permit HUD's 
review of grantee performance and to enable remote review of grantee 
data to allow HUD to assess compliance and risk.
    At a minimum, each grantee must:
    a. Enter its action plan and amendments as described in III.C.1, 
including performance measures, into the Public Action Plan in DRGR;
    b. Enter activities into the DRGR Action Plan at a level of 
detail sufficient to allow HUD to determine grantee compliance (when 
the activity type, national objective, and the organization that 
will be responsible for the activity is known);
    c. Categorize activities in DRGR under a ``project'';
    d. Enter into the DRGR system summary information on grantees' 
monitoring visits and reports, audits, and technical assistance it 
conducts as part of its oversight of its disaster recovery programs;
    e. Use the DRGR system to draw grant funds for each activity;
    f. Use the DRGR system to track program income receipts, 
disbursements, revolving loan funds, and leveraged funds (if 
applicable);
    g. Submit a performance report through the DRGR system no later 
than 30 days following the end of each calendar quarter. For all 
activities, the address of each CDBG-DR assisted property must be 
recorded in the performance report; and
    h. Publish a version of the performance report that omits 
personally identifiable information reported in the performance 
reports submitted to HUD on the grantee's official website within 
three days of submission to HUD, or in the event a performance 
report is rejected by HUD, publish the revised version, as approved 
by HUD, within three days of HUD approval.
    The grantee's first performance report is due after the first 
full quarter after HUD signs the grant agreement. Performance 
reports must be submitted on a quarterly basis until all funds have 
been expended and all expenditures and accomplishments have been 
reported. If a satisfactory report is not submitted in a timely 
manner, HUD may suspend access to CDBG-DR funds until a satisfactory 
report is submitted, or may withdraw and reallocate funding if HUD 
determines, after notice and opportunity for a hearing, that the 
jurisdiction did not submit a satisfactory report.

[FR Doc. 2023-25875 Filed 11-24-23; 8:45 am]
BILLING CODE 4210-67-P