`[Federal Register Volume 66, Number 103 (Tuesday, May 29, 2001)]
[Rules and Regulations]
[Pages 29010-29017]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-13230]


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SMALL BUSINESS ADMINISTRATION

13 CFR Part 119

RIN 3245-AE52


PRIME Act Grants

AGENCY: Small Business Administration.

ACTION: Final rule.

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SUMMARY: This final rule adds new regulations to set up the Program for 
Investment in Microentrepreneurs Act (``PRIME'' or ``the Act''), 
created by Title VII of the Gramm-Leach-Bliley Act, enacted November 
12, 1999. This rule sets forth the Act's grant requirements for 
qualified Microenterprise Development Organizations (``MDOs'') to: 
train and provide technical assistance to disadvantaged 
microentrepreneurs; build MDO's capacity to give disadvantaged 
microentrepreneurs such training and technical assistance; research and 
develop best practices for training and technical assistance programs 
for disadvantaged microentrepreneurs, and perform such other activities 
as the Administrator or designee determines are consistent with the 
Act.
    PRIME grants will enable MDOs to reach more disadvantaged 
microentrepreneurs with training and technical assistance, which will 
make a difference in their ability to start, grow, and sustain 
microenterprises in economically distressed, high unemployment areas. 
SBA will award a minimum of 75 percent of available funds to MDOs to 
use for training and technical assistance to disadvantaged 
microentrepreneurs. At a minimum, another 15 percent will be used to 
build MDOs' capacity to give more training and technical assistance. 
SBA will use the remaining funds to make grants for research and 
development on best practices or other purposes to improve MDOs' 
services to PRIME's ultimate beneficiaries--disadvantaged 
microentrepreneurs.

DATES: This rule is effective on June 28, 2001.

FOR FURTHER INFORMATION CONTACT: Jody Raskind, Chief, Microenterprise 
Development Branch, 202-205-6497.

SUPPLEMENTARY INFORMATION:

Introduction

    Congress recognized that many disadvantaged microentrepreneurs lack 
sufficient training and education to gain access to capital and to 
conduct other activities necessary to establish, maintain, and expand 
their businesses. It enacted the Program for Investment in 
Microentrepreneurs Act (``PRIME'' or ``the Act'') to augment training 
and technical assistance under the Small Business Act and other 
legislation. PRIME grants to qualified Microenterprise Development 
Organizations (``MDOs'') will help meet training and technical 
assistance needs for disadvantaged microentrepreneurs, thereby 
encouraging entrepreneurship and capital formation at the community 
level.
    The congressional mandate to provide cognitive support to the 
target market through the Act is recognition that many low income and 
very low-income entrepreneurs need training and technical assistance to 
start, operate, strengthen, or expand their businesses. In order to 
achieve measurable success, technical assistance providers must be 
accessible, consistent and committed to the entrepreneur's progress 
over extended periods of time. The competency and capacity of these 
providers must also be measured. Research into the outcomes of support, 
its long-term effect, and how best to continue assistance is essential 
in determining the value of support over the long run.
    The U.S. Department of Commerce's Characteristics of Business 
Ownership shows that in 1987, approximately 17 percent (2.3 million) of 
businesses in the United States were operated by low-income and very 
low-income microentrepreneurs. Since then a variety of economic 
developments, including corporate downsizing, declining availability of 
lower skilled manufacturing jobs and expanded opportunities in the 
technology field, have combined to make microenterprise an increasingly 
more viable option in the U.S. economy.
    The Aspen Institute estimated that during 1997 microlenders 
nationwide provided business assistance to 172,000 microentrepreneurs, 
a mere fraction of low- and very-low income individuals involved in 
microenterprise. The Institute further estimated that of that number, 
about 57,000 actively pursued and benefited from sustained business-
based training and technical assistance. Of those, approximately 6,000 
received loans.
    One of the major constraints is the cost of providing this training 
and technical assistance. Current private sector sources simply are not 
meeting the need. The Act, therefore, focuses on expanding the 
cultivation, support and motivation of these low- and very-low income 
microentrepreneurs. It will also help build the capacity of the 
microenterprise industry in order to deliver vital services to a much 
greater segment of the 2.3 million or more low income and very low 
income microentrepreneurs. One of the goals of the PRIME program is to 
be a resource for MDOs as they grow and develop and ultimately become 
self-sustaining.
    The Act authorizes the U.S. Small Business Administration (``SBA'') 
to make grants to ``qualified organizations'' to fund training and 
technical assistance for disadvantaged microentrepreneurs. It also 
authorizes SBA to make grants to increase the training and technical 
assistance capacities of MDOs. Further, it authorizes funding for 
grants for research and development, and other undertakings deemed by 
the Administrator or designee to be consistent with the purposes of the 
Act. The PRIME program requires that grants made by SBA be matched by 
grantees from non-Federal sources. These regulations set up four 
categories of Technical Assistance Grants targeted to these purposes.
    Grants made either for the purpose of providing technical 
assistance to disadvantaged microentrepreneurs or for capacity building 
purposes initially will be awarded, on a competitive basis, in amounts 
not less than $50,000. Such grants may be renewable, annually, for up 
to four additional years. Renewal of an existing grant will take place 
at the discretion of the SBA and will be based on the availability of 
funds and the individual grantee's performance in terms of goals met, 
milestones achieved, and demonstrated results.
    Grants for research and development will also be awarded on a 
competitive basis, though not subject to a minimum award. These grants 
may also be renewed based on the appropriateness of extended funding 
periods, availability of funds, and appropriation and performance.
    PRIME will be implemented with a clear focus on the applicants' 
abilities to meet the purposes of the Act. Accountability and outcomes 
will be an ongoing consideration during the grant period. Applicants 
for funding for technical assistance to disadvantaged 
microentrepreneurs will be evaluated based on such items as technical 
capabilities; market penetration potential; ability to meet stated 
goals; historical performance; key personnel; resource management; 
community

[[Page 29011]]

partnering and collaboration with state and local entities; 
accountability for outcomes; program sustainability; and replicability 
of program design. Applicants for funding as capacity builders will be 
similarly evaluated. Continued performance of these two groups will be 
measured in terms of such items as number of clients served; range and 
quality of service; number of businesses started, stabilized, expanded, 
and/or funded; number of jobs created; business survival rates; capital 
formation; and non-business outcomes such as wage employment.
    On October 10, 2000, SBA published the proposed rule for the PRIME 
program in the Federal Register (65 FR 60256). SBA received 13 timely 
comments in response to the proposed rule. What follows is a summary of 
the comments received and the actions taken in response to those 
comments.

Review of Comments

    SBA received 3 comments on Sec. 119.2, which sets forth definitions 
found in the Act and further defines terms not included in the Act. Two 
of the commenters expressed an interest in having the definition of 
``training and technical assistance'' clarified to convey that the 
examples of training and technical assistance which SBA included in the 
proposed rule are not conclusive. SBA adopted this comment by adding 
the language, ``such as, but not limited to,'' before the specific 
examples. One of the above mentioned commenters also requested that the 
definition of training and technical assistance include, ``services 
which may address additional barriers to success that low and very low 
income entrepreneurs may face.'' Although SBA can appreciate what this 
commenter is trying to accomplish with the recommended language, SBA 
has decided not to include such language until we can more clearly 
identify existing barriers. The PRIME program is a new initiative and 
the legislation enacting the program specifically defines ``training 
and technical assistance.'' As the program develops, and as we are able 
to more clearly identify barriers, SBA will consider expanding the 
definition of training and technical assistance in line with the 
statutory purpose of the PRIME program.
    The third commenter on Sec. 119.2 asked that the definition of 
``capacity building'' be expanded to include purposes beyond an MDO's 
ability to provide training and technical assistance to disadvantaged 
microentrepreneurs. As with the definition of training and technical 
assistance, the definition of capacity building is clearly set forth in 
the Act enacting the PRIME program. SBA believes that the definition of 
capacity building, as it appears in the Act, accurately portrays the 
intent of Congress and the purposes of the PRIME program. Therefore, 
SBA does not feel that it would be appropriate to expand the purposes 
beyond those articulated by Congress. In addition, SBA deleted the 
definition of the term ``emerging microenterprise development 
organization or program'' based upon comments received on Sec. 119.12, 
which are discussed in that part of this Supplementary Information.
    SBA received 3 comments in response to proposed Sec. 119.3, which 
lists organizations eligible to apply for PRIME grants. One commenter 
asked us to specify that Internal Revenue Service (IRS) classified 
organizations such as 501(c)(3)s are eligible to apply for PRIME 
grants. SBA does not feel this change is necessary. When addressing 
eligible organization within the rule for the PRIME program, SBA has 
not specified any IRS paragraph citations (e.g., 501, 509); rather, SBA 
simply articulates the statutory requirement that the eligible 
organizations be non-profits. Organizations such as 501(c)(3)s would 
satisfy the non-profit language used in the rule.
    A second commenter on Sec. 119.3 asked SBA to include specific 
language listing the local governments or agencies of local governments 
eligible for PRIME grants. SBA did not adopt this change because the 
Act authorizing PRIME specifically states that only non-profit entities 
are eligible organizations. The Act does allow for non-profit agencies 
to work, ``in conjunction with'' local governments or agencies of local 
governments however, eligible organizations themselves consist only of 
non-profits.
    The final comment on Sec. 119.3 asked for clarification that faith 
based organizations are eligible to apply for grant programs. SBA did 
not include any explicit language to that effect because there is no 
explicit statutory language disqualifying faith based organizations 
from participating in the program. SBA will need to review each faith 
based organization application to determine, on a case-by-case basis, 
whether there are any constitutional First Amendment issues presented.
    SBA received four comments on Sec. 119.4, which lists the uses for 
PRIME grants permitted by the Act. One commenter suggested that we 
revise the rule text to allow capacity building grants to go directly 
to MDOs for building their own capacity. SBA did not adopt this change 
because it is unnecessary. The PRIME program already allows for grants 
for the purposes recommended by the commenter under the heading of 
``Technical Assistance Grants.'' ``Capacity Building Grants,'' on the 
other hand, by statute, are awarded to MDOs for the benefit of building 
the capacity of other MDOs.
    The remaining commenters on this section also asked SBA to make the 
definition of ``training and technical assistance'' more flexible. SBA 
fulfilled this request by amending the definition of training and 
technical assistance in Sec. 119.2 to include the language, ``such as, 
but not limited to'' before the list of examples.
    SBA received nine comments on Sec. 119.5, which lays out the Act's 
parameters for allocating and apportioning PRIME grant awards. All of 
the commenters expressed concern that this section appears to require 
that at least 50 percent of each grantee's total award amount must 
serve ``very low income'' persons. SBA has amended the language of this 
section to clarify that because the PRIME program seeks to reach as 
many disadvantaged entrepreneurs as possible, the focus of Sec. 119.5 
is on the number and the quality of the grants reaching the 
disadvantaged entrepreneurs, not the amount of the grants. The section 
conveys that at least 50 percent of the total number of grants awarded 
under the PRIME program, as a whole, must serve ``very low income'' 
persons.
    SBA did not receive any comments in response to proposed 
Sec. 119.6, which stated that awards for training and technical 
assistance will not be less than $50,000. However, SBA amended this 
section to conform with the change made to Sec. 119.7 (How long and in 
what amounts will grant funding be available to a single grantee?)(See 
below). In this final rule, the minimum award for training and 
technical assistance and capacity building grants will be not less than 
$50,000 during the initial year of the grant.
    SBA received a total of 9 comments on Sec. 119.7, which explains 
for how long and in what amounts grant funding will be available to a 
single grantee. All of the commenters were opposed to declining award 
amounts in the option years. SBA understands the commenters concerns 
however, we have maintained a ``step down'' approach to the award 
amounts for the option years. SBA believes that this step down approach 
will allow SBA to accommodate new grantees every year while providing 
existing grantees with enough funding to pursue their plans. Therefore, 
the

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section provides that for Technical Assistance and Capacity Building 
Grants, after the initial grant, grant awards for following option 
years will be in amounts not to exceed 67 percent of the initial grant 
amount. SBA did not treat Research and Development Grants and 
Discretionary Grants similarly. SBA believes that these grants, by 
their very nature, require more flexibility. Often projects, such as 
research projects, are more unpredictable in terms of when milestones 
will be achieved and what direction the research will take upon 
attainment of each milestone. Therefore, for these types of grants, 
after making the initial grant, option year grant awards will be 
approved at SBA's discretion.
    In addition, to address the concerns raised by these comments, SBA 
made two other changes to Sec. 119.7. First, SBA modified the language 
of subsection (a) to clarify the discussion of option year funding. 
Secondly, SBA added a new subsection (d) to clarify that grantees in 
the final year of a project may request a one-time extension for up to 
12 months under OMB Circular A-110, paragraph .25(e)(2). The purpose of 
this revision is to place grantees on notice that extensions may be 
requested under the PRIME Program.
    SBA also made one other amendment to Sec. 119.7 in an effort to 
clarify the language of the section. We have amended the heading to 
read, ``How long and in what amounts will grant funding be available to 
a single grantee?'' (Emphasis added). This heading more accurately 
describes the content of the text, which follows the heading.
    SBA received only one comment on Sec. 119.8, which sets forth the 
matching requirements for grantees. The commenter was concerned that a 
request for a waiver from the matching requirements would count against 
them. In an effort to confirm that this is not the case, SBA amended 
some of the language within paragraph (c) and (d) and added new 
paragraphs (e) and (f). SBA's intent within this section is to convey 
that a request for a waiver should be made sincerely and only when 
absolutely necessary. Obviously, SBA wants to avoid issuing unnecessary 
waivers in order to ensure that program funds will be utilized in the 
most far-reaching manner possible. SBA will first evaluate applications 
based on merit alone and will rank order these applications 
accordingly. Once SBA completes this ranking, we will review the 
applications for waiver requests and will grant waiver requests in the 
same rank order until waiver request authority has been expended. If, 
when following the rank order, SBA comes to an application that 
requests a waiver but all waiver authority has already been granted, 
SBA has no option but to deny the waiver request and will therefore be 
forced to similarly deny the otherwise meritorious grant proposal. If 
such a situation occurs, such an applicant will not be able to suddenly 
turn around, come back to SBA stating that they have the required match 
amount and hope to receive a grant award. Accordingly, as we have 
stated, waiver requests should be made only when necessary.
    SBA received two comments in response to Sec. 119.10, which 
restates the Act's requirement that SBA not prefer SBA Microloan 
Program participants under Sec. 7(m) of the Small Business Act over 
non-participants or former participants in that program. Both comments 
supported this position therefore, the section remains as it was 
proposed.
    SBA received three comments in response to Sec. 119.11, which sets 
forth the information that will be requested in an application for 
funding under PRIME. All three comments suggested that the application 
is too long. These comments do not affect the regulation text of this 
section however, SBA wants to remind potential applicants that the 
application contains both instructions and requests for information. 
Not every page of the application contains a request for information. 
Of course, as the PRIME program progresses, SBA will look for 
opportunities to streamline the application itself.
    SBA received six comments on Sec. 119.12, which sets forth the 
criteria that SBA will use to evaluate grant applications. All six 
commenters indicated that SBA did not give enough weight to the past 
experience of the qualified organizations delivering technical 
assistance to disadvantaged entrepreneurs. After receiving these 
comments (which came from almost 50 percent of the total number of 
commenters), SBA decided to increase the weight given to past 
experience. Since issuing the proposed rule, and upon review of 
comments, SBA more firmly believes that an organization's ability to 
accomplish the objectives of the PRIME program may best be demonstrated 
by its prior experience and success in serving disadvantaged 
entrepreneurs. Also, based on these comments, SBA decided to eliminate 
the provision in proposed Sec. 119.12(a)(1). The proposed provision 
would require two separate competitions for Technical Assistance 
Grants. One competition for microenterprise development organizations 
that had been in operation for four years or less and one competition 
for microenterprise development organizations that had been in 
operation for more than four years. SBA believes that the adjustments 
to the past experience weighting makes two competitions unnecessary.
    SBA received a total of 5 comments on Secs. 119.16, 119.17, both of 
which address the reporting, record keeping, and related requirements 
of the PRIME program. All of the commenters were opposed to the 
quarterly reporting requirement and two of the commenters felt that the 
information being requested was unrealistic or excessive. In drafting 
these sections, SBA had to take into account the requirements found 
within Sec. 115 of the Riegle Community Development and Regulatory 
Improvement Act of 1994 (Riegle Act) (12 U.S.C. 4714) as required by 
the Act authorizing PRIME and the applicable circulars issued by the 
Office and Management and Budget (OMB). These directives, along with 
SBA's experience and the commenters' concerns, lead us to amend this 
section to allow for, in the case of Technical Assistance and Capacity 
Building Grants, quarterly reporting during the first two years. 
Thereafter, the grantees may request that SBA reduce the frequency of 
reports. For recipients of Research and Development Grants, reports 
will be required in accordance with agreed upon milestones. For 
Discretionary Grants, reports will be required as appropriate for the 
project, or on a schedule similar to that provided for Technical 
Assistance and Capacity Building Grant recipients.

Compliance With Executive Order 12866, 12988 and 13132, the 
Regulatory Flexibility Act, 5 U.S.C. 601-12, and the Paperwork 
Reduction Act, 44 U.S.C. Ch. 35

    The Office of Management and Budget (``OMB'') reviewed this rule as 
a ``significant'' regulatory action under Executive Order 12866.
    SBA has determined that this final rule will not have a significant 
economic impact on a substantial number of small entities within the 
meaning of the Regulatory Flexibility Act, 5 U.S.C. 601-612. Congress 
has limited the funding level for this program therefore, it can only 
affect a limited number of small businesses through making grants to 
specifically defined organizations.
    The Office of Management and Budget (OMB) has approved the 
information collection requirements contained in part 119 under the 
provisions of the Paperwork Reduction Act, 44 U.S.C. Ch. 35, and has 
assigned OMB control number 3245-0329. Information

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collected includes application information submitted by applicants in 
response to the Program Announcements, as provided in Secs. 119.9 and 
119.11, and reporting, recordkeeping and related requirements related 
to a grant award, as provided in Sec. 119.16. The required information 
will be used to evaluate applicants for PRIME grant awards and to 
monitor the financial and performance aspects of the awards once they 
are made. SBA estimates that it will take 80 hours to respond to the 
program announcements and to perform quarterly reporting and 
recordkeeping requirements. SBA estimates 500 applicants, resulting in 
an annual hour burden of 40,000 hours for the PRIME Program. SBA 
received only two comments on the proposed application packages 
suggesting that the applications were too long. SBA responded to these 
comments earlier in the preamble to this rule when addressing the 
comments made on Sec. 119.11. An agency may not conduct or sponsor, and 
a person is not required to respond to a collection of information 
unless it displays a currently valid OMB control number. The OMB 
control number associated with this collection information is 3245-
0329.
    For purposes of Executive Order 13132, SBA has determined that this 
final rule has no federalism implications because the legislation 
authorizing it provides grants to private, non-profit organizations 
working directly with disadvantaged entrepreneurs.
    For purposes of Executive Order 12988, SBA certifies that this 
final rule is drafted, to the extent practicable, in accordance with 
the standards set forth in section 3 of that Order.

List of Subjects in 13 CFR Part 119

    Grant programs--Business, Small business.

    For the reasons stated in the preamble, SBA adds 13 CFR part 119, 
as follows:

PART 119--PROGRAM FOR INVESTMENT IN MICROENTREPRENEURS (``PRIME'' 
OR ``THE ACT'')

Sec.
119.1   What is the Program for Investment in Microentreprenuers 
(``PRIME'' or ``the Act'')?
119.2   Definitions.
119.3   What types of organizations are eligible for PRIME grants?
119.4   What services or activities must PRIME grant funds be used 
for?
119.5   How are PRIME grant awards allocated?
119.6   What are the minimum and maximum amounts for an award?
119.7  How long and for what amounts will grant funding be available 
to a single grantee?
119.8  Are there matching requirements for grantees?
119.9  How will a qualified organization apply for PRIME grant 
awards?
119.10  Will SBA give preferential consideration to other SBA 
program participants?
119.11  What information will be requested in an application under 
the PRIME program?
119.12  What criteria will SBA use to evaluate applications for 
funding under the PRIME program?
119.13  How will an applicant make a subgrant?
119.14  Are there limitations regarding the use of program income?
119.15  If a grantee is unable to spend the entire amount allotted 
for a single fiscal year, can the funds be carried over to the next 
year?
119.16  What are the reporting, record keeping, and related 
requirements for grantees?
119.17  What types of oversight will SBA provide to grantees?
119.18  What are the restrictions against lobbying?
119.19  Is fundraising an allowable expense under the PRIME program?
119.20  Should grantees and subgrantees raise conflict of interest 
matters with SBA?

    Authority: 15 U.S.C. 634(b)(6) and Pub. L. 106-102.


Sec. 119.1  What is the Program for Investment in Microentrepreneurs 
(``PRIME'' or ``the Act'')?

    PRIME authorizes SBA to make grants to ``qualified organizations'' 
to fund training and technical assistance for disadvantaged 
entrepreneurs, build these organizations' own capacity to give training 
and technical assistance, fund research and development of ``best 
practices'' in microenterprise development and technical assistance 
programs for disadvantaged microentrepreneurs, and to fund other 
undertakings the Administrator or designee deems consistent with these 
purposes.


Sec. 119.2  Definitions.

    For the purposes of this part, the following definitions apply:
    Capacity Building Grant means a grant made under the Act identified 
under Sec. 119.4(b).
    Capacity building services means services provided to an 
organization or program that is currently, or is developing as, a 
microenterprise development organization or program, for the purpose of 
enhancing its ability to provide training and technical assistance to 
disadvantaged microentrepreneurs.
    Collaborative means two or more nonprofit entities that agree to 
act jointly as a qualified organization under this part.
    Developer means a person interested in starting or acquiring a 
microenterprise.
    Disadvantaged entrepreneur, or disadvantaged microentrepreneur, 
means the owner, majority owner, or developer, of a microenterprise who 
is also--
    (1) A low-income person;
    (2) A very low-income person; or
    (3) An entrepreneur who lacks adequate access to capital or other 
resources essential for business success, or is economically 
disadvantaged, as defined in this part.
    Discretionary Grant means a grant made under the Act identified 
under Sec. 119.4(d).
    Economically disadvantaged entrepreneur, or economically 
disadvantaged microentrepreneur, means an owner, majority owner, or 
developer of a microenterprise whose ability to compete in the free 
enterprise system has been impaired due to diminished capital and 
credit opportunities as compared to others in the industry such that 
his or her ownership of a small business would help to qualify the 
small business for assistance under section 7(j) or section 8(a) 
programs of the Small Business Act.
    Grantee means a recipient of a grant under the Act.
    Group has the same meaning as ``collaborative'' as defined in this 
section.
    Indian tribe means any Indian tribe, band, pueblo, nation, or other 
organized group or community, including any Alaska Native village or 
regional or village corporation, as defined in or established pursuant 
to the Alaska Native Claims Settlement Act, which is recognized as 
eligible for the special programs and services the United States 
provides to Indians because of their status as Indians.
    Indian tribe jurisdiction means Indian country, as defined in 18 
U.S.C. 1151, and any other lands, title to which is either held by the 
United States in trust for the benefit of any Indian tribe or 
individual or held by any tribe or individual subject to a restriction 
by the United States against alienation, and any land held by Alaska 
Native groups, regional corporations, and village corporations, as 
defined in or established under the Alaska Native Claims Settlement 
Act, public domain Indian allotments, and former Indian reservations in 
the State of Oklahoma.
    Intermediary means a private, nonprofit entity serving or seeking 
to

[[Page 29014]]

serve microenterprise development organizations or programs identified 
under Sec. 119.3.
    Large microenterprise development organization or program means a 
microenterprise development organization or program with 10 or more 
full time employees or equivalents, including its executive director, 
as of the date it files its application with SBA for a PRIME grant.
    Local community means an identifiable area and population 
constituting a political subdivision of a state.
    Low-income person means a person having an income, adjusted for 
family size, of not more than--
    (1) For metropolitan areas, 80 percent of the median income; and
    (2) For non-metropolitan areas, the greater of--
    (i) 80 percent of the area median income; or
    (ii) 80 percent of the statewide non-metropolitan area median 
income.
    Microenterprise means a sole proprietorship, partnership or 
corporation that--
    (1) Has fewer than 5 employees, including the owner; and
    (2) Generally lacks access to conventional loans, equity, or other 
banking services.
    Microenterprise development organization or program means a 
nonprofit entity, or a program administered by such an entity, 
including community development corporations or other nonprofit 
development organizations and social service organizations, that 
provides services to disadvantaged microentrepreneurs.
    Qualified organization means an organization eligible for a PRIME 
grant identified under Sec. 119.3.
    Research and Development Grant means a grant made under the Act 
identified under Sec. 119.4(c).
    Severe constraints on available sources of matching funds means the 
documented inability of a qualified organization applying for a PRIME 
grant to raise matching funds or in-kind resources from non-Federal 
sources during the 2 years immediately prior to the date of its 
application because of a lack of or increased scarcity of monetary or 
in-kind resources from potential non-Federal sources.
    Small microenterprise development organization or program means a 
microenterprise development organization or program with less than 10 
full time employees or equivalents, including its executive director, 
as of the date it files its application with SBA for a PRIME grant.
    Technical Assistance Grant means a grant made under the Act 
identified under Sec. 119.4(a).
    Training and technical assistance means services and support 
provided to disadvantaged entrepreneurs, such as, but not limited to, 
assistance intended to enhance business planning, marketing, 
management, financial management skills, business operations, or 
assistance for the purpose of increasing access to loans and other 
financial services.
    Very low-income person means having an income adjusted for family 
size of not more than 150 percent of the poverty line, as defined in 
section 673(2) of the Community Services Block Grant Act, 42 U.S.C. 
9902(2), including any revision required by that section.


Sec. 119.3  What types of organizations are eligible for PRIME grants?

    An organization eligible for a PRIME grant (``qualified 
organization'') is one that is:
    (a) A microenterprise development organization or program as 
defined in Sec. 119.2(q) (or a group or collaborative thereof) that has 
a demonstrated record of delivering microenterprise services to 
disadvantaged microentrepreneurs;
    (b) An intermediary, as defined in Sec. 119.2(l);
    (c) A microenterprise development organization or program as 
defined in Sec. 119.2(q) that is accountable to a local community, 
working with a State or local government or Indian tribe; or
    (d) An Indian tribe acting on its own, if the Indian tribe can 
certify that no private organization or program referred to in 
paragraphs (a), (b) and (c) of this section exists within its 
jurisdiction.


Sec. 119.4  What services or activities must PRIME grant funds be used 
for?

    A recipient of a PRIME grant (``grantee'') must use PRIME grants 
to--
    (a) Provide training and technical assistance to disadvantaged 
microentrepreneurs (``Technical Assistance Grant'');
    (b) Provide training and capacity building services to 
microenterprise development organizations and programs to assist them 
to develop microenterprise training and services (``Capacity Building 
Grant'');
    (c) Aid in researching and developing the best practices in the 
field of microenterprise development and technical assistance programs 
for disadvantaged microentrepreneurs (``Research and Development 
Grant''); or
    (d) Conduct such other activities as the Administrator or designee 
determines to be consistent with the purposes of the Act 
(``Discretionary Grant'').


Sec. 119.5  How are PRIME grant awards allocated?

    (a) At least 50 percent of the number of grant awards made under 
this part will be awarded to qualified organizations that benefit very 
low-income persons, including those residing on Indian reservations. In 
general, SBA will make grant award decisions to serve diverse 
populations by including as recipients both large and small 
microenterprise development organizations, and organizations serving 
urban, rural, and Indian tribal communities.
    (b) SBA will allocate the funding available for awards as follows:
    (1) A minimum of 75 percent for Technical Assistance Grants;
    (2) A minimum of 15 percent for Capacity Building Grants; and
    (3) The remaining 10 percent or less may be allocated by SBA, in 
its sole discretion to be used for:
    (i) Research and Development Grants; or
    (ii) Discretionary Grants.


Sec. 119.6  What are the minimum and maximum amounts for an award?

    (a) The minimum grant award for Technical Assistance and Capacity 
Building Grants will be $50,000 during the first year of the award, 
subject to the availability of funds.
    (b) There is no minimum grant award for Research and Development or 
Discretionary Grants.
    (c) The maximum amount that an individual grant recipient may 
receive in any fiscal year from a single award or multiple awards, 
under any of the purposes of the program, may not exceed $250,000 or 10 
percent of the total grant funds available for award in that fiscal 
year, whichever is less.


Sec. 119.7  How long and in what amounts will grant funding be 
available to a single grantee?

    (a) Generally, the funding period for a PRIME grant will be one 
year. Subject to availability of funds and continuing authorization, 
funding may be available on an annual basis allowing for the initial 
grant plus up to four option years, for a project period of up to five 
years. Decisions regarding option year awards and the funding levels of 
these awards will depend upon availability of funding and the grantee's 
performance as measured against project objectives and milestones. A 
grantee that enters into a cooperative agreement must submit a separate 
application to have the support continued for each subsequent year. In 
all cases, continuation awards require a determination by SBA that 
continued

[[Page 29015]]

funding is in the best interest of the Federal government. Neither the 
approval of any application nor the entering into of any cooperative 
agreement commits or obligates the Federal Government in any way to 
make any additional, supplemental, continuation or other award with 
respect to any grantee.
    (b) For Technical Assistance and Capacity Building Grants, after a 
grantee receives an initial grant, funding for any option year(s) must 
be no more than 67 percent of the initial grant amount.
    (c) For Research and Development and Discretionary Grants, after a 
grantee receives an initial grant, funding for any option year(s) will 
be approved at the discretion of the SBA.
    (d) In the final year of a project, grantees may apply to extend 
the expiration date of a grant if additional time beyond the 
established expiration date is required to assure adequate completion 
of the original scope of work within the funds already made available. 
For this purpose, the grantee may make an extension request for a one-
time, no-cost extension, not to exceed 12 months, prior to the 
established expiration date. Written notification of such an extension, 
with the supporting reasons, must be received by the SBA Grant Officer 
at least 60 days prior to the expiration of the award. SBA reserves the 
right to disapprove the extension if the requirements set forth in OMB 
Circular A-110, paragraph .25(e)(2) are not met or if the extension is 
not in the best interests of SBA.


Sec. 119.8  Are there matching requirements for grantees?

    Applicants and grantees must match SBA funding as follows:
    (a) Except as provided in paragraph (c) of this section, applicants 
and grantees must match Federal assistance with funds from sources 
other than the Federal Government in an amount not less than 50 percent 
of the grant amount awarded each year. Sources such as fees, grants, 
gifts, income from loan sources, and in-kind resources of a grant 
recipient from non-Federal public or private sources may be used to 
comply with the matching funds requirement;
    (b) Grantees receiving funds in option years as described in 
Sec. 119.7(b) through (c) are subject to the matching requirements of 
this section.
    (c) Applicants or grantees with severe constraints on available 
sources of matching funds may request that the Administrator or 
designee reduce or eliminate the matching requirements. Any reductions 
or eliminations must not exceed 10 percent of the aggregate of all 
PRIME grant funds made available by SBA in any fiscal year. By 
requesting a waiver, the applicant is implying that, but for the 
waiver, the proposed programming will not be possible at the levels 
requested.
    (d) An applicant may request a waiver of the matching fund 
requirement by submitting a written request with its application for 
funding. The request must justify, and evidence, the need for a waiver. 
As evidence, the request must include, but is not limited to:
    (1) The cause and extent of the constraints on the historical and 
projected ability to raise matching funds as demonstrated by financial 
statements and letters of rejection from previous funders and potential 
new funding sources;
    (2) Evidence of efforts to raise match specific to the subject 
application, including negative responses, and
    (3) Based on those efforts, a list of any matching funds expected 
for the PRIME grant.
    (e) Subject to Sec. 119.12 (a) through (d), applications will be 
evaluated on merit before being matched with cost proposals. Any 
organization requesting a waiver of matching funds, therefore, will not 
be rejected solely on the basis of such a request.
    (f) Applications will be ranked, within their respective 
categories, from the most to least qualified. The best qualified 
applicants in each category will be selected whether or not a waiver is 
requested until the availability of waivers is exhausted.


Sec. 119.9  How will a qualified organization apply for PRIME grant 
awards?

    (a) SBA will issue Program Announcements specifying the terms, 
conditions, and evaluation criteria for each potential set of awards. 
Program Announcements will summarize the purpose of the available 
funds; will advise potential applicants regarding how to obtain an 
application packet; and will provide summary information regarding 
deadlines and other requirements. Program Announcements may specify any 
limitations, special rules, procedures, and restrictions for available 
funding.
    (b) Applicants may submit applications in response to the Program 
Announcements. Each applicant shall submit an application for a grant 
in accordance with this part and the applicable Program Announcement.
    (c) SBA reserves the right to consider at the same time multiple 
applications from a single applicant when appropriate.


Sec. 119.10  Will SBA give preferential consideration to other SBA 
program participants?

    In making grants under this part, SBA will not give preferential 
consideration to an applicant that is a participant in programs 
established under section 7(m) of the Small Business Act.


Sec. 119.11  What information will be requested in an application under 
the PRIME program?

    Each application must contain the information and documentation 
specified in the applicable Program Announcement including, but not 
limited to, the following items.
    (a) For applications seeking Technical Assistance Grants:
    (1) Identifying information and core documentation for the 
applicant including such items as the applicant's articles of 
incorporation, by-laws, proof of IRS tax-exempt status, financial 
statements, and reference contacts.
    (2) A description of past and present activities and technical 
qualifications of the applicant, including workshops, programs and 
other technical assistance services, with specific descriptions of the 
extent to which such services have reached low and very low-income 
individuals, and the success rates of clients.
    (3) A list of applicant's community partnerships and collaborations 
with state and local entities, and a description of how such 
partnerships and collaborations are serving microentrepreneurs.
    (4) A description of the proposed activity for which the applicant 
will use PRIME grant funds, including training programming plans; a 
plan for outreach and delivery; applicant's capacity to provide 
thorough and detailed reports; and a description of the applicant's 
current data collection and management system, such as computer 
hardware, software and internet capabilities.
    (5) In the event the applicant is a collaborative, a plan for 
maintaining internal controls, accountability, and program quality 
control among the participants of the collaborative.
    (6) Resumes of the personnel that will be administering and 
managing the proposed activities under the PRIME grant, showing 
knowledge in such areas as business development, business structures, 
financial management, and business training and counseling.
    (7) A list of grants received, and/or contracts entered into, that 
are similar in scope to the subject grant, including name of Federal or 
other agency providing funding, grant or contract number, and a summary 
of services provided.

[[Page 29016]]

    (b) For applicants seeking Capacity Building Grants:
    (1) See paragraphs (a)(1), (5), (6) and (7) of this section.
    (2) A description of past and present activities and technical 
qualifications of the applicant, including workshops, programs, 
operational services, and other technical assistance services, or 
program development services with specific descriptions of the extent 
to which such services have improved the operations of client MDOs, 
assisted client MDOs with operational issues, and assisted client MDOs 
in reaching low and very low-income individuals.
    (3) A description of the proposed activity for which the applicant 
will use PRIME grant funds, including training programming plans, a 
plan for outreach and delivery, applicant's capacity to provide 
thorough and detailed reports; a description of the applicant's current 
data collection and management system, such as computer hardware, 
software, and internet capabilities and a description of how these 
capabilities will or will not be integrated into the training of MDOs.
    (c) For applicants seeking Research and Development Grants:
    (1) See paragraphs (a)(1), (6), and (7) of this section.
    (2) A research proposal indicating the thesis, method(s), scope, 
duration, and implementation plans (if any).
    (3) A description of the expected effect of the research on 
services to disadvantaged microentrepreneurs.
    (d) For applicants seeking Discretionary Grants:
    (1) See paragraph (a)(1) of this section.
    (2) A description of the proposed activity for which the applicant 
will use PRIME grant funds, including applicant's capacity to provide 
thorough and detailed reports, and a description of the applicant's 
current data collection and management system, such as computer 
hardware, software and internet capabilities.


Sec. 119.12  What criteria will SBA use to evaluate applications for 
funding under the PRIME program?

    During the first year for which funding is available for the PRIME 
program, SBA will give special consideration to organizations located 
in and serving areas of, or with a history of successful outreach to, 
low-income and very low-income persons, to enable the PRIME program to 
assist those with the greatest need first. SBA will evaluate 
applications for funding in accordance with the specific goals of the 
Act, and as more fully described in the Program Announcements. 
Evaluation criteria include, but are not limited to, the following:
    (a) Applications for Technical Assistance Grants:
    (1) Applicants will compete based on expertise and ability to 
fulfill the purposes of the Act.
    (2) SBA will evaluate organizational structure, financial 
stability, financial management systems, personnel capacity, and 
electronic communication capabilities (or potential for same). SBA will 
also evaluate data collection capabilities, reporting capacities, and 
ability to account for performance and outcome.
    (3) SBA will evaluate the applicant's history of providing 
technical assistance to low-income and very low-income 
microentrepreneurs. This factor includes patterns of program growth, 
client success, outcomes of training, success in establishing new 
businesses, and success in arranging micro-level financing when the 
client indicates financing as a goal.
    (4) SBA will evaluate the applicant's ability to use community 
partnerships and collaborations with state and local entities to better 
serve low-income and very low-income microentrepreneurs.
    (b) Applications for Capacity Building Grants:
    (1) SBA will evaluate the criteria set forth in paragraph (a)(2) of 
this section.
    (2) SBA will evaluate the applicant's history of providing capacity 
building services to MDOs, as an indication of the organization's 
understanding of the goals and purposes of capacity building, its 
historical effectiveness with the microenterprise development industry, 
and its ability to provide quality programming to the targeted market. 
SBA will evaluate patterns of program growth, outcomes of training, 
types of services provided, delivery systems used, the number and types 
of clients served, and the successes realized within the client's 
organizational goals.
    (3) SBA will evaluate expected impact on client MDOs; expected 
impact on services to low-and very-low income microentrepreneurs; and a 
plan for service and delivery.
    (c) Applications for Research and Development Grants:
    (1) SBA will evaluate the criteria set forth in paragraph (a)(2) of 
this section.
    (2) SBA will evaluate how the research potentially will enhance 
microenterprise-oriented technical assistance services to disadvantaged 
entrepreneurs. Applicants must show the method(s), scope, duration, and 
implementation plans of the proposed research.
    (3) SBA will evaluate applicant's plan of action incorporating 
original and secondary research. Applicants must show impact on 
improved access to microenterprise development services for 
disadvantaged microentrepreneurs, and the expected replicability/
transferability of the finished product to the field.
    (d) Applications for Discretionary Grants will be evaluated based 
on the goals and the viability of the project.


Sec. 119.13  How will an applicant make a subgrant?

    (a) An applicant that wants to make subgrants using PRIME grant 
funds must receive written approval from SBA prior to making subgrants. 
The applicant must identify the subgrantee(s) and describe in detail 
what the subgrantee(s) will do to help the grantee implement its 
proposal. An applicant must submit information to SBA demonstrating 
that, through the subgrantee(s), the grantee's program will:
    (1) Provide expanded services to the community,
    (2) Provide a method by which one or more previously unserved 
communities will gain access to the program, or
    (3) Provide other specific benefits to the clients, such as 
specialized training, expanded schedules of operation, or other 
benefits.
    (b) If an applicant has identified potential subgrantee(s) at the 
time it submits an application for a PRIME grant, the applicant must 
include the information requested in paragraph (a) of this section in 
the application. Otherwise, the applicant or grantee may submit the 
requested information at such time that approvals for subgrantee(s) are 
requested.
    (c) A grantee may not use more than 7.5 percent of the assistance 
received under its PRIME grant for administrative expenses in 
connection with the making of subgrants.


Sec. 119.14  Are there limitations regarding the use of program income?

    Program income, as defined in OMB Circular A-110, may only be used 
to further PRIME program objectives. As such, fees collected from 
clients, and other program income as defined, may be used to help fund 
the matching requirement. All program income, as defined, shall be 
reported on financial reports submitted to SBA and added to funds 
committed to the project by SBA and the recipient organization. 
However, any interest earned in excess of the maximum allowable amount 
as specified in the OMB circular incorporated into the grant must be 
returned to the Federal Government by the grantee.

[[Page 29017]]

Sec. 119.15  If a grantee is unable to spend the entire amount allotted 
for a single fiscal year, can the funds be carried over to the next 
year?

    (a) The grantee may request approval to use unexpended funds in the 
next budget period. This is permissible if funds are to be used for a 
non-severable, non-recurring project or activity within the scope of 
the PRIME program. Non-severable means a project in its entirety that 
cannot be subdivided. The request for using unexpended funds in the 
next budget period must include the following:
    (1) SF 424, budget pages, and justification;
    (2) Explanation of why the funds were not expended during the 
period in which they were awarded; and
    (3) Evidence of match. The match requirement for funds carried over 
to the next budget period can be met by using any excess of matching 
funds from the current budget period, new matching funds, or a 
combination of both.
    (b) The request must be made no later than 60 days before the end 
of the budget/project period or the de-obligation process will begin. 
Approved requests will require the issuance of a revised Notice of 
Award. Expenditures for funds carried over to the next budget period 
must be tracked separately.


Sec. 119.16  What are the reporting, record keeping, and related 
requirements for grantees?

    A grantee must keep records and meet the other requirements of 
section 115 of the Riegle Community Development and Regulatory 
Improvement Act of 1994 (Riegle Act), as if it were a community 
development financial institution. (See 12 U.S.C. 4714). In addition to 
meeting requirements of the Riegle Act, a grantee must also maintain 
data allowing it to measure the impact of services provided by it and 
any subgrantees, and, if specifically required by the terms of the 
PRIME grant, measure the success rate of individual clients whom the 
grantees assist. SBA will detail such requirements in its Program 
Announcements.


Sec. 119.17  What types of oversight will SBA provide to grantees?

    (a) In addition to reports required under the Riegle Act, SBA will 
require reports in accordance with applicable OMB circulars. Such 
reports will include the following information:
    (1) For recipients of Technical Assistance and Capacity Building 
Grants, for the first two years of receiving grant funding, narrative 
performance reports and financial status reports will be required 
quarterly within 15 calendar days of the end of each quarter. 
Thereafter, grantees may request that SBA reduce the frequency of 
reports from quarterly to semi-annually. The frequency of reporting 
then will be determined at the discretion of SBA. In addition, details 
of expenditures will be required with each request for payment. 
Grantees will be required to submit audited financial statements on an 
annual basis, if available, or annual financial statements prepared by 
a licensed, independent public accountant, within 120 calendar days of 
the end of the grantee's fiscal year.
    (2) For recipients of Research and Development Grants, reports will 
be required in accordance with agreed upon milestones and as part of 
the disbursement process.
    (3) For recipients of Discretionary Grants, reports will be 
required as appropriate for the project, or on a schedule as described 
in paragraph(a)(1) of this section, whichever is more frequent.
    (b) In addition, SBA may, from time to time, make site visits to 
the grantee, and review all applicable books and records.


Sec. 119.18  What are the restrictions against lobbying?

    No assistance made available under the PRIME program may be 
expended by a grantee or subgrantee to pay any person to influence, or 
attempt to influence, any agency, elected official, officer, or 
employee of a Federal, State, or local government in connection with 
its participation in the program.


Sec. 119.19  Is fundraising an allowable expense under the PRIME 
program?

    Expenditures of grant funds for fundraising activities are not 
allowable costs under this program. Applicants must be able to raise 
matching funds without the assistance of grant funds. Unless the full 
requirement for matching funds is waived, the applicant must 
demonstrate that it has adequate fundraising resources to obtain the 
required non-Federal matching funds to perform the project.


Sec. 119.20  Should grantees and subgrantees raise conflict of interest 
matters with SBA?

    Each grantee or subgrantee must provide SBA with a copy of its 
conflicts of interest policies prior to receipt of funding under the 
program. Such policies must clearly describe the grantee's or 
subgrantee's protections from conflicts of interest or the appearance 
thereof in the handling of grant funding and program provision under 
this program.

    Dated: May 21, 2001.
John Whitmore,
Acting Administrator.
[FR Doc. 01-13230 Filed 5-25-01; 8:45 am]
BILLING CODE 8025-01-P`