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Notice2024-31621

Common Application, Waivers, and Alternative Requirements for Community Development Block Grant Disaster Recovery Grantees: The Universal Notice

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Published

January 8, 2025

Issuing agencies

Housing and Urban Development Department

Abstract

This notice contains a preamble and the Community Development Block Grant Disaster Recovery Universal Notice: Waivers and Alternative Requirements (the "Universal Notice"). The Universal Notice describes the processes, procedures, timelines, waivers, and alternative requirements that U.S. Department of Housing and Urban Development (HUD) intends to implement with each allocation of Community Development Block Grant Disaster Recovery (CDBG-DR) funding after a qualifying presidential disaster declaration. Specifically, following the appropriation of CDBG-DR funds for qualifying disasters, HUD will publish an Allocation Announcement Notice in the Federal Register that incorporates, via cross-reference, the waivers and alternative requirements provided in the Universal Notice, as appropriate, along with any other new requirements imposed by the specific appropriation. This notice also describes the grant award process, pre-award certification submissions, criteria for Action Plan approval, and eligible disaster recovery activities to streamline post-disaster processes for future grantees. By publishing the Universal Notice, HUD intends to provide grantees and the public with increased transparency, consistency, and more timely access to CDBG-DR funds, helping to minimize program delays and accelerate recovery.

Full Text

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[Federal Register Volume 90, Number 5 (Wednesday, January 8, 2025)]
[Notices]
[Pages 1754-1797]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-31621]

[[Page 1753]]

Vol. 90

Wednesday,

No. 5

January 8, 2025

Part IV

Department of Housing and Urban Development

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Common Application, Waivers, and Alternative Requirements for Community
Development Block Grant Disaster Recovery Grantees: The Universal
Notice; Notice

Federal Register / Vol. 90 , No. 5 / Wednesday, January 8, 2025 /
Notices

[[Page 1754]]

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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Docket No. FR-6489-N-01]

Common Application, Waivers, and Alternative Requirements for
Community Development Block Grant Disaster Recovery Grantees: The
Universal Notice

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

ACTION: Notice.

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SUMMARY: This notice contains a preamble and the Community Development
Block Grant Disaster Recovery Universal Notice: Waivers and Alternative
Requirements (the ``Universal Notice''). The Universal Notice describes
the processes, procedures, timelines, waivers, and alternative
requirements that U.S. Department of Housing and Urban Development
(HUD) intends to implement with each allocation of Community
Development Block Grant Disaster Recovery (CDBG-DR) funding after a
qualifying presidential disaster declaration. Specifically, following
the appropriation of CDBG-DR funds for qualifying disasters, HUD will
publish an Allocation Announcement Notice in the Federal Register that
incorporates, via cross-reference, the waivers and alternative
requirements provided in the Universal Notice, as appropriate, along
with any other new requirements imposed by the specific appropriation.
This notice also describes the grant award process, pre-award
certification submissions, criteria for Action Plan approval, and
eligible disaster recovery activities to streamline post-disaster
processes for future grantees. By publishing the Universal Notice, HUD
intends to provide grantees and the public with increased transparency,
consistency, and more timely access to CDBG-DR funds, helping to
minimize program delays and accelerate recovery.

DATES: Applicability Date: January 13, 2025.

FOR FURTHER INFORMATION CONTACT: Tennille Parker, Director, Office of
Disaster Recovery (ODR), HUD, 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: <a href="https://www.fcc.gov/consumers/guides/telecommunications-relay-service-trs">https://www.fcc.gov/consumers/guides/telecommunications-relay-service-trs</a>. Email inquiries may be
sent to <a href="/cdn-cgi/l/email-protection#5c18352f3d2f28392e030e393f332a392e251c342938723b332a">[email&#160;protected]</a>.

Table of Contents

Preamble
Community Development Block Grant Disaster Recovery Universal
Notice: Waivers and Alternative Requirements (the ``Universal
Notice'')
I. Phase One: The Action Plan
I.A. CDBG-DR Action Plans Defined
I.B. Admin Action Plan
I.C. Action Plan
II. Phase Two: Financial Certification and Oversight of Funds
II.A. Certification of Adequate Financial Controls and
Procurement Processes, and Procedures for Proper Grant Management
II.B. Relying on Prior Financial Certification Submissions
II.C. Obligation and Expenditure of Funds
III. Phase Three: Implementation of Universal Notice Requirements
III.A. Policies and Procedures--Universal Notice Requirements
III.B. Grant Administration
III.C. State Grantee Only Requirements
III.D. Waivers and Alternative Requirements Related to Eligible
Activities
III.E. Ineligible Activities in CDBG-DR
III.F. Performance Reviews
III.G. Grantee Reporting Requirements in the Disaster Recovery
Grant Reporting (DRGR) System
IV. Assistance Listing Numbers
V. Finding of No Significant Impact
Appendix A. Certifications Waiver and Alternative Requirement for
Admin Action Plan Submission
Appendix B. Certifications Waiver and Alternative Requirement for
Action Plan Submission
Appendix C. Duplication of Benefits (DOB)
Appendix D. Detailed Table of Contents to the Universal Notice

SUPPLEMENTARY INFORMATION:

Preamble

Purpose and Policy Objectives

HUD has developed this preamble and the Universal Notice, to assist
States, local governments, Indian Tribes, CDBG-DR subrecipients, and
the public in planning for the award of CDBG-DR funds. Because not all
the requirements in the Universal Notice are appropriate or applicable
to Indian Tribes, HUD will publish an Addendum to the Universal Notice
at a later date to establish requirements that will apply when Indian
Tribes receive a CDBG-DR grant directly from HUD. This process will
allow HUD to ensure that the requirements imposed are fair and
consistent with the Indian Community Development Block Grant (ICDBG)
Program.
In December 2022, HUD published a Request for Information (RFI) for
HUD's Community Development Block Grant Disaster Recovery (CDBG-DR)
Rules, Waivers, and Alternative Requirements (FR-6336-N-01) \1\ seeking
public input to strengthen and improve CDBG-DR requirements. Based on
the feedback received through the RFI,\2\ HUD is establishing a revised
process for CDBG-DR grants for qualifying disasters whereby HUD will
incorporate applicable provisions of the Universal Notice, to the
extent they are consistent with future appropriations acts, in a
Federal Register notice that announces allocations of the appropriated
CDBG-DR funds (the ``Allocation Announcement Notice''). The Allocation
Announcement Notice (AAN) will impose the waivers and alternative
requirements of the Universal Notice for the subject CDBG-DR grants.
The AAN will also add or modify requirements of the Universal Notice as
necessary to comply with statutory provisions.
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\1\ View the request for information notice (FR-6336-N-01) here:
<a href="https://www.govinfo.gov/content/pkg/FR-2022-12-20/pdf/2022-27547.pdf">https://www.govinfo.gov/content/pkg/FR-2022-12-20/pdf/2022-27547.pdf</a>.
\2\ View a summary of the comments received, and HUD's responses
here: <a href="https://www.hud.gov/program_offices/comm_planning/cdbg-dr/universal_notice_grantees">https://www.hud.gov/program_offices/comm_planning/cdbg-dr/universal_notice_grantees</a>.
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The Universal Notice has no legal effect on a CDBG-DR grant until
funds are appropriated by Congress and the appropriation authorizes the
HUD Secretary to waive or specify alternative requirements for the
assistance, and the AAN that incorporates appropriate provisions of the
Universal Notice is published by the Department and goes into effect.
HUD will make the required findings in support of the waivers and
alternative requirements incorporated into and made effective through
AANs contemporaneously with the publication of each AAN. Because the
Universal Notice has no legal effect on its own but rather requires
authority provided by Congress through enacting special disaster
appropriations and contemporaneous publication of an AAN by HUD, this
is being published as a notice and is not a rulemaking.
The Universal Notice is designed to inform potential CDBG-DR
grantees and other stakeholders about each phase of the CDBG-DR grant
process, including but not limited to, pre-award grantee submissions;
grantee steps and timelines; and Action Plan development, submittal,
and implementation.
Through the Universal Notice, HUD seeks to:
<bullet> Outline a comprehensive and uniform set of waivers and
alternative requirements that HUD intends to apply to govern future
allocations of CDBG-DR funds, including all timelines, documentation,
and other requirements

[[Page 1755]]

for pre-award grantee submission to reduce the administrative burden
for future CDBG-DR grantees and assigned HUD Community Planning and
Development (CPD) staff member (e.g., CPD Representative, CPD
Specialist, etc. . . .);
<bullet> Encourage intentional and early coordination between CDBG-
DR grantees; other agencies/departments at the Federal, State, or local
level; and other regional or local planning efforts to better align
disaster recovery assistance and projects with the goals of regional
redevelopment plans, resilience plans, long-term recovery plans, and
State and local Hazard Mitigation Plans (HMP);
<bullet> Increase awareness of the availability of disaster
recovery assistance and advance fair disaster recovery outcomes,
including community engagement efforts and pre-disaster planning for
targeted assistance to historically marginalized groups that can be
adversely affected by disasters that often exacerbate inequalities for
residents of underserved communities, members of protected classes
under fair housing and civil rights laws, and vulnerable populations;
and
<bullet> Improve long-term community resilience by fully
integrating resilience planning and hazard mitigation activities into
disaster recovery to reduce the impacts of a changing climate and
future disasters, encourage green recovery efforts (focusing on
healthier water and air, and effective debris and waste management),
address environmental justice concerns associated with disaster
recovery efforts, and address recovery needs for accessible, resilient,
and affordable housing for low- and moderate-income persons.

Management and Oversight

Prior to accessing CDBG-DR funding, grantees must demonstrate that
they have the capacity to administer funds in a compliant manner as
described by the Universal Notice. Consistent with 2 CFR 200.206(b) of
the Uniform Administrative Requirements, Cost Principles, and Audit
Requirements for Federal Awards (Uniform Requirements), HUD will
evaluate each CDBG-DR grantee's capacity to effectively manage its
funds through a review of its pre-award submissions as provided in
section II. of the Universal Notice, which includes the grantee's
submissions in response to the Financial Management and Grant
Compliance Certification Requirements in section II.A.1. of the
Universal Notice.

Authority To Grant Waivers

CDBG-DR grants are generally subject to CDBG regulations outlined
in 24 CFR part 570.\3\ The appropriations acts (i.e., public laws) that
provide CDBG-DR funds typically allow the Secretary to waive
requirements 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 the use by the grantee of CDBG-
DR funds. Generally, the appropriations acts specify that there are
four types of requirements that the Secretary cannot waive under that
authority, these include fair housing, nondiscrimination, labor
standards, and the environment. However, HUD may also exercise its
regulatory waiver authority under 24 CFR 5.110, 91.600, and 570.5.\4\
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\3\ View 24 CFR part 570--Community Development Block Grants
Regulations here: <a href="https://www.ecfr.gov/current/title-24/subtitle-B/chapter-V/subchapter-C/part-570">https://www.ecfr.gov/current/title-24/subtitle-B/chapter-V/subchapter-C/part-570</a>.
\4\ View HUD's policy concerning the procedures that govern the
waiver of regulations and directives issued by HUD here: <a href="https://www.govinfo.gov/content/pkg/FR-2024-08-06/pdf/2024-17034.pdf">https://www.govinfo.gov/content/pkg/FR-2024-08-06/pdf/2024-17034.pdf</a>.
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The waivers and alternative requirements in the Universal Notice
draw from HUD's knowledge of the needs of grantees, public feedback,
and HUD's previously established waivers and alternative requirements
and the determinations by the Secretary regarding good cause and
consistency with the overall purposes of title I of the HCDA that
supported the waivers and alternative requirements. Historically, HUD
has established waivers and alternative requirements based on findings
of good cause that they provided additional flexibility to grantees in
program design and implementation, supported a full and swift recovery
from the most devasting disasters, and streamlined administrative
requirements that would otherwise increase the time it takes for
disaster funds to reach those most in need.
Unless otherwise provided, HUD intends to make these same findings
of good cause when the waivers and alternative requirements in the
Universal Notice are incorporated into and made effective through later
AANs. HUD will provide a statement regarding the Secretary's finding of
good cause and consistency with the purpose of title I of the HCDA, or
such other applicable standard, in each AAN. If HUD's findings of good
cause differ on certain waivers or alternative requirements from the
findings identified in this Universal Notice, HUD will include the
updated findings in support of those waivers and alternative
requirements in the AAN. CDBG-DR activities will be governed by the
regulations cited in the requirements of this notice, as incorporated
in the applicable AAN, as may be amended.
Grantees who have received previous allocations of CDBG-DR funds
must follow the requirements outlined in their applicable Federal
Register notice(s). However, any CDBG-DR grantee may request waivers
and alternative requirements to better align requirements across
grants, as long as good cause is provided. In addition, the waivers and
alternative requirements herein do not apply to funds provided under
the annual State or Entitlement CDBG programs or those provided under
any other component of the CDBG program, such as the Section 108 Loan
Guarantee Program.
After Congress appropriates CDBG-DR funds and HUD announces the
allocations, grantees may request that HUD grant additional waivers and
alternative requirements to address specific needs related to their
recovery activities. Waiver requests must be accompanied by supporting
data and must be submitted to the assigned HUD CPD staff member and to
the ODR mailbox at <a href="/cdn-cgi/l/email-protection#296d405a485a5d4c5b767b4c4a465f4c5b5069415c4d074e465f">[email&#160;protected]</a>. HUD will aim to publish
grantee-specific waivers and alternative requirements at least
quarterly in the Federal Register or on HUD's website. Grantees may
consult with their assigned HUD CPD staff member for anticipated
Federal Register publication timelines ahead of any waiver request
submittal.

Overview of Grant Life Cycle

To begin expending CDBG-DR funds, the following expedited steps are
necessary as broken out by each phase:
(1) Phase One: The Action Plan
a. Grantee follows its citizen participation plan for disaster
recovery (I.C.2.).
i. Grantee consults with stakeholders, including all required
consultations (I.C.2.a.).
ii. Grantee publishes its Action Plan on its website for no less
than 30 calendar days to solicit public comment (I.C.2.b.).
iii. Grantee responds to public comments and incorporates feedback
into its Action Plan.
b. Grantee submits its Action Plan (including the SF-424, SF-424B
and SF-424D, as applicable) within 90 calendar days from the
applicability date of the AAN (I.C.3.).
c. Grantee requests and receives Disaster Recovery Grant Reporting
(DRGR) system access (if the grantee

[[Page 1756]]

does not already have DRGR access) and may enter activities into the
DRGR system before or after submission of the Action Plan to HUD.
d. HUD reviews the Action Plan (allotted 45 calendar days from date
of receipt) and approves the Action Plan according to criteria
identified in this notice (I.C.5.).
e. HUD sends an Action Plan approval letter to the grantee. If the
Action Plan is not approved, HUD will notify the grantee of the
deficiencies. The grantee must then resubmit the Action Plan within 45
calendar days of the written notification. HUD will respond to approve
or disapprove the Action Plan within 30 calendar days of receiving the
revisions or resubmission.
(2) Phase Two: Financial Certification and Oversight of Funds.
a. Within 135 calendar days of the applicability date of the AAN,
the grantee submits documentation for the certification of financial
controls and procurement processes, and adequate procedures for grant
management (II.A.).
b. HUD will review the grantee's documentation for the
certification of financial controls and procurement processes, and
adequate procedures for grant management or any provided updates if the
grantee is relying on a prior certification (allotted 45 calendar days
from date of receipt).
c. The Secretary will certify to the proficiency of the grantee's
financial controls and procurement processes, and adequate procedures
for grant management in accordance with the requirements and HUD will
send the grantee the grant agreement.
d. Grantee signs and returns the grant agreement to HUD.
e. HUD signs and returns a fully executed grant agreement to the
grantee with a period of performance identified.
f. Grantee publishes the final HUD-approved Action Plan on its
official disaster recovery website.
g. HUD establishes the grantee's line of credit.
h. 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 in an approved DRGR Action Plan).
i. The grantee may draw down funds from the line of credit for an
activity after the Responsible Entity (1) completes an environmental
review(s) pursuant to 24 CFR part 58 and receives from HUD or the
State, as outlined in 24 CFR 58.18, an approved Request for Release of
Funds (RROF) and certification (as applicable), or (2) adopts another
Federal agency's environmental review and receives from HUD or the
State an approved RROF and certification (as applicable).
(3) Phase Three: Implementation of Universal Notice Requirements.
a. Within one year from the applicability date of the AAN, the
grantee must create and finalize policies and procedures for its
housing programs. If the grantee is not funding housing programs, see
section III.A. for more details.
b. Within eighteen months from the applicability date of the AAN,
the grantee must create and finalize policies and procedures governing
the rest of its CDBG-DR funded programs (e.g., economic revitalization,
public service, infrastructure programs, etc.).
c. Within two years from the applicability date of the AAN, these
policies and procedures will be subject to HUD review.
d. The grantee should begin to draw down funds from DRGR no later
than 180 calendar days after HUD executes a grant agreement with the
grantee (II.C.) or HUD approves the Action Plan and financial
certification and oversight of funds, whichever is later. Additionally,
all funds must be expended within six years of the date of obligation
(III.F.1.).
HUD provides additional flexibility to streamline access to CDBG-DR
funds, through the following options:
(1) Grantees may submit an Optional Action Plan for Program
Administrative Costs (``Admin Action Plan'') to access administrative
funds prior to the grantee's submission of its Action Plan (I.B.).
(2) Previous grantees covered by the Universal Notice or other
prior notices may rely on their previous financial certification
submissions as described in section II.B.
There may be times when appropriations acts allow additional
flexibilities for timing of financial certification and action plan
submissions, signing of grant agreements, and the availability of
administrative funds. HUD will adapt this grant life cycle to be in
compliance with any additional flexibilities provided in the
appropriations acts.

Community Development Block Grant Disaster Recovery Universal Notice:
Waivers and Alternative Requirements (the ``Universal Notice'')

The Universal Notice outlines the waivers and alternative
requirements that grantees are required to demonstrate compliance with
over the course of three phases of the grant life cycle which include:
(1) Phase One: The Action Plan, (2) Phase Two: Financial Certification
and Oversight of Funds, and (3) Phase Three: Implementation of
Universal Notice Requirements. Any references to the ``Universal
Notice'' or ``this notice'' in this document refer to sections I.
through V. and the attached appendices.
CDBG-DR grantees that are subject to the Universal Notice, must
comply with all waivers and alternative requirements, unless expressly
made inapplicable (e.g., a State only waiver does not apply to local
governments). Except as described in applicable waivers and alternative
requirements, the statutory and regulatory provisions governing the
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
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 (as defined under 42 U.S.C. 5302(a)(24)), HUD
waives the provisions of 24 CFR 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
Universal Notice.
Except as modified, statutory and regulatory provisions governing
the Entitlement CDBG program shall apply to local government grantees
(often referred to as units of local government in appropriations
acts). Applicable Entitlement CDBG program regulations are found at 24
CFR 570, as described in Sec. 570.1(a).

[[Page 1757]]

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 or 24 CFR 570.490, as
amended by the Universal Notice waivers and alternative requirements.
All grantees must follow all cross-cutting requirements, as applicable,
for all CDBG-DR funded activities including but not limited to the
environmental requirements outlined in the Universal Notice,\5\ the
Davis Bacon Act, Civil Rights Requirements, the Lead Safe Housing Rule,
and the Uniform Relocation Assistance and Real Property Acquisition
Policies Act of 1970, as amended (``URA'') and its implementing
regulations.
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\5\ View HUD's guidance on addressing Radon in the Environmental
Review process published in CPD Notice 23-103 here: <a href="https://www.hud.gov/sites/dfiles/CPD/documents/CPD_Notice_on_Addressing_Radon_in_the_Environmental_Review_Process.pdf">https://www.hud.gov/sites/dfiles/CPD/documents/CPD_Notice_on_Addressing_Radon_in_the_Environmental_Review_Process.pdf</a>.
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All grantees must maintain records of performance in DRGR, as
described elsewhere in the Universal Notice. Additionally, grantees
must comply with the requirements in the Uniform Administrative
Requirements, Cost Principles, and Audit Requirements for Federal
Awards at 2 CFR part 200, as amended (Uniform Requirements).
Any references to ``subrecipient'' in this notice refer to the term
as defined in 24 CFR 570.500(c). Subrecipients include, but are not
limited to, nonprofit organizations, units of general local government,
partner agencies, subgrantees, and Indian Tribes.

I. Phase One: The Action Plan

I.A. CDBG-DR Action Plans Defined

The action plan is a key mechanism for grantees to inform the
public and HUD of the intended use of the funds within their community
and how this plan connects to the community's remaining unmet needs and
mitigation needs associated with the qualifying disaster(s). It is
important that grantees understand the difference between the two
action plans associated with CDBG-DR funds.
<bullet> Admin Action Plan (Optional Action Plan for Program
Administrative Costs): This is an optional submission that allows a
grantee to access their funds for program administrative costs prior to
the award of the full grant (e.g., to increase staffing and capacity to
develop the required Action Plan). The Admin Action Plan has
streamlined requirements, including no public comment period or
deadline for submission, and is sent to HUD for review (as described in
the applicable AAN).
<bullet> Action Plan: The Action Plan is a required plan that a
grantee must develop to have access to grant funds. The Action Plan
must identify the use of all CDBG-DR funds--including criteria for
eligibility and how the uses address long-term recovery needs,
restoration of infrastructure and housing, economic revitalization, and
mitigation in the most impacted and distressed (MID) areas. The Action
Plan has a required 30-day public comment period, must be submitted
within 90 days of a grantee's AAN, and is sent to HUD for review (the
submission process will be described in the applicable AAN). References
to the ``Action Plan'' shall mean the Action Plan required by the
Universal Notice and not the consolidated plan or action plan required
by 24 CFR part 91.

I.B. Admin Action Plan

Typically, CDBG-DR awards are all subject to a five percent
administrative cap as specified by the appropriations acts and outlined
in section III.B.3. of this notice. Recent appropriations acts have
allowed the special treatment of administrative funds (as described in
section III.B.3.a.) and allowed grantees to access funding for program
administrative costs prior to the Secretary's certification as
described in section II.A. Note, the appropriations acts typically
require that all CDBG-DR funds be used pursuant to an action plan.
Grantees will follow the process described in this section, which
includes the submission of the Admin Action Plan, to access funds for
program administrative costs prior to the Secretary's certification.
I.B.1. Developing the Admin Action Plan. The grantee shall describe
the use of all grant funds for administrative costs in the Admin Action
Plan, including for any eligible pre-award program administrative costs
the grantee plans to reimburse itself or its subrecipients as described
in section III.B.14.a. The Admin Action Plan must include the criteria
for eligibility of administrative activities and the amount to be
budgeted for administrative activities. If a grantee submits the Admin
Action Plan, the grantee must consider the need to cover program
administrative costs over the life of the grant, which is six years
from HUD's signature on the initial grant agreement as described in
section III.F.1. of this notice. Therefore, grantees are strongly
encouraged to budget for these costs early in the grant lifecycle.
I.B.2. Submission and publication of the Admin Action Plan.
Normally, a grantee must publish any proposed action plan and
substantial amendments to the plan for public comment. However, because
the Admin Action Plan will only include program administrative costs,
and to allow for a more streamlined process and timely awarding of
grants, no public comment period is required.
Therefore, for Admin Action Plans and substantial amendments to
these plans only, the 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. Additionally, for Admin Action Plans
only, grantees are not subject to the action plan requirements in
section I.C.
Grantees must publish the Admin Action Plan online when it is
submitted to HUD (as described in the applicable AAN). The manner of
publication of the Admin Action Plan must include prominent posting on
the grantee's official disaster recovery website and include any
substantial amendments to the Admin Action Plan. When the grantee
submits its Admin Action Plan or substantial amendment to the Admin
Action Plan to HUD for approval, it must include the Standard Form 424
(SF-424). There is no due date for the Admin Action Plan as it is
optional and may be submitted any time prior to the grantee's Action
Plan. HUD will review the Admin Action Plan or substantial amendment to
the Admin Action Plan within 15 calendar days from the date of receipt
and determine whether to approve the Admin Action Plan per the criteria
identified here in section I.B. of the Universal Notice.
I.B.3. Entering administrative activities into DRGR. After HUD's
approval of the Admin Action Plan, the grantee enters the
administrative activities from its approved Admin Action Plan (or
substantial amendment to that plan) into the DRGR system, as described
in section III.G. Grantees are required to populate their DRGR Action
Plan since grant funds can only be drawn from the line of credit
through projects and activities that are established in the DRGR
system. This process will allow a grantee to access funds for program
administrative costs while the grantee begins developing its Action
Plan.
I.B.4. Applicability of the Admin Action Plan. A grantee's use of
grant funds for program administrative costs before approval of the
Action Plan must

[[Page 1758]]

be consistent with the Admin Action Plan. Once the Action Plan is
approved, the use of all grant funds must be consistent with the Action
Plan. Upon HUD's approval of the Action Plan, the optional Admin Action
Plan shall only be relevant to administrative costs charged to the
grant before the date of approval of the Action Plan.
I.B.5. Admin Action Plan 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 of 1990, as amended (42 U.S.C.
12706), and regulations at 24 CFR 91.225 and 91.325 are waived and
replaced with the following alternative requirement. Each grantee
choosing to submit an Admin Action Plan must also complete the
certifications in Appendix A and submit them with the Admin Action
Plan.
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 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 for program administrative costs before
submitting other statutorily required certifications.

I.C. Action Plan

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 Universal Notice and the applicable AAN. HUD will return all Action
Plans that are substantially incomplete as described in section I.C.5.
The Action Plan is substantially incomplete if the plan does not
satisfy all the required elements identified in the Universal Notice
and the applicable AAN. Grantees receiving an allocation are required
to submit an Action Plan within 90 calendar days of the applicability
date of the AAN, unless the grantee has requested, and HUD has approved
an extension of the submission deadline. HUD will monitor the grantee's
actions and use of funds for consistency with the Action Plan, as well
as meeting the performance and timeliness objectives therein.
I.C.1. Developing the Action Plan. The Action Plan must identify
the use of all CDBG-DR funding, including eligibility criteria for
accessing the funds and how the proposed uses will address long-term
recovery needs. At a minimum, the Action Plan must cover the impacts of
the qualifying disaster, restoration of housing, infrastructure,
economic revitalization, and mitigation in the MID areas. The CDBG-DR
allocations are based on the unmet needs of specific communities, which
are the least likely to fully recover without additional assistance.
Therefore, it is critical that the Action Plan demonstrates the
following, as described in the referenced sections:
1. An unmet needs assessment (review section I.C.1.a.).
2. A mitigation needs assessment (review section I.C.1.b.).
3. A fair housing and civil rights data assessment (review section
I.C.1.c.).
4. Connection between proposed programs and projects and unmet
needs, mitigation needs, and fair housing and civil rights assessments
(review section I.C.1.d.).
5. Set allocation and award caps (review section I.C.1.e.).
6. Establish funding criteria (review section I.C.1.f.).
7. Establish protocols for substantial amendments (review section
I.C.1.g.).
As grantees develop their Action Plan, they must consult with
various stakeholders, including the public (i.e., citizen
participation) and inform residents about their funding decisions prior
to submitting the Action Plan to HUD for review. Grantees will receive
specific instructions for Action Plan submittal in the applicable AAN.
Note, the citizen participation requirements to develop the action plan
are described in section I.C.2.
I.C.1.a. Unmet needs assessment. Each grantee must develop an unmet
needs assessment to strategically inform the use of the grant funds.
The unmet needs assessment will help a grantee evaluate community needs
across its jurisdiction by assessing the remaining effects of the
qualifying disaster as they relate to housing, infrastructure, and the
economy. Note, HUD can assist grantees in obtaining FEMA data to
support the development of the Action Plan and implementation of
recovery programs.\6\
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\6\ View more information about how to access this data on HUD's
website here: <a href="https://www.hud.gov/program_offices/comm_planning/cdbg-dr/data-sharing">https://www.hud.gov/program_offices/comm_planning/cdbg-dr/data-sharing</a>.
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I.C.1.a.(i). Unmet needs in the MID areas. A grantee must describe
the unmet need in the MID areas (see section III.D.2.), as the
allocations are based on the unmet needs of these specific communities,
which are the least likely to fully recover without additional
assistance. Grantees are required to use at least 80 percent of the
CDBG-DR award to benefit the HUD-identified MID areas. Local government
grantees whose HUD-identified MID areas include their entire
jurisdiction, must use 100 percent of the CDBG-DR award to benefit the
HUD-identified MID area. However, HUD encourages all grantees to
consider using 100 percent of its award to benefit HUD-identified MID
areas since the data from these areas were used to determine the amount
of the award. If allowed, and the grantee does choose to spend a
portion (i.e., up to 20 percent) of its award outside of the HUD-
identified MID area, it will determine and identify in the Action Plan
where the grantee will use that amount (``grantee-identified MID
areas''), and that portion of the allocation may only be used to
address those areas that the grantee determines are most impacted and
distressed, meaning the areas that have the greatest amount of damage
and unmet need outside of the HUD-identified MID areas. Additionally,
any grantee-identified MID areas must have received a presidential
major disaster declaration identified by the disaster numbers listed in
the applicable AAN. The grantee must use quantifiable and verifiable
data in its analysis, and reference it in its Action Plan, to identify
the grantee-identified MID areas and indicate how the proposed use of
funds will prioritize the remaining unmet needs for low- and moderate-
income (LMI) individuals and areas. The addition of a grantee-
identified MID area after the submittal of the initial Action Plan
would result in a substantial amendment to the grantee's Action Plan
(see section I.C.1.g.).
I.C.1.a.(ii). Unmet needs assessment requirements. At a minimum,
the unmet needs assessment must include the following, as they relate
to the HUD-identified and grantee-identified MID areas, and cite the
appropriate data sources:
1. Description of the effects of the qualifying disaster(s) and the
greatest remaining recovery needs that have not been addressed by other
sources of funds, including insurance proceeds, other Federal
assistance, or any other funding source; and
2. Evaluation of the three core aspects of recovery--housing,
infrastructure, and the economy (e.g., estimated job losses), which
considers the pre-disaster needs (e.g., a lack of affordable housing)

[[Page 1759]]

that have been exacerbated by the disaster. The assessment of housing
needs must address: (1) emergency shelters; (2) interim and permanent
housing; (3) rental and owner-occupied single family and multifamily
housing; (4) public housing (including HUD-assisted housing) and other
types of affordable housing, including housing for vulnerable
populations (including those who were unhoused prior to the disaster).
Disaster recovery needs evolve over time and grantees must amend
the Action Plan, including the unmet needs assessment, as additional
needs are identified, and/or additional resources become available. At
a minimum, grantees must revisit and update the unmet needs assessment
when reallocating funds from one program to another through a
substantial amendment (as described in section I.C.1.g.).
I.C.1.b. Mitigation needs assessment. 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 long-term recovery. 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.
For purposes of grants subject to the Universal Notice, mitigation
activities are defined as those activities that increase resilience 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.
At a minimum, the mitigation needs assessment must include a risk-
based assessment to identify current and future hazards (e.g., sea
level rise, strong winds, tornados, storm surge, flooding, volcanic
activity, earthquakes, extreme heat, drought, and wildfire risk, where
appropriate). The assessment must describe how the hazards do or can
impact the HUD-identified and grantee-identified MID areas and cite the
appropriate data sources. Grantees must explain how the risk-based
assessment will inform the use of the CDBG-DR funds and identify if
other sources of funding are available to address its identified
mitigation needs.
At a minimum, grantees must use the risks identified in the current
FEMA-approved State or local HMP, Community Wildfire Protection Plan
(CWPP), or other resilience or long-term recovery plans to inform the
assessment. 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.
A grantee may choose to simply cite the current FEMA-approved HMP,
CWPP, or other resilience or long-term recovery plan to address the
mitigation needs assessment, if there is a clear connection of programs
and projects to the mitigation needs. If a grantee chooses this option,
the grantee must make the HMP, CWPP, or other resilience or long-term
recovery plan available on the grantee's official disaster recovery
website and provide a direct link to the selected plan in the
mitigation needs assessment section of the Action Plan.
Mitigation needs evolve over time and grantees must amend the
mitigation needs assessment and Action Plan as conditions change, as
additional mitigation needs are identified, and additional resources
become available. At a minimum, grantees must revisit and update the
mitigation needs assessment when reallocating funds from one program to
another through a substantial amendment (as described in section
I.C.1.g.).

I.C.1.c. Fair Housing and Civil Rights Assessment

I.C.1.c.(i). Fair housing and civil rights laws and terminology
defined. The grantee must use its CDBG-DR funds in a manner that
complies with its fair housing and nondiscrimination obligations,\7\
which include:
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\7\ Visit HUD's Office of Fair Housing and Equal Opportunity's
website for more information about fair housing and civil rights
obligations here: <a href="https://www.hud.gov/fairhousing">https://www.hud.gov/fairhousing</a>.
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<bullet> Title VI of the Civil Rights Act of 1964, 42 U.S.C. 2000d
et seq.;
<bullet> Title VIII of the Civil Rights Act of 1968 (The Fair
Housing Act), 42 U.S.C. 3601-19;
<bullet> Section 504 and 508 of the Rehabilitation Act of 1973, 29
U.S.C. 794;
<bullet> The Americans with Disabilities Act of 1990,42 U.S.C.
12131 et seq.; and
<bullet> Section 109 of the HCDA, 42 U.S.C. 5309.
For purposes of the Universal Notice, HUD defines the following
terms as they relate to the requirements set forth in the Universal
Notice:
<bullet> Protected Classes: Race, color, national origin, religion,
sex (including sexual orientation and gender identity), familial
status, and disability.
<bullet> Vulnerable Populations: Groups or communities whose
circumstances present barriers to obtaining or understanding
information or accessing resources which may include: (1) persons at
risk of or experiencing homelessness; (2) older adults; (3) persons
with disabilities (mental, physical, developmental); (4) survivors of
domestic violence, dating violence, sexual assault, or stalking; (5)
persons with alcohol or other substance-use disorder; (6) persons with
HIV/AIDS and their families; or (7) public housing residents.
<bullet> Underserved Communities: Populations or geographic
communities, often comprised of protected classes, sharing a particular
characteristic 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, a Community Disaster
Resilience Zone (CDRZ), or those areas that meet at least one of the
distress criteria established for the designation of an investment area
of a Community Development Financial Institution at 12 CFR
1805.201(b)(3)(ii)(D).
Grantees must take the following actions to comply with
affirmatively furthering fair housing (AFFH): \8\
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\8\ Visit HUD's Office of Fair Housing and Equal Opportunity's
website for more information about requirements for affirmatively
furthering fair housing here: <a href="https://www.hud.gov/program_offices/fair_housing_equal_opp/affh">https://www.hud.gov/program_offices/fair_housing_equal_opp/affh</a>.
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1. Submit a certification to AFFH in accordance with 24 CFR 91.225
or 325, as applicable and 24 CFR 5.150, et seq.;
2. Update any policies and procedures to remain in compliance with
AFFH requirements, as amended by HUD and reflected in updated HUD
guidance and rules; and
3. Use their CDBG-DR funds in a manner that affirmatively furthers
fair housing.
I.C.1.c.(ii). Fair housing and civil rights data collection.
Collecting fair housing and civil rights data will position the grantee
to provide a fair and holistic recovery. At a minimum, the grantee must
collect the following data in terms of number and percentage for each
identified group, as defined above, and as they relate to the HUD-
identified and grantee-identified MID areas and cite the appropriate
data sources:
1. Populations with Limited English Proficiency (LEP) by language
spoken;
2. Persons belonging to protected classes;

[[Page 1760]]

3. Persons belonging to protected classes by housing tenure (i.e.,
homeowner vs renter);
4. Persons belonging to vulnerable populations;
5. Persons belonging to historically distressed and underserved
communities;
6. Indigenous populations and Tribal communities; and
7. Racially or ethnically concentrated areas of poverty (R/ECAPs).
Grantees are encouraged to consider housing tenure as it relates to
these data sets when available.
I.C.1.d. Connection of proposed programs and projects to unmet
needs, mitigation needs, and fair housing and civil rights assessments.
The grantee must describe the connection between identified unmet
needs, mitigation needs, fair housing and civil rights data, and the
allocation of CDBG-DR resources within its Action Plan. At a minimum,
the Action Plan must:
1. Provide a clear connection between a grantee's assessments and
its proposed programs and projects in the MID areas (or outside in
connection to the MID areas as described in section III.D.2.). 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 unmet needs and mitigation needs assessments or provide an
acceptable justification for a disproportional allocation.
2. Describe how the grantee is incorporating hazard mitigation
measures to reduce the impacts of future disasters and considering all
hazard risks, as identified in its mitigation needs assessment.
3. Based on the fair housing and civil rights data collected, the
grantee must:
<bullet> Describe how protected classes will benefit from CDBG-DR
funds in proportion to their communities' needs.
<bullet> Assess the impact of its planned use of CDBG-DR funds on
identified vulnerable populations and other identified historically
underserved communities. If programs are aimed at these groups, the
Action Plan should clearly define those populations.
4. Describe all reasonable efforts the grantee will take to
minimize displacement of persons or entities, assist any persons or
entities displaced, and ensure accessibility needs of displaced persons
with disabilities.
I.C.1.e. Allocation and award caps. It is critical for grantees to
demonstrate their planned use of funds through their Action Plan so the
public can understand what types of assistance disaster survivors can
apply for and what limits there are on possible awards.
Therefore, grantees must create a high-level budget for the full
amount of the CDBG-DR allocation so the public can understand how funds
will be split among program administration (subject to the five percent
cap, plus five percent of program income generated, as described in
section III.B.3.), planning (subject to the 15 percent cap, as
described in section III.B.4.), housing, infrastructure, and economic
revitalization (e.g., by program, subrecipient, grantee-administered
activity, or other category).
Grantees are also encouraged to budget for any planned public
service activities. The grantee's budget should also be consistent with
the requirements to integrate hazard mitigation into all its programs
and projects that involve construction, as described in section
III.D.3. Finally, grantees must develop an executive summary describing
the contents of the Action Plan and its proposed use of funds so that
interested parties will be able to understand and comment on the Action
Plan.
For each program it intends to fund, the grantee must include the
following in its Action Plan:
1. Provide a description of the disaster recovery program to be
funded;
2. Identify the CDBG-DR eligible activity and national objective,
including only those allowed under title I of the HCDA or otherwise
eligible pursuant to a waiver or alternative requirement;
3. Identify the responsible entity assuming the authority for the
decision making and completion of the environmental review per 24 CFR
58.4. State grantees who exercise HUD's environmental review
responsibilities must follow the requirements per 24 CFR 58.4(b)(2) and
24 CFR 58.18;
4. Identify which geographic areas (i.e., HUD-identified and/or
grantee-identified MID areas) that may benefit from CDGB-DR funds;
5. Explain how the grantee will identify and then reduce barriers
that individuals face or may face to access assistance, including
protected classes, vulnerable populations, and other historically
underserved communities;
6. If the appropriations act that funded the grantee's award
includes additional funds for mitigation, the grantee must also
identify how the proposed use of CDBG-DR mitigation set-aside funds
will meet the definition of mitigation activities (as described in
section I.C.1.b.);
7. Describe (1) the maximum amount of assistance (i.e., award cap)
available to a beneficiary under each of the grantee's disaster
recovery programs and (2) the maximum income (i.e., income cap) of any
beneficiary receiving CDBG-DR assistance for direct-benefit activities.
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. If the maximum amount of assistance is unknown for a
specific program or project when the grantee is submitting the initial
Action Plan to HUD, the grantee must update the Action Plan through a
substantial amendment (as described in section I.C.1.g.) once the
information is known. The substantial amendment must be submitted and
approved before awarding funds to applicants; and
8. Any other known eligibility criteria established by the grantee
for assistance (e.g., priority intake).
I.C.1.e.(i). Prioritization for allocations less than $20 million.
Section I.C.1.d. requires that the Action Plan demonstrates 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 unmet needs and
mitigation needs assessments or provide an acceptable justification to
HUD for a disproportional allocation.
HUD recognizes that grantees receiving an allocation of less than
$20 million for a qualifying disaster(s) may most effectively advance
recovery by more narrowly targeting these limited recovery and
mitigation resources. HUD will consider the small size of the grant and
HUD's allocation methodology as an acceptable justification for a
grantee to propose a disproportional allocation when the grantee is
allocating funds to address: (1) unmet affordable rental housing needs
in a MID area caused by or exacerbated by the disaster(s) that
incorporates mitigation, or (2) unmet infrastructure needs necessary to
build affordable rental housing in a MID area that incorporates
mitigation.
I.C.1.f. Funding criteria. The Action Plan must describe how the
grantee will distribute its grant funds, which can include the
following methodologies:
1. Direct implementation (through employees, contractors, or
through subrecipients); or
2. A method of distribution to local governments and Indian Tribes
(for States, as permitted by III.C.4.); or
3. A combination of a direct implementation model and a method of
distribution model.
Because grantees must spend at least 80 percent of the CDBG-DR
award to

[[Page 1761]]

benefit the HUD-identified MID area (see section III.D.2.), they should
consider how they will meet this requirement when developing funding
criteria. At a minimum, the grantee must establish the following
criteria within its Action Plan so the public can clearly understand
its funding criteria for funds sub-granted to eligible entities through
a method of distribution or for applications that the grantee solicits
for programs to be carried out directly:
1. All criteria used to allocate and award the funds, including the
relative importance of each criterion and any priorities;
2. Establish the maximum grant size available;
3. Describe how the distribution and selection criteria will
address disaster-related unmet needs or mitigation needs in a manner
that does not have an unjustified discriminatory effect on nor a
failure to benefit protected classes in proportion to their
communities' needs, including in racially and ethnically concentrated
areas of poverty; and
4. Describe the steps to be followed to encourage the participation
of those belonging to protected classes. Such description must include
an assessment of the following: (1) who may be expected to benefit, (2)
the timing of who will be prioritized, and (3) the amount or proportion
of benefits expected to be received.
If some required information is unknown when the grantee is
submitting its initial Action Plan to HUD, the grantee must update the
Action Plan through a substantial amendment once the information is
known. Historically, appropriations acts require a grantee to submit a
plan detailing the proposed use of all funds before HUD can obligate
funding to the grantee. Without all the required information in the
initial Action Plan, HUD may obligate only a portion of the grant funds
until the substantial amendment providing the required information is
submitted and approved by HUD.
I.C.1.g. Protocols for substantial amendments. In its Action Plan,
each grantee must specify criteria for determining what changes in the
grantee's Action Plan would constitute a substantial amendment to the
Action Plan and thus require public comment. At a minimum, the
following modifications will constitute a substantial amendment:
1. A change in program benefit or eligibility criteria (including
the expansion of eligible beneficiaries (e.g., establishing a new
grantee-identified MID area));
2. The addition or deletion of an activity;
3. A proposed reduction in the overall benefit requirement (as
described in section III.B.1.);
4. The allocation or reallocation of a reasonable monetary
threshold specified by the grantee in its Action Plan; and
5. An update to the submitted initial Action Plan if the original
submission was incomplete as allowed under section I.C.1.e. paragraph 7
and section I.C.1.f.
Once a grantee has set a reasonable monetary threshold in which a
reallocation or allocation of funds would constitute a substantial
amendment, grantees cannot disregard this threshold by submitting
multiple nonsubstantial amendments back-to-back in order to avoid
following a substantial amendment process (e.g., submitting two budget
reallocations within 30 days of each other that if taken together would
require a substantial amendment).
I.C.2. Citizen participation requirements. 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. Under the streamlined requirements, the grantee may be
required to hold a public hearing(s) on the proposed Action Plan and
must provide a reasonable opportunity (i.e., at least 30 calendar days)
for public 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 its citizen participation requirements at 24 CFR
570.486 (except as provided for in notices providing waivers and
alternative requirements). The grantee's records must demonstrate that
it has notified affected residents through electronic mailings, press
releases, statements by public officials, media advertisements, social
media, public service announcements, and/or contacts with neighborhood
organizations.
In addition to the requirements above, the streamlined citizen
participation alternative requirements for CDBG-DR grants are as
follows:
<bullet> Requirement for consultation during plan preparation (see
section I.C.2.a.);
<bullet> Publication of the Action Plan and opportunity for public
comment (see section I.C.2.b.);
<bullet> Consideration of public comments (see section I.C.2.c.).
I.C.2.a. Consultation during Action 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
during Action Plan preparation to ensure consistency of the Action Plan
with applicable regional development plans. This requirement also
includes consulting with organizations that advocate on behalf of
members of protected classes, vulnerable populations, and other
underserved communities impacted by the disaster to help address
requirements defined in section I.C.1.c. for the fair housing and civil
rights data collection. A grantee must consult with other relevant
government and local agencies, including State and local emergency
management agencies that have primary responsibility for the
administration of FEMA funds, agencies that manage local Continuum of
Care,\9\ Public Housing Agencies,\10\ and HUD-approved housing
counseling agencies,\11\ as applicable. Grantees must coordinate with
State Housing Finance Agencies to verify that all available funding
sources and opportunities for leverage are noted in the Action Plan.
Given the extensive coordination that is required to develop a
grantee's Action Plan, HUD recommends that grantees give their partners
a clear timeline on receiving feedback and create a consistent process
for how feedback will be received from these stakeholders.
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\9\ Find your local Continuum of Care here: <a href="https://www.hudexchange.info/grantees/">https://www.hudexchange.info/grantees/</a>.
\10\ Find your local Public Housing Agency on HUD's website
here: <a href="https://www.hud.gov/program_offices/public_indian_housing/pha/contacts">https://www.hud.gov/program_offices/public_indian_housing/pha/contacts</a>.
\11\ Find a HUD-approved housing counseling agency on HUD's
website here: <a href="https://answers.hud.gov/housingcounseling/s/?language=en_US">https://answers.hud.gov/housingcounseling/s/?language=en_US</a>.
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I.C.2.b. Public comment period and minimum public hearing
requirement. Following the creation of the Action Plan or substantial
amendment, the grantee must publish the proposed Action Plan or
substantial amendment for public comment. The manner of publication
must include prominent posting on the grantee's official disaster
recovery website and must afford residents, affected local governments,

[[Page 1762]]

and other interested parties a reasonable opportunity to review the
Action Plan or substantial amendment (i.e., at least 30 calendar days).
Grantees shall identify and redress any potential barriers that may
limit or prohibit protected classes, vulnerable populations, or other
underserved communities and individuals affected by the disaster from
providing public comment on the grantee's Action Plan or substantial
amendments. For example, grantees should consider how to address
barriers like lack of childcare and/or transportation that can limit
certain populations or communities from participating in public
hearings, providing comments, or other engagement events or techniques.
HUD anticipates that every community and every grantee will have
some identified barriers to address. Based on the specific barriers the
grantee identifies, particularly those that may limit or prohibit
equitable participation, the grantee must describe the reasonable
measures it will take to increase coordination, such as affirmative
marketing, targeted outreach, and engagement with underserved
communities and individuals, including protected classes such as
persons with disabilities and persons with LEP.
HUD strongly encourages grantees to hold as many hearings or
convenings as may be necessary to ensure they capture all citizen
comments to inform the comprehensive development of their Action Plan.
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 $20 million are not required to hold a public hearing; (2) CDBG-
DR grantees with allocations equal to or greater than $20 million but
less than $100 million are required to hold at least one public
hearing; (3) CDBG-DR grantees with allocations equal to or greater than
$100 million but less than $500 million are required to hold at least
two public hearings; and (4) CDBG-DR grantees with allocations equal to
or greater than $500 million shall convene at least three public
hearings. These are only minimum hearing requirements and the form and
structure of the hearings and convenings may vary to effectively
solicit meaningful engagement and feedback. Grantees may find they need
additional hearings to adequately capture and address all citizen
questions, concerns, and comments.
If the grantee is required to hold multiple public hearings, and a
grantee holds those hearings in-person, it must hold each hearing in a
different location within the HUD-identified MID area. Specifically,
the grantee should select locations that will promote a geographic
balance and maximize accessibility for stakeholders to actively
participate.

Figure One: Minimum Public Hearing Requirement Based on Grant Size
------------------------------------------------------------------------
Minimum public hearing
CDBG-DR grant value requirement
------------------------------------------------------------------------
<$20 Million.............................. No public hearing
requirement.
>=$20 Million but < $100 Million.......... One (1) public hearing
required.
>=$100 Million but < $500 Million......... Two (2) public hearings
required.
>=$500 Million............................ Three (3) public hearings
required.
------------------------------------------------------------------------

Grantees may convene public hearings virtually (alone, or in
concert with an in-person hearing). All in-person hearings must be held
within HUD-identified MID areas and in facilities that are physically
accessible to persons with disabilities. When conducting a virtual
hearing, the grantee must allow questions in real time, with answers
coming directly from the grantee representatives to all attendees.
A grantee's citizen participation plan must specify that it will
meet the requirements in the previous paragraph and the requirements in
section III.B.8.a. of this notice on vital documents. Additionally, for
both virtual and in-person hearings, the citizen participation plan
must include how the grantee will complete the following: (1) hold
hearings at times and locations convenient to potential and actual
beneficiaries, (2) provide accommodations for persons with
disabilities, and (3) to ensure effective communication for individuals
with disabilities, including through the provision of auxiliary aids
and services. 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. Meaningful access may
include live translation of attendees' questions and comments. In the
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 live in the MID areas. In
addition, for both virtual or in-person hearings, the grantee shall
provide reasonable notification and access for residents in accordance
with the grantee's certifications at section I.C.4., timely responses
to all citizen questions and issues, and public access to all questions
and responses.
I.C.2.c. Consideration of public comments. The grantee must provide
a reasonable time frame (no less than 30 calendar days) and reasonable
method(s) (including but not limited to 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 Action 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.
I.C.3. Submission of the Action Plan. The Action Plan (including
the SF-424, SF-424B and SF-424D, as applicable) and the certifications
included in Appendix B of the Universal Notice must be submitted to HUD
for review and approval. Note, the submission process will be described
in the applicable AAN. HUD will review each Action Plan within 45
calendar days from the date of receipt, as described in section I.C.5.
By submitting the required standard forms, the grantee is providing
assurances that it and its recipients will comply with statutory
requirements, including, but not limited to Federal civil rights
requirements.
I.C.4. Action Plan 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)), 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 requirement. Each grantee receiving an allocation under an
AAN must make all the certifications included in Appendix B of the
Universal Notice.
I.C.5. HUD Action Plan review process. HUD may return an Action
Plan or substantial amendment to an Action Plan if it is incomplete.
HUD will work with grantees to resolve or provide additional
information during the review period to avoid having to unnecessarily
formally disapprove an

[[Page 1763]]

Action Plan or substantial amendments. There may be several issues
related to the Action Plan or substantial amendments, as submitted,
that can be fully resolved through discussion and revision during the
review period, rather than through HUD's formal disapproval of the
Action Plan or substantial amendment. Therefore, the Secretary has
determined that good cause exists and is waiving 24 CFR 91.500 and
providing the alternative requirement described below.
I.C.5.a. General HUD review of an Action Plan. HUD will review the
Action Plan upon receipt. The Action Plan will be deemed approved 45
calendar days after HUD receives the plan, unless before that date HUD
notifies the jurisdiction that the plan is being returned or
disapproved (see definitions below). The grantee must publish the final
HUD-approved Action Plan on its official disaster recovery website.
I.C.5.b. Standard of review of an Action Plan. HUD may disapprove
or return an Action Plan or a portion of an Action Plan if it is
inconsistent with the purposes of the Cranston-Gonzalez National
Affordable Housing Act (42 U.S.C. 12703), if it is substantially
incomplete, or if the certifications under section I.C.4. of the
Universal Notice are not satisfactory to the Secretary in accordance
with 24 CFR 570.304 or 570.485(c), as applicable. The following are
examples of an Action Plan that is substantially incomplete:
<bullet> An Action Plan that fails to satisfy a required element in
the Universal Notice or applicable AAN (for example, an Action Plan
that was developed without the required citizen participation or the
required consultation); or
<bullet> An Action Plan that fails to describe how protected
classes would benefit from CDBG-DR funds in proportion to their
communities' needs.
I.C.5.c. Written notice of return of an Action Plan. HUD is
establishing an alternative process that offers a grantee the option to
voluntarily provide a revised Action Plan if HUD has identified
sections of the Action Plan that are substantially incomplete. If HUD
finds errors with the Action Plan submission, no later than day twenty
in HUD's 45-day review, HUD may return the Action Plan to the grantee
to resolve the identified errors. The review timeline will pause while
the grantee is updating the Action Plan for resubmission to HUD. Once
the grantee has resubmitted the Action Plan, the review timeline will
resume. A grantee is not required to revise the Action Plan submission,
but if they choose not to after being notified of errors, the Secretary
may disapprove the Action Plan as substantially incomplete if HUD
determines the Action Plan does not meet the requirements of the
Universal Notice and the applicable AAN.
I.C.5.d. Written notice of disapproval of an Action Plan. Within 15
calendar days after HUD notifies a grantee that it is disapproving its
Action Plan (initial notice should occur via email), it must inform the
jurisdiction in writing of the reasons for disapproval and actions that
the jurisdiction could take to meet the criteria for approval.
I.C.5.e. Revisions and resubmission of an Action Plan. After the
first notification of disapproval, the grantee must revise or resubmit
an Action Plan within 45 calendar days. HUD must respond to approve or
disapprove the Action Plan within 30 calendar days of receiving the
revisions or resubmission.
I.C.6. Amendments to the Action Plan. The grantee must amend its
Action Plan to update its needs assessments, modify or create new
activities, or reprogram funds, as necessary. 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.
I.C.6.a. Substantial amendment. In its Action Plan, each grantee
must specify criteria outlined in section I.C.1.g. to clearly define
what changes constitute a substantial amendment to the 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 I.C.2.b. and the consultation
requirements described in section I.C.2.a., which are not required for
substantial amendments. Every amendment to the Action Plan (substantial
and nonsubstantial) must be numbered sequentially and posted on the
grantee's website. A substantial amendment shall require a 30-day
public comment period and must be posted on the grantee's website.
I.C.6.a.(i). General HUD review of a substantial amendment to an
Action Plan. HUD will review a substantial amendment to an Action Plan
upon receipt. The substantial amendment will be deemed approved 45
calendar days after HUD receives the amendment, unless before that date
HUD has notified the jurisdiction that the amendment is disapproved.
I.C.6.a.(ii). Standard of review of a substantial amendment to an
Action Plan. HUD may disapprove a substantial amendment to an Action
Plan if it is substantially incomplete. HUD must notify the grantee in
writing that it is disapproving the substantial amendment and must
include the reasons for disapproval and actions that the jurisdiction
could take to meet the criteria for approval.
I.C.6.a.(iii). Revisions and resubmission of a substantial
amendment to an Action Plan. After the first notification of
disapproval, the grantee must revise or resubmit the substantial
amendment to the Action Plan within 45 calendar days. HUD must respond
to approve or disapprove the substantial amendment within 30 calendar
days of receiving the revisions or resubmission.
I.C.6.b. Nonsubstantial amendment. The grantee must notify HUD, but
is not required to seek public comment, when it makes any amendment to
the Action Plan that is not substantial. HUD must be notified at least
five business days before the amendment becomes effective. However, as
mentioned above, every amendment to the Action Plan (substantial and
nonsubstantial) must be numbered sequentially and posted on the
grantee's website. The Department will acknowledge receipt of the
notification of nonsubstantial amendments via email within five
business days.

II. Phase Two: Financial Certification and Oversight of Funds

II.A. Certification of Adequate Financial Controls and Procurement
Processes, and Procedures for Proper Grant Management

Appropriations acts typically require that the Secretary certify
that the grantee has proficient financial controls and procurement
processes and procedures in place to prevent any duplication of
benefits (DOB) as defined by section 312 of the Robert T. Stafford
Disaster Relief and Emergency Assistance Act of 1974, as amended (``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.
II.A.1. 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
135 calendar days of

[[Page 1764]]

the applicability date of the AAN. Historically, grant agreements have
not been executed until the Secretary has issued a certification for
the grantee. For each of the items outlined in sections II.A.1.a.
through II.A.1.g. 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. HUD will review the grantee's
certification documentation within 45 calendar days from the date of
receipt.
II.A.1.a. Proficient financial management controls. A grantee has
proficient financial management controls if the grantee's agency
administering this grant submits its most recent single audit and
Annual Comprehensive Financial Report (ACFR), 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 Community Development Block
Grant Mitigation (CDBG-MIT) funds. If the single audit or ACFR
identified weaknesses or deficiencies, the grantee must provide
documentation satisfactory to HUD showing how those weaknesses have
been removed or are being addressed.
II.A.1.b. Procedures for procurement. Each grantee must provide HUD
with 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 has adequate procurement processes
if the grantee complies with the procurement requirements at section
III.B.7., including:
(i) A State grantee has proficient procurement processes if HUD
determines that its procurement processes reflect that it:
(1) adopted 2 CFR 200.318 through 200.327 for both its own
procurement processes and for its subrecipients;
(2) follows its own State procurement policies and procedures based
on full and open competition 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 to
evaluate the cost or price of the product or service and comply with 2
CFR 570.489(l); or
(3) adopted 2 CFR 200.317, meaning that it will follow its own
State procurement processes based on full and open competition,
evaluate the cost or price of the product or service, and comply with 2
CFR 570.489(l), but impose 2 CFR 200.318 through 200.327 on its
subrecipients.
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 either i.) the
procurement processes that the administering agency is subject to, or
ii.) the same processes to which other local governments and
subrecipients are subject, or iii.) the procurement processes that the
agency carrying out the activity normally follows.
(ii) 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, and
200.214. When the grantee provides a copy of its procurement processes,
it must indicate the sections that incorporate these provisions.
II.A.1.c. Policies and procedures to maintain a comprehensive
disaster recovery website. A grantee has adequate policies and
procedures to maintain a comprehensive and accessible disaster recovery
website if it submits policies and procedures indicating to HUD that
the grantee will have a separate web page dedicated to its CDBG-DR
funded activities including the information described at section
III.B.8. The procedures must also indicate the frequency of website
updates. At a minimum, grantees must update their official disaster
recovery website quarterly.
II.A.1.d. 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:
(i) how the grantee will verify the accuracy of information
provided by applicants;
(ii) the criteria to be used to evaluate the capacity of potential
subrecipients;
(iii) 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;
(iv) if the grant size is $100 million or more, the grantee has or
will employ an internal auditor that provides both programmatic and
financial oversight of grantee activities and has adopted policies that
describe the auditor's role in detecting and preventing fraud, waste,
and abuse;
(v) (1) 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), (h), and (l)
and subparagraph II.A.1.b.(i) Procedures for procurement of the
Universal Notice, which policy includes the process for promptly
identifying and addressing such conflicts;
(2) for local government grantees, 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 policy includes the process for
promptly identifying and addressing such conflicts; and
(vi) how it will assist in investigating and taking action when
fraud occurs within the grantee's CDBG-DR activities and/or programs.
Following a disaster, property owners and renters are frequently the
targets of people fraudulently posing as government employees,
creditors, mortgage servicers, insurance adjusters, and contractors.
All grantees receiving CDBG-DR funds for the first time shall attend
and require subrecipients to attend fraud related training provided by
HUD Office of Inspector General (OIG), when offered, to assist in the
proper management of CDBG-DR grant funds. Grantees must report to the
appropriate HUD CPD staff member that it met this requirement and who
attended the training. In accordance with 2 CFR 200.113, grantees and
subrecipients of CDBG-DR must promptly inform in writing the OIG and
HUD when it has credible evidence of violations of Federal criminal law
involving fraud, bribery, or gratuities or a violation of the civil
False Claims Act that could potentially affect the Federal award at
<a href="https://www.hudoig.gov/hotline/report-fraud">https://www.hudoig.gov/hotline/report-fraud</a> (a subrecipient of CDBG-DR
must also inform the CDBG-DR grantee that awarded it funding). All
other instances of fraud, waste, and abuse should be referred to the
HUD OIG Fraud Hotline (phone: 1-800-347-3735 or email:
<a href="/cdn-cgi/l/email-protection#e1898e958d888f84a18994858e8886cf868e97">[email&#160;protected]</a>).
Grantees must address in their policies and procedures:
(1) how it will provide CDBG-DR beneficiaries with information that

[[Page 1765]]

raises awareness of possible fraudulent activity, how fraud can be
avoided, and what local or State agencies to contact to take action and
protect the grantee and beneficiary investment:
(2) 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; and
(3) 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 CDBG-DR assistance because the fraudulent
activity results in the creation of additional unmet need, the
procedures must also address what steps the grantee will follow to
provide additional assistance.
II.A.1.e. Policies and procedures to prevent DOB. A grantee has
adequate policies and procedures to prevent the DOB if the grantee
submits and identifies a uniform process that reflects the requirements
in Appendix C of the Universal Notice, including:
(i) 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;
(ii) determining a grantee's or an applicant's unmet need(s) for
CDBG-DR assistance before committing funds or awarding assistance;
(iii) requiring beneficiaries to enter into a signed agreement to
repay any duplicative assistance if they later receive 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.''; and
(iv) verifying that CDBG-DR funds will not be used for activities
reimbursable by, or for which funds are made available by, FEMA or the
U.S. Army Corps of Engineers (USACE). Although the language may vary
among appropriations acts, CDBG-DR funds may not be used for activities
reimbursable by, or for which funds are made available by FEMA or the
USACE.
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 a DOB.
Additionally, HUD can assist CDBG-DR grantees with access to the
necessary data to support a DOB review.\12\
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\12\ View more information about how to access this data, visit
HUD's website here: <a href="https://www.hud.gov/program_offices/comm_planning/cdbg-dr/data-sharing">https://www.hud.gov/program_offices/comm_planning/cdbg-dr/data-sharing</a>.
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II.A.1.f. Policies and procedures for timely expenditures of grant
funds. A grantee has adequate policies and procedures to determine
timely expenditures if it submits policies and procedures that indicate
the following to HUD:
(i) how it will track and document expenditures of the grantee and
its subrecipients (both actual and projected reported in performance
reports);
(ii) how it will ensure proper reporting, tracking, and expenditure
of program income, including how it will ensure that program income is
substantially disbursed before making additional withdrawals from the
United States Treasury, except when carrying out the same activities
through a revolving fund (see section III.B.12. and section III.B.13.
for additional requirements);
(iii) how it will reprogram funds in a timely manner for activities
that are stalled (e.g., a project is more than six months behind
schedule); and
(iv) how it will project expenditures of all CDBG-DR funds within
the period provided for in section III.F.1.
II.A.1.g. Capacity assessment and staffing analysis. To enable HUD
to assess risk as described in 2 CFR 200.206, the grantee must submit a
capacity assessment and staffing analysis to HUD. The capacity
assessment must describe the grantee's capacity to carry out the
recovery 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 a capacity assessment and staffing
analysis that meets the following requirements.
II.A.1.g.(i). Capacity assessment.
(1) Identify the lead agency responsible for implementation of the
CDBG-DR award and indicate that the head of that agency will report
directly to the chief executive officer of the jurisdiction.
(2) Conduct an assessment of its capacity to carry out CDBG-DR
recovery efforts.
(3) Develop a timeline with milestones describing when and how the
grantee will address all capacity gaps that are identified.
(4) Include a list of any open monitoring and HUD OIG audit
findings related to any CPD program and an update on the corrective
actions undertaken to address each finding.
II.A.1.g.(ii). Staffing analysis.
(1) Submit an organizational chart of the department or division
and 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 II.A.1.a. through f. along with staff contact information,
if available.
(2) Submit documentation demonstrating that it has assessed staff
capacity and identified positions for the purpose of: case management
in proportion to the applicant pool; program managers who will be
assigned responsibility for each primary recovery area (e.g., housing,
infrastructure, and economic revitalization); 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 75)
(Section 3), URA and its implementing regulations, section 104(d) of
the HCDA and its implementing regulations, and CDBG acquisition and
relocation requirements, fair housing compliance, and environmental
compliance. Additionally, demonstrate that the internal auditor, if
applicable, and responsible audit staff report independently to the
chief elected or executive officer or board of the governing body of
any designated administering entity.
(3) Describe how it will provide training and technical assistance
for any personnel that are not employed by the grantee at the time of
Action Plan submission, and how it will fill gaps in knowledge or
technical expertise required for successful and timely recovery.
Grantees must also include how it will provide training and technical
assistance to its subrecipients.
To fully complete the certification process, the grantee must have
completed and submitted the certification documentation required in the
applicable Certification Checklist. The grantee's documentation must
demonstrate that the standards meet the

[[Page 1766]]

requirements in the Universal Notice and the Certification Checklist.

II.B. Relying on Prior Financial Certification Submissions

This section applies to a grantee that has received CDBG-DR funds
that are subject to the requirements of the Universal Notice or that
received CDBG-DR funds under Public Laws 117-43, 117-180, and 117-328.
For five years after the execution of a grant agreement for an
initial allocation of funds a grantee received subject to the Universal
Notice, HUD will rely on the grantee's prior submissions provided in
response to the Financial Management and Grant Compliance Certification
Requirements for any subsequent allocation of funds that is also
subject to the Universal Notice. HUD will continue to monitor the
grantee's submissions and updates to policies and procedures during the
normal course of business.\13\
---------------------------------------------------------------------------

\13\ View the Community Planning and Development's Monitoring
Handbook for more information on HUD monitoring here: <a href="https://www.hud.gov/program_offices/administration/hudclips/handbooks/cpd/6509.2">https://www.hud.gov/program_offices/administration/hudclips/handbooks/cpd/6509.2</a>.
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For grantees that have received CDBG-DR funds under Public Laws
117-43, 117-180, and 117-328, HUD may rely on a grantee's prior
submissions provided in response to the Financial Management and Grant
Compliance Certification Requirements for five years after the
execution of a grant agreement for an initial allocation of funds under
those Public Laws.
If it has been more than five years since the executed grant
agreement for the original CDBG-DR grant under the Universal Notice or
under Public Laws 117-43, 117-180, and 117-328, grantees must update
and resubmit the documentation required by section II.A.1. with the
completed Certification Checklist. However, the Secretary may require
any CDBG-DR grantee to update and resubmit the documentation required
by section II.A.1., if there is good cause to require it.

II.C. Obligation and Expenditure of Funds

Once HUD approves the Action Plan and makes the required
certification of financial controls and procurement processes, and
adequate procedures for proper grant management HUD will then sign a
grant agreement obligating funds to the grantee. In addition, HUD will
establish the line of credit, and the grantee will receive DRGR system
access (if it does not already have DRGR system access). The grantee
will follow the DRGR Action Plan process to draw funds (see section
III.G.).
The grantee must meet the applicable environmental requirements
before the use or commitment of funds for each activity. After the
responsible entity (1) completes an environmental review(s) pursuant to
24 CFR part 58 and receives from HUD or the State, as outlined in 24
CFR 58.18, an approved RROF and certification (as applicable), or (2)
adopts another Federal agency's environmental review and receives from
HUD or the State, an approved RROF and certification (as applicable),
the grantee may draw down funds from the line of credit for an
activity. The disbursement of CDBG-DR funds must begin no later than
180 calendar days after HUD (1) executes a grant agreement with the
grantee, or (2) approves the Action Plan and financial certification
and oversight of funds, whichever is later. 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.

III. Phase Three: Implementation of Universal Notice Requirements

III.A. Policies and Procedures--Universal Notice Requirements

III.A.1. Development of program-specific policies and procedures.
Grantees must develop program-specific policies and procedures
governing the use of funds. The Universal Notice requires each grantee
to prioritize policies and procedures for its programs that address its
unmet housing recovery needs. Grantees must create and finalize
policies and procedures for their housing programs no later than one
year from the applicability date of the AAN. Not later than eighteen
months from the applicability date of the AAN, grantees must create and
finalize policies and procedures governing the rest of its CDBG-DR
funded programs (e.g., economic revitalization, infrastructure, public
service activities, and any other eligible activities the grantee will
fund) that shall be subject to HUD review. If a grantee has determined
that it does not have unmet housing needs in the MID areas, the grantee
must create policies and procedures for its other programs and
activities no later than one year from the applicability date of the
AAN.
III.A.2. Required policies and procedures for all CDBG-DR funded
programs. This section outlines the specific requirements that grantees
must adhere to when developing their policies and procedures. Grantees
must ensure their procedures comply with several key requirements, such
as fair housing and civil rights compliance and minimizing
displacement. Additionally, there are program-specific requirements
that grantees must meet depending on the type of program (e.g., housing
programs). Beyond the requirements described below, each grantee's
program-specific policies and procedures must adhere to the overarching
policies and procedures they certified to (refer to Phase Two:
Financial Certification and Oversight of Funds of the Universal Notice)
including the requirement to build procedures to detect and prevent
fraud, waste, and abuse; and any requirements set forth in this notice
or the regulations on other cross-cutting requirements (e.g.,
environmental reviews, Davis Bacon Act, Section 3, Lead Safe Housing,
etc.). Additionally, the grantee's program-specific policies and
procedures must align with the information in the Action Plan
(including the grantee's proposed allocations), as amended and approved
by HUD.
III.A.2.a. Fair housing and civil rights policies and procedures.
Each program-specific policy and procedure must address the following
requirements on fair housing and civil rights:
(i) a description of how the grantee's use of their CDBG-DR funds
is consistent with their obligation to AFFH. For example, grantees may
undertake a variety of actions consistent with the requirements to AFFH
such as: (1) overcoming prior disinvestment in housing, infrastructure,
and public services for protected class groups in the MID areas,
especially where such groups are highly concentrated; (2) enhancing (a)
the accessibility of disaster preparedness, resilience, or recovery
services, including the accessibility of evacuation services and
shelters for individuals with disabilities in the MID areas; (b) the
provision of critical disaster-related information in accessible
formats; and/or (c) the availability of integrated, accessible housing
and supportive services; or (3) using CDBG-DR funds to mitigate
environmental concerns and increase resilience among protected class
groups to protect against the effects of extreme weather events and
other natural hazards in the MID areas. Note, grantees must update
these policies and procedures to remain in compliance with AFFH
requirements as HUD may update its guidance and rules;
(ii) a description of how their proposed allocations to projects
and activities, selection criteria, and other actions can be expected
to reduce

[[Page 1767]]

barriers for individuals, vulnerable populations, protected classes,
and other underserved communities (as applicable);
(iii) a description of how each program will enhance for
individuals with disabilities in the MID areas (1) the accessibility of
disaster preparedness, resilience, or recovery services, including the
accessibility of evacuation services and shelters; (2) the provision of
critical disaster-related information in accessible formats; and/or (3)
the availability of integrated, accessible housing and supportive
services;
(iv) identification of 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 other underserved communities; and a
description of how each program will mitigate these specific
environmental concerns and increase resilience among these populations
in the MID area to protect against current and future hazard risks.
III.A.2.b. Minimizing displacement and relocation policies and
procedures. Each program-specific policy and procedure must address the
following requirements on minimizing displacement and relocation
assistance, as appropriate:
(i) 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.
Grantees must seek to minimize displacement or the adverse impacts from
displacement, consistent with the requirements of section III.B.15.a.
of the Universal 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;
(ii) grantees must amend an existing Residential Anti-displacement
and Relocation Assistance Plan (RARAP) or create a new RARAP specific
to CDBG-DR. Grantees must meet the requirements in section III.B.15.a.,
related to the RARAP prior to implementing any activity with CDBG-DR
grant funds, such as buyouts and other disaster recovery activities;
and
(iii) grantees must also describe how they will provide relocation
assistance to persons or entities displaced under the URA and its
implementing regulations at 49 CFR part 24, and under an optional
relocation policy under 24 CFR 570.606(d), when applicable. Grantees
must also plan and budget for such relocation activities. The
description will outline methods for identifying the needs of the
potentially displaced persons including site visits, interviews, and
orientations. It will also cover budget development variables like
housing market conditions, acquisition costs, relocation payments, and
professional services costs. Planning and budgeting must precede any
action that will cause displacement and/or temporary relocation
(including programmatic optional relocation) and should be scoped to
the complexity and nature of the anticipated displacing activity
including an evaluation of program resources available to carry out
timely and orderly relocations.
Finally, not all eligible activities will trigger displacement
(e.g., planning). In such cases, the grantee should include in its
policies and procedures an explanation that minimizing displacement is
not applicable because displacement will not occur.
III.A.2.c. Mitigation policies and procedures. Each program-
specific policy and procedure must address the following requirements
on mitigation and resilience:
(i) how mitigation measures and strategies to reduce natural hazard
risks will be integrated into the construction, reconstruction, or
rehabilitation of residential or non-residential buildings;
(ii) how CDBG-DR investments will be designed and constructed to
withstand chronic stresses and extreme events related to a changing
climate by identifying and implementing resilience performance measures
in DRGR.
III.A.2.d. Timeliness policies and procedures. As part of the
development of a grantee's program-specific policies and procedures,
each grantee must also develop projected expenditures and outcomes. 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 must
include in its policies and procedures how it will monitor its
expenditures and outcomes against the projections. The grantee must
upload these projections into DRGR and then post this information on
its public website as required by section III.B.8.
III.A.3. Required policies and procedures for housing programs.
In addition to the requirements in III.A.2., all policies and
procedures related to housing activities must also address the
following requirements:
(i) a description of the process the grantee will use to provide
exceptions to the maximum amount of assistance on a case-by-case basis.
At a minimum, the grantee's policies and procedures must communicate
how it will analyze the circumstances under which an exception is
needed and how it will demonstrate that the amount of assistance is
necessary and reasonable;
(ii) a description of how its program will align and build upon any
funding received from HUD's Rapid Unsheltered Survivor Housing (RUSH)
program, as applicable;
(iii) a description of the building standards and codes to be used
by 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. Grantee policies and procedures must require a warranty period
post-construction with a formal notification to beneficiaries on a
periodic basis (e.g., one year and one month before expiration date of
the warranty);
(iv) a description of the grantee's affordability standards,
including ``affordable rents,'' the enforcement mechanisms, and
applicable timeframes, that will apply to the new construction of
affordable rental housing of five or more units, as required in section
III.D.5.d;
(v) a description of how the grantee will use social media
platforms to alert its residents when its applications for housing
activities are open and when it is holding public hearings on CDBG-DR
plans or projects;
(vi) a description of the grantee's process for accepting
alternative methods for documenting ownership. Grantees may include the
following documentation as acceptable: deed, title, mortgage
documentation, tax receipts or bills, home insurance, home purchase
contracts, will or affidavit or heirship naming them as heir, receipts
of major repairs completed prior to the disaster, court documents,
letter from a manufactured housing community owner or public official,
self-certification, or utility bills; and
(vii) a description of the basic DOB framework for housing
activities. Grantee policies and procedures must follow the process
outlined in Appendix C in the Universal Notice and include how the
grantee will carry out the following steps for each beneficiary: (1)
assess applicant's total need; (2) identify total assistance; (3)
exclude non-duplicative amounts; (4) exclude funds for a different
purpose; (5) exclude funds for the same purpose, different allowable
use; (6) identify a final DOB amount (if any) and calculate the CDBG-DR
award; and (7) reassess

[[Page 1768]]

unmet need when necessary. Grantees must include the requirement to
have beneficiaries sign an agreement to repay any assistance later
received for the same purpose as the CDBG-DR funds (e.g., a subrogation
agreement) and include any other required steps listed in Appendix C.
A grantee that will be coordinating with a HUD-approved Housing
Counseling Agency \14\ would include what information and services it
will make available to both renters and homeowners.
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\14\ View additional information to locate a HUD-approved
Housing Counseling Agency here: <a href="https://apps.hud.gov/offices/hsg/sfh/hcc/hcs.cfm?weblistaction=summary">https://apps.hud.gov/offices/hsg/sfh/hcc/hcs.cfm?weblistaction=summary</a>.
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III.A.4. Required policies and procedures for infrastructure
programs. In addition to the requirements in section III.A.2., all
policies and procedures related to infrastructure activities must also
address the following requirements:
(i) how the grantee 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 local governments and Indian Tribes in the
MID areas to identify the unmet needs and associated costs of disaster-
related infrastructure improvements;
(ii) how the grantee will plan for the long-term operation and
maintenance of infrastructure and public facility projects funded by
CDBG-DR, as maintenance and repair of public facilities and
improvements is generally ineligible. Grantees must plan for the long-
term sustainability of these projects, including who will pay these
costs and who will operate and maintain the projects once they are
complete;
(iii) 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;
(iv) 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 and private
investment;
(v) how the grantee will prioritize infrastructure within
historically underserved communities that lacked adequate investments
in housing, transportation, water, and wastewater infrastructure prior
to the disaster; and
(vi) a description of the basic DOB framework for infrastructure
activities. Grantee policies and procedures must follow the process
outlined in Appendix C in the Universal Notice and include how the
grantee will carry out the following steps for each entity (e.g., local
government) assisted: (1) assess applicant's total need; (2) identify
total assistance; (3) exclude non-duplicative amounts; (4) exclude
funds for a different purpose; (5) exclude funds for the same purpose,
different allowable use; (6) identify a final DOB amount (if any) and
calculate the CDBG-DR award; and (7) reassess unmet need when
necessary. In its policies and procedures, the grantee must include how
it will identify whether any local or State funds are available for
these types of activities. And if local or State funds were previously
designated or planned for the activity, but are no longer available,
the grantee must describe how it will 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). The grantee must include any other required steps listed in
Appendix C.
III.A.5. Required policies and procedures for economic
revitalization programs. In addition to the requirements in section
III.A.2., all policies and procedures related to economic
revitalization activities must also address the following requirements:
(i) a description of how the grantee will prioritize underserved
communities that have been impacted by the disaster and that were
economically distressed before the disaster, as described in section
III.D.7.a. While HUD defines the minimum standard for underserved
communities in section I.C.1.c., grantees must describe how they will
further define areas that are considered underserved communities;
(ii) a description of how the grantee will use social media
platforms to alert its residents when its applications for economic
development activities are open and when it is holding public hearings
on CDBG-DR plans or projects; and
(iii) a description of the basic DOB framework for economic
revitalization activities. Grantee policies and procedures must follow
the process outlined in Appendix C in the Universal Notice and include
how the grantee will carry out the following steps for each business
assisted: (1) assess applicant's total need; (2) identify total
assistance; (3) exclude non-duplicative amounts; (4) exclude funds for
a different purpose; (5) exclude funds for the same purpose, different
allowable use; (6) identify a final DOB amount (if any) and calculate
the CDBG-DR award; and (7) reassess unmet need when necessary. Grantees
must include the requirement to have entities sign an agreement to
repay any assistance later received for the same purpose as the CDBG-DR
funds (e.g., a subrogation agreement) and include any other required
steps listed in Appendix C.
III.A.6. Consultation and website requirements for program
implementation policies. To promote effective program design and public
transparency, grantees must comply with the consultation and disaster
recovery website requirements for program implementation policies as
described in this section. Note, grantees are not expected to release
all program policies and procedures at once and can develop and publish
program-specific policies and procedures in phases, as programs are
ready to launch. However, grantees must comply with the timelines
identified in section III.A.1. of the Universal Notice for creating and
finalizing program-specific policies and procedures. The grantee must
also update its citizen participation plan (see section I.C.2.) to
describe how it will comply with the requirements of sections
III.A.6.a. and III.A.6.b.
III.A.6.a. Consultation with citizen advisory groups. Grantees are
required to gather feedback and recommendations on key program
decisions from its citizen advisory group at least annually. A citizen
advisory group is a body composed of individuals from a community who
volunteer or are appointed to provide input, advice, and
recommendations on various issues and policies affecting their
community. These groups typically serve as a bridge between the general
public and decision-makers, offering insights, perspectives, and
expertise to help inform and shape decisions that impact the
community's well-being and development. A citizen advisory group will
look different in each community because each community is unique.
Generally, the individuals who volunteer or are appointed should
represent the demographics of the community it is supporting. For
example, a citizen advisory group in a community that is predominantly
renters should include individuals who are renters. A citizen advisory
group in a community that has a large share of a specific racial or
ethnic minority group should include

[[Page 1769]]

members of that specific racial or ethnic minority group. Each grantee
can determine the cadence of meetings and how the group will provide
feedback to the grantee. As an example, a citizen advisory group may
review program-specific policies and procedures to determine if
programs are adequately reaching and assisting intended beneficiaries
and are achieving intended program outcomes. The grantee must describe
the process it will follow for the citizen advisory group in its
citizen participation plan.
III.A.6.b. Publication of program-specific policies and procedures.
Grantees must prominently post final program-specific policies and
procedures on their official disaster recovery website within the
timeline identified in section III.A.1. of the Universal Notice. In
addition, these program-specific policies and procedures must be
available to the public on the website before the grantee formally
begins accepting applications for that program. Grantees must also
comply with the general website requirements of section III.B.8. of the
Universal Notice.
III.A.7. HUD program-specific policies and procedures review
process. Within two years from the applicability date of the AAN, HUD
will review the grantee's program-specific policies and procedures,
either onsite or through remote monitoring, for compliance with the
requirements in section III. If a grantee's program-specific policies
and procedures are not in compliance with the requirements of the
Universal Notice, HUD may undertake corrective and remedial actions as
described in section III.F.2.a. HUD will continue to monitor the
grantee's program-specific policies and procedures during the normal
course of business (i.e., CPD's Monitoring Handbook and applicable CPD
Notice Implementing Risk Analyses for CPD programs).

III.B. Grant Administration

III.B.1. Overall benefit. Consistent with the HCDA, 24 CFR 570.484
and 24 CFR 570.200(a)(3), the Universal Notice requires grantees to
comply with the overall benefit requirement 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 AAN and related program income.
A grantee may request a waiver of the overall benefit requirement
to reduce the LMI benefit requirement below 70 percent of the total
grant. To request a waiver, the grantee must submit a substantial
amendment, 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 LMI
persons.
III.B.1.a. Use of the ``upper quartile'' or ``exception criteria.''
The LMA benefit requirement is modified when communities have few, if
any, areas within their jurisdiction that have 51 percent or more LMI
residents. In such a community, activities must serve an area that
contains a percentage of LMI residents that is within the upper
quartile of 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'' (i.e.,
upper quartile) applies to CDBG-DR funded activities in entitlement
communities covered by such criteria, including entitlement communities
that receive disaster recovery funds from a State. Each year, HUD
publishes the most recent data here: <a href="https://www.hudexchange.info/programs/acs-low-mod-summary-data/acs-low-mod-summary-data-exception-grantees/">https://www.hudexchange.info/programs/acs-low-mod-summary-data/acs-low-mod-summary-data-exception-grantees/</a>.
III.B.1.b. 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: <a href="https://www.huduser.gov/portal/datasets/cdbg-income-limits.html">https://www.huduser.gov/portal/datasets/cdbg-income-limits.html</a>.
Accordingly, HUD clarifies that the annual uncapped income limits
published by HUD apply 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.
III.B.2. 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 (42 U.S.C.
5304(b)(3)) 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 AAN.
Pursuant to this alternative requirement, grantees that use the
urgent need national objective must address the following three
criteria in their Action Plan: (i) describe in the 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; (ii) identify each program or
activity that will use the urgent need national objective--either
through its initial submission or through a substantial amendment to
the Action Plan submitted by the grantee within 36 months of the
applicability date of the grantee's initial AAN; and (iii) document how
each program and/or activity funded under the urgent need national
objective responds to the urgency, type, scale, and location of the
disaster-related impact as described in the grantee's unmet needs
assessment.
This alternative urgent need national objective is in effect for a
period of 36 months following the applicability date of the grantee's
initial AAN. After 36 months, the grantee will be required to follow
the criteria established in section 104(b)(3) of the HCDA (42 U.S.C.
5304(b)(3)) 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.B.3. Administration cap. Historically, the appropriations acts
authorize up to five percent of the grant (plus five percent of program
income generated by the grant) to be used for administrative costs
(i.e., program administrative costs) by the grantee or its
subrecipients. The Secretary does not

[[Page 1770]]

have the authority to waive or specify an alternative requirement to
increase the grant administration cap. 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.C.1. For example, administrative
activities include the grantee's overall grant management, internal
auditor activities, and DRGR recordkeeping.\15\
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\15\ View HUD's guidance on allocating costs between program
administrative costs, activity delivery costs, and planning costs
for CDBG-DR Grantees published in CPD Notice 23-06 here: <a href="https://www.hud.gov/sites/dfiles/OA/images/2023-06cpdn.pdf">https://www.hud.gov/sites/dfiles/OA/images/2023-06cpdn.pdf</a>.
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III.B.3.a. Use of funds for administrative costs across multiple
grants. The appropriations acts may authorize special treatment of
grant administrative funds. Grantees receiving funds under the
Universal Notice, and that have received CDBG-DR or CDBG-MIT grants in
the past or in any 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 these acts 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 (i) 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 the grant); (ii) review and modify its financial
management policies and procedures regarding the tracking and
accounting of administration costs, as necessary; and (iii) 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 II.A. Grantees are reminded that all uses of
funds for program administrative activities must qualify as an eligible
administration cost.
III.B.4. Planning cap. Both State and local government grantees are
limited to spending a maximum of 15 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. For example, planning activities can include grantees
conducting feasibility studies, marketing studies, local mitigation
plans, and long-term disaster recovery plans.\16\
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\16\ View HUD's guidance on allocating costs between program
administrative costs, activity delivery costs, and planning costs
for CDBG-DR Grantees published in CPD Notice 23-06 here: <a href="https://www.hud.gov/sites/dfiles/OA/images/2023-06cpdn.pdf">https://www.hud.gov/sites/dfiles/OA/images/2023-06cpdn.pdf</a>.
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III.B.5. Public service cap. Both State and local government
grantees are limited to spending a maximum of 15 percent of their total
grant amount on public services. Public service costs subject to the 15
percent cap are those defined in 42 U.S.C. 5305(a)(8) and more broadly
in 24 CFR 570.201(e). For example, public service activities can
include mental health services and counseling, and legal services for
disaster impacted individuals. The Universal Notice identifies specific
activities in III.D. that are exempt from this cap with the waiver and
alternate requirements established for each activity.
III.B.6. Consolidated Plan. The requirements for consistency with
the consolidated plan in Section 106 of the Cranston-Gonzalez National
Affordable Housing Act (42 U.S.C. 12706), and regulations at 24 CFR
91.225(a)(5), and 24 CFR 91.325(a)(5)) are temporarily waived 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 AAN. 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 AAN.
III.B.7. Procurement. To have a proficient procurement process, the
grantee must submit the policies and procedures to HUD as required by
section II.A.1.b.; and post the required documentation to the official
website as described in section III.B.8. below. Additionally, the
grantee must include the following alternative requirements in this
section in its submitted procurement policies and procedures, as
appropriate.
III.B.7.a. Procurement alternative requirements. HUD is
establishing an additional alternative requirement for all procurement
actions 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.
III.B.7.b. Procurement when using CDBG-DR as non-Federal match.
When using CDBG-DR grant funds as the non-Federal match as explained in
section III.D.6.d., grantees can adopt the procurement policies and
procedures that satisfy the other Federal agency's requirements to
promote consistency and seamlessly leverage their funding, so long as
they meet other cross-cutting requirements that apply to the CDBG-DR
funds (e.g., Section 3 requirements, Davis Bacon Act, etc.). Grantees
must identify which procurement policies and procedures will apply and
keep any decision document in its files. For example, CDBG-DR grants to
local governments are subject to the same procurement requirements that
apply to procurements by local governments using FEMA Public Assistance
(PA) funds. State CDBG-DR grantees (and other CDBG-DR grantees subject
to State CDBG rules under a waiver and alternative requirement) should
consider including a provision in their procurement requirements that
adopts FEMA procurement requirements for activities that will be used
to satisfy the non-Federal match. This will eliminate confusion about
which procurement rules apply.
Additionally, when CDBG-DR funds are used as the non-Federal match
in another Federal program, grantees are not required to comply with
the alternative requirements in section III.B.7.a. above.
III.B.8. Public disaster recovery 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

[[Page 1771]]

are used and administered. The public website must be accessible to
persons with disabilities and individuals with LEP in compliance with
Section 504, Title II of the ADA,\17\ Title VI, and Executive Order
13166.
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\17\ Note: the technical standards of Section 508 provide a
practical benchmark when seeking to comply with nondiscrimination
and effective communication obligations under Section 504 and the
ADA.
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III.B.8.a. Publication and accessibility of required documents. 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. To meet this requirement, each grantee must make the
following items available on its website: the Admin Action Plan (if
applicable) and the Action Plan (including all amendments); each
performance report (as created using the DRGR system); citizen
participation plan; procurement policies and procedures; program-
specific policies and procedures including a projection of expenditures
and outcomes (III.A.6.b.); 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.
The grantee must make the required documents available on the
grantee's website in a form accessible to persons with disabilities and
those with LEP.\18\ Grantees must take reasonable steps to ensure
meaningful access to their programs and activities by LEP persons,
members of protected classes, vulnerable populations, and individuals
from other underserved communities, and address any possible digital
inequities and related barriers. 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 grantee take reasonable steps
to provide language assistance to ensure meaningful access to
participation by non-English-speaking residents of the grantee's
jurisdiction.
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\18\ View HUD's guidance on LEP for more information on vital
documents here: <a href="https://www.lep.gov/guidance/HUD_guidance_Jan07.pdf">https://www.lep.gov/guidance/HUD_guidance_Jan07.pdf</a>.
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III.B.9. Application status. The grantee must provide multiple
methods of communication, such as websites, dashboards, social media,
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 and
when the application period begins. While grantees must identify
multiple methods, one of the methods identified must be to include this
information on the grantee's disaster recovery website. This must
include specific information on application status, including what
quarter the grantee projects it will open application intake for each
program, and then on a monthly basis, the grantee must include
information on which specific applications are under review, any other
relevant status update determined by the grantee, and which
applications are approved/disapproved. Grantees must use unique
application number identifiers to ensure personally identifiable
information (PII) is protected. Grantees must also describe how they
will use social media in their policies and procedures to announce when
applications are open as required by sections III.A.3. and III.A.5. HUD
strongly encourages grantees to consider how their application process
can be inclusive of persons who are home-bound or unable to move
freely.
III.B.10. Environmental requirements.
III.B.10.a. 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 local
governments), the State must submit the RROF and Certification to HUD
for approval.
III.B.10.b. Responsibilities of States assuming HUD environmental
responsibilities. When a State grantee distributes funds to
subrecipients that have Responsible Entity authority under 24 CFR part
58 (i.e., units of general local government), the State must exercise
HUD's responsibilities in accordance with 24 CFR 58.18. In its policies
and procedures, a State must designate the agency or agencies that will
be responsible for carrying out the requirements and administrative
responsibilities set forth in 24 CFR part 58, subpart H. The designated
State agency must develop a monitoring and enforcement program for
post-review actions on environmental reviews and monitor compliance
with any environmental conditions included in the award.
III.B.10.c. Adoption of another Federal agency's environmental
review. Recipients of CDBG-DR funds that supplement other Federal
assistance may adopt, without review or public comment, any
environmental review, approval, or permit performed by a Federal
agency, so long as the actions covered by the existing environmental
review, approval, or permit and the actions proposed for the CDBG-DR
supplemental funds are substantially the same. Such adoption shall
satisfy the responsibilities of the recipient with respect to such
environmental review, approval, or permit.
Projects originally funded by another agency that are later
supplemented with CDBG-DR do not have to supplement the other agency's
environmental review with any HUD environmental requirements that
differ from the originating agency (e.g., Federal Flood Risk Management
Standard (FFRMS) floodplain and elevation, noise, etc.). However, if
the activity is modified so the other agency's environmental review no
longer covers the activity, the grantee is required to reevaluate and
supplement the other agency's environmental review to comply with all
applicable HUD environmental regulations in 24 CFR part58. The
grantee's environmental review obligations are considered complete when
adopting another agency's environmental review as outlined in this
section. To be adequate:
1. The grantee must obtain a completed electronic or paper copy of
the Federal agency's review and retain a copy of the full file in its
environmental review record.
2. The grantee must review the scope of work completed by the
Federal agency's review and verify that the scope of work is
substantially the same with a memo to file in its environmental review
record.
3. The grantee must notify HUD on the RROF (HUD-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 RROF and Certification, immediately approve the
release of funds for an activity or project assisted with CDBG-DR funds
if the recipient

[[Page 1772]]

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).
III.B.10.d. 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).
III.B.10.e. Tiered environmental reviews. Tiering, as described at
40 CFR 1508.1(oo), 40 CFR 1501.11, 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'' (40 CFR 1501.11(b)). 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
RROF 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 both the broad level
and the site-specific review have been completed and approved.
III.B.10.f. FFRMS floodplain and elevation. HUD published the FFRMS
Final Rule on April 23, 2024, the rule became effective on May 23,
2024, and the compliance date for CDBG-DR funds was on June 24,
2024.\19\ CDBG-DR grantees must update their construction standards and
any related policies and procedures to comply with the requirements
outlined in the FFRMS final rule. While this section in the notice
summarizes the new rule, grantees should reference the new requirements
in Part 55 to ensure compliance.
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\19\ Visit HUD's Office of Environment and Energy's website for
additional information on FFRMS here: <a href="https://www.hud.gov/program_offices/comm_planning/environment_energy/ffrms">https://www.hud.gov/program_offices/comm_planning/environment_energy/ffrms</a>.
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The floodplain area is determined by the FFRMS based on available
data in the project area and whether the project scope contains a
Critical Action (as defined in 24 CFR 55.2(b)(3)). Residential
buildings (as defined in 44 CFR 59.1) and nonresidential buildings (as
defined in 44 CFR 59.1) that are located in the floodplain and receive
assistance for new construction, reconstruction, rehabilitation of
substantial damage, or rehabilitation that results in substantial
improvement, must be elevated to those floodplain standards. HUD
requires grantees to follow a three-tiered data standard to determine
the FFRMS floodplain, as follows:
<bullet> Non-critical Actions: (1) use the climate-informed science
approach (CISA), if available and actionable and formally adopted by
HUD; (2) if CISA is not available, then use the 0.2-percent-annual-
chance-floodplain (500-year floodplain), determined by FEMA; or (3) if
neither of these options are available, then use the freeboard value
approach (FVA) by adding two feet to the base flood elevation (BFE).
<bullet> Critical Actions: (1) use the CISA, if available and
actionable and formally adopted by HUD; (2) if CISA is not available,
then use the 500-year floodplain or the FVA by adding three feet to the
BFE, whichever results in the larger floodplain and higher elevation;
or (3) if the 500-year floodplain is not available, then use the FVA by
adding three feet to the BFE.
For residential buildings undergoing new construction or
substantial improvement located in the FFRMS floodplain, the lowest
floor (or FEMA-approved equivalent) must be designed using the
elevation of the FFRMS floodplain as the baseline standard for
elevation (except where higher elevations are required by Tribal,
State, or locally adopted code or standards, in which case those higher
elevations apply). Residential buildings (including multi-family) that
have no dwelling units below the FFRMS floodplain that are not critical
actions, and nonresidential buildings, undergoing new construction or
substantial improvement shall be designed, either with the lowest floor
(including basement) elevated to or above the elevation of the FFRMS
floodplain or with the structure floodproofed at least up to the
elevation of the FFRMS floodplain (using floodproofing standards as
outlined in FEMA regulations found in 44 CFR 60.3(c)(3)(ii) and
(c)(4)(i), or successor standard.
In addition to the requirements described in the FFRMS final rule,
grantees must comply with (1) all applicable environmental review
requirements found in 24 CFR part 55; and (2) all applicable State,
local, and Tribal codes and standards for floodplain management,
including elevation, setbacks, and cumulative substantial damage
requirements. Grantees should note that structures that are elevated
must meet Federal accessibility standards.
III.B.11. 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. Grantees are encouraged to work with State
insurance regulators and industry to assess availability and
affordability of insurance.
III.B.11.a. Flood insurance purchase requirements. When grantees
use CDBG-DR funds to rehabilitate or reconstruct existing residential
buildings in a Special Flood Hazard Area (SFHA), the grantee must
comply with applicable Federal, State, local, and Tribal laws and
regulations related to both flood insurance and floodplain management.
SFHA is defined by FEMA as the area that will be inundated by the flood
event having a one-percent chance of being equaled or exceeded in any
given year. The one-percent annual chance flood is also referred to as
the base flood or 100-year flood. 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
property receiving HUD assistance for acquisition or construction
(including rehabilitation) within a Special Flood Hazard Area and with
24 CFR 58.6(a)(2), which requires that flood insurance under the
National Flood Insurance Program be obtained. 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.
III.B.11.b. Federal assistance to owners remaining in a floodplain.
III.B.11.b.(i) 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

[[Page 1773]]

disaster assistance that was (1) conditioned on the person first having
obtained flood insurance under applicable Federal law, and (2) the
person has subsequently failed to obtain and maintain flood insurance
as required on such property.
The grantee must implement a process to verify and monitor for
compliance with section 582 and the requirement to obtain and maintain
flood insurance.
III.B.11.b.(ii) 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 (1) the
combined household income is greater than either 120 percent of AMI or
the national median, (2) the property was located in a SFHA at the time
of the disaster, and (3) the property owner did not obtain or maintain
flood insurance on the damaged property, even when the property owner
was not required to obtain and maintain such insurance.
III.B.11.b.(iii) Responsibility to inform property owners to obtain
and maintain flood insurance. Section 582 of the National Flood
Insurance Reform Act of 1994, as amended, (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.
III.B.12. Program income. For State or local government grantees,
HUD is waiving all applicable program income rules at 42 U.S.C.
5304(j), 24 CFR 570.489(e) and (f), 24 CFR 570.500, 24 CFR 570.504, and
24 CFR 570.509(a)(4) and providing the alternative requirement
described below.\20\ Program income earned by Indian Tribes that are
subrecipients of State or local government grantees will be subject to
the program income requirements for subrecipients of those grantees.
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\20\ View HUD's instructions and templates on how to handle
CDBG-DR program income here: <a href="https://www.hud.gov/program_offices/comm_planning/cdbg-dr/program_income">https://www.hud.gov/program_offices/comm_planning/cdbg-dr/program_income</a>.
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III.B.12.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.B.12.b. below, and received by State or local
government grantees, including subrecipients. When program 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 Universal 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 State or unit of general local government
grantees, including subrecipients, 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
State or local government grantees, including subrecipient, 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, including interest paid by borrowers on loans made from a
revolving fund, as defined in section III.B.13.
(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, as
defined in section III.B.13.
(ix) Interest earned on lump sum drawdowns for financing of
property rehabilitation activities as described in 24 CFR 570.513;
(x) Funds collected through special assessments made against non-
residential 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.
(xi) Gross income paid to a State or local government grantees,
including subrecipients, from the ownership interest in a for-profit
entity in which the income is in return for the provision of CDBG-DR
assistance.
(xii) Any income received by State or local government grantees
related to the CDBG-DR grant after closeout, including income received
by subrecipients after closeout (see section II.D.12.e.).
III.B.12.b. Program income--does not include. Program income does
not include the following:
(i) The total amount of funds that is less than $35,000 received
over the life of the grant and retained by State or local government
grantees, including subrecipients. Once a grantee, including
subrecipients, meets or exceeds the $35,000 threshold, only funds over
the threshold are considered program income and are subject to the
requirements of the Universal Notice.
(ii) Amounts generated by activities eligible under section
105(a)(15) of the HCDA (42 U.S.C. 5305(a)(15) and carried out by an
entity under the authority of section 105(a)(15) of the HCDA.
(iii) Income (except for interest described in 24 CFR 570.513)
earned on grant advances from the U.S. Treasury; this income must be
remitted to HUD for transmittal to the U.S. Treasury.
III.B.12.c. Recording program income. For State or local government
grantees, including their subrecipients, the receipt and expenditure of
program income shall be recorded using both DRGR and internal financial
records as part of the financial transactions of the CDBG-DR grant.
III.B.12.d. Retention of program income. State grantees may permit
local governments that receive or will receive program income to retain
the program income but are not required to do so.

[[Page 1774]]

Additionally, State or local government grantees may permit
subrecipients that receive or will receive program income to retain the
program income but are not required to do so. In all cases, program
income retained by local governments or subrecipients is treated as
additional CDBG-DR funds subject to the requirements of the Universal
Notice.
The written agreement between the grantee and the subrecipient,
shall specify whether program income received is to be returned to the
grantee or retained by the subrecipient. When program income is to be
retained by the subrecipient, the agreement shall specify the
activities that will be undertaken with program income and that all
provisions of the written agreement shall apply to the specified
activities. When the subrecipient retains program income, transfers of
grant funds by the grantee to the subrecipient shall be adjusted
according to the disbursement principles described in section
III.B.12.e. Any program income on hand when the agreement expires, or
received after the agreement's expiration, shall be paid to the
grantee.
III.B.12.e. Program income--use, close out, and transfer. 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 Universal Notice and must be used in
accordance with the grantee's Action Plan for disaster recovery.
Grantees must substantially disburse program income before making
additional withdrawals from the United States Treasury, except as
provided in section III.B.13. State grantees may meet this requirement
by carrying out activities directly or by distributing program income
to local governments in accordance with the State's approved method of
distribution, as provided in section I.C.1.f. Local government grantees
may meet this requirement by carrying out activities directly as
provided in section I.C.1.f.
Any income received by State or local government grantees related
to the CDBG-DR grant after closeout, including income received by
subrecipients after closeout, shall be treated as program income and
shall be subject to the requirements of the Universal Notice, unless
transferred to an annual CDBG program. If transferred to an annual CDBG
program, the following rules apply:
(1) Program income received by State or local government grantees
before or after closeout, including program income received by
subrecipients, may be transferred by the State or local government
grantees to the annual CDBG program before or after closeout of the
grant that generated the program income. In all cases, the grantee must
first seek and then receive HUD's approval;
(2) Any program income transferred will not be subject to the
waivers and alternative requirements of the Universal Notice. Rather,
those funds will be subject to the applicable regular CDBG program
rules. Any other transfer of program income not specifically addressed
in the Universal Notice may be carried out if the grantee first seeks
and then receives HUD's approval; and
(3) CDBG-DR grantees must continue to report annually in DRGR on
any program income received following closeout of the grant.
III.B.13. Revolving funds. State or 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 a local government, including subrecipients, to carry out specific
identified activities. A revolving fund, for these purposes, 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 used or 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. Given that funds in a
revolving loan fund, including interest earned on funds held in the
revolving loan fund as well as interest paid by borrowers on loans made
from the fund, are considered program income, grantees may transfer
revolving loan funds before or after closeout, pursuant to section
III.B.12.e.
III.B.14. Reimbursement of disaster recovery expenses. 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. Pre-award costs
are defined in 2 CFR 200.458 and are allowed in instances in which the
CDBG-DR grantee anticipated an allocation and incurred an eligible cost
prior to the award. For all pre-award costs, compliance with 24 CFR
part 58 must be completed before the start of the activity. Pre-
application costs are costs incurred by an applicant to CDBG-DR funded
programs on or after the incident date of the qualifying disaster but
before the time of application to a grantee or subrecipient (this may
be before or after the grantee signs its CDBG-DR grant agreement). For
all pre-application costs, compliance with 24 CFR part 58 must be
completed prior to the commitment of funds (i.e., prior to the grantee
or subrecipient committing to reimburse the qualifying entity for costs
incurred). Under CDBG-DR appropriations acts and HUD's environmental
regulations in 24 CFR part 58, the CDBG-DR ``recipient'' (as defined in
24 CFR 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 all applicable Federal laws and
authorities. The responsible entity assumes all legal liability for the
application, compliance, and enforcement of these requirements.
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.
III.B.14.a. Reimbursement of pre-award costs by a grantee or
subrecipient. The provisions at 24 CFR 570.200(h)(1)(i), (v), and (vi)
are waived; however, the rest of the provisions at 24 CFR 570.200(h)
will continue to apply to State and local governments to permit
grantees to incur pre-award costs. Additionally, HUD is establishing
the following alternative requirement: the provisions at 24 CFR
570.489(b) are applied to all CDBG-DR grantees to permit States and
local governments to allow subrecipients to incur costs before the
establishment of a formal grant relationship between the grantee and
the subrecipient. Grantees may reimburse themselves or their
subrecipients for otherwise allowable costs incurred on or after the
incident date of the qualifying disaster, if the environmental review
and all other cross-cutting requirements are met before the underlying
activity (e.g., rehabilitation of a government building) begins. As an
alternative requirement, grantees must include any pre-award activities
in their Action Plan, including eligible activities that were funded
with short-term subsidized loans (e.g., bridge

[[Page 1775]]

loans) that the grantee intends to reimburse or otherwise charge to the
grant, consistent with applicable program requirements.
III.B.14.b. Reimbursement of pre-application costs of homeowners,
renters, businesses, and other qualifying entities. Grantees are
permitted to charge to grants the pre-application costs of homeowners,
renters, businesses, and other qualifying entities for otherwise
allowable costs incurred on or after the incident date of the
qualifying disaster as identified in a grantees' applicable AAN. In
addition to the terms described in the remainder of the Universal
Notice, grantees may only charge costs to the grant that meet the
following requirements:
<bullet> Grantees may only charge the costs incurred for disaster
relief payments (see section III.D.5.h.) and rehabilitation,
demolition, and reconstruction of single family, multifamily, and
nonresidential buildings, including commercial properties, owned by
private individuals and entities, before the owner or renter applies to
a CDBG-DR grantee, recipient, or subrecipient for CDBG-DR assistance;
<bullet> 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;
<bullet> As required by 2 CFR 200.403(g), costs must be adequately
documented; and
<bullet> Grantees must complete a DOB check before providing
assistance pursuant to Appendix C.
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 two years after the
applicability date of the grantee's initial AAN for that disaster; and
(2) the person or entity incurs 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.
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 is
necessary and reasonable.
III.B.15. URA, Section 104(d), and related CDBG program
requirements. Certain activities and projects undertaken with CDBG-DR
funds are subject to the URA (49 CFR part 24), 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 (24
CFR 570.606), except as modified by these waivers and alternative
requirements:
1. Process for updating existing RARAP or establishing a CDBG-DR
specific RARAP (review section III.B.15.a.).
2. Optional relocation assistance policies (review section
III.B.15.b.).
3. Relocation assistance requirements under Section 104(d) (review
section III.B.15.c.).
4. One-for-one replacement waiver process (review section
III.B.15.d.).
5. Lump-sum relocation assistance to displaced residential tenants
(review section III.B.15.e.).
6. Voluntary acquisition--homebuyer primary residence purchase
(review section III.B.15.f.).
7. Applicability of Section 414 of the Stafford Act for projects
that begin one year after the applicable presidential disaster (review
section III.B.15.g.).
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 and/or providing alternative
requirements in this section for the purpose of providing enough
flexibility while preserving minimum standards of tenant and property
owner protections, and promoting the stable supply of decent, safe, and
sanitary affordable housing.
III.B.15.a. Section 104(d) RARAP. 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 and covered
under section III.A.2.b. 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 requirements listed in this
section and applicable waivers and alternative requirements.
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.
As each grantee establishes and supports feasible and cost-
effective recovery efforts to make communities more resilient against
future disasters, the RARAP must describe how the grantee plans to
minimize displacement of families and individuals from their homes and
neighborhoods as a result of any CDBG-DR assisted activities,
potentially through non-displacing disaster recovery activities (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
or 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 would be required for those displaced. This
description must also focus on relocation assistance under the URA and
its implementing regulations at 49 CFR part 24, section 104(d) and its
implementing regulations at 24 CFR part 42, 24 CFR 570.488, and/or 24
CFR 570.606, and relocation assistance pursuant to this section of the
Universal Notice, as well as any other assistance being made available
to displaced persons. The RARAP must include a description of how the
grantee will plan CDBG-DR 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. Any solutions
to minimize permanent displacement, such as the implementation of
temporary relocations or construction in phases, are strongly
encouraged. 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

[[Page 1776]]

with all applicable relocation requirements.
Grantees must include in their RARAP, their plans to replace, on a
one-for-one basis, all occupied and vacant occupiable low-income
dwelling units that are demolished or converted with CDBG-DR funds to
another use according to 24 CFR 42.325(b) and 24 CFR 49.375, unless a
waiver is pursued by the grantee and granted by HUD, as described in
III.B.15.d.
The RARAP, including section 104(d) one-for-one housing replacement
plans and protocols (if not waived), must be included in the grantee's
program-specific policies and procedures as required in III.A.2.b.(ii).
III.B.15.b. Optional relocation. 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 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 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 for CDBG-DR
funds.
III.B.15.c. Section 104(d) relocation assistance. The relocation
assistance requirements at section 104(d)(2)(A)(iii) and 104(d)(2)(B)
of the HCDA and 24 CFR 42.350, are waived. This waiver limits the types
and amount of relocation assistance a section 104(d) displaced person,
as defined under 24 CFR 42.305, is eligible to receive. The relocation
assistance will now align with the types and amounts provided under the
URA and implementing regulations at 49 CFR part 24. This waiver does
not impact a person's eligibility as a displaced person under section
104(d), rather it limits the amounts and types of relocation assistance
under section 104(d) to the amounts and types of assistance for
displaced persons under the URA, as amended. 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-DR funds are subject to the requirements of the URA;
however, only CDBG-DR funds are subject to section 104(d), while FEMA
funds are not. This limited waiver of the section 104(d) relocation
assistance requirements ensures uniform and equitable treatment of
individuals eligible to receive benefits under section 104(d) by
establishing that all forms of relocation assistance provided to those
individuals must comply with URA requirements.
III.B.15.d. One-for-one replacement requirement. All occupied and
vacant occupiable lower-income dwelling units that are demolished or
converted to a use other than lower-income dwelling units in connection
with a CDBG-DR assisted activity must be replaced with comparable
lower-income dwelling units in compliance with 24 CFR 42.375. CDBG-DR
grantees must follow the requirements at 24 CFR 42.375 and HUD will
follow up the publication of the Universal Notice with guidance on how
to meet these requirements in communities impacted by a disaster.
A grantee may request a waiver of section 104(d) one-for-one
replacement requirement and its regulations at section 104(d)(2)(A)(i)
and (ii) and 104(d)(3) of the HCDA and 24 CFR 42.375. To request a
waiver, a grantee must submit a good cause justification that includes
a data-driven analysis that indicates that there is an adequate supply
of vacant lower-income dwelling units in standard condition that will
be available to meet the housing needs of LMI owners and tenants in the
MID areas or surrounding communities in alignment with the requirement
to affirmatively further fair housing.
III.B.15.e. Lump sum rental assistance payments for residential
tenants. The requirements of 42 U.S.C. 3537(c) are waived to the extent
necessary to permit a grantee to make lump-sum relocation rental
assistance payments to displaced residential tenants. Waiving this
requirement allows grantees to provide lump sum rental assistance
payments to displaced residential tenants, thereby reducing grantees'
administrative burden of disbursing installment payments, in addition
to accelerating the availability of the rental assistance, to displaced
disaster survivors.
III.B.15.f. 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), as it may be amended, 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.
III.B.15.g. 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 under the Uniform Relocation
Assistance and Real Property Acquisition Policies Act of 1970 . . .
shall be denied such eligibility as a result of [their] being unable,
because of a major disaster as determined by the President, to meet the
occupancy requirements set by such Act.'' Accordingly, homeowner
occupants and tenants displaced from their homes as a result of the
identified disasters who would have otherwise not have 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
undertaken by a grantee or subrecipient for a CDBG-DR funded project
commencing more than one year after the date of the latest applicable
Presidentially declared disaster, 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 RROF 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).
This 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

[[Page 1777]]

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. Notwithstanding the flexibility provided by
this waiver, grantees are encouraged to carefully assess housing needs
and provide programmatic relocation assistance or other benefits to
eligible homeowner occupants and tenants displaced by the disaster that
may not have returned to their dwellings or found another place of
permanent residence one year after the disaster.
This waiver does not apply 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.
III.B.16. DOB. CDBG-DR grants are one of multiple Federal sources
that assist disaster recovery. These Federal funding sources are often
made available for the same purposes to grantees and disaster
survivors. For this reason, the Robert T. Stafford Disaster Relief and
Emergency Assistance Act (42 U.S.C. 5121-5207) (Stafford Act) and CDBG-
DR appropriations acts require HUD and its grantees to coordinate with
other Federal agencies that provide disaster assistance to prevent the
DOB. The Stafford Act's prohibition on DOB aims to ensure that Federal
assistance serves only to ``supplement insurance and other forms of
disaster assistance'' (42 U.S.C. 5170).
CDBG-DR grantees must prevent DOB when carrying out eligible
activities. A duplication occurs when a person, household, business, or
other entity receives disaster assistance from multiple sources for the
same recovery purpose, and the total assistance received for that
purpose is more than the total need. Total assistance can include cash
awards; insurance proceeds; grants and loans, including awards under
local, State, or Federal programs; and assistance from private or
nonprofit charity organizations. The amount of the DOB is the amount
received in excess of the total need for the same purpose. When total
need for eligible activities is more than total assistance for the same
purpose, the difference between these amounts is an ``unmet need.''
Grantees must limit their assistance to unmet needs for eligible
activities to prevent a DOB. Additionally, when reimbursement is
permitted, unmet needs can include amounts needed for reimbursement.
Grantees must follow the detailed DOB requirements listed in Appendix
C.
III.B.17. Citizen complaints. The grantee will provide a timely
written response to every citizen complaint. The grantee response must
be provided within 15 calendar 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: <a href="/cdn-cgi/l/email-protection#7810170c1411161d38100d1c17111f561f170e">[email&#160;protected]</a>).

III.C. State Grantee Only Requirements

III.C.1. 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.C.2. 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,
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 that States may fund or undertake are expanded to be
consistent with those of CDBG Entitlement grantees identified at 24 CFR
570.205.
III.C.3. 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 Universal 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 Universal 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
procured 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), (h) and (l), and subparagraph
II.A.1.d. of the Universal 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 and coordinate with the
Indian Tribe with jurisdiction over the Tribal area to carry out or to
fund CDBG-DR projects in the Tribal area.
III.C.4. 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 CDBG metropolitan
cities and urban counties and Indian Tribes. When a State distributes
funds through a method of distribution or by other means, the
requirements applying to

[[Page 1778]]

State grantees may apply to the grant funds unless otherwise amended by
the Universal Notice, or by subrecipient agreements.
III.C.5. Use of subrecipients (state grantees only). Section
III.C.3. 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 section II.A.1.(b) of the
Universal Notice. When 24 CFR 570.503 applies, notwithstanding 24 CFR
570.503(b)(5)(i), local governments that are subrecipients are defined
as recipients under 24 CFR part 58 and are therefore responsible
entities that assume environmental review responsibilities. 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 as stated in 24
CFR 58.18.
III.C.6. 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 and HUD OIG of the State's administration of CDBG-DR
funds, under 24 CFR 570.493 and reviews and audits by the State as
described in section III.C.8. below. 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.
III.C.7. 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.C.8. 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 (42 U.S.C. 5304(e)(2), as amended, and as modified by the
Universal 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.C.9. 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 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 will assess the recovery needs of all areas affected by
the disaster. Requirements related to consultation for all CDBG-DR
grantees are described in detail in sections I.C.2.a. and III.A.6. of
the Universal Notice.

III.D. Waivers and Alternative Requirements Related to Eligible
Activities

This section provides an overview of the waivers and alternative
requirements HUD has established for CDBG-DR grant funds as it relates
to eligible activities listed at 24 CFR 570.201 and section 105(a) of
the HCDA. Projects funded with CDBG-DR must be classified as an
eligible activity either through the program regulations cited in the
previous sentence or through a waiver and alternative requirement
issued in the Universal Notice or applicable AAN.
III.D.1. Connection to the disaster. 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 mitigation of
risk associated with activities carried out for these purposes, in the
``most impacted and distressed'' (MID) 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
(i.e., tie-back to the disaster). Accordingly, each activity must: (1)
address a direct or indirect impact from the disaster in a MID area;
(2) be a CDBG-eligible activity (or be eligible under a waiver or
alternative requirement); and (3) meet a national objective. This is
true for all activities except for mitigation activities funded by an
additional mitigation set-aside in the appropriations acts that do not
require a connection to the qualifying major disaster as described
below in section III.D.1.a. Requirements for the use of these
mitigation set aside funds are covered in section III.D.4.
III.D.1.a. 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
unmet needs assessment in the Action Plan (requirements for the
assessment are addressed in section I.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).
III.D.2. MID areas. Funds must be used for costs related to unmet
needs in

[[Page 1779]]

the MID areas resulting from qualifying disasters. HUD allocates funds
using the best available data that covers the eligible affected areas
and identifies 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 AAN. Grantees can request
that an additional area(s) be classified as a HUD-identified MID area
by contacting their assigned HUD staff member. To be eligible, the
area(s) must have received a presidential major disaster declaration
identified by the disaster numbers listed in the applicable AAN.
Grantees must submit the request with a data-driven analysis that
illustrates the basis for designating the additional area(s) as most
impacted and distressed as a result of the qualifying disaster. An
additional area(s) being classified as a HUD-identified MID area would
only result in a substantial amendment to the grantees' Action Plan, if
it was not already included as a grantee-identified MID area (see
section I.C.1.g.).
Grantees may use up to five percent of the total grant award for
grant administration and up to 15 percent of the total grant award for
planning costs. 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, only 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(ies), borough(s), parish(es), municipo/municipios, or
equivalent jurisdictions that overlap with the HUD designated ZIP code.
A grantee must indicate the decision to expand eligibility in its
action plan.
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).
III.D.3. Mitigation measures. Additionally, HUD is adopting the
following alternative requirement to section 105(a) of the HCDA (42
U.S.C. 5305(a)): Grantees may carry out the activities described in
section 105(a) of the HCDA, as modified by waivers and alternative
requirements, to the extent that the activities comply with the
following:
Grantees must incorporate mitigation measures when carrying out
activities to construct, reconstruct, or rehabilitate residential or
non-residential buildings 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 a changing climate. 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 life of the project. For all
mitigation measures adopted, grantees must report resilience
performance measures available in DRGR. For example, when building or
reconstructing homes in a floodplain, a grantee must follow HUD's
elevation requirements and will report the number of structures to be
elevated as a performance measure in DRGR.
III.D.4. Mitigation activities--CDBG-DR mitigation set-aside.
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 additional mitigation funds 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 additional mitigation funds 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. For purposes of grants
subject to the Universal 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. 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 additional mitigation
funds.
Grantees may also meet the requirement of the additional mitigation
funds 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. In section
III.D.3., grantees are instructed to incorporate mitigation measures
when carrying out ac

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