12534 Federal Register / Vol. 72, No. 50 / Thursday, March 15, 2007 / Rules and Regulations 

DEPARTMENT OF HOUSING AND 

URBAN DEVELOPMENT 

24 CFR Parts 91 and 570 

[Docket No. FR–5012–F–02] 

RIN 2501–AD15 

Timeliness Expenditure Standards for 

the Insular Areas Program 

AGENCY: Office of the Assistant 

Secretary for Community Planning and 

Development, HUD. 

ACTION: Final rule. 

SUMMARY: This final rule implements 

regulatory timeliness standards for the 

Insular Areas Program, as established by 

the Housing and Community 

Development Act of 1974. The 

expenditure standards will ensure that 

grantees carry out their programs in a 

timely manner. The standards take into 

consideration and reflect the unique 

circumstances faced by Insular Area 

grantees in their ability to expend CDBG 

allocations. The final rule provides that 

an Insular Area grantee may submit an 

abbreviated consolidated plan rather 

than a full consolidated plan. This final 

rule also makes technical and 

conforming changes to the Insular Areas 

program. The final rule follows 

publication of an August 7, 2006, 

proposed rule on which HUD did not 

receive any public comments. 

Accordingly, HUD is adopting the 

August 7, 2006, proposed rule without 

change. 

DATES: Effective Date: April 16, 2007. 

FOR FURTHER INFORMATION CONTACT: 

Stephen Rhodeside, Senior Program 

Officer, State and Small Cities Division, 

Office of Block Grant Assistance, Office 

of Community Planning and 

Development, Department of Housing 

and Urban Development, 451 Seventh 

Street, SW., Room 7184, Washington, 

DC 20410–7000, telephone (202) 708– 

1322 (this is not a toll-free number). 

Individuals with speech or hearing 

impairments may access this number 

through TTY by calling the toll-free 

Federal Information Relay Service at 

(800) 877–8339. 

SUPPLEMENTARY INFORMATION: 

I. Background 

On August 7, 2006, HUD published a 

proposed rule (71 FR 44860) for public 

comment to establish timeliness 

standards and procedures for the 

reallocation of funds for the Insular 

Areas Program. In addition, the August 

7, 2006, rule proposed to provide that 

an Insular Area grantee may submit an 

abbreviated consolidated plan that is 

appropriate to the types and amounts of 

assistance sought from HUD, instead of 

a full consolidated plan. The proposed 

rule also sought to make technical and 

conforming changes to the regulations. 

The Insular Areas program is a 

component of the Community 

Development Block Grant (CDBG) 

program, authorized by the Housing and 

Community Development Act of 1974 

(HCD Act) (42 U.S.C. 5301, et seq.). 

Under the CDBG program, Insular Area 

grantees are provided flexible funding to 

develop and implement community and 

economic development strategies that 

primarily benefit low- and moderateincome individuals. 

The August 7, 2006, rule proposed 

timeliness standards for the Insular 

Areas Program. Under the proposed 

standards, the amount of grant funds 

available but undisbursed 60 days prior 

to the conclusion of the Insular Area 

grantee’s most recent program year must 

be no more than two times the amount 

of the Insular Area grantee’s most recent 

grant. If the grantee fails to demonstrate 

to HUD’s satisfaction that the lack of 

timeliness has resulted from factors 

beyond the grantee’s reasonable control, 

the grantee shall be deemed to be 

untimely. A grantee that has less than 

two times its most recent grant in its 

CDBG line of credit 60 days prior to the 

conclusion of its most recent program 

year shall also be deemed to be 

untimely if the amount of CDBG 

program income the recipient has on 

hand at that time, together with the 

amount of funds in its CDBG line of 

credit, exceeds twice the amount of the 

grantee’s most recent grant, unless the 

grantee is able to demonstrate to HUD’s 

satisfaction that the lack of timeliness 

has resulted from factors beyond the 

grantee’s reasonable control. 

In determining the corrective action 

for untimely expenditure, HUD will 

consider the likelihood that the 

recipient will expend a sufficient 

amount of funds over the next program 

year to bring the grantee into 

compliance with the timeliness 

requirements. The first timeliness 

review under these standards will take 

place 60 days prior to the conclusion of 

the 2006 funding year, which would 

take place on August 2, 2007, for Insular 

Area grantees that do not change their 

program year start dates. Failure to meet 

the standards may cause HUD to reduce 

the next grant by 100 percent of the 

amount in excess of twice the Insular 

Area grantee’s most recent CDBG grant, 

unless HUD determines that the 

untimeliness resulted from factors 

outside of the grantee’s reasonable 

control. The earliest that HUD will 

reduce grants under this final rule will 

be in Fiscal Year (FY) 2008, should an 

Insular Area grantee be untimely 60 

days prior to the conclusion of its FY 

2006 and FY 2007 program years. 

Additionally, HUD proposed to add a 

provision that would allow funds to be 

reallocated to the remaining eligible 

Insular Areas on a pro rata basis should 

an Insular Area grantee have its funding 

reduced for failing to submit a final 

statement for CDBG funds. The 

proposed rule also addressed the issue 

of Insular Area grantees’ submission of 

abbreviated consolidated plans. 

Abbreviated consolidated plans 

submitted by Insular Areas grantees will 

be considered to be full consolidated 

plans, provided the Insular Area grantee 

complies with the submissions, 

certifications, amendments, and 

performance reports requirements of 

§ 570.440 and citizen participation 

requirements of § 570.441. However, if 

submission of a full consolidated plan 

would help a grantee integrate its CDBG, 

HOME and Emergency Shelter Grant 

programs, the grantee should strongly 

consider submitting a full consolidated 

plan. Various technical changes were 

proposed to reflect statutory 

amendments, remove outdated crossreferences, and delete provisions that 

are no longer required or applicable. 

For more detailed information 

regarding the regulatory changes, please 

refer to the preamble of the August 7, 

2006, proposed rule. 

II. This Final Rule 

This final rule follows the publication 

of the August 7, 2006, proposed rule. 

The public comment period on the 

proposed rule closed on October 6, 

2006. HUD did not receive any public 

comments on the proposed rule. HUD, 

therefore, is issuing this final rule 

without change from the proposed rule. 

III. Findings and Certifications 

Unfunded Mandates Reform Act 

Title II of the Unfunded Mandates 

Reform Act of 1995 (2 U.S.C. 1531– 

1538) (UMRA) establishes requirements 

for federal agencies to assess the effects 

of their regulatory actions on state, 

local, and tribal governments and the 

private sector. This final rule does not 

impose any federal mandates on any 

state, local, or tribal government or the 

private sector within the meaning of 

UMRA. 

Executive Order 13132, Federalism 

Executive Order 13132 (entitled 

‘‘Federalism’’) prohibits, to the extent 

practicable and permitted by law, an 

agency from promulgating a regulation 

that has federalism implications and 

either imposes substantial direct 


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compliance costs on state and local 

governments and is not required by 

statute, or preempts state law, unless the 

relevant requirements of section 6 of the 

executive order are met. This rule does 

not have federalism implications and 

does not impose substantial direct 

compliance costs on state and local 

governments or preempt state law 

within the meaning of the executive 

order. 

Regulatory Flexibility Act 

The Regulatory Flexibility Act (RFA) 

(5 U.S.C. 601 et seq.) generally requires 

an agency to conduct regulatory 

flexibility analysis of any rule subject to 

notice and comment rulemaking 

requirements, unless the agency certifies 

that the rule will not have a significant 

economic impact on a substantial 

number of small entities. This rule will 

not have a significant economic impact 

on a substantial number of small entities 

because the rule only codifies in HUD’s 

regulations procedures that will enable 

the Department to enforce its timeliness 

policy for the Insular Areas Program. As 

such, the rule does not significantly 

differ from the current status in terms of 

the impact on the number of entities, 

the amount of funding, or the governing 

requirements applicable. Therefore, the 

undersigned certifies that this final rule 

will not have a significant economic 

impact on a substantial number of small 

entities, and an initial regulatory 

flexibility analysis is not required. 

Environmental Impact 

A Finding of No Significant Impact 

with respect to the environment was 

made at the proposed rule stage 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 Finding of No 

Significant Impact remains applicable to 

this final rule and is available for public 

inspection between the hours of 8 a.m. 

and 5 p.m. weekdays in the Regulations 

Division, Office of General Counsel, 

Department of Housing and Urban 

Development, 451 Seventh Street, SW., 

Room 10276, Washington, DC 20410–

0500. Due to security measures at the 

HUD Headquarters building, please 

schedule an appointment to review the 

finding by calling the Regulations 

Division at (202) 708–3055 (this is not 

a toll-free number). Hearing or speechchallenged individuals may access this 

number through TTY by calling the tollfree Federal Information Relay Service 

at (800) 877–8339. 

Catalog of Federal Domestic Assistance 

The Catalog of Federal Domestic 

Assistance number for the Insular Areas 

Program is 14.225. 

List of Subjects 

24 CFR Part 91 

Aged, Grant programs-housing and 

community development, Homeless, 

Individuals with disabilities, Low and 

moderate income housing, Reporting 

and recordkeeping requirements. 

24 CFR Part 570 

Administrative practice and 

procedure, American Samoa, 

Community development block grants, 

Grant programs—education, Grant 

programs—housing and community 

development, Guam, Indians, Lead 

poisoning, Loan programs—housing and 

community development, Low and 

moderate income housing, New 

communities, Northern Mariana Islands, 

Pacific Islands Trust Territory, Pockets 

of poverty, Puerto Rico, Reporting and 

recordkeeping requirements, Small 

cities, Student aid, Virgin Islands. 

■ Accordingly, HUD amends 24 CFR 

parts 91 and 570 as follows: 

PART 91—CONSOLIDATED 

SUBMISSIONS FOR COMMUNITY 

PLANNING AND DEVELOPMENT 

PROGRAMS 

■ 1. The authority citation for 24 CFR 

part 91 continues to read as follows: 

Authority: 42 U.S.C. 3535(d), 3601–3619, 

5301–5315, 11331–11388, 12701–12711, 

12741–12756, and 12901–12912. 

■ 2. In § 91.235 revise paragraphs (a), 

(b)(3), and (e) and add paragraph (c)(4) 

to read as follows: 

§ 91.235 Special case; abbreviated 

consolidated plan. 

(a) Who may submit an abbreviated 

plan? A jurisdiction that is not a CDBG 

entitlement community under 24 CFR 

part 570, subpart D, and is not expected 

to be a participating jurisdiction in the 

HOME program under 24 CFR part 92, 

as well as an Insular Area that is a 

HOME or CDBG grantee, may submit an 

abbreviated consolidated plan that is 

appropriate to the types and amounts of 

assistance sought from HUD, instead of 

a full consolidated plan. 

(b) * * * 

(3) Limitation. For the HOME 

program, an abbreviated consolidated 

plan is permitted only with respect to 

reallocations to other than participating 

jurisdictions (see 24 CFR part 92, 

subpart J), and for Insular Area grantees 

that submit an abbreviated consolidated 

plan pursuant to 24 CFR 570.440. For 

the CDBG program, an abbreviated plan 

may be submitted for the HUDadministered Small Cities program 

(except that an abbreviated plan may 

not be submitted for the HUDadministered Small Cities program in 

the state of Hawaii), and for Insular Area 

grantees pursuant to 24 CFR 570.440. 

(c) * * * 

(4) Submissions, Certifications, 

Amendments, and Performance Reports. 

An Insular Area grantee that submits an 

abbreviated consolidated plan under 

this section must comply with the 

submission, certification, amendment, 

and performance report requirements of 

24 CFR 570.440. This includes 

certification that the grantee will 

affirmatively further fair housing, which 

means it will conduct an analysis of 

impediments to fair housing choice and 

undertake other activities required for 

fair housing planning, in accordance 

with 24 CFR 91.225(a)(1) and 

570.601(a)(2). 

* * * * * 

(e) Citizen Participation. An Insular 

Area grantee that submits an 

abbreviated consolidated plan under 

this section must comply with the 

citizen participation requirements of 24 

CFR 570.441. 

* * * * * 

PART 570—COMMUNITY 

DEVELOPMENT BLOCK GRANTS 

■ 3. The authority citation for 24 CFR 

part 570 continues to read as follows: 

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

5320. 

■ 4. Revise § 570.209(b)(2)(i) to read as 

follows: 

§ 570.209 Guidelines for evaluating and 

selecting economic development projects. 

* * * * * 

(b) * * * 

(2) Applying the aggregate standards. 

(i) A metropolitan city, an urban county, 

or an Insular Area shall apply the 

aggregate standards under paragraph 

(b)(1) of this section to all applicable 

activities for which CDBG funds are first 

obligated within each single CDBG 

program year, without regard to the 

source year of the funds used for the 

activities. For Insular Areas, the 

preceding sentence applies to grants 

received in program years after Fiscal 

Year 2004. A grantee under the HUDadministered Small Cities program in 

New York, or Insular Areas CDBG 

programs grants prior to Fiscal Year 

2005, shall apply the aggregate 

standards under paragraph (b)(1) of this 

section to all funds obligated for 

applicable activities from a given grant; 


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program income obligated for applicable 

activities will, for these purposes, be 

aggregated with the most recent open 

grant. For any time period in which a 

community has no open HUDadministered grant, the aggregate 

standards shall be applied to all 

applicable activities for which program 

income is obligated during that period. 

* * * * * 

■ 5. Add § 570.442 to subpart F to read 

as follows: 

§ 570.442 Reallocations-Insular Areas. 

(a) Any Insular Area funds that 

become available as a result of 

reductions under subpart O of this part, 

shall be reallocated in the same or 

future fiscal year to any remaining 

eligible Insular Area grantees pro rata 

according to population. 

(b) Any Insular Area grant funds for 

a fiscal year reserved for an applicant 

that chooses not to submit a final 

statement in accordance with § 570.440 

to receive such funds, shall be 

reallocated in the same or future fiscal 

year to any remaining eligible Insular 

Area grantees pro rata according to 

population. 

(c) No amounts shall be reallocated 

under this section in any fiscal year to 

any applicant whose grant amount in 

such fiscal year was reduced under 

subpart O of this part or who did not 

submit a final statement in accordance 

with § 570.440 for that fiscal year. 

(d) Insular Area grantees receiving 

additional funds under this section will 

be evaluated for timeliness under 

§ 570.902 based upon the original grant 

amount plus the additional funds 

received. Accordingly, references in 

§ 570.902 to an Insular Area’s grant 

amount for its current program year 

include such additional funds, and 

references to unexpended or 

undisbursed funds include such 

additional funds. 

■ 6. Revise § 570.600(a) to read as 

follows: 

§ 570.600 General. 

(a) This subpart K enumerates laws 

that the Secretary will treat as 

applicable to grants made under section 

106 of the Act, other than grants to 

states made pursuant to section 106(d) 

of the Act, for purposes of the 

Secretary’s determinations under 

section 104(e)(1) of the Act, including 

statutes expressly made applicable by 

the Act and certain other statutes and 

Executive Orders for which the 

Secretary has enforcement 

responsibility. This subpart K applies to 

grants made under the Insular Areas 

Program in § 570.405 and § 570.440 with 

the exception of § 570.612. The absence 

of mention herein of any other statute 

for which the Secretary does not have 

direct enforcement responsibility is not 

intended to be taken as an indication 

that, in the Secretary’s opinion, such 

statute or Executive Order is not 

applicable to activities assisted under 

the Act. For laws that the Secretary will 

treat as applicable to grants made to 

states under section 106(d) of the Act for 

purposes of the determination required 

to be made by the Secretary pursuant to 

section 104(e)(2) of the Act, see 

§ 570.487. 

* * * * * 

■ 7. In § 570.900, revise paragraphs 

(a)(1) and (b)(1) to read as follows: 

§ 570.900 General. 

(a) Performance review authorities—

(1) Entitlement, Insular Areas, and 

HUD-administered Small Cities 

performance reviews. Section 104(e)(1) 

of the 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 recipient has carried out its 

activities in a timely manner, whether 

the recipient has carried out those 

activities and its certifications in 

accordance with the requirements and 

the primary objectives of the Act and 

with other applicable laws, and whether 

the recipient has a continuing capacity 

to carry out those activities in a timely 

manner. 

* * * * * 

(b) * * * 

(1) The Department will determine 

the performance of each entitlement, 

Insular Areas, and HUD-administered 

small cities recipient in accordance with 

section 104(e)(1) of the Act by reviewing 

for compliance with the requirements 

described in § 570.901 and by applying 

the performance criteria described in 

§§ 570.902 and 570.903 relative to 

carrying out activities in a timely 

manner. The review criteria in § 570.904 

will be used to assist in determining if 

the recipient’s program is being carried 

out in compliance with civil rights 

requirements. 

* * * * * 

■ 8. In § 570.901, revise the introductory 

paragraph, redesignate existing 

paragraphs (f), (g), and (h), as 

paragraphs (g), (h), and (i) respectively, 

and add a new paragraph (f) to read as 

follows: 

§ 570.901 Review for compliance with the 

primary and national objectives and other 

program requirements. 

HUD will review each entitlement, 

Insular Areas, and HUD-administered 

small cities recipient’s program to 

determine if the recipient has carried 

out its activities and certifications in 

compliance with: 

* * * * * 

(f) For Insular Areas Program grants 

only, the application and amendment 

requirements at § 570.440, the citizen 

participation requirements at § 570.441, 

the displacement policy requirements of 

§ 570.606, and the lead-based paint 

requirements of 24 CFR 35.940; 

* * * * * 

■ 9. In § 570.902, revise the introductory 

paragraph, and add a new paragraph (c) 

to read as follows: 

§ 570.902 Review to determine if CDBGfunded activities are being carried out in a 

timely manner. 

HUD will review the performance of 

each entitlement, HUD-administered 

small cities, and Insular Areas recipient 

to determine whether each recipient is 

carrying out its CDBG-assisted activities 

in a timely manner. 

* * * * * 

(c) Insular Areas recipients. (1) Before 

the funding of the next annual grant and 

absent contrary evidence satisfactory to 

HUD, HUD will consider an Insular 

Areas recipient to be failing to carry out 

its CDBG activities in a timely manner 

if: 

(i) Sixty days prior to the end of the 

grantee’s current program year, the 

amount of Insular Area grant funds 

available to the recipient under grant 

agreements but undisbursed by the U.S. 

Treasury is more than 2.0 times the 

Insular Area’s grant amount for its 

current program year; and 

(ii) The grantee fails to demonstrate to 

HUD’s satisfaction that the lack of 

timeliness has resulted from factors 

beyond the grantee’s reasonable control. 

(2) Notwithstanding that the amount 

of funds in the line of credit indicates 

that the Insular Area recipient is 

carrying out its activities in a timely 

manner pursuant to paragraph (c)(1) of 

this section, HUD may determine that 

the recipient is not carrying out its 

activities in a timely manner if: 

(i) The amount of CDBG program 

income the recipient has on hand 60 

days prior to the end of its current 

program year, together with the amount 

of funds in its CDBG line of credit, 

exceeds 2.0 times the Insular Area’s 

grant amount for its current program 

year; and 

(ii) The grantee fails to demonstrate to 

HUD’s satisfaction that the lack of 

timeliness has resulted from factors 

beyond the grantee’s reasonable control. 

(3) In determining the appropriate 

corrective action to take with respect to 


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a HUD determination that a recipient is 

not carrying out its activities in a timely 

manner pursuant to paragraphs (c)(1) or 

(c)(2) of this section, HUD will consider 

the likelihood that the recipient will 

expend a sufficient amount of funds 

over the next program year to reduce the 

amount of unexpended funds to a level 

that will fall within the standards 

described in paragraphs (c)(1) and (2) of 

this section when HUD next measures 

the grantee’s timeliness performance. 

For these purposes, HUD will take into 

account the extent to which funds on 

hand have been obligated by the 

recipient and its sub-recipients for 

specific activities at the time the finding 

is made and other relevant information. 

(4) If a recipient is determined to be 

untimely pursuant to paragraphs (c)(1) 

or (c)(2) of this section in one year, and 

the recipient is again determined to be 

untimely in the following year, HUD 

may reduce the recipient’s next grant by 

100 percent of the amount in excess of 

twice the Insular Area’s most recent 

CDBG grant, unless HUD determines 

that the untimeliness resulted from 

factors outside of the grantee’s 

reasonable control. 

(5) The first review under paragraphs 

(c)(1) and (c)(2) of this section will take 

place 60 days prior to the conclusion of 

the Fiscal Year 2006 program year. 

■ 10. In § 570.903, revise the 

introductory paragraph, paragraph (a), 

and remove paragraph (d) to read as 

follows: 

§ 570.903 Review to determine if the 

recipient is meeting its consolidated plan 

responsibilities. 

The consolidated plan, action plan, 

and amendment submission 

requirements referred to in this section 

are in 24 CFR part 91. For the purpose 

of this section, the term consolidated 

plan includes an abbreviated 

consolidated plan that is submitted 

pursuant to 24 CFR 91.235. 

(a) Review timing and purpose. HUD 

will review the consolidated plan 

performance of each entitlement, Insular 

Areas, and Hawaii HUD-administered 

Small Cities grant recipient prior to 

acceptance of a grant recipient’s annual 

certification under 24 CFR 91.225(b)(3) 

to determine whether the recipient 

followed its HUD-approved 

consolidated plan for the most recently 

completed program year, and whether 

activities assisted with CDBG funds 

during that period were consistent with 

that consolidated plan, except that 

grantees are not bound by the 

consolidated plan with respect to the 

use or distribution of CDBG funds to 

meet non-housing community 

development needs. 

* * * * * 

■ 11. In § 570.910, revise paragraphs 

(b)(2)(iii) and (b)(8) to read as follows: 

§ 570.910 Corrective and remedial actions. 

* * * * * 

(b) * * * 

(2) * * * 

(iii) For entitlement and Insular Areas 

recipients, canceling or revising affected 

activities that are no longer feasible to 

implement due to the deficiency and reprogramming funds from such affected 

activities to other eligible activities 

(pursuant to the citizen participation 

requirements in 24 CFR part 91); or 

* * * * * 

(8) In the case of an entitlement or 

Insular Areas recipient, condition the 

use of funds from a succeeding fiscal 

year’s allocation upon appropriate 

corrective action by the recipient. The 

failure of the recipient to undertake the 

actions specified in the condition may 

result in a reduction, pursuant to 

§ 570.911, of the entitlement or Insular 

Areas recipient’s annual grant by up to 

the amount conditionally granted. 

■ 12. Revise § 570.911(b) to read as 

follows: 

§ 570.911 Reduction, withdrawal, or 

adjustment of a grant or other appropriate 

action. 

* * * * * 

(b) Entitlement and Insular Areas 

grants. Consistent with the procedures 

described in § 570.900(b), the Secretary 

may make a reduction in the entitlement 

or insular areas grant amount either for 

the succeeding program year or, if the 

grant had been conditioned, up to the 

amount that had been conditioned. The 

amount of the reduction shall be based 

on the severity of the deficiency and 

may be for the entire grant amount. 

* * * * * 

Dated: March 7, 2007. 

Pamela H. Patenaude, 

Assistant Secretary for Community Planning 

and Development. 

[FR Doc. E7–4681 Filed 3–14–07; 8:45 am] 

BILLING CODE 4210–67–P 


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