Changes to Accounting Requirements for the Community Development Block Grants (CDBG) Program

AGENCY:

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

ACTION:

Interim final rule.

SUMMARY:

This rule makes several changes to the existing Community Development Block Grant (CDBG) program regulations in order to better track the use of grant funds and improve accounting procedures in the program. Through this rule, HUD requires grantees to commence tracking the obligations and expenditures of funds for each specific fiscal year grant, rather than track such information cumulatively. In order to effectively implement this accounting change, changes are needed to the regulations applicable to affected grants, such as the program-specific regulations, consolidated plan regulations, and methods to calculate the cap on administrative and planning expenses. While amending these regulations to conform to and support this accounting practice in applicable regulations, HUD is also making certain grammatical and other technical corrections in those regulations.

DATES:

Effective date: December 14, 2015.

Comment due date: January 11, 2016.

ADDRESSES:

Interested persons are invited to submit comments regarding this interim rule. Communications must refer to the above docket number and title. There are two methods for submitting public comments. All submissions must refer to the above docket number and title.

1. Submission of Comments by Mail. Comments may be submitted by mail to the Regulations Division, Office of General Counsel, Department of Housing and Urban Development, 451 7th Street SW., Room 10276, Washington, DC 20410-0500.

2. Electronic Submission of Comments. Interested persons may submit comments electronically through the Federal eRulemaking Portal at www.regulations.gov. HUD strongly encourages commenters to submit comments electronically. Electronic submission of comments allows the commenter maximum time to prepare and submit a comment, ensures timely receipt by HUD, and enables HUD to make them immediately available to the public. Comments submitted electronically through the www.regulations.gov Web site can be viewed by other commenters and interested members of the public. Commenters should follow the instructions provided on that site to submit comments electronically.

Note:

To receive consideration as public comments, comments must be submitted through one of the two methods specified above. Again, all submissions must refer to the docket number and title of the rule.

No Facsimile Comments. Facsimile (fax) comments are not acceptable.

Public Inspection of Public Comments. All properly submitted comments and communications submitted to HUD will be available for public inspection and copying between 8 a.m. and 5 p.m., weekdays, at the above address. Due to security measures at the HUD Headquarters building, an advance appointment to review the public comments must be scheduled by calling the Regulations Division at 202-402-3055 (this is not a toll-free number). Individuals with speech or hearing impairments may access this number via TTY by calling the Federal Relay Service, toll-free, at 800-877-8339. Copies of all comments submitted are available for inspection and downloading at www.regulations.gov.

FOR FURTHER INFORMATION CONTACT:

Stanley Gimont, Director, Office of Block Grant Assistance, Department of Housing and Urban Development, Office of Community Planning and Development, 451 7th Street SW., Suite 7286, Washington, DC 20410 at 202-708-3587, (this is not a toll-free number). Individuals with speech or hearing impairments may access this number via TTY by calling the Federal Information Relay Service, toll-free, at 800-877-8339.

SUPPLEMENTARY INFORMATION:

I. Background

A. The CDBG Program

The CDBG program is a flexible program that provides communities with resources to address a wide range of unique community development needs. The CDBG program provides annual grants on a formula basis to units of general local government and States. The annual CDBG appropriation is allocated between metropolitan cities and urban counties, which are referred to as “entitlement areas,” and States, which must distribute the funds to their units of general local government, referred to as “nonentitlement areas.” HUD determines the amount of each grant by using a formula comprised of several measures of community need, including the extent of poverty, population, housing overcrowding, age of housing, and population growth lag.

A grantee must develop and follow a consolidated plan describing the planned use of CDBG funds, which includes a detailed plan that provides for and encourages citizen participation. This integral process emphasizes participation by persons of low or moderate income, particularly residents of predominantly low- and moderate-income neighborhoods, slum or blighted areas, and areas in which the grantee proposes to use CDBG funds. Not less than 70 percent of CDBG funds must be used for activities that benefit low- and moderate-income persons. In addition, each funded activity must meet one of the following national objectives for the program: Benefit low- and moderate-income persons, prevent or eliminate slums or blight, or address community development needs having a particular urgency because existing conditions pose a serious and immediate threat to the health or welfare of the community for which other funding is not available.

The regulations for the CDBG program are codified in 24 CFR part 570 (entitled “Community Development Block Grants”). The regulations governing the CDBG annual plan and citizen participation requirements are codified at 24 CFR part 91 (entitled “Consolidated Submissions for Community Planning and Development Programs”).

B. CDBG Accounting Requirements

CDBG grants funds are currently disbursed through the Integrated Disbursement and Information System (IDIS) on a “first-in, first-out” (FIFO) basis. Under this methodology, CDBG grantees do not designate a specific fiscal year grant in IDIS when funding an activity or when creating an expenditure voucher. In general, all obligations and disbursements are recorded against the earliest annual grant with an available balance, thereby exhausting the oldest grant available before recording expenditures against the next grant.

Grantees' accounting systems, on the other hand, typically track expenditures according to each annual grant. During any given time period, grantees expend funds from multiple grants for a range of activities that have a variety of implementation schedules. Expenditures are incurred against more recent grants for activities that are on schedule; and, often simultaneously, expenditures are incurred against earlier annual grants for activities that experience acceptable delays.

These two distinct accounting methods often complicate reconciliation between grantees' accounting records and IDIS's FIFO records. The revised methodology will simplify reconciliation by aligning the accounting practices used by HUD and those used by grantees.

HUD is cognizant that Fiscal Year (FY) 2015 funding and formula allocations are underway, but the revised methodology is now available and, through this rule, HUD directs CDBG grantees to commence using the revised methodology. For the FY 2015 and subsequent fiscal year grants, IDIS will support grant-specific accounting. Therefore, as of the effective date of this interim rule, when obligating funds to be expended for a CDBG activity (i.e., when funding an activity in IDIS), grantees must identify the specific annual grant that is the source of the funds. When creating an expenditure voucher, HUD, through IDIS, will disburse the funds according to the specific annual grant that was obligated to that activity.

In order to complement and support this accounting change, conforming changes are needed to the regulations covering affected FY grants to reflect this accounting practice, such as clarifying which accounting practice is utilized, revising records retention requirements, and conforming the calculation of the cap on administrative and planning expenses. Conforming changes are not only needed to the CDBG regulations in 24 CFR part 570 but also to the CDBG planning and citizen participation regulations in part 91. In addition, certain grammatical and other technical corrections need to be made to the CDBG regulations.

The following section of this preamble provides a section-by-section overview of the regulatory changes.

II. This Interim Rule—Section-by-Section Changes

Action Plans (§§ 91.220, 91.320, 91.325 and 91.505)

HUD revises those provisions regarding the CDBG program components of the action plans for entitlements at § 91.220(l) and states at § 91.320(l). The interim rule adds clarifying language to reiterate that the available resources for that annual action plan may include a variety of sources of funding in addition to the annual grant.

For State CDBG recipients, HUD clarifies § 91.320(l) to address program income funds that are retained by units of general local government. By including locally retained program income funds, such as general program income and revolving loan funds, the State's action plan will include all the CDBG funds available throughout the State, regardless of whether those funds are retained by the State or units of general local government.

For state CDBG recipients, HUD amends § 91.325(b)(4)(ii), which provides that the State shall certify that 70 percent of the amount expended shall principally benefit low- and moderate-income families, on a program year basis. This regulatory provision is inconsistent with § 570.484, which requires the same certification to be provided on an annual grant basis. Therefore, § 91.325(b)(4)(ii) is amended to be consistent with § 570.484.

HUD amends § 91.505(a)(2) to clarify that an amendment would be necessary for the use of program income, repayments, or reallocations that were not previously included in an action plan.

Definition of Origin Year (§§ 570.3 and 570.481)

The interim rule adds a definition to §§ 570.3 and 570.481(a)(3) for the term “origin year” to mean the Federal fiscal year in which the annual grant funds were appropriated. Current regulations use the term “grant year,” which has often been confused with a grantee's program year. The term “origin year” is intended to reinforce specificity concerning any one annual grant and support grant-specific accounting. In addition to the new definition, the interim rule makes corresponding language changes throughout parts 91 and 570.

Treasury Account Cancellations §§ 570.480(i) and 570.200(k)

The interim rule adds §§ 570.480(i) and 570.200(k) to incorporate the requirements of 31 U.S.C. 1552, which states that on September 30 of the 5th fiscal year after the period of availability for obligation of a fixed appropriation account ends, the United States Treasury account shall be canceled and any remaining balance (whether obligated or unobligated) shall be canceled and therefore not available for obligation or expenditure for any purpose. HUD's obligation period for CDBG is typically 3 fiscal years, including the origin year (as stated in each annual appropriations act). HUD obligates and makes the funds available to grantees as soon as possible, but has until the end of 3 fiscal years to do so. For example, a CDBG grant appropriated for Fiscal Year 2015 must be obligated by HUD by the end of Fiscal Year 2017, and any unexpended funds will be canceled and cease to be available on September 30, 2022. HUD reserves the right, however, to require an earlier expenditure and drawdown deadline under a grant agreement due to end-of-year accounting and timing issues. This provision is applicable to funds in the grantee's line of credit and any funds returned to the line of credit. However, this statute does not apply to funds repaid to a local account or program income deposited in a local account. CDBG funds have rarely been canceled because the FIFO accounting method disperses funds from the oldest source grant first, and timely expenditure of grant funds would prevent the grantee from having as many years' worth of grant funds in its line of credit.

Entitlement Administration and Planning Cap (§ 570.200)

In annual appropriations acts, Congress limits the amount grantees may use for planning, management development, and administration to not more than 20 percent of each grant. Under the FIFO method of accounting in IDIS, grantees would draw funds without distinguishing funds by origin year, making the application of a 20 percent limit to any one grant impractical for HUD to monitor. Current regulations at § 570.200(g) base the 20 percent limit upon obligations in a given program year, relative to the amount of the most recent grant plus program income. Therefore, § 570.200(g) is revised to better reflect the limitations imposed by annual appropriations acts.

Through this rule, HUD divides § 570.200(g) into two distinct compliance tests. The current test, retained and redesignated § 570.200(g)(2), which determines compliance based upon obligations of both grant funds and program income, will apply to all prior and future program years. For grants made in FY 2015 and subsequent years, an additional test is included at § 570.200(g)(1), which would limit planning and administration expenditures to no more than 20 percent of each separate origin year grant (excluding program income). This new test will be used to determine compliance with the annual appropriations acts requirement at the end of the grant. The key difference between the two tests is that the existing test addresses program income and the new test does not. The reason that two tests are necessary is because the existing test allows program income to be used in lieu of grant funds for planning, management development, and administration costs, thereby ensuring that grantees are compliant with the cash management principles that require program income to be spent ahead of draws of Treasury funds.

These two tests measure different things over different time periods. The existing test (the program year test) limits obligations of funds made by the grantee during a program year. The amount of funds obligated for planning and administrative costs is limited to 20 percent of the sum of the origin year grant amount for that program year plus the amount of program income received by the grantee (and all subrecipients) during that program year. Compliance is determined at the end of each program year based on the grantee's annual performance report submission. This test allows obligations of program income for planning and general administration cost to support grantee compliance with § 570.504(b)(2), which requires that program income be substantially disbursed before withdrawals of grant funds from the United States Treasury.

The origin year grant test limits expenditures for planning and administrative costs against a given origin year's grant. For any given origin year grant, compliance will be determined during the grant closeout. For purposes of the second test, it does not matter when the funds were obligated or expended. Beginning with origin year 2015 grants and with FY 2015 program years, grantees must ensure that they comply with both tests. Grantees are cautioned that compliance with one test does not automatically ensure compliance with the other test.

HUD recognizes that CDBG grantees are administering programs that typically have multiple grants open at any given time. The interim rule adds language at § 570.200(g) to reiterate that administration and planning costs support the general operation of a grantee's CDBG program, and thus are not tied to any specific origin year or CDBG grant. A grantee may use funds from any origin year grant for administration and planning costs for any CDBG grant. This provision is limited to only administration and planning costs and does not include staff and overhead costs directly related to carrying out activities eligible under § 570.201 through § 570.204, since those costs are eligible as part of such activities and allocable to specific origin year grants.

Eligible Activities: Public Services (§ 570.201)

HUD revises regulations at § 570.201 in order to clarify that the public service cap determination is applicable to nonentitlement grantees in Hawaii and recipients of insular area funds under the CDBG program.

State CDBG Program Administrative Requirements (§ 570.489)

HUD revises the regulations for State administrative costs in § 570.489. Redundancies are removed and clarifying language is added to § 570.489(a)(1)(i)(ii) and (iii) and § 570.489(e)(3). Current regulations at § 570.489(a)(1)(v) allow State CDBG grantees the option of using cumulative accounting of administrative costs, consistent with the FIFO accounting method. Under the new grant-based accounting, for origin year 2015 grants and subsequent grants, State CDBG grantees will no longer have the option of cumulative accounting of the State's administrative costs and instead must use year-to-year tracking. The cumulative method will only continue to be available for State administrative expenses charged to FY 2014 and prior fiscal year grants.

HUD clarifies § 570.489(a)(3) to explain how HUD determines compliance with the planning and administration cost cap. While this provision is already grant-specific, the current calculation incorporates program income into the 20 percent administrative and planning cap. Therefore, the interim rule clarifies the compliance test at § 570.489(a)(3) by dividing it into multiple parts. Section 570.489(a)(3)(i) describes administration costs for both States and units of general local government. Section 570.489(a)(3)(ii) maintains current language of the administrative and planning cap, with added clarity. Section 570.489(a)(3)(iii) adds a second compliance test based solely upon use of funds from each annual grant (excluding program income) beginning with origin year 2015 and subsequent years' grants. The second compliance test will demonstrate compliance with annual appropriations acts limiting the amount grantees may use for planning, management development, and administration to not more than 20 percent of each grant.

As noted under the discussion of changes made to § 570.200, HUD recognizes that CDBG grantees are administering programs that typically have multiple grants open at any given time. Similar to the change made to § 570.200(g), the interim rule revises § 570.489(a)(3)(iv) to reiterate that administration and planning costs support the general operation of a grantee's CDBG program, and thus are not tied to any specific origin year or CDBG grant. A grantee may use funds from any origin year grant for administration and planning costs for any CDBG grant. This provision is limited to only administration and planning costs and does not include staff and overhead costs directly related to carrying out other eligible activities, since those costs are eligible as part of such activities and allocable to specific origin year grants.

Section 570.489(e)(3) is edited for clarity and to remove redundancies.

Records To Be Maintained (§ 570.506)

This rule adds language in § 570.506 specifying that grantees' records pertaining to obligations, expenditures, and drawdowns must be able to relate financial transactions to either a specific origin year's grant or to program income received during a specific program year.

Grant Closeout Procedures—Entitlement CDBG (§§ 570.509, 570.513)

The current regulations at § 570.509 have primarily applied when an entitlement CDBG grantee discontinued its participation in the program as a grantee. The interim rule will now permit and necessitate close out of each origin year grant from HUD. Starting with FY 2015 origin year grants, each year's grant will be closed out when all activity associated with the grant is completed.

This necessitates several changes to the closeout process, which also result in conforming changes to other portions of the regulations. The grant funds, as well as program income received during the program year corresponding to the grant's origin year, must be fully expended before the grant can be closed out. In addition, the grantee must enter final accomplishment data and all activities on which those funds were expended must be reported as completed in a final annual report. The interim rule clarifies that, in order to close out a grant, any unexpended program income received during the program year associated with the grant's origin year must be included in a subsequent year's action plan, thereby rolling forward those available resources onto a more recent action plan with ongoing activities. The funds will be included in the section describing the CDBG funds available pursuant to § 91.220(l), thereby allowing that prior origin year's grant to be closed out.

In addition, the interim rule adds closeout criteria based upon the changes to the administration and planning cap at § 570.200(g).

The interim rule change regarding expenditure of associated program income before grant closeout triggers corresponding changes to § 570.513, lump sum drawdown. A grant cannot be closed out if grant funds or associated program income remain unexpended in a deposit account subject to an existing lump sum drawdown agreement. The change to § 570.513 will require a grantee to execute a new lump sum drawdown agreement covering any unexpended funds, and that program income must be identified in the current program year action plan.

Minor and Technical Changes

The interim rule makes minor changes to §§ 91.505, 570.206, 570.410, and 570.503 for regulatory and statutory cross-references and grammar. The interim rule also makes various technical changes to incorporate administrative requirements in 2 CFR part 200. These changes include a new paragraph § 570.485(d) to clarify that HUD is authorized to establish specific conditions on grants to States in accordance with 2 CFR 200.207; changes to § 570.489(g) to make clear that States can make subrecipient and contractor determinations in accordance with 2 CFR 200.330; and a new paragraph § 570.489(o), which states that HUD will close out grants to States in accordance with 2 CFR 200.343.

III. Specific Issues for Comment

HUD solicits and welcomes comments on all aspects of this interim rule. HUD also specifically solicits comment on the following topics related to the accounting methodology changes for CDBG. HUD seeks the view of grantees, other program participants and interested members of the public. HUD may, at a future date, offer regulatory changes addressing one or more of these topics.

1. Retention of Program Income by Local Governments (§ 570.489(e))

HUD solicits comments about the revisions made to § 570.489(e)(3)(ii)(B) beyond those made by this interim rule. The intent of the section is to reinforce the requirement that program income remains subject to CDBG requirements regardless of the status of any State award to a unit of general local government. The current language of this section uses terms such as “activity closeout” and “grant close out”, as well as concepts such as “part of the unit of general local government's grant” and “part of the state's program year,” and this language may not reflect HUD's intent as explicitly as contemplated by HUD. HUD therefore seeks comment on whether the regulatory language clearly reflects HUD's intent and, if not, what revisions are recommended to better convey the intent of this section.

2. Limitations on Local Retention of Program Income (§ 570.489(e))

HUD seeks information that better informs the nature of activities that continue with program income. For States that limit the local retention of program income, what types of limitations do States place upon the definition of the “same activity”? Do the limitations restrict the program income for the same activity in a very strict sense (i.e., limited to the same work, at the same address, with the same beneficiaries)? Do the limitations generally reflect an activity type, such as housing rehabilitation; and, if so, what are the considerations for not classifying this as a revolving loan fund? Do the limitations reflect multiple activities that are bundled into a single effort, such as a main street revitalization plan that might use program income from business loans for other activities in the vicinity, such as façade and side walk improvements along the same main street? Is tracking and reporting the use of these funds problematic, and what solutions have States found (especially for States that do not limit the local retention of program income)?

3. Entitlement Administration and Planning Cap (§§ 570.200 and 570.201(e))

HUD has some flexibility in the manner program income applies to the administration and planning cap at § 570.200(g) and the public service cap at § 570.201(e). Currently, program income received during the current program year is considered in the determination of compliance with § 570.200(g) and program income received during the prior program year is considered in the determination of compliance with § 570.201(e). HUD solicits comments regarding the possibility of making these two determinations match in terms of which program year is considered for compliance. In this regard, HUD seeks comment on whether compliance with both caps should be based on prior year receipts of program income or current year receipts, or whether the current distinction between the two should be maintained.

IV. Justification for Interim Rulemaking

HUD generally publishes rules for advance public comment in accordance with its rule on rulemaking at 24 CFR part 10. However, under 24 CFR 10.1, HUD may omit prior public notice and comment if it is “impracticable, unnecessary, or contrary to the public interest.” In this instance, HUD has determined that it is unnecessary to delay the effectiveness of this rule for advance public comment.

The interim rule provides that, for FY 2015 grants, Entitlement CDBG grantees are to track their obligations and expenditures of funds for each specific grant year. The scope of the interim regulatory amendments is limited to the change in the input of this information in IDIS and to those additional changes necessary to conform the regulations to the grant accounting system, such as the time periods of affected grants, records retention, and the calculation of the cap on administrative and planning expenses, along with minor clarifications and technical corrections.

This interim rule does not establish new and unfamiliar requirements for CDBG grantees. Rather the regulatory changes eliminate administrative burden on grantees by aligning CDBG accounting methodology, as reflected in IDIS, with the grant accounting system typically used by grantees, and the standard accounting practice of keeping track of grant commitments and expenditures on an annual grant basis.

Although, under the current regulations, Entitlement CDBG recipients have the option to track expenditures in a cumulative manner, HUD estimates that 80 to 90 percent of grantees adhere to the grant-specific accounting. In addition, the selection of the grant year is already required for State CDBG recipients when requesting funds, so grantees are already tracking this information.

Given that the overwhelming majority of CDBG grantees use grant-specific accounting (the use of which is also strongly recommended by HUD's Office of Inspector General) HUD has the justification necessary to issue this rule as an interim rule. While a small percentage of CDBG grantees are not using this system, it is not a system that is unfamiliar to them. In addition, IDIS itself provides the reports and tools necessary to document compliance with the regulatory changes for all grantees.

And with the grant year-specific accounting, it is now possible for HUD to determine compliance with the administrative expenditure cap on a grant-specific basis. The revised accounting methods also necessitate these additional regulatory changes specifying how grantees are to handle closeout procedures and maintain records. Since the accounting changes are required by existing appropriations law, HUD believes that it is appropriate for the remaining regulatory changes to be effective for the current grant year through an interim rule.

Although HUD has determined that good cause exists to publish this rule for effect without prior solicitation of public comment, HUD recognizes the value and importance of public input in the rulemaking process. Accordingly, HUD is issuing these regulatory amendments on an interim basis and providing a 60-day public comment period. All comments will be considered in the development of the final rule.

V. Findings and Certifications

Executive Order 12866, Regulatory Planning and Review

The Office of Management and Budget (OMB) reviewed this proposed rule under Executive Order 12866 (entitled “Regulatory Planning and Review”). OMB determined that this rule was significant under the order, but not an economically significant regulatory action. The docket file is available for public inspection in the Regulations Division, Office of General Counsel, 451 7th Street SW., Room 10276, Washington, DC 20410-0500. Due to security measures at the HUD Headquarters building, please schedule an appointment to review the docket file by calling the Regulations Division at 202-402-3055 (this is not a toll-free number). Individuals with speech or hearing impairments may access this number via TTY by calling the Federal Information Relay Service at 800-877-8339. The docket file is available for public inspection at the above address, or it may be viewed online at www.regulations.gov,, under the above docket number. Due to security measures at the HUD Headquarters building, an advance appointment to review the public comments must be scheduled by calling the Regulations Division at 202-708-3055 (this is not a toll-free number). Individuals with speech or hearing impairments may access this number through TTY by calling the Federal Relay Service at 800-877-8339 (this is a toll-free number).

Information Collection Requirements

In accordance with the Paperwork Reduction Act, an agency 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 information collection requirements contained in this interim rule have been submitted to the OMB under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520) and assigned OMB control number 2506-0117.

Unfunded Mandates Reform Act

Title II of the Unfunded Mandates Reform Act of 1995 (UMRA) establishes requirements for Federal agencies to assess the effects of their regulatory actions on State, local, and tribal governments and the private sector. This rule will not impose any Federal mandates on any State, local, or tribal governments or the private sector within the meaning of UMRA.

Environmental Review

This interim rule does not direct, provide for assistance or loan and mortgage insurance for, or otherwise govern, or regulate, real property acquisition, disposition, leasing, rehabilitation, alteration, demolition, or new construction, or establish, revise, or provide for standards for construction or construction materials, manufactured housing, or occupancy. Accordingly, under 24 CFR 50.19(c)(1), this rule is categorically excluded from environmental review under the National Environmental Policy Act of 1969 (42 U.S.C. 4321).

Impact on Small Entities

The Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et seq.) generally requires an agency to conduct a regulatory flexibility analysis of any rule subject to notice and comment rulemaking requirements, unless the agency certifies that the rule will not have a significant economic impact on a substantial number of small entities. As an initial matter, HUD notes that the scope of the rule is limited to accounting methodology, and does not add or modify other CDBG program requirements other than to provide grammatical and technical corrections. Further, accounting for grant funds by specific funding allocations is a practice used in other Federal programs, and so the requirements are not unfamiliar to, and may already be used by, CDBG grantees that also receive funding under such programs.

With respect to burden on small entities, as part of the development of HUD's Affirmatively Furthering Fair Housing (AFFH) final rule, HUD identified small entities participating in the CDBG program as those receiving a grant in FY 2015 of $500,000 or less (small CDBG grantees). The number of small CDBG grantees totaled 357 out of 1,258 CDBG grantees in FY 2015.

In this rule, HUD is now requiring small actions that were previously optional, but which many grantees were already performing. Further, any necessary accounting system changes would be one-time updates, rather than a recurring expense, and such costs would be reimbursed from the grantee's administrative expense account, funded by the CDBG grant. Therefore, the undersigned certifies that this rule will not have a significant impact on a substantial number of small entities.

Notwithstanding HUD's belief that this rule will not have a significant effect on a substantial number of small entities, HUD specifically invites comments regarding any less burdensome alternatives to this rule that will meet HUD's objectives as described in this preamble.

Executive Order 13132, Federalism

Executive Order 13132 (entitled “Federalism”) prohibits an agency from publishing any rule that has federalism implications if the rule either imposes substantial direct compliance costs on State and local governments and is not required by statute or the rule preempts State law, unless the agency meets the consultation and funding requirements of section 6 of the Executive order. This rule does not have federalism implications and does not impose substantial direct compliance costs on State and local governments nor preempt State law within the meaning of the Executive order.

Catalog of Federal Domestic Assistance

The Catalog of Federal Domestic Assistance numbers applicable to the program that would be affected by this rule are 14.218, 14.225, 14.228, and 14.248.

List of Subjects

24 CFR Part 91

• Aged
• Grant programs—housing and community development
• Homeless
• Individuals with disabilities
• Low and moderate income housing
• Reporting and recordkeeping requirements

24 CFR Part 570

• Administrative practice and procedure
• American Samoa
• Community development block grants
• Grant programs—education
• Grant programs—housing and community development
• Guam
• Indians
• Loan programs—housing and community development
• Low and moderate income housing
• Northern Mariana Islands
• Pacific Islands Trust Territory
• Puerto Rico
• Reporting and recordkeeping requirements
• Student aid
• Virgin Islands

Accordingly, for the reasons stated in the preamble, HUD is amending 24 CFR parts 91 and 570 as follows:

PART 91—CONSOLIDATED SUBMISSIONS FOR COMMUNITY PLANNING AND DEVELOPMENT PROGRAMS

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

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

2. In § 91.220, revise paragraphs (l)(1)(i) and (ii) to read as follows:

3. Amend § 91.320 as follows:

a. Capitalize the word “state” and “state's” each time it appears; and

b. Revise paragraph (k)(1).

The revision reads as follows:

4. In § 91.325, revise paragraph (b)(4)(ii) to read as follows:

5. In § 91.505, amend paragraph (a)(2) by adding “, reimbursements, or reallocations from HUD” after “including program income”.

PART 570—COMMUNITY DEVELOPMENT BLOCK GRANTS

6. The authority citation for part 570 continues to read as follows:

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

7. In § 570.3, revise the definition of “ Entitlement amount” and add the definition of “Origin year” in alphabetical order to read as follows:

8. In § 570.200, revise paragraph (g) and add paragraph (k) to read as follows:

9. Amend § 570.201 as follows:

a. In paragraph (e)(1), add “nonentitlement CDBG grants in Hawaii, and for recipients of insular area funds under section 106 of the Act,” following “subpart D of this part,” both times such language appears; and

b. In paragraph (e)(2), remove “Federal fiscal year” and add in its place “origin year”.

10. Amend § 570.206 as follows:

a. In the introductory text, add “program” after “reasonable”; and

b. In paragraph (a)(1) introductory text, remove “(or the grant period for grants under subpart F)”.

11. Amend § 570.410 as follows:

a. In paragraph (c)(2)(ii), remove “federal fiscal year” and add in its place “origin year”; and

b. In paragraph (c)(2)(iii), remove “(e)(3)” and add in its place “(e)(2)”, and remove “federal fiscal year” and add in its place “origin year”.

12. In § 570.480, add paragraph (h) to read as follows:

13. In § 570.481, revise paragraph (a)(2) and add paragraph (a)(3) to read as follows:

14. In § 570.485, add paragraph (d) to read as follows:

15. Amend § 570.489 as follows:

a. Capitalize the words “state” and “state's” each time they appear; and

b. In § 570.489, revise paragraphs (a)(1)(i), (ii), (iii), and (v) and (a)(2) and (3), paragraphs (e)(3) introductory text, (e)(3)(i) and (ii), and paragraph (g) and add paragraph (o) to read as follows:

16. In § 570.503, amend paragraph (b) introductory text by removing the second occurrence of the word “following”.

17. Amend § 570.506 as follows:

a. In paragraph (d), add “§ 570.503(b)(7) or” before “§ 570.505”; and

b. Revise paragraph (h).

The revision reads as follows:

18. Amend § 570.509 as follows:

a. Revise paragraph (a);

b. Remove paragraph (b)(1) and redesignate paragraphs (b)(2) through (4) as paragraphs (b)(1) through (3), respectively;

c. In newly redesignated paragraph (b)(2), add a sentence at the end;

d. In newly redesignated paragraph (b)(3), remove“ 24 CFR part 44” and add in its place “HUD regulations implementing the Single Audit Act requirements at 2 CFR part 200”;

e. Remove paragraph (c)(3) and redesignate paragraphs (c)(4) and (5) as paragraphs (c)(3) and (4), respectively; and

f. Revise newly redesignated paragraph (c)(3).

The revisions and additions read as follows:

19. In § 570.513, amend paragraph (b)(7) by adding after the first sentence a new second sentence to read as follows: