Notice of National Disaster Resilience Competition Grant Requirements, 36557-36580 [2016-13430]

Agencies

• DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Federal Register Volume 81, Number 109 (Tuesday, June 7, 2016)]
[Notices]
[Pages 36557-36580]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-13430]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Docket No. FR-5936-N-01]


Notice of National Disaster Resilience Competition Grant 
Requirements

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

ACTION: Notice.

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SUMMARY: This notice lists the awardees of Phase 2 of the National 
Disaster Resilience Competition (NDRC). The NDRC was conducted in 
accordance with Notice of Funding Availability (NOFA) FR-5800-N-29A2, 
published on grants.gov (Primary CFDA Number 14.272, last modified June 
25, 2015). Awardees have been allocated $999,108,000 made available 
pursuant to the Disaster Relief Appropriations Act, 2013, Public Law 
113-2 (Appropriations Act). This notice also updates and republishes 
Appendix A to the NOFA, which states the requirements applicable to 
NDRC grant recipients, including applicable waivers and alternative 
requirements. HUD is publishing the post-award requirements of Appendix 
A in the Federal Register because the Appropriations Act requires HUD 
to publish waivers and alternative requirements in the Federal Register 
no later than 5 days before their effective date. The requirements of 
Appendix A will also be incorporated into the grant agreement between 
the Grantees and HUD. The updates to Appendix A included in this notice 
reflect necessary revisions to citations and requirements that have 
changed since the NOFA's publication, as a result of the Department's 
implementation of the Office of Management and Budget's (OMB) final 
guidance, Uniform Administrative Requirements, Cost Principles, and 
Audit Requirements for Federal Awards, through amendments to 24 CFR 
parts 84, 85, and 570.

DATES: Effective Date: June 7, 2016.

FOR FURTHER INFORMATION CONTACT: Stanley Gimont, Director, Office of 
Block Grant Assistance, Office of Community Planning and Development, 
Department of Housing and Urban Development, 451 Seventh Street SW., 
Room 7286, Washington, DC 20410, telephone number 202-708-3587 (this is 
not a toll-free number). Persons with hearing or speech impairments may 
access this number via TTY by calling the Federal Relay Service at 800-
877-8339. Fax inquiries may be sent to Mr. Gimont at 202-401-2044.

SUPPLEMENTARY INFORMATION:

Table of Contents

Section 1: Program Background and Purpose
Section 2: List of Awards
Section 3: CDBG-NDR Program Requirements
    I. Use of Funds
    A. General
    B. Action Plan, Amendments, and Benefit Cost Analysis
    C. Applicable Statutory and Regulatory Requirements
    II. Timely Expenditure of Funds, and Prevention of Fraud, Abuse, 
and Duplication of Benefits
    A. Statutory Expenditure Deadline
    B. Secretary's Certifications and Grantee Submissions
    C. Duplication of Benefits Requirements
    III. Authority to Grant Waivers
    IV. Overview of Grant Process
    V. Applicable Rules, Statutes, Waivers, and Alternative 
Requirements
    A. Grant Administration
    B. Common Eligibility Waivers and Alternative Requirements and 
Other Provisions: Housing, Floodplain Issues, Infrastructure, 
Economic Revitalization
    C. Certifications and Collection of Information
Section 4: Duration of Funding
Section 5: Catalog of Federal Domestic Assistance
Section 6: Finding of No Significant Impact

Section 1:  Program Background and Purpose:

    NDRC awardees identified in this notice were allocated Community 
Development Block Grant National Resilient Disaster Recovery (CDBG-NDR) 
grant funds on a competitive basis. These funds were made available by 
the Appropriations Act for disaster recovery from major disasters 
declared under the Robert T. Stafford Disaster Relief and Emergency 
Assistance Act of 1974 (42 U.S.C. 5121 et seq.) (Stafford Act) in 2011, 
2012, and 2013. The Appropriations Act made available $16 billion in 
Community Development Block Grant Disaster Recovery (CDBG-DR) funds. On 
March 1, 2013, the President issued a sequestration order pursuant to 
section 251A of the Balanced Budget and Emergency Deficit Control Act, 
as amended (2 U.S.C. 901a), and reduced funding for CDBG disaster 
recovery grants under the Appropriations Act to $15.18 billion.
    HUD has not allocated other Appropriations Act funds competitively. 
As of September 2014, HUD had allocated or set aside approximately $13 
billion-$14 billion in response to Hurricane Sandy, and Tropical Storms 
Irene and Lee; $514 million in response to disasters occurring in 2011 
or 2012; and $654 million in response to other 2013 disasters. The 
Department determined that the data available for the earliest 
disasters eligible under the Appropriations Act no longer credibly 
represented additional current unmet needs (beyond those for which HUD 
had already allocated funding by formula) to support a formula 
allocation method for the remaining funding. No other reasonably 
current data sources common to all possible eligible jurisdictions 
existed at the time of the allocation. Because the law directs that 
CDBG-DR assistance must flow to the Most Impacted and Distressed areas 
with unmet recovery and revitalization needs related to the effects of 
a covered major disaster, HUD decided that a competition framework 
would work best to elicit the data needed to inform allocation choices, 
and ensure that the unmet disaster recovery and revitalization needs of 
communities around the country were appropriately considered.
    To comply with statutory direction that CDBG-NDR funds be used for 
disaster-related expenses in the Most Impacted and Distressed areas 
related to the Qualified Disaster, HUD has required that Grantees 
address unmet needs in areas identified in the Grantee's approved 
application and accepted by HUD as ``Most Impacted

[[Page 36558]]

and Distressed'' as a result of the effects of the Qualified Disaster.
    The Appropriations Act requires funds to be used only for specific 
disaster recovery related purposes. The Appropriations Act also 
requires that, prior to the obligation of CDBG-NDR funds, a Grantee 
shall submit a plan detailing the proposed use of funds, including 
criteria for eligibility and how the use of these funds will address 
disaster relief, long-term recovery, restoration of infrastructure and 
housing, and economic revitalization in the Most Impacted and 
Distressed areas. This Action Plan is discussed in section 3.I.B, 
``Action Plan, Amendments, and Benefit Cost Analysis,'' below.
    Allowable costs for CDBG-NDR funds under this appropriation include 
only those expenses necessary to meet the Unmet Recovery Needs of the 
Most Impacted and Distressed target area(s), but once the necessary 
Tie-Back is established for a Project, it could be designed to also 
meet other community development objectives and economic revitalization 
needs, including greater Resilience to address the negative effects of 
climate change. Tie-Back to the Qualifying Disaster was established for 
CDBG-NDR projects by demonstrating a logical link to addressing Unmet 
Recovery Needs from the Qualifying Disaster. Under this competition, 
HUD awarded points for leverage, long-term commitments, and regional 
coordination. The most competitive proposals, however, brought other 
resources and commitments to bear beyond the CDBG-NDR request to 
enhance Resilience beyond the Most Impacted and Distressed target areas 
with Unmet Recovery Needs (MID-URN target areas).

Summary of Competition Details

    HUD has established six goals for the NDRC: First, to fairly 
allocate remaining Appropriation Act funds; second, to create multiple 
examples of local disaster recovery planning that apply science-based 
and forward-looking risk analysis to address recovery, Resilience, and 
revitalization needs; third, to leave a legacy of institutionalizing, 
in as many States and local jurisdictions as possible, the 
implementation of thoughtful, innovative, and resilient approaches to 
addressing future risks; fourth, to provide resources to help 
communities plan and implement disaster recovery that makes them more 
resilient to future threats or hazards, including extreme weather 
events and climate change, while also improving quality of life for 
existing residents and making communities more resilient to economic 
stresses or other shocks; fifth, to fully inform and engage community 
stakeholders about the current and projected impacts of climate change 
and to develop pathways to Resilience based on sound science; and 
sixth, to leverage investments from the philanthropic community to help 
communities define problems, set policy goals, explore options, and 
craft solutions to inform their own local and regional resilient 
recovery strategies. As with all CDBG assistance, the priority is on 
serving low- and moderate-income people.
    The NDRC applied elements of the Hurricane Sandy Task Force's 
rebuilding strategy to support Grantee efforts to build back stronger 
and more resilient through integrating comprehensive planning and 
investing in meaningful efforts in their recovery and revitalization. 
The Task Force was established by Executive Order 13632 (published in 
the Federal Register on December 14, 2012, at 77 FR 74341) to: (1) 
Ensure governmentwide and regionwide coordination was available to 
assist communities make decisions about long-term rebuilding and (2) 
develop a comprehensive rebuilding strategy.
    The NDRC bears some similarities to other Federal programs that 
address disaster recovery and threat and hazard mitigation. This 
similarity (and the distinctions noted below) is deliberate. The 
similarity allows States and local governments to invest CDBG-NDR funds 
to support or fill gaps to address unmet needs inaccessible or 
unaffordable to other Federal programs, and for which insurance and 
State, local, and other resources are unavailable. In addition, any 
similarity in program structure will enable lessons learned from the 
competition to potentially be transferable to other Federal programs. 
The distinctions, on the other hand, spring from the CDBG nature of the 
funding source, as directed in the congressional appropriation. Among 
major disaster recovery programs, CDBG is notable in its statutory 
focus on determining and meeting the unmet needs of vulnerable lower-
income people and communities and targeting the Most Impacted and 
Distressed areas. CDBG is also singular in its ability to consider a 
wide range of local community development objectives related to 
recovery and economic revitalization, including integrally related 
Resilience objectives. HUD intends that the most successful proposals 
from the competition will take advantage of these CDBG similarities and 
distinctions to envision and implement recovery Projects that serve 
multiple purposes and position recovering communities for a prosperous 
and more resilient future. To ensure programs harmonize and do not 
duplicate benefits, HUD required all Applicants to describe how they 
consult with or coordinate with funders of other proposed recovery and 
Resilience investments in the Most Impacted and Distressed target area 
and region. The CDBG context also leads naturally to requiring 
Resilience elements within recovery projects because it creates 
stability. Reducing current and future risk is essential to the long-
term economic well-being of communities and businesses. When a disaster 
chills local and regional economies, investments in anchor Projects to 
reduce risk and stimulate economic revitalization can be an essential 
part of any disaster recovery.
    Eligible Applicants. Eligible Applicants in Phase 1 were States 
with Qualified Disasters and units of general local government who 
received CDBG-DR funding from HUD for disasters occurring in 2011--2013 
(including Grantees under prior disaster recovery supplemental 
funding)--a total of 67 potential Applicants (See Appendix B to the 
NOFA for a list of eligible Applicants). HUD set aside $181 million for 
applications serving Hurricane Sandy Qualified Disasters in the States 
of New York and New Jersey and in New York City, due to the 
catastrophic level of damage caused in those areas from Hurricane Sandy 
and tropical storms in 2011. Note that HUD reserved the right to fund 
applications out of rank order to ensure geographic diversity of 
funding. For the same reason, HUD also reserved the right to partially 
fund an application(s). To ensure HUD had complete understanding on how 
to scale down Projects, each Phase 2 Applicant was required to identify 
any phasing or scalability inherent in its proposal. Those invited to 
submit applications for Phase 2 should have developed proposals with 
scalable options to the degree possible and practicable, and were 
required to ensure that each component proposed for CDBG-NDR funding 
had independent utility.
    Successful completion of Phase 1 was a threshold requirement for 
eligible Applicants for Phase 2.
    Phase 1: Framing Unmet Recovery Needs, Vulnerabilities, and 
Community Development Objectives (Closed). During Phase 1 (the framing 
phase) of the NDRC, Applicants consulted with stakeholders and 
comprehensively framed the recovery needs, relevant risks and 
vulnerabilities (current and future), and related community development 
opportunities in the target

[[Page 36559]]

geographic areas. Every fundable application had to first demonstrate a 
logical link, or Tie-Back, to addressing Unmet Recovery Needs stemming 
from the effects of the community's presidentially declared major 
disaster from 2011, 2012, or 2013. The other objectives, needs, or 
issues a Project would address were unique to the Applicant's 
community. For example, a community that suffered a flood might want to 
offer flood buyouts and property acquisition in the Most Impacted and 
Distressed areas, followed by restoration of a wetland to limit future 
flooding and provide a nature preserve or recreation area. A community 
that lost housing and a road during a mudslide might not only want to 
construct housing in a safer area for survivors, but also to find a 
financing mechanism for affected downstream businesses to survive the 
effects of the last event and be prepared for and recover more quickly 
from future hazards. Once the community framed the recovery need(s), 
identified current and future risks and vulnerabilities and noted 
community development opportunities, the Applicant had to identify and 
seek commitments from the public and private Partners it needs to 
develop and implement a solution, and develop a high level 
implementation idea. The Applicant's responses in Phase 1 described 
this framing process and its results, identified the Partners and other 
resources, and described the resulting resilient recovery concept or 
idea.
    The Phase 1 CDBG-NDR NOFA included criteria and deadlines for both 
this initial ``framing'' phase and the later ``implementation'' phase 
of the competition. Applicants had approximately 180 days from the 
Phase 1 CDBG-NDR NOFA publication to complete the framing process and 
to submit initial proposals stating in general terms the Applicant's 
vulnerability(ies), issue(s), community development objectives, team 
(meaning the Applicant, all Partners, and any other supporting 
entities), required threshold items, known obstacles, substantial 
consultation and citizen engagement (particularly with affected and 
Vulnerable Populations), and general information about Unmet Recovery 
Needs.
    After the 180-day deadline, HUD reviewed, rated, and provided 
detailed comments on each initial application that met all threshold 
requirements. HUD then ranked the applications by score and selected 
the qualifying Applicants for the Phase 2 application round.
    Phase 2: From Framing to Implementation (Closed). In the second 
phase of the competition (the implementation phase), the highest 
scoring Applicants from the first phase were invited to fully 
articulate a Resilience-enhancing disaster recovery or revitalization 
Project or program that addressed as many of the Phase 1 identified 
risks, vulnerabilities, and community development opportunities as 
feasible and compete for implementation funding. The best Projects 
demonstrated how the proposal or Project would help the community 
recover from the effects of the covered disaster, advance community 
development objectives such as economic revitalization, and improve the 
community's ability to absorb or rapidly recover from the effects of a 
future extreme event, stress, threat, hazard, or other shocks. The 
proposed Phase 2 Project could be a pilot for the overall Phase 1 
solution, could be limited to the CDBG-NDR-eligible portion of a Phase 
1 concept that would benefit a geography larger than the Most Impacted 
and Distressed target area, or could be a stand-alone portion of a 
Project idea envisaged in Phase 1 that could take years or decades to 
completely realize. In any case, the Phase 2 Project could not be 
contingent on actions outside the scope of the Project to provide a 
defined level of protection against the threat(s) and hazard(s) 
identified, meet a CDBG-NDR national objective, or comply with program 
requirements as described in this notice. The Applicant was asked to 
explain how the Phase 2 proposal logically arises from the Phase 1 
framing.
    In Phase 2, each Applicant completed a benefit cost analysis (BCA) 
for any Covered Project(s), as described in the NOFA. Although the 
required completion of a BCA is new to CDBG disaster recovery, Rebuild 
by Design competitors completed BCAs and the analysis process helped 
improve the final proposals. The Federal Emergency Management Agency 
(FEMA) and U.S. Department of Transportation (DOT) also employ BCAs in 
reviewing applications for major Projects, and cost efficiency analysis 
is employed in reviews of environmental impact and consideration of 
alternatives. The CDBG-NDR BCA provided a sense of the cost efficiency 
of the proposal, but the BCA score was not used alone to rate soundness 
of approach. HUD recognizes that the benefits and costs may be 
difficult or impossible to comprehensively quantify, but, regardless of 
a proposed Project's scale, HUD did not fund any Phase 2 activities for 
which the benefits to the Applicant's community, and to the United 
States as a whole, were not demonstrated by the evidence submitted to 
justify the costs. Appendix H to the NOFA provided guidance on 
completing an acceptable BCA. Note that quantifying or otherwise 
accounting for social and ecological benefits and costs were a critical 
component, as was consideration of all related resources, including 
leverage, and the benefits and costs of long-term commitments under 
Factor 5.
    Some of the resources provided to CDBG Grantees to support 
completion of the environmental reviews required under 24 CFR part 58 
are also useful sources of information for a benefit-cost analysis. 
Consideration of these resources at an early stage in a Project may 
help speed the required environmental reviews. Applicants were strongly 
encouraged to integrate general and Project planning with the 
environmental review process, and to coordinate these reviews under the 
Unified Federal Review (UFR) process, where possible and as 
appropriate. The Applicant could have used public outreach meetings not 
only to seek Phase 1 planning input and Phase 2 Project comments or to 
meet the consultation requirement of the NDRC competition, but also to 
inform the public about environmental effects of different design 
approaches or of a proposed Project and its alternatives. Examples of 
required outreach included scoping for the National Environmental 
Policy Act, notices and evaluation in compliance with Executive Orders 
11988 and 11990 (the 8-step decision process for floodplain management 
and wetlands protection), and consultation for section 106 of the 
National Historic Preservation Act (54 U.S.C. 306108). The Applicant 
engagement plan was to include strategies to ensure that vulnerable and 
underserved populations are involved throughout the planning and 
decisionmaking processes, including outreach and engagement of low-
income and minority populations in furtherance of the Department's 
environmental justice obligations under Executive Order 12,898. This 
informs decisionmakers of the widest possible range of needs and 
options. Meaningful engagement and participation ensures the highest 
probability of success for all stakeholders.
    After HUD provided comments on the initial Phase 1 submissions, 
each continuing Applicant had approximately 120 days in Phase 2 to 
develop a final submission. HUD considered soundness of approach, 
needs, capacity, leverage, and long-term commitment at this phase. 
Leverage in this phase could have included

[[Page 36560]]

traditional financial and some types of in-kind contributions. The 
application must also have included the supporting actions undertaken 
by the Applicant locally (e.g., building code updates, executive 
orders, zoning revisions, comprehensive and mitigation plan linkages, 
interagency partnerships, financing mechanisms, or completing and 
adopting a forward-looking communitywide Resilience assessment and 
plan) to better position the Applicant to be more resilient to future 
threat(s) and hazard(s).
    Following submission of the Phase 2 applications, HUD and Federal 
agency partners reviewed, rated, and ranked the applications in 
accordance with the published criteria. HUD then determined the Phase 2 
awards as published in this notice.
Selection of Awardees
    HUD considered for funding any completed Phase 2 application that 
met all thresholds and received at least 75 percent of the total points 
available in Phase 2. The applicable postaward requirements that were 
included in Appendix A to the NOFA are updated in this notice and apply 
to awards described herein. These postaward grant management 
requirements are, insofar as feasible, identical to those imposed under 
the notices published for grants made under the formula allocations 
under the Appropriations Act.
    In both phases, HUD required thoughtful, evidence-based practice, 
incorporating consideration of the latest findings regarding the range 
of possible effects of climate change and other risks on the target 
geography during the useful life of any proposed Project. Many of the 
communities eligible to apply had already been subject to repetitive or 
increasingly severe disaster events and their community and regional 
plans, built environment, building codes, and design/construction 
practices may not yet have adjusted to enhance community Resilience to 
expected threat(s) and hazard(s) based on the best available data and 
science. Planning for an investment in a structure or improvement 
intended to endure and remain in service through its useful life must 
involve detailed consideration of the context in which the structure 
will be placed: The expected intensity and frequency of wind, rain, 
fire, flooding, snow loads, earthquake, drought conditions, and effects 
of climate change, for example and as relevant, should all influence 
community investment and policy decisions.
    States and local governments were strongly encouraged to take or 
commit to Resilience-enhancing actions to protect their communities 
from threat(s) and hazard(s), as well as to ensure the useful life of 
their Projects under changing conditions, including future risk caused 
by climate change. Taking or committing to actions enhanced the 
competitiveness of Phase 1 and 2 proposals. HUD only invited an 
Applicant to Phase 2 if it had at least committed to taking a permanent 
Resilience-enhancing action, and HUD awarded points in Phase 2 to 
Applicants that have or will implement significant Resilience-enhancing 
action(s), such as updating State and local building codes, zoning, 
hazard mitigation, consolidated or comprehensive plans (including area-
specific plans), and other ordinances or matters within the span of 
control of the Applicant and public sector Partners. Such improvements 
may have included coordination or merger of local plans or requirements 
in a way that will clearly enhance Resilience, such as hazard 
mitigation assessments and plans incorporated into forward-looking 
comprehensive plans updated to consider future impacts from climate 
change. Only significant updates made or major actions taken after the 
date of the Qualified Disaster were considered in responding to Factor 
5: Regional Coordination and Long-Term Commitment. If such changes were 
planned for completion within one year of grant award, Applicants could 
include them in this factor only if they also submitted, as an 
attachment to their application, a hard commitment to complete the 
changes by a specified date (see the Long-term Commitment Factor of 
Phase 2 for details). Applicants were required to identify leveraging 
funds to pay for costs attributable to any portion of a proposed 
Project (including any mitigating action) that was not necessary to 
meet Unmet Recovery Needs in the Most Impacted and Distressed area 
resulting from a Qualified Disaster.

Section 2: NDRC Awards

    The following awards have been made to Applicants for funding a 
portion of their Application. The components of the Applications for 
which CDBG-NDR funds may be used will be identified in grant agreements 
between HUD and the following CDBG-NDR awardees:

------------------------------------------------------------------------
                                                          Total CDBG-NDR
                      NDRC awardees                            award
------------------------------------------------------------------------
Connecticut.............................................     $54,277,359
New Orleans, LA.........................................     141,260,569
Iowa....................................................      96,887,177
New York City, NY.......................................     176,000,000
Louisiana...............................................      92,629,249
Springfield, MA.........................................      17,056,880
Tennessee...............................................      44,502,374
Virginia................................................     120,549,000
Shelby County, TN.......................................      60,445,163
Minot, ND...............................................      74,340,770
California..............................................      70,359,459
New York State..........................................      35,800,000
New Jersey..............................................      15,000,000
                                                         ---------------
  Total.................................................     999,108,000
------------------------------------------------------------------------

Section 3: CDBG-NDR Program Requirements

    This notice contains the postaward requirements applicable to CDBG 
funds made available by the Appropriations Act and awarded under the 
NDRC as CDBG-NDR grants. This notice supersedes Appendix A to the NOFA 
and updates the CDBG-NDR program requirements to reflect HUD's recent 
regulatory amendments to implement Federal uniform requirements.
    The Appropriations Act provides that funds shall be awarded 
directly to a State or unit of general local government (local 
government) at the discretion of the Secretary. A State or local 
government recipient of a CDBG-NDR grant is a ``Grantee,'' as defined 
by the NOFA. Other terms in this notice are defined in the NOFA, and 
the definitions in the NOFA are expressly incorporated and made a part 
of this notice and continue to apply in the post-award period.

I. Use of Funds

A. General

    The Appropriations Act made funds available for necessary expenses 
related to disaster relief, long-term recovery, restoration of 
infrastructure and housing, and economic revitalization in the Most 
Impacted and Distressed areas resulting from a major disaster declared 
pursuant to the Stafford Act, due to Hurricane Sandy and other eligible 
events in calendar years 2011, 2012, and 2013. The Appropriations Act 
requires funds to be used only for these specific disaster-related 
purposes.

B. Action Plan, Amendments, and Benefit Cost Analysis

    The Appropriations Act requires that, prior to the obligation of 
funds by HUD, a Grantee shall submit a plan detailing the proposed use 
of funds, including criteria for eligibility and how the use of these 
funds will address disaster relief, long-term recovery, restoration of 
infrastructure, and housing and economic revitalization in the Most 
Impacted and Distressed areas. For purposes of awards made in response 
to Phase 2 submissions under the NOFA,

[[Page 36561]]

the Grantee's Phase 1 and Phase 2 submissions for this competition, 
constitute, together, the action plan required by the Appropriations 
Act.
    Following execution of a grant agreement, the Grantee will publish 
on its Web site the action plan (DRGR Action Plan) contained in HUD's 
Disaster Recovery and Grant Reporting system (DRGR) that reflects the 
components funded through the CDBG-NDR grant. HUD will provide 
clarifying guidance as to the content and format of the DRGR Action 
Plan, which will help ensure clear communication of CDBG-NDR activities 
to the public.
    A Grantee may amend the Action Plan, but must receive prior HUD 
approval for substantial amendments to the plan. Before making any 
substantial amendment to the Action Plan, a Grantee must follow the 
same citizen participation requirements required by the NOFA for the 
preparation and submission of an NDRC application. Additionally, HUD 
must agree in writing that the substantially amended Application would 
still score in the fundable range for the competition based on the 
rating factors in the NOFA. Additional information about substantial 
amendments can be found in section 3.V.A.3 below.
    With the exception of general administration of the CDBG-NDR grant, 
the Grantee may only use CDBG-NDR funds to carry out or plan for the 
HUD approved components of a Grantee's Phase 2 activities for which the 
Grantee has submitted to HUD, and HUD has approved, an analysis of the 
activity's benefits and costs. For Covered Projects, as described in 
the NOFA, HUD has not approved the analysis if the benefits to the 
Applicant's community, and to the United States as a whole, are not 
demonstrated by the evidence submitted to justify the costs. Appendix H 
to the NOFA and the CDBG-NDR NOFA provided guidance on completing an 
acceptable BCA. For Applicants proposing a program rather than a 
specific Covered Project, HUD's acceptance of such a program-level BCA 
was not an approval of the Project- or activity-level analysis itself, 
which HUD will reserve the right to review after award through the 
Grant Terms and Conditions. A ``program'' for purposes of the BCA 
refers to a set of related measures or activities with a particular 
long-term goal or objective. A program is implemented by a specified 
agency that uses defined policies and procedures to select Projects or 
activities to assist.

C. Applicable Statutory and Regulatory Requirements

    1. General. All recipients of CDBG-NDR grants are subject to: (1) 
The requirements of the Appropriations Act; (2) portions of the Fiscal 
Year (FY) 2014 General Section of the Department's broader NOFA (as 
amended) and the NOFA (including appendices) made applicable by the 
grant agreement and this notice; and (3) applicable regulations 
governing the CDBG program at 24 CFR part 570, unless modified by 
waivers and alternative requirements published in this notice or other 
applicable Federal Register notices and; (4) the requirements of the 
grant agreement governing the CDBG-NDR award.
    2. Uniform Requirements. Grantees are subject to the revised 
Uniform Administrative Requirements, Cost Principles, and Audit 
Requirements for Federal Awards (Uniform Requirements). On December 26, 
2013, the OMB published (at 78 FR 78608) the final Uniform 
Requirements, which are codified at 2 CFR part 200. HUD adopted the 
Uniform Requirements at 2 CFR part 2400. HUD published conforming 
changes to its CDBG program regulations on December 7, 2015 (80 FR 
75931), that updated CDBG program regulations to reflect references to 
appropriate sections of 2 CFR part 200. The effective date of HUD's 
conforming rule is January 6, 2016.
    3. Other PostAward Requirements, including incorporated sections of 
the Fiscal Year 2014 General Section of the Department's Broader NOFA, 
as Amended:
     Incorporated Sections of the General Section. HUD is 
incorporating portions of the FY 2014 General Section to the 
Department's FY 2014 NOFAs for Discretionary Programs (General 
Section), as amended by the technical correction to HUD's General 
Section to the Department's FY 2014 NOFAs for Discretionary Programs 
(technical correction), relevant to the award of CDBG-NDR funds. 
Grantees must adhere to the requirements of the sections of the General 
Section, as amended by the technical correction, identified in the NOFA 
under the heading ``1. Applicable Requirements of the General Section 
(as modified by the Technical Correction to the General Section).'' 
Other requirements of the General Section are superseded by the 
requirements applicable to the use of CDBG-NDR funds identified in this 
notice and in the grant agreement.
     System for Award Management. Grantees must have a valid, 
active registration in the System for Award Management (SAM).
     False Statements. A false statement in an application is 
grounds for denial or termination of an award and possible punishment, 
as provided in 18 U.S.C. 1001.
     Conducting Business in Accordance with Ethical Standards/
Code of Conduct. Grantees must adhere to the conflict of interest 
requirements of 2 CFR part 570. In addition, local governments and 
States that have adopted the Uniform Requirements are required to 
develop and maintain a written standards of conduct as required by 2 
CFR 200.318.
     Equal Access to HUD-assisted or HUD-insured Housing. The 
Department is committed to ensuring that its programs are open to all 
eligible individuals and families regardless of sexual orientation, 
gender identity, or marital status. HUD funding recipients and 
subrecipients must comply with 24 CFR 5.105(a)(2) in connection with 
determining eligibility for housing assisted with HUD funds or subject 
to an FHA-insured mortgage, and in connection with making such housing 
available. This includes making eligibility determinations and making 
housing available regardless of actual or perceived sexual orientation, 
gender identity, or marital status, and prohibiting inquiries about 
sexual orientation or gender identity for the purpose of making 
eligibility determinations or making housing available. Applicants are 
encouraged to become familiar with these requirements, HUD's 
definitions of sexual orientation and gender identity at 24 CFR 5.100, 
clarifications to HUD's definition of family at 24 CFR 5.403, and other 
regulatory changes made through HUD's Equal Access Rule, published in 
the Federal Register on February 3, 2012 at 77 FR 5662.
     Procurement of Recovered Materials. State agencies and 
agencies of a political subdivision of a State that are using 
assistance under a program NOFA for procurement, and any person 
contracting with such an agency with respect to work performed under an 
assisted contract, must comply with the requirements of section 6002 of 
the Solid Waste Disposal Act. In accordance with section 6002, these 
agencies and persons must procure items designated in guidelines of the 
Environmental Protection Agency (EPA) at 40 CFR part 247 that contain 
the highest percentage of recovered materials practicable, consistent 
with maintaining a satisfactory level of competition, where the 
purchase price of the item exceeds $10,000 or the value of the quantity

[[Page 36562]]

acquired in the preceding fiscal year exceeded $10,000; must procure 
solid waste management services in a manner that maximizes energy and 
resource recovery; and must have established an affirmative procurement 
program for procurement of recovered materials identified in the EPA 
guidelines. Please refer to 2 CFR 200.322 and to www.epa.gov/osw/conserve/tools/cpg/pdf/rcra-6002.pdf for complete text and requirements 
of section 6002.
     Compliance with the Federal Funding Accountability and 
Transparency Act of 2006 (Pub. L. 109-282) (Transparency Act), as 
Amended. Prime Grant Awardee Reporting. Prime recipients of the 
Department's financial assistance are required to report certain 
subawards in the Federal Funding Accountability and Transparency Act 
Subaward System (FSRS) Web site located at https://www.fsrs.gov/ or its 
successor system for all prime awards listed on the FSRS Web site. 
Starting with awards made October 1, 2010, prime financial assistance 
awardees receiving funds directly from the Department were required to 
report subawards and executive compensation information both for the 
prime award and subaward recipients, including awards made as pass-
through awards or awards to vendors, if the initial prime grant award 
is $25,000 or greater, or the cumulative prime grant award will be 
$25,000 or greater if funded incrementally, as directed by HUD in 
accordance with OMB guidance; and the subaward is $25,000 or greater, 
or the cumulative subaward will be $25,000 or greater. For reportable 
subawards, if executive compensation reporting is required and subaward 
recipients' executive compensation is reported through the SAM system, 
the prime recipient is not required to report this information. The 
reporting of award and subaward information is in accordance with the 
requirements of the Transparency Act, as amended by section 6202 of 
Public Law 110-252, and OMB Guidance issued to Federal agencies on 
September 14, 2010 (75 FR 55669), and in OMB policy guidance. Please 
refer to www.fsrs.gov for complete information on requirements under 
the Transparency Act and OMB guidance.
     Compliance with Section 872 of the Duncan Hunter National 
Defense Authorization Act for Fiscal Year 2009 (Pub. L. 110-417), 
(Section 872). Section 872 requires the establishment of a 
governmentwide data system (currently designated the Federal Awardee 
Performance and Integrity Information System) to contain information 
related to the integrity and performance of entities awarded Federal 
financial assistance. Federal officials will make use of this 
information in making awards. OMB published final guidance to implement 
this requirement on July 22, 2015, at 80 FR 43301, for Federal awards 
issued on or after January 1, 2016, that meet the thresholds described 
in the preamble to the OMB guidance. Grantees are required to comply 
with any guidance issued by HUD to implement OMB's rule.

II. Timely Expenditure of Funds and Prevention of Waste, Fraud, Abuse, 
and Duplication of Benefits

A. Statutory Expenditure Deadline and Period of Availability

1. Expenditure Deadline and Extensions
    The Appropriations Act requires that HUD obligate all CDBG-NDR 
funds not later than September 30, 2017. To further ensure the timely 
expenditure of funds, section 904(c) under Title IX of the 
Appropriations Act, requires that all funds be expended within 2 years 
of the date HUD obligates funds to a Grantee, unless the Grantee 
requests and HUD approves an extension to the deadline. Funds are 
obligated to a Grantee upon HUD's signing of the Grantee's CDBG-NDR 
grant agreement, or amended grant agreement, obligating funds. Grantees 
may request to obligate awarded funds in phases as established in a 
schedule submitted by the Grantee, provided all funds are obligated 
prior to September 30, 2017. Grantees must not draw down funds in 
advance of need, to attempt to comply with the expenditure deadline.
2. Extensions of the Expenditure Deadline
    For any portion of funds that the Grantee believes will not be 
expended by the deadline and that it desires to retain, the NOFA 
required the Grantee to submit a letter to HUD justifying why it is 
necessary to extend the deadline for a specific portion of funds. 
Appendix E to the NOFA also required Applicants to submit extension 
requests with the application if the Applicant submitted a schedule 
that indicated time needed for completion of the proposal exceeds 24 
months. Some Applicants submitted extension requests to HUD within 
their applications and such extensions were considered within the 
application review process. If granted, any extensions will be 
published in the Federal Register in a subsequent notice. Grantees that 
did not submit an extension request with their Applications may still 
submit a request. As required by Appendix E to the NOFA, the extension 
request must justify the need for the extension, detail the compelling 
legal, policy, or operational challenges necessitating the extension, 
and identify the date when the funds covered by the extension will be 
expended. The Grantee must justify how, under the proposed schedule, 
the Project will proceed in a timely manner. For example, large and 
complex infrastructure Projects are likely to require more than 24 
months to complete. An extension request for such a Project should 
justify the new timeline for any proposed extension by comparing it to 
completion timelines for other, similarly sized Projects.
    Grantees are advised that extensions of the 2-year expenditure 
deadline may not be granted. Any funds not expended by the deadline (or 
extended deadline, if an extension is approved) will be recaptured.
3. Cancelation of Grant Funds
    Although HUD has authority to grant extensions of the 24-month 
expenditure deadline, Grantees are advised that 31 U.S.C. 1552(a) 
continues to apply to funds appropriated under the Appropriations Act. 
Specifically, CDBG-DR funds are to remain available for expenditure for 
5 years following the period of availability for obligation. All funds 
under the Appropriations Act, including those subject to an extension 
of the expenditure deadline, must be expended by September 30, 2022. 
Any grant funds that have not been disbursed by September 30, 2022, 
will be canceled and will no longer be available for disbursement to 
the Grantee or for obligation or expenditure for any purpose.

B. Secretary's Certifications and Grantee Submissions

    The Appropriations Act requires the Secretary to certify, in 
advance of signing a grant agreement, that the awardee has in place 
proficient financial controls and procurement processes and has 
established adequate procedures to prevent any duplication of benefits 
as defined by section 312 of the Stafford Act, to ensure timely 
expenditure of funds, to maintain comprehensive Web sites regarding all 
disaster recovery activities assisted with these funds, and to detect 
and prevent waste, fraud, and abuse of funds.
    To provide a basis for the Secretary to make the certification, 
each awardee submitted the certification required in Appendix F of the 
NOFA, related to the requirements of Public Law 113-2. In addition, 
before HUD executes a grant agreement, each awardee will satisfactorily 
complete a Certification Checklist and submit required documentation 
that, in HUD's

[[Page 36563]]

determination, is sufficient to support the Secretary's certification. 
The Certification Checklist will be posted by HUD and sent to awardees 
following award announcement. A HUD representative will review the 
awardee's submission and complete the HUD portion of the Certification 
Checklist. Failure to submit the checklist and documentation within 30 
days of the effective date of this notice may result in the 
cancellation of the award selection.
    To enable the Secretary to make the certification, each awardee 
must submit the items listed below to their designated HUD 
representative, in addition to submitting the Certification Checklist. 
Grant agreements will not be executed until HUD has issued a 
certification in response to the awardee's submission.
    (1) Financial Control Checklist. An awardee has in place proficient 
financial controls at the time of the Secretary's certification if each 
of the following criteria is satisfied.
    (a) The awardee submits its most recent single audit and annual 
financial statement, and the submission indicates that the awardee has 
no material weaknesses, deficiencies, or concerns that HUD considers to 
be relevant to the financial management of the CDBG program. If the 
single audit or annual financial statement identified weaknesses or 
deficiencies, the awardee must provide documentation showing how those 
weaknesses have been removed or are being addressed; and
    (b) With its completed checklist, the awardee must submit the Guide 
for Review of Financial Management, as modified, to support the 
financial controls certification required for Grantees by Public Law 
113-2 (Pub. L. 113-2 Financial Management Guide). The completed Public 
Law 113-2 Financial Management Guide must demonstrate that the 
financial standards are complete and conform to the requirements of the 
guide. The awardee must identify which sections of its financial 
standards address each of the questions in Public Law 113-2 Financial 
Management Guide and which personnel or unit is responsible for each 
checklist item.
    (2) Procurement. An awardee has in place a proficient procurement 
process if:
    (i) For local governments: The grantee will follow the specific 
applicable procurement standards identified in 2 CFR 200.318-200.326 
(subject to 2 CFR 200.110, as applicable). The grantee must provide a 
copy of its procurement standards and indicate the sections of its 
procurement standards that incorporate these provisions. The procedures 
should also indicate which personnel or unit is responsible for each 
item.
    (ii) For States: The grantee has adopted 2 CFR 200.318-200.326 
(subject to 2 CFR 200.110, as applicable), or the effect of grantee's 
procurement process/standards are equivalent to the effect of 
procurements under 2 CFR 200.318-200.326, meaning that they operate in 
a manner providing fair and open competition. The grantee must provide 
its procurement standards and indicate how the sections of its 
procurement standards align with the provisions of 2 CFR 200.318-
200.326, so that HUD may evaluate the overall effect of the grantee's 
procurement standards. The procedures should also indicate which 
personnel or unit is responsible for the task. Guidance on the 
procurement rules applicable to States is provided in section 3.V.A.21, 
of this notice. HUD will review this information and determine whether 
the standards, taken as a whole, are equivalent to the standards at 2 
CFR part 200, subpart D.
    (3) Duplication of Benefits. An awardee has adequate procedures to 
prevent the duplication of benefits if they contain uniform procedures 
for each of the following: verifying all sources of disaster 
assistance; determining a beneficiary's unmet need(s) before awarding 
assistance; and ensuring beneficiaries agree to repay the assistance if 
they later receive other disaster assistance for the same purpose. The 
procedures should also indicate which personnel or unit is responsible 
for the task. Duplication of benefits requirements applicable to the 
use of CDBG-NDR funds are discussed in section 3.II.C of this notice.
    (4) Adequate Procedures to Determine Timely Expenditures. An 
awardee has adequate procedures to determine timely expenditures if 
they contain uniform procedures that indicate how the awardee will 
track expenditures each month; how it will monitor expenditures of its 
recipients; how it will reprogram funds in a timely manner for 
activities that are stalled; and how it will project expenditures. The 
procedures should also indicate which personnel or unit is responsible 
for the task.
    (5) Procedures to Maintain Comprehensive Web sites Regarding All 
Disaster Recovery Activities Assisted with These Funds. An awardee has 
adequate procedures to maintain comprehensive Web sites regarding all 
disaster recovery activities if its procedures indicate that the 
awardee will have a separate page dedicated to its disaster recovery 
that will contain links to all Action Plans, including the DRGR Action 
Plan and portions required to be posted for citizen comment; Action 
Plan amendment; performance reports; citizen participation 
requirements; and activity/program information for activities described 
in the Action Plan. The procedures should also indicate the frequency 
of Web site updates and which personnel or unit is responsible for the 
task.
    (6) Procedures to Detect Fraud, Waste, and Abuse of Funds. An 
awardee has adequate procedures to detect fraud, waste, and abuse if 
its procedures indicate how the awardee will verify the accuracy of 
information provided by applicants; provide a monitoring policy 
indicating how and why monitoring is conducted, the frequency of 
monitoring, and which items are monitored; and indicate that the 
internal auditor has affirmed and described its role in detecting 
fraud, waste, and abuse.
    (7) Awardee Certification. As part of the submission of a complete 
Certification Checklist, the awardee is required to attest to the 
proficiency and adequacy of its controls.
    (8) Design. This notice amends the NOFA to clarify that prior to 
the Grantee's obligation of funds for construction, the Grantee will 
demonstrate that the engineering design for a Project is feasible, 
prior to obligation of funds by the Grantee for construction. This 
demonstration is satisfied if a registered professional engineer (or 
other design professional) certifies that the design meets the 
appropriate code or industry design and construction standards.
    (9) Continuing Obligation Related to Certification. After 
submitting materials necessary to support the Secretary's certification 
and the grant agreement is signed, Grantees have continuing 
obligations. HUD may request an update to the Grantee's certification 
submission each time the Grantee submits a substantial Action Plan 
amendment, or if HUD has reason to believe the Grantee has made 
material changes to the Grantee's support for its certifications.
    Grantees must submit to the Department, for approval, an update to 
the program schedule (projection of expenditures) and milestones 
(outcomes) included in the application response to the Phase 2, Factor 
3, Soundness of Approach rating. The projections must be based on each 
quarter's expected performance--beginning the quarter in which funds 
are available to the Grantee and continuing each quarter until all 
funds are expended. Each Grantee must also include these projected 
expenditures

[[Page 36564]]

and outcomes in activity set-up in the DRGR system within 90 days of 
the grant award letter. The information in the DRGR system (contained 
in the DRGR Action Plan) must be amended to reflect any subsequent 
changes, updates, or revision of the projections. Any subsequent 
changes, updates, or revision of the projections must receive written 
approval from HUD. Amending Action Plans solely to accommodate changes 
to the timeline for projected expenditures does not fall within the 
definition of substantial amendment and is not subject to citizen 
participation requirements.
    Guidance on the preparation of projections is available on HUD's 
Web site under the heading Office of Community Planning and Development 
Disaster Recovery Assistance (commonly known as the CPD Disaster 
Recovery Web site). The projections will enable HUD, the public, and 
the Grantee, to track proposed versus actual performance. HUD will make 
the DRGR Action Plan and performance reports available on the DRGR 
Public Data Portal at https://drgr.hud.gov/public/.
    Additionally, following execution of a grant agreement, the DRGR 
Action Plan that reflects the components funded through the CDBG-NDR 
grant must be posted on the Grantee's Web site.
    Additional information on the DRGR system requirements can be found 
in section V.A.2 below.
    Grantees are also required to ensure all contracts (with 
subrecipients, recipients, and contractors) clearly stipulate the 
period of performance or the date of completion. In addition, Grantees 
must enter expected contract completion dates for each activity in the 
DRGR system. When target dates are not met, Grantees are required to 
explain why in the activity narrative in the system.
    Other reporting, procedural, and monitoring requirements are 
discussed under ``Grant Administration'' in section 3.V.A of this 
notice. The Department will institute risk analysis and on-site 
monitoring of Grantee management, as well as collaborate with the HUD 
Office of Inspector General to plan and implement oversight of these 
funds.

C. Duplication of Benefits Requirements

    Duplication of benefits requirements in section 312 of the Stafford 
Act and in the Appropriations Act apply to the use of CDBG-NDR funds. 
To help prevent the duplication of benefits, HUD published a notice in 
the Federal Register on November 16, 2011, at 76 FR 71060. The 
Department published additional guidance on July 25, 2013, titled 
``Guidance on Duplication of Benefit Requirements and Provision of 
CDBG-DR Assistance.'' The steps and actions described in the November 
2011 and the July 2013 guidance documents are mandatory requirements 
applicable to the use of CDBG-NDR funds.

III. Authority To Grant Waivers

    The Appropriations Act authorizes the Secretary to waive, or 
specify alternative requirements for, any provision of any statute or 
regulation that the Secretary administers in connection with the 
obligation by the Secretary or the use by the recipient of these funds 
(except for requirements related to fair housing, nondiscrimination, 
labor standards, and the environment). Waivers and alternative 
requirements are based upon a determination by the Secretary that good 
cause exists and that the waiver or alternative requirement is not 
inconsistent with the overall purposes of title I of the Housing and 
Community Development Act of 1974, as amended (HCD Act). Regulatory 
waiver authority is also provided by 24 CFR 5.110, 91.600, and 570.5.

IV. Overview of Grant Process

    To begin expenditure of CDBG-NDR funds, the following expedited 
steps are necessary:
     If the application is selected for award, HUD sends an 
initial allocation letter notifying the Applicant that it has been 
selected for funding. HUD subsequently sends a grant award letter 
outlining next steps before the award is effective, and transmitting 
the unsigned grant agreement and grant conditions.
     Within 30 days of the effective date of this notice, 
awardee submits evidence, as described in section 3.II of this notice, 
that it has in place proficient financial controls and procurement 
processes and has established adequate procedures to prevent any 
duplication of benefits as defined by section 312 of the Stafford Act; 
ensure timely expenditure of funds; maintain comprehensive Web sites 
regarding all disaster recovery activities assisted with these funds; 
and detect and prevent waste, fraud, and abuse of funds.
     Once the Certification Checklist is completed and HUD 
determines that submissions are sufficient, the Secretary makes the 
certification required by the Appropriations Act.
     Grantee signs and returns the grant agreement.
     HUD signs the grant agreement and establishes the proper 
amount in a line of credit for the Grantee (this triggers the 2-year 
expenditure deadline for any funds obligated by this grant agreement).
     Grantee requests and receives DRGR system access (if the 
Grantee does not already have it).
     Grantee enters the activities from its application into 
the DRGR system that reflect the components funded through the CDBG-NDR 
grant (as contained in the DRGR Action Plan), submits it to HUD within 
the system (funds can be drawn from the line of credit only for 
activities that are established in DRGR System, and publishes on its 
Web site the DRGR Action Plan.
     The Grantee may draw down funds from the line of credit 
after the responsible entity completes applicable environmental 
review(s) pursuant to 24 CFR part 58 (or section 3.V.A.20 of this 
notice) and, as applicable, receives from HUD or the State an approved 
Request for Release of Funds and certification.
     Grantee begins to draw down funds within 60 days of 
receiving access to its line of credit.
     Grantee amends its published Action Plan to include any 
updates to its projection of expenditures and outcomes within 90 days 
of the date of the grant award letter.

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

    This section of the notice describes requirements imposed by the 
Appropriations Act, applicable waivers, and alternative requirements. 
For each waiver and alternative requirement described in this notice, 
the Secretary has determined that good cause exists and the action is 
not inconsistent with the overall purpose of the HCD Act.
    The waivers and alternative requirements provide additional 
flexibility in program design and implementation to support full and 
swift resilient disaster recovery, while meeting the unique 
requirements of the Appropriations Act. The following requirements 
apply only to the CDBG-NDR funds awarded under the NOFA, and not to 
funds provided under any other component of the CDBG program, such as 
the annual formula Entitlement or State and Small Cities programs, 
Section 108 Loan Guarantee Program, the Neighborhood Stabilization 
Program, any prior CDBG disaster recovery appropriation, or any formula 
award under the Appropriations Act.
    The NOFA required Applicants to submit waiver requests necessary to 
carry out an activity described in their applications (Phase 1 or Phase 
2). HUD anticipates that Grantees may encounter changing conditions or 
other good cause that justifies requesting a new or modified waiver or 
alternative

[[Page 36565]]

requirement after the award. Therefore, Grantees may request additional 
waivers and alternative requirements from the Department as needed to 
address specific needs related to their recovery activities.
    An overall benefit waiver request may be made by submitting a 
detailed justification that, at a minimum: (a) Identifies how the 
disaster-related needs of the low- and moderate-income population in 
the declared disaster area were sufficiently addressed by other means, 
or that the needs of non-low- and non-moderate-income persons are 
disproportionately greater by a significant margin, and that the 
jurisdiction lacks other resources to serve the needs of non-low- and 
non-moderate-income individuals; (b) describes proposed activity(ies) 
and/or program(s) that will be affected by the alternative requirement, 
including their proposed location(s) and role(s) in the Grantee's long-
term disaster recovery plan; and (c) describes how the activities/
programs identified in (b) prevent the Grantee from meeting the 50 
percent requirement. For any other waiver or alternative requirement 
request, Grantees must submit a written request that includes: the 
requirement to be waived and, if applicable, the alternative 
requirement to be added (meaning how the current requirement should be 
altered); a detailed statement of how the request is necessary to 
address Unmet Recovery Needs; the demographics of the population to be 
assisted; and a statement of alternative approaches considered to 
eliminate the need for a waiver.
    Except where noted, waivers and alternative requirements described 
below apply to all Grantees under this notice. Under the requirements 
of the Appropriations Act, regulatory waivers must be published in the 
Federal Register no later than 5 days before the effective date of such 
waiver.
    Except as described in this notice, statutory and regulatory 
provisions governing the State CDBG program shall apply to any State 
Grantee, while statutory and regulatory provisions governing the 
Entitlement CDBG program shall apply to local government Grantees. 
Applicable statutory provisions can be found at 42 U.S.C. 5301 et seq. 
Applicable State and Entitlement regulations can be found at 24 CFR 
part 570.
    All references in the NOFA and in this notice pertaining to 
timelines and/or deadlines are in terms of calendar days, unless 
otherwise noted. All references to ``substantial improvement'' shall be 
as defined in the HUD regulations at 24 CFR 55.2, unless otherwise 
noted.

A. Grant Administration

    1. Application for CDBG-NDR Waiver and Alternative Requirement. The 
requirements for CDBG actions plans, located 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), 
and 24 CFR 91.220 and 91.320 are waived for funds provided under the 
NOFA. Instead, HUD required each Grantee to submit an application for 
CDBG-NDR, and the Applicant's Phase 1 and Phase 2 submissions for this 
competition together constitute an Action Plan required under Public 
Law 113-2. HUD notes that 24 CFR 570.304 and 24 CFR 570.485, to the 
extent they govern annual formula CDBG grant approvals, do not apply to 
National Disaster Resilience Competition (NDRC) allocations, but the 
standard of review of certifications continues to apply to Grantee 
certifications. HUD will monitor the Grantee's activities and use of 
funds for consistency with its approved Action Plan and all other 
requirements, including performance and timeliness. Per the 
Appropriations Act, and in addition to the requirements at 24 CFR 
91.500, the Secretary may disapprove a substantial amendment to an 
Action Plan (application) if it is determined that the amended 
application does not satisfy all of the required elements identified in 
the NOFA, including in this notice, or the application would not score 
in the fundable range based on the rating factors in the NOFA. However, 
in reviewing substantial amendments, HUD will not penalize Grantees for 
scaling and scoping decisions made by HUD as part of the NDRC award 
selection process.
    a. Action Plan-related Requirements. The application was required 
to meet the criteria of the NOFA and identify the proposed use(s) of 
the Grantee's allocation, including criteria for eligibility, and how 
the uses address long-term recovery needs. Because HUD may not obligate 
Appropriations Act funds after September 30, 2017, the last date that 
Grantees may submit an amendment that would involve obligation of 
awarded funds by HUD is June 1, 2017. The requirement to expend funds 
within 2 years of the date of obligation will be enforced relative to 
the activities funded under each obligation, as applicable. All 
proposed amendments must address an unmet need in a Most Impacted and 
Distressed area, as established in the Action Plan or the proposed 
amendment, using the methodology required by the NOFA. The Grantee must 
develop a policy describing (a) how it will promote sound, sustainable 
long-term recovery planning informed by a post-disaster evaluation of 
hazard risk, especially land-use decisions that reflect responsible 
flood plain management and take into account possible sea level rise; 
and (b) how it will coordinate with other local and regional planning 
efforts to ensure consistency.
    In addition, grantees must adopt and meet the following minimum 
elevation or floodproofing requirements, applicable to all grantees 
receiving funds pursuant to the Appropriations Act. In order to better 
ensure a sustainable long-term recovery, grantees must elevate (or may, 
for certain nonresidential structures as described below, floodproof) 
new construction and substantially improved structures one foot higher 
than the latest Federal Emergency Management Agency (FEMA) issued base 
flood elevation. This standard was made after considering the history 
of FEMA flood mitigation efforts. This higher elevation also takes into 
account projected sea level rise, which is not considered in current 
FEMA maps and National Flood Insurance Program premiums, which will 
potentially rise as FEMA Flood Insurance Rate Maps that take Hurricane 
Sandy into account are issued.
    Each grantee must not use grant funds for any activity in an area 
delineated as a special flood hazard area, or equivalent, in FEMA's 
most recent and current data source unless it also ensures that the 
action is designed or modified to minimize harm to or within the 
floodplain. At a minimum, actions to minimize harm must include 
elevating or floodproofing new construction and substantial 
improvements to one foot above the base flood elevation and otherwise 
acting in accordance with Executive Order 11988 and 24 CFR part 55. The 
relevant data source and best available data under Executive Order 
11988 is the latest issued FEMA data or guidance, which includes 
advisory data (such as Advisory Base Flood Elevations) or preliminary 
and final Flood Insurance Rate Maps.
    Executive Order 11988, on floodplain management, requires that 
Federal agencies use the best available flood data to determine the 
location of projects and activities. In addition, best available flood 
risk data must be used to determine requirements for reconstruction, 
and the elevation of structures for grants funding (in whole or part) 
new construction and substantial improvements, as defined at 24 CFR 
55.2(b)(8). If a new construction

[[Page 36566]]

or substantial improvement project or activity is located in a 
floodplain, the lowest floor must be designed using the base flood 
elevation, determined in accordance with the best available data, plus 
one foot as the baseline standard for elevation. If higher elevations 
are required by locally adopted code or standards, those higher 
standards would apply.
    Instead of elevating nonresidential structures that are not 
critical actions as defined at 24 CFR 55.2(b)(2), grantees may design 
and construct the project such that, below the flood level, the 
structure is floodproofed using the best available flood data plus one 
foot. Floodproofing requires structures to be water tight with walls 
substantially impermeable to the passage of water and with structural 
components having the capability of resisting hydrostatic loads, 
hydrodynamic loads, the effects of buoyancy or higher standards 
required by the FEMA National Flood Insurance Program, as well as State 
and locally adopted codes. All mixed-use structures must be 
floodproofed consistent with the latest FEMA guidance.
    Additionally, the Grantee will encourage, where appropriate, 
construction methods that emphasize high quality, durability, energy 
efficiency, a healthy indoor environment, sustainability, and water or 
mold resistance, including how it will support adoption and enforcement 
of modern building codes and reduction of hazard risk, including 
possible sea level rise, storm surge, and flooding. All rehabilitation, 
reconstruction, and new construction should be designed to incorporate 
principles of sustainability, including water and energy efficiency, 
Resilience, and mitigating the impact of future disasters. Whenever 
feasible, Grantees should follow best practices such as those provided 
by the U.S. Department of Energy Home Energy Professionals: 
Professional Certifications and Standard Work Specifications. Grantees 
rebuilding housing in areas prone to high winds are especially 
encouraged to consider inclusion of construction methods from the 
Resilient Star demonstration underway by the Department of Homeland 
Security.
    At a minimum, HUD is requiring the following construction 
standards:
    (a) Green Building Standard for Replacement and New Construction of 
Residential Housing. Grantees must meet the Green Building Standard in 
this subparagraph for: (i) All new construction of residential 
buildings and (ii) all replacement of substantially damaged residential 
buildings. Replacement of residential buildings may include 
reconstruction (i.e., demolishing and rebuilding a housing unit on the 
same lot in substantially the same manner) and may include changes to 
structural elements such as flooring systems, columns, or load bearing 
interior or exterior walls.
    (b) Certification Standards. For purposes of this notice, the Green 
Building Standard means the Grantee will require that all construction 
covered by subparagraph (a), above, meet an industry-recognized 
standard that has achieved certification under at least one of the 
following programs: (i) ENERGY STAR (Certified Homes or Multifamily 
High Rise); (ii) Enterprise Green Communities; (iii) LEED (New 
Construction, Homes, Midrise, Existing Buildings Operations and 
Maintenance, or Neighborhood Development); (iv) ICC-700 National Green 
Building Standard; (v) EPA Indoor airPLUS (ENERGY STAR a prerequisite); 
or (vi) any other equivalent comprehensive green building program, 
including regional programs such as those operated by the New York 
State Energy Research and Development Authority or the New Jersey Clean 
Energy Program.
    (c) Standards for Rehabilitation of Nonsubstantially Damaged 
Residential Buildings. For rehabilitation other than that described in 
subparagraph (a), above, Grantees must follow the guidelines specified 
in the HUD CPD Green Building Retrofit Checklist, available on the CPD 
Disaster Recovery Web site. Grantees must apply these guidelines to the 
extent applicable to the rehabilitation work undertaken, including the 
use of mold resistant products when replacing surfaces such as drywall. 
When older or obsolete products are replaced as part of the 
rehabilitation work, rehabilitation is required to use ENERGY STAR-
labeled, WaterSense-labeled, or Federal Energy Management Program 
(FEMP) designated products and appliances. For example, if the furnace, 
air conditioner, windows, and appliances are replaced, the replacements 
must be ENERGY STAR-labeled or FEMP-designated products; WaterSense-
labeled products (e.g., faucets, toilets, showerheads) must be used 
when water products are replaced. Rehabilitated housing may also 
implement measures recommended in a Physical Condition Assessment (PCA) 
or Green Physical Needs Assessment (GPNA).
    (d) Implementation. For construction Projects completed, under 
construction, or under contract prior to the date that assistance is 
approved for the Project, the Grantee is encouraged to apply the 
applicable standards to the extent feasible, but the Green Building 
Standard is not required. For specific required equipment or materials 
for which an ENERGY STAR- or WaterSense-labeled or FEMP-designated 
product does not exist, the requirement to use such products does not 
apply.
    (e) Policies. HUD encourages Grantees to implement green 
infrastructure policies to the extent practicable. Additional tools for 
green infrastructure are available at the Environmental Protection 
Agency's (EPA) water Web site; Indoor airPLUS Web site; Healthy Indoor 
Environment Protocols for Home Energy Upgrades Web site; and ENERGY 
STAR Web site, www.epa.gov/greenbuilding.
    (f) Housing Related Information.
    (i) Grantees are reminded that public housing is eligible for FEMA 
Public Assistance and must ensure that there is no duplication of 
benefits when using CDBG-NDR funds to assist public housing. 
Information on the public housing agencies impacted by the disaster is 
available on the Department's Web site.
    (ii) To the extent the Grantee undertakes housing activities, the 
Grantee will encourage the provision of housing, for all income groups, 
that is disaster-resistant, including transitional housing and 
permanent supportive housing. Grantees must also assess how planning 
decisions may affect racial, ethnic, and low-income concentrations, and 
promote the availability of affordable housing in low-poverty, 
nonminority areas where appropriate and in response to disaster-related 
impacts.
    (iii) The Grantee shall minimize displacement of persons or 
entities, and assist any persons or entities displaced.
    (iv) Any safe room construction, reconstruction, or rehabilitation 
is required to meet at least consistent with the requirements of FEMA 
P-320 or FEMA P-361.
    (v) Wind retrofit construction, reconstruction, or rehabilitation 
activities funded under CDBG-DR are required to be implemented in 
conformance with FEMA P-804.
    (g) Funds Awarded to a State. For each program or activity that 
will be carried out by the State, the application as entered into the 
DRGR Action Plan must describe: (1) The Projected use of the CDBG-NDR 
funds, including the entity administering the program/activity, budget, 
and geographic area; (2) the threshold factors or Applicant eligibility 
criteria, grant size limits, and proposed start and end dates; (3) how 
the Projected use will meet CDBG eligibility criteria and a national 
objective; (4) how the Projected use relates to a specific impact of 
the disaster and will result in long-term

[[Page 36567]]

recovery; and (5) estimated and quantifiable performance outcomes 
(i.e., a performance measure) relative to the identified unmet need.
    If a State, in its application, uses a method of distribution to 
allocate funds to local governments, its Action Plan must describe all 
criteria used to determine the distribution, including the relative 
importance of each criterion. If this information was not included in 
the application, the Action Plan must be amended to include this 
information prior to drawing funds (this amendment is not a substantial 
amendment if the method of distribution has not changed since the 
submission of the application).
    (h) Funds Awarded Directly to a Local Government. The local 
government's application as entered into the DRGR Action Plan, shall 
describe: (1) The Projected use of the CDBG-DR funds, including the 
entity administering the program/activity, budget, and geographic area; 
(2) the threshold factors or Applicant eligibility criteria, grant size 
limits, and proposed start and end dates; (3) how the Projected use 
will meet CDBG eligibility criteria and a national objective; (4) how 
the Projected use relates to a specific impact of the disaster and will 
result in long-term recovery; and (5) estimated and quantifiable 
performance outcomes (i.e., a performance measure) relative to the 
identified unmet need.
    b. General Grant Oversight.
    (a) The Grantee must put in place mechanisms and/or procedures to 
detect and prevent fraud, abuse, and mismanagement of funds (including 
potential conflicts of interest).
    (b) The Grantee must maintain adequate capacity of its 
administering agency(ies) and staffs, and the capacity of any local 
government or other organization or Partner expected to carry out 
disaster recovery programs. The Grantee will plan and provide for 
increasing the capacity of local governments or other organizations, as 
needed and where capacity deficiencies (e.g., outstanding Office of 
Inspector General audit findings) have been identified. Grantees are 
responsible for providing adequate technical assistance to Partners, 
subrecipients, or subgrantees to ensure the timely, compliant, and 
effective use of funds. Although local governments or other 
organizations may carry out disaster recovery programs and Projects, 
each Grantee under the NOFA and this notice remains legally and 
financially accountable for the use of all funds and may not delegate 
or contract to any other party any inherently governmental 
responsibilities related to management of the funds, such as oversight 
(also see section 3.V.A.10 of this notice), policy development, and 
financial management.
    (c) The Grantee will manage program income (e.g., including, in 
agreements, whether subrecipients may retain it), and the purpose(s) 
for which it may be used. Waivers and alternative requirements related 
to program income can be found in paragraphs A.2(d) and A.17 of section 
3.V of this notice;
    (d) The Grantee must establish monitoring standards and procedures 
that are sufficient to ensure program requirements, including 
preventing duplication of benefits, are met and that provide for 
continual quality assurance and investigation. Some of this information 
may be adopted from the Grantee's submission of information that is 
required for the Department's certification. Grantees must also operate 
a robust internal audit function with an organizational diagram showing 
that responsible audit staff report independently to the chief officer 
or board of the organization designated to administer the CDBG-NDR 
award (typically, the organization is designated by a chief, elected 
official);
    c. Clarification of Disaster-related Activities. Each CDBG-NDR 
activity must be CDBG-eligible (or permissible under a waiver or 
alternative requirement published in an applicable Federal Register 
notice), meet a national objective, and Tie-back to the Qualifying 
Disaster by demonstrating a logical link to addressing Unmet Recovery 
Needs from the Qualifying Disaster. Additional details on disaster-
related activities are provided under section 3.V.B of this notice.
    (a) Ineligible Business Assistance. Local and regional economic 
recoveries are typically driven by small businesses. To target 
assistance to small businesses, the Department is instituting an 
alternative requirement to the provisions at 42 U.S.C. 5305(a) to 
prohibit Grantees from assisting businesses, including privately owned 
utilities, that do not meet the definition of a small business as 
defined by SBA at 13 CFR part 121.
    (b) Tie-Back to the Qualified Disaster and Ineligible Projects for 
Temporary Measures.
    (i) Tie-Back to the Disaster. Each Grantee must document Tie-Back, 
to show how each activity is connected to the Qualified Disaster for 
which it is receiving CDBG assistance. The Grantee must ensure that 
each activity reasonably ties back to addressing demonstrated direct 
and indirect effects of the Qualified Disaster. In regard to physical 
losses, damage or insurance estimates may demonstrate the connection to 
the direct effects of the disaster. For economic, social, or other 
nonphysical losses, post-disaster analyses or assessments, using the 
most rigorous methods feasible, may document the relationship between 
the disaster and the related effects. If Tie-back has been sufficiently 
documented in the application, the Grantee does not need to maintain 
additional documentation (although additional information documenting 
Tie-back may be necessary to support a substantial amendment).
    (ii) Temporary Measures. The Appropriations Act states that funds 
shall be used for recovering from a Presidentially declared major 
disaster. As such, all activities must respond to the effects of the 
declared disaster. HUD requires CDBG-NDR Grantees to incorporate 
resiliency measures into all activities, to ensure that communities 
recover to be safer, stronger, and more resilient. Incorporation of 
these measures also reduces costs in recovering from future disasters. 
However, Projects for temporary measures, including those that are 
designed solely to prepare for future needs and not to address a 
recovery need of the Qualified Disaster (e.g., sandbags, bladders, 
geotubes, newly established emergency operation centers) are ineligible 
for CDBG-NDR assistance. Equipment is generally ineligible for CDBG-NDR 
assistance unless necessary in the provision of an eligible public 
service or special economic development activity. Resilience measures 
that are not incorporated into rebuilding activities must Tie back to 
the Qualified Disaster and be a necessary expense related to disaster 
relief, long-term recovery, restoration of infrastructure, and housing, 
or economic revitalization. HUD has determined that, generally, 
designing a Project that improves Resilience to negative effects of 
climate change while meeting an Unmet Recovery Need is a necessary and 
reasonable cost of recovery.
    (iii) Grantees are not limited in their recovery to returning to 
pre-disaster conditions. HUD encourages Grantees to carry out 
activities that not only address disaster-related effects, but leave 
communities sustainably positioned to meet the needs of their post-
disaster populations and to further prospects for stability and growth.
    (iv) Use of Funds for Disasters Not Covered by The Appropriations 
Act. CDBG-DR funds awarded under the NOFA and this notice are limited 
to activities that respond to the Qualified Disaster(s) for which HUD 
made the

[[Page 36568]]

award. However, if the Grantee addresses an unmet need that arose from 
a previous disaster or a previous community development need that was 
exacerbated by a Qualified Disaster, and this use of funds was 
described in the Grantee's application that was approved for funding by 
HUD, and included in the grant agreement, the Grantee's activity may 
meet the remaining unmet need. If an impact or need originating from a 
Qualified Disaster identified in the NOFA is subsequently exacerbated 
by a future disaster, in some cases funds under the NOFA and this 
notice may be used to address the resulting exacerbated unmet need, 
with prior HUD approval.
    d. Use of the Urgent Need National Objective. The certification 
requirements for the documentation of urgent need, located at 24 CFR 
570.208(c) and 24 CFR 570.483(d), are waived for the grants under this 
notice until two years after the date HUD obligates funds to a Grantee 
for the activity. In the context of disaster recovery, these standard 
requirements may prove burdensome and redundant. Since the Department 
has only selected Grantees for CDBG-NDR awards with documented 
disaster-related impacts (as supported by data provided by FEMA, SBA, 
and Applicants), each Grantee is limited to spending funds only in 
counties identified in the Action Plan as the Most Impacted and 
Distressed area.
    Grantees need not issue formal certification statements to qualify 
an activity as meeting the urgent need national objective. Instead, 
each Grantee receiving a CDBG-NDR award was required to document how 
all programs and/or activities funded under the urgent need national 
objective respond to a disaster-related impact identified by the 
Grantee. This waiver and alternative requirement allows Grantees to 
more effectively and quickly implement disaster recovery programs. For 
activities that meet the urgent need national objective, Grantees were 
required to reference in their Action Plan the type, scale, and 
location of the disaster-related impacts that each Project, program, 
and/or activity is addressing (Action Plans must be amended, as 
necessary, to ensure that this information is included for each 
Project, Program, or CDBG-eligible activity undertaken with CDBG-NDR 
funds). As a reminder, at least 50 percent of each Grantee's CDBG-NDR 
grant award must be used for activities that benefit low- and moderate-
income persons, unless waived.
    e. Obligation and Expenditure of Funds. Upon the Secretary's 
certification, HUD will issue a grant agreement obligating the funds to 
the Grantee. Funds will be obligated based on the schedule described by 
the Grantee in its application or later requested by the Grantee and 
approved by HUD. In addition, HUD will establish the line of credit and 
the Grantee will receive DRGR system access (if it does not have access 
already). The Grantee must also enter its application activities into 
the DRGR system before it may draw funds, as described in paragraph A.2 
below.
    f. Environmental Requirements. Each activity must meet the 
applicable environmental requirements. After the responsible entity 
completes an environmental review(s) pursuant to 24 CFR part 58, as 
applicable (or paragraph A.20, as applicable), and receives from HUD or 
the State an approved Request for Release of Funds and certification 
(as applicable), the Grantee may draw down funds from the line of 
credit for the activity. Note that the disbursement of grant funds must 
begin no later than 60 days after the Grantee has received access to 
its line of credit.
    g. Action Plan Amendments, Submission to HUD, Treatment of 
Leverage, Partners, and BCA. A Grantee is encouraged to work with its 
HUD representative before making any amendment to its Action Plan. HUD 
can help determine whether the amendment would constitute a substantial 
amendment, and help ensure the proposed change complies with the NOFA 
and all applicable requirements.
    (i) Substantial Amendments. The following modifications constitute 
a substantial amendment requiring HUD approval: Any change to the 
funded portions of the Phase 1 or Phase 2 application that would result 
in a change of more than 5 points in the score for Capacity or 
Soundness of Approach factors, any change to the Most Impacted and 
Distressed target area(s) (a revised area must meet Most Impacted and 
Distressed threshold requirements in the NOFA, including Appendix G to 
the NOFA), any change in program benefit, beneficiaries, or eligibility 
criteria, the allocation or reallocation of more than $1 million, or 
the addition or deletion of an eligible activity. Amendments to the 
Action Plan that do not fall within the definition of a substantial 
amendment are referred to as ``nonsubstantial amendments.''
    For substantial amendments, Grantees must complete the citizen 
participation requirements of this notice, at section 3.V.A.3, before 
HUD can approve the amendment. HUD will only approve a substantial 
amendment if the new score is still within the competitive range. If 
the substantial amendment criteria are triggered, HUD will review the 
proposed change against the rating factors and threshold criteria and 
consider whether the application, inclusive of the proposed change, 
would continue to score in the fundable range. This review is not 
limited to the Capacity and Soundness of Approach factors. In reviewing 
substantial amendments, HUD will not penalize Grantees for scaling and 
scoping decisions made by HUD as part of the NDRC award selection 
process. Additionally, in re-rating and re-ranking any substantial 
amendment, the Grantee's initial leverage score will remain unchanged 
if the Grantee will meet the amount of leverage included in its grant 
terms. As indicated in the NOFA, if a Grantee makes or proposes to make 
a substantial amendment to its Project, HUD reserves the right to amend 
the Grantee's award and reduce the grant amount or recapture the grant, 
as necessary.
    (ii) Information for Substantial and Nonsubstantial Amendments. If 
the Grantee proposes to amend its Action Plan, each proposed amendment 
must be highlighted, or otherwise identified, within the context of the 
funded portions of the application and be submitted to HUD. All 
amendments must comply with provisions of this notice, including Tie-
back requirements. Grantees may not amend an Action Plan to include 
funding for ineligible activities identified in section C.2 of the 
NOFA. The beginning of every proposed amendment must include a section 
that identifies exactly what content is being added, deleted, or 
changed and whether it is believed that the change would affect the 
scoring under the rating factors, and, thus, potentially trigger a 
substantial amendment. This section must also include a chart or table 
that clearly illustrates where funds are coming from and to where they 
are moving. The amendment must include a revised budget allocation 
table that reflects the entirety of all funds, as amended. A Grantee's 
most recent version of its application and its DRGR Action Plan must be 
accessible for viewing as a single document, at any given point in 
time, rather than the public or HUD having to view and cross-reference 
changes among multiple amendments. The requirement for each Grantee to 
expend funds within 2 years of the date of obligation will be enforced 
relative to the date activities are funded under each obligation, as 
applicable, even if the Action Plan is amended. Every amendment to the 
Action Plan (substantial and nonsubstantial) must be numbered 
sequentially and posted on

[[Page 36569]]

the Grantee's Web site. The Department will acknowledge receipt of the 
proposed amendment via email or letter within 5 business days of 
receipt. HUD may seek additional information from the Grantee to 
determine whether a proposed amendment is a substantial amendment.
    (iii) Amendments that may affect the BCA accepted by HUD. If 
requested by HUD, a Grantee must submit an update to its BCA to support 
a request for a substantial amendment.
    (iv) Leverage Accepted by HUD. Grantees are required to show, 
through quarterly reports as the Project proceeds, evidence that firmly 
committed leverage resources in the amount required by the grant terms 
and conditions were actually received and used for their intended 
purposes. The Grantee may not propose an amendment to reduce the amount 
of leverage pledged once a final amount is identified in the grant 
agreement. In re-rating and re-ranking any substantial amendment, the 
Grantee's initial leverage score will remain unchanged if the Grantee 
will meet the amount of leverage included in its grant terms. Sources 
of leverage funds may be substituted after grant award without 
affecting a Grantee's leverage score in any re-rating and re-ranking, 
as long as the dollar amount of leverage is equal to or greater than 
the total amount of leverage required by the grant terms and 
conditions. Substitution of a leverage source in the same amount 
committed and identified in the grant terms and conditions is a 
nonsubstantial amendment. Section 3.V.A.2.e describes additional DRGR 
leverage reporting requirements.
    (v) Partners Accepted by HUD. The NOFA permitted a Grantee to 
identify a Partner in its application that the Grantee would be 
otherwise required by program requirements to competitively procure. A 
Grantee is not required to secure the services of any Partner by 
competitive procurement if the Partner is duly documented and 
identified in the application. The Department has granted permission 
for single source procurement of these Partners, pursuant to 2 CFR 
200.320(f)(3) (cited in the NOFA as 24 CFR 85.36(d)(4)(i)(C), which has 
since been superseded by the Uniform Requirements) and advised State 
Grantees that have not adopted the local government procurement 
requirements in part 200 to review State requirements associated with 
single source procurement and to follow all applicable procurement 
requirements. In many cases, this will entail the Grantee undertaking a 
cost analysis prior to making payments to such a Partner, and the 
Grantee will be responsible for ensuring compliance with requirements 
that all CDBG-NDR costs be necessary and reasonable (for local 
government Grantees, see 2 CFR 200.323, for State governments that have 
not adopted 2 CFR 200.323, see State procurement requirements 
applicable to single source procurements). If a Partner dissolves the 
partnership after award and before activities are complete, the Grantee 
should make its best effort to replace the Partner with a similarly 
skilled Partner, if the Grantee's application was rated and ranked 
based on the capacity of the dissolved Partner. The Grantee's 
application may have to be re-rated and re-ranked based on the lost 
capacity unless the Grantee follows a contingency plan included in its 
application to address such a loss. If a Grantee wants to add a Partner 
that would otherwise have to be procured as a contractor after the 
award or if the Partner was identified in the application but was found 
by HUD to lack sufficient documentation, through HUD's application 
review process, then that selection would not be covered by the single-
source permission above and would be subject to procurement 
requirements under 2 CFR part 200 or State law, as applicable. 
Additionally, as required by Appendix D to the NOFA, the Grantee shall 
execute a written subrecipient agreement, developer agreement, 
contract, or other agreement, as applicable, with each Partner 
regarding the use of the CDBG-NDR funds, before disbursing any CDBG-NDR 
funds to the Partner. The written agreement must conform with all CDBG-
NDR requirements and shall require the Partner to comply with all 
applicable CDBG-NDR requirements, including those found in Disaster 
Relief Appropriations Act, 2013 (Pub. L. 113-2), title I of the Housing 
and Community Development Act of 1974 (42 U.S.C. 5302 et seq.), the 
CDBG program regulations at 24 CFR part 570, this notice and any other 
applicable Federal Register notice, and commitments made in the 
grantee's Phase 1 and Phase 2 applications.
    2. HUD Performance Review Authorities and Grantee Reporting 
Requirements in the Disaster Recovery Grant Reporting System (DRGR).
    a. Performance Review Authorities. Section 5304(e) of 42 U.S.C. 
requires that the Secretary shall, at least on an annual basis, make 
such reviews and audits as may be necessary or appropriate to determine 
whether the Grantee has carried out its activities in a timely manner, 
whether the Grantee's activities and Grantee certifications are carried 
out in accordance with the requirements and the primary objectives of 
the HCD Act and other applicable laws, and whether the Grantee has the 
continuing capacity to carry out those activities in a timely manner. 
Applicants were informed by section VI.A.4 of the General Section of 
the Department's broader NOFA (as amended, and made applicable by the 
NOFA) that the Department expects Grantees to fulfill performance 
promises made as part of their application. This notice waives the 
requirements for submission of a performance report, pursuant to 42 
U.S.C. 12708 and 24 CFR 91.520. In the alternative, and to ensure 
consistency between grants allocated under the Appropriations Act and 
prior CDBG disaster recovery appropriation laws, HUD is requiring that 
Grantees enter information in the DRGR system in sufficient detail to 
permit the Department's review of Grantee performance on a quarterly 
basis and to enable remote review of Grantee data to allow HUD to 
assess compliance and risk.
    b. DRGR Action Plan. Each Grantee must enter the components of its 
Action Plan funded through the CDBG-NDR grant into the DRGR system, 
including performance measures. This is referred to as the DRGR Action 
Plan. As more detailed information about uses of funds is identified by 
the Grantee, the Grantee must enter this information into the DRGR 
system at a level of detail that is sufficient to serve as the basis 
for acceptable performance reports, HUD review of compliance 
requirements, and citizen understanding of progress. The information 
must also be entered into the DRGR system so that the Grantee is able 
to draw its CDBG-NDR funds from the line of credit. To enter an 
activity into the DRGR system, the Grantee must know the activity type, 
national objective, and the organization that will be responsible for 
the activity. In addition, a Data Universal Numbering System (DUNS) 
number must be entered into the system for any entity carrying out a 
CDBG-NDR funded activity, including the Grantee, recipient(s) and 
subrecipient(s), contractor(s), and developers. Additionally, following 
execution of a grant agreement, Grantees must publish on their Web 
sites the DRGR Action Plan. HUD will provide clarifying guidance as to 
the content and format of the DRGR Action Plan, which will help ensure 
clear communication of CDBG-NDR activities to the public.
    c. Tracking Oversight Activities in the DRGR System; Use of DRGR 
Data for HUD Review and Dissemination. Each Grantee must also enter 
into the DRGR system summary information on monitoring visits and 
reports, audits,

[[Page 36570]]

and technical assistance it conducts as part of its oversight of its 
disaster recovery programs. The Grantee's Quarterly Performance Report 
(QPR) will include a summary indicating the number of Grantee oversight 
visits and reports (see subparagraph e for more information on the 
QPR). HUD will use data entered into the DRGR Action Plan and the QPR, 
transactional data from the DRGR system, and other information provided 
by the Grantee to: (1) Provide reports to Congress and the public; as 
well as to (2) monitor for anomalies or performance problems that 
suggest fraud, abuse of funds, and duplication of benefits; (3) 
reconcile budgets, obligations, funding draws, and expenditures; (4) 
calculate expenditures to determine compliance with administrative and 
public service caps and the overall percentage of funds that benefit 
low- and moderate-income persons; and (5) analyze the risk of Grantee 
programs to determine priorities for the Department's monitoring.
    d. Tracking Program Income in the DRGR System. Grantees must use 
the DRGR system to draw grant funds for each activity. Grantees must 
also use the DRGR system to track program income receipts, 
disbursements, and revolving loan funds. If a Grantee permits local 
governments or subrecipients to retain program income, the Grantee must 
establish program income accounts in the DRGR system. The DRGR system 
requires Grantees to use program income before drawing additional grant 
funds, and ensures that program income retained by one organization 
will not affect grant draw requests for other organizations.
    e. DRGR System Quarterly Performance Report (QPR). Each Grantee 
must submit a QPR through the DRGR system no later than 30 days 
following the end of each calendar quarter. Within 3 days of submission 
to HUD, each QPR must be posted on the Grantee's official Web site. HUD 
will also post the reports via the DRGR Public Web site. The Grantee's 
first QPR is due after the first full calendar quarter after the grant 
award. For example, a grant award made in April requires a QPR to be 
submitted by October 30. QPRs must be submitted on a quarterly basis 
until the grant program is completed and meets the criteria for 
closeout. During the grant closeout process, a final QPR may be 
required by HUD to ensure complete reporting. HUD will close out CDBG-
NDR grants in accordance with this notice (or other applicable Federal 
Register notice) and notice CPD 2014-02, Closeout Instructions for 
Community Development Block Grant (CDBG) Programs Grants, as amended, 
insofar as the notice applies to CDBG-DR grants.
    Each QPR will include information about the uses of funds for 
activities identified in the DRGR Action Plan during the applicable 
quarter. This includes, but is 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-DR funds to be expended on each activity; beginning and actual 
completion dates of completed activities; achieved performance 
outcomes, such as number of housing units completed or number of low- 
and moderate-income persons benefiting; and the race and ethnicity of 
persons assisted under direct-benefit activities. The DRGR system will 
automatically display the amount of program income receipted, the 
amount of program income reported as disbursed, and the amount of grant 
funds disbursed. Grantees must include a description of actions taken 
in that quarter to affirmatively further fair housing, within the 
section titled ``Overall Progress Narrative'' in the DRGR system. In 
addition, leveraged funds shall be identified for each activity, as 
applicable, in the DRGR system, and use of leverage funds required by 
the Grantee's grant agreement shall be included in the Grantee's QPR.
    3. Citizen Participation Waiver and Alternative Requirement. To 
permit a more streamlined process, and ensure disaster recovery grants 
are awarded in a timely manner, provisions of 42 U.S.C. 5304(a)(2) and 
(3), 42 U.S.C. 12707, 24 CFR 570.486, 91.105(b) and (c), and 91.115(b) 
and (c), with respect to citizen participation requirements, are waived 
and replaced by the requirements below.
    Note that the citizen participation process is distinct from 
consultation requirements. The streamlined requirements mandate at 
least one public hearing at the Applicant's level of government for 
each substantial amendment, and require providing a reasonable 
opportunity (at least 15 days for any substantial amendment) for 
citizen comment and ongoing citizen access to information about the use 
of grant funds.
    The streamlined citizen participation requirements for CDBG-NDR 
grants are:
    a. Publication of the Action Plan, Access to Information, and 
Substantial Amendments: At all times, the Grantee must maintain a 
public Web site that contains the latest versions of its Action Plan, 
including the DRGR Action Plan and the version as submitted to HUD for 
the competition and including the following portions: Executive 
summary; Factor narratives; Eligibility; national objective; overall 
benefit; and schedule responses, threshold requirements documentation, 
and all exhibits (A-G) (but of the attachments, only Attachments D and 
F must be published); and opportunity for public comment, hearing, and 
substantial amendment criteria. Before the Grantee submits a proposed 
substantial amendment, the Grantee must publish the proposed 
submission, including a section that identifies exactly what content is 
being added, deleted, or changed, and whether it believes that the 
change would affect the scoring under the rating factors, and, thus, 
potentially trigger a substantial amendment; a chart or table that 
clearly illustrates where funds are coming from and to where they are 
moving; and a revised budget allocation table that reflects the 
entirety of all funds, as amended.
    The manner of publication of a proposed substantial amendment must 
include prominent posting on the Grantee's official Web site, and must 
afford citizens, affected local governments, and other interested 
parties a reasonable opportunity to examine the plan or amendment's 
contents. The topic of disaster recovery must, for citizens, be 
navigable from the Grantee's homepage. Grantees are required to hold at 
least one public hearing to solicit public comments before finalizing 
each substantial amendment submission.
    Grantees are also encouraged to notify affected citizens of 
proposed amendments and public hearings, through electronic mailings, 
press releases, statements by public officials, media advertisements, 
public service announcements, and/or contacts with organizations 
located in or serving the target area or neighborhood.
    Grantees are responsible for ensuring that all citizens have equal 
access to information about the programs, including persons with 
disabilities and limited English proficiency (LEP). Each Grantee must 
ensure that program information is available in the appropriate 
languages for the geographic area served by the jurisdiction and the 
appropriate format for persons with disabilities.
    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

[[Page 36571]]

English Proficient Persons, published on January 22, 2007, in the 
Federal Register (72 FR 2732).
    Subsequent to publication of any proposed substantial amendment, 
the Grantee must provide a reasonable time frame and method(s) 
(including electronic submission) for receiving comments on the 
submission. A summary by topic of all comments received on the amended 
submission and a list of commenters by name or organization must be 
submitted to HUD along with the submission.
    Following execution of a grant agreement, the Grantee must post on 
its Web site the DRGR Action Plan that reflects the components funded 
through CDBG-NDR funds. HUD will provide clarifying guidance as to the 
content and format of the DRGR Action Plan that will help ensure clear 
communication of CDBG-NDR activities to the public. Subsequent to 
award, a Grantee may substantially amend the Action Plan if it follows 
the citizen participation requirements in this notice, and HUD agrees 
in writing that the initial application, inclusive of the proposed 
amendment, would still score in the fundable range for the competition.
    b. Nonsubstantial Amendment. The Grantee is not required to 
undertake public comment when it makes any Action Plan amendment that 
is not substantial. The Grantee must impose an effective date 5 
business days after submission to HUD.
    c. Physical Accessibility. Meetings must be held in facilities that 
are physically accessible to persons with disabilities, or where 
physical accessibility is not achievable, Grantees and Partners must 
give priority to alternative methods of product or information delivery 
regarding programs and activities to qualified individuals with 
disabilities in the most integrated setting appropriate, in accordance 
with HUD's implementing regulations for section 109 of the HCD Act and 
section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 794) at 24 CFR 
part 8 and all applicable laws and regulations. In addition, all 
notices of and communications during all training sessions and public 
meetings shall be provided in a manner that is effective for persons 
with hearing, visual, and other communication-related disabilities, or 
provide other means of accommodation for persons with disabilities, 
consistent with section 504 of the Rehabilitation Act of 1973 and HUD's 
section 504 regulations. See 24 CFR part 8.6.
    d. Additional Post-Award Requirements. The Grantee must update its 
citizen participation plan for CDBG-NDR grants to reflect the 
requirements of this notice. The purpose of this plan is to inform 
citizens of the citizen complaint process and the Grantee's response 
policy, the methods through which the public can learn about the grant 
and activity status, and the process the city will use to amend the 
Action Plan. The plan must satisfy the requirements of 24 CFR 91.105 or 
91.115, as applicable (except as provided for in notices providing 
waivers and alternative requirements for this grant).
    (1) Web site. The topic of disaster recovery must be navigable by 
citizens from the Grantee (or relevant agency) homepage. Grantees are 
also encouraged to notify affected citizens through electronic 
mailings, press releases, statements by public officials, media 
advertisements, public service announcements, and/or contacts with 
neighborhood organizations.
    (2) Availability and Accessibility of the Application/Action Plan 
and the DRGR Action Plan. The Grantee must make the previously 
published portions of the Application, the Application as submitted to 
HUD, the DRGR Action Plan, any Action Plan amendments, and all 
performance reports available to the public on its Web site 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 the 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 Application and to the Grantee's use of grant funds.
    (3) Citizen Complaints. The Grantee will provide a timely written 
response to every citizen complaint. As required by law, the Grantee 
will provide a response within 15 working days of the receipt of the 
complaint, if practicable.
    4. Direct Grant Administration and Means of Carrying Out Eligible 
Activities.
    a. Requirements Applicable to State Grantees. Requirements at 42 
U.S.C. 5306 are waived, to the extent necessary, to allow a State to 
directly carry out eligible activities with CDBG-NDR funds, rather than 
distribute all funds to local governments. Experience in administering 
CDBG supplemental disaster recovery funding demonstrates that this 
practice can expedite recovery. Pursuant to this waiver, the standard 
at section 570.480(c), the provisions at 42 U.S.C. 5304(e)(2), and the 
CDBG State program regulations will also include activities that the 
State carries out directly. In addition, activities eligible under the 
NOFA may be carried out, subject to State law, by the State through its 
employees, through procurement contracts, or through assistance 
provided under agreements with subrecipients or recipients, so long as 
the State is consistent with its Action Plan, including description of 
capacity and commitments to work with Partners. Notwithstanding this 
waiver, State Grantees continue to be responsible for civil rights, 
labor standards, and environmental protection requirements contained in 
the HCD Act and 24 CFR part 570, as well as ensuring such compliance by 
subgrantees.
    b. Requirements for All Grantees -- Direct Administration and 
Assistance to Neighborhood Organizations Described in 42 U.S.C 
5305(a)(15) of the HCD Act. Activities made eligible at 42 U.S.C. 
5305(a)(15) may only be undertaken by the eligible entities described 
in that section, whether the assistance is provided to such an entity 
from the State or from a local government.
    5. Consolidated Plan Waiver. To the extent that the Grantee did not 
receive points for consistency with the Consolidated Plan for the 
jurisdiction in which the Most Impacted and Distressed area is located, 
HUD is waiving the requirement for consistency with the consolidated 
plan, for no longer than 6 months (requirements at 42 U.S.C. 12706, 24 
CFR 91.325(a)(5), 91.225(a)(5), 91.325(b)(3), and 91.225(b)(3)), 
because the effects of a major disaster alter a Grantee's priorities 
for meeting housing, employment, and infrastructure needs. In 
conjunction, 42 U.S.C. 5304(e), to the extent that it would require HUD 
to annually review Grantee performance under the consistency criteria, 
is also waived for 6 months. All applications that did not submit the 
Certification of Consistency with the Consolidated Plan (form HUD-2991) 
in the attachments must update the Consolidated Plan within 6 months of 
grant award. At a minimum, the updated consolidated plan must include 
the criteria discussed in this notice. If not completed since the 
Qualified Disaster that led to the Grantee's eligibility under the 
NOFA, a Grantee must update its Analysis of Impediments to Fair Housing 
Choice in coordination with its post-waiver consolidated plan update or 
within the 18 months after the consolidated plan update, so that it 
more accurately reflects conditions following the disaster.
    6. Requirement for Consultation During Plan Preparation. Currently, 
the statute and regulations require States to consult with affected 
units of local

[[Page 36572]]

government in nonentitlement areas of the State in determining the 
State's proposed method of distribution. Because Grantees complied with 
the extensive consultation requirements of the NOFA, including Appendix 
I to the NOFA, HUD is waiving 42 U.S.C. 5306(d)(2)(C)(iv), 42 U.S.C. 
5306(d)(2)(D), and 24 CFR 91.325(b) and 91.110, to permit Grantees to 
rely on the consultation completed during Phase 1 and Phase 2 of the 
competition. No additional consultation is necessary to carry out the 
Project or program for which the Grantee received an allocation of 
CDBG-NDR funds.
    7. Overall Benefit Waiver and Alternative Requirement. The primary 
objective of the HCD Act 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)). To carry out 
this objective, the statute requires that 70 percent of the aggregate 
of a CDBG program's funds be used to support activities benefitting 
low- and moderate-income persons. This target could be difficult to 
reach, and perhaps even impossible, for many Grantees affected by the 
Qualified Disasters. CDBG-NDR Grantees experienced disaster impacts 
that affected entire communities--regardless of income--and the 
existing requirement may prevent Grantees from providing assistance to 
damaged areas of need. Therefore, this notice waives the requirements 
at 42 U.S.C. 5301(c), 42 U.S.C. 5304(b)(3)(A),and 24 CFR 570.484 and 
570.200(a)(3), that 70 percent of funds be used for activities that 
benefit low- and moderate-income persons. Instead, 50 percent of funds 
must benefit low- and moderate-income persons. This provides Grantees 
with greater flexibility to carry out recovery activities by allowing 
up to 50 percent of the grant to assist activities under the urgent 
need or prevention or elimination of slums or blight national 
objectives.
    A Grantee may seek a waiver to reduce the overall benefit 
requirement below 50 percent of the total grant (see instructions to 
request waivers in section 3.V), but overall benefit waivers are 
uncommon and Grantees, generally, must have submitted a request and 
justification for this waiver with its application. The 50 percent 
overall benefit requirement will not be reduced unless the Secretary 
specifically finds that there is a compelling need to further reduce 
the threshold.
    8. Use of the ``Upper Quartile'' or ``Exception Criteria'' for Low- 
and Moderate-Income Area Benefit Activities. Per the requirements at 42 
U.S.C. 5305(c)(2)(A), certain communities are allowed to use a 
percentage of less than 51 percent to qualify activities under the low- 
and moderate-income area benefit category. This exception is referred 
to as the ``exception criteria'' or the ``upper quartile.'' For 
entitlement communities that meet the regulatory exception criteria, 
the State (or its subgrantee, if permitted by the State) may apply the 
criteria if acting directly in that community.
    9. Use of ``Uncapped'' Income Limits. The Quality Housing and Work 
Responsibility Act of 1998 (Title V of Pub. L. 105-276) enacted a 
provision that directed the Department to grant exceptions to at least 
10 jurisdictions that are currently ``capped' under HUD's low- and 
moderate-income limits. Under this exception, a number of CDBG 
entitlement grantees may use ``uncapped'' income limits that reflect 80 
percent of the actual median income for the area. Each year, HUD 
publishes guidance on its Web site identifying which grantees may use 
uncapped limits. The uncapped limits apply to disaster recovery 
activities funded pursuant to this notice in jurisdictions covered by 
the uncapped limits, including jurisdictions that receive disaster 
recovery funds from the State, if the State permits the use.
    10. Grant Administration Responsibilities and General 
Administration Cap.
    a. Grantee responsibilities. Per the Appropriations Act, each 
Grantee shall administer its award directly, in compliance with all 
applicable laws and regulations. Each Grantee shall be financially 
accountable for the use of all funds provided in this notice and may 
contract for administrative support, but Grantees may not delegate or 
contract to any other party any inherently governmental 
responsibilities related to management of the funds, such as oversight, 
policy approval or adoption, and financial management.
    b. General administration Cap. For grants under this notice, the 
annual CDBG program administration requirements must be modified to be 
consistent with the Appropriations Act, which allows up to 5 percent of 
the grant award, inclusive of any program income, to be used for 
general administration costs, by the Grantee, by local governments, or 
by subrecipients. Thus, the total of all costs charged to the grant and 
classified as general administration must be less than or equal to the 
5 percent cap. (See Notice CPD 13-07 for additional guidance regarding 
classification of general administration costs.)
    (1) Alternative Requirements. For State Grantees under this notice, 
the provisions of 42 U.S.C. 5306(d) and 24 CFR 570.489(a)(1)(i), (ii), 
and (iii) will not apply to the extent that they specify a cap on 
general administration and technical assistance expenditures, limit a 
State's ability to charge a nominal application fee for grant 
applications for activities the State carries out directly, and require 
a dollar-for-dollar match of State funds for administrative costs 
exceeding $100,000. Thus, 42 U.S.C. 5306(d)(5) and (6) are waived and 
replaced with the alternative requirement that the aggregate total for 
general administrative and technical assistance expenditures must not 
exceed 5 percent. States remain limited to spending a maximum of 20 
percent of their total grant amount on a combination of planning and 
general administration costs. Planning costs subject to the 20 percent 
cap are those defined in 42 U.S.C. 5305(a)(12).
    (2) Local Government Grantees Are Also Subject to the 5 Percent 
Administrative Cap. This 5 percent applies to all general 
administration costs, whether incurred by the Grantee or its 
subrecipients. Local government Grantees also remain limited to 
spending 20 percent of the total CDBG-NDR award on a combination of 
planning and general administration costs.
    (3) Planning and Administrative Costs Pledged as Leverage: Grantees 
cannot charge to the grant any administrative and planning costs 
pledged as leverage.
    11. Planning-Only Activities--Applicable to State Grantees Only. 
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 entitlement program, these general planning 
activities are presumed to meet a national objective under the 
requirements at 24 CFR 570.208(d)(4). The Department notes that 
effective CDBG disaster recoveries

[[Page 36573]]

have relied on some form of areawide 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 570.208(d)(4) when funding disaster recovery-assisted, 
planning-only activities, or directly administering planning activities 
that guide recovery in accordance with the Appropriations Act. In 
addition, the types of planning activities that States may fund or 
administer are expanded to be consistent with those of entitlement 
communities identified at 24 CFR 570.205.
    12. Waiver And Alternative Requirement for Distribution to CDBG 
Metropolitan Cities and Urban Counties--Applicable to State Grantees 
Only. Section 5302(a)(7) of 42 U.S.C. (definition of ``nonentitlement 
area'') and provisions of 24 CFR part 570 that would prohibit or 
restrict a State from distributing CDBG funds to entitlement 
communities and Indian tribes under the CDBG program, are waived, 
including 24 CFR 570.480(a) and 570.486(c) (revised April 23, 2012). 
Instead, the State may distribute funds to local governments and Indian 
tribes.
    13. Use of Subrecipients--Applicable to State Grantees Only. The 
State CDBG program rule does not make specific provision for the 
treatment of entities that the CDBG Entitlement program calls 
``subrecipients.'' 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. Therefore, for States taking advantage of the waiver to 
carry out activities directly through a subrecipient, the requirements 
at 24 CFR 570.503, 570.500(c), and 570.489(m) apply, except only the 
specific references to 2 CFR part 200 made applicable by the State CDBG 
regulations must be included in subrecipient agreements. Pursuant to 24 
CFR 570.489(p) (revised December 7, 2015), a State Grantee must ensure 
that its costs and those of its State recipients and subrecipients are 
in conformance with 2 CFR part 200, subpart E, as may be amended, where 
carrying out activities directly, including through the use of a 
subrecipient.
    14. Recordkeeping.
    (a) State Grantees. When a State carries out activities directly, 
24 CFR 570.490(b) is waived 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 under 24 CFR 570.493 
of the State's administration of CDBG-NDR funds. 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; ensure 
compliance with requirements of this notice and any other notice 
governing the use of CDBG-NDR grants; and show how activities funded 
are consistent with the descriptions of activities proposed for funding 
in the Action Plan and DRGR system. For fair housing and equal 
opportunity purposes, and as applicable, such records shall include 
data on the racial, ethnic, disability, and gender characteristics of 
persons who are Applicants for, participants in, or beneficiaries of 
the program.
    b. Local Government Grantees. Entitlement Grantees remain subject 
to the recordkeeping requirements of 24 CFR 570.506.
    15. Change of Use of Real Property--Applicable to State Grantees 
Only. This waiver conforms to the change of the use of real property 
rule to the waiver allowing a State to carry out activities directly. 
For purposes of this program, all references to ``unit of general local 
government'' in 24 CFR 570.489(j) shall be read as ``unit of general 
local government or State.''
    16. 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. Section 
570.492 of 24 CFR 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 local governments, as 
may be necessary or appropriate to meet the requirements of 42 U.S.C. 
5304(e)(2), as amended, and 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 subrecipients, public agencies, or local governments.
    17. Program Income Alternative Requirement. The Department is 
waiving applicable program income rules at 42 U.S.C 5304(j), 24 CFR 
570.500(a) and (b), 570.504, and 570.489(e) to the extent necessary to 
provide additional flexibility as described under this notice. The 
alternative requirements provide guidance regarding the use of program 
income received before and after grant closeout and address revolving 
loan funds.
    a. Definition of Program Income.
    (1) For the purposes of this subpart, ``program income'' is defined 
as gross income generated from the use of CDBG-NDR funds and received 
by a State, local government, or tribe, or a subrecipient of a State, 
local government, or tribe, unless excluded from the definition as 
described in paragraph 17.a.(2) and paragraph 17.d below. When income 
is generated by an activity that is only partially assisted with CDBG-
NDR funds, the program income to the CDBG-NDR grant shall be prorated 
to reflect the percentage of CDBG-NDR funds used (e.g., a single loan 
supported by CDBG-NDR funds and other funds; a single parcel of land 
purchased with CDBG-NDR funds and other funds). Program income 
includes, but is not limited to, the following:
    (a) Proceeds from the disposition by sale or long-term lease of 
real property purchased or improved with CDBG-NDR funds;
    (b) Proceeds from the disposition of equipment purchased with CDBG-
NDR funds;
    (c) Gross income from the use or rental of real or personal 
property acquired with CDBG-NDR funds by a State, local government, or 
tribe, or subrecipient of a State, local government, or tribe, less 
costs incidental to generation of the income (i.e., net income);
    (d) Net income from the use or rental of real property owned by a 
State, local government, or tribe or subrecipient of a State, local 
government, or tribe, that was constructed or improved with CDBG-NDR 
funds;
    (e) Payments of principal and interest on loans made using CDBG-NDR 
funds;
    (f) Proceeds from the sale of loans made with CDBG-NDR funds;
    (g) Proceeds from the sale of obligations secured by loans made 
with CDBG-NDR funds;
    (h) Interest earned on program income pending disposition of the 
income, but excluding interest earned on funds held in a revolving fund 
account;
    (i) 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

[[Page 36574]]

all or part of the CDBG-NDR portion of a public improvement; and
    (j) Gross income paid to a State, local government, or tribe, or 
paid to a subrecipient thereof, from the ownership interest in a for-
profit entity in which the income is in return for the provision of 
CDBG-NDR assistance.
    (2) ``Program income'' does not include the following:
    (a) The total amount of funds which is less than $25,000 received 
in a single year and retained by a State, local government, tribe, or 
retained by a subrecipient thereof;
    (b) Amounts generated by activities both eligible and carried out 
by an entity under the authority of section 105(a)(15) of the HCD Act;
    b. Retention of Program Income. Per 24 CFR 570.504(c), a local 
government Grantee receiving a direct CDBG-NDR award may permit a 
subrecipient to retain program income. State Grantees may permit a 
local government or tribe, which receives or will receive program 
income, to retain the program income, but are not required to do so.
    c. Program Income--Use, Closeout, and Transfer.
    (1) Program income received (and retained, if applicable) before or 
after closeout of the grant that generated the program income, and used 
to continue disaster recovery activities, is treated as additional 
CDBG-NDR grant funds subject to the requirements of this notice and 
must be used in accordance with the Grantee's Action Plan. To the 
maximum extent feasible, program income shall be used or distributed 
before additional withdrawals from the U.S. Treasury are made, except 
as provided in subparagraph d of this paragraph.
    (2) In addition to the regulations dealing with program income 
found at 24 CFR 570.489(e) and 570.504, modified by this notice, the 
following rules apply: A Grantee may transfer program income before 
closeout of the CDBG-NDR grant that generated the program income to its 
annual CDBG program. In addition, a State Grantee may transfer program 
income before closeout to any annual CDBG-funded activities carried out 
by a local government or Indian tribe within the State, including a 
local government that is an Entitlement CDBG grantee if that 
Entitlement grantee received CDBG disaster recovery assistance from the 
State or from HUD under Public Law 113-2.
    Program income received by a Grantee, or received and retained by a 
subgrantee, after closeout of the grant that generated the program 
income, may also be transferred to a Grantee's annual CDBG award. In 
all cases, any program income received, and not used to continue 
disaster recovery activities, will not be subject to the waivers and 
alternative requirements of this notice. Rather, those funds will be 
subject to the Grantee's non-disaster formula CDBG program rules.
    d. Revolving Loan Funds. Entitlement Grantees, State Grantees, and 
local governments or tribes (as permitted by a State Grantee) may 
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. These activities generate payments, 
which will be used to support similar activities going forward. These 
payments to the revolving fund are program income and must be 
substantially disbursed from the revolving fund before additional grant 
funds are drawn from the U.S. Treasury for payments that could be 
funded from the revolving fund. Such program income is not required to 
be disbursed for nonrevolving fund activities.
    State Grantees may also establish a revolving fund to distribute 
funds to local governments or tribes to carry out specific, identified 
activities. The same requirements, outlined above, apply to this type 
of revolving loan fund. Lastly, note that no revolving fund established 
per this notice, shall be directly funded or capitalized with an 
advance of CDBG-NDR grant funds.
    18. Reimbursement of Disaster Recovery Expenses. Grantees may not 
use CDBG-NDR grant funds to pay for any activities carried out on or 
before the date of the letter notifying the grantee of the award of the 
grant, except that grant funds may be used to reimburse CDBG-NDR 
eligible costs of grant application preparation, including planning and 
citizen outreach activities. The provisions of 24 CFR 570.489(b) are 
applied to permit a State to reimburse itself for otherwise allowable 
application-related costs incurred by itself or its recipients, 
subgrantees or subrecipients (including public housing authorities) on 
or after the date of publication of the initial CDBG-NDR NOFA. An 
entitlement Grantee is subject to the provisions of 24 CFR 570.200(h) 
but may reimburse itself or its subrecipients for otherwise allowable 
application-related costs incurred on or after the publication date of 
the initial CDBG-NDR NOFA. Section 570.200(h)(1)(i) of 24 CFR will not 
apply to the extent that it requires preagreement activities to be 
included in a consolidated plan. The Department expected Grantees to 
include all preagreement activities in their applications. The 
provisions at 24 CFR 570.200(h) and 570.489(b), as modified by this 
paragraph, apply to Grantees reimbursing application-related costs 
incurred by itself or its recipients or subrecipients prior to signing 
a grant agreement with HUD.
    19. One-for-One Replacement, Relocation, and Real Property 
Acquisition Requirements. Activities and Projects assisted by CDBG-NDR 
are subject to the Uniform Relocation Assistance and Real Property 
Acquisition Policies Act of 1970, as amended, (42 U.S.C. 4601 et seq.) 
(URA) and section 104(d) of the HCD Act (42 U.S.C. 5304(d))(Section 
104(d)). The implementing regulations for the URA are at 49 CFR part 
24. The regulations for Section 104(d) are at 24 CFR part 42, subpart 
C. For the purposes of promoting the availability of decent, safe, and 
sanitary housing and expediting disaster recovery and rehousing 
efforts, HUD is waiving the following URA and Section 104(d) 
requirements for CDBG-NDR Grantees:
    a. One-for-One Replacement. One-for-one replacement requirements at 
section 104(d)(2)(A)(i)-(ii) and (d)(3) and 24 CFR 42.375 are waived in 
connection with funds allocated under this notice for lower-income 
dwelling units that are damaged by the disaster and not suitable for 
rehabilitation. The Section 104(d) one-for-one replacement requirements 
generally apply to demolished or converted occupied and vacant 
occupiable lower-income dwelling units.
    This waiver exempts disaster-damaged units that meet the Grantee's 
definition of ``not suitable for rehabilitation'' from the one-for-one 
replacement requirements. Before carrying out a program or activity 
which may be subject to the one-for-one replacement requirements, the 
Grantee must define ``not suitable for rehabilitation'' in its 
application or in policies/procedures governing these programs and 
activities. Grantees with questions about the one-for-one replacement 
requirements are encouraged to contact the HUD regional relocation 
specialist responsible for their State.
    HUD is waiving the one-for-one replacement requirements because 
they do not account for the large, sudden changes that a major disaster 
may cause to the local housing stock, population, or economy. 
Furthermore, the requirements may discourage Grantees from converting 
or demolishing disaster-damaged housing when excessive costs would 
result from

[[Page 36575]]

replacing all such units. Disaster-damaged housing structures that are 
not suitable for rehabilitation can pose a threat to public health and 
safety and may impede economic revitalization. Grantees should reassess 
post-disaster population and housing needs to determine the appropriate 
type, amount, and location of lower-income dwelling units to 
rehabilitate and/or rebuild. Grantees should note, however, that the 
demolition and/or disposition of Public Housing Authority-owned public 
housing units is covered by section 18 of the United States Housing Act 
of 1937, as amended, and 24 CFR part 970, neither of which is waived by 
this notice.
    b. Relocation Assistance. The Section 104(d) relocation assistance 
requirements at section 104(d)(2)(A) and 24 CFR 42.350 are waived to 
the extent that they differ from the requirements of the URA and 
implementing regulations at 49 CFR part 24, as modified by this notice, 
for activities related to disaster recovery. Without this waiver, 
disparities exist in relocation assistance associated with activities 
typically funded by HUD and FEMA (e.g., buyouts and relocation). Both 
FEMA and HUD funds are subject to the URA; however, HUD's CDBG Funds 
are also subject to Section 104(d), while FEMA funds are not. The URA 
provides that a displaced person is eligible to receive a rental 
assistance payment that covers a period of 42 months. By contrast, 
Section 104(d) allows a lower-income displaced person to choose between 
the URA rental assistance payment and a rental assistance payment 
calculated over a period of 60 months. This waiver of the Section 
104(d) requirements assures uniform and equitable treatment by setting 
the URA and its implementing regulations as the sole standard for 
relocation assistance under this notice.
    c. Arm's Length Voluntary Purchase. The requirements at 49 CFR 
24.101(b)(2)(i)-(ii) are waived to the extent that they apply to an 
arm's length voluntary purchase carried out by a person who uses CDBG-
NDR funds and does not have the power of eminent domain, in connection 
with the purchase and occupancy of a principal residence by that 
person. Given the often large-scale acquisition needs of Grantees, this 
waiver is necessary to reduce burdensome administrative requirements 
following a disaster. Grantees are reminded that any tenants occupying 
real property that is acquired through voluntary purchase may be 
eligible for relocation assistance.
    d. Rental Assistance to a Displaced Person. The requirements at 
sections 204(a) and 206 of the URA, and 49 CFR 24.2(a)(6)(viii), 
24.402(b)(2), and 24.404 are waived to the extent that they require the 
Grantee to use 30 percent of a low-income displaced person's household 
income in computing a rental assistance payment if the person had been 
paying more than 30 percent of household income in rent/utilities 
without ``demonstrable hardship'' before the Project. Thus, if a tenant 
has been paying rent/utilities in excess of 30 percent of household 
income without demonstrable hardship, using 30 percent of household 
income to calculate the rental assistance payment would not be 
required. Before carrying out a program or activity in which the 
Grantee will provide rental assistance payments to displaced persons, 
the Grantee must define ``demonstrable hardship'' in its application or 
in the policies and procedures governing these programs and activities. 
The Grantee's definition of demonstrable hardship applies when 
implementing these alternative requirements.
    e. Tenant-Based Rental Assistance. The requirements of sections 204 
and 205 of the URA, and 49 CFR 24.2(a)(6)(ix) and 24.402(b) are waived 
to the extent necessary to permit a Grantee to meet all or a portion of 
a Grantee's replacement housing financial assistance obligation to a 
displaced tenant by offering rental housing through a tenant-based 
rental assistance (TBRA) housing program subsidy (e.g., Section 8 
Housing Choice Voucher Program), provided that the tenant is provided 
referrals to comparable replacement dwellings in accordance with 49 CFR 
24.204(a), 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.
    f. Moving Expenses. The requirements at section 202(b) of the URA 
and 49 CFR 24.302, which require that a Grantee offer a displaced 
person the option to receive a fixed moving cost payment based on the 
Federal Highway Administration's Fixed Residential Moving Cost Schedule 
instead of receiving payment for actual moving and related expenses, 
are waived. As an 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 that 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.
    Without this waiver and alternative requirement, disaster recovery 
may be impeded 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.''
    g. Optional Relocation Policies. The regulation at 24 CFR 
570.606(d) is waived to the extent that it requires optional relocation 
policies to be established at the Grantee or State recipient level. 
Unlike the annual formula CDBG program, States receiving CDBG-NDR funds 
may carry out disaster recovery activities directly or through 
subrecipients. The regulation at 24 CFR 570.606(d) governing optional 
relocation policies does not account for this distinction. This waiver 
also makes clear that local governments receiving CDBG disaster funds 
may establish separate optional relocation policies. This waiver is 
intended to provide States and local governments with maximum 
flexibility in developing optional relocation policies with CDBG-NDR 
funds.
    20. Environmental Requirements.
    a. Clarifying Note on the Process for Environmental Release of 
Funds When a State Carries Out Activities Directly. In the CDBG 
program, a State distributes CDBG Funds to local governments and takes 
on HUD's role in receiving environmental certifications from the grant 
recipients and approving releases of funds. For State Grantees under 
this notice, HUD allows the State to carry out activities directly, in 
addition to distributing funds to subrecipients and/or subgrantees. 
Thus, per 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.
    b. Adoption of Another Agency's Environmental Review. In accordance 
with the Appropriations Act, recipients of Federal funds that use such 
funds to supplement Federal assistance provided under sections 402, 
403, 404, 406, 407, or 502 of the Stafford Act may adopt, without 
review or public comment, any environmental review, approval, or permit 
performed by a Federal agency, and such adoption shall satisfy the 
responsibilities of the recipient with respect to such environmental 
review, approval, or permit that is required by the HCD Act. The 
Grantee must notify

[[Page 36576]]

HUD in writing of its decision to adopt another agency's environmental 
review. The Grantee must retain a copy of the review in the Grantee's 
environmental records.
    c. Release of Funds. In accordance with the Appropriations Act, and 
notwithstanding 42 U.S.C. 5304(g)(2), the Secretary may, upon receipt 
of a request for release of funds and certification, immediately 
approve the release of funds for an activity or Project assisted with 
CDBG-NDR funds if the recipient has adopted an environmental review, 
approval or permit under subparagraph b, above, or the activity or 
Project is categorically excluded from review under the National 
Environmental Policy Act of 1969 (42 U.S.C. 4321 et seq.).
    d. Historic Preservation Reviews. To facilitate expedited historic 
preservation reviews under section 106 of the National Historic 
Preservation Act of 1966 (54 U.S.C. 306108), HUD strongly encourages 
Grantees to allocate general administration funds to support the 
capacity of the State Historic Preservation Officer (SHPO)/Tribal 
Historic Preservation Officer (THPO) to review CDBG-NDR Projects.
    21. Procurement.
    a. State Grantees. Per 24 CFR 570.489(d), a State must have fiscal 
and administrative requirements for expending and accounting for all 
funds. Additionally, States and State subgrantees (Units of General 
Local Governments) and subrecipients) shall follow requirements of 24 
CFR 570.489(g). HUD is imposing a waiver and alternative requirement to 
require the State to establish requirements for procurement policies 
and procedures based on full and open competition for subrecipients, in 
addition to units of general local government.
    The State can comply with the requirement under 24 CFR 570.489(g) 
to follow its procurement policies and procedures and establish 
procurement requirements for its UGLGs and subrecipients in one of 
three ways (subject to 2 CFR 200.110, as applicable):
    (i) A State can follow its existing procurement policies and 
procedures and establish requirements for procurement policies and 
procedures for units of general local government and subrecipients, 
based on full and open competition, that specify methods of procurement 
(e.g., small purchase, sealed bids/formal advertising, competitive 
proposals, and noncompetitive proposals) and their applicability;
    (ii) A State can adopt 2 CFR 200.317, which requires the State to 
follow the same policies and procedures it uses for procurements from 
its non-Federal funds and comply with 2 CFR 200.322 (procurement of 
recovered materials) and 2 CFR 200.326 (required contract provisions), 
but requires the State to make its subrecipients and UGLGs follow 2 CFR 
200.318 through 200.326; or
    (iii) A State can adopt the provisions that apply to CDBG 
entitlement grantees (2 CFR 200.318 through 2 CFR 200.326) for itself 
and its subgrantees (subrecipients and units of general local 
government).
    b. Direct Grants to Local Governments. Any unit of general local 
government receiving a direct grant from HUD is subject to procurement 
requirements in the Uniform Administrative Requirements at 2 CFR 
200.318 through 2 CFR 200.326 (subject to 2 CFR 200.110, as 
applicable).
    c. Additional Requirements Related to Procurement (States and Local 
Governments). HUD may request periodic updates from grantees that 
employ contractors. A contractor is a third-party firm that the grantee 
acquires through a procurement process to perform specific functions, 
consistent with the procurement requirements in the CDBG program 
regulations. A subrecipient is not a contractor (see 2 CFR 200.330). 
Grantees are also required to ensure all contracts and agreements (with 
subrecipients, recipients, and contractors) clearly state the period of 
performance or date of completion. Grantees must incorporate 
performance requirements and penalties into each contract or agreement. 
The Appropriations Act requires HUD to provide Grantees with technical 
assistance on contracting and procurement processes.
    22. Public Web site. The Appropriations Act requires Grantees to 
maintain a public Web site that provides information accounting for how 
all grant funds are used and managed/administered, including details of 
all contracts and ongoing procurement policies. To meet this 
requirement, each Grantee must make the following items available on 
its Web site: The Action Plan (including the latest version of its 
Action Plan, the latest version of its DRGR Action Plan, the version as 
submitted to HUD for the competition, and all amendments, as described 
in section 3.V.A.3 of this notice); each QPR (as created using the DRGR 
system) detailing expenditures for each contractor; procurement 
policies and procedures; executed CDBG-NDR contracts; and the status of 
services or goods currently being procured by the Grantee (e.g., phase 
of the procurement, requirements for proposals, etc.).
    23. Timely Distribution of Funds. The provisions at 24 CFR 570.494 
and 24 CFR 570.902 regarding timely distribution of funds are waived 
and replaced with the following alternative requirement: Grantees must 
adhere to the requirement in section 904(c) of the Appropriations Act, 
which requires that all funds be expended within 2 years of the date 
HUD obligates funds to a Grantee, as described in section 3.II.A.1.a in 
this notice. HUD expects each Grantee to expeditiously obligate and 
expend all funds, including any recaptured funds or program income, and 
to carry out activities in a timely manner to ensure this deadline is 
met.
    Additionally, to track Grantees' progress, HUD will evaluate 
timeliness in relation to each Grantee's established projection 
schedules (see section 3.II. B and section 3.V.A.1.j of this notice). 
The Department will, absent substantial evidence to the contrary, deem 
a Grantee to be carrying out its programs and activities in a timely 
manner if the schedule for carrying out its activities is substantially 
met. In determining the appropriate corrective action pursuant to this 
section, HUD will take into account the extent to which unexpended 
funds have been obligated by the Grantee and its subrecipients for 
specific activities at the time the finding is made and other relevant 
information. As stated in the NOFA, if a Grantee does not proceed 
within a reasonable time frame, HUD reserves the right to withdraw any 
funds the Grantee has not obligated under their award. If funds are 
withdrawn prior to September 30, 2017, HUD shall redistribute any 
withdrawn amounts to one or more other jurisdictions eligible for CDBG-
DR funding.
    24. Review of Continuing Capacity to Carry Out CDBG-Funded 
Activities in a Timely Manner. If HUD determines at any time that the 
Grantee has not carried out its CDBG-NDR activities and certifications 
in accordance with the requirements and criteria described in this 
notice, HUD will undertake a further review to determine whether or not 
the Grantee has the continuing capacity to carry out its activities in 
a timely manner. In making the determination, the Department will 
consider the following alternative requirements to provisions under 42 
U.S.C. 5304(e): The nature and extent of the Grantee's performance 
deficiencies, types of corrective actions the Grantee has undertaken, 
and the success or likely success of such actions.
    25. Corrective and Remedial Actions. To ensure compliance with the

[[Page 36577]]

requirements of the Appropriations Act and to effectively administer 
the CDBG-NDR program in a manner that facilitates recovery, 
particularly the alternative requirements permitting States to act 
directly to carry out eligible activities, HUD is waiving 42 U.S.C. 
5304(e) of the HCD Act to the extent necessary to impose the following 
alternative requirement: HUD may undertake corrective and remedial 
actions for States in accordance with the authorities applicable to 
entitlement Grantees in subpart O (including corrective and remedial 
actions in 24 CFR 570.910, 570.911, and 570.913) or under subpart I of 
the CDBG regulations at 24 CFR part 570. Before determining appropriate 
corrective actions, HUD will notify the Grantee of the procedures 
applicable to its review. As in the annual CDBG program, in accordance 
with 24 CFR 570.300, the policies and procedures set forth in subpart O 
apply to local governments receiving direct grants from HUD.
    26. Reduction, Withdrawal, or Adjustment of a Grant or Other 
Appropriate Action. Prior to a reduction, withdrawal, or adjustment of 
a grant, or other appropriate action, taken pursuant to this notice, 
the Grantee shall be notified of such proposed action and given an 
opportunity within a prescribed time period for an informal 
consultation. Consistent with the procedures described in this notice, 
the Secretary may adjust, reduce or withdraw the grant, or take other 
actions, as appropriate, except that funds already expended on eligible 
approved activities shall not be recaptured.

B. Common Eligibility Waivers and Alternative Requirements and Other 
Provisions: Housing, Floodplain Issues, Infrastructure, Economic 
Revitalization

    1. Housing-Related Eligibility Waivers. The broadening of 42 U.S.C. 
5305(a)(24) 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, 42 
U.S.C. 5305(a) is waived to the extent necessary to allow: 
Homeownership assistance for households with up to 120 percent of the 
area median income, down payment assistance for up to 100 percent of 
the down payment (an increase from the limit in 42 U.S.C. 
5305(a)(24)(D)), and new housing construction. While homeownership 
assistance may be provided to households with up to 120 percent of the 
area median income, only those funds used to serve households with up 
to 80 percent of the area median income may qualify as meeting the low- 
and moderate-income person benefit national objective.
    2. Housing incentives. Incentive payments are generally offered in 
addition to other programs or funding (such as insurance), to encourage 
households to relocate in a suitable housing development or an area 
promoted by the community's comprehensive recovery plan. For example, a 
Grantee may offer an incentive payment (possibly in addition to a 
buyout payment) for households that volunteer to relocate outside of a 
floodplain or to a lower-risk area. Therefore, 42 U.S.C. 5305(a) and 
associated regulations are waived to the extent necessary to allow the 
provision of housing incentives. Grantees providing housing incentives 
must maintain documentation, at least at a programmatic level, 
describing how the amount of assistance was determined to be necessary 
and reasonable. Incentives to relocate individuals outside of a 
floodplain, when combined with acquisition that would lead to 
redevelopment in the floodplain, is not permissible if it does not 
increase Resilience. When assessing compliance under this alternative 
requirement, HUD will look closely at how those activities that include 
housing incentives are necessary and reasonable, are consistent with 
the BCA submitted with the application, and increase Resilience. In 
addition, the incentives must be in accordance with the Grantee's 
Action Plan and any other program policies. Note that this waiver does 
not permit a compensation program. Additionally, a Grantee may require 
the incentive to be used for a particular purpose by the household 
receiving the assistance.
    3. Limitation on Emergency Grant Payments Interim Mortgage 
Assistance. 42 U.S.C. 5305(a)(8) is modified to extend interim mortgage 
assistance to qualified individuals from 3 months, for up to 20 months. 
Interim mortgage assistance is typically used in conjunction with a 
buyout program, or the rehabilitation or reconstruction of single-
family housing, during which mortgage payments may be due but the home 
is uninhabitable. The time required for a household to complete the 
rebuilding process may often extend beyond 3 months. Thus, interim 
assistance is critical for many households facing financial hardship 
during this period. A Grantee using this alternative requirement must 
document, in its policies and procedures, how it will determine the 
amount of assistance to be provided is necessary and reasonable.
    4. Acquisition of Real Property and Flood Buyouts. Grantees under 
this notice and the NOFA are able to carry out property acquisition for 
a variety of purposes. However, the term ``buyouts,'' as referenced in 
this notice refers, to acquisition of properties located in a floodway 
or floodplain that is intended to reduce risk from future flooding. HUD 
is providing alternative requirements for consistency with the 
application of other Federal resources commonly used for this type of 
activity.
    a. Buyout Requirements.
    (1) Any property acquired, accepted, or from which a structure will 
be removed pursuant to the Project will be dedicated and maintained in 
perpetuity for a use that is compatible with open space, recreational, 
or wetlands management practices.
    (2) No new structure will be erected on property acquired, 
accepted, or from which a structure was removed under the acquisition 
or relocation program other than (a) a public facility that is open on 
all sides and functionally related to a designated open space (e.g., a 
park, campground, or outdoor recreation area), (b) a rest room, (c) a 
flood control structure, or (d) a structure that the local floodplain 
manager approves in writing before the commencement of the construction 
of the structure.
    (3) After receipt of the assistance, with respect to any property 
acquired, accepted, or from which a structure was removed under the 
acquisition or relocation program, no subsequent application for 
additional disaster assistance, for any purpose, will be made by the 
recipient to any Federal entity in perpetuity.
    (4) Grantees have the discretion to determine an appropriate 
valuation method (including the use of pre-flood value or post-flood 
value as a basis for property value). However, in using CDBG-NDR funds 
for buyouts, the Grantee must uniformly apply whichever valuation 
method it chooses.
    (5) All buyout activities must be classified using the ``buyout'' 
activity type in the DRGR system.
    (6) Any State Grantee implementing a buyout program or activity 
must consult with affected local governments.
    b. Redevelopment of Acquired Properties.
    (1) Properties purchased through a buyout program may not typically 
be redeveloped, with a few exceptions. See subparagraph a.(2), above.
    (2) Grantees may redevelop an acquired property if: (a) The 
property is not acquired through a buyout program, and (b) the purchase 
price is based on the property's post-flood fair market

[[Page 36578]]

value (the pre-flood value may not be used). In addition to the 
purchase price, Grantees may opt to provide relocation assistance to 
the owner of a property that will be redeveloped if the property is 
purchased by the Grantee or subgrantee through voluntary acquisition, 
and the owner's need for additional assistance is documented.
    (3) In carrying out acquisition activities, the Grantee must ensure 
compliance with its long-term redevelopment plans.
    5. Alternative Requirement for Housing Rehabilitation--Assistance 
for Second Homes. The Department is instituting an alternative 
requirement to the rehabilitation provisions at 42 U.S.C. 5305(a) as 
follows: A ``second home'', as defined in IRS Publication 936 (Home 
Mortgage Interest Deductions), is not eligible for rehabilitation 
assistance, residential incentives, or to participate in a CDBG-NDR 
buyout program (as defined by this notice).
    6. Floodplains and Flood Insurance. Grantees, recipients, and 
subrecipients must implement procedures and mechanisms to ensure that 
assisted property owners comply with all flood insurance requirements, 
including the purchase and notification requirements described below, 
prior to providing assistance. For additional information, please 
consult with the Field Environmental Officer in the local HUD Field 
Office, or review the guidance on flood insurance requirements on HUD's 
Web site. Additional requirements for flood insurance, future Federal 
disaster assistance, and flood control structures are included below.
    a. Flood Insurance Purchase Requirements. HUD does not prohibit the 
use of CDBG-NDR funds for existing residential buildings in a Special 
Flood Hazard Area (SFHA) (or ``100-year'' floodplain). However, Federal 
laws and regulations related to both flood insurance and floodplain 
management must be followed, as applicable. With respect to flood 
insurance, a HUD-assisted homeowner for a property located in an SFHA 
must obtain and maintain flood insurance in the amount and duration 
prescribed by FEMA's National Flood Insurance Program. Section 102(a) 
of the Flood Disaster Protection Act of 1973 (42 U.S.C. 4012a) mandates 
the purchase of flood insurance protection for any HUD-assisted 
property within an SFHA.
    b. Future Federal Assistance to Owners Remaining in a Floodplain.
    (1) Section 582 of the National Flood Insurance Reform Act of 1994, 
as amended, (42 U.S.C. 5154a) prohibits flood disaster assistance in 
certain circumstances. In general, it provides that no Federal disaster 
relief assistance made available in a flood disaster area may be used 
to make a payment (including any loan assistance payment) to a person 
for repair, replacement, or restoration for damage to any personal, 
residential, or commercial property if that person, at any time, has 
received Federal flood disaster assistance that was conditioned on the 
person first having obtained flood insurance under applicable Federal 
law and the person has, subsequently, failed to obtain and maintain 
flood insurance, as required under applicable Federal law, on such 
property. This means that a Grantee may not provide disaster assistance 
for the repair, replacement, or restoration to a person who has failed 
to meet this requirement.
    (2) Section 582 also implies a responsibility for a Grantee that 
receives CDBG-NDR funds or that designates annually appropriated CDBG 
funds for disaster recovery. That responsibility is to inform property 
owners receiving disaster assistance that triggers the flood insurance 
purchase requirement that they have a statutory responsibility to 
notify any transferee of the requirement to obtain and maintain flood 
insurance, and that the transferring owner may be liable if he or she 
fails to do so. These requirements are described below.
    (3) Duty to notify. In the event of the transfer of any property 
described in subparagraph (5), the transferor shall, not later than the 
date on which such transfer occurs, notify the transferee in writing of 
the requirements to:
    (a) Obtain flood insurance in accordance with applicable Federal 
law with respect to such property, if the property is not so insured as 
of the date on which the property is transferred; and
    (b) Maintain flood insurance in accordance with applicable Federal 
law with respect to such property. Such written notification shall be 
contained in documents evidencing the transfer of ownership of the 
property.
    (4) Failure to notify. If a transferor fails to provide notice as 
described above and, subsequent to the transfer of the property:
    (a) The transferee fails to obtain or maintain flood insurance, in 
accordance with applicable Federal law, with respect to the property;
    (b) The property is damaged by a flood disaster; and
    (c) Federal disaster relief assistance is provided for the repair, 
replacement, or restoration of the property as a result of such damage, 
the transferor shall be required to reimburse the Federal Government in 
an amount equal to the amount of the Federal disaster relief assistance 
provided with respect to the property.
    (5) The notification requirements apply to personal, commercial, or 
residential property for which Federal disaster relief assistance made 
available in a flood disaster area has been provided, prior to the date 
on which the property is transferred, for repair, replacement, or 
restoration of the property, if such assistance was conditioned upon 
obtaining flood insurance in accordance with applicable Federal law 
with respect to such property.
    (6) The term ``Federal disaster relief assistance'' applies to HUD 
or other Federal assistance for disaster relief in ``flood disaster 
areas.'' The term ``flood disaster area'' is defined in section 
582(d)(2) of the National Flood Insurance Reform Act of 1994, as 
amended, to include an area receiving a Presidential declaration of a 
major disaster or emergency as a result of flood conditions.
    c. Floodplain Management. HUD CDBG-NDR grants must conform to 
Executive Orders 11988, on Floodplain Management, and 11990, on 
Wetlands, as well as HUD's regulations at 24 CFR parts 55 and 58, which 
may include identifying alternate locations, and, as necessary, 
modifying the Project.
    d. Federally Funded Levees, Floodwalls, and Other Flood Control 
Structures. The requirements in this section apply to new structures 
and improvements to existing structures.
    (1) Operation and Maintenance. HUD expects the Grantee or one of 
its Partners to take responsibility for operating and maintaining any 
levee, floodwall, or other flood control structure.
    (2) Purpose. One function of such a structure must be for the 
purpose of providing flood protection for existing structures at risk 
of flooding, although the CDBG-NDR Project incorporating such a 
structure must also meet an Unmet Recovery Need and may include co-
benefits that meet other community development objectives, but must not 
be created to reduce flooding to currently undeveloped land.
    (3) Special Requirements for Levees. A levee or levee system (new 
or existing) proposed under this NOFA must be technically sound (i.e., 
levee is tied off to high ground, is geotechnically stable, etc.), well 
maintained, and provide reliable flood protection. Any levee Project 
carried out as a CDBG-NDR activity must meet FEMA accreditation 
standards upon completion and the Sources and Uses statement must 
identify, and the

[[Page 36579]]

Leverage response commit to providing a source of funding for 
operations and maintenance of the levee in perpetuity.
    If HUD provides funding for such a structure under this notice, the 
grant terms and conditions will require the Grantee to upload into the 
DRGR system (and, if directed by HUD, the National Levee Database) 
shape files or other geographic information system data delineating the 
exact location of the assisted structure and of the area served and 
protected by the structure (meaning the area subject to inundation to 
any depth in the event of a levee breach at any location), and to 
provide additional data for input to the National Levee Database, 
including the status of the levee under the U.S. Army Corps of 
Engineers Public Law 84-99 Program (Levee Rehabilitation and 
Improvement Program), accreditation status under the National Flood 
Insurance Program; levee owner/operator, and public party that is 
legally responsible for the maintenance of the levee; number of all 
structures, and of people that reside, in the leveed area; critical 
structures and facilities in the leveed area, as-built plans sealed by 
a licensed professional engineer; levee cross-section plots and 
coordinates; levee features (i.e., gravity drains, pump stations relief 
wells, boreholes, etc.); levee design flow; levee design frequency; 
level of freeboard being no less than 3 vertical feet; and points of 
contact for public safety/emergency management and repository for the 
Levee Emergency Action Plan, levee operations and maintenance, and 
flood risk/floodplain management plan for the levee.
    Information provided to HUD for submission to the National Levee 
Database (or to the database, as directed by HUD) is to be updated on 
an annual basis or any time that there is a change in the status of the 
levee, including updates to the inspection date, inspection type, and 
inspection rating of the levee. This information will be shared with 
FEMA, the U.S. Army Corps of Engineers, members of the House and Senate 
appropriations committees, and any other interested Federal agencies 
and affected parties, as appropriate. This information is intended to 
be used to ensure that no additional Federal resources are used for 
operations and maintenance of the structure in the future.
    (4) Public Notification. In addition, because occupants in the 
floodplain behind flood control structures are at risk when the levee 
or other structure is overtopped or fails, the grant terms and 
conditions governing HUD funding for any levee, floodwall, or other 
flood control structure will require the Grantee to provide, to all 
property owners, businesses, and residents in the leveed area, 
notification of the presence, condition, and level of protection of the 
levee, on no less than an annual basis. This notification must include 
messages regarding public safety information and evacuation procedures, 
promotion of flood insurance, family and business evacuation planning, 
and point of contact for reports of any problems, questions, and 
additional information related to the structure.
    7. Use of CDBG-NDR as Match and Order of Assistance Between FEMA, 
U.S. Army Corps of Engineers, and CDBG-NDR. As provided by the HCD Act, 
funds may be used as a matching requirement, share, or contribution for 
any other Federal program when used to carry out an eligible CDBG-NDR 
activity. This includes programs or activities administered by FEMA or 
the U.S. Army Corps of Engineers. By law, the amount of CDBG-NDR funds 
that may be contributed to a U.S. Army Corps of Engineers Project is 
$250,000 or less. However, the Appropriations Act prohibits use of 
funds for any activity reimbursable by, or for which funds are made 
available by, FEMA or the U.S. Army Corps of Engineers.
    8. National Objective Documentation for Economic Development 
Activities. Sections 570.483(b)(4)(i) and 570.208(a)(4)(i) of 24 CFR 
are waived to allow the Grantees under this notice to identify low- and 
moderate-income jobs benefit by documenting, for each person employed, 
the name of the business, type of job, and the annual wages or salary 
of the job. HUD will consider the person income-qualified if the annual 
wages or salary of the job is at or under the HUD-established income 
limit for a one-person family. This method replaces the standard CDBG 
requirement in which Grantees must review the annual wages or salary of 
a job in comparison to the person's total household income and size 
(i.e., number of persons). Thus, it streamlines the documentation 
process by allowing the collection of wage data from the assisted 
business for each position created or retained, rather than from each 
individual household.
    This alternative requirement has been granted on several prior 
occasions to CDBG disaster recovery Grantees, and to date, those grants 
have not exhibited any issues of concern in calculating the benefit to 
low- and moderate-income persons. The Department has determined that, 
in the context of disaster recovery, this waiver is consistent with the 
HCD Act.
    9. Public Benefit for Certain Economic Development Activities. 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 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 can impede recovery by limiting the amount of 
assistance the Grantee may provide to a critical activity.
    This notice waives the public benefit standards at 42 U.S.C. 
5305(e)(3), 24 CFR 570.482(f)(1), (2), (3), (4)(i), (5), and (6), and 
570.209(b)(1), (2), (3)(i), (4) for economic development activities 
designed to create or retain jobs or businesses (including, but not 
limited to, long-term, short-term, and infrastructure Projects). 
However, Grantees shall report and maintain documentation on the 
creation and retention of total jobs; the number of jobs within certain 
salary ranges; the average amount of assistance provided per job, by 
activity or program; the North American Industry Classification System 
(NAICS) code for each business assisted; and the types of jobs. HUD is 
also waiving 570.482(g) and 570.209(c) and (d) to the extent these 
provisions are related to public benefit.
    10. Clarifying note on Section 3 Resident Eligibility and 
Documentation Requirements. The definition of ``low-income persons'' in 
12 U.S.C. 1701u and 24 CFR 135.5, is the basis for eligibility as a 
Section 3 resident. This notice authorizes Grantees to determine that 
an individual is eligible to be considered a Section 3 resident if the 
annual wages or salary of the person are at, or under, the HUD-
established income limit for a one-person family for the jurisdiction.
    11. Waiver and Modification of the Job Relocation Clause to Permit 
Assistance to Help a Business Return. Traditional CDBG requirements 
prevent program participants from providing assistance to a business to 
relocate from one labor market area to another, if the relocation is 
likely to result in a significant loss of jobs in the labor market from 
which the business moved.
    This prohibition can be a critical barrier to reestablishing and 
rebuilding a displaced employment base after a major disaster. 
Therefore, 42 U.S.C. 5305(h), 24 CFR 570.210, and 24 CFR 570.482(h) are 
waived to allow a Grantee to provide assistance to any eligible 
business that was operating in the disaster-declared labor market area 
before the incident date of the applicable disaster and has since

[[Page 36580]]

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. 12. 
Alternative Requirement for Assistance to Businesses, Including 
Privately-Owned Utilities. The Department is instituting an alternative 
requirement to the provisions at 42 U.S.C. 5305(a) as follows: When 
CDBG-NDR Grantees provide funds to for-profit businesses, such funds 
may only be provided to a small business, as defined by the SBA under 
13 CFR part 121. CDBG-NDR funds may not be used to directly assist a 
privately owned utility for any purpose. Note that a private utility 
may be a Partner to the Applicant for purposes of implementing a CDBG-
NDR program.

C. Certifications and Collection of Information

    1. Certifications Waiver and Alternative Requirement. Sections 
91.325 and 91.225 of title 24 of the Code of Federal Regulations are 
waived, and as an alternative requirement, each State or local 
government that applied for an award under the NOFA are held to the 
certifications required by Appendix F to the NOFA and submitted with 
its Phase 1 and its Phase 2 applications as a requirement for funding.
    a. As required by the NOFA, an Applicant signing the SF-424 cover 
page, either through electronic submission or in paper copy submission 
(for those Applicants granted a waiver to submit in paper), affirms 
that the certifications and assurances associated with the Application 
are material representations of the facts upon which the Department 
will rely when making an award to the Applicant. If it is later 
determined that the signatory to the application submission knowingly 
made a false certification or assurance or did not have the authority 
to make a legally binding commitment for the Applicant, the Applicant 
may be subject to criminal prosecution, and the Department may 
terminate the award to the Applicant organization or pursue other 
available remedies.
    b. Affirmatively Furthering Fair Housing Certification. All 
activities under this notice shall be carried out in a manner that 
affirmatively furthers fair housing, as required by section 808(e)(5) 
of the Fair Housing Act, as amended (42 U.S.C. 3608(e)(5)). Each 
Applicant made the required certification for CDBG-NDR activities 
included in Appendix F of the NOFA.
    Grantees shall adhere to the certifications included in Appendix F 
of the NOFA and 24 CFR 570.601, and take appropriate actions to support 
and document compliance with the certification.
    2. Information Collection Approval Note. The information collection 
requirements contained in this document were approved by OMB under the 
Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520) and assigned OMB 
Control Number [Paperwork Reduction Act Number 2506-0203]. In 
accordance with the Paperwork Reduction Act, HUD may not conduct or 
sponsor, and a person is not required to respond to, a collection of 
information, unless the collection displays a currently valid OMB 
control number. The public reporting burden for the collection of 
information following the award of funds is estimated to average 56.2 
hours per annum, per respondent, for grant set-up and administration. 
This includes the time for executing the grant agreement, establishing 
the grant within the DRGR system, voucher submissions, and quarterly 
reports. The information will be used for monitoring the administration 
of funds. Response to this request for information is required in order 
to receive the benefits to be derived.
Section 4: Duration of Funding
    CDBG-NDR funds are subject to 31 U.S.C. 1552(a), and, therefore, 
are to remain available for expenditure for 5 years following the 
period of availability for obligation. All funds under the 
Appropriations Act must be expended by September 30, 2022. In addition, 
the Appropriations Act requires that HUD obligate all CDBG-NDR funds by 
September 30, 2017. The Appropriations Act (Section 904(c) of title IX 
in division A) also requires that all funds be expended within 2 years 
of the date HUD obligates funds. For more information, including 
information on extensions, see section 3.II of this notice.
Section 5: Catalog of Federal Domestic Assistance
    The primary Catalog of Federal Domestic Assistance (CFDA) number 
for the disaster recovery grants under this notice is 14.272. 
Additional supporting CFDAs are 14.218 and 14.228.
Section 6: Finding of No Significant Impact
    A Finding of No Significant Impact (FONSI) with respect to the 
environment was made on the NDRC NOFA, in accordance with HUD 
regulations at 24 CFR part 50, which implements section 102(2)(C) of 
the National Environmental Policy Act of 1969 (42 U.S.C. 4332(2)(C)). 
The FONSI remains applicable to the NDRC and this notice. It is 
available for public inspection between 8 a.m. and 5 p.m., weekdays, in 
the Regulations Division, Office of General Counsel, Department of 
Housing and Urban Development, 451 7th Street SW., Room 10276, 
Washington, DC 20410-0500. Due to security measures at the HUD 
Headquarters building, an advance appointment to review the docket file 
must be scheduled by calling the Regulations Division at 202-708-3055 
(this is not a toll-free number). Hearing- or speech-impaired 
individuals may access this number through TTY by calling the Federal 
Relay Service at 800-877-8339 (this is a toll-free number).

    Dated: June 1, 2016.
Nani A. Coloretti,
Deputy Secretary.
[FR Doc. 2016-13430 Filed 6-6-16; 8:45 am]
 BILLING CODE 4210-67-P