Timeliness Expenditure Standards for the Insular Areas Program

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 [Federal Register: March 15, 2007 (Volume 72, Number 50)]
[Rules and Regulations]
[Page 12533-12537]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr15mr07-28]
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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
24 CFR Parts 91 and 570
[Docket No. FR-5012-F-02]
RIN 2501-AD15

Timeliness Expenditure Standards for the Insular Areas Program

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

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

DATES: Effective Date: April 16, 2007.

FOR FURTHER INFORMATION CONTACT: Stephen Rhodeside, Senior Program
Officer, State and Small Cities Division, Office of Block Grant
Assistance, Office of Community Planning and Development, Department of
Housing and Urban Development, 451 Seventh Street, SW., Room 7184,
Washington, DC 20410-7000, telephone (202) 708-1322 (this is not a
toll-free number). Individuals with speech or hearing impairments may
access this number through TTY by calling the toll-free Federal
Information Relay Service at (800) 877-8339.

SUPPLEMENTARY INFORMATION:

I. Background

    On August 7, 2006, HUD published a proposed rule (71 FR 44860) for
public comment to establish timeliness standards and procedures for the
reallocation of funds for the Insular Areas Program. In addition, the
August 7, 2006, rule proposed to provide that an Insular Area grantee
may submit an abbreviated consolidated plan that is appropriate to the
types and amounts of assistance sought from HUD, instead of a full
consolidated plan. The proposed rule also sought to make technical and
conforming changes to the regulations.
    The Insular Areas program is a component of the Community
Development Block Grant (CDBG) program, authorized by the Housing and
Community Development Act of 1974 (HCD Act) (42 U.S.C. 5301, et seq.).
Under the CDBG program, Insular Area grantees are provided flexible
funding to develop and implement community and economic development
strategies that primarily benefit low- and moderate-income individuals.
    The August 7, 2006, rule proposed timeliness standards for the
Insular Areas Program. Under the proposed standards, the amount of
grant funds available but undisbursed 60 days prior to the conclusion
of the Insular Area grantee's most recent program year must be no more
than two times the amount of the Insular Area grantee's most recent
grant. If the grantee fails to demonstrate to HUD's satisfaction that
the lack of timeliness has resulted from factors beyond the grantee's
reasonable control, the grantee shall be deemed to be untimely. A
grantee that has less than two times its most recent grant in its CDBG
line of credit 60 days prior to the conclusion of its most recent
program year shall also be deemed to be untimely if the amount of CDBG
program income the recipient has on hand at that time, together with
the amount of funds in its CDBG line of credit, exceeds twice the
amount of the grantee's most recent grant, unless the grantee is able
to demonstrate to HUD's satisfaction that the lack of timeliness has
resulted from factors beyond the grantee's reasonable control.
    In determining the corrective action for untimely expenditure, HUD
will consider the likelihood that the recipient will expend a
sufficient amount of funds over the next program year to bring the
grantee into compliance with the timeliness requirements. The first
timeliness review under these standards will take place 60 days prior
to the conclusion of the 2006 funding year, which would take place on
August 2, 2007, for Insular Area grantees that do not change their
program year start dates. Failure to meet the standards may cause HUD
to reduce the next grant by 100 percent of the amount in excess of
twice the Insular Area grantee's most recent CDBG grant, unless HUD
determines that the untimeliness resulted from factors outside of the
grantee's reasonable control. The earliest that HUD will reduce grants
under this final rule will be in Fiscal Year (FY) 2008, should an
Insular Area grantee be untimely 60 days prior to the conclusion of its
FY 2006 and FY 2007 program years.
    Additionally, HUD proposed to add a provision that would allow
funds to be reallocated to the remaining eligible Insular Areas on a
pro rata basis should an Insular Area grantee have its funding reduced
for failing to submit a final statement for CDBG funds. The proposed
rule also addressed the issue of Insular Area grantees' submission of
abbreviated consolidated plans. Abbreviated consolidated plans
submitted by Insular Areas grantees will be considered to be full
consolidated plans, provided the Insular Area grantee complies with the
submissions, certifications, amendments, and performance reports
requirements of Sec.  570.440 and citizen participation requirements of
Sec.  570.441. However, if submission of a full consolidated plan would
help a grantee integrate its CDBG, HOME and Emergency Shelter Grant
programs, the grantee should strongly consider submitting a full
consolidated plan. Various technical changes were proposed to reflect
statutory amendments, remove outdated cross-references, and delete
provisions that are no longer required or applicable.
    For more detailed information regarding the regulatory changes,
please refer to the preamble of the August 7, 2006, proposed rule.

II. This Final Rule

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

III. Findings and Certifications

Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (2 U.S.C.
1531-1538) (UMRA) establishes requirements for federal agencies to
assess the effects of their regulatory actions on state, local, and
tribal governments and the private sector. This final rule does not
impose any federal mandates on any state, local, or tribal government
or the private sector within the meaning of UMRA.

Executive Order 13132, Federalism

    Executive Order 13132 (entitled ``Federalism'') prohibits, to the
extent practicable and permitted by law, an agency from promulgating a
regulation that has federalism implications and either imposes
substantial direct

[[Page 12535]]

compliance costs on state and local governments and is not required by
statute, or preempts state law, unless the relevant requirements of
section 6 of the executive order are met. This rule does not have
federalism implications and does not impose substantial direct
compliance costs on state and local governments or preempt state law
within the meaning of the executive order.

Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et seq.)
generally requires an agency to conduct regulatory flexibility analysis
of any rule subject to notice and comment rulemaking requirements,
unless the agency certifies that the rule will not have a significant
economic impact on a substantial number of small entities. This rule
will not have a significant economic impact on a substantial number of
small entities because the rule only codifies in HUD's regulations
procedures that will enable the Department to enforce its timeliness
policy for the Insular Areas Program. As such, the rule does not
significantly differ from the current status in terms of the impact on
the number of entities, the amount of funding, or the governing
requirements applicable. Therefore, the undersigned certifies that this
final rule will not have a significant economic impact on a substantial
number of small entities, and an initial regulatory flexibility
analysis is not required.

Environmental Impact

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

Catalog of Federal Domestic Assistance

    The Catalog of Federal Domestic Assistance number for the Insular
Areas Program is 14.225.

List of Subjects

24 CFR Part 91

    Aged, Grant programs-housing and community development, Homeless,
Individuals with disabilities, Low and moderate income housing,
Reporting and recordkeeping requirements.

24 CFR Part 570

    Administrative practice and procedure, American Samoa, Community
development block grants, Grant programs--education, Grant programs--
housing and community development, Guam, Indians, Lead poisoning, Loan
programs--housing and community development, Low and moderate income
housing, New communities, Northern Mariana Islands, Pacific Islands
Trust Territory, Pockets of poverty, Puerto Rico, Reporting and
recordkeeping requirements, Small cities, Student aid, Virgin Islands.

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

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

? 1. The authority citation for 24 CFR part 91 continues to read as follows:

    Authority: 42 U.S.C. 3535(d), 3601-3619, 5301-5315, 11331-11388,
12701-12711, 12741-12756, and 12901-12912.

? 2. In Sec.  91.235 revise paragraphs (a), (b)(3), and (e) and add
paragraph (c)(4) to read as follows:

Sec.  91.235  Special case; abbreviated consolidated plan.

    (a) Who may submit an abbreviated plan? A jurisdiction that is not
a CDBG entitlement community under 24 CFR part 570, subpart D, and is
not expected to be a participating jurisdiction in the HOME program
under 24 CFR part 92, as well as an Insular Area that is a HOME or CDBG
grantee, may submit an abbreviated consolidated plan that is
appropriate to the types and amounts of assistance sought from HUD,
instead of a full consolidated plan.
    (b) * * *
    (3) Limitation. For the HOME program, an abbreviated consolidated
plan is permitted only with respect to reallocations to other than
participating jurisdictions (see 24 CFR part 92, subpart J), and for
Insular Area grantees that submit an abbreviated consolidated plan
pursuant to 24 CFR 570.440. For the CDBG program, an abbreviated plan
may be submitted for the HUD-administered Small Cities program (except
that an abbreviated plan may not be submitted for the HUD-administered
Small Cities program in the state of Hawaii), and for Insular Area
grantees pursuant to 24 CFR 570.440.
    (c) * * *
    (4) Submissions, Certifications, Amendments, and Performance
Reports. An Insular Area grantee that submits an abbreviated
consolidated plan under this section must comply with the submission,
certification, amendment, and performance report requirements of 24 CFR
570.440. This includes certification that the grantee will
affirmatively further fair housing, which means it will conduct an
analysis of impediments to fair housing choice and undertake other
activities required for fair housing planning, in accordance with 24
CFR 91.225(a)(1) and 570.601(a)(2).
* * * * *
    (e) Citizen Participation. An Insular Area grantee that submits an
abbreviated consolidated plan under this section must comply with the
citizen participation requirements of 24 CFR 570.441.
* * * * *

PART 570--COMMUNITY DEVELOPMENT BLOCK GRANTS

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

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

? 4. Revise Sec.  570.209(b)(2)(i) to read as follows:

Sec.  570.209  Guidelines for evaluating and selecting economic
development projects.

* * * * *
    (b) * * *
    (2) Applying the aggregate standards. (i) A metropolitan city, an
urban county, or an Insular Area shall apply the aggregate standards
under paragraph (b)(1) of this section to all applicable activities for
which CDBG funds are first obligated within each single CDBG program
year, without regard to the source year of the funds used for the
activities. For Insular Areas, the preceding sentence applies to grants
received in program years after Fiscal Year 2004. A grantee under the
HUD-administered Small Cities program in New York, or Insular Areas
CDBG programs grants prior to Fiscal Year 2005, shall apply the
aggregate standards under paragraph (b)(1) of this section to all funds
obligated for applicable activities from a given grant;

[[Page 12536]]

program income obligated for applicable activities will, for these
purposes, be aggregated with the most recent open grant. For any time
period in which a community has no open HUD-administered grant, the
aggregate standards shall be applied to all applicable activities for
which program income is obligated during that period.
* * * * *

? 5. Add Sec.  570.442 to subpart F to read as follows:

Sec.  570.442  Reallocations-Insular Areas.

    (a) Any Insular Area funds that become available as a result of
reductions under subpart O of this part, shall be reallocated in the
same or future fiscal year to any remaining eligible Insular Area
grantees pro rata according to population.
    (b) Any Insular Area grant funds for a fiscal year reserved for an
applicant that chooses not to submit a final statement in accordance
with Sec.  570.440 to receive such funds, shall be reallocated in the
same or future fiscal year to any remaining eligible Insular Area
grantees pro rata according to population.
    (c) No amounts shall be reallocated under this section in any
fiscal year to any applicant whose grant amount in such fiscal year was
reduced under subpart O of this part or who did not submit a final
statement in accordance with Sec.  570.440 for that fiscal year.
    (d) Insular Area grantees receiving additional funds under this
section will be evaluated for timeliness under Sec.  570.902 based upon
the original grant amount plus the additional funds received.
Accordingly, references in Sec.  570.902 to an Insular Area's grant
amount for its current program year include such additional funds, and
references to unexpended or undisbursed funds include such additional funds.

? 6. Revise Sec.  570.600(a) to read as follows:

Sec.  570.600  General.

    (a) This subpart K enumerates laws that the Secretary will treat as
applicable to grants made under section 106 of the Act, other than
grants to states made pursuant to section 106(d) of the Act, for
purposes of the Secretary's determinations under section 104(e)(1) of
the Act, including statutes expressly made applicable by the Act and
certain other statutes and Executive Orders for which the Secretary has
enforcement responsibility. This subpart K applies to grants made under
the Insular Areas Program in Sec.  570.405 and Sec.  570.440 with the
exception of Sec.  570.612. The absence of mention herein of any other
statute for which the Secretary does not have direct enforcement
responsibility is not intended to be taken as an indication that, in
the Secretary's opinion, such statute or Executive Order is not
applicable to activities assisted under the Act. For laws that the
Secretary will treat as applicable to grants made to states under
section 106(d) of the Act for purposes of the determination required to
be made by the Secretary pursuant to section 104(e)(2) of the Act, see
Sec.  570.487.
* * * * *

? 7. In Sec.  570.900, revise paragraphs (a)(1) and (b)(1) to read as follows:

Sec.  570.900  General.

    (a) Performance review authorities--(1) Entitlement, Insular Areas,
and HUD-administered Small Cities performance reviews. Section
104(e)(1) of the Act requires that the Secretary shall, at least on an
annual basis, make such reviews and audits as may be necessary or
appropriate to determine whether the recipient has carried out its
activities in a timely manner, whether the recipient has carried out
those activities and its certifications in accordance with the
requirements and the primary objectives of the Act and with other
applicable laws, and whether the recipient has a continuing capacity to
carry out those activities in a timely manner.
* * * * *
    (b) * * *
    (1) The Department will determine the performance of each
entitlement, Insular Areas, and HUD-administered small cities recipient
in accordance with section 104(e)(1) of the Act by reviewing for
compliance with the requirements described in Sec.  570.901 and by
applying the performance criteria described in Sec. Sec.  570.902 and
570.903 relative to carrying out activities in a timely manner. The
review criteria in Sec.  570.904 will be used to assist in determining
if the recipient's program is being carried out in compliance with
civil rights requirements.
* * * * *

? 8. In Sec.  570.901, revise the introductory paragraph, redesignate
existing paragraphs (f), (g), and (h), as paragraphs (g), (h), and (i)
respectively, and add a new paragraph (f) to read as follows:

Sec.  570.901  Review for compliance with the primary and national
objectives and other program requirements.

    HUD will review each entitlement, Insular Areas, and HUD-
administered small cities recipient's program to determine if the recipient
has carried out its activities and certifications in compliance with:
* * * * *
    (f) For Insular Areas Program grants only, the application and
amendment requirements at Sec.  570.440, the citizen participation
requirements at Sec.  570.441, the displacement policy requirements of
Sec.  570.606, and the lead-based paint requirements of 24 CFR 35.940;
* * * * *

? 9. In Sec.  570.902, revise the introductory paragraph, and add a new
paragraph (c) to read as follows:

Sec.  570.902  Review to determine if CDBG-funded activities are being
carried out in a timely manner.

    HUD will review the performance of each entitlement, HUD-
administered small cities, and Insular Areas recipient to determine
whether each recipient is carrying out its CDBG-assisted activities in
a timely manner.
* * * * *
    (c) Insular Areas recipients. (1) Before the funding of the next
annual grant and absent contrary evidence satisfactory to HUD, HUD will
consider an Insular Areas recipient to be failing to carry out its CDBG
activities in a timely manner if:
    (i) Sixty days prior to the end of the grantee's current program
year, the amount of Insular Area grant funds available to the recipient
under grant agreements but undisbursed by the U.S. Treasury is more
than 2.0 times the Insular Area's grant amount for its current program
year; and
    (ii) The grantee fails to demonstrate to HUD's satisfaction that
the lack of timeliness has resulted from factors beyond the grantee's
reasonable control.
    (2) Notwithstanding that the amount of funds in the line of credit
indicates that the Insular Area recipient is carrying out its
activities in a timely manner pursuant to paragraph (c)(1) of this
section, HUD may determine that the recipient is not carrying out its
activities in a timely manner if:
    (i) The amount of CDBG program income the recipient has on hand 60
days prior to the end of its current program year, together with the
amount of funds in its CDBG line of credit, exceeds 2.0 times the
Insular Area's grant amount for its current program year; and
    (ii) The grantee fails to demonstrate to HUD's satisfaction that
the lack of timeliness has resulted from factors beyond the grantee's
reasonable control.
    (3) In determining the appropriate corrective action to take with
respect to

[[Page 12537]]

a HUD determination that a recipient is not carrying out its activities
in a timely manner pursuant to paragraphs (c)(1) or (c)(2) of this
section, HUD will consider the likelihood that the recipient will
expend a sufficient amount of funds over the next program year to
reduce the amount of unexpended funds to a level that will fall within
the standards described in paragraphs (c)(1) and (2) of this section
when HUD next measures the grantee's timeliness performance. For these
purposes, HUD will take into account the extent to which funds on hand
have been obligated by the recipient and its sub-recipients for specific
activities at the time the finding is made and other relevant information.
    (4) If a recipient is determined to be untimely pursuant to
paragraphs (c)(1) or (c)(2) of this section in one year, and the
recipient is again determined to be untimely in the following year, HUD
may reduce the recipient's next grant by 100 percent of the amount in
excess of twice the Insular Area's most recent CDBG grant, unless HUD
determines that the untimeliness resulted from factors outside of the
grantee's reasonable control.
    (5) The first review under paragraphs (c)(1) and (c)(2) of this
section will take place 60 days prior to the conclusion of the Fiscal
Year 2006 program year.

? 10. In Sec.  570.903, revise the introductory paragraph, paragraph (a),
and remove paragraph (d) to read as follows:

Sec.  570.903  Review to determine if the recipient is meeting its
consolidated plan responsibilities.

    The consolidated plan, action plan, and amendment submission
requirements referred to in this section are in 24 CFR part 91. For the
purpose of this section, the term consolidated plan includes an
abbreviated consolidated plan that is submitted pursuant to 24 CFR 91.235.
    (a) Review timing and purpose. HUD will review the consolidated
plan performance of each entitlement, Insular Areas, and Hawaii HUD-
administered Small Cities grant recipient prior to acceptance of a
grant recipient's annual certification under 24 CFR 91.225(b)(3) to
determine whether the recipient followed its HUD-approved consolidated
plan for the most recently completed program year, and whether
activities assisted with CDBG funds during that period were consistent
with that consolidated plan, except that grantees are not bound by the
consolidated plan with respect to the use or distribution of CDBG funds
to meet non-housing community development needs.
* * * * *

? 11. In Sec.  570.910, revise paragraphs (b)(2)(iii) and (b)(8) to read
as follows:

Sec.  570.910  Corrective and remedial actions.

* * * * *
    (b) * * *
    (2) * * *
    (iii) For entitlement and Insular Areas recipients, canceling or
revising affected activities that are no longer feasible to implement
due to the deficiency and re-programming funds from such affected
activities to other eligible activities (pursuant to the citizen
participation requirements in 24 CFR part 91); or
* * * * *
    (8) In the case of an entitlement or Insular Areas recipient,
condition the use of funds from a succeeding fiscal year's allocation
upon appropriate corrective action by the recipient. The failure of the
recipient to undertake the actions specified in the condition may
result in a reduction, pursuant to Sec.  570.911, of the entitlement or
Insular Areas recipient's annual grant by up to the amount
conditionally granted.

? 12. Revise Sec.  570.911(b) to read as follows:

Sec.  570.911  Reduction, withdrawal, or adjustment of a grant or other
appropriate action.

* * * * *
    (b) Entitlement and Insular Areas grants. Consistent with the
procedures described in Sec.  570.900(b), the Secretary may make a
reduction in the entitlement or insular areas grant amount either for
the succeeding program year or, if the grant had been conditioned, up
to the amount that had been conditioned. The amount of the reduction
shall be based on the severity of the deficiency and may be for the
entire grant amount.
* * * * *

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