Allocations and Common Application and Reporting Waivers Granted to and Alternative Requirements for Community Development Block Grant (CDBG) Disaster Recovery Grantees Under the Supplemental Appropriations Act, 2010 (Pub. L. 111-212), 69097-69112 [2010-28421]

Agencies

• DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Federal Register Volume 75, Number 217 (Wednesday, November 10, 2010)]
[Notices]
[Pages 69097-69112]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-28421]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Docket No. FR-5452-N-01]


Allocations and Common Application and Reporting Waivers Granted 
to and Alternative Requirements for Community Development Block Grant 
(CDBG) Disaster Recovery Grantees Under the Supplemental Appropriations 
Act, 2010 (Pub. L. 111-212)

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 allocation of CDBG 
disaster recovery funds for the purpose of assisting the recovery 
efforts in areas 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 severe storms and flooding that 
occurred from March through May, 2010. 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 upon the request of a grantee. 
Therefore, this Notice describes applicable waivers and alternative 
requirements, as well as the application process, eligibility 
requirements, and relevant statutory provisions for grants provided 
under this Notice.

DATES: Effective Date: November 15, 2010.

FOR FURTHER INFORMATION CONTACT: Scott Davis, 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 Mr. Davis at 202-401-2044. (Except for the 
``800'' number, these telephone numbers are not toll-free.)

SUPPLEMENTARY INFORMATION:

Authority To Grant Waivers

    The Supplemental Appropriations Act, 2010 (Pub. L. 111-212, 
approved July 29, 2010) appropriates $100 million, 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 severe storms 
and flooding from March 2010 through May 2010 for which the President 
declared a major disaster covering an entire State, or States with more 
than 20 counties declared major disasters, under title IV of the Robert 
T. Stafford Disaster Relief and Emergency Assistance Act of 1974 (42 
U.S.C. 5121 et seq.).
    The Supplemental Appropriations Act authorizes the Secretary to 
waive, or specify alternative requirements for any provision of any 
statute or regulation that the Secretary administers in connection with 
the obligation by the Secretary, or use by the recipient, of these 
funds and guarantees, except for requirements related to fair housing, 
nondiscrimination, labor standards, and the environment (including 
requirements concerning lead-based paint), upon: (1) A request by the 
grantee explaining why such a waiver is required to facilitate the use 
of such funds or guarantees, and (2) 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). 
Regulatory waiver authority is also provided by 24 CFR 5.110, 91.600, 
and 570.5.
    The Secretary finds that the following waivers and alternative 
requirements, as described below, are necessary to facilitate the use 
of these 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 Supplemental Appropriations 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.

Allocations

    This Notice makes available $50 million of the $100 million 
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 severe storms 
and flooding that occurred from March 2010 through May 2010, for which 
the President declared a major disaster covering an entire State, or 
States with more than 20 counties declared major disasters, under title 
IV of the Robert T. Stafford Disaster Relief and Emergency Assistance 
Act of 1974 (42 U.S.C. 5121 et seq.).
    The Supplemental Appropriations Act further notes:

    That funds shall be awarded directly to the State or unit of 
general local government at the discretion of the Secretary * * * 
Provided further, that funds allocated under this heading shall not 
adversely affect the amount of any formula assistance received by a 
State or subdivision thereof under the Community Development Fund: 
Provided further, that a State or subdivision thereof may use up to 
5 percent of its allocation for administrative costs * * *

    Almost all of the prior appropriations to the CDBG disaster 
recovery program have required funds to be administered through an 
entity or entities designated by the Governor of each State. In 
contrast, the Supplemental Appropriations Act, 2010, states that funds 
may be awarded directly to a State or unit of general local government, 
at the discretion of the Secretary. Based on the eligible date range 
specified by Congress,

[[Page 69098]]

communities affected by the relevant disasters, and estimates of unmet 
need, HUD has determined that, in addition to Tennessee, Rhode Island, 
and Kentucky, multiple units of general local government will also 
receive a direct allocation under today's Notice. Therefore, except as 
described in this Notice, statutory and regulatory provisions governing 
the State CDBG program shall apply to any State receiving an allocation 
under this Notice, while statutory and regulatory provisions governing 
the CDBG entitlement program shall apply to any unit of general local 
government receiving a direct allocation in this Notice. Applicable 
State and entitlement regulations can be found at 24 CFR part 570. 
Unless noted otherwise, the term ``grantee'' refers to any grantee--
whether State, city, or county--receiving a direct award under this 
Notice.
    HUD computes allocations based on data that are generally available 
and that cover all the eligible affected areas. As a result, HUD is 
making the following allocations in today's Notice:

                               Table 1--Initial Allocations Under Pub. L. 111-212
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              Disaster No.                          State                      Grantee              Allocation
----------------------------------------------------------------------------------------------------------------
1912...................................  Kentucky..................  State Government..........      $13,000,000
1894...................................  Rhode Island..............  City of Cranston..........        1,277,067
1894...................................  Rhode Island..............  City of Warwick...........        2,787,697
1894...................................  Rhode Island..............  State Government..........        8,935,237
1909...................................  Tennessee.................  City of Memphis...........        2,031,645
1909...................................  Tennessee.................  Nashville-Davidson County.       10,731,831
1909...................................  Tennessee.................  Shelby County.............        1,212,788
1909...................................  Tennessee.................  State Government..........       10,023,735
                                                                                                ----------------
    Total..............................  ..........................  ..........................       50,000,000
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    Please see Appendix A for a complete description of the allocation 
methodology.
    Subsequent to this Notice, HUD will make a final review of long-
term disaster recovery needs for all States or subdivisions thereof 
affected by the disasters that occurred between March and May, 2010, to 
allocate the remaining $50 million. This review will include unmet 
housing, infrastructure, and economic revitalization needs.
    The Supplemental Appropriations Act requires funds to be used only 
for specific purposes. The statute directs that each grantee will 
describe, in an Action Plan for Disaster Recovery, criteria for 
eligibility and how the use of the grant funds will address long-term 
recovery, and restoration of infrastructure, housing, and economic 
revitalization. HUD will monitor compliance with this directive and may 
disallow expenditures if it finds that funds duplicate other benefits 
or do not meet a statutory purpose. 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.
    As provided for in the Supplemental Appropriations Act, funds may 
be used as a matching requirement, share, or contribution for any other 
Federal program. However, 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.

Prevention of Fraud, Abuse, and Duplication of Benefits

    To prevent fraud, abuse of funds, and duplication of benefits under 
the Supplemental Appropriations Act, this Notice includes specific 
reporting, written procedures, monitoring, and internal audit 
requirements applicable to each grantee. Please see the note regarding 
duplication of benefits at paragraph 27. Also see paragraph 5, sections 
B-D, under ``Applicable Rules, Statutes, Waivers, and Alternative 
Requirements; Pre-Grant Process,'' for these requirements. In addition, 
the Department will: (1) Institute risk analysis and on-site monitoring 
of grantee management of the grants and of the specific uses of funds, 
(2) be extremely cautious in considering any waiver related to basic 
financial management requirements; the standard, time-tested CDBG 
financial requirements will continue to apply, and (3) collaborate 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 grantee under 
today's Notice may request additional waivers from the Department as 
needed to address specific needs related to its recovery activities. 
The Department will respond to requests for waivers of provisions not 
covered in this Notice, after working with the grantee to tailor its 
program(s) to best meet its disaster recovery needs.
    Each grantee under today's Notice receives an annual CDBG 
allocation, and therefore has a consolidated plan, citizen 
participation plan, monitoring plan, and has made CDBG certifications. 
To facilitate the timeliness of assistance, and expedite community 
recovery, HUD encourages each grantee to carry out its CDBG disaster 
recovery activities, to the extent possible, in the context of its 
ongoing community development programs (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 Supplemental Appropriations Act, 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.
    The following application and reporting waivers and alternative 
requirements are in response to requests from each grantee under this 
Notice.

Application for Allocations Under the Supplemental Appropriations Act, 
2010

    These waivers and alternative requirements streamline the pre-grant 
process and set guidelines for each

[[Page 69099]]

grantee's application. HUD encourages each grantee that receives an 
allocation to submit an Action Plan for Disaster Recovery to HUD as 
soon as practicable following this Notice. Please see paragraph 5 under 
``Applicable Rules, Statutes, Waivers, and Alternative Requirements; 
Pre-Grant Process,'' for more detailed information regarding the Action 
Plan requirements.

Overall Benefit to Low- and Moderate-Income Persons

    The primary objective of Title I of the HCD Act and of the funding 
program of each grantee is the ``development of viable urban 
communities, by providing decent housing and a suitable living 
environment and expanding economic opportunities, principally for 
persons of low and moderate income.'' 42 U.S.C. 5301(c). The statute 
goes on to require that 70 percent of the aggregate of a regular CDBG 
program's funds be used to support activities benefitting low- and 
moderate-income persons. Many communities that have suffered a 
Presidentially-declared disaster find this target difficult, if not 
impossible, to reach. Furthermore, previous disasters, and disasters 
covered by the Supplemental Appropriations Act, 2010, affect entire 
communities regardless of income, often causing extensive damage to 
community structures, housing occupied by persons and families of 
varying incomes, and infrastructure. Disaster-affected communities are 
also often faced with the dissolution, or relocation of income-
producing jobs.
    Therefore, today's Notice provides grantees with greater 
flexibility to carry out recovery activities and grants 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 regular CDBG programs.
    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.

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 CDBG disaster recovery supplemental 
appropriations. HUD believes that, in using statutory language similar 
to that used for prior CDBG supplemental appropriations, 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.
    Please note that any city or county receiving a direct award under 
today's Notice will be subject to the standard entitlement regulations. 
Thus, the waiver and alternative requirement allowing a State to carry 
out activities directly are inapplicable and unnecessary.

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 an 
entitlement community. 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, a State taking advantage 
of the waiver to carry out activities directly must follow the 
alternative requirements drawn from the CDBG entitlement rule and 
specified in this Notice whenever using a subrecipient. Any city or 
county receiving a direct award under today's Notice is subject to the 
standard CDBG entitlement regulations regarding subrecipients.

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 strategic plan 
priorities (and the full consolidated plan) following the disaster. At 
that time, the grantee should also update its Analysis of Impediments, 
so that it more accurately reflects the impacts of 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 Supplemental Appropriations Act. 
Where possible, the Action Plan for Disaster Recovery, including 
certifications, should not repeat common action-plan elements the 
grantee has already committed to carry out as part of its annual CDBG 
submission.
    Any grantee receiving an allocation under this Notice will be 
responsible for compliance with Federal requirements. During the course 
of the grant, HUD will monitor the grantee's actions and use of funds 
for consistency with the Action Plan. The grantee 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. An Action 
Plan may also be amended to modify activities.

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 grant 
recipient levels for public hearings or meetings as the method for 
disseminating information or collecting citizen comments.
    The CDBG program normally requires a grantee to solicit comments 
from its citizens for at least 30 days 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 
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

[[Page 69100]]

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 grantee's official Web site 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 through the Department's Disaster Recovery Grant Reporting 
(DRGR) system, or by mailing/e[dash]mailing a paper copy);
     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 agreement;
     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 enters the Action 
Plan into 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.
    The Department expects each grantee to make a reasonable effort to 
notify all affected citizens that the Action Plan is available for 
comment. Examples of a reasonable effort include electronic mailings, 
press releases, statements by public officials, media advertisements, 
and personal contacts with neighborhood representatives. 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, including persons with 
disabilities. In addition, each grantee must ensure that program 
information is available in the appropriate languages for the 
geographic area served by the jurisdiction. This issue may be 
particularly applicable to States receiving an award under this Notice. 
Unlike grantees in the regular State CDBG program, State grantees under 
today's Notice may make grants throughout the State, including into 
CDBG entitlement areas if these entitlements are included in a relevant 
disaster declaration. Thus, State CDBG staff may not be aware of 
limited-English-proficient (LEP) speaking populations in those 
metropolitan jurisdictions. For assistance in ensuring that this 
information is available to LEP populations, recipients should consult 
the Final Guidance to Federal Financial Assistance Recipients Regarding 
Title VI, Prohibition Against National Origin Discrimination Affecting 
Limited English Proficient Persons published on January 22, 2007, in 
the Federal Register (72 FR 2732).

Administration Limitation

    For all State grantees under today's Notice, the annual State CDBG 
program administration requirements must be modified to be consistent 
with the Supplemental Appropriations 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 general 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 any State 
grantee to the extent that they cap administration expenditures and 
require a dollar-for-dollar match of State funds for administrative 
costs exceeding $100,000. However, a State under today's Notice may 
fund planning activities that exceed the 5 percent limitation on 
general administrative costs. HUD does not waive 24 CFR 570.489(a)(3), 
which allows a State to spend up to 20 percent of its total allocation 
on a combination of planning and program administration costs.
    Any city or county receiving a direct award under today's Notice is 
also subject to the 5 percent administrative cap. This 5 percent 
applies to all administrative costs--whether incurred by the grantee or 
its subrecipients. However, the provisions at 24 CFR 570.200(g) allow a 
city or county to fund planning activities that may exceed the 5 
percent general administration cap. Thus, similar to a State grantee, a 
city or county receiving a direct allocation under today's Notice is 
allowed to spend 20 percent of its total allocation on a combination of 
planning and program administration costs.

Planning

    The annual State CDBG program requires that local government grant 
recipients for planning-only grants must document that the use of funds 
meets a national objective. In the State CDBG program, these planning 
grants are typically used for individual project plans. By contrast, 
planning activities carried out by entitlement communities are more 
likely to include non-project specific plans such as functional land-
use plans, master plans, historic preservation plans, comprehensive 
plans, community recovery plans, development of housing codes, zoning 
ordinances, and neighborhood plans. These plans may guide long-term 
community development efforts comprising multiple activities funded by 
multiple sources. In the annual entitlement program, these more general 
stand-alone planning activities are presumed to meet a national 
objective under the requirements at 24 CFR 570.208(d)(4). The 
Department notes that almost all effective CDBG disaster 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. Therefore, for State grantees 
receiving an award under this Notice, the Department is removing the 
eligibility requirements at 24 CFR 570.483(b)(5) or (c)(3). Instead, 
States must comply with 24 CFR 570.208(d)(4) when funding disaster 
recovery-assisted planning-only grants, or directly administering 
planning activities that guide recovery in accordance with the 
Supplemental Appropriations Act. 24 CFR 570.208(d)(4) will apply to any 
city or county receiving a direct allocation under this Notice.

Reporting

    HUD is waiving the annual reporting requirement. In the alternative 
and to ensure consistency between grants allocated under today's Notice 
and grants allocated previously under the CDBG disaster recovery 
program, HUD is requiring quarterly reports from each grantee on the 
uses of the awarded funds, the funded activities, and other various 
aspects. HUD will use many of the data elements 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, 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 DRGR to record obligations and to make 
draws of funds from the line of credit established for each grant. HUD 
will use transactional data from DRGR, and grantee reports, to: (1) 
Monitor for anomalies or performance problems that suggest fraud, abuse 
of funds, and duplication of benefits; (2) reconcile

[[Page 69101]]

budgets, obligations, funding draws, and expenditures; (3) calculate 
applicable administrative and public service limitations and the 
overall percent of benefit to low- and moderate-income persons; and (4) 
report to Congress and the public. Furthermore, the grantee reports and 
DRGR will be used 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 business days of the report's submission to HUD.

Eligibility--Housing Related

    The broadening of the Section 105(a)(24) of the 1974 Act, and a 
waiver of Section 105(a) is necessary following major disasters in 
which large numbers of affordable housing units have been damaged or 
destroyed, as is the case of the disasters eligible under this Notice. 
Thus, in accordance with the grantees' requests, the following is 
eligible: New housing construction, 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. These 
modifications will allow each grantee to implement mixed-use housing 
recovery programs included in its HUD-accepted action plan.
    In addition, Metropolitan Nashville and Davidson County has stated 
that it may be necessary for the community to offer incentives to 
promote suitable housing development or resettlement in accordance with 
its comprehensive recovery plan. Generally, incentives are offered in 
addition to other programs or funding (such as insurance), to try to 
influence individual residential location decisions, when these 
decisions are in doubt. For example, a grantee may offer an incentive 
payment (possibly in addition to buyouts) for households that volunteer 
to relocate within a particular period of time, or who choose to 
resettle outside a 100- or 500-year floodplain.
    In the past, the State of New York successfully used an incentive 
program to induce rapid and stable resettlement of lower Manhattan 
following September 11, 2001. Also, the city of Grand Forks, North 
Dakota, provided a very affordable soft-second loan as an incentive to 
help induce households to resettle within the city during its recovery. 
Therefore, Metropolitan Nashville and Davidson County may provide 
housing incentives so long as it maintains documentation, at least at a 
programmatic level, describing how the amount of assistance was 
determined to be necessary and reasonable. The Department is waiving 42 
U.S.C. 5305(a) and associated regulations to make this use of grant 
funds eligible. Please note that this waiver does not permit a 
compensation program. Additionally, if the Entitlement grantee requires 
the incentives to be used for a particular purpose by the household 
receiving the assistance, then the activity will be that required use, 
and not considered as an incentive.

Eligibility--Emergency Grant Payments

    Upon its request, HUD is waiving 42 U.S.C. 5305(a) so that 
Metropolitan Nashville and Davidson County may extend interim mortgage 
assistance to qualified individuals for up to 20 months. Several 
hundred families are in the position of paying a mortgage and rent 
while awaiting reconstruction or the implementation of a FEMA-funded 
hazard mitigation program. Thus, this interim assistance will be 
critical for many households facing financial hardship.

Eligibility--Buildings for the General Conduct of Government

    Grantees under this Notice (except for the State of Tennessee) have 
requested a limited waiver of the prohibition on funding buildings for 
the general conduct of government. HUD has considered the request and 
agrees that it is consistent with the overall purposes of the 1974 Act 
for each requesting grantee to be able to use the grant funds under 
this notice to repair or reconstruct buildings used for the general 
conduct of government. Provided that the building is selected in 
accordance with the method described in the grantee's Action Plan for 
Disaster Recovery, and it has been determined that the building has 
substantial value in promoting disaster recovery. However, as stated by 
the Supplemental Appropriations Act, funds allocated under today's 
Notice may not be used for activities reimbursable by, or for which 
funds are made available by, FEMA or the Army Corps of Engineers.

Anti-Pirating

    The limited waiver of the job relocation requirements allows a 
grantee to provide assistance to a business located in another State, 
or another labor market area within the same State, if the business was 
displaced from a declared area and wishes to return. This waiver is 
necessary to allow a grantee affected by a major disaster to 
reestablish and rebuild its employment base. This waiver will not apply 
to the City of Cranston.

Relocation Requirements

    The grantees have indicated that they plan to engage in, or wish to 
facilitate, 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 grantees believe these waivers will more effectively 
assist 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 
government-wide 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 severe storms and 
flooding that occurred from March through May, 2010.
    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 
authority to acquire by 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

[[Page 69102]]

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 this waiver would impede disaster recovery whenever 
TBRA program subsidies are available but funds for cash relocation 
assistance are limited. This waiver gives grantees 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. In the alternative, the grantee must establish and 
offer 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 
and provide alternative requirements in this case 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 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.
    Some disaster recovery CDBG funds may be used to support programs 
receiving FEMA funding, e.g. buyouts and relocation activities. 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

    The waivers and alternative requirements pertaining to program 
income are most significant for State grantees under this Notice. Prior 
to 2002, program income earned on disaster recovery grants was usually 
considered program income in accordance with the rules of the regular 
State CDBG program of the applicable grantee. As a result, the funds 
lost their disaster recovery identity, and thereby lost use of the 
waivers and streamlined alternative requirements.
    The HCD Act provides that a unit of general local government in 
receipt of CDBG funds from a State can retain program income if it uses 
the funds for additional eligible activities under the annual CDBG 
program; although the Act also states that under certain circumstances, 
a State may require the program income to be returned.
    This Notice waives the existing statute and regulations to give 
each State grantee, in all circumstances, the choice of whether a unit 
of general 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.
    Additionally, this Notice addresses the use of program income for 
both State grantees, and units of general local government receiving a 
direct allocation under today's Notice. Any program income to the 
disaster recovery grant generated by activities undertaken directly by 
the grantee or its agent(s) will retain the original disaster recovery 
grant's alternative requirements and waivers and remain under the 
grantee's discretion until grant closeout. At closeout, any program 
income on hand or received subsequently will become program income to 
the grantee's annual CDBG program. The alternative requirements provide 
all the necessary conforming changes to the program income regulations.

Economic Development

    Grantees under today's Notice (except for Shelby County) have asked 
to apply individual salaries or wages-per-job and the income limits for 
a household of one when documenting the national objective for business 
assistance activities. This method would replace the usual CDBG 
standard of total household income and income limits by total household 
size. The grantees have asserted that this proposed documentation would 
be simpler and quicker for participating lenders to administer, easier 
to verify, and would not misrepresent the amount of low- and moderate-
income benefit provided. Upon consideration, HUD is granting this 
waiver. CDBG disaster recovery grantees received this waiver following 
September 11, 2001, the Gulf Coast hurricanes of 2005, and the 
Presidentially-declared 2008 disasters. Due to the significant breadth 
of many State and local economic development programs, this waiver will 
play a key role in streamlining the documentation process because it 
allows collection of wage data for each position created or retained 
from the assisted businesses, rather than from each individual 
household.
    In addition to national objective documentation, grantees under 
today's

[[Page 69103]]

Notice (except for the State of Tennessee) have requested a waiver of 
the standard public benefit provisions. The public benefit provisions 
set standards for individual economic development activities (such as a 
single loan to a business) and for economic development activities in 
the annual aggregate. Currently, public benefit standards limit the 
amount of CDBG assistance per job retained or created, or the amount of 
CDBG assistance per low- and moderate-income person to which goods or 
services are provided by the activity. These dollar thresholds were set 
more than a decade ago and, under disaster recovery conditions (which 
often require a larger investment to achieve a given result), can 
impede recovery by limiting the amount of assistance the grantee may 
provide to a critical activity. Requesting grantees will make public in 
their Action Plans the disaster recovery needs each activity is 
addressing and the public benefits expected.
    After consideration, today's Federal Register Notice waives the 
public benefit standards for the cited activities, except that each 
grantee requesting the waiver shall report and maintain documentation 
on the creation and retention of: (a) Total jobs, (b) number of jobs 
within certain salary ranges, (c) the average amount of assistance per 
job by activity or program, and (d) the types of jobs. As a conforming 
change for the same activities or programs, HUD is also waiving 
paragraph (g) of 24 CFR 570.482 and paragraph (c) of 24 CFR 570.209 to 
the extent these provisions are related to public benefit.

Certifications

    HUD is waiving the standard CDBG certifications and substituting an 
alternative requirement for certifications that are tailored to the 
CDBG disaster recovery grants.

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

    Unless stated otherwise, the following waivers and alternative 
requirements apply to any State or unit of general local government 
receiving a direct award under this Notice.
    1. General note. Prerequisites to a grantee's receipt of CDBG 
disaster recovery assistance include: (1) Adoption of a citizen 
participation plan; (2) publication of a proposed Action Plan for 
Disaster Recovery; (3) public notice and comment; and (4) submission to 
HUD of an Action Plan for Disaster Recovery, including certifications. 
Except as described in this Notice, statutory and regulatory provisions 
governing the State CDBG program shall apply to any State receiving an 
allocation under this Notice, while statutory and regulatory provisions 
governing the CDBG entitlement program shall apply to any unit of 
general local government receiving a direct allocation in this Notice. 
Applicable statutory provisions can be found at 42 U.S.C. 5301 et seq. 
Applicable State and entitlement provisions can be found at 24 CFR part 
570.
    2. Overall benefit waiver and alternative requirement. The 
requirements at 42 U.S.C. 5301(c), 42 U.S.C. 5304(b)(3)(A), 24 CFR 
570.484, and 24 CFR 570.200(a)(3), 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 a grant's funds are for 
activities that principally benefit low-and moderate-income persons.
    3. Direct grant administration and means of carrying out eligible 
activities--applicable to State grantees only. 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 
grantee through its employees, or through procurement contracts, or 
through loans or grants under agreements with subrecipients. 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, 24 
CFR 91.325(a)(5), and 24 CFR 91.225(a)(5), that housing activities 
undertaken with CDBG funds be consistent with the consolidated 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, is also waived. These waivers apply only until 
the grantee first updates its strategic plan priorities (and the full 
consolidated plan) following the disaster. At that time, the grantee 
must also update its Analysis of Impediments, so that it more 
accurately reflects the impacts of the disaster.
    5. 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, 24 CFR 91.220, and 24 CFR 
91.320 are waived for these disaster recovery grants. Each State or 
unit of general local government receiving a direct award under this 
Notice 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 it will promote sound short- and long-term recovery 
planning at the State (if applicable) and local levels, especially 
land-use decisions that reflect responsible flood plain management, 
removal of regulatory barriers to reconstruction, and coordination with 
planning requirements of other local, State and Federal programs and 
entities;
    (2) How it will leverage CDBG disaster recovery funds with funding 
provided by other HUD programs, FEMA (and specifically the Hazard 
Mitigation Grant Program), the Small Business Administration, the Army 
Corps of Engineers, the U.S. Department of Agriculture, and other 
State, local, private, and non-profit sources to generate a more 
effective and comprehensive recovery;
    (3) How it will encourage construction methods that emphasize high 
quality, durability, energy efficiency, sustainability, and mold 
resistance, including how it will support adoption and enforcement of 
modern building codes and mitigation of flood risk, where appropriate; 
and
    (4) How it 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(e) or 24 CFR 
91.215(e) (as applicable);
    C. Monitoring standards and procedures that are sufficient to 
ensure program requirements, including nonduplication of benefits, are 
met and

[[Page 69104]]

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 grantee will take to avoid or 
mitigate occurrences of fraud, abuse, and mismanagement, especially 
with respect to accounting, procurement, and accountability. Also, a 
description of how it 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. Projected uses of funds.
    (1) Funds awarded to a State; method of distribution. A State's 
method of distribution shall describe the method of allocating funds to 
units of local government and descriptions of specific programs or 
projects the State will carry out directly, as applicable. The 
descriptions will include:
    (a) When funds are allocated to units of local government, all 
criteria used to distribute funds, including: (1) The relative 
importance of each criterion, (2) a description of how the disaster 
recovery grant resources will be allocated among all funding 
categories, and (3) the threshold factors and grant size limits that 
are to be applied; and
    (b) The projected uses for the CDBG disaster recovery funds, by 
responsible entity, activity, and geographic area, when the State 
carries out an activity directly;
    (c) 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), and/or restoration of 
infrastructure, housing, and economic revitalization.
    (2) Funds awarded directly to a unit of general local government. 
The unit of local government shall describe specific programs and 
projects it will carry out. The Action Plan will describe:
    (a) How the disaster recovery grant resources will be allocated and 
the relative importance of all criteria by which projects are selected; 
and
    (b) The threshold factors and grant size limits that are to be 
applied; and
    (c) The projected uses for the CDBG disaster recovery funds, by 
responsible entity, activity, and geographic area; and
    (d) How the 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.
    (3) Clarity of Action Plan. All grantees must include sufficient 
information so that citizens, units of general local government (where 
applicable), 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 grantee. If a grantee 
submits an action plan that includes sufficient detail and clarity for 
only a portion of the allocation, HUD may still issue a grant agreement 
for the entire grant amount. However, HUD will restrict access to the 
portion of the funds for which the grantee has not clearly described 
eligible activities.
    6. Citizen participation waiver and alternative requirement. 
Provisions of 42 U.S.C. 5304(a)(2) and (3), 42 U.S.C. 12707, 24 CFR 
570.486, 24 CFR 91.105(b), 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 a State, entitlement, 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 
a grant administered under this Notice 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. Each grantee will specify in its Action Plan 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. Prior to submission of a substantial 
amendment, the grantee is encouraged to work with the Department to 
ensure the proposed change is consistent with this Notice, and all 
applicable regulations and Federal law.
    C. The grantee must notify HUD, but is not required to notify the 
public, when it makes any plan amendment that is not substantial. The 
Department may acknowledge receipt of the notification via e-mail 
within 5 business days.
    D. The grantee must consider all comments received on the Action 
Plan or any substantial amendment. A summary of the comments and the 
grantee's response to each must be submitted to HUD with the Action 
Plan or substantial amendment.
    E. 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.
    F. The grantee will provide a timely written response to every 
citizen complaint. The response will be provided within 15 working days 
of the receipt of the complaint, if practicable.
    7. Modify requirement for consultation with local governments--
applicable to State grantees only. Currently, the statute and 
regulations require consultation with affected units of local 
government in the non-entitlement areas 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 any State receiving an allocation under 
this Notice consult with all disaster-affected units of general local 
government, including any CDBG-entitlement communities, in determining 
the use of funds.
    8. Note on change to administration limitation. Up to 5 percent of 
the grant amount may be used for administrative costs.

[[Page 69105]]

    A. 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.
    B. Any city or county receiving a direct award under today's Notice 
is also subject to the 5 percent administrative cap. This 5 percent 
applies to all administrative costs--whether incurred by the grantee or 
its subrecipients. To the extent necessary, HUD retains the provisions 
of 24 CFR 570.200(g) which allow a city or county to fund planning 
activities that may exceed the 5 percent general administration cap. 
Thus, similar to a State grantee, a city or county receiving a direct 
allocation under today's Notice is ultimately limited to spending 20 
percent of its total allocation on a combination of planning and 
program administration costs.
    9. Planning activities. For CDBG disaster recovery-assisted general 
planning activities that will guide recovery in accordance with the 
Supplemental Appropriations Act, the State CDBG program rules at 24 CFR 
570.483(b)(5) and (c)(3) are waived and the presumption at 24 CFR 
570.208(d)(4) applies for any State grantee under this Notice. 24 CFR 
570.208(d)(4) will apply to any unit of general local government that 
receives a direct allocation under this Notice.
    10. Waiver and alternative requirement for distribution to CDBG 
metropolitan cities and urban counties--applicable to State grantees 
only.
    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 UGLGs 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 local government located in 
entitlement areas, and to State or federally recognized Indian tribes. 
Instead, the State is required 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.
    11. Use of subrecipients--applicable to State grantees only. 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(a), in instances where a State's subrecipients 
are governmental entities, except that HUD recommends, but does not 
require, application of the requirements at 24 CFR part 85.
    C. 24 CFR 570.502(b), in instances where a State's subrecipients 
are not governmental entities, except that HUD recommends, but does not 
require, application of the requirements at 24 CFR part 84.
    12. Recordkeeping--applicable to State grantees only. 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: 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 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.
    13. Change of use of real property--applicable to State grantees 
only. 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 .''
    14. Responsibility for review and handling of noncompliance --
applicable to State grantees only. This change is in conformance with 
the waiver allowing the 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 under this Notice: The State shall 
make reviews and audits, including onsite 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.
    15. 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