[Federal Register Volume 62, Number 152 (Thursday, August 7, 1997)]
[Rules and Regulations]
[Pages 42385-42391]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-20738]



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Rules and Regulations
                                                Federal Register
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Federal Register / Vol. 62, No. 152 / Thursday, August 7, 1997 / 
Rules and Regulations

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DEPARTMENT OF AGRICULTURE

Rural Housing Service
Rural Business-Cooperative Service
Rural Utilities Service
Farm Service Agency

7 CFR Parts 1901, 1951, and 4284

RIN 0570-AA20


Rural Cooperative Development Grants

AGENCIES: Rural Housing Service, Rural Business-Cooperative Service, 
Rural Utilities Service, and Farm Service Agency, USDA.

ACTION: Final rule.

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SUMMARY: The Rural Business-Cooperative Service (RBS) revises its 
regulations published previously under Rural Technology and Cooperative 
Development Grants (RTCDG). This action is necessary to comply with the 
Federal Agriculture Improvement and Reform Act of 1996 (the 1996 Act) 
(Pub. L. 104-127), which removed ``technology'' from RTCDG, thereby 
directing the focus of the program specifically to cooperative 
development. The 1996 Act also clarified that public bodies were not 
eligible applicants, and modified application requirements and 
applicant selection criteria. This action will comply with legislation 
which authorizes grants for establishing and operating centers for 
rural cooperative development. Exhibit A will be removed since it 
contains administrative material. The intended effect of this action is 
to improve the economic condition of rural areas through cooperative 
development.

EFFECTIVE DATE: August 7, 1997.

FOR FURTHER INFORMATION CONTACT: James E. Haskell, Assistant Deputy 
Administrator, Cooperative Services, Rural Business-Cooperative 
Service, U.S. Department of Agriculture, Stop 3250, Room 4016, South 
Agriculture Building, 1400 Independence Avenue, SW., Washington, DC 
20250. Telephone (202) 720-8460.

SUPPLEMENTARY INFORMATION:

Classification

    We are issuing this final rule in conformance with Executive Order 
12866. The Office of Management and Budget has determined that it is 
not a ``significant regulatory action.''

Environmental Impact Statement

    This document has been reviewed in accordance with 7 CFR part 1940, 
subpart G, ``Environmental Program.'' RBS has determined that this 
action does not constitute a major federal action significantly 
affecting the quality of the human environment, and in accordance with 
the National Environmental Policy Act of 1969, Public Law 91-190, an 
Environmental Impact Statement is not required.

Executive Order 12988

    This final rule has been reviewed under Executive Order 12988, 
Civil Justice Reform. In accordance with this rule: (1) All state and 
local laws and regulations that are in conflict with this rule will be 
preempted; (2) no retroactive effect will be given to this rule; and 
(3) administrative proceedings in accordance with the regulations of 
the Agency at 7 CFR part 11, must be exhausted before bringing suit in 
court challenging action taken under this rule unless these regulations 
specifically allow bringing suit at an earlier time.

Intergovernmental Review

    This program is listed in the Catalog of Federal Domestic 
Assistance under number 10.771 and is subject to the provisions of 
Executive Order 12372, which requires intergovernmental consultation 
with state and local officials. RBS has conducted intergovernmental 
consultation in the manner delineated in RD Instruction 1940-J.

National Performance Review

    This regulatory action is being taken as part of the National 
Performance Review program to eliminate unnecessary regulations and 
improve those that remain in force.

Unfunded Mandates Reform Act of 1995

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Public 
Law 104-4, establishes requirements for Federal agencies to assess the 
effects of their regulatory actions on State, local, and tribal 
governments and the private sector. Under section 202 of the UMRA, RBS 
generally must prepare a written statement, including a cost-benefit 
analysis, for proposed and final rules with ``Federal mandates'' that 
may result in expenditures to State, local, or tribal governments, in 
the aggregate, or to the private sector, of $100 million or more in any 
one year. When such a statement is needed for a rule, section 205 of 
the UMRA generally requires RBS to identify and consider a reasonable 
number of regulatory alternatives and adopt the least costly, more 
cost-effective or least burdensome alternative that achieves the 
objectives of the rule. This rule contains no Federal mandates (under 
the regulatory provisions of Title II of the UMRA) for State, local, 
and tribal governments or the private sector. Thus this rule is not 
subject to the requirements of sections 202 and 205 of the UMRA.

Regulatory Flexibility Act

    The undersigned has determined and certified by signature of this 
document that this rule will not have a significant economic impact on 
a substantial number of small entities since this rulemaking action 
does not involve a new or expanded program. The removal of 
``technology'' from RTCDG substantially narrows the scope of this 
program. No provision of this rule requires action on the part of small 
businesses not required of large businesses. This rule requires no 
action on the part of any applicant not previously required by an 
applicant. Therefore, a Regulatory Impact Analysis was not completed.

Paperwork Reduction Act

    The information collection and recordkeeping requirements contained 
in this regulation were previously approved by the Office of Management 
and Budget (OMB) under the provisions of 44 U.S.C. chapter 35 and were 
assigned OMB control number 0570-0006, in accordance with the Paperwork 
Reduction Act of 1995. Under the Paperwork Reduction Act of 1995, no

[[Page 42386]]

persons are required to respond to a collection of information unless 
it displays a valid OMB control number. The valid OMB control number 
assigned to the collection of information in these final regulations is 
displayed at the end of the affected section of the regulations. This 
final rule does not impose any new information or recordkeeping 
requirements from those approved by OMB.

Background

    The RTCDG program was established by rule on August 12, 1994, (59 
FR 41386-98) and was authorized by section 310B(f) through (h) of the 
Consolidated Farm and Rural Development Act (7 U.S.C. Sec. 1932). The 
1996 Act removed ``technology'' from RTCDG, thereby directing the focus 
of the program specifically to cooperative development. The 1996 Act 
also clarified that public bodies were not eligible applicants, and 
modified application requirements and applicant selection criteria. The 
primary objective of the Rural Cooperative Development Grant (RCDG) 
program is to improve the economic condition of rural areas through 
cooperative development. The program is administered through Rural 
Development State Offices acting on behalf of RBS. RBS is one of the 
successors of the Rural Development Administration pursuant to the 
Department of Agriculture Reorganization Act of 1994 (Pub. L. 103-354).

Discussion of Public Comments

    RBS published a proposed rule in the Federal Register on March 26, 
1997, (62 FR 14354) and asked for comments on or before April 25, 1997. 
The Agency received a total of eight comments. The commenters 
represented the National Cooperative Business Association, Rocky 
Mountain Farmers Union, North Dakota Association of Rural Electric 
Cooperatives and North Dakota Association of Telephone Cooperatives, 
the Federation of Southern Cooperatives/Land Assistance Fund (two 
commenters), North Dakota State University, Washington State 
University, and the North Dakota Farmers Union. One respondent did not 
comment directly on the proposed rule but, instead strongly supported 
the comments submitted by another commenter.
    Six respondents were concerned about the definition of 
``cooperative development'' under Sec. 4284.504 which includes the 
language ``* * * promote the development of new services and products * 
* * new processes * * * or new enterprises * * *'' The respondents felt 
this definition should be clarified to indicate that the activities 
undertaken by a cooperative need not be completely different from those 
undertaken by other cooperatives. They also felt this definition should 
more clearly define activities involved in cooperative development, 
including technical assistance and development of business plans. The 
agency agrees with these comments and has changed the definition of 
``cooperative development'' accordingly.
    Several respondents suggested that under Sec. 4284.516, which 
provides that grant funds may not be used to duplicate current services 
or replace or substitute support previously provided, may preclude 
centers from working on projects already underway. The agency 
understands and appreciates this concern and the fact that cooperative 
development is a long term process. The intent of the wording in this 
section is not to preclude centers from working on projects already 
underway. The agency did not modify this section, but will remain 
cognizant of the respondents' concern.
    Most of the respondents felt the definition of ``project'' under 
Sec. 4284.504 was ambiguous in drawing a distinction between what a 
center is and what a project is. A few of these respondents suggested 
that the definition should clarify that a center does projects and uses 
federal funds to engage in those projects. The agency agrees, and has 
modified the definition of ``project'' to provide that clarity. The 
clarification is also used under Sec. 4284.527(e) to change from grant 
to project.
    Five respondents suggested that the provisions addressing grant 
purposes under Sec. 4284.515 should be clarified to indicate that 
eligible activities of centers assisted under the program must be 
linked to the development of cooperatives. Four of these respondents 
further suggested that each provision (a through e) should end with the 
words ``for the purpose of cooperative development'' after the word 
``center.'' While the agency feels the proposed rule is adequate in 
focusing the program on cooperative development, it has modified 
Sec. 4284.515 in the manner suggested.
    The provision requiring applicants to file a ``Request for 
Environmental Information'' under Sec. 4284.527(b)(3) for each project 
identified in their plans that involve grants to provide financial 
assistance to third-party recipients drew comments from six 
respondents. They felt the provision was unduly burdensome for 
applicants because cooperative development projects have potential 
impacts in many areas so the cost of gathering such information to 
complete this form would greatly exceed any possible benefits. The 
agency feels the information contained in the ``Request for 
Environmental Information'' is legally required and therefore 
Sec. 4284.527(b)(3) has been retained in the final rule.
    Six respondents felt the provision requiring applicants to collect 
evidence of support from each affected governmental unit under the 
preapplications portion of Sec. 4284.528(a)(2)(v) is unduly burdensome 
for applicants. This rule was not amended because all affected 
governmental bodies should be on record as supporting the project. The 
time spent documenting this support will be worth the time spent in 
order to avoid misunderstandings later.
    Two respondents thought the selection criteria under Sec. 4284.540 
were satisfactory. Other respondents did not comment on this section.
    One respondent did not comment on any of the provisions in the 
proposed rule, but instead requested information about the program.
    The provision addressing subsequent grants under Sec. 4284.574 
received comments from five respondents. Each suggested the provision 
be clarified to state that a second application need not be filed for 
assistance under the program to be awarded for the following year. The 
agency did not modify this provision since it currently states that, 
``If it is determined to be in the best interests of the program, 
preference may be given to a project or projects for an additional 
grant in the immediately succeeding year.''
    A definition for ``regionally operated'' has been added and 
definitions for ``Urbanized area'' and ``Urbanizing area'' have been 
slightly modified to make them consistent with ``Rural and rural 
area.''
    Internal management procedures have been removed from the 
regulations but will appear in internal agency instructions.
    Pursuant to the Administrative Procedure Act, 5 U.S.C. 553, good 
cause is found for making this final rule effective less than 30 days 
after publication of this document in the Federal Register because the 
appropriations allocated to the program must be expended before the end 
of Fiscal Year 1997, and there is a critical need--recognized by both 
the Executive and Legislative Branches--to immediately assist rural 
America through the development of self-help cooperative organizations.

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List of Subjects

7 CFR Part 1901

    Civil rights, Compliance reviews, Fair housing, Minority groups.

7 CFR Part 1951

    Account servicing, Grant programs--Housing and community 
development, Reporting requirements, Rural areas.

7 CFR Part 4284

    Business and industry, Grant programs--Housing and community 
development, Rural areas.
    Accordingly, chapters XVIII and XLII, title 7, Code of Federal 
Regulations, are amended as follows:

PART 1901--PROGRAM-RELATED INSTRUCTIONS

    1. The authority citation for part 1901, subpart E, continues to 
read as follows:

    Authority: 5 U.S.C. 301, 7 U.S.C. 1989, 40 U.S.C. 442, 42 U.S.C. 
1480, 42 U.S.C. 2942.

Subpart E--Civil Rights Compliance Requirements *C*


Sec. 1901.204  [Amended]

    2. Section 1901.204 is amended in paragraph (a)(27) by removing the 
words ``Technology and.''

PART 1951--SERVICING AND COLLECTIONS

    3. The authority citation for part 1951 continues to read as 
follows:

    Authority: 5 U.S.C. 301, 7 U.S.C. 1989, 42 U.S.C. 1480.

Subpart E--[Revised]

    4. The title of subpart E is amended by revising the word 
``Insured'' to read ``Direct.''


Sec. 1951.201  [Amended]

    5. Section 1951.201 is amended in the first sentence by revising 
the word ``Insured'' to read ``Direct'' and by revising the words 
``Rural Technology and'' to read ``Rural.''

PART 4284--GRANTS

    6. The authority citation for part 4284 continues to read as 
follows:

    Authority: 5 U.S.C. 301, 7 U.S.C. 1989, 16 U.S.C. 1005.

Subpart F--Rural Cooperative Development Grants

    7. Part 4284, subpart F is revised to read as follows:

Subpart F--Rural Cooperative Development Grants

Table of Contents

Sec.
4284.501  Purpose.
4284.502  Policy.
4284.503  [Reserved]
4284.504  Definitions.
4284.505  Applicant eligibility.
4284.506--4284.514  [Reserved]
4284.515  Grant purposes.
4284.516  Ineligible grant purposes.
4284.517--4284.526  [Reserved]
4284.527  Other considerations.
4284.528  Application processing.
4284.529--4284.539  [Reserved]
4284.540  Grant selection criteria.
4284.541  Grant approval, fund obligation, grant closing, and third-
party financial assistance.
4284.542--4284.556  [Reserved]
4284.557  Fund disbursement.
4284.558  Reporting.
4284.559--4284.570  [Reserved]
4284.571  Audit requirements.
4284.572  Grant servicing.
4284.573  Programmatic changes.
4284.574  Subsequent grants.
4284.575  Grant suspension, termination, and cancellation.
4284.576--4284.586  [Reserved]
4284.587  Exception authority.
4284.588--4284.599  [Reserved]
4284.600  OMB control number.

Subpart F--Rural Cooperative Development Grants


Sec. 4284.501  Purpose.

    (a) This subpart outlines the Rural Business-Cooperative Service's 
(RBS) policies and authorizations and contains procedures to provide 
grants for cooperative development in rural areas.
    (b) Grants will be made available to nonprofit corporations and 
institutions of higher education for the purpose of establishing and 
operating centers for rural cooperative development.
    (c) Copies of all forms and Instructions referenced in this subpart 
are available in the RBS National Office or any Rural Development State 
Office.


Sec. 4284.502  Policy.

    The grant program will be used to facilitate the creation or 
retention of jobs in rural areas through the development of new rural 
cooperatives, value-added processing, and rural businesses.


Sec. 4284.503  [Reserved]


Sec. 4284.504  Definitions.

    Agency--Rural Business-Cooperative Service (RBS) or a successor 
agency.
    Approval official--Any authorized agency official.
    Center--The entity established or operated by the grantee for rural 
cooperative development.
    Cooperative--A user-owned and controlled business from which 
benefits are derived and distributed equitably on the basis of use.
    Cooperative development--The startup, expansion, or operational 
improvement of a cooperative to promote development in rural areas of 
services and products, processes that can be used in the production of 
products, or enterprises that can add value to on-farm production 
through processing or marketing activities. Development activities may 
include, but are not limited to, technical assistance, research 
services, educational services, and advisory services. Operational 
improvement includes making the cooperative more efficient or better 
managed.
    Economic development--The growth of an area as evidenced by 
increases in total income, employment opportunities, decreased 
outmigration of populations, value of production, increased 
diversification of industry, higher labor force participation rates, 
increased duration of employment, higher wage levels, or gains in other 
measurements of economic activity, such as land values.
    Nonprofit institution--Any organization or institution, including 
an accredited institution of higher education, no part of the net 
earnings of which inures, or may lawfully inure, to the benefit of any 
private shareholder or individual.
    Project--A planned undertaking by a center which utilizes the funds 
provided to it to promote economic development in rural areas through 
the creation and enhancement of cooperatives.
    Public body--Any state, county, city, township, incorporated town 
or village, borough, authority, district, economic development 
authority, or Indian tribe on federal or state reservations or other 
federally recognized Indian tribe in rural areas.
    RBS--The Rural Business-Cooperative Service, an agency of the 
United States Department of Agriculture, or a successor agency.
    Regionally operated--A regionally operated program includes 
programs that cover or are eligible to cover two or more counties.
    Rural and rural area--Includes all territory of a state that is not 
within the outer boundary of any city having a population of 50,000 or 
more and its immediately adjacent urbanized and urbanizing areas.
    Rural Development--Rural Development mission area.
    Servicing office--Any Rural Development State Office.
    State--Any of the 50 States, the District of Columbia, the

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Commonwealth of Puerto Rico, the Virgin Islands of the United States, 
Guam, American Samoa, the Commonwealth of the Northern Mariana Islands, 
the Republic of Palau, the Federated States of Micronesia, and the 
Republic of the Marshall Islands.
    Subcenter--A unit of a center acting under the same direction as 
and having a purpose consistent with that of the center.
    Urbanized area--An area immediately adjacent to a city having a 
population of 50,000 or more with a population density of more than 100 
persons per square mile, as determined by the Secretary of Agriculture 
according to the latest decennial census of the United States which, 
for general social and economic purposes, constitutes a single 
community and has a boundary contiguous with that of the city. Such 
community may be incorporated or unincorporated to extend from the 
contiguous boundaries to recognizable open country, less densely 
settled areas, or natural boundaries such as forests or water. Minor 
open spaces such as airports, industrial sites, recreational 
facilities, or public parks shall be disregarded. Outer boundaries of 
an incorporated community extend at least to its legal boundaries. 
Cities which may have a contiguous border with another city, but are 
located across a river from such city, are recognized as a separate 
community.
    Urbanizing area--A community with a population density of more than 
100 persons per square mile, as determined by the Secretary of 
Agriculture according to the latest decennial census of the United 
States, which is not now, or within the foreseeable future not likely 
to be, clearly separate from and independent of a city of 50,000 or 
more population and its immediately adjacent urbanized areas. A 
community is considered ``separate'' when it is separated from the city 
and its immediately adjacent urbanized area by open country, less 
densely settled areas, or natural barriers such as forests or water. 
Minor open spaces such as airports, industrial sites, recreational 
facilities, or public parks shall not be considered as an area to 
determine if a community is separate. A community is considered 
``independent'' when its social (e.g., government, educational, health, 
and recreational facilities) and economic structure (e.g., business, 
industry, tax base, and employment opportunities) are not primarily 
dependent on the city and its immediately adjacent urbanized areas.


Sec. 4284.505  Applicant eligibility.

    (a) Grants may be made to nonprofit corporations and institutions 
of higher education. Grants may not be made to public bodies.
    (b) An outstanding judgment obtained against an applicant by the 
United States in a Federal Court (other than in the United States Tax 
Court), which has been recorded, shall cause the applicant to be 
ineligible to receive any grant or loan until the judgment is paid in 
full or otherwise satisfied. RBS grant funds may not be used to satisfy 
the judgment.


Secs. 4284.506--4284.514  [Reserved]


Sec. 4284.515  Grant purposes.

    Grant funds may be used to pay up to 75 percent of the costs for 
carrying out relevant projects. Applicant's contribution may be in cash 
or in-kind contribution in accordance with parts 3015 and 3019 of this 
title and must be from nonfederal funds except that a loan from another 
federal source can be used for the applicant's contribution. Grant 
funds may be used for, but are not limited to, the following purposes:
    (a) Applied research, feasibility, environmental and other studies 
that may be useful to individuals, cooperatives, small businesses, and 
other similar entities in rural areas served by the center for the 
purpose of cooperative development.
    (b) Collection, interpretation, and dissemination of principles, 
facts, technical knowledge, or other information that may be useful to 
individuals, cooperatives, small businesses, and other similar entities 
in rural areas served by the center for the purpose of cooperative 
development.
    (c) Providing training and instruction for individuals, 
cooperatives, small businesses, and other similar entities in rural 
areas served by the center for the purpose of cooperative development.
    (d) Providing loans and grants to individuals, cooperatives, small 
businesses, and other similar entities in rural areas served by the 
center for the purpose of cooperative development in accordance with 
this subpart.
    (e) Providing technical assistance, research services, and advisory 
services to individuals, cooperatives, small businesses, and other 
similar entities in rural areas served by the center for the purpose of 
cooperative development.


Sec. 4284.516  Ineligible grant purposes.

    Grant funds may not be used to:
    (a) Pay more than 75 percent of relevant project or administrative 
costs;
    (b) Duplicate current services or replace or substitute support 
previously provided;
    (c) Pay costs of preparing the grant application package;
    (d) Pay costs incurred prior to the effective date of the grant;
    (e) Pay for building construction, the purchase of real estate or 
vehicles, improving or renovating office space, or the repair or 
maintenance of privately-owned property;
    (f) Fund political activities; or
    (g) Pay for assistance to any private business enterprise which 
does not have at least 51 percent ownership by those who are either 
citizens of the United States or reside in the United States after 
being legally admitted for permanent residence.


Secs. 4284.517--4284.526  [Reserved]


Sec. 4284.527  Other considerations.

    (a) Civil rights compliance requirements. All grants made under 
this subpart are subject to the requirements of title VI of the Civil 
Rights Act of 1964, which prohibits discrimination on the basis of 
race, color, and national origin as outlined in part 1901, subpart E of 
this title. In addition, the grants made under this subpart are subject 
to the requirements of section 504 of the Rehabilitation Act of 1973, 
as amended, which prohibits discrimination on the basis of disability; 
the requirements of the Age Discrimination Act of 1975, which prohibits 
discrimination on the basis of age; and title III of the Americans with 
Disabilities Act, which prohibits discrimination on the basis of 
disability by private entities in places of public accommodations.
    (b) Environmental requirements--(1) General applicability. Unless 
specifically modified by this section, the requirements of part 1940, 
subpart G of this title apply to this subpart. For example, the 
Agency's general and specific environmental policies contained in 
Secs. 1940.303 and 1940.304 of this title must be complied with. 
Although the purpose of the grant program established by this subpart 
is to improve business, industry, and employment in rural areas, this 
purpose is to be achieved, to the extent practicable, without adversely 
affecting important environmental resources of rural areas such as 
important farmland and forest lands, prime rangelands, wetland, and 
flood plains. Prospective recipients of grants, therefore, must 
consider the potential environmental impacts of their applications at 
the earliest planning stages and develop plans and projects that 
minimize the potential to adversely impact on the environment.

[[Page 42389]]

    (2) Technical assistance. An application for a project exclusively 
involving technical assistance is generally excluded from the 
environmental review process by Sec. 1940.310(e)(1) of this title. 
However, as further specified in Sec. 1940.333 of this title, the 
grantee of a technical assistance grant, in the process of providing 
technical assistance, must consider and generally document within their 
plans the potential environmental impacts of the plan and 
recommendations provided to the recipient of the technical assistance.
    (3) Applications for grants to provide other than technical 
assistance to third-party recipients. As part of the preapplication, 
the applicant must provide a complete ``Request for Environmental 
Information,'' for each project specifically identified in its plan to 
provide other than technical assistance to third parties who will 
undertake eligible projects with such assistance. The Agency will 
review the preapplication, supporting materials, and the required 
``Request for Environmental Information'' and assess the impact of the 
preapplication. This assessment will focus on the potential cumulative 
impacts of the projects as well as any environmental concerns or 
problems that are associated with individual projects that can be 
identified at this time from the information submitted. Because the 
Agency's approval of this type of grant application does not constitute 
a commitment to the use of grant funds for any identified third-party 
projects (see Sec. 4284.541), no public notification requirements will 
apply to the preapplication. After the grant is approved, each third-
party project to be assisted under the grant will undergo the 
applicable environmental review and public notification requirements in 
part 1940, subpart G of this title prior to the Agency providing its 
consent to the grantee to assist the third-party project. If the 
preapplication reflects only one project which is specifically 
identified as the third-party recipient for financial assistance, the 
Agency may proceed directly to the appropriate environmental assessment 
for the third-party recipient with public notification as required. The 
applicant must be advised that if the recipient or project changes 
after the grant is approved, the project to be assisted under the grant 
will undergo the applicable environmental review and public 
notification requirements.
    (c) Government-wide debarment and suspension (non-procurement) and 
requirements for drug-free workplace. Persons who are disbarred or 
suspended are excluded from federal assistance and benefits including 
grants under this subpart. Grantees must certify that they will provide 
a drug-free workplace.
    (d) Restrictions on lobbying. All grants must comply with the 
lobbying restrictions contained in part 3018 of this title.
    (e) Excess capacity or transfer of employment. If a proposed 
project has financial assistance from all sources for more than $1 
million and will increase direct employment by more than 50 employees, 
the applicant will be requested to provide written support for an 
Agency determination that the proposal will not result in a project 
which is calculated to, or likely to, result in the transfer of any 
employment or business activity from one area to another. This 
limitation will not prohibit assistance for the expansion of an 
existing business entity through the establishment of a new branch, 
affiliate, or subsidiary of such entity if the expansion will not 
result in an increase in the unemployment in the area of original 
location or in any other area where such entity conducts business 
operations.
    (f) Management assistance. Grant recipients will be supervised, as 
necessary, to ensure that projects are completed in accordance with 
approved plans and specifications and that funds are expended for 
approved purposes. Grants made under this subpart will be administered 
under, and are subject to, parts 3015, 3017, 3019, and 3051 of this 
title, as appropriate, and established RBS guidelines.
    (g) Uniform Relocation Assistance and Real Property Acquisition 
Policies Act. All projects must comply with the requirements contained 
in part 21 of this title.
    (h) Flood or mudslide hazard area precautions. If the grantee 
financed project is in a flood or mudslide area, flood or mudslide 
insurance must be obtained through the National Flood Insurance 
Program.
    (i) Termination of federal requirements. Once the grantee has 
provided assistance with project loans in an amount equal to the grant 
provided by RBS, the requirements imposed on the grantee shall not be 
applicable to any new projects thereafter financed from the RCDG funds. 
Such new projects shall not be considered as being derived from federal 
funds. The purposes of such new projects, however, shall be consistent 
with these regulations.
    (j) Intergovernmental review. Grant projects are subject to the 
provisions of Executive Order 12372 which requires intergovernmental 
consultation with state and local officials. A loan fund established in 
whole, or in part, with grant funds will also be considered a project 
for the purpose of intergovernmental review as well as the specific 
projects funded with grant funds from the RCDG funds. For each project 
to be assisted with a grant under this subpart and which the state has 
elected to review under their intergovernmental review process, the 
state point of contact must be notified. Notification, in the form of a 
project description, can be initiated by the grantee. Any comments from 
the state must be included with the grantee's request to use RBS grant 
funds for the specific project. Prior to the RBS decision on the 
request, compliance with requirements of intergovernmental consultation 
must be demonstrated for each project. These requirements should be 
completed in accordance with ``Intergovernmental Review of Department 
of Agriculture Programs and Activities,'' part 3015, subpart V of this 
title.


Sec. 4284.528  Application processing.

    (a) Preapplications. (1) Applicants will file an original and one 
copy of an ``Application for Federal Assistance (For Non-
construction),'' with the appropriate Rural Development State Office.
    (2) All preapplications shall be accompanied by:
    (i) evidence of applicant's legal existence and authority to 
perform the proposed activities under the grant.
    (ii) the latest financial information to show the applicant's 
financial capacity to carry out the project. At a minimum, the 
information should include a balance sheet and an income statement. A 
current audited report is preferred where one is reasonably obtainable.
    (iii) an estimated breakdown of total costs, including costs to be 
funded by the applicant or other identified sources. Certification must 
be provided from the applicant that its matching share to the project 
is available and will be used for the project. The matching share must 
meet the requirements of parts 3015 and 3019 of this title as 
applicable. Certifications from an authorized representative of each 
source of funds must be provided indicating that funds are available 
and will be used for the proposed project.
    (iv) a budget and description of the accounting system to be used.
    (v) the area to be served, identifying within that area each 
governmental unit (i.e., town, county, etc.) affected by the proposed 
project. Evidence of support and concurrence from each affected 
governmental unit must be provided by

[[Page 42390]]

either a resolution or a written statement from the chief elected local 
official.
    (vi) a listing of cooperative businesses to be assisted or created.
    (vii) applicant's experience with similar projects, including 
experience of key staff members and persons who will be providing the 
proposed services and managing the project.
    (viii) the number of months duration of the project and the 
estimated time it will take from grant approval to beginning of 
service.
    (ix) the method and rationale used to select the areas or 
businesses that will receive the service.
    (x) a brief description of how the work will be performed and 
whether organizational staff, consultants or contractors will be used.
    (xi) an evaluation method to be used by the applicant to determine 
if objectives of the proposed activity are being accomplished.
    (xii) a brief plan that contains the following provisions and 
describes how the applicant will meet these provisions:
    (A) A provision that substantiates how the applicant will 
effectively serve rural areas in the United States.
    (B) A provision that the primary objective of the applicant will be 
to improve the economic condition of rural areas by promoting 
development of new cooperatives or improvement of existing 
cooperatives.
    (C) Supporting data from established official independent sources 
along with any explanatory documentation.
    (D) A description of the activities that the applicant will carry 
out to accomplish such objective.
    (E) A description of the proposed activities to be funded under 
this subpart.
    (F) A description of the contributions that the applicant's 
proposed activities are likely to make to the improvement of the 
economic conditions of the rural areas served by the applicant.
    (G) Provisions that the applicant, in carrying out its activities, 
will seek, where appropriate, the advice, participation, expertise, and 
assistance of representatives of business, industry, educational 
institutions, the federal, state, and local governments.
    (H) Provisions that the applicant will consult with any college or 
university administering Extension Service programs and cooperate with 
such college or university in the coordination of the center's 
activities and programs.
    (I) Provisions that the applicant will take all practicable steps 
to develop continuing sources of financial support for the center, 
particularly from sources in the private sector.
    (J) Provisions for:
    (1) monitoring and evaluating its activities; and
    (2) accounting for money received and expended by the applicant 
under this subpart.
    (K) Provisions that the applicant will provide for the optimal 
application of cooperative development in rural areas, especially those 
areas adversely affected by economic conditions, such that local 
economic conditions can be improved through cooperative development.
    (xiii) the agreement proposed to be used between the applicant and 
the ultimate recipients, if grant funds are to be used for the purpose 
of making loans or grants to individuals, cooperatives, small 
businesses, and other similar entities (ultimate recipients) in rural 
areas for eligible purposes under this subpart. This agreement should 
include the following:
    (A) An assurance that the responsibilities of the grantee, as a 
recipient of grant funds under this subpart, are passed on to the 
ultimate recipient and the ultimate recipient understands its 
responsibilities to comply with the requirements contained in this 
subpart and parts 3015 and 3019 of this title, as applicable.
    (B) Provisions that the ultimate recipient will comply with 
debarment and suspension requirements contained in part 3017 of this 
title and will execute a ``Certification Regarding Debarment, 
Suspension, Ineligibility and Voluntary Exclusion--Lower Tier Covered 
Transactions.''
    (C) Provisions that the ultimate recipient will execute an ``Equal 
Opportunity Agreement,'' and an ``Assurance Agreement.''
    (D) Documentation that the ultimate recipient understands its 
responsibilities to the applicant.
    (E) Documentation that the applicant understands its 
responsibilities in monitoring the ultimate recipient's activities 
under the grant and the applicant's plan for such monitoring.
    (F) Documentation, when other references or sources of information 
are used, along with copies, if possible, that provides dates, 
addresses, page numbers and explanations of how interpretations are 
made to substantiate that such things as economically distressed 
conditions do exist.
    (G) Narrative addressing all items in Sec. 4284.540(a) of this 
subpart regarding grant selection criteria.
    (b) Applications. Upon notification that the applicant has been 
selected for funding, the following will be submitted to Rural 
Development by the applicant:
    (1) Proposed scope of work, detailing the proposed activities to be 
accomplished and timeframes for completion of each activity.
    (2) Other information requested by RBS to make a grant award 
determination.
    (c) Applicant response. If the applicant fails to submit the 
application and related material by the date shown on the invitation 
for applications, Rural Development may discontinue consideration of 
the preapplication.


Secs. 4284.529-4284.539  [Reserved]


Sec. 4284.540  Grant selection criteria.

    Grants will be awarded under this subpart on a competitive basis. 
The priorities described in this paragraph will be used by RBS to rate 
preapplications. RBS review of preapplications will include the 
complete preapplication package submitted to the Rural Development 
State Office. Points will be distributed according to ranking as 
compared with other preapplications on hand. All factors will receive 
equal weight with points awarded to each factor on a 5, 4, 3, 2, 1 
basis depending on the applicant's ranking compared to other 
applicants.
    (a) Preference will be given to applications that:
    (1) demonstrate a proven track record in administering a nationally 
coordinated, regionally or State-wide operated project;
    (2) demonstrate previous expertise in providing technical 
assistance in rural areas;
    (3) demonstrate the ability to assist in the retention of business, 
facilitate the establishment of cooperatives and new cooperative 
approaches, and generate employment opportunities that will improve the 
economic conditions of rural areas;
    (4) demonstrate the ability to create horizontal linkages among 
businesses within and among various sectors in rural areas of the 
United States and vertical linkages to domestic and international 
markets;
    (5) commit to providing technical assistance and other services to 
underserved and economically distressed rural areas of the United 
States;
    (6) commit to providing greater than a 25 percent matching 
contribution with private funds and in-kind contributions;
    (7) evidence transferability or demonstration value to assist rural 
areas outside of project area; and
    (8) demonstrate that any cooperative development activity is 
consistent with positive environmental stewardship.
    (b) Each preapplication for assistance will be carefully reviewed 
in accordance

[[Page 42391]]

with the priorities established in this section. A priority rating will 
be assigned to each preapplication. Preapplications selected for 
funding will be based on the priority rating assigned each 
preapplication and the total funds available. All preapplications 
submitted for funding should contain sufficient information to permit 
RBS to complete a thorough priority rating.


Sec. 4284.541  Grant approval, fund obligation, grant closing, and 
third-party financial assistance.

    The grantee will execute all documents required by RBS to make a 
grant under this subpart. By accepting the grant, the grantee agrees to 
comply with parts 3015 and 3019 of this title.


Secs. 4284.542-4284.556  [Reserved]


Sec. 4284.557  Fund disbursement.

    Grants will be disbursed as follows:
    (a) A ``Request for Advance or Reimbursement,'' will be completed 
by the applicant and submitted to Rural Development not more frequently 
than monthly. Payments will be made by electronic funds transfer 
pursuant to the Debt Collection Improvement Act of 1996 (Pub. L. 104-
134).
    (b) The grantee's share in the cost of the project will be 
disbursed in advance of grant funds or on a pro-rata distribution basis 
with grant funds during the disbursement period.


Sec. 4284.558  Reporting.

    A ``Financial Status Report,'' and a project performance activity 
report will be required of all grantees on a quarterly calendar basis. 
A final project performance report will be required with the last 
``Financial Status Report.'' The final report may serve as the last 
quarterly report. The final report must include a final evaluation of 
the project. Grantees must constantly monitor performance to ensure 
that time schedules are being met, projected work by time periods is 
being accomplished, and other performance objectives are being 
achieved. Grantees are to submit an original of each report to Rural 
Development. The project performance reports shall include, but not be 
limited to, the following:
    (a) A comparison of actual accomplishments to the objectives 
established for that period;
    (b) Reasons why established objectives (if any) were not met;
    (c) Problems, delays, or adverse conditions which will affect 
attainment of overall project objectives, prevent meeting time 
schedules or objectives, or preclude the attainment of particular 
project work elements during established time periods. This disclosure 
shall be accompanied by a statement of the action taken or planned to 
resolve the situation; and
    (d) Objectives and timetable established for the next reporting 
period.


Secs. 4284.559-4284.570  [Reserved]


Sec. 4284.571  Audit requirements.

    The grantee will provide an audit report in accordance with 
Sec. 1942.17 of this title. Audits must be prepared in accordance with 
general accounting principles and standards using the publication, 
``Standards for Audit of Governmental Organizations, Programs, 
Activities and Functions.''


Sec. 4284.572  Grant servicing.

    Grants will be serviced in accordance with part 1951, subpart E of 
this title.


Sec. 4284.573  Programmatic changes.

    The grantee shall obtain prior approval for any change to the scope 
or objectives of the approved project. Failure to obtain prior approval 
of changes to the scope or budget can result in suspension or 
termination of grant funds.


Sec. 4284.574  Subsequent grants.

    Subsequent grants will be processed in accordance with the 
requirements contained in this subpart. Cooperative development 
projects receiving assistance under this program will be evaluated one 
year after assistance is received. If it is determined to be in the 
best interests of the program, preference may be given to a project or 
projects for an additional grant in the immediately succeeding year.


Sec. 4284.575  Grant suspension, termination, and cancellation.

    Grants may be canceled by RBS by written notice. Grants may be 
suspended or terminated for cause or convenience in accordance with 
parts 3015 and 3019 of this title, as applicable.


Secs. 4284.576-4284.586  [Reserved]


Sec. 4284.587  Exception authority.

    The Administrator may, in individual cases, make an exception to 
any requirement or provision of this subpart, if the Administrator 
determines that application of the requirement or provision would 
adversely affect the Government's interest.


Secs. 4284.588-4284.599  [Reserved]


Sec. 4284.600  OMB control number.

    The information collection requirements contained in this 
regulation have been approved by the Office of Management and Budget 
(OMB) and have been assigned OMB control number 0570-0006. You are not 
required to respond to this collection of information unless it 
displays a valid OMB control number.

    Dated: July 30, 1997.
Jill Long Thompson,
Under Secretary, Rural Development.
[FR Doc. 97-20738 Filed 8-6-97; 8:45 am]
BILLING CODE 3410-XY-U