Federal Register, Volume 85 Issue 162 (Thursday, August 20, 2020)

[Federal Register Volume 85, Number 162 (Thursday, August 20, 2020)]
[Notices]
[Pages 51457-51475]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-18242]

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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Docket No. FR-6218-N-01]

Notice of Program Rules, Waivers, and Alternative Requirements
Under the CARES Act for Community Development Block Grant Program
Coronavirus Response Grants, Fiscal Year 2019 and 2020 Community
Development Block Grants, and for Other Formula Programs

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

ACTION: Notice.

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SUMMARY: This notice describes the program rules, statutory and
regulatory waivers, and alternative requirements applicable to
supplemental Community Development Block Grant (CDBG) funds made
available to prevent, prepare for, and respond to coronavirus (CDBG-CV
funds) and to annual formula CDBG grants awarded in fiscal years 2019
and 2020. Except as otherwise described in this notice and the CARES
Act, the statutory and regulatory provisions governing the CDBG program
apply to CDBG-CV and CDBG grants. This notice also describes conforming
waivers and alternative requirements for other formula programs
included in the consolidated planning regulations in 24 CFR part 91.

DATES: Applicable: August 7, 2020.

FOR FURTHER INFORMATION CONTACT: Jessie Handforth Kome, Director,
Office of Block Grant Assistance, Office of Community Planning and
Development, Department of Housing and Urban Development, 451 7th
Street SW, Room 7282, Washington, DC 20410, telephone number 202-708-
3587. Persons with hearing or speech impairments may access this number
via TTY by calling the Federal Relay Service at 800-877-8339. Facsimile
inquiries may be sent to Ms. Kome at 202-708-0033. Except for the
``800'' number, these telephone numbers are not toll-free. Questions
regarding the CDBG-CV program may be submitted to
exception occurred on : 2020-18242.htm
exception occurred on : 2020-18242.htm
hud.gov">[email protected]hud.gov. Interested parties may also visit HUD's
website at https://www.hud.gov/program_offices/comm_planning for
updated information and resources.

SUPPLEMENTARY INFORMATION:

[[Page 51458]]

Table of Contents

I. Overview and Background
II. Summary of Special Authorities Under the CARES Act
II.A. Program Modifications in the CARES Act
II.B. Authority To Grant Waivers and Alternative Requirements
III. CDBG-CV Grants
III.A. Allocations of CDBG-CV Funds
III.A.1. First Allocation
III.A.2. Additional Allocations
III.A.3. Reallocation.
III.B. CDBG-CV Grant Rules, Waivers, and Alternative
Requirements
III.B.1. General Grant Requirements
III.B.2. Responsible Use of CARES Act Funds
III.B.3. Overview of Process To Receive CDBG-CV Grants
III.B.4. Application for Grant Funds and Citizen Participation
III.B.5. Allowable Costs, Eligible Activities and National
Objectives
III.B.6. Other Program Requirements
III.B.7. Period of Performance, Timeliness, and Closeout
III.B.8. Reporting
III.B.9. Duplication of Benefits
III.B.10 Citizenship Requirements
IV. Fiscal Year 2019 and Fiscal Year 2020 CDBG Grants
IV.A. General Requirements
IV.B. Flexibilities, Waivers, and Alternative Requirements
IV.B.1. Timeliness
IV.B.2. Consolidated Plan, Citizen Participation, and CAPER
IV.B.3. Flexibilities that Apply to Coronavirus-Related
Activities.
IV.B.4. Provisions That Do Not Apply to FY 19 and FY 20 Grants.

I. Overview and Background

On January 21, 2020, the Centers for Disease Control and Prevention
(CDC) confirmed the first case in the United States of a coronavirus
known by several names, including novel coronavirus, and SARS-CoV-2,
and which causes the disease commonly referred to as COVID-19. On March
27, 2020, President Trump signed the Coronavirus Aid, Relief, and
Economic Security Act (Pub. L. 116-136) (CARES Act). The CARES Act
makes available $5 billion in CDBG coronavirus response (CDBG-CV) funds
to prevent, prepare for, and respond to coronavirus. In the CARES Act
and this notice, the term ``coronavirus'' means SARS-CoV-2 or another
coronavirus with pandemic potential.
The nation faces significant public health and economic challenges
related to this respiratory disease. To address these challenges, CDBG-
CV and CDBG grants are a flexible source of funding that can be used to
pay costs that are not covered by other sources of assistance,
particularly to benefit persons of low and moderate income.
This notice is broken into sections. Section II provides a general
overview of the CDBG-CV and CDBG program flexibilities provided by the
CARES Act. Section III describes the allocations, grant procedures,
program flexibilities, waivers, and alternative requirements applicable
to CDBG-CV grants. Section IV describes the program flexibilities,
waivers, and alternative requirements that apply to fiscal years 2019
and 2020 CDBG grants used to prevent, prepare for, and respond to
coronavirus or that affect other aspects of program administration.
Other sections contain administrative information related to this
notice.

II. Summary of Special Authorities Under the CARES Act

The CARES Act modifies some CDBG program rules and authorizes the
Secretary of HUD to grant waivers and alternative requirements.
Accordingly, this notice describes how requirements of the CDBG program
are modified for CDBG-CV grants, fiscal year 2020 CDBG grants under the
Department of Housing and Urban Development Appropriations Act, 2020
(Pub. L. 116-94), and fiscal year 2019 CDBG grants under the Department
of Housing and Urban Development Appropriations Act, 2019 (Pub. L. 116-
6). For ease of reference, citations in this notice include
parentheticals indicating whether a CDBG program statute or regulation
applies to entitlement grants, state grants, insular area grants, or
grants to nonentitlement counties in Hawaii. Where citations do not
include Hawaii counties or insular areas, the additional citation is
not necessary because the cited entitlement CDBG regulation applies to
insular areas and Hawaii counties in addition to entitlement grantees.

II.A. Program Modifications in the CARES Act

The Community Development Fund heading in title XII of Division B
of the CARES Act modifies some CDBG program requirements to provide
immediate support for coronavirus efforts. The modifications are
described in more detail in Section III, and are the following:
Permits a public comment period of no less than 5 days
when citizen participation is required.
Permits grantees to develop expedited citizen
participation procedures and to hold virtual public hearings when
necessary for public health reasons.
Eliminates the public services cap for coronavirus-related
activities.
Allows states and local governments to reimburse allowable
costs of eligible activities regardless of the date the costs were
incurred.

II.B. Authority To Grant Waivers and Alternative Requirements

The CARES 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 use of
CDBG-CV grants, fiscal year 2020 CDBG grants, and fiscal year 2019 CDBG
grants to prevent, prepare for, and respond to coronavirus or that
affect other aspects of program administration for the fiscal year 2019
and 2020 CDBG grants, except for requirements related to fair housing,
nondiscrimination, labor standards, and the environment, upon a finding
by the Secretary that any such waivers or alternative requirements are
necessary to expedite or facilitate the use of such amounts to prevent,
prepare for, and respond to coronavirus. Additional waiver authority is
provided in 24 CFR 5.110 and 91.600. In accordance with these
provisions, HUD may waive regulatory provisions (subject to statutory
limitations) for good cause.
As required by the CARES Act, the Secretary has considered the
waivers and alternative requirements in this notice and finds that
there is good cause for each and that each is necessary to expedite or
facilitate the use of grant funds to prevent, prepare for, and respond
to coronavirus.

III. CDBG-CV Grants

This section describes the CDBG-CV allocations to states and units
of general local government (including insular areas), the process to
access grant funds, and the rules, waivers, and alternative
requirements that apply to CDBG-CV grants.

III.A. Allocations of CDBG-CV Funds

Of the $5 billion made available by the CARES Act, HUD will use
$10,000,000 to make technical assistance awards to provide an immediate
increase in capacity building and technical assistance to support the
use of CDBG-CV grants and CDBG grants to prevent, prepare for, and
respond to coronavirus.
The remaining funds will be allocated as described in sections
III.A.1. and III.A.2.
III.A.1. First Allocation
The CARES Act requires HUD to allocate up to $2 billion in CDBG-CV
funds using the same formula that it used to allocate fiscal year 2020
CDBG

[[Page 51459]]

grants pursuant to section 106 of the Housing and Community Development
Act of 1974 (42 U.S.C. 5306). HUD made this first CDBG-CV allocation on
April 2, 2020, 24 days before the 30-day allocation deadline in the
CARES Act, in the amount of $2 billion. The allocations are available
on HUD's website at https://www.hud.gov/program_offices/comm_planning/budget/fy20/.
III.A.2. Additional Allocations
The CARES Act requires HUD to make a second round of CDBG-CV
allocations within 45 days of enactment of the CARES Act. HUD is
required to make this allocation in the amount of $1 billion directly
to states and insular areas to prevent, prepare for, and respond to
coronavirus within the state or insular area. HUD made this second
round of CDBG-CV allocations on May 11, 2020, in the amount of $1
billion. The allocations and methodology are available on HUD's website
at: https://www.hud.gov/program_offices/comm_planning/budget/fy20/. The
second CDBG-CV allocations were based on factors identified in the
CARES Act: Public health needs, risk of transmission of coronavirus,
number of coronavirus cases compared to the national average, economic
and housing market disruptions, and other factors, as determined by the
Secretary, using best available data.
The CARES Act authorized HUD to allocate the remaining $2 billion
in CDBG-CV funds, minus the $10 million set aside for technical
assistance, on a rolling basis. The CARES Act provides that the
remaining $2 billion shall be distributed directly to states or units
of general local government, at the discretion of the Secretary,
according to a formula based on factors to be determined by the
Secretary, prioritizing risk of transmission of coronavirus, number of
coronavirus cases compared to the national average, and economic and
housing market disruptions resulting from coronavirus. The District of
Columbia is defined as a metropolitan city under the Housing and
Community Development Act of 1974 and not as a state or insular area.
As such, it was not eligible for funding under the Round 2 $1 billion
allocation. To ensure national geographic coverage in Round 2, HUD made
an allocation from the third round of funding to the District of
Columbia simultaneously with the second round because the District met
the geographic criteria for the third round of allocations and was the
only geographic area in the nation that was not covered by the second
round of allocations.
HUD will publish additional third round allocations and a
description of the allocation formulas on HUD's website at https://www.hud.gov/program_offices/comm_planning/budget/fy20/ and will provide
a link to this site in any press release announcing an allocation.
III.A.3. Reallocation
Under Section 106 of the Housing and Community Development Act of
1974 (HCD Act) (42 U.S.C. 5306), HUD reallocates annual formula CDBG
funds that cannot be distributed to grantees when it allocates the next
fiscal year's appropriation of annual formula CDBG funding. Given the
immediate need for coronavirus assistance, the Department is specifying
the following alternative requirement to sections 106I and (d)(3)I (42
U.S.C. 5306I and 5306(d)(3)I), and the reallocation provisions of 24
CFR 570.4(a), 570.420I, 570.429(d)(2), and 570.442(b), to expedite the
use of any funds that may become available for reallocation.
If a jurisdiction receiving an allocation of CDBG-CV funds fails to
apply for funding in accordance with the requirements of this notice by
August 16, 2021 (the deadline established by the CARES Act) or HUD is
unable to distribute funds to a grantee for another reason, HUD may
notify the jurisdiction of the cancellation of all or part of its
allocation amount. Funds that are not awarded to jurisdictions under
the formulas described in paragraphs III.A.1. and III.A.2. may be
reallocated based on factors identified in the CARES Act, as determined
by the Secretary. If made, reallocations will be published on HUD's
website.

III.B. CDBG-CV Grant Rules, Waivers, and Alternative Requirements

This section describes program flexibilities in the CARES Act and
provides waivers and alternative requirements to expedite or facilitate
the use of CDBG-CV funds. The rules, waivers, and alternative
requirements described in this section only apply to CDBG-CV grants (as
specified in this section) and in some cases to fiscal year 2019 and
fiscal year 2020 CDBG grants (as specified in section IV) and program
income (as specified in sections III.B.5.(f)(iv) and III.B.6.(a)). The
CARES Act statutory flexibilities, waivers, and alternative
requirements do not apply to other sources of CDBG funds (even if used
in conjunction with CDBG-CV funds, fiscal year 2019 CDBG funds, or
fiscal year 2020 CDBG funds) except as otherwise described in section
IV.B.3.(b).
III.B.1. General Grant Requirements
CDBG-CV grants are subject to the requirements of the CARES Act,
the authorities and conditions imposed on fiscal year 2020 CDBG grants,
and the mandatory provisions of this notice and waivers and alternative
requirements. Except as otherwise described, grantees must comply with
statutory and regulatory provisions governing the CDBG program. These
include regulations at: 24 CFR part 570 subpart I (states); 24 CFR part
570 subparts A, C, D, E, F, J, K, and O for CDBG (entitlements,
nonentitlement Hawaii counties and insular areas).
To facilitate the use of CDBG-CV funds in accordance with the grant
requirements, HUD is imposing an alternative requirement that the
definitions of CDBG funds in 24 CFR 570.3 (entitlements) and 24 CFR
570.481(a)(2) (states) include CDBG-CV funds. This alternative
requirement applies the requirements in 24 CFR part 570 to the use of
CDBG-CV funds, except as modified by rules, waivers, and alternative
requirements applicable to CDBG-CV grants.
CDBG-CV grant agreements will impose requirements by incorporating
program rules, waivers, and alternative requirements (including those
published in memoranda, in this and any future notices).
Grantees should not assume that their normal CDBG funding
distribution procedures are adequate to swiftly distribute and use
CDBG-CV grants. For example, if a grantee's existing policies mandate
lengthy processes to select activities or complete procurements,
grantees should try to expedite actions with local waiver authorities
or emergency procedures that may be available without state or local
rulemaking. In addition, urban counties that normally distribute CDBG
funds on a proportional basis among all participating jurisdictions
should consider whether their normal procedures would result in funding
awards that are too small to be used expeditiously and productively by
the participating jurisdictions.
III.B.2. Responsible Use of CARES Act Funds
CDBG-CV funds are subject to additional measures designed to
prevent fraud, waste, and abuse. HUD will conduct regular oversight and
monitoring activities to determine that use of CDBG-CV funds is
consistent with grant requirements and limited to the necessary and
reasonable costs of activities to prevent, prepare for, and respond to
coronavirus. Measures to

[[Page 51460]]

increase transparency and accountability include:
Regular reporting on the use of CDBG-CV funds, including
reporting that may be required by the CARES Act to conduct audits and
reviews of programs, operations, and expenditures relating to funds
under the CARES Act and the Coronavirus response (see section III.B.8.
for information on reporting requirements); and
a requirement that grantees prevent the duplication of
benefits that is caused when a person, household, business, or other
entity receives financial assistance from multiple sources for the same
purpose, and the total assistance is more than the total need (see
section III.B.9. for information on duplication of benefits).
III.B.3. Overview of Process To Receive CDBG-CV Grants
On April 2, 2020, HUD published the first round of CDBG-CV
allocations on the hud.gov website and notified jurisdictions of their
allocation amounts. On April 9, 2020, John Gibbs, Acting Assistant
Secretary for Community Planning and Development, issued a memorandum
with the subject, ``CARES Act Flexibilities for CDBG Funds Used to
Support Coronavirus Response and plan amendment waiver'' (``April 9
memorandum''), available at https://www.hud.gov/sites/dfiles/CPD/documents/CARES-Act-Flexibilities-CDBG-Funds-Used-Support-Coronavirus-Response.pdf. The memorandum advised grantees to amend or prepare
consolidated plan submissions for CDBG-CV grants as soon as possible.
Grantees may have partially or fully completed the application process
before HUD publishes this notice.
The April 9 memorandum also granted waivers to expedite this
process of applying for CDBG-CV funds by permitting application for a
grantee's share of the first $2 billion through a substantial amendment
to a grantee's most recent annual action plan (the most recent year may
be the 2019 annual action plan). These waivers and alternative
requirements describing the content of a substantial amendment to add
CDBG-CV allocations to the most recent annual action plan are in
section III.B.4.(b)(i).
Submitting a substantial amendment may speed access to grant funds
because consultation and public hearings are not required (although 24
CFR 570.441I(2) requires insular areas to hold a public hearing for
amendments, section III.B.4.(a)(iii) waives this requirement for CDBG-
CV substantial amendments). However, the April 9 memorandum does not
preclude grantees from applying by submitting a FY 2020 Action Plan
that includes the CDBG-CV funds. If the grantee chooses to include
CDBG-CV grant funds in its annual action plan for FY 2020 funds, the
grantee must comply with action plan submission procedures in 24 CFR
part 91 (including consultation and a public hearing), as modified by
the waiver and alternative requirements in paragraph III.B.4.(a)(iv),
which apply the CARES Act citizen participation flexibilities to all
consolidated plan formula grant programs.
The following procedures apply regardless of whether the grantee
applies for CDBG-CV funds through an action plan or action plan
substantial amendment:
Rather than wait to apply until HUD allocates all
available CDBG-CV funds, HUD recommends that grantees apply as soon as
possible for CDBG-CV funds that HUD has allocated. Grantees receiving
subsequent allocations can make substantial amendments to apply for
subsequent allocation amounts after they are announced.
All grantees may adopt and use expedited procedures to
draft, propose, modify, or amend consolidated plans for CDBG-CV and
fiscal year 2019 and 2020 CDBG grants as described in section III.B.4.
These expedited procedures amend the grantee's citizen participation
plan and require it be published for no less than 5 calendar days to
solicit public comment. Expedited procedures may include virtual
hearings, as described in section III.B.4.(a)(ii).
The grantee must publish its application for CDBG-CV funds
(whether through a new action plan or action plan substantial
amendment) for no less than 5 calendar days to solicit public comment.
The comment period can run concurrently with the comment period on
changes to add expedited procedures to the citizen participation plan.
The grantee must respond to public comments.
The grantee must submit its application for CDBG-CV funds
to HUD for review in accordance with 24 CFR 91.500. To receive a CDBG-
CV grant, a grantee must also submit a SF-424, SF-424D and the
certifications at 24 CFR 91.225(a) and (b) or 24 CFR 91.325(a) and (b)
and 24 CFR 91.425.
HUD and the grantee will enter a grant agreement and HUD
will establish the grantee's line of credit.
The grantee may draw funds from the line of credit after
the Responsible Entity completes applicable environmental review(s)
pursuant to 24 CFR part 58 and, as applicable, receives from HUD the
Authority to Use Grant Funds (AUGF) form and certification.
III.B.4. Application for Grant Funds and Citizen Participation
This section III.B.4. describes the CDBG program flexibilities in
the CARES Act and additional waivers and alternative requirements that
HUD granted to facilitate or expedite the process to amend consolidated
plans and apply for CDBG-CV grants.
III.B.4.(a) Expedited Citizen Participation and Virtual Hearings
The CARES Act permits grantees to adopt expedited citizen
participation procedures and hold virtual hearings for consolidated
plan submissions for CDBG-CV funds and for CDBG grants for fiscal years
2019 and 2020. Section III.B.4.(a)(iii) includes a corollary waiver and
alternative requirement to permit states to extend these flexibilities
to units of general local government and insular areas. Section
III.B.4.(a)(iv) includes a corollary waiver and alternative requirement
extending these flexibilities to other consolidated plan formula
programs.
III.B.4.(a)(i) Citizen Participation, Public Notice and Comment
Period. The CARES Act authorizes a CDBG-CV grantee to adopt and utilize
expedited procedures to prepare, propose, modify, or amend its
consolidated plan, notwithstanding sections 104(a)(2), (a)(3), and (c)
of the HCD Act (42 U.S.C. 5304(a)(2), (a)(3), and (c)) and section 105
of the Cranston-Gonzalez National Affordable Housing Act (NAHA, at 42
U.S.C. 12705). The expedited procedures may permit virtual hearings, as
described in section III.B.4.(a)(ii), whenever a public hearing is
required by 24 CFR 91.105 (entitlements), 91.115 (states), 570.431
(Hawaii counties), 570.441 (insular areas), or by the grantee's citizen
participation plan. Expedited procedures adopted by the grantee shall
provide citizens with notice and a reasonable opportunity to comment of
no less than 5 days.
Expedited procedures must be published for no less than 5 calendar
days to solicit public comment, and once adopted, become part of the
grantee's citizen participation plan. The public comment period for
incorporating expedited procedures into the citizen participation plan
may run concurrently with the public comment period on a proposed CDBG-
CV substantial amendment or other proposed consolidated plan
submissions for CDBG-CV funds and fiscal year 2019 and 2020 CDBG
grants. Consolidated plan submissions for other

[[Page 51461]]

programs are addressed in section III.B.4.(a)(iv).
The CARES Act modifies the annual formula CDBG program requirement
that a grantee must solicit comments from its citizens for a period of
at least 30 days before it submits a substantial amendment or an annual
action plan to HUD.
III.B.4.(a)(ii) Virtual Hearings. For as long as national or local
health authorities recommend social distancing and limiting public
gatherings for public health reasons, the CARES Act authorizes the
grantee to hold virtual hearings in lieu of in-person public hearings
for CDBG-CV grants and for fiscal year 2019 and 2020 CDBG grants
(virtual hearings for other consolidated plan formula programs are
addressed in section III.B.4.(a)(iv)). All virtual hearings held under
the authority provided by the CARES Act shall provide reasonable
notification and access for citizens in accordance with the grantee's
certifications, timely responses from local officials to all citizen
questions and issues, and public access to all questions and responses.
Therefore, grantees may use online platforms to hold virtual
hearings that facilitate public access to all questions and responses
and provide timely responses from local officials. Additionally,
grantees must take appropriate actions to encourage the participation
of all residents, including the elderly, minorities, persons with
limited English proficiency, as well as persons with disabilities,
consistent with the jurisdiction's citizen participation plan.
The CARES Act does not modify nondiscrimination requirements.
Consistent with 24 CFR 91.105 (entitlements) and 91.115 (states), and
24 CFR 570.431 (Hawaii counties) and 570.441 (insular areas), a
jurisdiction is expected to take whatever actions are appropriate to
encourage the participation of all its citizens in virtual and in-
person hearings, including minorities and persons with limited English
proficiency, as well as persons with disabilities. Whether hearings are
in-person or virtual, grantees must take appropriate steps to ensure
effective communication with persons with disabilities consistent with
the requirements of accessibility laws, such as Section 504 of the
Rehabilitation Act and the Americans with Disabilities Act. The grantee
must provide appropriate auxiliary aides and services where necessary
to afford individuals with hearing and vision impairments an equal
opportunity to access and participate in such hearings. These may
include effective methods that make aurally delivered information
available to individuals who are deaf or hard or hearing, and visually
delivered materials available to individuals who are blind or have low
vision. The type of auxiliary aid or service necessary to ensure
effective communication will vary in accordance with the method of
communication used by the individual; the nature, length, and
complexity of the communication involved; and the context in which the
communication is taking place. In determining what types of auxiliary
aids and services are necessary, a grantee shall give primary
consideration to the requests of individuals with disabilities. In
order to be effective, auxiliary aids and services should be provided
in accessible formats, in a timely manner, and in such a way as to
protect the privacy and independence of the individual with a
disability. For virtual hearings, such steps should include ensuring
that information is provided on an accessible website, that emails and
other digital notifications are accessible, and that the application or
platform used to host the hearing is also accessible. Additional
services such as audio description or captioning may also be needed to
provide effective communication in a digital context. Helpful
guidelines for ensuring the accessibility of web-based and digital
materials are available through the World Wide Web Consortium's Web
Accessibility Initiative at https://www.w3.org/WAI/. Examples of
auxiliary aids and services that may be necessary when conducting
hearings online can be found at 28 CFR 35.104.
Grantees must also take reasonable steps to provide meaningful
access to persons with limited English proficiency consistent with
Title VI of the Civil Rights Act. To ascertain their obligations,
grantees should conduct the four-factor analysis set forth in HUD's
limited English proficiency guidance found at https://www.hud.gov/sites/documents/FINALLEP2007.PDF, which may be covered by grantees'
Language Assistance Plan, recognizing that the use of the internet to
conduct such a hearing may change the analysis. For virtual or online
hearings, such services may also include translation of documents and
captioning or interpretation in the appropriate language(s). More
information on the four-factor analysis and other requirements can be
found at https://www.hud.gov/sites/documents/FINALLEP2007.PDF.
III.B.4.(a)(iii) Modifications to citizen participation
requirements for local governments that receive funds from States and
for insular areas. HUD is clarifying that by authorizing states to
adopt expedited citizen participation procedures, the CARES Act
authorized expedited procedures and virtual public hearings for citizen
participation by units of general local government that receive CDBG-CV
funds from a state through a method of distribution. This is because 24
CFR 91.115I requires states to include citizen participation
requirements for units of general local government in its own citizen
participation plan. Expedited procedures must still describe how units
of local governments receiving funds from the state will meet the
citizen participation requirements in 24 CFR 570.486.
Additionally, HUD is waiving the requirement in 570.441I(2) that an
insular area must hold a public hearing on a substantial amendment.
Instead, HUD is imposing an alternative requirement to permit the
insular area to adopt expedited requirements by modifying its citizen
participation plan to replace the hearing if it provides community
residents with reasonable notice and an opportunity to comment on
substantial amendments to the consolidated plan or annual action plan.
III.B.4.(a)(iv) Extension of CARES Act Flexibilities to All
Consolidated Plan Formula Programs (CDBG, CDBG-CV, HOME, HOPWA, HTF,
ESG) and Section 108 Loan Guarantees. The CARES Act altered
consolidated plan citizen participation requirements for some CDBG-CV
grants, fiscal year 2019 and 2020 annual formula CDBG grants, and
Emergency Solutions Grant supplemental CARES Act (ESG-CV) grants. It
did not modify citizen participation for other annual formula CDBG and
ESG grants, Section 108 Loan Guarantees, or for HOME Investment
Partnerships (HOME), Housing Trust Fund (HTF), and Housing
Opportunities for Persons With AIDS (HOPWA) formula programs before
fiscal year 2019.
On April 1, 2020, HUD issued two waivers to modify citizen
participation requirements for consolidated plan substantial amendments
for CDBG, ESG, HOME, HTF, and HOPWA. The first eliminated the 30-day
minimum for the required public comment period for substantial
amendments, provided that no less than 5 days are provided for public
comments on each substantial amendment concerning the proposed uses of
CDBG, HOME, HTF, HOPWA, or ESG funds. The second allowed grantees to
determine what constitutes reasonable notice and opportunity to
comment, given their circumstances, for the 2020 program year. The
waivers were published in a memorandum

[[Page 51462]]

signed by Acting Assistant Secretary John Gibbs on March 31, 2020. It
is available at: https://www.hud.gov/sites/dfiles/CPD/documents/Availability-of-Waivers-of-CPD-Grant-Program-and-Consolidated-Plan-Requirements-to-Prevent-the-Spread-of-COVID-19-and-Mitigate-Economic-Impacts-Caused-by-COVID-19.pdf.
HUD is now issuing waivers and alternative requirements to expedite
procedures to modify citizen participation plans for all 2020 fiscal
year consolidated plan and annual action plan submissions that pertain
to ESG, HOME, HTF, and HOPWA formula programs. The waivers are
necessary to effectively implement the CARES Act flexibilities offered
to CDBG grantees because planning and annual action plan consolidated
plan submissions for CDBG-CV and CDBG grants are inextricably linked
with the consolidated plan submissions for ESG, HOME, HTF, and HOPWA.
In 1995, HUD published the consolidated plan regulation at 24 CFR
part 91. The consolidated plan replaced the following separate
application and planning submissions: The Comprehensive Housing
Affordability Strategy (CHAS), enacted by NAHA at 42 U.S.C. 12701, the
Community Development Plan requirements, added to the CDBG program by
NAHA (42 U.S.C. 5304), the CDBG final statement, the HOME program
description, and the ESG and HOPWA applications. In 2015, HUD published
an interim rule that added HTF to the consolidated planning
regulations. States and units of general local government (including
insular areas) that apply for Section 108 loan guarantees pursuant to
24 CFR 570.704 may also be required to include the use of guaranteed
loan funds in their consolidated plans.
Grantees that apply for CDBG-CV or CDBG funds as part of their 3-5
year consolidated plan or annual action plan submissions cannot
reasonably take advantage of the expedited CARES Act citizen
participation requirements unless the other programs included in these
submissions are subject to the same expedited requirements. Creating a
separate application process for CDBG-CV and CDBG funds would add time
and complications that are likely to delay the availability of funds
and undermine the purpose of the CARES Act provisions to expedite
assistance. Further, separating CDBG planning and applications would
thwart several of the reasons cited for the consolidated planning rule,
e.g., providing comprehensive information on the jurisdiction that is
easy to understand and reducing paperwork and simplifying the process
of requesting and obtaining federal funds available to the
jurisdictions (60 FR 1878, published January 5, 1995).
Therefore, HUD is waiving provisions at 24 CFR 91.105(b)(4), (c)(2)
and (k), 24 CFR 91.115(b)(4), (c)(2) and (i), 24 CFR 91.401, 24 CFR
570.431, 24 CFR 570.441, and 24 CFR 570.704 to the extent necessary to
permit the following alternative requirement: CDBG, HOME, HTF, HOPWA,
and ESG grantees may modify their citizen participation plans to adopt
expedited procedures that apply when the grantees prepare, propose,
modify, or amend any consolidated plan submissions that contain uses of
CDBG-CV funds or uses of fiscal year 2019 or 2020 CDBG funds to
prevent, prepare for, and respond to coronavirus. The expedited
procedures must, at a minimum, provide citizens with notice and a
reasonable opportunity to comment of no less than 5 days.
Additionally, HUD is waiving provisions at 24 CFR 91.105(b) and I,
24 CFR 91.115(b) and I, 24 CFR 91.401, and 24 CFR 570.431, 570.441, and
570.486(a) to the extent necessary to establish the following
alternative requirement. For as long as national or local health
authorities recommend social distancing and limiting public gatherings
for public health reasons, CDBG, ESG, HOME, HTF, and HOPWA grantees,
and units of general local government receiving CDBG funds from state
or insular area CDBG grantees, may hold virtual hearings in lieu of in-
person public hearings to fulfill public hearing requirements imposed
by 42 U.S.C. 12707(a)(3) and the regulations at 24 CFR part 91 and 24
CFR part 570, or by the grantee's citizen participation plan.
For each virtual hearing, a grantee shall provide reasonable
notification and access for citizens in accordance with the grantee's
certifications, timely responses from local officials to all citizen
questions and issues, and public access to all questions and responses.
Therefore, grantees may use online platforms to hold virtual hearings
that provide public access to questions and responses and provide
timely responses from local officials. This alternative requirement is
only applicable to consolidated planning submissions describing the use
of fiscal year 2019 or 2020 annual formula funds for CDBG, ESG, HOME,
HTF, and HOPWA, or for CDBG-CV or ESG-CV funds provided under the CARES
Act.
HUD cannot modify requirements for CDBG grantees to mirror the
elimination of citizen participation for substantial amendments and new
consolidated plan submissions for ESG-CV funds because HUD cannot waive
the minimum requirements the CARES Act imposed on CDBG grantees.
Therefore, this waiver and alternative requirement does not alter or
expand the authority for ESG grantees to omit the citizen participation
and consultation requirements for consolidated plan submissions that
only pertain to ESG CARES Act (ESG-CV) funding.
III.B.4.(b) CDBG-CV Application Content and Submission
III.B.4.(b)(i). CDBG-CV Application Content, Submission,
Consistency with Other Portions of Consolidated Plan. In the April 9
memorandum, HUD issued a waiver and alternative requirement that
permits a grantee to apply for CDBG-CV funds by submitting a
substantial amendment to its most recently approved annual action plan.
Grantees may also apply for CDBG-CV funds in a future annual action
plan submission.
As part of the application submission, HUD is temporarily waiving
the requirements (found at 42 U.S.C. 12706 and 24 CFR 91.325(a)(5) and
91.225(a)(5)) that grantees certify that the housing activities to be
undertaken with CDBG, HOME, ESG, and HOPWA funds are consistent with
the strategic plan portion of the consolidated plan. HUD is imposing a
related alternative requirement that allows grantees to submit those
certifications when the grantee submits its next full (3-5 year)
consolidated plan due after the 2020 program year. Grantees may not
have considered the needs associated with CDBG-CV funds when developing
their current consolidated plan strategic plan and needs assessment.
In conjunction, HUD is temporarily waiving 42 U.S.C. 5304I to the
extent that it requires HUD to annually review grantee performance
under the consistency criteria. This waiver also only applies until the
grantee submits its next full (3-5 year) consolidated plan due after
the 2020 program year.
Applying through a substantial amendment to the most recent action
plan. If the CDBG-CV application is submitted as a substantial
amendment to the most recent annual action plan, the substantial
amendment must include the CDBG-CV allocation as an available resource
for the year. The amendment must include the proposed use of all funds
and how the funds will be used to prevent, prepare for, and respond to
coronavirus. To permit this expedited application process, in the April
9 memorandum HUD waived statutory provisions at 42 U.S.C. 12705(a)(2)
to the extent they require

[[Page 51463]]

updates to the housing and homeless needs assessment, (24 CFR 91.205
and 91.405), housing market analysis (24 CFR 91.210 and 91.410), and
strategic plan (24 CFR 91.215 and 91.415. HUD also waived 24 CFR 91.220
(entitlements) and 91.320 (states), to the extent those regulations
limit the action plan to a specific program year, to permit grantees to
prepare substantial amendments to their most recent annual action plan
(including their 2019 annual action plan).
In the April 9 memorandum, HUD also issued a waiver and alternative
requirement to 24 CFR 91.505 to facilitate the use of the CDBG-CV funds
to the extent necessary to require submission of the substantial
amendment to HUD for review in accordance with 24 CFR 91.500, and
required that, to receive a CDBG-CV grant, a grantee must also submit a
SF-424, SF-424D, and the certifications at 24 CFR 91.225(a) and (b)
(entitlements) or 24 CFR 91.325(a) and (b) (states).
HUD is now adding to the waivers in the April 9 memorandum as
follows. The abbreviated consolidated plan regulations for insular
areas at 24 CFR 570.440(i) are waived to the extent necessary to impose
the same alternative requirements in the April 9, 2020 waiver, so that
if an insular area applies for CDBG-CV funds by submitting a
substantial amendment to an abbreviated consolidated plan, the
following requirements apply. The substantial amendment must include
the CDBG-CV allocation as an available resource for the year. The
amendment must include the proposed use of all funds and how the funds
will be used to prevent, prepare for, and respond to coronavirus. The
grantee must submit the substantial amendment to HUD for review in
accordance with 24 CFR 91.500, and to receive a CDBG-CV grant, it must
submit a SF-424, SF-424D and the certifications at 24 CFR 570.440I.
If CDBG-CV funds are included in a substantial amendment to the
most recently submitted annual action plan, existing cooperation
agreements between a local government and an urban county governing
other CDBG funds in the most recently submitted annual action plan (for
purposes of either an urban county or a joint program) will
automatically cover CDBG-CV funding as well. These cooperation
agreements will continue to apply to the use of CDBG-CV funds for the
duration of the CDBG-CV grant.
Applying through a new annual action plan submission. The action
plan submission procedures in 24 CFR part 91 (including consultation
and a public hearing) apply to grantees that choose to submit CDBG-CV
applications by including CDBG-CV funds in a new annual action plan
submission. Content of action plans is described at 24 CFR 91.220
(entitlements), 91.320 (states), and 24 CFR 570.440 (insular areas).
Applying for additional CDBG-CV allocations. The waivers and
alternative requirements in the April 9 memorandum apply to all
allocations of CDBG-CV funds. HUD encourages grantees to apply for
additional allocations of CDBG-CV funds as they are announced by
submitting substantial amendments to their most recent annual action
plan. Grantees are advised that an application for an additional
allocation of CDBG-CV funds should be submitted as a substantial
amendment to the annual action plan that describes the first CDBG-CV
allocation.
An application submitted as a substantial amendment must include
the CDBG-CV allocation as an available resource for the year and
include the proposed use of all funds and how the funds will be used to
prevent, prepare for, and respond to coronavirus.
HUD strongly encourages grantees to apply for allocations through
substantial amendments as they are announced. However, grantees that
have not submitted applications for CDBG-CV funds when additional
allocations are announced may submit a single application for all
allocations as a substantial amendment to the most recent annual action
plan, or as part of a new annual action plan.
III.B.4.(b)(ii). Content of CDBG-CV application for States Acting
Directly. The waiver and alternative requirement in paragraph
III.B.6.(b)(i) permit states to carry out activities directly.
Therefore, HUD is granting the following waiver and alternative
requirement to amend 24 CFR 91.320(d) and 24 CFR 91.320(k)(1)(i) to the
extent necessary to require a state to submit a description of a method
of distribution and include a list of the use of all funds for
activities it will carry out directly, and how the use of the funds
will prevent, prepare for, and respond to coronavirus. A state that has
already submitted its application for CDBG-CV funds may amend its
annual action plan that describes the use of CDBG-CV funds to modify
its description of a method of distribution and include a list of the
use of all funds for activities it will carry out directly, and how the
use of the funds will prevent, prepare for, and respond to coronavirus.
III.B.4.(b)(iii). Deadline to Apply for Assistance. Under the CARES
Act, the deadline is August 16, 2021, for grantees to submit their
CDBG-CV action plan and the annual Action Plan for fiscal year 2019 and
2020 CDBG funds. This deadline supersedes the August 16, 2020 deadline
established by 24 CFR 91.15 in accordance with section 116(b) of the
HCD Act.
III.B.5. Allowable Costs, Eligible Activities and National Objectives
This section describes modifications to the CDBG program
requirements that address allowability of costs that can be charged to
CDBG-CV grants.
III.B.5.(a) Use of Funds for CARES Act Purposes
The grantee is required to use all CDBG-CV funds for CDBG-eligible
activities that are carried out to prevent, prepare for, and respond to
coronavirus. CDBG-CV grants cannot be used for any other purpose. This
requirement is discussed more fully in section III.B.5.(f), which
discusses eligible activities.
Additionally, HUD weighed the purpose of the CARES Act to prevent,
prepare for, and respond to coronavirus with the intent of Congress
expressed in section 101I of the HCD Act (42 U.S.C. 5301I) that CDBG
funds not be utilized to reduce substantially the amount of local
financial support for community development activities below the level
of such support prior to the availability of such assistance. Given the
extreme and unexpected downturn in local and national economic
conditions, local resources are strained. Jurisdictions must provide
new and expanded support with fewer resources. Therefore, HUD has
concluded that when CDBG funding is used for purposes of the CARES Act,
it is not considered to substantially replace the amount of local
financial support previously provided to community development
activities.
III.B.5.(b) Reimbursements
The CARES Act provides that CDBG-CV funds may be used to cover or
reimburse allowable costs of activities to prevent, prepare for, and
respond to coronavirus incurred by a state or locality regardless of
the date on which such costs were incurred. This authority is broader
than the authority to reimburse costs with other CDBG funds.
The term ``locality'' is not defined by the CARES Act, the HCD Act,
or the CDBG program regulations. For purposes of CDBG-CV grants, a
``locality'' shall mean units of general local government, as defined
in section 102 of the HCD Act.
The CARES Act also requires that all costs reimbursed with CDBG-CV
funds be allowable costs, meaning they comply with all grant
requirements.

[[Page 51464]]

Therefore, HUD is adopting the following waivers and alternative
requirements to 24 CFR 570.200(h) and 570.489(b) to facilitate the use
of CDBG-CV funds to reimburse allowable costs by modifying current
regulations that are inconsistent with CARES Act reimbursement
authority and imposing safeguards to help ensure the allowability of
all costs charged to the CDBG-CV grant:
Grantees shall not reimburse costs incurred before January 21,
2020, without written approval from HUD's Office of Block Grant
Assistance (OBGA), by emailing the contact person listed at the
beginning of this notice. HUD is imposing a presumption that costs of
activities undertaken before January 21, 2020, the date the CDC
confirmed the first case of coronavirus in the United States in the
State of Washington,\1\ are highly unlikely to be eligible for
reimbursement because they likely are not costs to prevent, prepare
for, and respond to coronavirus. The need to pay for coronavirus-
related costs incurred after this date far exceeds the amount of CDBG-
CV funds available. HUD cautions that it will only consider granting
written approval in extraordinary cases where the clear link to the
purposes of the CARES Act is documented by substantial evidence
provided to HUD by the grantee. Inquiries related to this requirement
can be submitted to the contact identified above for this notice.
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\1\ See CDC Press Release at: https://www.cdc.gov/media/releases/2020/p0121-novel-coronavirus-travel-case.html.
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HUD is waiving the requirements of 570.200(h) and 570.489(b) to the
extent necessary to authorize a grantee to permit reimbursement of pre-
application costs of subrecipients, units of general local government,
and itself, in addition to pre-agreement and pre-award costs. However,
an environmental review must be performed and a release of funds must
be obtained in accordance with 24 CFR part 58 prior to committing CDBG-
CV funds to reimburse such costs. After the grantee signs a CDBG-CV
agreement it may reimburse a unit of general local government or
subrecipient for costs incurred before the unit of general local
government or subrecipient applies to the grantee for assistance.
For grantees subject to the entitlement CDBG regulation at 24 CFR
570.200(h), the following waivers and alternative requirements apply:
In lieu of the effective date described at 570.200(h), the grantee
shall use the date in box 4 of form HUD-7082, Funding Approval/
Agreement. HUD is waiving the requirement at 570.200(h)(1)(i) and (ii)
that the activity for which costs are incurred must be included in a
consolidated plan action plan or amended consolidated plan action plan
before incurring the costs. Instead, the activity for which costs were
incurred must be included in the grantee's CDBG-CV application before
CDBG-CV funds are used to reimburse those costs. Or, if the use of
CDBG-CV funds for reimbursements is not included in the CDBG-CV
application, this use may be included in a subsequent amendment to the
annual action plan that describes the use of the CDBG-CV funds
(following the grantee's citizen participation plan procedures for
amendments). To facilitate the use of funds provided under a one-time
grant rather than an annual appropriation, HUD is waiving the time
limitation and the monetary limitation on reimbursements in
570.200(h)(1)(v) and (vi) and related provisions at 570.200(h)(2). HUD
is not waiving the requirement at 570.200(h)(1)(iii) to comply with the
environmental review procedures stated in 24 CFR part 58.
All grantees may authorize subrecipients to incur pre-award costs
in accordance with pre-agreement cost authority under 24 CFR 570.489(b)
(states) and pre-award cost authority under 24 CFR 570.200(h)
(entitlements), as modified above. Consistent with the waiver and
alternative requirement in paragraph III.B.6.(b)(i) that authorizes
states to act directly, the provisions of 24 CFR 570.489(b) are waived
to the extent necessary to authorize a state to charge to the grant
pre-agreement costs of its subrecipients in addition to the pre-
agreement costs of units of general local government, in accordance
with procedures established by the state and subject to the
requirements that apply to pre-agreement costs of units of general
local government in 24 CFR 570.489(b), and the requirements that apply
to the use of CDBG-CV funds.
While provisions of 24 CFR 570.489(b) requiring compliance with 24
CFR part 58 do not apply prior to an application for CDBG-CV funds, a
unit of general local government or state must document compliance with
the environmental review requirements at 24 CFR part 58 following the
application to the state or unit of general local government for
funding and prior to reimbursement of pre-application costs, per 24 CFR
570.200(h)(1)(iii) and 24 CFR 570.489(b). If a grantee cannot meet all
requirements at 24 CFR part 58 and cannot demonstrate there was no
environmental harm committed, the pre-application costs cannot be
reimbursed with CDBG-CV or other HUD funds.
III.B.5.(c) Terms and Conditions Made Applicable by the CARES Act
The CARES Act subjects CDBG-CV funds to the authorities and
conditions applicable to annual CDBG grants for fiscal year 2020.
Therefore, the following requirements apply to CDBG-CV grants:
III.B.5.(c)(i). Limitations on Use of Funds for Eminent Domain. The
grantee shall ensure that no CDBG-CV funds are used to support any
Federal, state, or local projects that seek to use the power of eminent
domain, unless eminent domain is employed only for a public use. For
the purposes of this requirement, public use shall not be construed to
include economic development that primarily benefits private entities.
Any use of funds for mass transit, railroad, airport, seaport or
highway projects as well as utility projects which benefit or serve the
general public (including energy-related, communication-related, water-
related and wastewater-related infrastructure), other structures
designated for use by the general public or which have other common-
carrier or public-utility functions that serve the general public and
are subject to regulation and oversight by the government, and projects
for the removal of an immediate threat to public health and safety or
brownfield as defined in the Small Business Liability Relief and
Brownfields Revitalization Act (Pub. L. 107-118) shall be considered a
public use for purposes of eminent domain.
III.B.5.(c)(ii). Prohibition on Certain Funds Transfers. The
Grantee or unit of general local government that directly or indirectly
receives CDBG-CV funds may not sell, trade, or otherwise transfer all
or any such portion of such funds to another such entity in exchange
for any other funds, credits or non-Federal considerations, but must
use such funds for activities eligible under title I of the HCD Act or
permitted by waiver and alternative requirements that apply to the use
of CDBG-CV funds.
III.B.5.(c)(iii). E.O. 12372--Special Contract Condition.
Notwithstanding any other provision governing CDBG-CV funds, no funds
may be obligated or expended for the planning or construction of water
or sewer facilities until receipt of written notification from HUD of
the release of funds on completion of the review procedures required
under Executive Order (E.O.) 12372, Intergovernmental Review of Federal
Programs, and HUD's implementing regulations at 24 CFR part

[[Page 51465]]

52. The recipient shall also complete the review procedures required
under E.O. 12372 and 24 CFR part 52 and receive written notification
from HUD of the release of funds before obligating or expending any
funds for any new or revised activity for the planning or construction
of water or sewer facilities not previously reviewed under E.O. 12372
and implementing regulations.
III.B.5.(c)(iv). Mandatory Evaluation of Special Economic
Development Activities. CDBG-CV funds may not be provided to a for-
profit entity pursuant to section 105(a)(17) of the Act unless such
activity or project has been evaluated and selected in accordance with
Appendix A to 24 CFR 570--``Guidelines and Objectives for Evaluating
Project Costs and Financial Requirements.'' Given the likelihood that
CDBG-CV funds will be used to assist businesses needing working capital
financing for everyday operations, such as payroll costs, HUD intends
to provide advice or technical assistance on the application of the
guidelines and objectives set forth in Appendix A to such assistance.
HUD will consider providing advice or technical assistance in
recognition of the differences in underwriting assistance for the wide
range of economic development projects permitted under section
105(a)(17) (as implemented at 24 CFR 570.203(b)).
III.B.5.(d) National Objectives
III.B.5.(d)(i) Use of Urgent Need National Objective. HUD has
received questions regarding the records necessary to document that a
grantee's activities to prevent, prepare for, and respond to
coronavirus satisfy the urgent need national objective. To meet the
urgent need national objective criteria at 24 CFR 570.208I
(entitlements) and 570.483(d) (states), a grantee (or in the case of
the State CDBG program, a unit of general local government or a state,
if the state is carrying out activities directly as authorized by
section III.B.6.(b)(i)) must certify that: (1) The activity is designed
to alleviate existing conditions; (2) those existing conditions pose a
serious and immediate threat to the health or welfare of the community
and are of recent origin or recently became urgent; and (3) that the
grantee, state, or unit of general local government is unable to
finance the activity on its own, and that other sources of funds are
not available. The State CDBG regulation at 24 CFR 570.483(d) requires
the state's determination of these elements in addition to the unit of
general local government's certification.
Entitlement grantees must maintain records required by 24 CFR
570.506(b)(12) to document: (1) The nature and degree of seriousness of
the condition requiring assistance and the timing of its development;
(2) evidence that the recipient certified that the CDBG activity was
designed to address the urgent need; and (3) evidence confirming that
other financial resources to alleviate the need were not available. The
State CDBG recordkeeping requirements at 24 CFR 570.490 require states
and state recipients to maintain records to demonstrate compliance with
the urgent need criteria.
The following information provides guidance on how a grantee may
satisfy existing recordkeeping requirements for the urgent need
national objective criteria in addition to a grantee's or unit of
general local government's certification and a state's determination
(or state's certification, if the state is acting directly):
Criteria 1: Is the activity designed to alleviate existing
conditions? For CDBG-CV grants, the records the grantee maintains to
demonstrate that the activity was designed to alleviate existing
conditions can be the same records used to show that grant funds were
used to prevent, prepare for, and respond to coronavirus, as required
by the CARES Act.
Criteria 2: Does the condition pose a serious and immediate threat
to the health or welfare of the community that is of recent origin or
that recently became urgent? In light of the severity of coronavirus
and the urgency of the nation in addressing its impacts, pursuant to 24
CFR 570.208I (entitlements) or 24 CFR 570.483(d) (states), a grantee
may certify that the activity is designed to alleviate existing
conditions which pose a serious and immediate threat to the health or
welfare of the community within 18 months following a date determined
by one of the following three methods:
Referral to a U.S. Department of Health and Human Services
issued press release declaring a public health emergency for the entire
United States found at https://www.hhs.gov/about/news/2020/01/31/secretary-azar-declares-public-health-emergency-us-2019-novel-coronavirus.html. The declaration was retroactive to January 27, 2020;
Referral to the President's declaration of the ongoing
Coronavirus Disease 2019 (COVID-19) pandemic as an emergency of
sufficient severity and magnitude to warrant an emergency declaration
for all states, tribes, territories, and the District of Columbia
pursuant to section 501(b) of the Robert T. Stafford Disaster Relief
and Emergency Assistance Act, 42 U.S.C. 5121-5207 (the ``Stafford
Act''). (The President subsequently approved additional major disaster
declarations for states); or
Referral to the effective date of a grantee's own local or
state emergency declaration.
Criteria 3: Is the grantee or unit of general local government
unable to finance the activity on its own, and are other sources of
funds are not available to carry out the activity? The extreme needs of
local governments resulting from coronavirus in the United States
outweigh available resources, despite the extraordinary level of
assistance provided to states and units of general local government
under the CARES Act. Therefore, documentation that the activity will
prevent, prepare for, and respond to the coronavirus may be used to
demonstrate that a grantee or unit of general local government is
unable to finance the activity on its own.
All CDBG-CV grantees are required to establish and maintain
adequate procedures to prevent any duplication of benefits for assisted
activities (as discussed in section III.B.9. of this notice). To
demonstrate that no financial assistance has been received or is
available to pay costs charged to a CDBG-CV grant, a grantee may
demonstrate that no other funds are available for an activity by
maintaining records of compliance with mandatory duplication of
benefits requirements described in section III.B.9.
All grantees are reminded to consider how the use of the urgent
need national objective will affect their compliance with the CDBG
``overall benefit'' requirements discussed in paragraph
III.B.5.(d)(iv).
III.B.5.(d)(ii) Modification of Location-Based Presumption of LMI
Benefit for Job Creation and Retention National Objective Criteria. To
facilitate the use of funds for economic development, HUD is removing
the higher poverty rate required in some cases for central business
districts, which is not required by statute. HUD is instituting an
alternative requirement to modify the regulations at 24 CFR
570.208(a)(4)(v) (entitlement) and 24 CFR 570.483(b)(4)(v) (state) by
deleting the criteria at 24 CFR 570.208(a)(4)(v)(B) (entitlement) and
24 CFR 570.483(b)(4)(v)(B) (state). Under this alternative requirement,
for purposes of the LMI job creation/retention national objective at 24
CFR 570.208(a)(4) and 24 CFR 570.483(b)(4), a census tract qualifies
for the presumptions under the criteria established in regulations at
24

[[Page 51466]]

CFR 570.208(a)(4)(v) and 24 CFR 570.483(b)(4)(v) if the poverty rate is
at least 20 percent and if it evidences pervasive poverty and general
distress using the criteria described in 24 CFR 570.208(a)(4)(v)(C)
(entitlement) and 24 CFR 570.483(b)(4)(v)(C) (states).
This alternative requirement eliminates a requirement that census
tracts that contain at least a portion of a central business district
must have a poverty rate of at least 30 percent before residents and
businesses in the tract are entitled to a presumption of low- and
moderate-income (LMI) benefit. HUD has determined that eliminating the
30 percent requirement for tracts that contain central business
districts will standardize the required poverty rate to meet the
presumption regardless of where the persons or the business is located,
which facilitates the use of grant funds to assist desperate
businesses. Central business districts are hubs that contain many
coronavirus-affected businesses and facilitating assistance to
businesses that seek to retain jobs is consistent with the purposes of
the CARES Act. Standardizing the poverty rate for the LMI benefit
presumption may help to avoid wholesale collapse of central business
districts at a when many businesses have closed or at risk of closing
due to insufficient revenues.
III.B.5.(d)(iii) LMI Job Creation and Retention Records. HUD is
establishing the following waiver and alternative requirement to
facilitate and expedite assistance to coronavirus-affected businesses
by streamlining national objective criteria and recordkeeping
requirements for activities that benefit LMI persons by retaining or
creating jobs. The normal job creation and retention recordkeeping
requirements consider family income when determining whether a
beneficiary is a person of low or moderate income, but these
requirements are likely to be burdensome during a time when
unemployment has surged and family income is more difficult to
document. Collection of income information directly from assisted
businesses can streamline assistance. Therefore, notwithstanding that
the definitions of low-income person and moderate-income person in 24
CFR 570.3 are based on family income, for purposes of meeting the
national objective criteria for job creation or retention at 24 CFR
570.208(a)(4) and 24 CFR 570.483(b)(4), HUD is imposing the following
waiver and alternative requirement: Grantees and employers may consider
individuals that apply for or hold jobs to be members of one-person
families for activities that prevent, prepare for, and respond to
coronavirus. HUD is also modifying related recordkeeping requirements
at 24 CFR 570.506(b)(7) (entitlement) and the jointly agreed upon
requirements referenced in 24 CFR 570.490 (state) by adding the
following additional presumption: The recipient may substitute records
showing the type of job and the annual wages or salary of the job in
lieu of maintaining records showing the person's family size and income
to demonstrate that the person who filled or held/retained the job was
a low- or moderate-income person, when required by paragraph 24 CFR
570.506(b)(5)(i)(B), (b)(5)(ii)(C), (b)(6)(iii) or (b)(6)(v)
(entitlement) or the requirements referenced in 24 CFR 570.490 (state).
HUD will consider the person income-qualified if the annual wages or
salary of the job is equal to or less than the Section 8 low-income
limit established by HUD for a one-person family. Under this
alternative requirement, a grantee will have substantially reduced
documentation requirements because they will be working with assisted
businesses rather than each person, and potentially their households,
who received a job.
III.B.5.(d)(iv) Overall Benefit to LMI Persons. HUD is establishing
an alternative requirement to modify the calculation of overall LMI
benefit, so that compliance with the requirement is separated from the
annual formula CDBG program calculation of overall benefit. Overall LMI
benefit for CDBG-CV grants will be calculated based on the percentage
of the CDBG-CV grant that benefits LMI persons. This alternative
requirement is consistent with the idea that one-time, supplemental
funding should not skew the calculation of overall benefit for use of
annual formula CDBG grants and guaranteed loan funds. This modification
expedites and facilitates the use of funds in part by enabling grantees
to best plan which activities will benefit LMI persons.
Section 101I of the HCD Act (42 U.S.C. 5301I) establishes the
primary objective of the HCD Act: 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.'' CDBG-CV grants are subject to the
requirement that 70 percent of funds are for activities that benefit
LMI persons. The requirements at 42 U.S.C. 5301I, 42 U.S.C.
5304(b)(3)(A), 24 CFR 570.200(a)(3) (entitlements and nonentitlement
counties in Hawaii), 24 CFR 570.420(d)(2)-(3) (insular areas), and 24
CFR 570.484 (states) shall remain in place to the extent that they
require the grantee to ensure that 70 percent of its CDBG-CV grant be
expended for activities that benefit LMI persons. As an alternative
requirement, however, HUD is requiring that grantees must demonstrate
compliance with the overall benefit requirement separately for a
grantee's total CDBG-CV grant allocation and not in combination with
annual formula CDBG funding or commitments under the Section 108 Loan
Guarantee program.
Under this alternative requirement, there is no option for grantees
to select the timeframe for compliance. HUD previously instructed
grantees to submit certifications required by 24 CFR 91.225
(entitlements) or 24 CFR 91.325 (states). The regulations at 24 CFR
91.225(b)(4)(ii) and 24 CFR 91.325(b)(4)(ii) require grantees to
certify that the aggregate use of CDBG funds will comply with the
overall benefit requirement during a period specified by the
jurisdiction, consisting of one, two, or three specific consecutive
program years. Under this alternative requirement, grantees are not
required to carry out the grant consistent with the mandatory overall
benefit certification because HUD has changed the requirement related
to overall benefit.
III.B.5.(e) Public Benefit
III.B.5.(e)(i) Elimination of Aggregate Public Benefit Test. HUD is
waiving the standard for aggregate public benefit that applies to
economic development activities described in 24 CFR 570.209(b)(1)-(2)
(entitlement) and in 24 CFR 570.482(f)(2)-(3) (state). The public
benefit standards were designed to require that economic development
activities, in the aggregate, provide an appropriate amount of public
benefit based on the amount of CDBG funds used. Given the clear benefit
derived from addressing economic disruptions due to coronavirus, CDBG-
CV grantees can adequately demonstrate public benefit based on the
individual public benefit standards, as modified by waivers and
alternative requirements in section III.B.5.(e)(ii).
Therefore, to facilitate and expedite the use of CDBG-CV funds for
coronavirus-related economic development activities, HUD is waiving the
aggregate public benefit standards at 24 CFR 570.209(b)(1)-(2)
(entitlement) and 24 CFR 570.482(f)(2)-(3) (state). In granting this
waiver, HUD notes that based on the growing number of urgent requests
for economic development assistance, particularly from small business,
grantees are likely to have difficulty determining the appropriate

[[Page 51467]]

amount of CDBG assistance, in the aggregate, for their current and next
program years.
III.B.5.(e)(ii) Modification of Individual Public Benefit
Standards. To facilitate the use of grant funds by providing greater
leeway to grantees to identify the most advantageous means of providing
economic development assistance, HUD is modifying the individual public
benefit standards. HUD is imposing a waiver and alternative requirement
to establish an alternative means by which grantees can demonstrate
public benefit from the use of CDBG-CV funds for individual special
economic development activities.
Certain economic development activities described in 24 CFR 570.209
(entitlement) and in 24 CFR 570.482(f)(1) (state) are subject to
individual public benefit standards at 24 CFR 570.209(b)(3)
(entitlement) and 24 CFR 570.482(f)(4) (state). Grantees must satisfy
these public benefit standards to show that the amount of CDBG funds
used for individual economic development activities is appropriate
relative to the benefit to the public from those activities.
HUD is waiving the individual standards at 24 CFR 570.209(b)(3) and
24 CFR 570.482(f)(4) and imposing the following alternative
requirement. For activities subject to the public benefit standards,
grantees must document that: (a) The activity will create or retain at
least one full-time equivalent, permanent job per $85,000 of CDBG funds
used; (b) the activity will provide goods or services to residents of
an area such that the number of LMI persons residing in the area served
by the assisted businesses amounts to at least one LMI person per
$1,700 of CDBG funds used; or (c) the assistance was provided due to
business disruption related to coronavirus (in which case, no monetary
standard applies because HUD has determined that there is sufficient
public benefit derived from the provision of assistance to stabilize or
sustain businesses in the grantee's jurisdiction that suffer disruption
due to coronavirus, and that facilitation of business assistance for
this purpose may help to avoid complete economic collapse within the
grantee's jurisdiction). This alternative requirement does not modify
the requirements related to eligible activities and national objectives
criteria.
III.B.5.(f) Eligible Activities
Grantees may use CDBG-CV funds only for those activities carried
out to prevent, prepare for, and respond to coronavirus. By law, use of
funds for any other purpose is unallowable. To satisfy these purposes,
grantees may assist activities that respond to direct effects, such as
the need to rehabilitate a building to add isolation rooms for
recovering coronavirus patients. A grantee may also undertake
activities to address indirect effects of the virus, such as the
economic and housing market disruptions caused by social distancing
measures and stay at home orders implemented to prevent the spread of
coronavirus.
Some activities clearly tie back to the purposes of the CARES Act,
such as public services, economic development and microenterprise
assistance, public facilities, and the rehabilitation of private
buildings to provide housing. However, HUD is not prohibiting grantees
from carrying out any particular CDBG eligible activity described in
the HCD Act and the part 570 regulations, because other CDBG eligible
activities, such as acquisition, can justifiably be used to fulfill the
CARES Act purposes depending upon the circumstances.
To remain consistent with the structure of a block grant program
and the flexibility of CDBG to provide multiple avenues to achieve the
purposes of the CARES Act, HUD is implementing the limitation that
funds be used for the coronavirus-related purposes of the CARES Act by
requiring grantees to document the use of funds to prevent, prepare
for, and respond to coronavirus, rather than by expressly prohibiting
grantees from undertaking any of the eligible activities described in
the HCD Act. HUD cautions grantees that the recordkeeping requirements
of this notice require clear documentation that all uses of funds
satisfy the statutory purposes of the CARES Act.
The current needs to prevent, prepare for, and respond to
coronavirus may require use of CDBG-CV funds for uncommon activities.
HUD is preparing a series of technical assistance products that
describe opportunities to quickly deploy CDBG-CV funds to address
immediate needs. As this technical assistance is developed, it will be
posted on the CDBG-CV page on the https://www.hud.gov/program_offices/comm_planning/cdbg_programs_covid-19.
When identifying eligible activities to be carried out with CDBG-CV
funds, grantees can reduce the potential for duplication of benefits by
designing activities that address needs not covered by other sources of
financial assistance. More information on requirements to prevent the
duplication of benefits is described in section III.B.9.
III.B.5.(f)(i) Extension of Emergency Payments. HUD is providing an
alternative requirement to extend the period that grantees can make
emergency grant payments on behalf of individuals and families.
Normally, CDBG funds may not be used for income payments, which are not
included among eligible activities in section 105(a) of the HCD Act for
states, and which are expressly prohibited by 24 CFR 570.207(b)(4) in
the Entitlement CDBG regulations. The phrase income payments means a
series of subsistence-type grant payments made to an individual or
family for items such as food, clothing, housing (rent or mortgage) or
utilities, but excludes emergency payments made over a period of up to
three consecutive months to the provider of such items or services on
behalf of an individual or family.
Coronavirus has had a massive impact on families' ability to work
for pay, make rent or mortgage payments, access or pay for food,
clothing, and basic utilities, and access many other essential items
and services. To help individuals and families address these
challenges, HUD is waiving section 105(a)(8) of the HCD Act and 24 CFR
570.207(b)(4) only to the extent necessary to establish the following
alternative requirement: CDBG-CV funds may be used to provide emergency
payments for individuals or families impacted by coronavirus for items
such as food, clothing, housing (emergency rental assistance or
mortgage assistance) or utilities for up to six consecutive months.
Emergency payments must be made to the provider of such items or
services on behalf of an individual or family, and not directly to an
individual or family in the form of income payments, debit cards, or
similar direct income payments. CDBG-CV grantees must ensure that
proper documentation is maintained to ensure that all costs incurred
are eligible. Grantees using this alternative requirement must
document, in their policies and procedures, how they will determine the
amount of assistance to be provided is necessary and reasonable.
III.B.5.(f)(ii) Opportunity Zones and Related Flexibilities for
Economic Development. To facilitate and expedite the use of grant funds
for economic development during this time of extraordinary need, HUD is
clarifying the existing requirements and adopting an alternative
requirement that expands economic development activities that can be
carried out with CDBG-CV funds. HUD is adopting this alternative
requirement because the entitlement

[[Page 51468]]

regulations at 24 CFR 570.203(b) describe some financing mechanisms for
economic development, but do not provide an exhaustive list of the
forms of support grantees can provide to private, for-profit businesses
and to nonprofits for special economic development activities. Many
economic development activities are carried out in conjunction with
other forms of assistance and Federal tax-based programs that help
provide additional sources of financing for economic development,
particularly in LMI areas. HUD wants to facilitate the ability for
grantees to use CDBG-CV funds to fill financing gaps that cannot be met
by other sources and quickly launch critical economic development
projects, particularly in Opportunity Zones and other target areas,
without taking the time to seek additional clarification from HUD on
activity eligibility for individual projects.
First, this notice clarifies an existing requirement of economic
development activities that grantees may carry out pursuant to 24 CFR
570.203(b) (entitlement) or section 105(a)(17) of the HCD Act (state).
Grantees may provide assistance to an economic development project
through a for-profit entity that passes the funds through a financing
mechanism (e.g., Qualified Opportunity Funds and New Markets Tax Credit
(NMTC) investment vehicles). The regulations at 24 CFR 570.203(b)
already list forms of support by which grantees can provide assistance
to private, for-profit businesses where the assistance is appropriate
to carry out an economic development project. HUD has previously
interpreted this provision to allow for CDBG assistance to NMTC
investment vehicles. This clarification makes clear that such
assistance through any financing mechanism (which is not limited to
NMTC investment vehicles) is eligible under 24 CFR 570.203(b). The
regulation also does not apply to states, but states may consider 24
CFR 570.203(b), as clarified by the following alternative requirement,
as guidance in the same way that they may consider other Entitlement
CDBG regulations.
HUD is not waiving 24 CFR 570.203(b) (entitlement) or section
105(a)(17) (state), and other statutory and regulatory requirements
remain in place.
Second, this notice establishes an alternative requirement that
expands the authority in section 105(a)(15) of the HCD Act and 24 CFR
570.204 to permit grantees subject to entitlement CDBG regulations to
assist nonprofit organizations serving the development needs of their
jurisdiction by carrying out community economic development projects
through a financing mechanism. The nonprofit may pass assistance
through a financing mechanism to another entity based on the language
in section 105(a)(15) of the HCD Act. Grantees subject to entitlement
regulations must document that the assisted nonprofit is serving the
development needs of the jurisdiction and that the assistance is used
for a community economic development project that is necessary to
prevent, prepare for, and respond to coronavirus.
III.B.5.(f)(iii) Public Services Cap. The CARES Act provides that
notwithstanding section 105(a)(8) of the HCD Act (42 U.S.C.
5305(a)(8)), there shall be no per centum limitation for the use of
funds for public services activities to prevent, prepare for, and
respond to coronavirus. The CARES Act provides this flexibility for all
CDBG-CV funds and CDBG funds appropriated in fiscal years 2019 and 2020
to the extent that grantees use these funds to carry out public service
activities to prevent, prepare for, and respond to coronavirus.
Following enactment of the CARES Act, the public services cap
described in section 105(a)(8) of the HCD Act and 24 CFR 570.201I has
no effect on CDBG-CV grants. Program income generated by the use of
CDBG-CV funds is given special treatment, as discussed in III.B.6.(a).
Therefore, notwithstanding the provisions of section 105(a)(8) of the
HCD Act, program income is not a consideration for purposes of
determining the amount of CDBG-CV funds that can be expended on public
services. The calculation of the public services cap for fiscal year
2020 and 2019 annual formula CDBG grants is discussed in section
IV.B.4.(a).
III.B.5.(f)(iv) Other Public Services Considerations. HUD reminds
grantees to comply with other requirements in section 105(a)(8) of the
HCD Act, and for grantees subject to entitlement CDBG regulations, 24
CFR 570.201I. Namely, CDBG-CV funds may only be used for those public
service activities that are new or that represent a quantifiable
increase above the level of an existing service that has been provided
by or on behalf of the unit of general local government (through funds
raised by the unit or received by the unit from the state in which it
is located) in the 12 calendar months before the submission of the
action plan, unless the Secretary finds that the discontinuation of
such services was the result of events not within the control of the
unit of general local government.
Additionally, grantees are reminded that the purchase of personal
property and equipment is generally ineligible. However, the
entitlement CDBG regulation at 24 CFR 570.207(b)(1) (which may be used
as guidance by state grantees), allows grantees to purchase or to pay
depreciation in accordance with 2 CFR part 200, subpart E, for personal
property, fixtures, and equipment when necessary when such items
constitute all or part of a public service. Examples of use of
equipment that constitute all or part of a public service include
equipment and supplies owned by the grantee or subrecipient that
provides the public service, e.g., ventilators or other medical
equipment and supplies that will be used in providing health care at a
field clinic, or a vehicle outfitted with medical equipment to provide
mobile health care.
III.B.5.(f)(v). Clarification on Application of Requirements in 2
CFR part 200. In response to the coronavirus pandemic, the Office of
Management and Budget (OMB) released two memoranda that allow Federal
agencies to grant exceptions to some requirements under 2 CFR part 200,
the Uniform Administrative Requirements, Cost Principles and Audit
Requirements for Federal Awards. HUD reminds grantees that the
flexibilities in these memoranda do not automatically apply to
grantees. HUD has not approved class exceptions to 2 CFR part 200 for
CDBG-CV grants or CDBG grants, so the requirements in 2 CFR part 200
continue to apply.
The OMB memoranda were for limited purposes and were not intended
to cover all grantees and activities. The March 9, 2020 memorandum, M-
20-11, Administrative Relief for Recipients and Applicants of Federal
Financial Assistance Directly Impacted by the Novel Coronavirus (COVID-
19) (available at https://www.whitehouse.gov/wp-content/uploads/2020/03/M-20-11.pdf), allows Federal agencies to grant class exceptions in
instances where the agency has determined that the purpose of the
Federal awards is to support the continued research and services
necessary to carry out the emergency response related to COVID-19. The
March 19, 2020 memorandum, M-20-17, Administrative Relief for
Recipients and Applicants of Federal Financial Assistance Directly
Impacted by the Novel Coronavirus (COVID-19) due to Loss of Operations
(available at https://www.whitehouse.gov/wp-content/uploads/2020/03/M-20-17.pdf) allows HUD to make class exceptions for an expanded scope of
recipients affected by the loss of operational capacity and increased
costs due to the COVID-19 crisis. OMB indicated that it would

[[Page 51469]]

reassess the authority granted by these memoranda within 90 days.
III.B.6. Other Program Requirements
III.B.6.(a) Program Income
To expedite use of grant funds, HUD is clarifying the requirements
for CDBG-CV grants on the treatment of program income at 24 CFR 570.504
(entitlement) and 24 CFR 570.489I-(f) (state) that is generated by the
use of CDBG-CV funds. The receipt and expenditure of program income
that is generated by the use of CDBG-CV funds shall be treated as
annual formula CDBG program income and recorded as part of the
financial transactions of the annual formula CDBG grant program. This
clarification will facilitate expenditures of CDBG-CV grant funds for
their intended purpose, while continuing to maintain appropriate
controls on the use of program income.
III.B.6(a)(i) Use of program income before annual formula CDBG
grant funds. Any program income generated from the use of CDBG-CV funds
will be receipted in HUD's Integrated Disbursement and Information
System (IDIS) as program income to the annual formula CDBG grant
program.
III.B.6(a)(ii) Inapplicability of float-funded activities. Based on
the treatment of income generated from the use of CDBG-CV funds as
annual formula CDBG program income, HUD is waiving 24 CFR 570.301(b)
and section 104(h) of the HCD Act for CDBG-CV grants. HUD is imposing
the following alternative requirement: Grantees shall not use CDBG-CV
funds for float-funded activities or guarantees.
III.B.6(a)(iii) Retention of program income by subrecipients. A
grantee may permit subrecipients (including units of general local
government receiving funds from a state) to retain program income from
the use of CDBG-CV funds under this paragraph if the amount held does
not exceed the subrecipient's projected cash needs for CDBG activities
including activities to prevent, prepare for, and respond to
coronavirus.
III.B.6.(b) Rules Applicable to State CDBG-CV Grants
The paragraphs in this section apply only to State CDBG-CV
grantees.
III.B.6.(b)(i) Direct Action by States. The waivers and alternative
requirements in this section and in sections III.B.6.(b)(ii)-(iv)
permit a state grantee to use a portion of its funds to act directly to
carry out activities through employees, contractors, and subrecipients
in all geographic areas within its jurisdiction, including entitlement
areas and tribal populations. HUD is issuing the waivers and
alternative requirements in this section based in part on information
in requests from states and in part to implement provisions of the
CARES Act that permit grant funds allocated to states to be used in
entitlement areas.
HUD has determined that this waiver and alternative requirement
will facilitate and expedite the use of CDBG-CV funds by supporting
states in their roles as significant coordinators of statewide and
regional activities to prevent, prepare for, and respond to
coronavirus. Additionally, these waivers and alternative requirements
are designed to reduce administrative costs and streamline the delivery
of assistance by maintaining a single set of grant requirements for all
CDBG-CV allocations.
These waivers and alternative requirements are only available to a
state if it complies with the following alternative requirements in
this paragraph and in III.B.6.(b)(ii)-(iv):
Nonentitlement set aside: A state must set aside a portion of its
grant for use by nonentitlement units of general local government. The
nonentitlement set aside must be no less than an amount equal to the
state's first CDBG-CV allocation and may be from any portion of the
state's additional CDBG-CV allocation. This limitation is imposed for
consistency with the CDBG-CV formulas, which include a direct
allocation to entitlement areas and to states on behalf of
nonentitlement areas to prevent, prepare for, and respond to
coronavirus. The nonentitlement set aside fulfills the intent reflected
by the formula to address needs in urban and rural areas, while giving
states the flexibility to determine how to expend each allocation as it
is made based on needs within its jurisdiction.
Inclusion in CDBG-CV Application: A state's proposal to act
directly and to distribute or use CDBG-CV funds in entitlement areas
must be published for public comment in its application for CDBG-CV
funds or in a subsequent substantial amendment to the annual action
plan that includes the CDBG-CV funds.
Activities carried out in tribal areas: A state grantee may carry
out activities in tribal areas. States carrying out projects in tribal
areas through employees, contractors, or subrecipients must obtain the
consent of the Indian tribe with jurisdiction over the tribal area.
Other conforming changes: Requirements at section 106(d) of the HCD
Act (42 U.S.C. 5306(d)) and 24 CFR 570.480(g) are waived to the extent
necessary to allow a state to use its CDBG-CV funds for eligible
activities that the state carries out directly. The standard at 24 CFR
570.480I and the provisions at section 104I(2) of the HCD Act (42
U.S.C. 5304I(2)) are modified to also include activities that the state
carries out directly. Section 106(d) of the HCD Act is not otherwise
waived, except as provided in this notice.
A state may carry out eligible activities directly, consistent with
the entitlement program requirement of 24 CFR 570.200(f), through its
employees, through procurement contracts, or through assistance
provided under agreements with subrecipients. Pursuant to section 102I
of the HCD Act, one or more public agencies may be designated by the
chief executive officer of a state to undertake activities assisted
under this chapter. A state is responsible for ensuring that CDBG-CV
funds are used in accordance with all program requirements. The use of
interagency agreements, subrecipient agreements (including agreements
with Indian tribes and designated public agencies, as described in
section III.B.6.(b)(ii)) or contracts does not relieve the state of
this responsibility. States are responsible for determining the
adequacy of performance under subrecipient agreements and procured
contracts, and for taking appropriate action when performance problems
arise. State grantees continue to be responsible for civil rights,
labor standards, and environmental protection requirements, for
compliance with all applicable requirements, including conflict of
interest provisions in 24 CFR 570.489(g) and (h).
The national objective criteria in 24 CFR 570.483 are modified by
the following alternative requirement when states carry out activities
directly: The state must fulfill all requirements that 570.483 imposes
on units of general local government to demonstrate compliance with
national objective criteria.
The recordkeeping requirements at 24 CFR 570.490(b) are waived when
states carry out activities directly, and the following alternative
requirement shall apply: The state shall establish and maintain such
records as may be necessary to facilitate review and audit by HUD of
the state's administration of CDBG-CV funds, under 24 CFR 570.493.
Consistent with applicable statutes, regulations, waivers and
alternative requirements, and other Federal requirements, the content
of records maintained by the state shall be sufficient to: (1) Enable
HUD to make the applicable determinations described at 24 CFR 570.493;
(2) make compliance

[[Page 51470]]

determinations for activities carried out directly; and (3) show how
activities funded are consistent with the descriptions of activities
proposed for funding in the CDBG-CV application. For fair housing and
equal opportunity (FHEO) purposes, as applicable, such records shall
include data on the race, ethnicity, and sex of persons who are
applicants for, participants in, or beneficiaries of the activity.
The change of use of real property rule at 24 CFR 570.489(j) is
modified to include instances when a state carries out activities
directly. All references to ``unit of general local government'' shall
be read as ``state, unit of general local government (UGLG) or state
subrecipient.''
To include instances when a state carries out activities directly,
24 CFR 570.492 is waived and the following alternative requirement
applies: The state shall make reviews and audits, including on-site
reviews of any subrecipients and local governments, as may be necessary
or appropriate to meet the requirements of section 104I(2) of the HCD
Act, as amended. In the case of noncompliance with these requirements,
the state shall take such actions as may be appropriate to prevent a
continuance of the deficiency, mitigate any adverse effects or
consequences, and prevent a recurrence. The state shall establish
remedies for noncompliance by any subrecipients or local governments.
To include instances when a state carries out activities directly
in accordance with the waiver in this paragraph, 24 CFR 570.489(g) is
modified to revise the requirement that ``[t]he state shall establish
requirements for procurement policies and procedures for units of
general local government'' so that it applies to ``units of general
local government and subrecipients.'' To facilitate grant
administration by adopting state-wide procurement policies, a state
agency designated to oversee the use of all its CDBG-CV funds pursuant
to section 102I of the HCD Act may impose its procurement requirements
on all uses of CDBG-CV funds by the state, including by other state
agencies that administer a portion of the CDBG-CV grants, so long as
those requirements comply with 24 CFR 570.489(g).
III.B.6.(b)(ii) Use of Subrecipients by States (Including
Nonprofits and Tribes). HUD is adopting the following alternative
requirement that shall apply when states carry out activities directly:
States carrying out activities through subrecipients must comply with
24 CFR 570.489(m) relating to monitoring and management of
subrecipients. The definition of subrecipient at 24 CFR 570.500(c)
applies when states carry out activities through subrecipients, and the
requirements of 24 CFR 570.489(g) (as modified by section
III.B.6.(b)(i)) shall apply.
For purposes of this alternative requirement, the definition of
subrecipients at 24 CFR 570.500I is modified to expressly include
Indian tribes. Indian tribes that receive CDBG-CV funding from a state
grantee must comply with the Indian Civil Rights Act (Title II of the
Civil Rights Act of 1968, 25 U.S.C. 1301 et seq.). This conforming
requirement is necessary because the state CDBG regulations do not
anticipate states distributing funds through means other than a method
of distribution to units of general local government.
III.B.6.(b)(iii) Activities Carried Out by States in Entitlement
Areas. The provisions of 24 CFR 570.486(c) are waived to the extent
that they allow States, either directly or through units of general
local government, to use CDBG-CV funding for activities located in
entitlement areas without contribution from the entitlement
jurisdiction, consistent with the waiver and alternative requirements
in sections III.B.6.(b)(i) and (ii). HUD is granting this waiver to
facilitate and expedite the use of grant funds for consistency and ease
of administration by granting the same geographic flexibilities to all
allocations of CDBG-CV funds, since they will be administered under a
single grant.
III.B.6.(b)(iv) Use of the ``upper quartile'' or ``exception
criteria'' for LMI area benefit activities. Section 105(c)(2)(A) of the
HCD Act authorizes HUD to permit an exception to the LMI area benefit
national objective criteria that are normally satisfied when at least
51 percent of the population of an area are persons of low and moderate
income. HUD is clarifying how this ``exception criteria'' applies when
State CDBG-CV grantees carry out activities in entitlement
jurisdictions as authorized by section III.B.6.(b)(iii). If the area in
which the activity is carried out would benefit from the ``exception
criteria'' that permit a grantee to use a percentage less than 51
percent to qualify activities under the LMI area benefit criteria,
those exception criteria apply to the use of CDBG-CV funds by a state
the same way that they apply to the use of CDBG funds by the
entitlement grantee in the same area. CDBG-CV grantees are required to
use the most recent data available in implementing the exception
criteria. For more information on the data set, please visit https://www.hudexchange.info/programs/acs-low-mod-summary-data/acs-low-mod-summary-data-exception-grantees/.
III.B.6.(b)(v) Elimination of State Administrative Match. To
expedite the use of CDBG-CV funds, HUD is waiving the requirement for
matching state administrative funds, subject to the requirements of
section III.B.6.(b)(vi) below. Requiring states to match administrative
funds may considerably slow down the expenditure of CDBG-CV funds in
states struggling to accurately project and adjust their budgets given
the challenges caused by coronavirus. The requirements at 42 U.S.C.
5306(d)(3)(A) and 24 CFR 570.489(a) are waived to the extent necessary
to eliminate the state match requirement for general administrative
costs.
III.B.6.(b)(vi) Cap on State Administrative Costs and Technical
Assistance. Pursuant to 24 CFR 570.489(a)(3)(iii), a state and its
funded units of general local government and subrecipients are, in
aggregate, permitted to expend no more than 20 percent of the CDBG-CV
grant for planning, management, and administrative costs. Under 42
U.S.C. 5306(d)(5) and (6) and 24 CFR 570.489(a)(1) a state may not
directly use more than $100,000 plus 3 percent of its annual grant for
administrative and technical assistance costs combined. HUD is waiving
42 U.S.C. 5306(d)(5) and (6) and 24 CFR 570.489(a)(1) and establishing
an alternative requirement that a state may use up to 7 percent of its
CDBG-CV grant combined for general administration and technical
assistance costs; of that 7 percent, a state may use up to 5 percent of
CDBG-CV funds for general administration costs and up to 2 percent of
the grant for technical assistance activities. The remainder of the
amount may be used by units of general local government for
administrative and technical assistance costs, provided that a state
and its funded units of general local government and subrecipients
expend no more than 20 percent of the CDBG-CV grant for planning,
management, and administrative costs. A grantee must meet this
alternative requirement over the life of its grant, as amended to
incorporate additional allocations of CDBG-CV funds.
CDBG-CV grant funds shall not be used to pay planning and program
administrative costs allocable to another grant under the CDBG annual
formula program; however, CDBG-CV funds may be used to pay costs that
benefit both the CDBG-CV grant and another CDBG award and can be
distributed

[[Page 51471]]

between the grants in proportions that may be reasonably approximated.
III.B.6.(b)(vii) Procurement. Except as described in section
III.B.6. to accommodate states acting directly, this notice does not
modify procurement requirements at 24 CFR 570.489(g) for state
grantees. As discussed above, the local procurement policies and
procedures that apply to the use of annual formula CDBG grant funds may
not be nimble enough to accommodate this urgent need to quickly procure
goods and services necessary to carry out eligible activities. HUD
recommends that CDBG-CV grantees review their existing procurement
policies to explore the potential use of state or local waiver
authority and emergency procedures that may expedite procurement
processes.
Additionally, if the grantee plans to use CDBG-CV grants to carry
out eligible activities that satisfy non-Federal cost share
requirements under section 105(a)(9) of the HCD Act, the grantee should
consider modifying procurement policies to authorize grantees to use
procurement policies and procedures of the agencies paying the Federal
cost share of the activity, to the extent that those policies and
procedures are consistent with the procurement requirements on the use
of CDBG-CV funds. Modifying procurement policies to allow the use of
procurement requirements imposed by other Federal grants is easier for
state grantees, but entitlement grantees that anticipate use of a
substantial amount of CDBG-CV funds to satisfy non-Federal cost share
may also be able to adopt a similar provision where the other Federal
granting agency imposes the procurement requirements in 2 CFR part 200.
III.B.6.(c) Rules for Entitlements, Insular Areas, and Nonentitlement
Hawaii Counties
III.B.6.(c)(i) Administrative and Planning Cost Caps. To expedite
the use of grant funds, HUD is waiving requirements of 24 CFR
570.200(g) that are inconsistent with the treatment of program income
in section III.B.6.(a) and the treatment of CDBG-CV funds as a
standalone grant. The following alternative requirement applies to
grants subject to subpart D (entitlement grants and grants to the
nonentitlement counties of the State of Hawaii): No more than 20
percent of the total CDBG-CV grant shall be expended for planning and
program administrative costs, as defined in 24 CFR 570.205 and 24 CFR
570.206, respectively. There is no program year obligation test for
planning and administrative costs of CDBG-CV grants. Additionally,
CDBG-CV funds shall not be included in the compliance determination of
the program year obligation test applicable to annual formula CDBG
funds. Additionally, program income, regardless of the source funding
of the activity that generated the income, shall be included in the
compliance determination of the administrative and planning cost cap
applicable to annual formula CDBG grants and program income, separately
from CDBG-CV funds.
CDBG-CV grant funds shall not be used to pay planning and program
administrative costs allocable to another grant under the CDBG annual
formula program; however, CDBG-CV funds may be used to pay costs that
benefit both the CDBG-CV grant and another CDBG award and can be
distributed between the grants in proportions that may be reasonably
approximated.
III.B.6.(d) Compliance With Environmental Review Requirements
III.B.6.(d)(i) Overview of Environmental Review Requirements.
Environmental regulations at 24 CFR 58.22 prohibit CDBG grantees, a
recipient, and any other participant in the development process from
committing HUD or non-HUD funds to a project until the environmental
compliance review process has been successfully completed or until
receipt of the Authority to Use Grant Funds, if applicable. In
addition, neither a recipient nor any participant in the development
process may commit non-HUD funds on or undertake an activity or project
if the activity or project would have an adverse environmental impact
or limit the choice of reasonable alternatives. Therefore, it is very
important for grantees to begin and complete any required environmental
compliance review as soon as possible. Grantees are urged to contact
their Field Environmental Officer for more information about
environmental review requirements.
III.B.6.(d)(ii) Clarifying note on the process for environmental
release of funds when a State carries out activities directly. Usually,
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. Under the waiver and
alternative requirement in paragraph III.B.6.(b), HUD will allow a
State CDBG-CV grantee to carry out activities directly in addition to
distributing funds to subrecipients. 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.
III.B.6.(d)(iii) Clarifying note on emergency environmental review
procedures. HUD's environmental review regulations in 24 CFR part 58
include two provisions that may be relevant to environmental review
procedures for activities to prevent, prepare for, and respond to
coronavirus. The first is 24 CFR 58.34(a)(10), which provides an
exemption for certain activities undertaken in response to a national
or locally declared public health emergency. Except for the applicable
requirements of 24 CFR 58.6, a responsible entity does not have to
comply with the requirements of part 58 or undertake any environmental
review, consultation or other action under NEPA and the other
provisions of law or authorities cited in 24 CFR 58.5 for exempt
activities or projects consisting solely of exempt activities. Exempt
activities include assistance for temporary or permanent improvements
that do not alter environmental conditions and are limited to
protection, repair, or restoration activities necessary only to control
or arrest the effects from imminent threats to public safety.
The second is a streamlined public notice and comment period in the
regulation at 24 CFR 58.33, which may apply in some cases for emergency
activities undertaken to prevent, prepare for, and respond to
coronavirus. The application of these two provisions following a
presidentially-declared or locally-declared public health emergency is
discussed in the Notice, Guidance on conducting environmental review
pursuant to 24 Part 58 for activities undertaken in response to the
public health emergency as a result of COVID-19 posted at https://www.hud.gov/sites/dfiles/OCHCO/documents/2020-07cpdn.pdf.
III.B.6.(e) Compliance With Labor Laws
CDBG-CV grants are subject to the Davis-Bacon prevailing wage
requirements imposed by section 110(a) of the HCD Act. HUD cannot waive
this or other labor laws. Under regulations of the Department of Labor
(DOL) at 29 CFR 1.6(g), where Federal assistance is not approved prior
to contract award (or the beginning of construction if there is no
contract award), Davis-Bacon wage rates apply retroactively to the
beginning of construction and must be incorporated retroactively in the
contract specifications. However, if there is no evidence that the
owner intended to apply for the CDBG-CV assistance prior to the
contract award or the start of the construction, HUD may request that
DOL allow prospective,

[[Page 51472]]

rather than retroactive, application of the Davis-Bacon wage rates. DOL
may allow prospective application of Davis-Bacon requirements where it
finds that it is necessary and proper in the public interest to prevent
injustice or undue hardship and it finds no intent to apply for the
federal assistance before contract award or the start of construction.
The CDBG-CV Grantee should contact a HUD Labor Relations Specialist if
such a situation arises.
III.B.6.(f) Relationship to Section 108 Loan Guarantees
Under the Section 108 Loan Guarantee Program, CDBG grantees can
borrow up to five times their most recent CDBG grant by issuing
federally guaranteed notes. To ensure that CDBG-CV funds are used for
the purposes authorized by the CARES Act, HUD is issuing the following
alternative requirement to sections 108(b) and (c) of the HCD Act (42
U.S.C. 5308(c)): CDBG-CV funds shall not be factored into a grantee's
Section 108 borrowing authority.
A grantee may use CDBG-CV funds to make a direct payment of
principal, interest, or any fees due under a Section 108 note only if
the use of funds is to prevent, prepare for, and respond to
coronavirus. The necessity of such use shall be documented by the
grantee or the subrecipient that provided the assistance (e.g., if
Section 108 funds were used by the grantee to provide assistance to a
for-profit business in the form of a loan and the business is unable to
make a payment due to the reduction in revenue caused by coronavirus,
any restructuring of that loan must be supported by modification to
loan documents that document the relationship to coronavirus). When
CDBG-CV funds are used to subsidize or replace principal, interest, or
fees due under a loan previously made with guaranteed loan funds as
part of an activity to assist a for-profit or a subrecipient, and the
CDBG-CV assistance is necessary to respond to the impact of coronavirus
(e.g., a third-party business borrower whose loan is the intended
source for repayment of a Section 108 loan is not collecting sufficient
revenue due to local public health conditions), the documentation that
the original assisted activity satisfies national objective criteria
shall be sufficient to demonstrate that the use of the guaranteed loan
funds and the additional CDBG-CV assistance meet a CDBG national
objective.
This alternative requirement does not limit the Secretary's
authority under section 108I of the HCD Act.
III.B.7. Period of Performance, Timeliness, and Closeout
III.B.7.(a) Period of Performance
CDBG-CV grantees must expend all CDBG-CV funds (including CDBG-CV
funds from additional allocations that are obligated by HUD through
amendments to the grant agreement) within the 6-year period of
performance established by the CDBG-CV grant agreement. HUD is imposing
this period of performance to ensure the use of CDBG-CV funds to
prevent, prepare for, and respond to coronavirus. The CDBG regulations
at 24 CFR 570.200(k) and 24 CFR 570.480(h) permit HUD to establish a
period for expenditure and performance in a grant agreement that is
shorter than the normal 8-year period. HUD is exercising its authority
to establish a 6-year period of performance and expenditure deadline in
the CDBG-CV grant agreement. Grant funds are not available for
expenditure after the period of performance. In addition, to further
ensure the expedited use of the funds, HUD is imposing an alternative
requirement that each grantee must expend at least 80 percent of all
CDBG-CV funds (including CDBG-CV funds from additional allocations that
are obligated by HUD through amendments to the grant agreement) no
later than the end of the third year of the period of performance
established by the CDBG-CV grant agreement. If this three-year
requirement is not met, and evidence meeting the criteria for extension
described in section III.B.7.(c) below is not provided, an amount
equivalent to the difference between the total amount expended at the
end of the third year and 80 percent of all CDBG-CV funds will be
recaptured from the CDBG-CV grant.
III.B.7.(b) Timeliness
CDBG-CV grants are available for limited purposes under the CARES
Act. They are subject to a shortened period of performance. Under
section III.B.6.(a), program income generated by the use of CDBG-CV
funds is treated as program income to a grantee's annual formula CDBG
program. For these reasons, HUD is waiving to the extent necessary to
allow HUD to determine that every grantee has circumstances beyond its
reasonable control the timely performance enforcement actions found at
24 CFR 570.902 (entitlement timely expenditure), and 24 CFR 570.494
(state timely distribution). CDBG-CV funds will not be included in
determining compliance with the requirements of 24 CFR 570.902 and
570.494. However, as program income to the grantees' annual formula
CDBG programs, income generated from CDBG-CV activities will be
included in timely expenditure compliance determinations for each
entitlement grantee's annual formula CDBG program. Grantees should
consider the potential effects of additional program income to
compliance with timeliness requirements applicable to their annual
formula CDBG grant program when they select and design CDBG-CV assisted
activities.
III.B.7.(c) Closeout
To facilitate the use of grant funds in a timely manner, HUD is
waiving the CDBG closeout regulations at 24 CFR 570.509 for grantees
subject to entitlement regulations and imposing an alternative
requirement that HUD will close out grants in accordance with grant
closeout requirements of 2 CFR 200.343. This approach is consistent
with the state regulation at 24 CFR 570.489(o). This will help all
grantees to expend grant funds within a short timeframe designed to
maximize the ability of CDBG-CV funds to prevent, prepare for, and
respond to coronavirus. Grantees subject to this alternative
requirement must submit all financial, performance, and other reports
as required by 24 CFR 91.520.
In general, HUD expects all grantees to comply with all grant
requirements and fully close out a grant at the end of the period of
performance. However, HUD recognizes that there are many things that
could disrupt a grantee's intended timeline for activity completion:
Litigation, disasters, limited construction seasons due to weather, or
other extenuating circumstances. Therefore, HUD may authorize an
extension of the three-year expenditure requirement or the overall
period of performance if the grantee provides evidence of such
extenuating circumstances that would warrant the extension and that
they could demonstrate they would meet all program requirements within
the extended expenditure period or period of performance.
HUD may consider, in closing out CDBG-CV grants, any requirements
that remain applicable after closeout. These may include authority for
HUD to monitor the recipient's compliance and performance after the
closeout of the award with respect to requirements that are applicable
after closeout, and HUD may take findings of noncompliance into
account, with the closeout process, as unsatisfactory performance of
the recipient, in the consideration of any future grant made under
title I of the HCD Act. Examples of requirements that may survive
closeout include: (i)

[[Page 51473]]

Closeout costs (e.g., audit costs) and costs resulting from contingent
liabilities described in the closeout agreement; (ii) use of real
property assisted with CDBG funds in accordance with program
regulations; (iii) taking measures that are adequate to enforce and
implement mandatory flood insurance coverage requirements; and (iv)
other provisions included in the grant closeout agreement.
III.B.8. Reporting
The reporting requirements that apply to the use of annual formula
CDBG grants also apply to CDBG-CV grants. Section 104I of the HCD Act
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 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.
III.B.8.(a) General Reporting Requirements
Reporting requirements for CDBG-CV grantees can be found at 42
U.S.C. 12708(a), 24 CFR 91.520, 24 CFR 570.507 (entitlement), 24 CFR
570.440(j) (insular areas), and 24 CFR 570.491 (state).
III.B.8.(b) Additional CARES Act Reporting
Section 15011 of the CARES Act requires that recipients of $150,000
or more of CARES Act funding submit, not later than 10 days after the
end of each calendar quarter, a report containing: Information
regarding the amount of funds received; the amount of funds obligated
or expended for each project or activity; a detailed list of all such
projects or activities, including a description of the project or
activity; and detailed information on any subcontracts or subgrants
awarded by the recipient. As outlined in OMB memorandum M-20-21,
Implementation Guidance for Supplement Funding in Response to the
Coronavirus Disease (COVID-19) (available at https://www.whitehouse.gov/wp-content/uploads/2020/04/Implementation-Guidance-for-Supplemental-Funding-Provided-in-Response.pdf), existing reporting
requirements are anticipated to meet the requirements of Section 15011,
but the content and format for this reporting is still under
development and will need to be reviewed against current program
practices. The Department will work in coordination with OMB to ensure
that this requirement can be fulfilled by recipients of CARES Act
funding in a manner that utilizes to the greatest extent possible
existing reporting streams, providing the necessary transparency and
accountability with minimal additional burden. If additional reporting
is necessary, further advice or technical assistance will be provided
by the Department.
III.B.9. Duplication of Benefits
The CARES Act requires HUD to ensure that there are adequate
procedures in place to prevent any duplication of benefits as required
by section 312 of the Stafford Act, as amended by section 1210 of the
Disaster Recovery Reform Act of 2018 (division D of Public Law 115-254;
42 U.S.C. 5121 et seq.).
Duplication of benefits occurs when Federal financial assistance is
provided to a person or entity through a program to address losses
resulting from a Federally-declared emergency or disaster, and the
person or entity has received (or would receive, by acting reasonably
to obtain available assistance) financial assistance for the same costs
from any other source (including insurance), and the total amount
received exceeds the total need for those costs.
A grantee is required to develop and maintain adequate procedures
to prevent a duplication of benefits that address (individually or
collectively) each activity or program. A grantee's policies and
procedures are not adequate unless they include, at a minimum: (1) A
requirement that any person or entity receiving CDBG-CV assistance
(including subrecipients and direct beneficiaries) must agree to repay
assistance that is determined to be duplicative; and (2) a method of
assessing whether the use of CDBG-CV funds will duplicate financial
assistance that is already received or is likely to be received by
acting reasonably to evaluate need and the resources available to meet
that need.
Most CARES Act assistance programs have more limited durations for
availability of assistance or a more limited scope of eligible
activities or entities than does CDBG-CV. HUD strongly encourages each
CDBG-CV grantee to become familiar with the range of available
assistance and uses and apply its more flexible CDBG-CV assistance to
unmet needs or to gaps, with special attention to the coronavirus
response, prevention, or preparation needs of LMI persons.
HUD will provide advice and technical assistance to grantees to
facilitate compliance with this requirement.
III.B.10 Citizenship Requirements
Please note that the U.S. Department of Homeland Security, U.S.
Citizenship and Immigration Services provides that the Immigration
Reform and Control Act, 8 U.S.C. 1324a et seq. prohibits employers from
hiring and employing an individual for employment in the U.S. knowing
that the individual is not authorized with respect to such employment.
This generally applicable law also applies to CDBG grantees and their
subrecipients and/or contractors/subcontractors (including relating to
employees recruited under Section 3). For more information, please see
https://www.uscis.gov/i-9-central/form-i-9-resources/handbook-for-employers-m-274/10-why-employers-must-verify-employment-authorization-and-identity-of-new-employees and https://www.uscis.gov/i-9-central/legal-requirements-and-enforcement.

IV. Fiscal Year 2019 and Fiscal Year 2020 CDBG Grants

IV.A. General Requirements

Except as described in this notice or other applicable waivers and
alternative requirements, the statutory and regulatory provisions
governing the CDBG program apply to fiscal year 2019 and 2020 CDBG
grants, including regulations at 24 CFR part 570 subpart I (states), 24
CFR part 570 subparts A, C, D, E, J, K, and O (entitlements), and 24
CFR subpart F (insular areas and Hawaii counties).

IV.B. Flexibilities, Waivers, and Alternative Requirements

The following rules, waivers, and alternative requirements apply to
fiscal year 2019 and 2020 CDBG grants. These include statutory
authorities included in the CARES Act and other waivers and alternative
requirements or clarifications that HUD is making for fiscal year 2019
and 2020 grants.
IV.B.1. Timeliness
Because of the coronavirus many local governments are operating
under extenuating circumstances and may need additional time for
certain administrative requirements, HUD is suspending for fiscal year
2020 all corrective actions, sanctions, and informal consultations for
timeliness effective January 21, 2020. Grantees are advised that this
suspension does not eliminate the timely expenditure

[[Page 51474]]

requirements set forth in 24 CFR 570.902 (entitlements). HUD will
continue to run expenditure reports and will continue to notify
grantees of deficiencies.
Based on government restrictions, closures, shelter-in-place
orders, and social distancing guidance related to coronavirus, HUD has
determined that all entitlement grantees have factors beyond their
reasonable control that, to HUD's satisfaction, impact the carrying out
of CDBG-assisted activities in a timely manner. As a result, HUD has
determined that corrective actions related to timeliness are not
appropriate at this time. HUD will monitor changing conditions. Before
the end of the fiscal year, HUD will determine whether to extend this
suspension for all or a portion of fiscal year 2021. HUD may consider
regional and local conditions when determining when to begin scheduling
informal consultations.
IV.B.2. Consolidated Plan, Citizen Participation, and CAPER
IV.B.2.(a) Expedited Citizen Participation and Virtual Hearings
Section III.B.4.(a) of section III apply to all fiscal year 2019
and 2020 annual formula CDBG grants, regardless of the use of funds.
This section describes the program flexibilities provided by the CARES
Act related to Expedited Citizen Participation and Virtual Hearings.
Where this section refers to CDBG-CV funds, it shall apply equally to
fiscal years 2019 and 2020 CDBG grants.
IV.B.2.(b). Deadline To Submit Consolidated Plans and FY 2020 Annual
Action Plans
The deadline for grantees to submit action plans and other updates
to their consolidated plans submissions for fiscal years 2019 and 2020
to include CDBG-CV funds is August 16, 2021.
IV.B.2.(c) CAPER Extension
On May 7, 2020, Acting Assistant Secretary John Gibbs issued a
memorandum to all Community Planning and Development Field Office
Directors, Deputy Directors and Program Managers with the subject
``Availability of a Waiver and Alternate Requirement for the
Consolidated Annual Performance and Evaluation Report (Performance
Report) for Community Planning and Development (CPD) Grant Programs in
Response to the Spread of Coronavirus.'' This memorandum authorized a
waiver of the regulatory requirement at 24 CFR 91.520(a) that grantees
submit a performance report known as the Consolidated Annual
Performance and Evaluation Report (CAPER) within 90 days of the end of
a jurisdiction's program year. The waiver was granted under HUD's
regulatory waiver authority at 24 CFR 5.110 and 24 CFR 91.600. Under
this memorandum, for program year 2019 CAPERs, the requirement that
grantees submit a performance report within 90 days after the close of
a jurisdiction's program year is waived, subject to the condition that
within 180 days after the close of a jurisdiction's program year the
jurisdiction shall submit its performance report.
IV.B.2.(d) Other Consolidated Planning Waivers
HUD is temporarily waiving the requirement for consistency with the
consolidated plan (requirements at 42 U.S.C. 12706 and 24 CFR
91.325(a)(5) and 91.225(a)(5)) when fiscal year 2019 and 2020 CDBG
funds are used to prevent, prepare for, and respond to coronavirus,
because grantees may not have considered the needs associated with this
special purpose funding when developing their current consolidated plan
strategic plan and needs assessment. In conjunction, HUD is temporarily
waiving 42 U.S.C. 5304(e) to the extent that it would require HUD to
annually review grantee performance under the consistency criteria.
These waivers apply only until the grantee submits its next full (3-5
year) consolidated plan due after the 2020 program year.
HUD is imposing a related alternative requirement. The regulations
at 24 CFR 91.225(b)(5) (entitlements) and 24 CFR 91.325(b)(5) (states)
require grantees to certify that the housing activities to be
undertaken with CDBG, HOME, ESG, and HOPWA funds are consistent with
the strategic plan portion of the consolidated plan. Under this
alternative requirement, grantees are not required to carry out the
portions of their fiscal year 2019 and 2020 annual formula CDBG grants
that are used to prevent, prepare for, and respond to coronavirus in a
manner consistent with the certifications in 24 CFR 91.225(b)(5) and 24
CFR 91.325(b)(5), because HUD has changed the requirement related to
consistency.
IV.B.3. Flexibilities That Apply to Coronavirus-Related Activities
The following flexibilities apply to all fiscal year 2019 and 2020
CDBG grants when those grants are used for activities to prevent,
prepare for, and respond to coronavirus.
IV.B.3.(a) Calculation of the Public Services Cap. As described in
paragraph III.B.5.(f)(iii), following enactment of the CARES Act, the
public services cap described in section 105(a)(8) of the HCD Act and
24 CFR 570.201(e) has no effect on assistance available to the grantee
for fiscal years 2019 and 2020, including the program income that would
normally be included in the grantee's calculation of the program income
cap for fiscal years 2019 or 2020, when the grantee uses CDBG grant
funds to prevent, prepare for, and respond to coronavirus. For fiscal
years 2019 and 2020, the cap shall still be calculated and shall apply
to public service activities carried out for activities that do not
prevent, prepare for, and respond to coronavirus. Additionally, CDBG-CV
grant funds shall not be included in the public service cap compliance
determination which is applicable to annual formula CDBG funds used for
activities not related to coronavirus.
Program income generated by the use of CDBG-CV grants is considered
program income to the grantee's annual formula CDBG program, as
discussed in section III.B.6.(a).
The public services cap imposed by section 105(a)(8) of the HCD Act
applies to ``the amount of any assistance to a unit of general local
government (or in the case of nonentitled communities not more than 15
per centum statewide) under this title including program income''
(emphasis added). The CARES Act provision that removes the public
services cap applies to all ``activities to prevent, prepare for, and
respond to coronavirus'' for the CDBG-CV grants and fiscal year 2019
and 2020 annual formula CDBG grants. The activities for grants are
described in each grantee's annual action plan required by 24 CFR
91.220 (entitlements), 24 CFR 91.320 (states), or 24 CFR 570.440 and 24
CFR 91.235 (insular areas). In these regulations, the activities for
grants include activities carried out with grant funds and program
income expected to be made available. Therefore, removing the cap in
section 105(a)(8) of the HCD Act for activities to prevent, prepare
for, and respond to coronavirus also removes the public services cap on
the use of the program income, and removes the corresponding regulatory
cap in 24 CFR 570.201(e) (entitlements) for CDBG-CV funds and fiscal
year 2019 and 2020 funds used to prevent, prepare for, and respond to
coronavirus.
Program income generated by the use of CDBG-CV grants is considered
program income to the grantee's annual formula CDBG program, as
discussed in section III.B.6.(a). Additionally, program income,
regardless of the source funding of the activity that generated the
income, shall be included in the compliance determination of the public
service cap applicable to the annual

[[Page 51475]]

formula CDBG grants and program income, separately from CDBG-CV funds.
For purposes of calculating the public services cap, the treatment of
program income generated by the CDBG-CV grant and received (i.e.,
documented in IDIS) by the annual formula CDBG program shall be
considered as any other program income received by the annual formula
CDBG program.
IV.B.3.(b) Provisions in Section III that apply to Coronavirus-
Related Activities. The following provisions in Section III apply to
the use of fiscal year 2019 and 2020 CDBG funds for activities to
prevent, prepare for, and respond to coronavirus; these provisions
shall also apply to the use of Section 108 guaranteed loan funds when
they are used together with fiscal year 2019 and 2020 CDBG funds for
activities to prevent, prepare for, and respond to coronavirus. Where
these paragraphs refer to CDBG-CV funds, they shall apply equally to
fiscal years 2019 and 2020 CDBG grants.
III.B.5.(d)(i) Use of Urgent Need National Objective.
III.B.5.(d)(ii) Modification of Location-Based Presumption
of LMI Benefit for Job Creation and Retention National Objective
Criteria.
III.B.5.(d)(iii) LMI Job Creation and Retention Records.
III.B.5.(e)(i) Elimination of Aggregate Public Benefit
Test.
III.B.5.(e)(ii) Modification of Individual Public Benefit
Standards.
III.B.5.(f)(i) Extension of Emergency Payments.
III.B.5.(f)(ii) Opportunity Zones and Related
Flexibilities for Economic Development.
III.B.5.(f)(iii) Public Services Cap.
III.B.5.(f)(iv) Other Public Services Considerations.
III.B.5.(f)(v) Clarification on Application of Cost
Principles.
III.B.6.(d)(iii) Clarifying note on emergency
environmental review procedures.
III.B.9. Duplication of Benefits (applies for programs and
activities with annual formula CDBG funds when the grantee uses these
funds to carry out programs to respond to losses caused by disasters
and emergencies).
III.B.10. Citizenship Requirements.
IV.B.4. Provisions That Do Not Apply to FY 19 and FY 20 Grants
Waivers and alternative requirements and other provisions in the
following paragraphs of Section III do not apply to fiscal year 2019
CDBG Grants and fiscal year 2020 CDBG grants:
III.A. Allocations of CDBG-CV Funds
III.B.1. General Grant Requirements
III.B.2. Responsible Use of CARES Act Funds
III.B.3. Overview of Process to Receive CDBG-CV Grants
III.B.4.(b) CDBG-CV Application Content and Submission
III.B.5.(a) Use of Funds for CARES Act Purposes
III.B.5.(b) Reimbursements
III.B.5.(c) Terms and Conditions Made Applicable by the
CARES Act
III.B.5.(d)(iv) Overall Benefit to LMI Persons.
III.B.6.(a) Program Income
III.B.6.(b) Rules Applicable to State CDBG-CV Grants
III.B.6.(c) Rules for Entitlements, Insular Areas, and
Nonentitlement Hawaii Counties
III.B.6.(d)(ii) Clarifying note on the process for
environmental release of funds when a state carries out activities
directly.
III.B.6.(e) Compliance with Labor Laws
III.B.6.(f) Relationship to Section 108 Loan Guarantees
III.B.7. Period of Performance, Timeliness, and Closeout
III.B.8. Reporting
Paperwork Reduction Act: The information collection requirements in
this notice have been approved by the Office of Management and Budget
(OMB) under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520)
and assigned OMB Control Number 2506-0085. 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.
Catalog of Federal Domestic Assistance: The Catalog of Federal
Domestic Assistance numbers for the CDBG-CV grants under the CARES Act
are: 14.218 (Community Development Block Grants/Entitlement Grants);
14.225 (Community Development Block Grants/Special Purpose Grants/
Insular Areas); and 14.228 (Community Development Block Grants/State's
Program and Non-Entitlement Grants in Hawaii) (formerly CDBG Grant/
Small Cities Program).
Environmental Impact: A Finding of No Significant Impact (FONSI)
with respect to the environment has been made in accordance with HUD
regulations at 24 CFR part 50, which implement section 102(2)(C) of the
National Environmental Policy Act of 1969 (42 U.S.C. 4332(2)(C)). The
FONSI is available for inspection at HUD's Funding Opportunities web
page at: https://www.hud.gov/grants/. The FONSI 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).

John Gibbs,
Assistant Secretary for Community Planning and Development.
[FR Doc. 2020-18242 Filed 8-19-20; 8:45 am]
BILLING CODE 4210-67-P