Allocations and Common Application and Reporting Waivers Granted to and Alternative Requirements for Community Development Block Grant (CDBG) Disaster Recovery Grantees Under 2008 Supplemental CDBG Appropriations, 7244-7255 [E9-3216]

Agencies

• DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Federal Register Volume 74, Number 29 (Friday, February 13, 2009)]
[Notices]
[Pages 7244-7255]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-3216]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Docket No. FR-5256-N-01]


Allocations and Common Application and Reporting Waivers Granted 
to and Alternative Requirements for Community Development Block Grant 
(CDBG) Disaster Recovery Grantees Under 2008 Supplemental CDBG 
Appropriations

AGENCY: Office of the Secretary, HUD.

ACTION: Notice of allocations, waivers, and alternative requirements.

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SUMMARY: This Notice advises the public of the initial allocation of 
grant funds for CDBG disaster recovery grants for the purpose of 
assisting in the recovery in areas covered by a declaration of major 
disaster under title IV of the Robert T. Stafford Disaster Relief and 
Emergency Assistance Act (42 U.S.C. 5121 et seq.) as a result of 
natural disasters that occurred in 2008. As described in the 
SUPPLEMENTARY INFORMATION section of this Notice, HUD is authorized by 
statute and regulations to waive statutory and regulatory requirements 
and specify alternative requirements for this purpose, upon the request 
of the state grantees. This Notice also describes the common 
application, eligibility, and administrative waivers and the common 
alternative and statutory requirements for the grants. This Notice also 
grants to additional state allocatees the waivers included in the 
Federal Register published on September 11, 2008 (73 FR 52870).

DATES: Effective Date: February 18, 2009.

FOR FURTHER INFORMATION CONTACT: Jessie Handforth Kome, Director, 
Disaster Recovery and Special Issues Division, Office of Block Grant 
Assistance, Department of Housing and Urban Development, 451 7th 
Street, SW., Room 7286, Washington, DC 20410, telephone number 202-708-
3587. Persons with hearing or speech impairments may access this number 
via TTY by calling the Federal Information Relay Service at 800-877-
8339. Facsimile inquiries may be sent to Ms. Kome at 202-401-2044. 
(Except for the ``800'' number, these telephone numbers are not toll 
free.)

SUPPLEMENTARY INFORMATION:

Authority To Grant Waivers

    The Consolidated Security, Disaster Assistance, and Continuing 
Appropriations Act, 2009 (Pub. L. 110-329, approved September 30, 2008) 
(hereinafter, ``Second 2008 Act'' to differentiate it from the earlier 
2008 Supplemental Appropriations Act, Pub. L. 110-252, approved June 
30, 2008) appropriates $6.5 billion, to remain available until 
expended, in CDBG funds for necessary expenses related to disaster 
relief, long-term recovery, and restoration of infrastructure, housing 
and economic revitalization in areas affected by hurricanes, flooding, 
and other natural disasters that occurred during 2008, for which the 
President declared a major disaster under title IV of the Robert T. 
Stafford Disaster Relief and Emergency Assistance Act (42 U.S.C. 5121 
et seq.). A rescission of $377,139,920 (Pub. L. 110-161, approved 
December 26, 2007), and a statutory set-aside of $6.5 million for HUD 
administrative costs reduces the amount to be distributed to 
$6,116,360,080. The Second 2008 Act authorizes the Secretary to waive, 
or specify alternative requirements for any provision of any statute or 
regulation that the Secretary administers in connection with the 
obligation by the Secretary or use by the recipient of these funds and 
guarantees, except for

[[Page 7245]]

requirements related to fair housing, nondiscrimination, labor 
standards, and the environment (including requirements concerning lead-
based paint), upon a request by the state explaining why such waiver is 
required to facilitate the use of such funds or guarantees and a 
finding by the Secretary that such a waiver would not be inconsistent 
with the overall purpose of Title I of the Housing and Community 
Development Act of 1974 (HCD Act). Additionally, regulatory waiver 
authority is provided by 24 CFR 5.110, 91.600, and 570.5. The following 
application and reporting waivers and alternative requirements are in 
response to requests from the states receiving an allocation under this 
Notice.
    The Secretary finds that the following waivers and alternative 
requirements, as described below, are necessary to facilitate use of 
the funds for the statutory purposes and are not inconsistent with the 
overall purpose of Title I of the HCD Act or the Cranston-Gonzalez 
National Affordable Housing Act, as amended.
    Under the requirements of the Second 2008 Act and the Department of 
Housing and Urban Development Reform Act of 1989 (the HUD Reform Act), 
regulatory waivers must be justified and published in the Federal 
Register.
    Except as described in this Notice, statutory and regulatory 
provisions governing the CDBG program for states, including those at 24 
CFR part 570, shall apply to the use of these funds. In accordance with 
the Second 2008 Act, HUD will reconsider every waiver in this Notice on 
the 2-year anniversary of the day this Notice is published.

Additional Waivers

    Each state receiving an allocation may request additional waivers 
from the Department as needed to address the specific needs related to 
that state's recovery activities. The Department will respond 
separately to the state's requests for waivers of provisions not 
covered in this Notice, after working with the state to tailor the 
program to best meet the unique disaster recovery needs in its impacted 
areas.

Allocations

    This Notice makes available $2.145 billion of the $6.1165 billion 
of supplemental appropriation for the CDBG program for necessary 
expenses related to disaster relief, long-term recovery, and 
restoration of infrastructure, housing, and economic revitalization in 
areas affected by hurricanes, floods, and other natural disasters 
occurring in 2008, for which the President declared a major disaster 
under title IV of the Robert T. Stafford Disaster Relief and Emergency 
Assistance Act (42 U.S.C. 5121 et seq.).
    The Second 2008 Act further notes:

    That funds provided under this heading shall be administered 
through an entity or entities designated by the Governor of each 
state * * * Provided further, that funds allocated under this 
heading shall not adversely affect the amount of any formula 
assistance received by a state under the Community Development Fund: 
Provided further, that each state may use up to 5 percent of its 
allocation for administrative costs.

    HUD computes allocations based on data that are generally available 
and that cover all the eligible affected areas. Congress also required 
that states devote ``not less than 650,000,000'' to support ``repair, 
rehabilitation, and reconstruction (including demolition, site 
clearance and remediation) of the affordable rental housing stock 
(including public and other HUD-assisted housing) in the impacted areas 
where there is a demonstrated need as determined by the Secretary.'' 
HUD expects each grantee receiving an allocation to use the prorated 
share indicated in the allocation table for affordable rental housing 
activities.

------------------------------------------------------------------------
                                                             Affordable
                  State                       Allocation       housing
                                                              minimum *
------------------------------------------------------------------------
Arkansas.................................      $20,294,857    $2,156,733
Florida..................................       17,457,005     1,855,155
Georgia..................................        4,570,779       485,736
Illinois.................................       41,984,121     4,461,649
Indiana..................................       95,042,622    10,100,172
Iowa.....................................      125,297,142    13,315,318
Kentucky.................................        3,217,686       341,943
Louisiana................................      438,223,344    46,569,962
Mississippi..............................        6,283,404       667,737
Missouri.................................       13,979,941     1,485,647
Puerto Rico..............................       17,982,887     1,911,040
Tennessee................................       20,636,056     2,192,992
Texas....................................    1,314,990,193   139,743,911
Wisconsin................................       25,039,963     2,660,995
                                          ------------------------------
    Total................................    2,145,000,000   227,948,990
------------------------------------------------------------------------

    In determining the allocations, HUD focused on two factors:
     Unmet housing needs. This is each state's (or Puerto 
Rico's) relative share of estimated unmet housing needs for property 
owners experiencing serious damage to their homes; and
     Concentrated damage. To determine infrastructure and 
economic revitalization needs, HUD focused on areas of particular 
concentration of damage--specifically, each state's (or Puerto Rico's) 
share of seriously damaged homes in areas where more than 20 percent of 
the homes experienced damage.
    In the first quarter of calendar year 2009, HUD will make a final 
review of long-term disaster recovery needs for all states affected by 
disasters in 2008 to allocate the remaining $3.972 billion. This review 
will include unmet housing, infrastructure, and economic revitalization 
needs.
    A state included in the subsequent announcement may immediately 
proceed to prepare and submit an Action Plan for disaster recovery in 
accordance with this Notice, although HUD will not be able to make the 
grant until the allocations and waivers are published in the Federal 
Register. Therefore, HUD commits to swiftly determining, announcing, 
and publishing the additional allocations once the data are available.
    HUD invites each grantee receiving an allocation under the Second 
2008 Act to submit an Action Plan for Disaster

[[Page 7246]]

Recovery in accordance with this Notice.
    The Second 2008 Act requires funds be used only for specific 
purposes. The statute directs that each grantee will describe, in its 
Action Plan for Disaster Recovery, criteria for eligibility and how the 
use of the grant funds will address long-term recovery and 
infrastructure restoration, housing, and economic revitalization. HUD 
will monitor compliance with this direction and may be compelled to 
disallow expenditures if it finds uses of funds do not meet the 
statutory purposes, or that funds allocated duplicate other benefits. 
HUD encourages grantees to contact their assigned HUD offices for 
guidance in complying with these requirements during development of 
their Action Plans for Disaster Recovery or if they have any questions 
regarding meeting these requirements.
    As provided for in the Second 2008 Act, the funds may not be used 
for activities reimbursable by or for which funds are made available by 
the Federal Emergency Management Agency (FEMA) or the Army Corps of 
Engineers. Further, none of the funds may be used as the required 
match, share, or contribution for another federal program.

Prevention of Fraud, Abuse, and Duplication of Benefits

    The Second 2008 Act also directs the Secretary to:

    Establish procedures to prevent recipients from receiving any 
duplication of benefits and report quarterly to the Committees on 
Appropriations with regard to all steps taken to prevent fraud and 
abuse of funds made available under this heading including 
duplication of benefits.

    To meet this directive, HUD is pursuing four courses of action. 
First, this Notice includes specific reporting, written procedures, 
monitoring, and internal audit requirements for grantees. Second, to 
the extent its resources allow, HUD will institute risk analysis and 
on-site monitoring of grantee management of the grants and of the 
specific uses of funds. Third, HUD will be extremely cautious in 
considering any waiver related to basic financial management 
requirements. The standard, time-tested CDBG financial requirements 
will continue to apply. Fourth, HUD is collaborating with the HUD 
Office of Inspector General to plan and implement oversight of these 
funds.

Waiver Justification

    This section of the Notice briefly describes the basis for each 
waiver and related alternative requirements, if any.
    Each state eligible for a disaster recovery grant receives annual 
CDBG allocations, has a consolidated plan, a citizen participation 
plan, a monitoring plan, and has made CDBG certifications. HUD 
encourages each CDBG disaster recovery grantee to carry out CDBG 
disaster recovery activities in the context of its ongoing community 
development program to the extent feasible (for example, by selecting 
activities consistent with the consolidated plan, by providing overall 
benefit to at least 70 percent low- and moderate-income persons, and by 
holding hearings or meetings to solicit public comment).
    The waivers, alternative requirements, and statutory changes 
described in this Notice apply only to the CDBG supplemental disaster 
recovery funds appropriated in the Second 2008 Act and, where 
applicable, the Supplemental Appropriations Act, 2008 (Pub. L. 110-252, 
approved June 30, 2008), and not to funds provided under the regular 
CDBG program or those provided under any other component of the CDBG 
program, such as the Neighborhood Stabilization Program. These actions 
provide additional flexibility in program design and implementation and 
implement statutory requirements unique to this appropriation.

Application for Allocations Under the Second 2008 Act

    These waivers and alternative requirements streamline the pre-grant 
process and set the guidelines for states' applications for their 
allocations. HUD encourages each grantee that receives an allocation to 
submit an Action Plan for Disaster Recovery to HUD as soon as 
practicable following an allocation announcement.

Overall Benefit to Low- and Moderate-Income Persons

    Pursuant to explicit authority in the Second 2008 Act, HUD is 
granting an overall benefit waiver that allows for up to 50 percent of 
the grant to assist activities under the urgent need or prevention or 
elimination of slums or blight national objectives, rather than the 30 
percent allowed under the annual state CDBG program. The primary 
objective of Title I of the HCD Act and of the funding program of each 
grantee is ``development of viable urban communities, by providing 
decent housing and a suitable living environment and expanding economic 
opportunities, principally for persons of low and moderate income.'' 
The statute goes on to set the standard of performance for this primary 
objective at 70 percent of the aggregate of the funds used for support 
of activities producing benefit to low- and moderate-income persons. 
Since extensive damage to community structures and housing affected 
those with varying incomes, and income-producing jobs are often lost 
for a period of time following a disaster, HUD is waiving the 70 
percent overall benefit requirement and establishing the 50 percent 
requirement in order to give grantees even greater flexibility to carry 
out recovery activities within the confines of the CDBG program's 
national objectives. HUD may provide additional waivers of this 
requirement only if the Secretary specifically finds a compelling need 
to further reduce or eliminate the percentage requirement. The 
requirement that each activity meet one of the three national 
objectives of the CDBG program is not waived.

Consistency With the Consolidated Plan

    HUD is waiving the requirement for consistency with the 
consolidated plan because the effects of a major disaster usually alter 
a grantee's priorities for meeting housing, employment, and 
infrastructure needs. To emphasize that uses of grant funds must be 
consistent with the overall purposes of the HCD Act, HUD is limiting 
the scope of the waiver for consistency with the consolidated plan; the 
waiver applies only until the grantee first updates its consolidated 
plan priorities following the disaster.

Action Plan for Disaster Recovery

    HUD is waiving the CDBG action plan requirements and substituting 
an Action Plan for Disaster Recovery. This will allow rapid 
implementation of disaster recovery grant programs and ensure 
conformance with provisions of the Second 2008 Act. Where possible, the 
Action Plan for Disaster Recovery, including certifications, does not 
repeat common action-plan elements the grantee has already committed to 
carry out as part of its annual CDBG submission. Although a state as 
the grantee may designate an entity or entities to administer the 
funds, the state is responsible for compliance with federal 
requirements. During the course of the grant, HUD will monitor the 
state's use of funds and its actions for consistency with the Action 
Plan. The state may submit an initial partial Action Plan and amend it 
one or more times subsequently until the Action Plan describes uses for 
the total grant amount. The state may also amend activities in its 
Action Plan.

[[Page 7247]]

Citizen Participation

    The citizen participation waiver and alternative requirements will 
permit a more streamlined public process, but one that still provides 
for reasonable public notice, appraisal, examination, and comment on 
the activities proposed for the use of CDBG disaster recovery grant 
funds. The waiver removes the requirement at both the grantee and state 
grant recipient levels for public hearings or meetings as the method 
for disseminating information or collecting citizen comments.
    Normally, in the CDBG program, a grantee takes at least 30 days 
soliciting comment from its citizens before it submits an annual action 
plan to HUD, which then has 45 days to accept or reject the plan. To 
expedite the process and to ensure that the disaster recovery grants 
are awarded in a timely manner, while preserving reasonable citizen 
participation, HUD is waiving the requirement that the grantee follow 
its citizen participation plan to the extent necessary to allow for a 
grantee to submit an Action Plan for Disaster Recovery in an expedited 
manner. HUD is shortening the minimum time for citizen comments and is 
requiring the proposed Action Plan for Disaster Recovery and any 
amendment thereof to be posted on the grantee's official Web site as 
the plan or amendment is developed, published, and submitted to HUD.
    In combination, this Notice's alternative requirements provide the 
following expedited steps for disaster recovery grants:
     Proposed Action Plan for Disaster Recovery published via 
the usual methods and on the Internet for no less than 7 calendar days 
of public comment;
     Final Action Plan posted on the Internet and submitted to 
HUD (grant application includes Standard Form 424 (SF-424) and 
certifications; other parts of the Action Plan may initially be 
submitted either via Disaster Recovery Grant Reporting (DRGR) or 
paper);
     HUD expedites review;
     HUD accepts the plan and prepares a cover letter, grant 
agreement, and grant conditions;
     Grant agreement signed by HUD and immediately transmitted 
to the grantee;
     Grantee signs and returns the grant agreements;
     HUD establishes the line of credit and the grantee 
requests and receives DRGR access (if the grantee does not already have 
it);
     If it has not already done so, grantee creates an Action 
Plan in DRGR and submits it to HUD. (Funds can be drawn from the line 
of credit only for an activity that is established in an Action Plan in 
DRGR.)
    After completing the environmental review(s) pursuant to 24 CFR 
part 58 and, as applicable, receiving from HUD or the state an approved 
Request for Release of Funds and certification, the grantee may draw 
down funds from the line of credit.
    Grantees are cautioned that, despite the expedited application and 
plan process, they are still responsible for ensuring that all citizens 
have equal access to information about the programs. Among other 
things, this means that each grantee must ensure that program 
information is available in the appropriate languages for the 
geographic area served by the jurisdiction. This will be an issue 
particularly for states that this notice is allowing to make grants 
throughout the state, including into regular CDBG entitlement areas if 
these entitlements are included in a relevant disaster declaration. 
Because regular state CDBG funds are not used in entitlement areas, 
state CDBG staffs may not be aware of limited-English-proficient (LEP) 
speaking populations in those metropolitan jurisdictions.

Administration Limitation

    State program administration requirements must be modified to be 
consistent with the Second 2008 Act, which allows up to 5 percent of 
the grant to be used for administrative costs, whether by the state, by 
entities designated by the state, by units of local government, or by 
subrecipients. The provisions at 42 U.S.C. 5306(d) and 24 CFR 
570.489(a)(1)(i) and (iii) will not apply to the extent that they cap 
state administration expenditures and require a dollar-for-dollar match 
of state funds for administrative costs exceeding $100,000. HUD does 
not waive 24 CFR 570.489(a)(3), which will allow the state to fund 
planning activities that may exceed the 5 percent limitation on general 
administrative costs.

Use of Subrecipients

    The state CDBG program rule does not make specific provision for 
the treatment of entities called ``subrecipients'' in the CDBG 
entitlement program. The waiver allowing the state to directly carry 
out activities creates a situation in which the state may use 
subrecipients to carry out activities in a manner similar to 
entitlement communities rather than use a method of distributing funds 
to local governments. HUD and its Office of Inspector General have long 
identified the use of subrecipients as a practice that increases the 
risk of abuse of funds. However, HUD's experience is that this risk can 
be successfully managed by following the CDBG entitlement requirements 
and related guidance. Therefore, HUD is requiring that when using 
subrecipients, a state taking advantage of the waiver allowing it to 
carry out activities directly must follow the alternative requirements 
drawn from the CDBG entitlement rule and specified in this Notice.

Reporting

    HUD is waiving the annual reporting requirement because Congress 
requires quarterly reports from the grantees and from HUD on various 
aspects of the uses of funds and on the activities funded with these 
grants. Many of the data elements the grantees will report to Congress 
quarterly are the same as those that HUD will use to exercise oversight 
for compliance with the requirements of this Notice and for prevention 
of fraud, abuse of funds, and duplication of benefits. To collect these 
data elements and to meet its reporting requirements, HUD is requiring 
each grantee to report to HUD quarterly using the online DRGR system, 
which uses a streamlined, Internet-based format. Grantees will also use 
the recently enhanced DRGR to record obligations and to make draws of 
funds from the line of credit established for each grant. HUD will use 
the transactional data from DRGR and from grantee reports to monitor 
for anomalies or performance problems that suggest fraud, abuse of 
funds, and duplication of benefits; to reconcile budgets, obligations, 
funding draws, and expenditures; to calculate applicable administrative 
and public service limitations and the overall percent of benefit to 
low- and moderate-income persons; to report to Congress and the public; 
and as a basis for risk analysis in determining a monitoring plan.
    The grantee must post the quarterly report on an Internet site for 
its citizens within 3 days of the report's submission to HUD. If a 
grantee chooses, it may use this report, together with a statement 
regarding any sole source procurements, as its required quarterly 
submission to the Committees on Appropriations. Each quarter, HUD will 
submit to the Committees a summary description of its report reviews, 
of other HUD monitoring and technical assistance activities undertaken 
during the quarter, and of any significant conclusions related to fraud 
or abuse of funds or duplication of benefits.

[[Page 7248]]

Eligibility--Housing Related

    The waiver of Section 105(a) of the 1974 Act to allow new housing 
construction, and of Section 105(a)(24), to allow homeownership 
assistance for families whose income is up to 120 percent of median 
income and payment of up to 100 percent of a housing down payment, is 
necessary following major disasters in which large numbers of 
affordable housing units have been damaged or destroyed, as is the case 
in the disasters eligible under this Notice. The broadening of the 
Section 105(a)(24) waiver, in accordance with the states' requests, 
will allow each state to implement mixed-use housing recovery programs 
included in its HUD-accepted action plan.

Anti-Pirating

    The limited waiver of the job relocation requirements allows the 
flexibility for a state to provide assistance to a business located in 
another state or another market area within the same state if the 
business was displaced from a declared area within the state by the 
disaster and wishes to return. This waiver is necessary to allow a 
grantee affected by a major disaster to rebuild its employment base.

Expanded Distribution and Direct Action

    The waivers and alternative requirements allowing distribution of 
funds by a state to entitlement communities and Indian tribes, and to 
allow a state to carry out activities directly, rather than distribute 
all funds to units of local government, are consistent with waivers 
granted for previous, similar disaster recovery cases. HUD believes 
that, in using very similar statutory language to that used for the 
CDBG supplemental appropriations for Hurricane Katrina, Rita, and Wilma 
recovery, Congress is signaling its intent that the states under this 
appropriation also be able to carry out activities directly. Therefore, 
HUD is waiving program requirements in order to support this intent. 
HUD is also including in this Notice the necessary complementary 
waivers and alternative requirements related to subrecipients, to 
ensure proper management and disposition of funds during grant 
execution and at closeout.

Relocation Requirements

    The states have indicated that they plan or wish to facilitate the 
ability of their local government grantees to engage in voluntary 
acquisition and relocation activities (in a form often called 
``buyouts''), by using waivers related to acquisition and relocation 
requirements under the Uniform Relocation Assistance and Real Property 
Acquisition Policies Act of 1970, as amended, (42 U.S.C. 4601 et seq.) 
(URA), and the replacement of housing and relocation assistance 
provisions under section 104(d) of the HCD Act (42 U.S.C. 5304(d)). The 
states asked for waivers to help promote the acquisition of real 
property and relocation of displaced persons in a timely and efficient 
manner.
    CDBG funds are federal financial assistance. Therefore, CDBG-
assisted programs or projects are subject to the URA and the 
governmentwide implementing regulations at 49 CFR part 24. The URA's 
protection and assistance apply to acquisitions of real property and 
displacements resulting from the acquisition, rehabilitation, or 
demolition of real property for CDBG-assisted programs or projects. The 
URA provides assistance and protections to individuals and businesses 
affected by federal or federally assisted projects. HUD is waiving the 
following URA requirements to help promote accessibility to suitable 
decent, safe, and sanitary housing for victims of hurricanes and 
flooding in 2008.
    The acquisition requirements of the URA and implementing 
regulations are waived so that they do not apply to an arm's length 
voluntary purchase carried out by a person who does not have the power 
of eminent domain, in connection with the purchase and occupancy of a 
principal residence by that person. The failure to suspend these 
requirements would impede disaster recovery and may result in windfall 
payments.
    A limited waiver is granted of the URA's implementing regulations 
to the extent that they require grantees to provide URA financial 
assistance sufficient to reduce the displaced person's post-
displacement rent/utility cost to 30 percent of household income. The 
failure to suspend these one-size-fits-all requirements could impede 
disaster recovery. To the extent that a tenant has been paying rent in 
excess of 30 percent of household income without demonstrable hardship, 
rental assistance payments to reduce tenant costs to 30 percent would 
not be required.
    The URA and implementing regulations are waived to the extent 
necessary to permit a grantee to meet all or a portion of a grantee's 
replacement housing financial assistance obligation to a displaced 
renter by offering rental housing through a tenant-based rental 
assistance (TBRA) housing program subsidy (e.g., Section 8 rental 
voucher or certificate), provided that the tenant is also provided with 
referrals to suitable, available rental replacement dwellings where the 
owner is willing to participate in the TBRA program, and the period of 
authorized assistance is at least 42 months. Failure to grant the 
waiver would impede disaster recovery whenever TBRA program subsidies 
are available but funds for cash relocation assistance are limited. 
This waiver gives states an additional relocation resource option.
    The URA and implementing regulations are waived to the extent that 
they require a grantee to offer a person displaced from a dwelling the 
option to receive a ``moving expense and dislocation allowance'' based 
on the current schedule of allowances prepared by the Federal Highway 
Administration, provided that the grantee establishes and offers the 
person a moving expense and dislocation allowance under a schedule of 
allowances that is reasonable for the jurisdiction and takes into 
account the number of rooms in the displacement dwelling, whether the 
person owns and must move the furniture, and, at a minimum, the kinds 
of expenses described in 49 CFR 24.301. Failure to suspend this 
provision would impede disaster recovery by requiring grantees to offer 
allowances that do not reflect current local labor and transportation 
costs. Persons displaced from a dwelling remain entitled to choose a 
payment for actual reasonable moving and related expenses if they find 
that approach preferable to the locally established moving expense and 
dislocation allowance.
    In addition to the URA waivers, HUD is waiving requirements of 
section 104(d) of the HCD Act dealing with one-for-one replacement of 
lower-income dwelling units demolished or converted in connection with 
a CDBG-assisted development project for housing units damaged by one or 
more disasters. HUD is waiving this requirement because it does not 
take into account the large, sudden changes a major disaster may cause 
to the local housing stock, population, or local economy. Further, the 
requirement does not take into account the threats to public health and 
safety and to economic revitalization that may be caused by the 
presence of disaster-damaged housing structures that are unsuitable for 
rehabilitation. As it stands, the requirement would impede disaster 
recovery and discourage grantees from converting or demolishing 
disaster-damaged housing because of excessive costs that would result 
from replacing all such units within the specified time frame. HUD is 
also waiving the relocation assistance

[[Page 7249]]

requirements contained in section 104(d) of the HCD Act to the extent 
that they differ from those of the URA (42 U.S.C. 4601 et seq.). This 
change will simplify implementation while preserving statutory 
protections for persons displaced by projects assisted with CDBG 
disaster recovery grant funds.
    Although the Second 2008 Act precludes the use of these disaster 
recovery CDBG grants for federal cost share or match, some disaster 
recovery CDBG funds used to support buyouts and relocation activities 
may be used in support of programs receiving FEMA funding. The 
statutory requirements of the URA are also applicable to the 
administration of FEMA mitigation funding, and disparities in rental 
assistance payments for activities funded by HUD and FEMA will thus be 
eliminated. FEMA is subject to the requirements of the URA. Pursuant to 
this authority, FEMA requires that rental assistance payments be 
calculated on the basis of the amount necessary to lease or rent 
comparable housing for a period of 42 months. HUD is also subject to 
these requirements, but is also covered by alternative relocation 
provisions authorized under 42 U.S.C. 5304(d)(2)(A)(iii) and (iv), and 
implementing regulations at 24 CFR 42.350. These alternative relocation 
benefits, available to low- and moderate-income displacees opting to 
receive them in certain HUD programs, require the calculation of 
similar rental assistance payments on the basis of 60 months, rather 
than 42 months, thereby creating a disparity between the available 
benefits offered by HUD and FEMA (although not always an actual cash 
difference). The waiver assures uniform and equitable treatment by 
allowing the URA benefits requirements to be the standard for 
assistance under this Notice.

Program Income

    A combination of CDBG provisions limits the flexibility available 
to the states for the use of program income. Prior to 2002, program 
income earned on disaster recovery grants had usually been program 
income in accordance with the rules of the regular CDBG program of the 
applicable state and had lost its disaster recovery grant identity, 
thus losing use of the waivers and streamlined alternative 
requirements. Also, the state CDBG program rule and law are designed 
for a program in which the state distributes all funds rather than 
carrying out activities directly. The HCD Act specifically provides for 
a local government receiving CDBG grants from a state to retain program 
income if it uses the funds for additional eligible activities under 
the annual CDBG program. The HCD Act allows the state to require return 
of the program income to the state under certain circumstances. This 
Notice waives the existing statute and regulations to give the states, 
in all circumstances, the choice of whether a local government 
receiving a distribution of CDBG disaster recovery funds and using 
program income for activities in the Action Plan may retain this income 
and use it for additional disaster recovery activities. In addition, 
this Notice allows program income to the disaster recovery grant 
generated by activities undertaken directly by the state or its 
agent(s), to retain the original disaster recovery grant's alternative 
requirements and waivers and to remain under the state's discretion 
until grant closeout, at which point any program income on hand or 
received subsequently will become program income to the state's annual 
CDBG program. The alternative requirements provide all the necessary 
conforming changes to the program income regulations.

Certifications

    HUD is waiving the standard certifications and substituting 
alternative ones. The alternative certifications are tailored to CDBG 
disaster recovery grants and remove certifications and references that 
are redundant or appropriate to the annual CDBG formula program.

Waivers and Alternative Requirements for Grants Under the Supplemental 
Appropriations Act, 2008

    In HUD's December 19, 2008 Federal Register notice (73 FR 77818), 
HUD published supplemental disaster recovery allocations and notified 
the states that received an initial fund allocation under that Notice 
that they could apply the waivers and alternative requirements of HUD's 
September 11, 2008 Federal Register notice (73 FR 52870), if they 
requested those waivers from HUD. Today's Federal Register Notice 
notifies Congress and the public that the states receiving initial 
allocations under the December 19, 2008 Notice have, with one 
exception, requested all the waivers and alternative requirements under 
HUD's September 11, 2008 notice, and that HUD is granting them. The 
exception is the State of Minnesota, which did not request the waivers 
that would allow it to carry out activities directly or to facilitate 
flood buyouts. Those waivers and alternative requirements, therefore, 
do not apply to Minnesota's grant; all the others do.

Applicable Rules, Statutes, Waivers, and Alternative Requirements; Pre-
Grant Process

    1. General note. Prerequisites to a grantee's receipt of CDBG 
disaster recovery assistance include adoption of a citizen 
participation plan; publication of its proposed Action Plan for 
Disaster Recovery; public notice and comment; and submission to HUD of 
an Action Plan for Disaster Recovery, including certifications. Except 
as described in this Notice, statutory and regulatory provisions 
governing the CDBG program for states, including those at 42 U.S.C. 
5301 et seq. and 24 CFR part 570, shall apply to the use of these 
funds.
    2. Overall benefit waiver and alternative requirement. The 
requirements at 42 U.S.C. 5301(c), 42 U.S.C. 5304(b)(3)(A), and 24 CFR 
570.484 that 70 percent of funds are for activities that benefit low- 
and moderate-income persons are waived to stipulate that at least 50 
percent of disaster recovery grant funds are for activities that 
principally benefit low- and moderate-income persons.
    3. Direct grant administration by states and means of carrying out 
eligible activities. Requirements at 42 U.S.C. 5306 are waived to the 
extent necessary to allow a state to use its disaster recovery grant 
allocation directly to carry out state-administered activities eligible 
under this Notice. Activities eligible under this Notice may be 
undertaken, subject to state law, by the recipient through its 
employees, or through procurement contracts, or through loans or grants 
under agreements with subrecipients, or by one or more entities that 
are designated by the chief executive officer of the state. Unless a 
waiver provides otherwise, activities made eligible under section 
105(a)(15) of the HCD Act, as amended, may only be undertaken by 
entities specified in that section, whether the assistance is provided 
to such an entity from the state or from a unit of general local 
government.
    4. Consolidated Plan waiver. Requirements at 42 U.S.C. 12706 and 24 
CFR 91.325(a)(5), that housing activities undertaken with CDBG funds be 
consistent with the strategic plan, are waived. Further, 42 U.S.C. 
5304(e), to the extent that it would require HUD to annually review 
grantee performance under the consistency criteria, also is waived. 
These waivers apply only until the time that the grantee first updates 
the consolidated plan priorities following the disaster.
    5. Citizen participation waiver and alternative requirement. 
Provisions of 42 U.S.C. 5304(a)(2) and (3), 42 U.S.C.

[[Page 7250]]

12707, 24 CFR 570.486, and 24 CFR 91.115(b), with respect to citizen 
participation requirements, are waived and replaced by the requirements 
below. The streamlined requirements do not mandate public hearings at 
either the state or local government level, but do require providing a 
reasonable opportunity (at least 7 days) for citizen comment and 
ongoing citizen access to information about the use of grant funds. The 
streamlined citizen participation requirements for this grant are:
    a. Before the grantee adopts the action plan for this grant or any 
substantial amendment to this grant, the grantee will publish the 
proposed plan or amendment (including the information required in this 
Notice for an Action Plan for Disaster Recovery). The manner of 
publication must include prominent posting on the state, local, or 
other relevant Internet site and must afford citizens, affected local 
governments, and other interested parties a reasonable opportunity to 
examine the plan or amendment's contents. Subsequent to publication, 
the grantee must provide a reasonable time frame and method(s) 
(including electronic submission) for receiving comments on the plan or 
substantial amendment. The grantee's plans to minimize displacement of 
persons or entities and to assist any persons or entities displaced 
must be published with the Action Plan.
    b. In the Action Plan, each grantee will specify its criteria for 
determining what changes in the grantee's activities constitute a 
substantial amendment to the plan. At a minimum, adding or deleting an 
activity or changing the planned beneficiaries of an activity will 
constitute a substantial change. The grantee may modify or 
substantially amend the Action Plan if it follows the same procedures 
required in this Notice for the preparation and submission of an Action 
Plan for Disaster Recovery. The grantee must notify HUD, but is not 
required to notify the public, when it makes any plan amendment that is 
not substantial.
    c. The grantee must consider all comments received on the Action 
Plan or any substantial amendment and submit to HUD a summary of those 
comments and the grantee's response, with the Action Plan or 
substantial amendment.
    d. The grantee must make the Action Plan, any substantial 
amendments, and all performance reports available to the public on the 
Internet and on request. In addition, the grantee must make these 
documents available in a form accessible to persons with disabilities 
and non-English-speaking persons. During the term of this grant, the 
grantee will provide citizens, affected local governments, and other 
interested parties with reasonable and timely access to information and 
records relating to the Action Plan and to the grantee's use of this 
grant.
    e. The grantee will provide a timely written response to every 
citizen complaint. Such response will be provided within 15 working 
days of the receipt of the complaint, if practicable.
    6. Modify requirement for consultation with local governments. 
Currently, the statute and regulations require consultation with 
affected units of local government in the nonentitlement area of the 
state regarding the state's proposed method of distribution. HUD is 
waiving 42 U.S.C. 5306(d)(2)(C)(iv), 24 CFR 91.325(b), and 24 CFR 
91.110, with the alternative requirement that the state consult with 
all disaster-affected units of general local government, including any 
CDBG-entitlement communities, in determining the use of funds.
    7. Action Plan waiver and alternative requirement. The requirements 
at 42 U.S.C. 12705(a)(2), 42 U.S.C. 5304(a)(1), 42 U.S.C. 5304(m), 42 
U.S.C. 5306(d)(2)(C)(iii), 24 CFR 1003.604, and 24 CFR 91.320 are 
waived for these disaster recovery grants. Each state must submit to 
HUD an Action Plan for Disaster Recovery that describes:
    a. The effects of the covered disasters, especially in the most 
affected areas and populations, and the greatest recovery needs 
resulting from the covered disasters that have not been addressed by 
insurance proceeds, other federal assistance, or any other funding 
source;
    b. The grantee's overall plan for disaster recovery including:
    (1) How the state will promote sound short- and long-term recovery 
planning at the state and local levels, especially land-use decisions 
that reflect responsible flood plain management, removal of regulatory 
barriers to reconstruction, and prior coordination with planning 
requirements of other state and federal programs and entities;
    (2) How the state will encourage construction methods that 
emphasize high quality, durability, energy efficiency, sustainability, 
and mold resistance, including how the state will promote enactment and 
enforcement of modern building codes and mitigation of flood risk, 
where appropriate; and
    (3) How the state will provide or encourage provision of adequate, 
flood-resistant housing for all income groups that lived in the 
disaster-affected areas prior to the incident date(s) of the applicable 
disaster(s), including a description of the activities it plans to 
undertake to address emergency shelter and transitional housing needs 
of homeless individuals and families (including subpopulations), to 
prevent low-income individuals and families with children (especially 
those with incomes below 30 percent of median) from becoming homeless, 
to help homeless persons make the transition to permanent housing and 
independent living, and to address the special needs of persons who are 
not homeless identified in accordance with 24 CFR 91.315(d);
    c. Monitoring standards and procedures that are sufficient to 
ensure program requirements, including non-duplication of benefits, are 
met and that provide for continual quality assurance, investigation, 
and internal audit functions with responsible staff reporting 
independently to the Governor of the state or, at a minimum, to the 
chief officer of the governing body of any designated administering 
entity;
    d. A description of the steps the state will take to avoid or 
mitigate occurrences of fraud, abuse, and mismanagement, especially 
with respect to accounting, procurement, and accountability, with a 
description of how the state will provide for increasing the capacity 
for implementation and compliance of local government grant recipients, 
subrecipients, subgrantees, contractors, and any other entity 
responsible for administering activities under this grant; and
    e. Method of distribution. The state's method of distribution shall 
include descriptions of the method of allocating funds to units of 
local government and descriptions of specific projects the state will 
carry out directly, as applicable. The descriptions will include:
    (1) When funds are to be allocated to units of local government, 
all criteria used to select applications from local governments for 
funding, including the relative importance of each criterion, and a 
description of how the disaster recovery grant resources will be 
allocated among all funding categories and the threshold factors and 
grant size limits that are to be applied; and
    (2) When the state will carry out activities directly, the 
projected uses for the CDBG disaster recovery funds, by responsible 
entity, activity, and geographic area;
    (3) How the method of distribution to local governments or use of 
funds described in accordance with the above subparagraphs will result 
in eligible uses of grant funds related to long-term recovery from 
specific effects of the disaster(s) or restoration of infrastructure, 
housing, and economic revitalization; and

[[Page 7251]]

    (4) Sufficient information so that citizens, units of general local 
government, and other eligible subgrantees or subrecipients will be 
able to understand and comment on the Action Plan and, if applicable, 
be able to prepare responsive applications to the state.
    f. Required certifications (see the applicable Certifications 
section of this Notice); and
    g. A completed and executed federal form SF-424.
    8. Allow reimbursement for pre-agreement costs. The provisions of 
24 CFR 570.489(b) are applied to permit a grantee to reimburse itself 
for otherwise allowable costs incurred on or after the incident date of 
the covered disaster.
    9. Clarifying note on the process for environmental release of 
funds when a state carries out activities directly. Usually, a state 
distributes CDBG funds to units of local government and takes on HUD's 
role in receiving environmental certifications from the grant 
recipients and approving releases of funds. For this grant, HUD will 
allow a state grantee to also carry out activities directly instead of 
distributing them to other governments. According to the environmental 
regulations at 24 CFR 58.4, when a state carries out activities 
directly, the state must submit the certification and request for 
release of funds to HUD for approval.
    10. Duplication of benefits. In general, 42 U.S.C. 5155 (section 
312 of the Robert T. Stafford Disaster Assistance and Emergency Relief 
Act, as amended) prohibits any person, business concern, or other 
entity from receiving financial assistance with respect to any part of 
a loss resulting from a major disaster as to which he has received 
financial assistance under any other program or from insurance or any 
other source. The Second 2008 Act stipulates that funds may not be used 
for activities reimbursable by or for which funds have been made 
available by FEMA or by the Army Corps of Engineers.
    11. Waiver and alternative requirement for distribution to CDBG 
metropolitan cities and urban counties.
    a. Section 5302(a)(7) of title 42, U.S.C. (definition of 
``nonentitlement area'') and provisions of 24 CFR part 570 that would 
prohibit a state from distributing CDBG funds to units of general local 
government regardless of their status in the entitlement CDBG program 
and to Indian tribes, are waived, including 24 CFR 570.480(a), to the 
extent that such provisions limit the distribution of funds to units of 
general local government located in entitlement areas and to state or 
federally recognized Indian tribes. The state is required instead to 
distribute funds to activities assisting a declared county or counties 
and eligible under this Notice without regard to the status of a local 
government or Indian tribe under any other CDBG program.
    b. Additionally, because the state grantees under this 
appropriation have requested a waiver to carry out activities directly, 
HUD is applying the regulations at 24 CFR 570.480(c) with respect to 
the basis for HUD determining whether the state has failed to carry out 
its certifications so that such basis shall be that the state has 
failed to carry out its certifications in compliance with applicable 
program requirements. Also, 24 CFR 570.494 regarding timely 
distribution of funds is waived. However, HUD expects each state 
grantee to expeditiously obligate and expend all funds, including any 
recaptured funds or program income, and to carry out activities in a 
timely manner.
    12. Program income alternative requirement. 42 U.S.C. 5304(j) and 
24 CFR 570.489(e) are waived to the extent necessary to allow 
additional flexibility in the administration of program income.
    a. Program income.
    (1) For the purposes of this subpart, ``program income'' is defined 
as gross income received by a state, a unit of general local 
government, a tribe or a subrecipient of a state, a unit of general 
local government or a tribe that was generated from the use of CDBG 
funds, except as provided in paragraph (a)(2) of this section. When 
income is generated by an activity that is only partially assisted with 
CDBG funds, the income shall be prorated to reflect the percentage of 
CDBG funds used (e.g., a single loan supported by CDBG funds and other 
funds; a single parcel of land purchased with CDBG funds and other 
funds). 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 funds;
    (ii) Proceeds from the disposition of equipment purchased with CDBG 
funds;
    (iii) Gross income from the use or rental of real or personal 
property acquired by the unit of general local government or tribe or 
subrecipient of a state, a tribe or a unit of general local government 
with CDBG funds, less the costs incidental to the generation of the 
income;
    (iv) Gross income from the use or rental of real property owned by 
a state, tribe, or the unit of general local government or a 
subrecipient of a state, tribe or unit of general local government, 
that was constructed or improved with CDBG funds, less the costs 
incidental to the generation of the income;
    (v) Payments of principal and interest on loans made using CDBG 
funds;
    (vi) Proceeds from the sale of loans made with CDBG funds;
    (vii) Proceeds from the sale of obligations secured by loans made 
with CDBG funds;
    (viii) Interest earned on program income pending disposition of the 
income, but excluding interest earned on funds held in a revolving fund 
account;
    (ix) Funds collected through special assessments made against 
properties owned and occupied by households not of low- and moderate-
income, where the special assessments are used to recover all or part 
of the CDBG portion of a public improvement; and
    (x) Gross income paid to a state, tribe, or a unit of general local 
government or subrecipient from the ownership interest in a for-profit 
entity acquired in return for the provision of CDBG assistance.
    (2) ``Program income'' does not include the following:
    (i) The total amount of funds which is less than $25,000 received 
in a single year, that is retained by a unit of general local 
government, tribe, or subrecipient;
    (ii) Amounts generated by activities eligible under section 
105(a)(15) of the HCD Act and carried out by an entity under the 
authority of section 105(a)(15) of the HCD Act;
    (3) The state may permit the unit of general local government or 
tribe which receives or will receive program income to retain the 
program income, subject to the requirements of paragraph (a)(3)(ii) of 
this section, or the state may require the unit of general local 
government or tribe to pay the program income to the state.
    (i) Program income paid to the state. Program income that is paid 
to the state or received by the state is treated as additional disaster 
recovery CDBG funds subject to the requirements of this Notice and must 
be used by the state or distributed to units of general local 
government in accordance with the state's Action Plan for Disaster 
Recovery. To the maximum extent feasible, program income shall be used 
or distributed before the state makes additional withdrawals from the 
U.S. Treasury, except as provided in paragraph (b) of this section.
    (ii) Program income retained by a unit of general local government 
or tribe.
    (A) Program income that is received and retained by the unit of 
general local government or tribe before closeout of

[[Page 7252]]

the grant that generated the program income is treated as additional 
disaster recovery CDBG funds and is subject to the requirements of this 
Notice.
    (B) Program income that is received and retained by the unit of 
general local government or tribe after closeout of the grant that 
generated the program income, but that is used to continue the disaster 
recovery activity that generated the program income, is subject to the 
waivers and alternative requirements of this Notice.
    (C) All other program income is subject to the requirements of 42 
U.S.C. 5304(j) and subpart I of 24 CFR part 570.
    (D) The state shall require units of general local government or 
tribes, to the maximum extent feasible, to disburse program income that 
is subject to the requirements of this Notice before requesting 
additional funds from the state for activities, except as provided in 
paragraph (b) of this section.
    b. Revolving funds.
    (1) The state may establish or permit units of general local 
government or tribes to establish revolving funds to carry out 
specific, identified activities. A revolving fund, for this purpose, is 
a separate fund (with a set of accounts that are independent of other 
program accounts) established to carry out specific activities which, 
in turn, generate payments to the fund for use in carrying out such 
activities. 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 revolving 
fund activities. Such program income is not required to be disbursed 
for nonrevolving fund activities.
    (2) The state may also establish a revolving fund to distribute 
funds to units of general local government or tribes to carry out 
specific, identified activities. A revolving fund, for this purpose, is 
a separate fund (with a set of accounts that are independent of other 
program accounts) established to fund grants to units of general local 
government to carry out specific activities which, in turn, generate 
payments to the fund for additional grants to units of general local 
government to carry out such activities. Program income in the 
revolving fund must be disbursed from the fund before additional grant 
funds are drawn from the U.S. Treasury for payments to units of general 
local government that could be funded from the revolving fund.
    (3) A revolving fund established by either the state or unit of 
general local government shall not be directly funded or capitalized 
with grant funds.
    c. Transfer of program income. Notwithstanding other provisions of 
this Notice, the state may transfer program income before closeout of 
the grant that generated the program income to its own annual CDBG 
program or to any annual CDBG-funded activities administered by a unit 
of general local government or Indian tribe within the state.
    d. Program income on hand at the state or at its subrecipients at 
the time of grant closeout by HUD and program income received by the 
state after such grant closeout shall be program income to the most 
recent annual CDBG program grant of the state.
    13. Note that use of grant funds must relate to the purposes of the 
Second 2008 Act. In addition to being eligible under 42 U.S.C. 5305(a) 
or this Notice and meeting a CDBG national objective, the Second 2008 
Act requires that activities funded under this Notice must also be for 
necessary expenses related to disaster relief, long-term recovery, and 
restoration of infrastructure, housing, and economic revitalization in 
areas affected by hurricanes, flooding, and other natural disasters 
that occurred in 2008, for which the President declared a major 
disaster under title IV of the Robert T. Stafford Disaster Relief and 
Emergency Assistance Act (42 U.S.C. 5121 et seq.) as a result of the 
specific natural disaster or disasters for which the state received a 
funding allocation.
    13a. Note on change to administration limitation. Up to 5 percent 
of the grant amount may be used for administrative costs. The 
provisions of 42 U.S.C. 5306(d) and 24 CFR 570.489(a)(1)(i) and (iii) 
will not apply to the extent that they cap state administration 
expenditures, limit a state's ability to charge a de minimis 
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. HUD does not waive 24 CFR 
570.489(a)(3), which will allow the state to carry out planning 
activities that may exceed the 5 percent limitation on general 
administrative costs.

Reporting

    14. Waiver of performance report and alternative requirement. The 
requirements for submission of a Performance Evaluation Report (PER) 
pursuant to 42 U.S.C. 12708 and 24 CFR 91.520 are waived. The 
alternative requirement is that:
    a. Each grantee must submit its Action Plan for Disaster Recovery, 
including performance measures, into HUD's Internet-based DRGR system. 
(The signed certifications and the SF-424 must be, and the initial 
Action Plan for Disaster Recovery may be, submitted in hard copy.) As 
additional information about uses of funds becomes available to the 
grantee, the grantee must enter such detail into DRGR, in sufficient 
detail to serve as the basis for acceptable performance reports.
    b. Each grantee must submit a quarterly performance report, as HUD 
prescribes, no later than 30 days following each calendar quarter, 
beginning after the first full calendar quarter after grant award and 
continuing until all funds have been expended and all expenditures 
reported. Each quarterly report will include information about the uses 
of funds during the applicable quarter including (but not limited to) 
the project name, activity, location, and national objective; funds 
budgeted, obligated, drawn down, and expended; the funding source and 
total amount of any non-CDBG disaster funds; beginning and ending dates 
of activities; and performance measures such as numbers of low- and 
moderate-income persons or households benefiting. Quarterly reports to 
HUD must be submitted using HUD's Internet-based DRGR system and, 
within 3 days of submission, be posted on the grantee's official 
Internet site open to the public.
    15. Use of subrecipients. The following alternative requirement 
applies for any activity that a state carries out directly by funding a 
subrecipient:
    a. 24 CFR 570.503, except that specific references to 24 CFR parts 
84 and 85 need not be included in subrecipient agreements.
    b. 24 CFR 570.502(b), except that HUD recommends but does not 
require application of the requirements of 24 CFR part 84.
    16. Recordkeeping. Recognizing that the state may carry out 
activities directly, 24 CFR 570.490(b) is waived in such a case and the 
following alternative provision shall apply: State records. The state 
shall establish and maintain such records as may be necessary to 
facilitate review and audit by HUD of the state's administration of 
CDBG disaster recovery funds under 24 CFR 570.493. Consistent with 
applicable statutes, regulations, waivers and alternative requirements, 
and other federal requirements, the content of records maintained by 
the state shall be sufficient to: enable HUD to make the applicable 
determinations described at 24 CFR 570.493; make compliance 
determinations for activities carried out directly by the state; and 
show how activities funded are consistent with the descriptions of 
activities proposed for

[[Page 7253]]

funding in the Action Plan. For fair housing and equal opportunity 
purposes, and as applicable, such records shall include data on the 
racial, ethnic, and gender characteristics of persons who are 
applicants for, participants in, or beneficiaries of the program.
    17. Change of use of real property. This waiver conforms the change 
of use of real property rule to the waiver allowing a state to carry 
out activities directly. For purposes of this program, in 24 CFR 
570.489(j), (j)(1), and the last sentence of (j)(2), ``unit of general 
local government'' shall be read as ``unit of general local government 
or state.''
    18. Responsibility for state review and handling of noncompliance. 
This change conforms the rule with the waiver allowing the state to 
carry out activities directly. 24 CFR 570.492 is waived and the 
following alternative requirement applies: The state shall make reviews 
and audits, including on-site reviews of any subrecipients, designated 
public agencies, and units of general local government, as may be 
necessary or appropriate to meet the requirements of section 104(e)(2) 
of the HCD Act, as amended, as modified by this 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 
designated public agencies or units of general local governments and 
for its subrecipients.
    19. Housing-related eligibility waivers. 42 U.S.C. 5305(a) is 
waived to the extent necessary to allow homeownership assistance for 
households with up to 120 percent of area median income and downpayment 
assistance for up to 100 percent of the down payment (42 U.S.C. 
5305(a)(24)(D)) and to allow new housing construction.
    20. Waiver and modification of the job relocation clause to permit 
assistance to help a business return. 42 U.S.C. 5305(h) and 24 CFR 
570.482 are hereby waived only to allow the grantee to provide 
assistance under this grant to any business that was operating in the 
covered disaster area before the incident date of the applicable 
disaster and has since moved, in whole or in part, from the affected 
area to another state or to a labor market area within the same state 
to continue business.

Relocation Requirements

    21. Waiver of one-for-one replacement of units damage