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RES 2004-1316 - Agmt with Housing Authority for rental assistance program • of,tAAHA, ,e4tV r4'p RECEIVED Planning Department �r'S Omaha/Douglas Civic Center �'rAt. 1819 Farnam Street,Suite 1100 OCT 8 2 2, Omaha,Nebraska 68183-0002 po ro _ (402)444-5200 � 4� i 1 r t (402)444-5150 eTFo FEB��� , y Telefax(402)444-6140 City of Omaha Robert C.Peters Mike Fahey,Mayor Director October 19, 2004 Honorable President and Members of the City Council, The attached proposed Resolution approves an Agreement between the City of Omaha and the Housing Authority of the City of Omaha (OHA), 540 South 27th Street, Omaha, Nebraska, to provide funding for the City's Rental Assistance Program. The funding in the total amount of $532,424.00 consists of $185,522.00 in FY 2003 HOME Funds and $300,000.00 in FY 2004 HOME Funds for rental assistance payments and $46,902.00 for administration. Rental assistance payments totaling $485,522.00 shall be paid from Fund No. 12179, Organization No. 128034; and administrative funds of $46,902.00 shall be paid from General Fund No. 11111, Organization No. 109023. This Rental Assistance Program which OHA has operated successfully since 1997 serves as a valuable component of the Omaha Continuum of Care for people who have experienced homelessness. This funding will support a minimum of 60 low-income households in their efforts to achieve self-sufficiency including households from transitional programs for homeless persons and programs for persons with disabilities. Funding for rental assistance to low-income households was included in the 2003 Consolidated Submission for Community Planning and Development Programs approved November 5, 2002 by Resolution No. 2509, and the 2004 Consolidated Submission for Community Planning and Development Programs approved November 4, 2003 by Resolution No. 1328. f% Honorable President and Members of the City Council Page -2- The Contractor has on file a current Annual Contract Compliance Report Form (CC-1). The contract Compliance Ordinance requires that the Human Relations Director conduct a preaward review of the employment practices of a contractor with a City contract of$500,000.00 or more. As is City policy, the Human Relations Director will review the Contract Compliance Ordinance to ensure Contractor compliance prior to the expenditure of City funds. Your favorable consideration of this Resolution is requested. Sincerely, Referred to City Council for Consideration: Z,i.v f- 2 7-e,/ Robert C. Peters Date/ Mayor's Office Date Planning Director Approved as to Funding: Approved: `U�.n�- a►)a3 P01- fa,(2 Carol A. Ebdon Date Gail Kinsey T ompson, Director Date Finance Director 110; z3 °y Human Relations Department P:\PLN2\11281pjm.doc 4 AGREEMENT THIS AGREEMENT is entered into by and between the City of Omaha, a Municipal Corporation in Douglas County, Nebraska, and the Housing Authority of the City of Omaha, a Body Politic and Corporate (hereinafter referred to as the "Omaha Housing Authority"), a governmental entity that administers the Housing Assistance Payments Program under Section 8 of the United States Housing Act of 1937 (also known as the Section 8 Program). RECITALS: WHEREAS, the City of Omaha (hereinafter referred to as the "City") is a Municipal Corporation located in Douglas County, Nebraska, and is organized and existing under the laws of the State of Nebraska, and is authorized and empowered to exercise all powers conferred by the State Constitution, laws, Home Rule Charter of the City of Omaha, 1956, as amended, and local ordinances, including,but not limited to, the power to contract; and, WHEREAS, on February 12, 1992, the City was designated as a Participating Jurisdiction for the Home Investment Partnerships Program (HOME) by the U.S. Department of Housing and Urban Development; and, WHEREAS, on September 9, 2003, by Resolution No. 1179, the City Council approved an Agreement between the City of Omaha and the Housing Authority of the City of Omaha (OHA), which provided $937,163.50 in HOME funding comprised of$140,261.50 in FY 2001 HOME Funds, $500,000.00 in FY 2002 HOME Funds and $250,000.00 in FY 2003 HOME Funds; and $46,902.00 in General Funds for administrative costs to provide rental assistance to low-income households; and, WHEREAS, the term of that Agreement expired July 31, 2004 and was extended until October 31, 2004 by the Planning Director of the City of Omaha as allowed under Section 2.04 of that Agreement in order to utilize funds most effectively; and, WHEREAS, $185,522.00 in FY 2003 HOME Funds for rental assistance is remaining from that Agreement; and, WHEREAS, on November 4, 2003, by Resolution No. 1328 the City Council approved the 2004 Consolidated Submission for Community Planning and Development Programs which allocated $300,000.00 in FY 2004 HOME funds for the OHA to provide rental assistance to low- income households; and, WHEREAS, the OHA requests administrative funds in the amount of $46,902.00 to effectively operate a rental assistance program; and, WHEREAS, the Omaha Housing Authority possesses the administrative capability and agrees to administer the City's Rental Assistance Program; and, WHEREAS, the terms and conditions under which the Omaha Housing Authority will provide such administration have been agreed upon; and, WHEREAS, it is in the best interest of the City to enter into an Agreement with the Omaha Housing Authority for administration of the City's Rental Assistance Program for the total amount of$532,424.00. NOW, THEREFORE, IN CONSIDERATION OF THESE MUTUAL COVENANTS, the City of Omaha and the Omaha Housing Authority do hereby agree as follows: SECTION 1. DEFINITIONS AND ABBREVIATIONS 1.1 "City" shall mean - the City of Omaha. 1.2 "Director" shall mean—the Planning Director of the City of Omaha. 1.3 "Contractor" shall mean - the Housing Authority of the City of Omaha, a Body Politic and Corporate (referred to herein as the "Omaha Housing Authority"), 540 South 27th Street, Omaha,Nebraska 68105. (See Exhibit"A") 1.4 "OHA" shall mean- the Omaha Housing Authority. -2 - 1.5 "HOME" shall mean - the program conducted under the provisions of the Cranston-Gonzalez National Affordable Housing Act, Title II, Subtitle A - HOME Investment Partnerships (P.L. 101-625) and the Code of Federal Regulations 24 CFR Part 92, dated September 16, 1996, as amended, the HOME Investment Partnerships Program, Final Rule is attached hereto as Exhibit "B" and incorporated herein as though fully set forth. 1.6 "Subrecipient" shall mean - a public or private non-profit agency, authority or organization receiving HOME Funds to undertake eligible activities. In this Agreement, the subrecipient is the OHA. 1.7 "Recipient" shall mean-the City of Omaha. 1.8 "Tenant-based rental assistance" shall mean—a form of rental assistance in which the assisted tenant may move from a dwelling unit with a right to continued assistance. (24 CFR 92.2) 1.8.1 The term of the rental assistance contract may not exceed 24 months, but may be renewed, subject to the availability of HOME funds. The term of the rental assistance contract must begin on the first day of the term of the lease. For a rental assistance contract between OHA and an owner, the term of the contract must terminate on termination of the lease. For a rental assistance contract between OHA and a household, the term of the contract need not end on termination of the lease, but no payments may be made after termination of the lease until a household enters into a new lease. (24 CFR 92.209 (e)) 1.8.2 The contract between the tenant and OHA must be for not less than one year, unless by mutual agreement by the tenant and OHA. 1.9 "TBRA" shall mean—tenant-based rental assistance. 1.10 "Rental Assistance Program" shall mean—a tenant-based rental assistance project operated by the OHA under the terms of this Agreement. 1.11 "Client" shall mean — qualified very low- and low- income participants in the Rental Assistance Program. 1.11.1 "Low-Income" shall mean -- a household whose annual household income does not exceed 80 percent of the median income for the Omaha NE-IA Metropolitan Statistical Area as determined by HUD (Exhibit"C"). 1.11.2 "Very Low-Income" shall mean a household whose annual household income does not exceed 50 percent of the median income for the Omaha NE-IA Metropolitan Statistical Area as determined by HUD (Exhibit"C"). - 3 - 1.12 "Person with disabilities" shall mean — a household composed of one or more persons, at least one of whom is an adult, who has a physical, mental or emotional impairment that: 1) is expected to be of long-continued and indefinite duration; 2) substantially impedes his or her ability to live independently; and 3) is of such a nature that such ability could be improved by more suitable housing conditions. A person will also be considered to have a disability if he or she has a developmental disability, which is a severe, chronic disability. (24 CFR 92.2) 1.13 "Transitional housing"shall mean-- housing that: 1) is designed to provide housing and appropriate supportive services to persons, including (but not limited to) deinstitutionalized individuals with disabilities, homeless individuals with disabilities, and homeless households with children; and 2) has as its purpose facilitating the movement of individuals and households to independent living within a time period that is set by the project owner before occupancy (24 CFR 92.2). Assistance in transitional housing shall not exceed 24 months. 1.14 "HOME Funds" shall mean - that portion of the HOME Investment Partnerships Program Entitlement awarded to the City as may be available during program year 2004 for rental assistance payments and administrative costs as described in Section 3 of this Agreement in an amount not to exceed $485,522.00 and comprised of $185,522.00 in 2003 HOME funds and $300,000.00 in FY 2004 HOME Funds for rental assistance payments and $46,902.00 in administrative funds subject to the terms, conditions and requirements herein. Rental assistance payments totaling $485,522.00 shall be paid from Fund No. 12179, Organization No. 128034. Administrative funds of$46,902.00 shall be paid from General Fund No. 11111, Organization No. 109023. 1.15 Program Income" shall mean - the gross income received by the Recipient or Subrecipient directly generated from the use of HOME Funds (24 C.F.R. 92.503). When such income is generated by an activity that is only partially assisted with HOME Funds, the income shall be prorated to reflect the percentage of HOME Funds used. Any program income fund received during the term of this Agreement shall be returned to the City within thirty (30) days prior to any additional distribution of HOME Funds. 1.16 "Maximum TBRA" shall mean— the amount of monthly assistance paid to, or on behalf of, a household may not exceed the difference between the Fair Market Rent for the Omaha NE-IA Metropolitan Statistical Area as determined by HUD (see Exhibit"D") and 30 percent of the household's monthly adjusted income. 1.17 "Minimum tenant contribution to rent" shall mean—30 percent of the household's monthly adjusted income which may be $0.00. 1.18 "Housing Quality Standards" shall mean — Section 8 Housing Quality Standards for Existing Homes (HQS) as established by HUD. - 4 - 1.19 "Project" shall mean — tenant-based rental assistance provided to one or more households. (24 CFR 92.2) 1.20 "Project Completion" shall mean—at least 60 households on an annual basis have been enrolled in the Rental Assistance Program and the final drawdown has been disbursed for the project. SECTION 2. RESPONSIBILITIES OF THE CONTRACTOR 2.01 Overall Project Performance. The OHA shall administer the Rental Assistance Program as required in the Scope of Work summary below. The Contractor shall: 2.01.1 Within 60 days from the date of execution of this Agreement, submit a Rental Assistance Program Plan that: 2.01.1.1 Establishes written tenant selection policies with preferences that may include, but not be limited to, households that are in transitional programs for homeless persons and persons with disabilities. The tenant selection policies should also allow this Rental Assistance Program to serve households selected from the OHA Section 8 waiting list. 2.01.1.2 ' Outlines tenant selection procedures including referrals from organizations which serve people in transitional programs for homeless persons and persons with disabilities, application processing and eligibility determination. 2.01.1.2 Includes a plan to affirmatively market the availability of rental assistance to low and very low income households which details organizations to be contacted and outreach activities to potential eligible clients. 20.1.2 Insure that, to the extent that the rental assistance is targeted exclusively to individuals with preferences, at least 50% of the individuals must qualify or would qualify in the near future for one of the three Federal preferences: households that occupy substandard housing (including households that are homeless or living in a shelter for homeless persons); households that are paying more than 50 percent of their annual income for rent, or families that are involuntarily displaced. 2.01.2 Assign a staff person dedicated full-time to the operation of this Rental Assistance Program. - 5 - 2.01.3 Inspect housing units occupied by clients initially and re-inspect annually to insure the housing meets Housing Quality Standards and lead-based paint requirements. 2.01.4 Provide Rental Assistance to a minimum of 60 low-income households on an annual basis beginning within 60 days from the date of execution of this Agreement. 2.01.5 At a minimum, 90 percent of the HOME Funds disbursed for rental assistance shall be provided to households whose incomes do not exceed 60 percent of the median household income for the Omaha, Nebraska- Iowa area, as determined and made available by the U.S. Department of Housing and Urban Development, at the time of occupancy or at the time HOME Funds are invested, whichever is later; and, the remainder of the HOME Funds shall be provided to households whose incomes do not exceed 80% of the median household income at the time of occupancy or at the time HOME Funds are invested, whichever is later. 2.02 Program Budget. Rental Assistance Payments $485,522.00 Administrative Costs: Housing Specialist Salary and Benefits Allocation of OHA overhead Director of Leased Housing CFO, Accounting staff Building costs Other administrative costs Total Administrative Costs $ 46,902.00 Total Program Budget $532,424.00 2.03 Project Responsibilities. Contractor shall: 2.03.1 Submit a quarterly progress report to the City of Omaha, Director of Planning within 15 days from the end of the calendar year quarter. The progress report will delineate OHA accomplishments for the previous 90 day period on the specific activities listed in Section 2.01 herein and projected accomplishments for the following quarter. 2.03.2 Submit to the City a quarterly financial report (income statement) and request for reimbursement delineating the revenue and line item expenditures for the Rental Assistance Program. In addition, a monthly check register is to be submitted listing each expenditure by check number, payee, date, and amount. Quarterly billing shall be submitted by - 6 - OHA no later than fifteen (15) days following each quarterly reporting period. 2.03.3 Submit Household Characteristics for each household at the time that the household is enrolled into the Rental Assistance Program and update annually. This information shall be reported in a format similar to HUD- 40095 attached as Exhibit"E" and shall include: 2.03.3.1 copy of rental assistance contract, 2.03.3.2 contract end date, 2.03.3.3 tenant's last name, 2.03.3.4 number of bedrooms, 2.03.3.5 tenant contribution to rent, 2.03.3.6 subsidy amount, 2.03.3.7 total rent, 2.03.3.8 monthly gross income, 2.03.3.9 % of area median income, 2.03.3.10 race/ethnicity of head of household, 2.03.3.11 size of household, 2.03.3.12 head of household characteristic, 2.03.3.13 type of contract whether owner or tenant contract, 2.03.3.14 whether the tenant is in a HOME assisted unit. 2.03.4 Whenever it makes a determination based on household income or adjusted household income, the OHA must use the definitions of"annual income, adjusted income, monthly income, and monthly adjusted income", as those terms are defined by 24 CFR 5.609, Annual Income. (24 CFR 5.609 is attached hereto as Exhibit "F".) Income eligibility must be recertified annually. 2.03.5 Comply with all requirements of the HOME Investment Partnerships Program, Final Rule (24 CFR Part 92, dated September 16, 1996, as amended), in particular 92.209 concerning the provision of tenant-based rental assistance. (The HOME Investment Partnerships Program, Final Rule is attached hereto as Exhibit "B" and incorporated herein as though fully set forth.) 2.03.6 Contractor shall not use lead-based paint in the performance of this Agreement, including the performance of any subcontractor(42 USC 4821 et seg., 24 C.F.R. 92.355 and 24 C.F.R. Part 35). "Lead-based Paint" means any paint containing more than six one-hundredths of one (1) per centum of lead by weight (calculated as lead metal) in the total nonvolatile content of the paint, or the equivalent measure of lead in the dried film of paint already applied. The Contractor further agrees to abide by Federal requirements regarding lead-based paint poisoning prevention. - 7 - 2.03.7 The Contractor agrees to affirmatively market the availability of rental assistance to low and very low income households and submit a written Affirmative Marketing Plan to the Director. 2.03.8 Contractor shall establish procedures that ensure that potential clients are informed of the differences between this Rental Assistance Program and OHA's standard Section 8 assistance. Such procedures shall ensure that applicants who are on OHA's Section 8 waiting list and who enroll in this Rental Assistance Program remain eligible for Section 8 assistance to the same extent as before they enrolled in this Rental Assistance Program. 2.04 Term of the Agreement. This Agreement shall be in full force and effect for a period from October 1, 2004, through July 31, 2005, and may be extended by the Director for a period not to extend beyond October 31, 2005. SECTION 3. GENERAL ADMINISTRATON REQUIREMENTS OF THE CONTRACTOR 3.01 Financial Management. 3.01.1 Audits. The Contractor shall comply with all provisions and regulations of the Program and have an annual audit completed in compliance with OMB Circular A-133, attached hereto as Exhibit "G", and incorporated herein as though fully set forth. A copy of the audit shall be provided to the Director. The auditor shall determine the appropriate type of audit to be conducted; i.e., limited scope or full compliance. A single audit is not an allowable expense unless the Subrecipient expends total federal funds over $300,000.00 in each fiscal year. A limited-scope audit may be allowable provided the auditor conducts the audit in accordance with generally accepted auditing standards and the recipient expends less than $300,000.00 in each fiscal year. 3.01.3.1 Any deficiencies noted in audit reports must be fully cleared by the Contractor within 30 days after receipt of audit by the Contractor. Failure of the Contractor to comply with the above audit requirements will constitute a violation of this Agreement and may result in the withholding of future payments and may constitute a default subject to default remedies referenced herein in Section 9. 3.01.2 Reimbursement. The Contractor shall request disbursement/ reimbursement of HOME Funds only when such funds are needed for payment of eligible costs pursuant to Section 2.02 of this Agreement. The amount of such requests must be limited to the actual amount needed. - 8 - 3.02 Record Retention. The Contractor shall maintain such records and accounts, including household characteristics, property, personnel and financial records, as are deemed necessary by the City to assure a proper accounting for all expenses. The Comptroller General of the United States, or any of their duly authorized representatives, or any duly authorized representatives of the City, as approved by the Director, shall have access to any books, documents, papers, records and accounts of the Contractor, Contractor, or subcontractors which are directly pertinent to this Project for the purpose of making audit, examination, excerpts and transcriptions. Such records and accounts shall be retained for five (5) years from project completion. (See Sections 92.508 (a)(2)(v), (vi) and 92.508(a)(5) of Exhibit B attached hereto for record keeping requirements.) 3.03 Accounting Standards. The Contractor agrees to comply with the requirements of OMB Circular A-87 (attached hereto as Exhibit "H") and the following requirements of 24 CFR Part 85: Section 85.6, 85.12, 85.20, 85.22, 85.26, 85.32-85.34, 85.36, 85.44, 85.51, and 85.52 and agrees to adhere to the accounting principles and procedures required therein, utilize adequate internal controls, and maintain necessary source documentation for all costs incurred. 3.04 Personnel and Participant Conditions. 3.04.1 Contract Compliance Clause. 3.04.1.1 Section 10-192 of the Omaha Municipal Code, Equal Employment Opportunity Clause. The Contractor or its subcontractors shall not discriminate against any employee or applicant for employment because of race, religion, color, sex, age, national origin, familial or handicap status. As used herein, the word "treated" shall mean and include, without limitation, the following: recruited, whether by advertising or by other means; compensated; selected for training, including apprenticeship; promoted; upgraded; demoted; downgraded; transferred; laid off; and terminated. The Contractor or its subcontractors agree to and shall post in conspicuous places, available to employees and applicants for employment, notices to be provided by the contracting officers setting forth the provisions of this nondiscrimination clause. 3.04.1.2 The Contractor or its subcontractors shall, in all solicitations or advertisements for employees placed by or on behalf of the contractor, state that all qualified applicants will receive consideration for employment without regard to race, religion, color, sex, age, national origin, familial or handicap status. - 9 - 3.04.1.3 The Contractor or its subcontractors shall send to each representative of workers with which he has a collective bargaining agreement or other contract or understanding a notice advising the labor union or workers' representative of the contractor's commitments under the equal employment opportunity clause of the city and shall post copies of the notice in conspicuous places available to employees and applicants for employment. 3.04.1.4 The Contractor or its subcontractors shall furnish to the Human Relations Director all federal forms containing the information and reports required by the federal government for federal contracts under federal rules and regulations, including the information required by sections 10-192 to 10- 194, inclusive, of the Omaha Municipal Code and shall permit reasonable access to his records. Records accessible to the Human Relations Director shall be those which related to paragraphs 3.04.1.1 through 3.04.1.7 of this subsection and only after reasonable notice is given the contractor. The purpose of this provision is to provide for investigation to ascertain compliance with the program provided herein. 3.04.1.5 The Contractor or its subcontractors shall take such actions with respect to any subcontractor as the City may direct as a means of enforcing the provisions of paragraphs 3.04.1.1 through 3.04.1.7 herein, including penalties and sanctions for noncompliance; however, in the event the contractor becomes involved in or is threatened with litigation as the result of such directions by the City, the City will enter into such litigation as is necessary to protect the interests of the City and to effectuate the provisions of this division, and, in the case of contracts receiving federal assistance, the contractor or the City may request the United States to enter into such litigation to protect the interests of the United States. 3.04.1.6 The Contractor or its subcontractors shall file and shall cause his subcontractors, if any, to file compliance reports with the Contractor in the same form and to the extent as required by the federal government for federal contracts under federal rules and regulations. Such compliance reports shall be filed with the City's Human Relations Director. Compliance reports filed at such times as directed shall contain information as to the employment practices, policies, programs and statistics of the Contractor, and it's subcontractors. - 10 - 3.04.1.7 The Contractor or its subcontractors shall include the provisions of paragraphs 3.04.1.1 through 3.04.1.7 of this section, "Equal Employment Opportunity Clause," and Section 10-193 in every contract, subcontract or purchase order so that such provisions will be binding upon each subcontractor or vendor. (Code 190, Section 10-192; Ord. No. 35344, Sections 1, 9-26-00, Executive Order 11246). (Exhibit"I") 3.04.2 Workers' Compensation. The Contractor shall provide Workers' Compensation Insurance coverage for all employees involved in the performance in this Agreement. 3.04.3 Employment Insurance and Bonding. The Contractor shall purchase a blanket fidelity bond covering all employees, at a minimum, in an amount equal to cash advances from the City. The Contractor shall comply with bonding and insurance requirements of OMB Circular A- 122, Bonding and Insurance(attached hereto as Exhibit"I"). 3.04.4 Section 3 — Employment of Low-Income Persons (Section 3 of HUD Act of 68, as amended, 1 U.S.C. 1701u). The Contractor shall make its best efforts to comply with Section 3. The purpose of Section 3 is to ensure that employment and other economic opportunities generated by HUD assistance or HUD-assisted projects covered by Section 3 shall, to the greatest extent feasible, be directed to low and very low-income persons, particularly persons who are recipients of HUD assistance for housing. 3.04.5 Conflict of Interest. The Contractor agrees to abide by the provisions of 24 C.F.R. 92.356 with respect to conflicts of interest, and covenants that it presently has financial interest and shall not acquire any financial interest, direct or indirect, which would conflict in any manner or degree with the performance of services required under this Agreement. The Contractor further covenants that in the performance of this Agreement no person having such a financial interest shall be employed or retained by the Contractor hereunder. These conflict of interest provisions apply to any person who is an employee, agent, consultant, officer or elected official or appointed official of the City or any designated public agencies or subrecipients which are receiving funds under the CDBG entitlement program. SECTION 4. RESPONSIBILITIES OF THE CITY 4.01 Performance Monitoring. The City shall monitor the performance standards of the OHA as stated in Section 2. Substandard Performance as determined by the City will constitute non- - 11 - compliance with this Agreement. If action to correct such substandard performance is not taken by the OHA within a reasonable period of time after being notified by the City, contract suspension or termination procedures may be initiated. 4.02 Payments. 4.02.1 It is expressly agreed and understood that the total amount to be paid by the City under this Agreement shall not exceed $532,424.00, comprised of $485,522.00 in HOME Funds and $46,902.00 in General Funds. The Payment of these funds is subject to and conditioned upon actual receipt by the City of the same. Should adequate funding not be available to the City, the City shall notify the OHA as soon as reasonably possible and the Agreement will be terminated. 4.02.2 City agrees to reimburse the OHA the actual amount of Rental Assistance Payments disbursed by the OHA to eligible households in an amount not to exceed $485,522.00 from the HOME Program Entitlement grant and administrative costs in an amount not to exceed $46,902.00 from General Funds during the term of this Agreement. Reimbursement shall be on a monthly basis for the budget line item expenditures shown in Section 2.02. Payments shall be made for quarterly requests for payment and shall be reimbursements for actual expenditures. SECTION 5. MUTUAL AGREEMENTS BETWEEN CITY AND CONTRACTOR 5.01 Release of Information Laws. The Contractor specifically hereby states, agrees and certifies that it is familiar with the limited purpose set forth in the Federal Laws, Rules and Regulations, and in the laws of the State of Nebraska, for which personal information requested may be used, and that the information received will be used solely for those limited purposes and not to harass, degrade, or humiliate any person. The information released shall be used for the limited purposes stated and the Contractor further agrees to indemnify and hold harmless the City of Omaha for any liability arising out of the improper use by the Contractor of the information provided. 5.02 Captions. Captions used in this Agreement are for convenience and are not used in the construction of this Agreement. 5.03 Applicable Laws. Parties to this Agreement shall conform with all existing and applicable City ordinances, resolutions, state laws, federal laws, and all existing and applicable rules and regulations. Nebraska law will govern the terms and the performance under this Agreement. 5.04 Interest of the City. Pursuant to Section 8.05 of the Home Rule Charter, no elected official or any officer or employee of the City shall have a financial interest, direct or indirect, in any City Agreement. Any violation of this section - 12 - with the knowledge of the person or corporation contracting with the City shall render the Agreement voidable by the Mayor or Council. 5.05 Merger. This Agreement shall not be merged into any other oral or written agreement, lease, or deed of any type. 5.06 Modification. This Agreement contains the entire agreement of the parties. No representations were made or relied upon by either party other than those that are expressly set forth herein. No agent, employee or other representative of either party is empowered to alter any of the terms herein unless done in writing and signed by an authorized officer of the respective parties, pursuant to Section 10- 142 of the Omaha Municipal Code. 5.07 Assignment. The Contractor may not assign its rights under this Agreement without the express prior written consent of the City. 5.08 Strict Compliance. All provisions of this Agreement and each and every document that shall be attached shall be strictly complied with as written, and no substitution or change shall be made except upon written direction from authorized representatives of the parties, pursuant to Section 10-142 of the Omaha Municipal Code. 5.09 Termination. This Agreement may be suspended or terminated in accordance with 24 CFR 85.43, Enforcement or 24 CFR 85.44, Termination for Convenience (Exhibit "K"). If through any cause, the Contractor shall fail to fulfill in a timely and proper manner any obligations under this Agreement, or violate any of the covenants, representations or agreements hereof, the City may upon written notice terminate this Agreement or such parts thereof as to this Agreement, and may hold the Contractor liable for any damages caused to the City by reason of such default and termination. Upon termination of this Agreement, all funds and interest in any account hereunder shall become the property of the City and shall be returned to the City. 5.10 Reversion of Assets. Upon the expiration of this Agreement the Contractor shall transfer to the City of Omaha any HOME Funds on hand at the time of expiration and any accounts receivable attributable to the use of HOME Funds. 5.11 Indemnification. The Contractor shall indemnify and hold the City harmless from and against: (1) any and all claims arising from contracts between the Contractor and third parties made to effectuate the purposes of this Agreement; and, (2) any and all claims, liabilities or damages arising from the preparation or presentation of any of the work covered by this Agreement. 5.12 Unenforceable Provisions. Any provision of this Agreement, which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition of enforceability without invalidating the remaining - 13 - provisions hereof or affecting the validity or enforceability of such provision in any other jurisdiction. 5.13 Disclosure of Lobbying. The OHA shall certify and disclose, to the best of its knowledge and belief, that: (a) No Federal appropriated funds have been paid or will be paid, by or on behalf of the OHA, to any person for influencing or attempting to influence an officer or employee of Congress , or an employee of a Member of Congress in connection with the awarding of any Federal contract, the making of any Federal grant, the making of any Federal loan, the entering into of any cooperative agreement, and the extension, continuation, renewal, amendment or modification of any Federal contract, grant, loan, or cooperative agreement. (b) If any funds other than Federal appropriated funds have been paid or will be paid to any person for influencing or attempting to influence an officer or employee of any agency, a Member of Congress, an officer or employee of Congress, or an employee of a Member of Congress in connection with this Federal contract, grant, loan, or cooperative agreement, the OHA shall complete and submit Standard Form-LLL, "Disclosure Form to Report Lobbying", in accordance with its instructions. (c) The language of this certification be included in the award documents for all subawards at all tiers (including subcontracts, subgrants, and contracts under grants, loans, and cooperative agreements) and that all subrecipients shall certify and disclose accordingly. 5.14 Notices. The City and Contractor hereby expressly agree that for purposes of notice, including legal service of process, during the term of this Agreement and for the period of any applicable statute or limitations thereafter, the following named individuals shall be authorized representatives of the parties: 1) City of Omaha 2) Housing Authority of the City of Omaha Director Executive Director Planning Department 540 South 27th Street Omaha Douglas Civic Center Omaha,Nebraska 68105 1819 Farnam Street, 11th Floor Omaha, Nebraska 68183 - 14 - IN WITNESS WHEREOF, the parties have executed this Agreement as of the date indicated below:. , 1 - . ATTEST: - CITY OF OMAHA: a9d-a; am-J D E P UT Y CITY CLERK OF T CIz YOF.OMAHA DATE MAYOR OF THE CI OF OMAHA ATE • 'IUSING AUTHORITY OF T ITY OF 1 AHA, a Body or c d Co to NESS w i :RAD ASH ORD DATE EXECUTIVE DIRECT APPR ED AS TO FORM: ASSISTANT CITY ATTORNEY DATE P:\PLN2\11252pjm.doc - 15 - SCHEDULE OF EXHIBITS Exhibit A 1.3 Board Resolution B 1.5, 2.03.5 24 CFR Part 92, HOME Investment Partnerships Program,Final Rule C 1.11.1, 1.11.2 Median Family Income Chart D 1.16 Fair Market Rents E 2.03.3 Household Characteristics form F 2.03.4 24 CFR 5.609 Annual Income G 3.01.1 OMB Circular A-133 H 3.03 OMB Circular A87 I 3.04.1.7 Equal Employment Opportunity J 3.04.3 OMB Circular A-122 K 5.09 Termination P:\PLN2\11252pjm.doc - 16 - RESOLUTION NO. 2004-90 APPROVAL OF CONTRACT WITH CITY OF OMAHA RELATING TO THE HOME INVESTMENT PARTNERSHIPS PROGRAM WHEREAS, the Housing Authority of the City of Omaha(OHA)participates in the Home Investment Partnerships Program(HOME)with the City of Omaha; and WHEREAS, the City Council of the City of Omaha has previously provided funding for the HOME program, which funding provided rental assistance to low-income households; and WHEREAS, OHA has administered the HOME rental assistance program; and WHEREAS, the HOME program has a carryover of existing funds previously awarded from the 2002 and 2003 allocations in the amount of$193,204 and the City Consolidated Plan for Housing and Community Development has authorized an additional $300,000 from the 2004 allocation to OHA to continue the Transitional Rental Assistance Program; and WHEREAS, the Transitional Rental Assistance Program differs from the Section 8 Housing Choice Voucher program, having a separate waiting list, guidelines and criteria; and WHEREAS, OHA desires to continue administering the HOME program and make use of the funding provided by the City of Omaha. NOW, THEREFORE, BE IT RESOLVED that the Board of Commissioners of the Housing Authority of the City of Omaha approve the contract between the City of Omaha and the Housing Authority of the City of Omaha relating to funding and administration of the HOME program and that the Executive Director be authorized to execute same. This resolution shall take effectively immediat ly. 6/14Ad Frank Brown, Chairman OHA Board of Directors 09/23/04 t IINIM INN Wednesday EX k 110 ;* 8 September 15, 1999 IM▪MEIMMIM MO,In IIIMMINIMININIMWM NMI SE /1111 "NM E �• 1 In�� Mk i S OR IIMMINIMP INIMINNIOF BM v �� _ o �- ~o o ml MOM ON MI i M MM. INN MEM mil p / ���� milliMi C �� AminmEll 'Mon �- MI In •INE/1/1=Mil In▪ ilil MS s m▪i In In Min NI Min IN Iiiilimlinini Part II g 2 Department. of ME al Housing anal. Urban Mr In MR MIL Win▪n MiniiiiiiMin Development Ma 24 CFR Part 35, et al.. Requirements for Notification, Evaluation mimilimimi Moon and Reduction of Lead-Based Paint Hazards in Federally Owned Residential Imin in AMR Property and Housing Receiving Federal Assistance; Final Rule z /0=111MINO In Alignii Ilia imam/Nem Ida 1111,11, 'n A .. 50140 Federal Register/Vol. 64, No. 178/Wednesday, September 15, 1999/Rules and Regulations DEPARTMENT OF HOUSING AND Information Relay Service at 1-800- 5.Distinction Between HUD Programs and URBAN DEVELOPMENT 877-8339. Those of Other Federal Agencies SUPPLEMENTARY INFORMATION: 6.Response to Children With Lead Poisoning 24 CFR Parts 35, 91,92,200,203,206, 7.Fair Housing Requirements 280,291, 570,572,573, 574ti 576, Table of Contents 8.Qualification Requirements 582,583,585,761,881,882,883,886, I.Background • E.Paint Stabilization vs.Paint Repair � E. Subparts 891,901,906,941,965,968,970,982, A.Lead Poisoning 1.Subpart A—Disclosure of Known Lead- 983,1000, 1003,and 1005 B.Legislative and Regulatory History Based Paint Hazards Upon Sale or Lease C.HUD Reinvention of Residential Property [Docket No.FR-'3482-F-06] D.Public Input on Rulemaking 2.Subpart B—General Lead-Based Paint 1.HUD Guidelines Requirements and Definitions for All RIN 2501-AB57 2.Title X Task Force Programs 3.Meetings with HUD Clients a.Definitions Requirements for Notification, 4.Comments on Proposed Rule b.Exemptions Evaluation and Reduction of Lead- E.Related Actions by EPA and HUD c.Options Based Paint Hazards in Federally 1.Disclosure Rule d.Notice of Evaluation and Hazard Owned Residential Property and 2.EPA Certification Requirements and Work Reduction Activities Housing Receiving Federal Assistance Practices Standards e.Lead Hazard Information Pamphlet 3.EPA Standards for Hazardous Levels of f. Use of Paint Containing Lead AGENCY: Office of the Secretary-Office of Lead in Paint.Dust and Soil g.Prohibited Methods of Paint Removal Lead Hazard Control,HUD. 4.EPA Laboratory Accreditation Program h.Compliance With Other,State,Tribal, ACTION: Final rule. 5.Possible EPA Regulations on Renovation and Local Laws and Remodeling I.Minimum Requirements SUMMARY:The purpose of this rule is to II.Summary of Public Comments on j Waivers ensure that housing receiving Federal Proposed Rule 1. nfor Evaluation or Hazard Reduction assistance and federallyowned housingDiversity 1.Enforcement A. of Comments m.Records that is to be sold does not pose lead- B.Commenters'Broad Concerns 3.Subpart C—Disposition of Residential based paint hazards to young children. 1."Missed Opportunities" . Property Owned by a Federal Agency It implements sections 1012 and 1013 of 2.Cost of Compliance Other Than HUD the Residential Lead-Based Paint Hazard 3.Legality of Portions of the Rule 4:Subpart D—Project-Based Assistance Reduction Act of 1992,which is Title X 4.Perceived HUD Overreaching Provided by a Federal Agency Other of the Housing and Community III.Response to Public Comments and Than HUD 5.Subpart E—Reserved Development Act of 1992.The Final Rule Provisions 6.Subpart F—HUD-Owned Single Family requirements of this rule are based on A.Scope and Applicability Property the practical experience of cities, states 1.Housing Receiving Less Than$5,000 in 7.Subpart G-Multifamily Mortgage and others who have been controlling Project-Based Rental Assistance Insurance lead-based paint hazards in low-income 2.Tenant-Based Rental Assistance 8.Subpart H—Project-Based Rental privately-owned housing and public,. 3.Federally Owned Housing and the Assistance housing through HUD assistance.It also Availability of Appt'opriations 9.Subpart I—HUD-Owned and Mortgagee-in- reflects the results of new scientific and 4.Soil and Dust Standards Possession Multifamily Property technological research and innovation a.Legal Issues 10.Subpart.)—Rehabilitation on the sources,effects, costs, and b.Coordination With EPA Rulemaking 11.Subpart K—Acquisition,Leasing,Support 5.Exemptions Services,or Operation e p methods of evaluating and controlling a.Housing for the Elderly 12.Subpart L—Public Housing Programs lead hazards.With today's action, b.Absence of Lead-Based Paint or Prior 13.Subpart M—Tenant-Based Rental HUD's lead-based paint requirements Hazard Reduction Assistance for all Federal programs are now c.Housing To Be Demolished: • 14.Subparts N-Q—Reserved consolidated in one part of title 24 of d.Nonresidential Property 15.Subpart R—Methods and Standards for the Code of Federal Regulations. e.Rehabilitation Disturbing Little or No , Lead-Based Paint Hazard Evaluation and DATES: Effective Dates:Section 35.140 is Painted Surface Reduction Activities effective on-on November 15, 1999.All f.Emergency Actions and Natural Disasters a.Standards otherprovisions of the rule arc effective g.Law Enforcement Seized Property b.Adequacy of Dust-Lead Standards h.Emergency Rental and Foreclosure c.Summary Notice Formats on September 15, 2000. Prevention Assistance d.Interim Controls FOR FURTHER INFORMATION CONTACT:For i.Adverse Weather e.Standard Treatments questions on this rule,call (202) 755- j.Historic Properties I f.Clearance 1785,ext. 104 (this is not a toll-free k.Insufficient Appropriations g.Occupant Protection and Worksite number) or e-mail your to 6.Deference to Other Agencies Preparation number) or a io ail your inquiry For lead- 7.Changes and Deletions to Current HUD h.Safe Work Practices lead_ Regulations i.Ongoing Lead-Based Paint Maintenance based paint program information, 8.Indian Housing Programs 4 and Reevaluation contact Steve Weitz, Office.of Lead 9.Applicability of Subparts to Programs and IV.Deletions of Current Regulations Hazard Control, Department of Housing Dwelling Units and Urban Development,451 7th Street, B.Structure of the Rule V.Additional Public Comment SW,Room B-133,Washington,DC 1.Organization VI.Regulatory Assessment 20410-0500. For legal questions, contact 2.Simplicity and Overall Strategy g" ry John B. Shumway, Office of General 3.Prescriptiveness A.Economic Analysis C.Effective Date 1.Summary and Methodology of Cost-Benefit Counsel,Room 9262,Department of D. Other General Issues Analysis Housing and Urban Development. 1.Policy on Abatement 2.Regulatory Costs Hearing and speech-impaired persons 2.Cost of Compliance 3.Monetized Benefits may access the above telephone number 3.Use of Task Force Recommendations 4.Monetized Net Benefits via TTY by calling the toll-free Federal 4.De Minimis Exceptions 5.Data Sources ` 1 ey Federal Register/Vol. 64, No. 178/Wednesday, September 15, 1999/Rules and Regulations 50141 6.Public Comments HUD estimates that over 60 million 101-550; 42 U.S.C. 4851 et seq.). which B.Paperwork Reporting Act Statement occupied homes, or approximately 80 hereafter is referred to as "Title X" C.Regulatory Flexibility Act—Final percent of all homes built before 1980, because it is Title X of the Housing and Regulatory Flexibility Analysis have some lead-based paint.Many of Community Development Act of 1992. 1.Need For and Objectives of the Final Rule those 60 million homes have only small redefines the concept of"lead-based 2.Public Comments amounts of such paint, however; paint hazards."Under prior Federal b. pima vs. Not OperatingAde Costsoe generally,the older the home, the legislation, a lead-based paint hazard b.CapitalssWill a g Y c.Costs Be Higher Than HUD greater the amount of lead-based paint. was defined as any paint greater than or Assumes The use of lead in paint was highest in equal to one milligram of lead per d.There Will Be a Significant Impact housing built before 1960. It was square centimeter (mg/cm2), regardless e.Owners Whose Entire Portfolio Is completely banned for residential use in of its condition or location.Title X Affected May Be Impacted Especially 197E by the Consumer Product Safety states that a lead-based paint hazard is Hard Commission. "any condition that causes exposure to 3.Impact on Small Entities Higher childhood blood lead levels lead from lead-contaminated dust, lead- a.Number of Small Entities Affected by the g Rule are associated with lower household contaminated soil or lead-contaminated b.Economic Impact income, residence in large urban areas, paint that is deteriorated or present in 4.Final Rule Requirements non-Hispanic African American race, 'chewable surfaces, friction surfaces,or a.Lead Hazard Information Pamphlet and living in older homes. Recent data impact surfaces that would result in b. Resident Notice from the period 1991-1994 indicate that adverse human health effects."Thus, c.Evaluation over 16 percent of young children of under this definition, intact lead-based d.Hazard Reduction Activities less than 6 years of age from low income paint on most surfaces is not considered e.Ongoing Lead-Based Paint Maintenance families had blood levels above the level a"hazard," although the condition of and Reevaluation of concern set by the Centers for Disease the paint should be monitored and Blood Responsed To a Child With an Elevated d Lead Level Control and Prevention (CDC), maintained to ensure that it does not g.Record Keeping compared with only one percent for become deteriorated. 5.Description of Alternatives and young children from high income Title X defines two methods of Minimization of Economic Impact families. Over 8 percent of all young "evaluating" lead-based paint hazards a.Effective Date children living in housing built before or lead-based paint. One method. "risk b.Stringency of Requirements in Relation 1946 had blood lead levels over the CDC assessment," includes dust wipe to Amount of Federal Assistance and • level of concern compared to only 1.6 sampling and other environmental Nature of Program percent for those living in housing built sampling to identify lead based paint d.c.De Qualifications Minimis Area of Deteriorated Paint. ifications after 1973. Over 11 percent of non- hazards.The other, "inspection" (or e.Options to Provide Greater Flexibility Hispanic African American children "lead-based paint inspection"), f.Avoidance of Duplication were above the CDC level of concern determines the presence only of lead- VII.Findings and Certifications compared to 2.3 percent for non- based paint. Evaluation may also be Hispanic white children.Twenty-two accomplished by a combination of the A. Unfunded Mandates Reform Act percent of non-Hispanic African two methods. The combination B.Environmental Impact American children living in pre 1946 approach results in an identification of Planningve and Review housing Executive Order 12866.Regulatory were over the CDC level of all lead-based paint and lead-based paint hazards.Title X provides for three D.Executive Order 12612,Federalism concern. E.Executive Order 13045.Protection of Childhood lead poisoning is"the types of lead-based paint"hazard Children From Environmental Health most common environmental disease of reduction":Interim controls, abatement Risks and Safety Risks young children," (CDC 1990) eclipsing of lead-based paint hazards, and F. Congressional Review of Major Final Rules all other environmental health hazards complete abatement of all lead-based VIII.References found in the residential environment paint.Interim controls are"measures (ATSDR 1988). Lead is highly toxic and designed to reduce temporarily human IX.List of Subjects affects virtually every system of the exposure or likely exposure to lead- I.Background body.At high exposure levels, lead based paint hazards.' Abatement means poisoning can cause coma,convulsions. "a set of measures designed to A. Lead Poisoning and death.While adults can suffer from permanently eliminate lead-based paint Childhood lead poisoning causes excessive lead exposures.the groups hazards" or lead-based paint.To ensure reduced intelligence,low attention most at risk are fetuses,infants, and that evaluation and hazard reduction are span, reading and learning disabilities, children under age 6.At low levels, the carried out safely and effectively,Title and has been linked to juvenile neurotoxic effects of lead have the X authorizes new requirements for delinquency, behavioral problems, and greatest impact on children's developing consistency and quality control. many other adverse health effects. Over brains and nervous systems,causing B. Legislative and Regulatory History the past 20 years,the removal of lead reductions in IQ and attention span, The lead based paint from gasoline, food canning and other reading and learning disabilities, existing • sources has been successful in reducing hyperactivity, and behavioral problems. regulations pertaining to the population blood lead levels by over$0 These effects have been identified in D Department's es rr dentia is, as well as to al property all percent. Nearly 1 million children, many carefully controlled research Y owned however,still have excessive levels of studies(National Academy of Sciences the time of sale,were written pursuant lead in their blood,making lead 1993;HUD 1997).The vast majority of to othe passage of then e ea d Bo sed1P i t poisoning a major childhood childhood lead-poisoning cases, g environmental disease (See CDC 1997a). however,go undiagnosed and untreated, amended prior to 1992 (42 U.S.C. 4821 Lead-based paint in housing is the major since most poisoned children have no et seq.).This legislation required.the remaining source of exposure and is obvious symptoms. Secretary to "establish procedures to responsible for most cases of childhood The Residential Lead-Based Paint eliminate as far as practicable the lead poisoning today. Hazard Reduction Act of 1992 (Pub. L. hazards of lead-based paint poisoning 50142 Federal Register/Vol. 64, No. 178/Wednesday, September 15, 1999/Rules and Regulations µ with respect to any existing housing hazard evaluation, decisions about reduction measures with the statutory which may present such hazards and hazard reduction activities will be more requirements of Title X as well as with which is covered by an application for fully informed, and available resources HUD's duty to protect children living in mortgage insurance or housing will be better targeted to reduce a residential property that is owned or assistance payments under a program exposure to occupants and to the assisted by the Federal government. administered by the Secretary." HUD environment. D. Public Input on Rulemaking interpreted the phrase"housing assistance payments" broadly and C..HUD Reinvention Consistent with Executive Order therefore in 1976 drafted regulations to The Department has launched a major 12866, Regulatory Planning arid Review, eliminate the hazards of lead-based restructuring to meet the changing and with Executive Order 13045 on paint for virtually all of its programs. housing and development needs of --Protection of Children From Part 35 of the Department's regulations communities across the country.The Environmental Health Risks and Safety in title 24 of the Code of Federal restructuring includes program Risks, HUD has increased public Regulations was promulgated setting consolidation, organizational changes participation in the regulatory forth general procedures for the within the Department, and relocation development process,with attention to inspection and treatment of defective of some cross-cutting functions outside the special needs of children. Because of paint surfaces in HUD-associated of Washington,D.C. HUD's reinvention the magnitude of the changes required housing.The regulation at 24 CFR efforts are taking place in the context of in HUD's lead-based paint regulations 35.5(c), however, gave each Assistant a broader, government-wide reinvention and the potential impact of these Secretary the authority to develop, process,the National Performance changes, public involvement was regulations pertaining to their specific Review, initiated by President Clinton crucial to the rulemaking process.The areas of responsibility, and varying and Vice President Gore.The goal of the three main avenues for public program regulations concerning lead- reinvention is to give State,tribal and involvement in the development of the based paint now exist throughout title local decisionmakers maximum proposed rule were the HUD Guidelines 24. flexibility to tailor Federal resources in for the Evaluation and Control of Lead- The Department's lead-based paint response to local circumstances,needs Based Paint Hazards in Housing (June regulations have been amended from and priorities. 1995) (HUD Guidelines),the time to time in response to changes in In order to keep pace with the recommendations from the Task Force the law, court orders and increased changes HUD is undertaking, the on Lead-Based Paint Hazard Reduction knowledge about the hazards and Department's program regulations must and Financing (Task Force), and three treatment of lead-based paint.The most also change.Although this lead-based major meetings of HUD clients to seek recent Department-wide regulatory paint rule was developed to implement input on the implementation of Title X. revisions pertaining to lead-based paint the statutory requirements of Title X for In addition to these three methods of were made in 1986", 1987 and 1988. federally owned residential property public involvement,there was, of Some additional revisions specific to and housing receiving Federal course, the opportunity for public the public and Indian housing programs assistance, the Department saw this as comment on the proposed rule. were issued in 1991,and important . an opportunity to revise all of its lead- 1.HUD Guidelines.The HUD changes were made in 1995 to the based paint regulations to keep pace Guidelines were mandated by section Housing Quality Standards (HQS) that with changes in the scientific 1017 of Title X.They were developed by apply to Section 8 tenant-based rental understanding of how childhood lead housing, public health and assistance and certain other HUD poisoning occurs,lead based paint environmental professionals with broad programs. technology and in HUD service delivery. experience in lead-based paint hazard Title X represents a new and The rule consolidates numerous lead- identification and control.The HUD sweeping approach to the problem of based paint regulations found Guidelines form the basis for many of lead-based paint poisoning of children, throughout HUD's program regulations the lead-based paint evaluation and necessitating a comprehensive revision into part 35 of title 24 of the Code of reduction methods described in subpart of HUD's lead-based paint regulations, Federal Regulations.This eliminates R, and are intended to help property Title X amends what had previously redundant lead-based paint regulations owners, government agencies and been general language contained in the and achieves consistency among the private contractors sharply reduce Lead-Based Paint Poisoning Prevention lead-based paint requirements for children's exposure to lead-based paint Act and sets out specific requirements different HUD programs. Before this hazards,without adding unnecessarily for federally owned residential property ' rule, many HUD clients received to the cost of housing. and housing receiving Federal funding froth several HUD programs 2. Title X Task Force.The Task Force assistance.Title X stresses identification with separate and sometimes on Lead-Based Paint Hazard Reduction of hazards,notification to occupants of inconsistent sets of program regulations. and Financing(Task Force) was the existence of these hazards,and This rule groups HUD programs by mandated by section 1015 of Title X. control of those hazards.This final rule the type of assistance provided to make The Task Force submitted its report also reflects current knowledge of the it easier to understand and implement with recommendations, Putting the causes of lead poisoning and current For instance,a client receiving HUD Pieces Together: Controlling Lead lead-based paint hazard evaluation and funds for rehabilitation will find only Hazards in the Nation's Housing, to reduction technologies and practices. one rehabilitation subpart.In addition, then-HUD Secretary Henry Cisneros and The presence of lead-based paint will be grouping HUD programs by type of EPA Administrator Carol Browner in more accurately identified,with fewer assistance allows greater flexibility for July 1995.Members of the Task Force false negatives or false positives. local governments and recipients of included representatives from Federal Likewise, the existence, nature,severity HUD funds. agencies,the Federal Home Loan and location of lead-based paint hazards Finally,the rule reflects HUD's efforts Mortgage Corporation, the Federal (in dust,soil and deteriorated paint) to balance the practical need for cost- National Mortgage Association,the will be more accurately identified and effective,affordable lead-based paint building and construction industry, reported. By improving lead-based paint hazard notification, evaluation and landlords,tenants, primary lending Federal Register/Vol. 64, No. 178/Wednesday, September 15, 1999/Rules and Regulations 50143 institutions, private mortgage insurers, assisted programs involving housing. authority,the two agencies published a single family and multifamily real estate Groups representing the housing and final rule on March 6, 1996,which interests, nonprofit housing developers, community development industry, or became effective on September 6, 1996 property liability insurers, public segments of it, accounted for an for owners of more than four dwelling housing agencies, low-income housing additional nine comments. units and on December 6, 1996 for advocacy organizations, lead-poisoning Fourteen Federal agencies submitted owners of four or fewer dwelling units. prevention advocates and community- comments on the rule, including 11 The rule requires that,before based organizations serving agencies affected by it as potential completing the transaction,sellers and communities at high-risk for childhood regulated entities, and three others with lessors of applicable housing must: (1) lead poisoning.The mandate of the Task their own regulatory role in some aspect Provide purchasers and lessees (tenants) Force was to address sensitive issues of health and safety regulations with the lead hazard information related to lead-based paint hazards in associated with lead poisoning. Four pamphlet approved by EPA; (2) disclose private housing, including standards of comments were received from hospitals, all known information about the evaluation and control, financing, and physicians or health agencies other than presence of lead-based paint or lead- liability and insurance for rental those included in the count of State or based paint hazards; (3) provide property owners and hazard control local agencies, above. Four lead purchasers and lessees with any 1 contractors. Methods found in this rule poisoning prevention advocacy groups available records or reports pertaining to for ongoing lead-based paint submitted comments, along with three the presence of lead-based paint or lead- maintenance and the option for more broadly based environmental based paint hazards; (4) include, as an I standard treatments are drawn from the groups and five law firms or legal aid attachment to the contract or lease, Task Force recommendations.Further organizations. certain disclosure and discussion of ways the Department used Housing developers, or acknowledgement language and a the Task Force recommendations in representatives of developers, accounted warning statement about the dangers of developing this rule is provided below for five comments.Eight others were lead-based paint; and (5) include certain under"Other General Issues." received from persons identifying disclosure and acknowledgment 3.Meetings with HUD Clients.Prior to themselves as consultants or experts on language in the contract or lease.In the development of the proposed rule, some aspect of the rule,or individuals addition,sellers must allow purchasers the Department held three meetings who did not explain the basis of their a ten-day opportunity to inspect the with HUD clients on the potential interest in the rule. In addition,two dwelling for lead-based paint or lead- implications of Title X on HUD comments were received from based paint hazards.Purchasers and programs.The meetings involved HUD standards-setting entities, and one each sellers are free to negotiate another constituents,grantees, and field staff of from a bank, a secondary mortgage mutually-agreeable time period and all the Offices of Public and Indian market organization, a coalition of other aspects of the inspection or risk Housing (PIH), Community Planning tenant action groups, a child welfare assessment. Agents must ensure and Development (CPD), and Housing, group,and an advocacy group compliance with these requirements. as well as advocacy and tenant representing industries that •Section 1018 does not require either the representatives.Participants shared manufacture or use lead. buyer or the-seller to conduct an their thoughts on several Title X issues Comments are summarized below in inspection, nor does it require either the including: Risk assessment and interim Section II of this preamble and buyer or the seller to take action to controls, hazard reduction activities described in more detail in Section III reduce any lead-based paint or lead- during the course of rehabilitation, of this preamble. based paint hazards.Also, with lease occupant notice of evaluation and E.Related Actions by EPA and HUD agreements, neither the landlord nor the hazard reduction activities,and tenant is required by section 1018 to responding to children with elevated Title X requires EPA and HUD to take conduct any type of inspection or blood-lead levels.Additional written other very important actions that are hazard reduction. comments were accepted from complementary to and in some cases Section 1012 of Title X (42 U.S.C. participants after the meetings. binding on this final rule.Five such 4822) directs HUD to require that 4. Comments on Proposed Rule. actions are: (1) The HUD—EPA tenants and purchasers of"target Under the authority of Title X,HUD regulation on notification and housing"receiving Federal assistance be published a proposed rule in the disclosure during real estate provided the same EPA-approved Federal Register of June 7, 1996 (61 FR transactions; (2) the EPA standards for pamphlet that must be used in 29170).The proposed rule set forth new certification of firms and individuals compliance with the section 1018 requirements for lead-based paint performing lead-based paint activities, notification and disclosure regulation. hazard notification, evaluation, and- and associated work practices ("Target housing" is a statutorily reduction for federally owned standards; (3) EPA standards for defined term in Title X that means residential property and housing determining hazardous levels of lead in housing constructed before 1978, except receiving Federal assistance. Comments paint, dust and soil; (4) the EPA housing for the elderly and persons with on the proposed rule were requested on program for the accreditation of disabilities unless a child of less than 6 or before September 5, 1996. laboratories for analysis of lead in paint, years of age resides or is expected to Most of the 93 comments were from dust and soil;and (5) EPA requirements reside in the housing, and except any persons representing organizations that applying to renovation and remodeling zero-bedroom dwelling.) As described would be directly affected by the rule. activities. below, HUD has avoided duplication of More than a third of the comments (34) 1. Disclosure Rule. Section 1018 of pamphlet dissemination requirements if came from agencies of State or local Title X (42 U.S.C. 4852d) directs EPA the pamphlet has already been provided . government: Community development and HUD to issue joint regulations in compliance with the disclosure rule. agencies, public housing authorities, requiring disclosure of known lead- 2. EPA Certification Requirements • planners, mayors, health departments based paint or lead-based paint hazards and Work Practices Standards.Title IV and other organizations directly or by persons selling or leasing most of the Toxic Substances Control Act indirectly involved with federally . housing built before 1978. Under that (TSCA, 15 U.S.C. 2681-2692), as 50144 Federal Register/Vol. 64. No. 178/Wednesday; September 15, 1999/Rules and:Regulations amended by Title X, section 402(a) (15 TSCA section 403 (15 U.S.C. 2683) of work may also be affected. Until EPA U.S.C. 2682(a)) requires EPA to establish requires EPA to issue regulations promulgates and makes effective a new a regulatory framework governing lead- identifying, for the purposes of Title X, regulation under TSCA section 402(c), based paint activities that will ensure levels of lead in paint,dust and soil that the requirements in this rule issued by that individuals engaged in risk are considered hazardous. EPA HUD shall be followed in housing assessments, inspections and abatement published a proposed rule on June 3, covered by the rule. are properly trained,that contractors are 1998.When promulgated and effective, IL Summary of Public Comments on certified (licensed), and that training the final rule implementing section 403 Proposed Rule programs are accredited.TSCA section will contain standards that affect the 404 (15 U.S.C. 2684) mandates a process risk assessments,required in this rule.In A. Diversity of Comments under which EPA will approve State the meantime, the interim levels of lead With only a few exceptions, programs for training and certification in paint, dust and soil set forth in this commenters on the proposed rule of individuals and firms under section rule issued by HUD shall be followed in agreed that lead-based paint hazards are 402. In States lacking their own housing covered by the rule.When the a serious health problem deserving to be programs, EPA must establish, TSCA 403 rule is effective, HUD will addressed.There was, however, an administer and enforce Federal issue any technical amendments that are extraordinary diversity of views programs. EPA published a final rule on needed to make clear what standards are regarding how best to control lead based August 29, 1996 (40 CFR part 745, applicable to this rule at that time. paint and its associated risks. subparts L and Q, 61 FR 45777-45830) 4. EPA Laboratory Accreditation implementing sections 402 and 404 as Program.Under TSCA section 405(b) Additionally, commenters varied widely they pertain to target housing and (15 U.S.C. 2685(b)),EPA has established on the question of what relative priority "child-occupied facilities" (generally, the National Lead Laboratory lead based paint control efforts should certain facilities regularly visited by Accreditation Program(NLLAP).NLLAP enjoy,given the shortage of resources children under 6 years).The regulations recognizes laboratories which have for the provision of housing services contain the following requirements: demonstrated the ability to accurately generally,and the costs associated with Training and certification to ensure the analyze lead in paint,dust,and soil lead hazard control measures. proficiency of individuals who offer to samples.To be NLLAP recognized, Commenters also perceived the conduct lead-based paint inspections, laboratories must successfully proposed rule in different ways. Some risk assessments or abatement services; participate in the Environmental Lead considered it biased in favor of lead accreditation requirements to ensure Proficiency Analytical Testing (ELPAT) based paint abatement as opposed to that training programs provide quality program and undergo a systems audit. less expensive interim control instruction;work practice standards to EPA has recognized the American procedures. Several argued that in ensure that lead-based paint activities Association for Laboratory recent years interim controls have are conducted safely,reliably and Accreditation (A2LA) and the American become accepted as a wiser response to effectively; and procedures for States Industrial Hygiene Association (AIHA) lead hazards than more elaborate and Tribes to apply to EPA for as NLLAP accrediting organizations. abatement processes.Other authorization to administer these The National Lead Information Center commenters, however, warned against elements.It is expected that many States Clearinghouse (1-800-424-LEAD) what they saw as undue readiness in the and Tribes will have EPA-authorized provides the public with a continually proposed rule to undertake limited certification programs in place prior to updated list of NLLAP recognized measures to control hazards in the effective date for the 402/404 rule, laboratories.In this rule on lead-based circumstances where, these commenters which is August 29, 1999. Regardless of paint requirements in housing receiving believed,such measures would be the status of EPA authorizations, Federal assistance and federally owned inadequate and would afford only however, after that time, all lead-based housing,HUD is requiring the use of temporary solutions of unknown paint inspections, risk assessments and NLLAP recognized laboratories for duration. abatements must be conducted by laboratory-based analysis of lead in Spokespersons for State and local individuals and contractors certified in paint, dust and soil samples. funded agencies, despite providing accordance with the EPA rule and the 5.Possible EPA Regulations many comments on ways to make the work must be in accordance with the Pertaining to Renovation and rule more effective,were concerned that work practice standards contained in Remodeling.TSCA section 402(c) (15 the cost of compliance with the rule that rule. U.S.C. 2682(c)) requires EPA to study would severely affect their housing HUD requires that lead-based paint ' the extent to which various types of programs. inspections, risk assessments and renovation activities cfeate a lead-based Most, although not all,of the abatements done in compliance with its paint exposure hazard for workers or commenters representing the health final rule on lead-based paint activities occupants where the work is being industry or environmental concerns in federally owned and assisted housing conducted.The same section directs pleaded for a stronger rule, for more be conducted in accordance with the EPA to revise the regulations rapid effectiveness, and for a more EPA rule implementing TSCA sections implementing section 402(a) to apply to strenuous program of hazard control 402 and 404, i.e., that individuals and renovation and remodeling activities or than the proposed rule required. firms be certified and the work be done to determine that such regulations are Regulated Federal agencies, like their in accordance with the work practices not required. EPA has not yet made the State and local counterparts,worried standards.It should be noted that the determination as to whether regulatory about costs and often advocated wider EPA regulation is not applicable to revision is necessary.If EPA does discretion.Many State and Federal interim controls. It has been necessary, decide to issue such regulations,it is commenters advocated more deference therefore, for HUD to include basic possible that they would apply to on HUD's part to hazard control standards for such procedures in this interim controls,Which are a type of programs,present or future, that have rule. hazard reduction activity commonly been or will be developed elsewhere. 3. EPA Standards for Hazardous required in this HUD rule but not Commenters from varying Levels of Lead in Paint, Dust and Soil. currently regulated by EPA. Other types backgrounds suggested that HUt.'s rule Federal Register/Vol. 64, No. 178/Wednesday, September 15, 1999/Rules and Regulations 50145 was likely to become the nationwide them away from older dwellings most in Section 302 of the LPPPA requires "standard" for compliance, i.e., that need of rehabilitation. HUD "to establish procedures to courts (through tort litigation) and (5) Landlords in HUD's tenant-based eliminate as far as practicable the lending institutions (through rental assistance program will not hazards of lead-based paint poisoning underwriting standards) eventually accept the additional financial burden with respect to any existing housing would establish a standard of care of participating in the program. which may present such hazards and applicable to private housing suppliers 3. Legality of Portions of the Rule. which is covered by an application for that was closely patterned after the Two of the issues presented raised mortgage insurance or housing standards set out in this rule.Most challenges to the legitimacy of portions assistance payments under a program often,this observation was accompanied of the rule, asserting that:. administered by the Secretary or by expressions of concern that the (1) Lead hazard controls in the tenant otherwise receives more than $5,000 in proposed rule was not adequate to based subsidy programs and controls on project-based assistance under a Federal properties receiving less than$5,000 in housing program." In addition, the provide the appropriate standard of care for the nation's housing stock. project-based assistance are beyond the LPPPA requires HUD to establish scope of the statute. procedures for the inspection and B. Commenters'Broad Concerns (2)The rule's soil-testing and soil- reduction of lead-based paint hazards in Following is a brief description of the abatement/control provisions are Federally owned housing at disposition. most common concerns expressed by outside the scope of HUD's authority,to Accordingly, this final rule covers all the commenters.The Department's the extent they fail to differentiate the target housing that: (1) HUD is response to these concerns is described sources of lead in dust. associated with: (2) receives more than and explained in Section IV of this 4. Perceived HUD Overreaching. $5,00Q in project-based assistance under preamble below. Beyond the aforementioned legal a program of an agency other than HUD; 1. "Missed Opportunities". Some challenges, some commenters thought and (3) is being disposed of by the argued that the proposed rule was that the rule exceeded proper bounds. Federal government. misdirected, set the wrong priorities, The asserted that: Since 1975,when it first proposed spent limited resources less wisely than (1�The rule is an ' unfunded regulations implementing section 302, they could be spent, or failed to take mandate," in that it would require HUD has taken a broad interpretation of important additional considerations into expensive undertakings by those the phrase "covered by an application account.Most typical are comments regulated,without the offer of a new for mortgage insurance or housing suggesting that the rule: source of financial assistance. assistance payments under a program (1) Should stress abatement more (or (2)The rule,by imposing new risk administered by the Secretary."The assessment requirements and/or new scope of HUD's lead based paint less); obligations to control hazards,would (2) Is inadequately focused onregulations has always included all controlling lead im units currently endanger existing contracts. HUD-associated housing, and this final occupied by small children; (3)The underlying statute makes no rule continues that policy.The phrase, distinction between HUD-assisted and "or otherwise receives more than $5,000 (3) Pays insufficient attention to soil- other housingreceivingFederal related hazards; in project-based assistance under a (4) Pays too little deference to EPA assistance,while the rule provides for Federal housing p,ogram, was added to and/or private-sector standards-setters; this dichotomy without providing any section 302 by Title X in 1992.HUD's (5) Stresses liability risk-management justification. interpretation of that phrase is (4)The rule fails to provide real explained below. over health-based hazard control measures; or support to local hazard control efforts, 1. Housing Receiving Less Than (6) Otherwise misses an opportunity instead imposing requirements that fail $5,000 in Project-Based Rental to apply the most effective possible rule to recognize important community Assistance. Section 1012(a) amends the to an acknowledged problem. concerns. first sentence of the Lead-Based Paint 2. Cost of Compliance.A very large III.Response to Public Comments and Poisoning Prevention Act to add the number of commenters expressed Final Rule Provisions phrase "or otherwise receives more than concerns about costs. Cost-related $5,000 in project-based assistance under comments took many forms, but the A. Scope and Applicability a Federal housing program" so that 42 most frequently raised assertions were This rule implements the U.S.C. 4.822(a) now reads as follows: variations on the following: requirements of the Lead-Based Paint "The Secretary of Housing and Urban (1)The cost-benefit analysis in the Poisoning Prevention Act (LPPPA), as Development * * * shall establish Economic Analysis is inaccurate and amended by section 1012 and section procedures to eliminate as far as grossly underestimates the impact the 1013 of Title X. practicable the hazards of lead-based rule will have on the ability of federally Throughout this rule,lead-based paint paint poisoning with respect to any funded entities to carry out their hazard notification, evaluation,and existing housing which may present programs. reduction requirements represent the such hazards and which is covered by (2) Because of high costs,the minimum activities required.Parties an application for mortgage insurance or regulation will divert resources that may voluntarily undertake more housing assistance payments under a could be better used to meet other extensive lead-based paint activities if program administered by the Secretary 1 critical housing needs. appropriate or permitted under the or otherwise receives more than$5,000 (3) Costs will be so extreme that many specific housing program with which in project-based assistance under a housing programs currently in existence the dwelling unit or residential property Federal housing program.' will be forced to close down or is associated. One commenter asserted that HUD is drastically curtail their productivity. If the requirements of this rule for a "clearly outside of its statutory (4) The rule will cause existing dwelling unit or residential property authority" in imposing requirements on housing to deteriorate as it becomes too differ from those of the State,tribal or multifamily properties receiving less expensive to rehabilitate, or will distort local government, the more protective than $5,000 in project-based assistance. local selection processes by steering requirement applies. Quoting the 1992 amendments, the • 50146 Federal Register/Vol. 64, No. 178/Wednesday, September 15, 1999/Rules and Regulations commenter declared that despite HUD's virtually all types of housing assistance, housing constructed between 1960 and 1978) imposing only minimal procedures on including tenant-based rental increase the cost to the Government of these under-$5,000 properties, the rule assistance—the type of assistance that it outstanding direct loan obligations or loan would result in additional costs and seems to cover most obviously.The guarantee commitments,such activities shall regulatory burdens on property owners legislative history for Title X states, be5 t(e)of theae Fe modifications Credited under section that the Congress"never intended to however,that housing receiving tenant- 1990 d Federal subject thRee Act of 1990 and shall be to the availability regulate." based rental assistance would be exempt of appropriations.To the extent that HUD disagrees.The statute does not from the Lead-Based Paint Poisoning paragraphs(A) and (B)impose additional prohibit the Department from Prevention Act, as amended by Title X. costs to the Resolution Trust Corporation and establishing lead-based paint hazard Congress was concerned that,due to the the Federal Deposit Insurance Corporation, reduction requirements for housing tendency of residential properties to its requirements shall be carried out only if receiving less than $5,000 in project- pass in and out of tenant-based Federal appropriations are provided in advance in an based assistance under a program assistance programs, it would be appropriations Act.In the absence of administered by the Secretary of HUD. unworkable and inequitable to impose appropriations sufficient to cover the costs of The legislative historymakes this clear. subparagraphs (A) and(B),these g greater burdens on owners of such requirements shall not apply to the affected The Senate committee report properties than on other private agency or agencies." accompanying the bill states, "Title X landlords (Senate Report 102-332,page In the proposed rule,the Department would expand the coverage of the 117). interpreted this language to mean that LPPPA to include pre-1978 housing Clearly, Congress did not intend for HUD (and other Federal agencies that suitable for occupancy by families HUD to apply the new minimum * * *which is covered by an procedures set out in section 1012(a) of own residential property) need not application for mortgage insurance or Title X to tenant-based rental assistance. comply with the requirements set out in housing assistance payments under a HUD does not believe,however,that section 302(a)(3) if sufficient funds are HUD program or receives more than Congress intended to abolish HUD's not appropriated to the agency for this $5,000 in housing assistance through current procedures,which serve to purpose.The Department then proposed another federal program" (emphasis protect,in a minimal way, the children in the absence of sufficient added, Senate Report 102-332,page in families receiving this type of appropriations to include requirements 117). housing assistance.Rather,HUD infers to identify and treat deteriorated paint Although the statute gives HUD that Congress intended for the in HUD-owned properties (similar to authority to impose the same Department to effectively retain its current procedures), even if funding is requirements on HUD assisted housing present lead-based paint requirements not made available to the Department to receiving less than$5,000 as on that for tenant-based rental assistance.In its carry out more extensive lead-based receiving more than$5,000,the current regulations,HUD requires units paint evaluation and reduction. Department recognizes that the Congress with tenant-based rental assistance Commenters expressed strong intended that the stringency of the occupied by families with children objections to basing the rule's requirements would be related generally under 6 to meet the minimal standard requirements on the adequacy of to the amount of financial assistance for lead-based paint found in its appropriations.Several commenters from the Government.HUD is not Housing Quality Standards(HQS) (see questioned whether a determination requiring, therefore, housing receiving 24 CFR 982.401).In this rule,then,HUD that appropriations were"inadequate" multifamily project-based rental continues to require tenant-based rental would or could ever be made.There was assistance of$5,000 or less per unit per property to meet HQS.-To streamline also sentiment against using such a two- year to comply with the statutorily requirements,HUD has modified the pronged system for determining specified requirements for multifamily lead-based paint requirements in the regulatory responsibility at all: "Letting housing receiving project-based rental current HQS slightly,in order to be our standards be set by appropriation assistance of more than$5,000 per unit consistent with recent scientific levels is dreadful public policy when per year. Instead, the rule requires such information on how to protect children the health of children [is] at stake." housing to comply with the less who are exposed to lead-based paint A commenter urged HUD to retain stringent procedures established for hazards.The requirements in this rule high standards in the regulations and tenant-based rental assistance. for tenant-based rental assistance "let the legislative process deal with the 2. Tenant-Based Rental Assistance. continue to apply only to units in which fiscal responsibility [for] this Some commenters thought that the children of less than 6 years of age community health issue."If more costly Congress never intended for the rule to ' reside. HUD does not believe Congress requirements are optional, money will impose duties on landlords in the intended that Federal funds be used to not be appropriated, predicted another tenant-based rental assistance programs. subsidize housing that can poison commenter. Others agreed, saying that This group argued that there exists a childreh. since adequate (separate) appropriations "statutory, program-wide exemption for 3.Federally Owned Housing and the are not at all likely to be forthcoming for housing receiving tenant-based Section Availability of Appropriations. Section each program, contemplating them 8 assistance." 1013 of Title X amends the Lead-Based confuses "an already complex The statute is silent on whether die Paint Poisoning Prevention Act at regulation." new minimum procedures for lead- section 302 to modify existing State and local funded agencies and based paint hazard notification, requirements for the sale (disposition) of others expressed their resentment evaluation and reduction apply to all residential property constructed concerning the"adequate tenant-based rental assistance.Congress before 1978 and owned by a Federal appropriations" approach taken in the did not amend the first sentence of the agency. Section 302(a)(3)(C) (42 U.S.C. subparts affecting HUD and other Lead-Based Paint Poisoning Prevention 4822(a)(3)(C)) states that: Federal agency responsibilities in the Act,set out above, to delete or amend "To the extent that subparagraphs(A)and proposed rule: "HUD has two standards, the phrase "housing assistance (B) (which contain evaluation and abatement depending on whether,there is a Federal payments."HUD has historically requirements for pre-1960 housing•and appropriation.We find this interesting interpreted this general phrase to cover evaluation and notification requirements for as HUD has refused to seek an 1 1 Federal Register/Vol. 64, No. 178/Wednesday, September 15, 1999/Rules and Regulations 50147 appropriation since the legislation was property and HUD-owned multifamily sufficient appropriations. Congress was passed in 1992. Instead, subpart G (HUD property, rather than providing separate silent concerning what activities the without appropriations) will be used." subparts for when HUD has sufficient Department should carry out to reduce Two commenters posed the question, appropriations and when HUD does not Lead-based paint hazards in HUD-held "may CDBG and HOME recipients have sufficient appropriations. An properties in the absence of ignore their regulations if there is not additional subpart is included for appropriations.This created a "gap" for additional or sufficient funding to residential property owned by Federal HUD's interpretation. Under Chevron properly do the work?" agencies other than HUD; the U.S.A., Inc.v. National Resources Another commenter roundly requirements in this subpart are Defense Council, 467 U.S. 837 (1984), condemned the appropriations-based identical to those in Title X. Each where a statute is silent or ambiguous dichotomy as"seriously misguided": affected agency must decide whether on a specific issue, the Department's * * There will never be explicit the requirements of Title X apply to it: interpretation of the statute will be 'sufficient'appropriations,and the Secretary HUD feels that it is inappropriate for the upheld if it is based on a permissible or is unlikely ever to make an explicit Department to decide this issue for reasonable construction of the statute. pronouncement that appropriations are other agencies. The Department believes that Congress 'insufficient.'HUD should be adopting a HUD maintains,however, that the did not intend for HUD to ignore lead- 11 single set of requirements that stipulate language of section 302(a)(3)(C) makes based paint in its properties,even in the minimum levels of hazard controls as part of the lead-based paint requirements for absence of sufficient appropriations. As the price of doing business,not as a matter HUD-owned residential property a consequence,HUD has developed of fiscal convenience." conditional on the sufficiency of procedures for HUD-owned properties, An environmental health advocacy appropriated funds to be used to as set forth in subparts F and I.which group discussed the statutory exception conduct inspections and abate lead- it believes are reasonable. that is provided for the disposition of based paint hazards in HUD-owned 4. Soil and Dust Standards. a.Legal certain federally owned housing—where residential property.HUD has never Issues. A legal question raised by inspection and risk assessment is called received such an appropriation for these commenters had to do with the for (under section 302(a)(3)) except purposes and it did not receive such a Department's authority to regulate in the when compliance would increase the line item in the most recent area of dust and soil.Two basic cost to the Government of outstanding appropriations act,Therefore, in the questions were raised: authority to direct loan obligations or loan guarantee Department's view, "appropriations" regulate in the asserted absence of a commitments (or would impose are not presently sufficient to conduct nexus with lead-based paint, and additional costs on RTC or FDIC)—and the lead-based paint activities required authority to regulate in the absence of there are no appropriations to fund under section 302(a)(3)(A) and (B) and EPA regulations defining hazardous those increased costs. - HUD is not required to implement these levels of lead in dust and soil under The described exception,the procedures.If sufficient appropriations section 403 of the Toxic Substances commenter maintained,was the only become available at a later time, this 'Control Act. such exception/exemption in the final rule may have to be amended. One commenter claimed that HUD is statute: It should be noted that HUD interprets exceeding its authority and has moved the first sentence of section 302(a)(3)(C) "arbitrarily and capriciously" by setting .,* * * Absolutely no evidence exists tv to apply only to HUD programs where interim controls and abatement levels support the contention that Congress implied the cost of conducting lead-based paint for lead in soil and dust without or otherwise intended that HUD should be able to grant federal agencies broad evaluation or abatement activities under reference to the risk posed by the type discretion to opt out of lead hazard section 302(a)(3)(A) and (B) increase of lead contained in soil or dust,or to evaluation and control requirements.Such an HUD's outstanding direct loan the bioavailability of the lead. Because interpretation would allow federal agencies obligations or loan guarantee HUD's action is in advance of EPA's such as the General Services Administration commitments. Since appropriations are statutorily mandated determinations of and the Department of Defense to simply not sufficient for the Department to soil cleanup levels,HUD is dispose of their properties without paying conduct inspections and abatement of overreaching, in the commenter's heed to their condition or habitability lead-based paint hazards in accordance opinion, because the Congress intended * * * •' with section 302(a)(3)(A) and (B),a that EPA's regulatory action— The group urged that,in its final determination of the effect of such identifying what are hazardous levels of property disposition regulations, HUD activities on HUD's direct loan lead in dust and soil—was to be the clearly limit waiver availability only to obligations or loan guarantee "first step" in rulemaking on that those agencies that qualify, based on the commitments is unnecessary. subject matter.According to the cited statutory exemptions.The Although HUD has made the commenter, the Congress gave HUD and commenter also urged that HUD revise determination for purposes of section EPA authority to implement interim the regulation to describe "minimum 302(a)(3) that it does not have controls and abatement with respect to steps" that even agencies entitled to the "sufficient appropriations" and hazards from lead-based paint, waiver must undertake. A"sweeping therefore, the Department is not including the dust from lead-based exemption" is clearly unacceptable, the required to implement the procedures paint and soil contaminated by lead- group declared, and HUD "must not set out in section 302(a)(3) for its HUD- based paint.Thus. HUD set ad hoc condone such an irresponsible policy . owned properties,the Department standards for lead dust and soil in the and must instead set some floor of nevertheless has included lead-based absence of any EPA study results and minimum requirements with which all paint procedures in this final rule which without any nexus to lead-based paint. federal agencies must comply, the Department can afford to implement Further, the commenter stated that regardless of appropriations." and which, in HUD's view,are fully HUD was attempting to "decouple"dust HUD acknowledges the validity of - protective. While Congress under Title and soil testing and abatement from any many of these comments. In the final X did not require the Department to necessary relation to lead-based paint rule, the Department includes single carry out the requirements in section itself.The "unstated premise" of HUD's subparts for HUD-owned single family 302(a)(3)(A) and (B) in the absence of rule would be that all lead in dust is 50148 Federal Register/Vol. 64, No. 178/Wednesday, September 15, 1999/Rules and Regulations assumed to come from paint, although it is established that paint is the source or owns. Such standards were published this is not the case. HUD's approach of the lead in dust at the site. in Lead-Based Paint: Interim Guidelines would unfairly burden property owners HUD acknowledges,however,that for Hazard Identification and Abatement with the costs of cleaning up soil and owners cannot be expected to have in Public and Indian Housing, • dust which may have become protected their properties from dust- September 1990 (Interim Guidelines): contaminated from"sources not under lead deriving from such sources as and again in Guidelines for the the property owner's controI."This gasoline combustion, nearby bridge Evaluation and Control of Lead-Based regulatory requirement, the commenter repainting, or nearby industrial activity. Paint Hazards in Housing,June 1995 asserted,would raise the constitutional It is reasonable that this final rule (HUD Guidelines).These standards have questions of a"taking without just should give the highest priority to the already been widely used in HUD compensation and deprivation of reduction of lead in old residential paint programs.The scientific literature has property without due process of law that may cause lead exposure in confirmed that lead in dust and soil are under the Fifth Amendment* * *" children.As explained below in Section important pathways to childhood lead The commenter concluded that HUD III.A.5.b of this preamble,HUD has exposure, as discussed below in Section should not"decouple" lead found in exempted from the requirements of this III.E.15.b of this preamble. dust and soil from the source of that final rule residential properties that are When EPA regulations implementing lead, and should reconsider its found not to contain lead-based paint or TSCA section 403 are final and imposition of a single dust-lead that have had all lead-based paint effective, they will apply to this HUD standard unrelated to the source of the removed. (This exemption is consistent rule and will supersede most of the lead or its bioavailability.Where there with a similar exemption in the real HUD interim standards for dust and is a source of dust related to lead paint, estate notification and disclosure rule soil.If the final section 403 rule does HUD's standards may be workable, the that was issued jointly by HUD and EPA not establish a standard for an activity commenter acknowledged,although on March 6, 1996.) Thus, in this final or situation that is covered by the HUD waiting for EPA's upcoming standards rule, dust-lead hazards and soil-lead interim standards,there may be a under section 403 of the 1992 Act hazards are regulated only in properties question as to whether that aspect of the "would have been more consistent with in which lead-based paint is known or interim standards is retained. HUD Congress' intent." HUD's proposed presumed to be present. expects that, after the section 403 rule standards,however,would be "unfair" b. Coordination With EPA is published,the Department will to the extent there are other sources of Rulemaking.With regard to publish a technical amendment to this lead involved,because the Department coordination with EPA rulemaking on rule or engage in additional rulemaking assertedly lacks authority to regulate hazardous levels of lead in dust and to make clear what the applicable lead that is from non-paint sources, and soil,HUD agrees that the standards set standards are. because the regulations would bear"no forth in final regulations promulgated 5.Exemptions. a. Housing for the relationship to cause or risk." and made effective by EPA pursuant to Elderly.This rule applies most broadly HUD and EPA,after careful TSCA section 403 will be relevant to to "target housing."which is defined in consideration,do not agree with the this rule.The final rule states that the Title X as housing constructed prior to commenter's argument. EPA,which has section 403 standards shall be 1978, except housing for the elderly or the relevant regulatory authority under referenced when such standards are persons with disabilities (unless any TSCA section 403, has concluded that promulgated and effective.There may child who is less than 6 years of age the language of Title X supports an be a period of time, however, between resides or is expected to reside in the interpretation that dust and soil lead are the effective date of this final rule and unit) or any 0-bedroom dwelling unit. covered regardless of the source of the the 403 regulations.Therefore, the As in the proposed rule,HUD interprets lead. Definitions in Title X do not limit Department is including in this final the exemptions for elderly and disabled the source of lead in soil or dust to lead rule interim standards for levels of lead housing to apply only to residential from lead-based paint.The definitions in dust and soil that are based on a property which is designated of"lead-contaminated dust"and"lead- recently-completed, peer-reviewed, exclusively for elderly or disabled use. contaminated soil" do not specify that pooled analysis of virtually all available Some commenters complained about the source of lead in the dust or soil epidemiological studies that directly this restrictive interpretation and urged must be lead-based paint.In fact,the measure the relationship between lead that it should be enough that elderly or definition of"lead-based paint hazard" in children's blood and lead in dust and disabled persons reside in a dwelling specifies lead-contaminated dust and soil (Lanphear et al. 1998).This ensures unit and that no young children are . soil as sources of lead contamination ' that HUD's interim standards are expected to reside there.After careful separate from and not explicitly linked scientifically valid.The interim consideration,HUD has decided to to lead-contaminated paint. standards promulgated in this rule are retain the interpretation of the Furthermore, as a practical matter, it reasonably consistent with the exemption that was adopted in the is not possible to determine through standards recently proposed by EPA. proposed rule.This is consistent with routine chemical analysis the source of For further dismission of the interim the definition of target housing used in the lead in the dust and soil at any given standards, see Sections IlI.E.15.a and b all regulations issued pursuant to Title site,not to mention every site of pre- of this preamble,below. X. The statute has never been 1978 housing in the nation.Also, it is The Department does not agree with interpreted as providing an exemption well known that the scientific literature the comment(cited above in Section for each dwelling that happens to be has determined that lead in dust is an III.A.4.a of this preamble) that it should occupied by elderly or disabled persons. important source of childhood lead delay all regulatory action pertaining to Such a policy, in the judgment of the 1 exposure and that dust lead is well lead in dust and soil until final 403 Department, would be contrary to the correlated with paint lead (Lanphear, regulations are promulgated.HUD has intent of the statute,which is to 1996).It is unlikely,therefore,that the previously established standards for eliminate as far as practicable lead- Congress meant to curtail the reduction dust lead and soil lead to ensure that based paint hazards in all housing of lead in dust at each individual hazard controls are properly targeted receiving Federal assistance and in property covered by this regulation until and are effective in the housing it assists federally owned housing at disposition. Federal Register/Vol. 64, No. 178/Wednesday, September 15, 1999/Rules and Regulations 50149 Most dwellings currently occupied by most recent inspection by a certified exemptions.The commenters were elderly persons or persons with lead-based paint inspector, provided concerned primarily with rehabilitation disabilities will probably be occupied appropriate technology is used. activities funded under the Community by a child in the future. Laboratory analysis of a properly taken Development Block Grant or HOME The Department defines the phrase paint sample is a more reliable method programs.. "expected to reside" in the statutory of measurement than the use of a With regard to weatherization, the definition of target housing as meaning portable X-ray fluorescence (XRF) Department believes this is too broad a that there is actual knowledge that a analyzer on site.Therefore a new category on which to base an exemption child is expected to reside, rather than laboratory analysis of a paint sample from this rule. Weatherization often a general presumption that a child will can overturn either an old portable XRF includes window replacement,which probably reside in the dwelling unit reading or an old laboratory test, but a can generate lead dust and therefore sometime in the future. If a woman new portable XRF reading can overturn should be performed with safe work residing in the dwelling unit is known only an old portable XRF reading. practices. With regard to such activities to be pregnant, there is actual These general exemptions are as water and sewer hookups and knowledge that a child is expected to intended to apply only if the entire installation of security devices,HUD reside in that unit. However,in the residential property is free of lead-based has provided in subpart B of the final context of most residential real estate paint or has had all lead-based.paint rule an exemption for rehabilitation that transactions it is not advisable to removed.The term"residential does not disturb a painted surface. Also, inquire as to whether a woman is property" is defined in the rule as activities that disturb painted surfaces pregnant.The term"expected to reside" including such things as outbuildings, of no more than a"de minimis" amount is used in the statutory definition of fences, and play equipment affixed to of 2 square feet in any one interior "target housing" in Title X, but it is not the property as well as dwelling units room, 20 square feet on exterior defined there.It would not be and common areas. surfaces, or 10 percent of the total unreasonable for people seeking to HUD is providing this exemption to surface area on an interior or exterior comply with the law to think that the assure that the highest priority in the component with a small surface area are term might refer to the distant future, use of scarce lead-based paint hazard not required to use "safe work • that is "expected to reside at some time, control resources is given to residential practices," and worksite clearances are however far in the future."That properties with lead-based paint.The not required for such work. (This de uncertain potentiality is not part of Department recognizes that some minimis is stated in the section on safe HUD's interpretation of statutory intent. properties have dust-lead hazards and/ work practices in subpart R of the rule.) Therefore HUD is providing this or soil-lead hazards but do riot have any Therefore, installation of security tightened definition to minimize lead-based paint.These properties are devices under rehabilitation assistance confusion. expected to be a small proportion of the will generally not require special b. Absence of Lead-Based Paint, or total affected stock, however. precautions usually associated with Prior Hazard Reduction.The proposed c. Housing To Be Demolished.In rule provided exemptions from certain response to questions from various lead based paint hazard reduction. requirements if a residential property sources, the rule provides that housing Furthermore, in situations in which was found to contain no lead-based to be demolished is exempt,provided security devices are being installed as a paint, but such exemptions did not the housing remains unoccupied until part of the operation and maintenance apply to all programs. To streamline the demolition. Owners should be aware, of of a residential property that is required final rule, exemptions are provided for course, that other local,State and under this rule to incorporate ongoing properties found not to have lead-based Federal regulations pertaining to lead based paint maintenance as a part paint by a certified lead-based paint environmental protection and of the everyday maintenance of the inspector and for properties in which all occupational safety and health may property, the same "de minimis" lead-based paint has been identified and apply to demolitions. exemption applies. removed in accordance with procedures d. Nonresidential Property.The final f. Emergency Actions and Natural established by an EPA-authorized State rule also states explicitly that property Disasters.The proposed rule provided a or tribal program or by EPA in that is not and will not be used for general exemption for properties accordance with 40 CFR part 745, human habitation is exempt.In the case undergoing emergency repairs in subparts L and Q. If the method of of a mixed use property, HUD intends response to natural disaster.The abatement is enclosure or that only those parts of the property Department believes that there are encapsulation, this exemption does not normally associated with residential use circumstances in which the time apply because lead-based paint is still shall be covered by this rule.For required for compliance could adversely present. example.retail and office affect life or property and,consequently, An owner or recipient of Federal establishments in an apartment building an appropriately tailored exemption is assistance hoping to qualify for this would not be covered, but hallways needed. exemption may question whether leading to such uses would be covered Two commenters requested additional correcting for possibly incorrect(or if the hallways also service dwelling exemptions beyond the "natural outdated) positive findings during lead- units that are covered by the rule. disaster" exemption set out in the based paint inspections is permissible. . e. Rehabilitation.Disturbing Little or proposed rule.They believed it was too In the rule; the owner or recipient No Painted Surface. Commenters also narrow in scope, arguing that any form always retains the option of having complained that existing exemptions in of disaster should be the basis for an additional tests performed by a certified HUD rules for weatherization, exemption from the rule's requirements. lead-based paint inspector. Nothing in emergency repairs, water/sewer On the other hand, others claimed that the regulation is intended to revoke or hookups, installation of security no justification existed for exempting restrict that option. An additional test devices, and other special work were no damaged properties. At a minimum, can sometimes clarify whether lead- longer included in the rule,even these properties need risk assessment based paint is or is not present.Actions though, the commenters said,these and full disclosure before any sale, one may be taken based on the results of the were "realistic and necessary" commenter said. 50150 Federal Register/Vol. 64, No. 178/Wednesday, September 15, 1999/Rules and Regulations v In the final rule, HUD has provided in subject to subpart K, Acquisition, other than HUD an exemption from that subpart B a more carefully worded Leasing, Support Services, or Operation. subpart if a Federal agency determines provision that provides an exception for The exemption for any specific dwelling that sufficient funds are not "emergency actions immediately unit expires after 100 days. HUD does appropriated to carry out the necessary to safeguard against an not intend that multiple households requirements of the subpart. In the final imminent danger to human life, health receiving emergency assistance can be rule, this exemption,which implements or safety, or protect property from recycled through a unit without a provision of section 1013 Title X,has further structural damage (such as when subjecting the unit to the requirements been moved to the Exemptions section a property has been damaged by a of subpart K. of subpart B (See Section III.A.3 of this natural disaster, fire, or structural i.Adverse Weather. In the proposed preamble). collapse) * * *"The exemption states, rule, the subparts covering disposition .6. Deference to Other Agencies. however, that in such cases "occupants of HUD-owned single family property Commenters sought, in varying forms, shall be protected from exposure to lead included an exception allowing delay of "exemptions" providing for deference to in dust and debris generated by such repainting if weather conditions make • State or local agencies or other Federal emergency actions to the extent such work infeasible.In the final rule, agencies based on State lead-control practicable."It is HUD's intent that such the concept behind this exception has laws or an agency's demonstrated protection would include a thorough been broadened to apply to evaluation performance. cleanup.The exemption extends only to and reduction activities under all In the final rule, the Department has the completion of repairs necessary to subparts,allowing delay"for a provided such deference in specific respond to the emergency; after that,the reasonable time during a period when situations. First, HUD is requiring that requirements of the rule apply. weather conditions are unsuitable for inspections, risk assessments and g.Law Enforcement Seized Property. conventional construction activities." abatements be conducted in accordance A spokesperson for the Treasury HUD intends that this exception will with the work practices standards of a Department's Asset Forfeiture Program allow reasonable delay only and will State or Indian Tribe with a program urged that law enforcement agencies not be an excuse for noncompliance. authorized by EPA under subpart Q of seizing real properties should be able to j.Historic Properties.The National 40 CFR part 745 or, in the absence of dispose of those properties without the Park Service commented that HUD such a program,with EPA's standards at financial burden of compliance with the should provide greater flexibility to 40 CFR part 745, subpart L. Therefore rule,with only a duty to warn potential allow a balance to be achieved in HUD is in effect incorporating the transferees or purchasers of the possible specific cases between the objectives of opportunity that is built into the EPA presence of a lead-based paint hazard. the National Historic Preservation Act regulations for States to determine, The Justice Department's U.S.Marshals and those of the Lead-Based Paint within the EPA framework, procedures Service made similar comments,adding Poisoning Prevention Act. Conflicts for evaluation and reduction.With that the regulations will create "an between the two goals,the protection of regard to the policies of Federal economic disincentive to seizing and historically significant buildings and the fagencies other than HUD,the final rule forfeiting pre-1978 residential creation of lead-safe housing. may occur gives such agencies the authorityeto property." where abatement is required. For g In view of the special nature of law example, the use of artificial siding and determine whether appropriations are enforcement,HUD has added a the replacement of historic trim and sufficient to implement the provision in subpart B of the final rule doors is generally not appropriate for requirements of section 1013 of Title X. that exempts seized properties owned historic buildings.In response,HUD has (See further discussion of this matter in for 270 days or less from the evaluation added a general exception in subpart B Section III.A.3 of this preamble,above.) and hazard reduction requirements of that allows designated parties to use One agency suggested that high- subpart C of this rule,which sets interim controls instead of abatement performing public housing agencies requirements for the disposition of methods,if requested by the State with good property maintenance records residential properties owned by Federal Historic Preservation Office,on should be exempt from the additional agencies other than HUD.For seized properties listed or determined to be evaluations provided in the rule, properties owned longer than 270 days, eligible for listing in the National Because the current performance rating the requirements of subpart C will Register of Historic Places or instrument used by HUD and public apply. Ownership begins upon receipt contributing to a National Register housing agencies does not include a of a judicial order of forfeiture. Historic District.If interim controls are specific grade for lead-based paint Approximately 400 seized, pre-1978 ' conducted, ongoing maintenance and activities,HUD does not believe it has dwelling units are disposed of annually reevaluation shall be conducted as a valid way to identify "high-performing by the Department of the Treasury and required by the applicable subpart.For public housing agencies"for the the Federal Marshals Service of the comprehensive guidance on eliminating purposes of this rule.It is not possible, Department of Justice combined. HUD lead-based paint hazards from historic therefore,to provide such a broad expects that the Federal law housing without removing historically exemption at this time. enforcement agencies, in exercising significant features, see Chapter 18 of 7. Changes and Deletions to Current their managerial responsibilities over the HUD Guidelines or the National HUD Regulations.In the proposed rule, seized residential property,will make Parks Service publication, "Preservation HUD did not include specific provisions every reasonable effort to maintain the Brief 37:Appropriate Methods for for the deletion of existing part 35 property in a lead-safe condition. Reducing Lead Patnt Hazards in Historic provisions being replaced by this rule or h. Emergency Rental and Foreclosure Housing," by S.C. Park and D.C.Hicks, the numerous lead-based paint Prevention Assistance. Some State and National Parks Service,Washington. DC requirements set out in various program local agencies urged that programs 20013-7127 (1995). regulations in Title 24. It was stated, providing emergency rental assistance k. Insufficient Appropriations.In the however, in the preamble to the or foreclosure prevention assistance be proposed rule, the Department included proposed rule that such deletions would exempted.The final rule provides a in the subpart covering disposition of be made, and this final rule provides limited exemption for such programs residential property by a Federal agency such changes and deletions. Federal Register/Vol. 64, No. 178/Wednesday, September 15, 1999/Rules and Regulations 50151 8. Indian Housing Programs.In the the programs to which the subpart was level. An example of this situation is proposed rule, two subparts were to be applicable. This led to concern provided in subpart B of the rule. applicable to Indian housing programs: within the Department that such lists B. Structure of the Rule the one pertaining to rehabilitation may be incomplete or go out of date. (which was to apply to the Indian Therefore, in the final rule these lists 1. Organization. In the interests of Community Development Block Grant have been removed from the simplicity and streamlining, all of the Program), and the one pertaining to applicability sections.In the Department's lead-based paint public and Indian housing programs applicability sections. care has been requirements, including the disclosure (which was to apply to housing owned taken to try to describe clearly what rule, are now located in part 35.The and operated by Indian housing types of housing assistance is and is not proposed rule set forth lead-based paint authorities under public and Indian covered by each subpart.A current list requirements in three parts, including housing programs).With the enactment of programs covered by each subpart is new parts 36 and 37 that,together with of the Native American Housing available on the interne at part 35, subpart H,were to comprise all Assistance and Self Determination Act www.hud.gov, or by mail from the of HUD's regulatory requirements for of 1996 (NAHASDA,Pub. L. 104-330. National Lead Information Center at 1- lead-based paint in a single place.Part 25 U.S.C. 4101 et seq,), it has been 800-424-LEAD. 36 was to describe the lead-based paint necessary to revise the way this rule Several HUD housing assistance requirements for each program covered applies to Indian housing programs. programs have more than one type of under the Lead-Based Paint Poisoning NAHASDA separated Indian housingPrevention Act, grouped in subparts P eligible activity, so some programs are according the agency office from public housing and made funding subject to more than one subpart of this accoringto the typey oroaffice for Indian housing under the United rule, as was mentioned above in regard Part responsible was ando describe of standards States Housing Act of 1937 unavailable. to the Indian Housing Block Grant The primary program created byand procedures for conducting the lead- NAHASDA is the Indian Housing Block p ry P $ program.In fact, there are at least Wing based paint evaluation and hazard such programs at the time of this reduction activities required in part 36, Grant Program,which can be used for writing.These programs,with the with different activities described in many different forms of housing subpart designations in parentheses, are different subparts. assistance.Therefore the following as follows:Indian Housing Block Grant subparts have been made applicable to program (H.J, K. and M), Indian In the preamble to the proposed rule, howeher,Him indicated that it was the Indian Housing Block Grant Community Development Block Grant considering consolidating parts 36 and program: Subpart H,Project Based program (J and K),Home Investment 37 in the final rule.This has been done. Rental Assistance;subpart J, Partnerships program(HOME) (J,K. and The entire rule consists of 12 subparts Rehabilitation (also applicable to the M),Community Development Block (B, C,D, F through M, and R,with E and Indian Community Development Block Grant program (J and K), Supportive N through Q reserved), all in part 35. Grant program);subpart K,Acquisition, Housing Program (H,J. and K), Shelter Subpart A of part 35 is the rule Leasing, Support Services,or Operation Plus Care (H and M), Housing requiring disclosure of known lead- (also applicable to the Indian Opportunities for Persons With AIDS based paint hazards upon sale or lease Community Development Block Grant (HOPWA) (J and M),Homeownership of of residential property (disclosure rule), Program); and subpart M,Tenant-Based Multifamily Units (HOPE 2) (J and K), which was promulgated on March 6, Rental Assistance.Tribes and tribally and HOPE for Homeownership of Single 1996.EPA published the same rule at 40 designated housing entities receiving Family Homes (HOPE 3) (J and K). CFR part 745, subpart F. In this current funds from the Indian Housing Block Grantees, participating jurisdictions, rulemaking.HUD is moving the location Grant and Indian Community Indian tribes and other entities of the disclosure rule from subpart H to Development Block Grant programs administering these flexible programs subpart A of 24 CFR part 35. No text or must determine which subpart of this must decide which subpart or section of final rule applies based on the type of P section number changes are being made this rule applies to the type of assistance to the disclosure rule.The general activity being conducted or assistance being provided to a particular dwelling being provided to a particular dwelling requirements found in subpart A of the unit or residential property.If more than proposed rule are located under subpart unit or residential property.If more than one type of assistance is being provided, one subpart or section applies, the one B of today's final rule. the most protective requirements apply. with the most protective requirements Subpart B of the final rule provides all 9. Applicability of Subparts to applies.To assist in making this the general requirements, definitions, Programs and Dwelling Units.Subparts judgment,HUD is providing in subpart exemptions. and options that apply to C, D, and F through M of the final rule B of the rule a table listing subparts and subparts B, C, D, F through M, and R. each set forth requirements for a specific sections in order from the most to least Subpart B does not apply to the type of Federal housing activity or protective initial hazard reduction Disclosure Rule in subpart A. All assistance, such as mortgage insurance, requirements. In some cases, more than residential properties and dwelling . rehabilitation assistance, project-based one program as well as more than one units subject to this final rule are also rental assistance, tenant-based rental subpart or section may apply to a subject to the Disclosure Rule. Subparts assistance, or public housing. Each of property or dwelling unit. In this case C, D, and F through M set forth the these subparts applies to more than one also the most protective requirements requirements for each program or type program. For example,there are at least aPPly. of assistance. Subpart R of the final rule five HUD programs that provide tenant- A multifamily residential property contains the required standards and based rental assistance,so all five are may have some dwelling units subject to methods for conducting evaluation and therefore subject to subpart M,which .one set of requirements and other units hazard reduction activities formerly states the lead-based paint requirements subject to other requirements.In this found in part 37 of the proposed rule. for housing receiving tenant-based case,the owner has the choice of either The provisions of subpart R are rental assistance. operating the property with different referenced in subparts B, C, D, and F In the proposed rule, HUD listed in sets of requirements or operating the through M. As explained below, the the applicability section of each subpart entire property at the most protective standards and methods requirements of 50152 Federal Register/Vol. 64, No. 178/Wednesday, September 15, 1999/Rules and Regulations this rule have been streamlined used (similar to the "essential insurance, but there is a continuing considerably. maintenance practices" recommended relationship between the Department. One commenter suggested that the by the Task Force); the borrower and the lender through the requirements for notice to residents of (3) Visual assessment and paint insurance agreement.These properties the results of evaluation and hazard stabilization; were built toward the end of the period reduction be located at the beginning of (4) Risk assessment and interim when lead-based paint was used in the rule so that they need not be controls (with the option of performing housing and are less likely to have lead- repeated for each program or type of specified standard treatments); based paint hazards than older housing. housing.This has been done.The notice (5) Lead-based paint inspection and This strategy is also applied as a requirements are found in subpart B at risk assessment, and interim controls; transitional requirement for multifamily §35.125 and are referenced in the (6) Risk assessment and abatement of properties receiving project-based program-specific subparts. lead-based paint hazards; and assistance during the phase-in period 2. Simplicity and Overall Strategy. (7) Lead-based paint inspection, and before a risk assessment is conducted. Several commenters complained that, abatement of all lead-based paint. The third strategy.visual assessment, despite the effort to consolidate lead- These strategies include the following paint stabilization and clearance, paint regulations in a single rule, the fundamental principles.Whenever provides assurance that the housing to format of the proposed rule remained hazard reduction methods are employed which it is applied is "lead safe."To "program specific".Others called it (except for disturbances of only a small provide such assurance, HUD intends "cumbersome". Because community area of paint surface) clearance is that clearance be unit-wide, not just for development and housing required to ensure that the job is done the worksite. It should be noted that administrators must work with a variety properly. Second.ongoing lead-based clearance is required only if paint of programs, they will be required to paint maintenance practices are stabilization is performed,so a unit that operate under different subparts. Calling required in rental housing whenever passes the initial visual assessment(i.e. the rule lengthy and technical,one HUD has a continuing relationship with no deteriorated paint is identified) commenter said it would be helpful if the property.Third. to ensure that the undergoes no dust testing. Also, if the it could be organized"in a more user- controls are still intact and effective housing is in poor physical condition. friendly fashion," using cross- over time, reevaluation is required or if there are high levels of lead in the references. Several commenters whenever a risk assessment and interim soil,lead-based paint hazards may regarded the rule as"confusing" or in controls are required and there is a reappear.Therefore,ongoing need of further consolidation. continuing HUD subsidy or ownership maintenance is required whenever HUD One commenter complained that of rental housing.Fourth,special has a continuing relationship with there remained"at least 14 different procedures are required in programs rental property.The final rule applies requirements,"based on the program with a continuing subsidy or HUD this strategy to HUD-owned single authority or on the amount of assistance ownership of rental housing whenever a family housing that is sold with a provided. child is identified with a blood lead mortgage insured by HUD; properties In the final rule there are seven level that calls for environmental with acquisition,leasing,support evaluation and hazard reduction assessment and intervention (called an services,or operation assistance; tenant- strategies for HUD housing programs. "environmental intervention blood lead based rental assistance programs where These strategies vary in stringency, level" in the rule). a child of less than 6 years of age costliness, and lasting effectiveness in The first strategy,safe work practices resides; multifamily housing receiving preventing childhood lead poisoning. during rehabilitation,is applied only to up to and including$5,000 per unit per They are applied to the various forms of rehabilitation assistance of no more than year in project-based rental assistance; housing assistance, based generally on: $5,000 per unit.This is a "do no harm" and single family properties assisted (1) The amount, nature and duration of policy that is intended to assure that under the project-based certificate or financial assistance provided under the low-cost rehabilitation does not generate voucher program,the moderate program; (2) the risk of childhood lead lead-based paint hazards.It allows low- rehabilitation program, or another HUD- poisoning in the housing (based on year cost rehabilitation to go forward without funded project-based rental assistance of construction); and (3) whether the costly lead-based paint requirements; program. housing is generally rental or owner- but it does not necessarily determine The fourth strategy, risk assessment occupied. whether or not the entire dwelling unit and interim controls,with the option to There are two primary differences or property is "lead safe," because, for conduct standard treatments, provides between the strategies of the final rule ' this strategy, clearance must be assurance that all lead-based paint and those of the proposed rule: (1) Paint conducted only for the worksite,which hazards have been eliminated. Unit- repair has been replaced by paint may not include the entire unit. wide clearance is always required. stabilization; and (2) clearance is The goal of the second strategy, Ongoing maintenance of painted required in the final rule after paint ongoing lead-based paint maintenance surfaces is required whenever HUD has stabilization, and the clearance only, is to ensure that paint is kept a continuing relationship with the requirement has replaced the dust- stabilized and that the work is done in property;and reevaluation is required if testing requirement for pre-1950 a safe manner. Clearance is required HUD is the owner, if there is project- housing with tenant-based rental only of the worksite.This strategy does based rental assistance in a multifamily assistance. not provide full assurance that a property exceeding$5,000 per unit per In order from Ieast to most stringent, property is free of lead-based paint year, and in public housing.This the seven strategies are: hazards, but it will minimize such strategy is applied to properties that are (1) Safe work practices duping hazards over time.It is applied to subject to an application for multifamily rehabilitation; properties that are subject to an mortgage insurance and were built (2) Ongoing lead based paint application for multifamily mortgage before 1960, housing receiving maintenance practices to assure that insurance and were built between 1960 multifamily project-based assistance of paint is maintained so that it remains and 1977.These are rental properties more than$5,000 per unit annually,and intact, and that safe work practices are with no subsidy,only mortgage housing receiving rehabilitation Federal Register/Vol. 64, No. 178/Wednesday, September 15, 1999/Rules and Regulations 50153 assistance of$5,000—$25,000 per unit. during the period prior to completion of requirements, should certification A risk assessment and interim controls abatement to assure that all public mechanisms not be in place. are also required in public housing housing occupied by families will be The effective date of the EPA developments that have lead-based free of lead-based paint hazards.The certification requirements and the EPA paint that has not yet been abated, requirement for conversions and major work practices standards is August 31, The fifth strategy. lead-based paint rehabilitations financed with 1999. By that date, individuals inspection, risk assessment, and interim multifamily mortgage insurance is new, conducting inspections, risk controls, is applied only to HUD-owned however. HUD believes that such assessments and abatement must be multifamily housing.It differs from the properties, after undergoing such certified and all such activities must be • fourth strategy in that it requires a lead- substantial renovation, should be as free performed pursuant to the work based paint inspection as well as a risk as reasonably possible of any future practices standards in that regulation or assessment. Most of these properties are lead-based paint hazards. in requirements of EPA-authorized State being sold, frequently without HUD 3. Prescriptiveness.There were or Tribal programs.There is no need for mortgage insurance, so HUD will not several comments to the effect that the HUD to issue detailed requirements for have a continuing relationship with rule was too prescriptive.These risk assessment, inspection and them and thus will not be able to ensure commenters generally recommended a abatement.They have been omitted, that ongoing lead-based paint movement toward "performance-based" therefore, from the final rule, except for maintenance practices and reevaluation requirements, arguing that a interim dust and soil standards. are practiced. With a lead-based paint performance-based rule would stand up This leaves the question of whether inspection, HUD will provide the buyer better to future technical innovations. the proposed requirements for interim. with information on the location of any One commenter recognized that controls and related procedures that are remaining lead-based paint on the adopting performance-based standards not covered by the EPA regulations are property that the buyer and later owners was not always a simple matter. too prescriptive. Related procedures can use to avoid generating dust-lead Decisions to do so must be made include standard treatments, occupant hazards in the future. "requirement-by-requirement," but the protection and worksite preparation, The sixth strategy involves risk commenter urged looking for means to clearance, ongoing lead-based paint assessment and abatement of lead-based use such standards wherever feasible, maintenance, reevaluation, and safe paint hazards.This strategy is used and cautioned against"locking in" work practices.In the final rule,HUD when Federal rehabilitation assistance requirements which new technology or has tried to strike a balance between the is greater than $25,000 per unit.When research may well show to be need to assure that the procedures will Federal funds are used to make such a inappropriate in the future.For be effective in preventing childhood substantial investment in a property,it example, the commenter recommended lead poisoning and the goal of providing is logical that long-term hazard control against specifying HEPA vacuuming in flexibility and avoiding rigidity. measures be implemented at a time the rule, indicating that research C. Effective Date when substantial concurrent underway may suggest that in some rehabilitation is being done.Paint cases less specialized equipment or less The proposed rule included an testing of surfaces to be disturbed extensive procedures can be just as effective date of 12 months after during rehabilitation is called for to effective.Another commenter suggested publication of the final rule, and the ensure that new lead-based paint basing requirements on performance, Department explained in the preamble hazards are not inadvertently created, but including a more prescriptive "safe that this time period was chosen to but the designated party has the option harbor" optional alternative. allow all affected parties time to prepare to presume the presence of lead-based Sometimes, the commenter observed, for implementation of the new paint on such surfaces. performance-based standards are simply requirements. The objective of the seventh strategy, unhelpful to those regulated due to lack Some commenters urged that the lead-based paint inspection and of clarity or information about the effective dates in the rule be moved up abatement of lead-based paint, is method of obtaining the desired in whole or in part,while others asked abatement of all lead-based paint.This performance. for a further delay to allow affected strategy applies to public housing and to Several commenters recommended parties to secure expert assistance or properties that are being converted from against"too rigid" regulatory training opportunities. One commenter nonresidential to residential use or are requirements that would require "full- urged waiting to make the rule effective subject to major rehabilitation and are blown" future rule making proceedings until EPA's upcoming rule on health- being financed with HUD/FHA to overturn. Some suggested based standards for lead in dust and soil multifamily mortgage insurance.This is incorporation of guidelines into the rule was promulgated and made effective. not a new requirement for public by reference. Advocates of rapid effectiveness housing. Current public housing Although the proposed rule included pointed out that the rule already was regulations require a lead-based paint prescriptive requirements, §37.1(b) of "overdue," and claimed that important inspection and, at the time of the proposed rule stated that those health benefits could be realized by the modernization, abatement of all lead- requirements did not apply to lead- regulation's becoming operational based paint.However, because complete based paint inspections, risk sooner rather than later. Several modernization (and therefore complete assessments and abatements performed commenters advocated immediate abatement) may not occur for many by inspectors, risk assessors, abatement effectiveness for portions of the rule years in some housing developments, supervisors and workers certified in dealing with occupant protection, and because modernization (and accordance.with EPA regulations under worksite preparation and the therefore abatement of lead-based paint) the Toxic Substances Control Act prohibitions against unsafe practices. can occur on a piecemeal basis(e.g., (TSCA). Rather, the prescriptive HUD considered imposing an kitchens one year, bathrooms another), standards in proposed part 37 were to immediate effective date because the the final rule, like the proposed rule, apply only when such activities were • statutory effective date of January 1, adds the requirements of strategy four, performed by individuals who were not 1995 had already passed and because of risk assessment and interim controls, certified in accordance with EPA the risk to the health of children from 50154 Federal Register/Vol. 64, No. 178/Wednesday, September 15, 1999/Rules and Regulations a further delay in implementing these project-based rental assistance, abatement," used to mean"any set of requirements. On the other hand, HUD properties that are receiving Section 8 measures to permanently eliminate noted that program administrators at all assistance on or after the effective date lead-based paint hazards."This should levels of government, as well as of this rule Must comply. In the case of be the "maximum requirement" of the property owners and contractors competitively awarded grants under the rule. While abatement of intact lead- performing lead-based paint activities, HOPWA, Supportive Housing, and based paint would always remain an would not have adequate time for Shelter Plus Care programs, the option, it need not and should not be education, training, planning and requirements apply to grants awarded required.the commenter urged. budgeting to implement fully the new pursuant to NOFAs issued on or after The same commenter urged that the technical standards, requirements and October 1, 1999. For formula grants definition of abatement should not procedures with an effective date earlier under HOPWA, the requirements apply include reference to lead-based paint than proposed. to activities for which program funds (i.e., intact paint). By doing so, there is After thorough consideration of these are first obligated on or after September a deviation from the definition of varying points of view HUD has decided 15, 2000. Subpart I states that HUD- abatement in Title X itself. Failing to to retain the proposed 12-month time owned multifamily properties and make the distinction between intact LBP period following publication for a properties for which HUD is mortgagee- and lead hazards is likely to "recreate phasing in of the effective date of the in-possession must comply with the * * * the scenarios that Title X was final rule,with one exception:the rule if they are offered for sale or held supposed to end: Paralyzed non- prohibition of certain methods of paint or managed by HUD on or after the compliance because of the costs and removal or surface preparation set forth effective date of this rule. Subpart J, burdens of performing abatement of in§35.140 shall be effective 60 days pertaining to rehabilitation assistance, non-hazardous intact LBP." after publication of this final rule. In includes program-specific information A commenter who felt the rule didn't addition, designated parties may choose on the effective date for projects funded stress abatement enough was "troubled to comply with the requirements of this under the HOME program,the by the rule's implicit acceptance that it final rule before the effective date, Community Development Block Grant is infeasible to abate lead paint from instead of complying with existing (CDBG) programs,the Indian Housing housing."Arguing that the societal requirements,if they desire and Block Grant (IHBG) program,HUD- returns more than justified the cost,the provided there is not a programmatic administered homelessness assistance commenter declared that the obstacles limitation that would preclude such an programs, and the Indian Community to abatement as a predominant policy action. Development Block Grant program. were"not economic, but political." The exception to the 12-month phase- Project-specific effective date policies HUD agrees that abatement should be in policy is appropriate for prohibited for housing subject to subpart K, targeted toward hazards,not the mere practices.These are already well Acquisition,Leasing, Support Services, presence of lead-based paint, except in known: many are in HUD's current or Operation,are the same as for subpart public housing,where lead-based paint regulations and guidance and are J.With regard to public housing,subpart abatement is required by statute,and for prohibited by the EPA final rule on L states that all housing to which the conversions and major rehabilitation training and certification,which was subpart applies is covered by the rule as projects seeking HUD/FHA multifamily published on August 29, 1996.Many of the effective date of this final rule. mortgage insurance.The final rule States already prohibit these practices, Finally,subpart M,which pertains to defines abatement accordingly but and other safer paint removal methods tenant-based rental assistance,states retains the existing lead-based paint are well known. (See Section III.E.2.g. of that housing receiving such assistance abatement requirements for public this preamble.) becomes subject to the requirements of housing.The legislative history of Title One commenter requested this rule at the time of an initial or X shows that Congress did not intend clarification of the effective date's periodic inspection that occurs on or for the existing public housing program impact on pre-rule lead-based paint after the effective date of this final rule. requirements to be changed. control activities already undertaken (The initial or periodic inspection 2. Cost of Compliance.Many and partially completed, and urged that referred to in the previous sentence is commenters—particularly State and it be made clear that this ongoing work the inspection conducted by the public local funded agencies,housing could be carried forward after the housing agency (PHA) or other developers,and their national and effective date "without revision."The administering agency to determine regional spokespersons—expressed Department's policy on this matter , whether the housing unit meets the serious concerns about the rule's cost. varies somewhat from program to requirements of the program. It is not a While many suggestions for change in program, because of differences in lead-based paint inspection.) details of the rule were provided by regulations and administrative these commenters, the tenor of their procedures. Therefore the applicability D. Other General Issues comments was not so much against the sections of subparts F through M 1. Policy on Abatement.Some rule as against the idea of carrying out include statements specific to each commenters saw in the proposed rule an its mandate without separate funds program.In subpart F, pertaining to undue emphasis on abatement,as earmarked solely for that purpose. HUD-owned single family housing, any opposed to more limited lead hazard Some commenters felt that HUD had property to be sold with a HUD-insured control measures. "As such," one grossly underestimated the costs of mortgage and which is offered for sale organization declared, "the rule appears compliance and that these costs,in on or after the effective date of this final inadequately protective of children's many circumstances,would divert rule must comply with the requirements health,and unlikely to realize the full already-limited funding from its of the rule. In the case of subpart G, benefits predicted by the Economic principal purpose of providing shelter. pertaining to multifamily mortgage Analysis as justification for the costs of Rural housing suppliers,especially, insurance, any property for which a compliance."Abatement should not be lamented the anticipated problems the HUD or FHA commitment is made on or a defined term in the rule, nor used at rule would bring. One commenter after the effective date must comply all, this commenter stated.The expressed the fear that the rule would with the rule.With regard to subpart H, recommended term was "hazard "severely hamper rehabilitation in rural, Federal Register/Vol. 64, No. 178/Wednesday, September 15, 1999/Rules and Regulations 50155 small communities and would In response to these comments,HUD the 1995 report of the Task Force on potentially drive the cost of doing does not believe that the childhood lead Lead-Based Paint Hazard Reduction and business so high that many poisoning problem has been Financing (Task Force),which was a communities may decide that it is "overblown," in light of the results of Federal advisory committee appointed simply not worth it to try and repair the National Health and Nutrition by the Secretary of HUD pursuant to existing, older substandard housing." Evaluation Survey (described in Section section 1015 of Title X. Some commenters suggested that the II.A of this preamble, above) showing Two recommendations of particular dangers of lead paint were exaggerated that approximately 900,000 children interest are the standards or procedures or that local health department controls still have blood lead levels equal to or referred to as "essential maintenance were adequate to locate children with greater than 10 µg/dL, the CDC level of practices" and"standard treatments." high blood lead levels and cope with the concern.HUD also disagrees that the These procedures were directed toward problem on a case-by-case basis. rule should impose requirements only rental housing. Essential maintenance Other public agency commenters were on units housing young children.HUD practices are the steps the recommended more positively disposed toward the believes that it is not practical in most • steps that a landlord should take to goal of preventing childhood lead housing programs to expect managers to reduce the risk of childhood lead poisoning before a child is poisoned, know when children are or are not poisoning in pre-1978 dwelling units instead of waiting until the damage has residing in particular units,especially and associated common areas. Standard already been done, but still worried in light of the significant resident treatments are more aggressive measures about funding.Typical of these turnover rates and inconsistencies in ' to assure that possible lead-based paint comments was that of a middle sized program administration among hazards are controlled in older housing. city with an active lead-hazard control comparable units receiving comparable These procedures were not incorporated program. Calling the rule (and Title X) Federal assistance.Title X holds that it by name in the proposed rule, although an"unfunded mandate,"the commenter is far better to identify and correct lead- many of their elements or concepts were cited the staff costs associated with the based paint hazards before a child is included. rule's monitoring expectations, calling poisoned. Such prevention is especially In the final rule, HUD is requiring that them unrealistic: "If additional funds important,because some effects of lead all rental housing which has a were provided for hard and soft poisoning appear to be irreversible.The continuing financial or regulatory rehabilitation as well as staff costs, this one exception to this policy is in the involvement with HUD must be [rule] would be a good policy initiative tenant-based rental assistance programs, maintained in a manner similar to that that we could fully support and in which income certification recommended in the Task Force's implement.However,without requirements facilitate the. essential maintenance practices. Also, additional funds, * * * it presents a determination of childhood occupancy the Department has adopted the concept major problem for cities trying to and for which there is legislative history of standard treatments, as set forth in address an overall need for affordable indicating Congressional concern that the Task Force report, as an option to housing." lead-based paint requirements could the basic requirement of a risk A frequent suggestion was that the deter landlords from program assessment and interim controls. This rule would cause "redundant and participation. option is set forth in§35.120(a). unnecessary" lead-based paint work to With regard to the cost of the Clearance testing is required after be performed.The focus, these rehabilitation requirements, it is standard treatments as well as interim commenters argued,should be on important to note that the requirements controls. reducing and controlling lead hazards in of the rule are limited for housing Another Task Force recommendation units occupied by small children or receiving up to and including$5,000 mentioned favorably by some children who had already been lead per unit in rehabilitation assistance. commenters is the "lead hazard control poisoned. Also, the option to perform standard plan,"which is a plan to be developed A major housing industry treatments instead of a risk assessment by a property owner that lays out when organization asserted that the proposal and interim controls may reduce costs and where certain hazard control contains unnecessary impediments to in certain situations. (See further measures will be conducted within a the performance of paint repair work discussion below in Section III.E.10 of residential property.The plan allows an and interim control tasks by employees this preamble.) HUD intends to work owner to prioritize the work and of owners and managers, or by the closely with local housing and undertake the most important tasks or owners themselves, and urged the community development agencies to dwelling units first, followed by lower Department to eliminate these wherever further develop ways to efficiently meld priority work later, as for example at . feasible. lead-based paint hazard reduction with apartment turnover.The proposed rule One commenter, a municipal health rehabilitation. did provide for a hazard reduction plan department lead poisoning prevention With regard to the public housing • for multifamily properties receiving program, predicted that the proposed program,HUD does not believe that more than $5,000 per unit in HUD rule's changes would"seem daunting" long-term annual cost increases will be project-based assistance. to community-based agencies at first. significant, although there will be one- Although the lead hazard control plan The commenter generally agreed with time risk assessment and interim control was intended to provide property the rule's approach and predicted that costs in the short term for some housing owners with flexibility in scheduling compliance costs would be "minimal." agencies.HUD encourages public lead-hazard control work, many The commenter said, however, that housing agencies to schedule commenters perceived the plan "government support and leadership to completion of abatement of lead-based requirement as "red tape" of limited ensure that training, inspection/risk paint in order to put this issue behind value and questioned whether HUD assessment services, and dust wipe them. would have the staff resources and resources are available and sometimes 3. TUse of Task Force expertise to review and approve such subsidized could prove to be Recommendations. Numerous plans on a timely basis.HUD shares instrumental in effective commenters called upon HUD to assure these concerns and, in the interests of implementation." that the rule maintain consistency with regulatory streamlining, has decided to 50156 Federal Register/Vol. 64, No. 178/Wednesday,.September 15, 1999/Rules and Regulations delete the plan requirement.The during abatement on surfaces totaling Such requirements have existed in Department continues to believe that it no more than 2 square feet per room or current HUD regulations for many years. would be a useful document for 20 square feet on exterior surfaces.This In the final rule, as in the proposed rule, property managers, especially those de minimis exemption is separate from they are included in the subparts with responsibility for large multifamily the safety-related exception allowing pertaining to project-based rental developments. and encourages owners dry scraping in conjunction with the use assistance, disposition of HUD-owned to develop such plans.The American of heat guns or within 1 foot of electrical and mortgagee-in-possession Society for Testing and Materials outlets: that is. the area covered by the multifamily housing, public housing, (ASTM,West Conshohocken,PA safety-based exception is not part of the and tenant-based rental assistance. 19428-2959) has developed a Standard area covered by the safe work practices Commenters addressing EBL-related Guide for Evaluation,Management, and de minimis exemption). requirements raised several different Control of Lead Hazards in Facilities, 5. Distinction Between HUD Programs concerns:The measurement standards and is developing an accompanying and Those of Other Federal Agencies. that trigger environmental intervention, user guidebook.These materials can Several commenters asserted that the the terminology used to refer to such a provide the basis for developing a lead rule distinguishes between HUD- level, information exchange hazard control plan.They are assisted housing and that assisted by requirements between housing particularly appropriate for owners of other Federal agencies without any authorities and health departments, multifamily dwellings. statutory basis and without providing hazard control requirements for units 4.De Minimis Exceptions.The any justification.The Department's occupied by young children with an proposed rule included de minimis response is that, although the Secretary EBL condition, reoccupancy levels of paint deterioration, consistent is given authority to develop regulations requirements for dwelling units that with the HUD Guidelines,below which for other agencies (with respect to were previously occupied by an EBL no action would be required.These de project-based assistance and Federally- child but have not undergone evaluation minimis levels were defined as riot more owned property),HUD cannot and or hazard reduction, relocation than 10 square feet of deteriorated paint should not make lead-based paint policy requirements, and the potential for on an exterior wall;not more than 2 decisions for other agencies beyond discrimination by landlords against square feet on an interior component what is set forth in Title X.HUD does families with young children generally with a large surface area including,but not have the knowledge of other and EBL children in particular. not limited to,interior walls, ceilings, agencies' housing programs that is In the proposed rule. HUD defined floors and doors;or not more than 10 necessary to draft detailed lead-based "elevated blood lead level (EBL) . percent of the total surface area on an paint regulations for all other Federal (requiring the evaluation of lead interior or exterior component with a agencies, and achieving consensus hazards)" as meaning"an excessive small surface area including,but not among all agencies on such regulations absorption of lead that is a confirmed limited to,window sills,baseboards and is unlikely.The sections concerning concentration of lead in whole blood of trim. HUD project-based assistance and HUD- 20 µg/dL (micrograms of lead per Commenters objected to the de owned property, therefore,should deciliter of whole blood) for a single minimis levels on four grounds: (1) That remain separate from the sections venous test or of 15-19 µg/dL in two the de minimis exception is arbitrary provided for other agencies.Other consecutive venous tests taken 3 to 4 and not supported by science; (2) that Federal agencies can be expected to months apart."One commenter argued the levels are too large, potentially develop their own regulations or that HUD should not use a standard allowing a total of over ten square feet guidance, using HUD's regulations as a other than 10 µg/dL,which is the basic of defective paint per room (counting starting point. CDC level of concern,because it is four walls plus a ceiling plus small 6. Response to Children with Lead "illogical to take no action when we components); (3) that some owners or Poisoning.The Department's primary know a child is poisoned* * * but inspectors may use the de minimis focus in this rule is on prevention of instead to wait until the child is more exception as an excuse for overlooking childhood lead poisoning,not on case poisoned," and because defining an EBL hazardous conditions; and (4) that it is management of children who have at a level higher than that known to likely to shift the attention of workers already been poisoned.Title X cause adverse effects will create from the importance of practicing lead specifically calls for the identification potential liability for public housing hazard control and maintaining painted and correction of hazards in all housing. authorities and assisted owners. surfaces in a lead-safe manner to Nevertheless,HUD feels special HUD has consulted again with CDC measuring the size of defective paint , requirements are needed for lead- and has concluded, as it did prior to surfaces in order to document that poisoned children who have already issuance of the proposed rule, that CDC surfaces fall above or below the de been poisoned by lead-based paint did not and does not intend to minimis level. hazards. HUD cannot ignore the recommend a full home inspection or HUD acknowledges the merit of these possible connection between a child's assessment in response to blood lead comments,and after careful blood lead level and the condition of the levels below 15 µg/dL. CDC advises that consideration has decided to eliminate dwelling unit where the child lives, a blood lead level of 10-14 µg/dL the de minimis exception for particularly in view ot research on the should trigger monitoring, certain deteriorated paint from the final rule. relation of dust-lead to blood-lead levels parental actions; and perhaps All deteriorated lead-based paint (either (see Section III.E.15.b of the preamble, community-wide education,but not known or presumed to be lead-based below).Therefore,in housing where the hazard control in an individual child's paint) must be addressed.This will Federal Government maintains a home.CDC recommends follow-up simplify the rule's implementation continuing financial or ownership blood lead testing of such children in considerably.HUD did retain, however, relationship, requirements were about 3 months, the provision of a de minimis exemption for safe work included in the proposed rule to information to parents on lead hazards, practices and clearance,which is evaluate and reduce lead-based paint nutrition and housekeeping if consistent with the EPA provision at 40 hazards when a child with an elevated appropriate, and the taking of an CFR 745.227(e)that allows dry scraping blood lead level (EBL) is identified. environmental history to try to identify 1 Federal Register/Vol. 64, No. 178/Wednesday, September 15, 1999/Rules and Regulations 50157 an.obvious source of lead exposure care providers where judgment is intervention blood lead levels in (CDC 1997), required in interpreting this definition. particular,These comments ranged from EPA noted that it is confusing to Another issue is how best to make suggestions to penalize the landlords define the term"elevated blood lead housing agencies aware of when there is involved to indications that, in the level" or"EBL" differently than normal a child with an environmental absence of funding assistance, it was usage.The agency pointed out that CDC, intervention blood lead level living in a unfair to "penalize (owners) for in their 1997 screening guidelines, uses dwelling unit under tenant-based rental participating in the Section 8 (Voucher the term to refer 10 µg/dL or greater and assistance or under another program to and Certificate) Program in a way not that most public health agencies and which the requirements of subpart M of required of owners in the private others in the field of lead poisoning this rule apply.The proposed rule market." (Emphasis in original.) In prevention do the same. HUD agrees required that, to the extent practicable, response, HUD believes that the that this is potentially confusing and the housing agency or other environmental intervention blood lead has therefore substituted in the final administering agency would attempt to level requirements in this rule are not in rule the term"environmental obtain annually from the State or local fact fundamentally different than those intervention blood lead level" to replace health department the names and covering private-sector owners who do "elevated blood lead level"or"EBL" addresses of children less than age 6 not receive subsidies. Local ordinances when the latter terms refer to the blood identified with environmental often permit health or housing lead level requiring evaluation and intervention blood lead levels.The departments to order lead hazard hazard reduction of the child's home. housing agency was then required to control work in any home where an One State public health department match this information with the names environmental intervention blood lead urged HUD to modify the rule's and addresses of families receiving level.child is identified.For an standards for determining when Federal assistance.If a match occurred, explanation of the antidiscrimination environmental intervention is needed. the agency was to require a risk provisions of the Fair Housing Act,see Requiring tests showing two blood lead assessment and interim controls in the Section IV.D.7 of this preamble. levels of 15-19 micrograms per deciliter child's home.These requirements are The Department has concluded that it in consecutive tests three to four months similar to those currently in HUD is very important that local housing apart is "problematic," the commenter regulations pertaining to tenant-based agencies know when there is a child said, because many children do not get rental assistance.They were issued in with an environmental intervention follow-up tests at the required three-four response to the United States General blood lead level residing in an assisted month interval,but rather more Accounting Office report entitled unit and that owners comply with frequently—or less.Two tests showing "Children in Section 8 Tenant-Based requirements designed to make the units levels of 15 or higher, whether or not Housing are not Adequately Protected" free of lead-based paint hazards. It is consecutive, and whether or not at a (GAO/RCED-94-137,May 13, 1994). well known that,while local health fixed time interval,should be adequate The intent of this requirement is to departments chiare een,le toey dentoften do not to identify the child, and it is important ensure that families with young poisoned that the rule not define the test intervals children that receive tenant-based rental have the resources to correct the cause. too strictly.It is not in the best interests assistance are obtaining housing free of HUD is making, therefore, the of the child to recognize test results that lead-based paint hazards. At the same following changes to the requirements come in only at precise intervals, the time, the CDC is urging local public pertaining to exchange of information commenter said. A child may have two health departments to provide on environmental intervention blood tests of 15-19 µg/dL, but because of environmental intervention blood lead lead( )levvel on conditions:g agency or other local seasonal variations in lead exposure, the level-related information to housing agency administering tenant based high-level results may not be agencies. at consecutive. At least two commenters A few commenters indicated that they rental assistance tuf ta atte l p as ine the recommended that this standard should had encountered difficulty in securing quarterly (instead be consistent with CDC guidance. the cooperation of health authorities in proposed rule) to obtain from the State HUD agrees.In the final rule,the making these records available because or local public health department, or the Department has defined environmental of the authorities' concerns about the Indian Health Service as applicable,the intervention blood lead level to conform privacy of medical information.While names and/or addresses of children of to the new guidelines by CDC issued in these access problems can be overcome, less than 6 years of age with 1997 (CDC 1997b). The revised one commenter said, by securing a environmental intervention blood leadlevels.This change is beingmade to definition is "a confirmed concentration release signed by the child's parent or g of lead in whole blood equal to or guardian,there are other concerns assure that poisoned children will greater than 20 µg/dL (micrograms of besides the question of invasion of receive help on a more timely basis.The lead per deciliter) for a single test or of privacy.If the agency administering the Department encourages health 15-19 µg/dL in two tests taken at least tenant-based assistance program has departments and housing agencies to 3 months apart."This revision removes information concerning the voluntarily enter into agreements to the word, "consecutive," and allows for environmental intervention blood lead exchange information more frequently, nonconsecutive readings that are more level status of a family's children and e.g., monthly.especially in jurisdictions than 3 months apart.The final rule has the information is disclosed to potential in which childhood lead poisoning is a also removed the requirement that blood landlords, the information"becomes a frequent occurrence in housing lead levels be determined only by barrier for the family in its housing occupied by families receiving tenant- venous blood specimens.This decision search," because some landlords may based rental l assistance. siLne. basis, the is best left to the child's health care illegally refuse to rent to the family. (2) quarterly provider,and may be affected by Several other commenters expressed housing agency or other local agency technological advances.HUD expects concern about the potential for housing administering the tenant-based rental housing agencies, grantees,property discrimination against families with assistance must provide health owners, and other parties to which this children in general, and those with departments with addresses of assisted rule applies to rely on medical health children with identified environmental units (as well as attempt to obtain ` 50158 Federal Register/Vol. 64,, No. 178/Wednesday, September 15, 1999/Rules and Regulations addresses of environmental intervention information is brought to the agency by would further make it inadvisable to ask blood lead level children from the a party other than a medical health care questions about EBL status, pregnancy, health department), except that such a provider.In response, the Department is or intentions to become pregnant. report to the health department is not including a provision requiring Restrictive covenants against children, required if the health department states verification of such data with the public including EBL children, are also illegal. that it does not wish to receive it. health department or other medical Therefore, no renter or buyer may be (3)The address match may be done by healthcare provider. If it is verified that asked to sign a statement that a child, either the housing or the health agency. a child has an environmental or EBL child, is not expected to reside HUD's intent is to encourage workable intervention blood lead level, the in the dwelling. Owners of rental cooperative arrangements between the agency,owner,or HUD (as the case may housing may eliminate lead-based paint two types of agencies for the purpose of be) must complete a risk assessment and hazards in a percentage of units and matching environmental intervention conduct interim controls of identified hold those units available for families blood lead level and housing assistance hazards. with children and affirmatively market information on a timely basis. 7.Fair Housing Requirements.Several them to appropriate families. An owner With regard to the evaluation and commenters expressed concern about may also tell families of the danger of hazard reduction that must be done if a the potential for housing discrimination moving into a unit which has not been child with an environmental against families with children in treated and recommend an alternative intervention blood lead level is found to general,and those with children with comparable unit.In no case may an be residing in a HUD-assisted or HUD- environmental intervention blood lead owner refuse to allow a family to owned unit, the final rule sets one levels in particular.Therefore HUD is occupy the unit, however, because of uniform requirement far all programs: providing the following discussion of the presence of a child or require that risk assessment and interim controls, the application of the Fair Housing Act a family move because lead is found. followed by ongoing lead-based paint and other laws pertaining to persons Laws against discrimination will be maintenance.One commenter with disabilities to lead-based paint enforced by HUD. complained that the proposed rule issues. Title II of the Americans With failed to require anything beyond The Fair Housing Act prohibits Disabilities Act (ADA) establishes a interim controls—a standard, the discrimination in housing based on commenter said,that is "too low and race, color, national origin, religion, sex, clear and comprehensive prohibition ineffective in the face of a poisoned disability, and familial status. Familial against discrimination on the basis of child." Current information shows that status,for purposes of the Fair Housing disability in State and local government interim controls are as effective as Act,includes children under 18 services. Section 504 of the abatement methods in the short term (regardless of age or number),pregnant Rehabilitation Act of 1973 provides for and will continue to provide adequate women,and people seeking custody of nondiscrimination against persons with protection if continuing maintenance children under 18. Only providers of disabilities in Federally-assisted standards are met(National Center housing that meets the specific housing. Both laws define a person with 1998).In the final rule, ongoing lead- definition of housing for older persons a disability as any person who has a based paint maintenance is required in may refuse to rent to families with physical or mental impairment that all HUD housing programs for which children. Children with elevated blood substantially limits one or more major there is also a requirement that interim lead levels and persons with Multiple life activities, has a record of an controls be conducted in response to a Chemical Sensitivity(MCS)may fall impairment, or is regarded by others as case of a child with an environmental under the definition of persons with having such an impairment. Under both intervention blood lead level.To ensure disabilities.Among the actions laws, EBL children and persons with that these requirements are not avoided, prohibited under the Fair Housing Act MCS may fall under the definition of the rule states that the requirements are any action which differentiates on a persons with disabilities.Among the apply regardless of whether the child prohibited basis for any of the actions prohibited'under Title II of the with the environmental intervention following: Refusal to rent or sell ADA and Section 504 are those which blood lead level is or is not still living housing;refusal to negotiate for discriminate, on the basis of disabilities, in the assisted unit. Furthermore, it is housing;making a dwelling unavailable; in Federally-assisted programs,services, HUD's intent that the requirements denying a dwelling;providing different and activities.Such actions include a apply to the unit even if no child of less housing services or facilities;falsely refusal to (1) allow participation in a than six years of age resides in the unit, stating that housing is not available for program,service, or activity; (2) provide because the requirements were triggered ' inspection,sale, or rental; refusing to programs, services and activities in an when a child was in residence.Also,if make a mortgage loan;imposing integrated setting, unless separate or a public health department performs the different terms or conditions on a loan; different measures are necessary to evaluation of the dwelling unit or, after setting different terms, conditions, or ensure equal opportunity; (3) eliminate the hazard reduction work is performed, privileges for sale or rental of a unnecessary eligibility standards or certifies the unit to be lead safe, it is not dwelling;segregating a portion of the rules that deny an equal opportunity to necessary for the housing agency or population into special buildings or enjoy a program,service or activity other designated party to perform those areas; maintaining different lease unless "necessary" for the provisions of functions.Finally, in the case of conditions; and advertising or making the program, service or activity; (4) housing to which subpart M (tenant- any statement that indicates a limitation make reasonable modifications in based rental assistance) applie , if the or preference based on any prohibited policies, practices, and procedures that hazard reduction is not performed, the basis of the Fair Housing Act. deny equal access, unless a fundamental unit does not meet Housing Quality Based on this law, it is illegal for alteration in the program would result; Standards. owners of housing to discriminate (5) make reasonable accommodations, Some local housing agencies have against families with children,or EBL unless an undue burden or fundamental asked for guidance on what their children, even if the unit is known to alteration would result, e.g., furnish response should be to information on a have lead-based paint hazards.The auxiliary aids and services when child's blood lead level if the prohibitions of the Fair Housing Act necessary to ensure effective s. Federal Register/Vol. 64, No. 178/Wednesday, September 15, 1999/Rules and Regulations 50159 communication(e.g., interpreters,or level child be conducted by a certified soil testing in public housing be accessible formats,such as braille, large risk assessor. conducted by personnel certified in print,or audio cassette) and/or provide Certification requirements in the accordance with an EPA-authorized notice to and relocate residents with proposed rule were somewhat different State or tribal program or EPA MCS prior to removing lead-based paint for interim controls than for abatement. regulations, a provision that is also in hazards with harmful toxic chemicals; Recognizing that the EPA regulations do accordance with many State laws. Also, and (6) operate programs so that,when not cover interim controls, HUD dust testing in housing assisted through viewed in their entirety, they are readily proposed that all workers performing tenant-based rental assistance will not accessible to, and usable by, individuals interim controls be trained in be required at the evaluation stage,so with disabilities. A covered housing accordance with the basic Occupational the qualification issue for that function provider must not impose special Safety and Health Administration is no longer relevant; but clearance of charges to pay for measures necessary to (OSHA) hazard communication the dwelling unit (or, in some cases, ensure nondiscriminatory treatments, standard at 29 CFR 1926.59 and only the worksite) will be required if such as relocation expenses when supervised by a certified abatement paint stabilization, interim controls or necessary to remove lead-based paint supervisor. abatement is required. See the hazards. or making modifications to Comments on the qualifications discussion below of the authority of provide accessibility.Finally, it is requirements dealt with five issues: (1) trained technicians to perform clearance unlawful under these laws for a covered Whether housing agency personnel had examinations. housing provider to make inquiries into to be certified to perform dust and soil There was much concern among the nature and severity of a person's testing; (2) the availability of qualified .commenters about the availability of a disability,although that information personnel and firms, and temporary qualified (and affordable) work force of may be volunteered when a reasonable qualifications in case of an inadequate persons certified (or otherwise accommodation is requested. supply of certified personnel; (3) adequately trained) to perform the 8. Qualification Requirements.The qualification requirements for interim necessary work called for in the rule. proposed rule required that most lead- controls; (4) the independence of the Rural housing suppliers claimed such based paint inspections,risk clearance examiner; and (5) the trained people would have to be assessments and abatements be authority of a trained technician to imported from far away—and at conducted by individuals or firms that perform clearance examinations. premium rates.There were also calls for are certified in accordance with national EPA objected to the exemption of reciprocity for State-approved training EPA requirements for lead-based paint public and Indian housing authorities programs until the EPA-approved activities developed pursuant to from certification requirements related programs are implemented. sections 402 and 404 of the Toxic to dust and soil testing.EPA did not HUD expects that most States will Substances Control Act (TSCA). EPA accept HUD's rationale for suggesting have EPA authorized certification published a final rule on August 29, that noncertified personnel could programs by the effective date of this 1996 that takes full effect on August 29, perform lead-based-paint-related rule.Those that do not will be covered 1999.After that time, all lead-based functions for public and Indian housing by the EPA certification program paint inspections, risk assessments, and agencies,other than under emergency directly. After August 29, 1999, abatements nationwide will have to be circumstances. On the other hand, inspections, risk assessments and conducted in accordance with the EPA another commenter said he was abatements must be done in accordance work practices standards at 40 CFR "pleased" that dust testing would be with the standards of EPA or an 745.227 or State or tribal standards that permitted in that program by non- authorized State or tribal program. have been authorized by EPA under licensed Housing Quality Standards • While this fact does not in itself procedures set forth at 40 CFR part 745, (HQS) inspectors trained in lead-hazard eliminate the possibility that there will subpart Q. Recognizing that there might evaluation.The commenter be shortages in the supply of certified be temporary limitations on the supply recommended that"non-licensed, but personnel for inspections, risk of certified personnel,HUD proposed to trained" rehabilitation inspectors assessments and abatements in some provide for the possibility of temporary similarly be allowed to accomplish parts of the country, it increases the qualifications. clearance testing in the funded likelihood that the certification The proposed rule included two rehabilitation programs. A public mechanisms will be in place in most of apparent exceptions to this general interest commenter remarked that"HUD the nation when this rule becomes certification requirement.Public and should begin the process of educating effective.At the time of this writing, 37 Indian housing agencies ("HAs") these workers at once,so that a qualified States have already enacted lead-based conducting dust and soil testing for work force is available when the paint hazard control laws. In the final . public and Indian housing were not requirements go into effect." rule, the Department has made one required to be certified in accordance A local funded agency indicated that change to the qualifications with the EPA requirements.The its State law would not allow Section 8 requirements that may result in Department pointed out that HAs were housing inspectors to perform increased availability of persons required to complete lead-based paint inspections requiring dust wipes,and qualified to perform clearances. See the inspections by December 6, 1994, and the agency went on to say that licensure discussion below of the authority of that many HAs have already taken the for inspectors costs $250, renewable technicians to perform clearance initiative to conduct risk assessments in every two years, and that risk examinations. housing projects. Further,HUD did not assessment training ran to $300 per The Department intends to monitor extend the certification requirement to person. Costs to housing authorities, the availability of qualified personnel. dust testing conducted by HAs for the and to landlords, for importing licensed One source of information is likely to be Section 8 tenant-based rental assistance personnel to perform inspections and the "Lead Listing," a nationwide listing program.The Department, however,did assessments were regarded as of inspectors and risk assessors require that a risk assessment conducted prohibitive by the commenter. developed by the National Lead in response to an identified The Department has decided to Assessment and Abatement Council environmental intervention blood lead require in the final rule that dust and (NLAC) with HUD assistance.The . 50160 Federal Register/Vol. 64, No. 178/Wednesday, September 15, 1999/Rules and Regulations "Lead Listing" can be accessed by HUD agrees that persons performing perform the work themselves.The calling 1-888-LEADLIST (this is a toll- interim controls should be prepared to "independence" provision would make free number) or can be found on the protect themselves and the occupants this impossible.The commenter Internet at www.leadlisting.org.HUD from exposure to lead,should know recommended, first, eliminating the notes the constructive suggestion by one how to protect interior and exterior clearance testing requirement for hazard commenter that such monitoring should environments from contamination and reduction work involving only"basic be done in cooperation with the States, how to clean up the worksite, and interim controls." A second solution as is being done with the development should understand the importance of an would be to remove from the quoted and maintenance of the Lead Listing. independent clearance examination.In provision the words "paid" and "or HUD would also expect to coordinate the final rule,HUD is requiring that otherwise compensated", so that with EPA in the development of such persons performing interim controls, clearance testing by employees and information and in determining whether including paint stabilization, be trained affiliates of a contractor would be any further Federal response is needed. in lead hazards in accordance with prohibited, but the owner could retain One national organization questioned OSHA regulations at 29 CFR 1926.59 an independent, certified risk assessor the requirement that workers and either be supervised by a certified to perform the clearance testing work. performing"interim control treatments" abatement supervisor (the requirement HUD agrees that a property owner or be supervised by a certified abatement of the proposed rule) or successfully manager should be able to employ both supervisor.Arguing that the definition complete one of the following training hazard reduction and clearance of"interim controls"was too broad, the courses: (1) An accredited abatement personnel.The final rule requires that commenter recommended breaking the supervisor course; (2) an accredited clearance examinations and hazard definition down so that"painting, lead-based paint worker course; (3) the reduction activities be conducted by maintenance and similar routine tasks" Lead-Based Paint Maintenance Training entities that are independent of each could be performed without a certified Program,developed by the National other unless the owner or designated supervisor. Such a change, the Environmental Training Association for party uses qualified in-house employees commenter said,would be in accord EPA and HUD; (4) the Remodeler's and to conduct clearance.The final rule, with Congress' intent that certification Renovator's Lead-Based Paint Training however,does not permit the same requirements not be imposed on interim Program, prepared by HUD and the individual employee to conduct both control workers, and the change would National Association of the Remodeling hazard reduction and clearance, due to decrease routine property maintenance Industry (NARI);or (5) another course the clear conflict of interest this would costs.A similar complaint was directed approved for this purpose by HUD after pose. Aat the requirement that the appropriate consultation with EPA.HUD intends mentioned,HUD has made a worksite preparation be determined by that any person performing hands-on, change in the final rule that may a certified risk assessor, abatement interim controls work on the worksite in increase the availability of persons supervisor or planner/designer.The compliance with the final rule must qualified to perform clearance commenter feared that the rule could be have satisfied one of the optional examinations, and thus may reduce the construed as requiring professional requirements. With regard to the OSHA cost.The proposed rule required that worksite design for"mere paint repair training requirements,OSHA clearances be performed by either a work and for such basic interim control regulations at 29 CFR 1926.62 require certified risk assessor or a certified lead tasks as rehanging of doors. , ." and that workers exposed to airborne lead based paint inspector. One group of asked that the rule be clarified to below the OSHA action level of 30 µg/ commenters urged thata technician eliminate the worksite preparation cu.m. be trained under the hazard with less traininngg d thann a risk assessor or rm requirement for interim control work. communication construction standard, clearancenspector in situationsed whereto perf interim Noting that the Task Force had which is at 29 CFR 1926.59.If airborne clearances lead-based-ba haads r recommended a one-daytrainingcourse lead is at or above the action level, ongoingontrols lead-basedo paintpa mnt intenan e ongoing maintenance for maintenance supervisors, one OSHA requires a more complete has been conducted.These commenters commenter advocated HUD/EPA training program.Workers performing argued that the skills needed for the cooperation in developing a short interim controls of lead-based paint clearance function are modest compared course geared for maintenance workers hazards are not expected to be exposed to those required for lead-based paint that is inexpensive, requires one day or to airborne lead above 30 µg/cu.m. inspections or risk assessments and, less to complete, and is frequently Therefore the final rule states that the further, that the speed and affordability offered. Other commenters endorsed the required training must be in accordance of clearance is of critical importance to short training course idea.The idea was' with 29 CFR 1926.59. the practical workability of the system a popular one, not only among cost- A national housing organization of requirements to be set forth in the conscious funded agencies, but with questioned the language barring a rule. public interest organizations as well. clearance examiner from being In the conference report on the VA- A national environmental group "affiliated with,paid,employed or HUD-Independent Agencies disagreed with the emphasis on limiting otherwise compensated by the entity Appropriations Act for FY 1999,the the occasions for use of expert performing the hazard reduction and Congress urged EPA"to develop a personnel. All hazard control activities, cleanup."The provision assumes,the relevant one-day sampling technician including paint repairs, should be commenter said, that the hazard training course and to encourage the conducted by trained personnel, the reduction work has been performed by recognition of this discipline." As of organization declared. A landlord who an independent contractor.In the case this writing, it is HUD's understanding has permitted paint to become of paint stabilization and interim that EPA plans to develop such a course deteriorated to the point that it presents controls, this assumption will often be and that an important purpose of the a lead hazard is "unlikely to have the incorrect.Where only paint stabilization course will be to train people to perform skills or inclination to perform a paint and simple interim controls are clearance examinations.Therefore, repair in a manner that does not required,it was argued,the rule should anticipating that trained clearance increase exposure,"the group said. permit owners and their employees to technicians may be available,HUD is Federal Register/Vol. 64, No. 178/Wednesday, September 15, 1999/Rules and Regulations 50161 providing in the final rule two ways The Department assumes that the risk HUD recognizes that performance of they could perform clearances following assessor,or lead-based paint inspector clearance examinations by a certified or interim controls or maintenance: first, as would require the technician to work as uncertified technician may not be a technician who is uncertified or an apprentice until the inspector or permissible under some State or tribal unlicensed and whose work must be assessor is satisfied that the technician's regulations, even with the written approved in writingbya certified risk work isof satisfactoryapproval quality, but HUD appro al of a risk assessor or lead-based assessor or lead-based paint inspector: leaves that process and decision to the paint inspector. Where that is the case, or, second, as a technician who is risk assessor or inspector. In the rule, the State or tribal regulation would certified or licensed to perform HUD places no restrictions on the scope apply. HUD also recognizes that EPA clearance examinations without the or scale of clearance examinations that may, in the future, establish certification approval of a risk assessor or inspector. could be performed in this manner. procedures for clearance technicians (or Uncertified or unlicensed clearance HUD is setting a limitation, however, a similar discipline) and, at that time, technicians must have successfully on the authority of a certified or may.make it illegal nationwide for completed a training course on licensed technician who is taking full uncertified technicians to perform the clearance examinations (or similar title) responsibility for the clearance on-site work of a clearance examination. that is developed or accepted by EPA or examination without written approval However, HUD thinks it will be efficient by a State or tribal program authorized of a risk assessor or lead-based paint ,to have trained technicians, certified or by EPA pursuant to 40 CFR part 745, inspector. In this case,the authority not,working with higher level certified subpart Q (the EPA regulations extends, under the HUD rule, only to personnel and encourages other implementing TSCA section 404).The clearances of single family units or regulatory entities to permit it. course must be given by a training 9.Paint Stabilization vs.Paint Repair. individual units and associated P provider accredited by a State,Indian The proposed rule established a common areas in a mult�`unit property. tribe or the EPA for training in lead- The authority does not extend to procedure called "paint repair," which based paint inspection or risk . was a repainting of a deteriorated paint clearance examinations of multifamily assessment. HUD assumes that certified properties, or parts thereof,in which the surface using safe work practices to or licensed clearance technicians would clearance examiner engages in random minimize the generation of dust, protect also be required to complete such occupants and the environment, and sampling of dwelling units and common training. Certification or licensing of areas.In the opinion of the Department, leave the site clean.The procedure was clearance technicians must be by a State it is unlikely that a one day course will widely used in the rule: it was required or Indian tribe or EPA. in the subparts or sections applicable to be adequate to teach all the techniques, With regard to the training course single family mortgage insurance, taken by an unlicensed or uncertified Procedures and judgments required to disposition of HUD-owned single family conduct random sampling of dwelling clearance technician, there are several property (without sufficient units and common areas in large. .. possible arrangements that are multifamily clearance examinations: - ' appropriation.), multifamily'insurRf - acceptable to HUD under this rule. The property, disposition of HUD-owned course can be developed by EPA, or it Under the HUD-final rule, however, and mortgagee-in-possession property can be candevelopedbe bya State or Indian clearance technicians may perform multifamily clearances involving (without sufficient tribe with a program authorized by EPA residential prappropriations), r roperty receiving an pursuant to TSCA section 404.A State random sampling with the written average of less than $5,000 per unit in or Indian tribe may adopt or accept a approval of a certified risk assessor or Federal rehabilitation assistance, CPD course prepared byanother EPA lead-based paint inspector. p p Furthermore, certified clearance non rehabilitation, and tenant based authorized State or tribe. While the rental assistance. technicians may,without written training provider from whom the course Many commenters questioned this approval of an inspector or risk assessor, is taken must be accredited by EPA or procedure.The most common position an EPA-authorized State or tribal conduct clearance examinations of any was a caution against leaving anything program, it is not necessary from HUD's number of individual dwelling units in the rule that implied that"mere point of view that the technician be and associated common areas in overpainting" of surfaces,without trained within the State or Indian nation multifamily properties, provided results addressing the substrate, could ever be where the clearance is being performed from the units and areas in which considered an appropriate course of or by a training provider accredited by clearance examinations are conducted action. A typical comment was the that State or tribe.The ultimate are not used to represent units and areas following: "HUD's final regulations responsibility for quality control rests for which no examination or testing has should require that whenever with the certified lead-based paint been conducted. deteriorated paint is repaired, the cause inspector or risk assessor who approves Under this policy on technicians, of the deterioration must be corrected the work of the technician and signs the people can prepare themselves to and the substrate stabilized." Another clearance report. perform clearances with less investment commenter argued that paint repair,by Under this policy, an unlicensed or in training and equipment than is itself,was "inconsistent with the HUD uncertified but properly trained required to become a risk assessor or Guidelines." clearance technician could perform a lead-based paint inspector.HUD is HUD agrees that it can be ineffective clearance examination on site, prepare hopeful, therefore, that the policy will to try to put paint on a damaged the report, and send the report(by e- contribute to an increased availability of substrate, such as crumbling plaster. mail, fax, or other method) to a certified persons authorized to perform Old lead-based paint on such a surface risk assessor or certified lead-based clearances and a reduction in the cost of could shortly become deteriorated again paint inspector,who may be located in clearances, The policy retains the after repainting. On the other hand, another area.The risk assessor or reliance on a certification or licensing HUD is aware that substrate inspector could review and sign the process. Certification by a State or other stabilization requires case-by-case report and forward it to the client,' entity provides a way to take action judgment in the field as to when taking responsibility for the quality of against fraudulent or otherwise substrate repair is necessary and what the clearance examination and report. unprofessional clearance examiners. extent and method of repair is 50162 Federal Register/Vol. 64, No. 178/Wednesday, September 15, 1999/Rules and Regulations • appropriate.There is reason to be definitions from the HUD Guidelines, the definition of abatement more closely concerned that cautious administrators existing HUD or EPA regulations,and to that in Title X. Also the terms "lead- may sometimes insist on repairs that are from definitions compiled and set forth contaminated dust" and "lead- overly expensive or that others will not by the American Society for Testing and contaminated soil" were changed to correct the underlying problem. Materials (ASTM),West Conshohocken, "dust-lead hazard" and "soil-lead After careful consideration, the PA 19428-2959, in a document entitled hazard" respectively to conform with Department has eliminated "paint "Standard Terminology Relating to terminology being used by EPA in their repair" throughout the final rule and Abatement of Hazards from Lead-Based proposed regulation implementing instead is requiring"paint Paint in Buildings and Related TSCA section 403, which was published stabilization,"which calls for the repair Structures" (ASTM Standard E 1605- on June 3, 1998 (63 FR 30301-55).The of any physical defect in the substrate 94). latter change of terminology has been of a painted surface or component that In most cases public comments on made throughout this final rule; the is causing deterioration of the surface or definitions concerned the scope of the definitions of lead-contaminated dust component. It should be noted that the definition rather than the meaning, and and lead-contaminated soil have been purpose of this requirement is not the commenters wanted the scope to be replaced with definitions of dust-lead complete renovation but merely to try to either expanded or limited.In response hazard and soil-lead hazard assure that the integrity of the to comments, the definition of respectively, and the same substitution repainting will survive for a reasonable residential property was revised in the of terms has been made in the definition period of time.Also,if a substrate is final rule to more precisely define its of lead-based paint hazard. In the being damaged because of a water leak, scope to "a dwelling unit, common proposed section 403 rule, EPA has repair of the leak would be necessary in areas,building exterior surfaces,and adopted the position that"lead- any case to meet housing or building any surrounding land, including contaminated dust"and "lead- codes. In situations in which a costly outbuildings,.fences, and play contaminated soil" are general terms E-.. epai)Aaiay be necessary to stabilize a equipment affixed to the land belonging-- retaingrto dust and soil with varying damaged substrate,designated parties to an owner and available for use by levels of lead concentration but not should always determine through paint residents but not including land used necessarily to levels that are considered testing whether or not the surface has for agricultural, commercial, industrial, hazardous.In the definition of"soil- lead-based paint. Frequently the paint or other non-residential purposes, and lead hazard" in this final rule, HUD is will not be leaded at the Federal not including paint on the pavement of including a de minimis area of bare soil standard of 1.0 mg/sq.cm.,so paint parking lots,garages, or roadways" ' outside of play areas that is not stabilization will not be required under rather than the proposed rule language considered a hazard.To be considered 1 this rule.If the deteriorated paint is of"a dwelling unit, common areas and a soil-lead hazard according to this 1 lead-based paint, the designated party any surrounding land belonging to an definition,spots or areas of bare soil may consider alternative methods for owner and accessible to occupants." outside of play areas must total more controlling the hazard,such as Paint striping on parking lots,garages, than 9 square feet per residential enclosure of the surface. • and roadways will not be covered by property and have a lead concentration 1 E. Subparts this rule. Common area was expanded of an average of equal to or exceeding in scope to mean"a portion of a 2000 micrograms per gram. 1. Subpart A—Disclosure of Known residential property that is available for The term accessible (chewable) Lead-Based Paint Hazards Upon Sale or use by occupants of more than one surface has been replaced with II Lease of Residential Property.This dwelling unit" rather than"generally chewable surface.This was done for two subpart contains the requirements for accessible to occupants of all dwelling reasons: (1)It avoids confusion with the disclosure of known lead-based paint units".Throughout the final rule,HUD use of the word "accessible" in and/or lead-based paint hazards in the has avoided using the term"accessible" regulations and guidance implementing sale or lease of target housing.This joint if its meaning might be confused with the Americans With Disabilities Act HUD/EPA regulation was promulgated that in regulations implementing the (ADA),which is an important law as required by section 1018 of Title X Americans With Disabilities Act. affecting residential real estate;and (2) (42 U.S.C. 4852d), and was originally Hazard reduction was expanded to it substitutes an easily understood term, published at 24 CFR part 35,subpart H. include standard treatments.Paint "chewable," for a somewhat ambiguous Subpart H has been transferred testing was added, replacing the term, "accessible," that might imply unchanged to this subpart A.so the proposed-rule's limited paint inspection "reachable" as well as "chewable."The regulations implementing sections 1012 , for reasons explained below in the substitution of"chewable" for and 1013 of Title X can be published in discussion of options in Section "accessible" was also made in the consecutive subparts B, C,D,F through III.E.2.c.(4) of this preamble. definition of"lead-based paint hazard." M, and R. The publication of the EPA regulation In response to many requests for further 2. Subpart B—General Lead-Based at 40 CFR part 745,subparts L and Q, clarity as to what constitutes a chewable Paint Requirements and Definitions For • significantly affected the definitions surface,HUD has added to the 1 All Programs.This subpart sets out section as it did the remainder of this definition of"chewable surface" a general"requirements for federally ' • regu'laft-nn.The definitions of several statement that, "Hard metal substrates owned residential property and housing technical terms have been deleted from and other materials that cannot be receiving Federal assistance. the final rule,since they were associated dented by the bite of a young child are a. Definitions. In the proposed rule, with the evaluation and hazard not considered chewable." In most HUD used the definitions,where reduction activities now covered by the homes,the only chewable surfaces are possible, that were included in section EPA regulation. likely to be protruding, interior wooden 1004 of Title X (42 U.S.C. 4851b).In In the definition of abatement,the window sills. cases where the statute either failed to statement that"permanent means at A new term, designated party,has define terms, or where the definition least 20 years effective life"was been added to simplify and reduce the was inadequate for'the purpose of a relocated to a separate definition of length of the rule.It means "a Federal regulation, the Department drew "permanent."This was done to conform agency,grantee,subrecipient, f • ' - , Federal Register/Vol. 64, No. 178/Wednesday, September 15, 1999/Rules and Regulations 50163 participating jurisdiction, housing criteria in subpart R, it is not necessary administrative costs (e.g., overhead for agency. CILP recipient, tribe, tribally to conduct a full risk assessment.This administering a rehabilitation program, designated housing entity (TDHE), term,was not defined or used in the processing fees, etc.)." sponsor, or property owner responsible proposed rule, but HUD now believes The definition of HEPA vacuum has for complying with applicable that.the option to conduct such a screen been.made more precise. The proposed requirements."The definition of the should be available,because it is rule definition was "a vacuum with an term dwelling unit has been changed to potentially less costly than and.often as attached high-efficiency particulate air conform to the Title X definition of effective as a full risk assessment, (HEPA) filter capable of removing ' "residential dwelling."The substantive especially in housing built after 1959 particles of 0.3 microns or larger from meaning does not change. As in the that is in good condition.The term paint air at 99.97 percent efficiency."The proposed rule,HUD prefers to use testing replaces the proposed-rule term final definition requires that a HEPA "dwelling unit" instead of"residential limited paint inspection in response to filter be integral to the vacuum cleaner dwelling" because the former term is a comment from EPA that it would be and gives an actual-performance, rather more commonly used and understood helpful to differentiate more clearly than potential-performance, definition and is more distinct from a related term between a full "inspection," as specified of HEPA filter. Both definitions use used in the rule, "residential property." in the EPA rule implementing TSCA performance measures of filter As explained in Section III.D.6 of this section 402, and a more limited collection efficiency,with values preamble above, in the discussion of procedure to determine the presence of common in the hazardous dust standard policy on responding to children with lead-based paint only on deteriorated setting, e.g., EPA in asbestos rules (40 elevated blood lead levels, the defined paint surfaces or surfaces to be CFR 763.83, 763.121), OSHA in a lead term elevated blood lead level (EBL) has disturbed by rehabilitation. rule (29 CFR 1926.62(f)(3)), and DOE in been changed to environmental Title X exempts housing for the a HEPA filter specification (DOE-STD— intervention blood lead level, and the elderly and persons with disabilities 3020-97). Current technology for definition has been changed slightly to unless a child of less than 6 years of age assessing personal respirator filter conform to CDC guidance.The term resides or is expected to reside in such performance is used by NIOSH in its emergency repair has been removed housing.Believing that expected to respirator rule (42 CFR 84.181), by from the definitions section,because it reside requires interpretation,the OSHA in citing the NIOSH rule (63 FR is only used once in the rule, in the Department is introducing in this final 1297,January 8, 1998),and by DOE in section later in subpart B setting forth rule a definition stating that"expected the specification cited above. the exception for emergency actions; to reside" means there is actual The technological precision reflected and its meaning there is clear. knowledge that a child will reside and in the regulations just cited is not seen The definition of evaluation has been that if a resident woman is known to be in the HEPA vacuum industry, however, pregnant there is actual knowledge that so the rule can not specify the changed. Title X defines this important a child will reside in the dwelling unit. procedure for testing conformance. term as meaning a risk assessment, (As mentioned, it is not advisable to Performance and operational criteria of inspection, or combination of the two. inquire as to pregnancy status in most the manufacturer(s) of the filter and the The proposed rule added"visual real estate transactions. See Section vacuum unit as a whole are to be used evaluation" and made the determination III D.7 of this preamble, above, on fair for filter efficiency and particle size of the presence of deteriorated paint one housing requirements.) criteria. HUD is promoting research and of the purposes of evaluation as well as Firm commitment, a term used only development of standards on collection the determination of the presence of in subpart G, Multifamily Mortgage efficiency measurement applicable to lead-based paint hazards and lead-based Insurance, is defined for purposes of HEPA vacuums. For example, it paint.In the final rule,HUD has clarity to mean a valid commitment supports research at the University of removed "visual evaluation" from the issued by HUD or the Federal Housing Cincinnati (Cincinnati, OH 45267-0056) definition of"evaluation." has removed Commissioner setting forth the terms on vacuum cleaner dust penetration. the related purpose of identifying and conditions upon which a mortgage HUD staff participates on the American deteriorated paint, and has added "lead will be insured or guaranteed.In this Society for Testing and Materials' (West hazard screen" and "paint testing" as rule,grantee is a term used only in Conshohocken,PA 19428-2959) Task evaluation methods. "Visual subparts J, Rehabilitation, and K, Force F11.23.01 on vacuum cleaner evaluation"was removed because it is Acquisition, Leasing, Support Services system filtration efficiency working on a quite different from the activities or Operation. It is defined to mean any vacuum dust penetration measurement mentioned in the statutory definition of State or local government, Indian tribe, standard.HUD is aware of the American "evaluation."It does not involve any IHBG recipient, or insular area that has Society of Mechanical Engineers' (New testing of paint, dust or soil for lead been designated by HUD to administer York,NY 10017--2392) Air and Gas concentration, nor does it determine the Federal housing assistance under a Cleaning Group work on protocols to presence or absence of lead-based paint program covered by subparts J and K, assess HEPA filter application hazards or lead-based paint.Therefore it except the HOME program or the performance. DOE cites the testing does not produce "evaluation" results Flexible Subsidy-Capital Improvement procedures of ASME Code AG-1. that, in the opinion of the Department, Loan Program (CILP).The defined term Section FC,HEPA Filters.Because the have to be reported to occupants. For participating jurisdiction is used in the standards above are not yet directly additional clarity, HUD has changed the HOME program, and CILP recipient is applicable to fully assessing HEPA term visual evaluation to visual the defined term used to mean an owner vacuums,HUD will monitor and assessment. A"lead hazard screen" and of a multifamily property which is support research and standards "paint testing,"however, do involve undergoing rehabilitation funded by the development,and revise its definition testing and produce reportable results. CILP program.The definition of hard as needed.HUD welcomes data on Lead hazard screen means a limited risk costs of rehabilitation has been changed, research and measurement criteria for assessment that involves paint testing, in response to comments requesting HEPA vacuums and HEPA filters. dust testing and soil testing. If a greater clarity, to add the following The proposed-rule definition of HUD- property passes a screen using the statement: "Hard costs do not include owned property has been changed tab . 50164 Federal Register/Vol. 64, No. 178/Wednesday, September 15, 1999/Rules and Regulations conform to the definition of federally statutory provision found in section hazards." On the other hand, because no owned property that is in Title X.The 302(c) of the Lead-Based Paint risk assessment is done,standard definition in the final rule is Poisoning Prevention Act,which states treatments may be implemented in some "residential property owned or managed that"the Secretary (of HUD) shall units that have no lead-based paint by HUD,or for which HUD is a trustee periodically review and reduce the level hazards, and resources may be or conservator."The Department below 1.0 milligram per centimeter expended unnecessarily.HUD is acknowledges,however, that although squared or 0.5 percent by weight to the including the standard treatments this definition conforms word for word extent that reliable technology makes option in the final rule in response to to the Title X definition,it does not feasible the detection of a lower level public comments that certified risk represent common usage. For practical and medical'evidence supports the assessors may be in short supply in and programmatic purposes,HUD imposition of a lower level." While some parts of the nation, that the cost considers property it owns to be only HUD has no plans to propose a lower of risk assessments may be excessive, that to which it has title; it distinguishes level,the statutory responsibility and because the decision to test is best between owned and managed property. remains whether it is mentioned in the left to the discretion of the designated However,this distinction does not affect rule or not. party. the application of the rule.The rule b. Exemptions. A detailed discussion (2) Presumption in the case of covers both HUD-owned and HUD- of the exemptions provided in subpart abatement.Where abatement is managed property. Subpart I of the rule B is found in Section III.A.5 of this required,the designated party may applies to multifamily property that is preamble,above. presume that lead-based paint or lead- HUD-owned or for which HUD is c. Options. In addition to exemptions, based paint hazards or both are present . "mortgagee-in-possession."A property the final rule provides several options throughout the property,omit the for which HUD is mortgagee-in- that HUD believes will provide owners evaluation, and conduct abatement on possession is one for which title has not and other parties with flexibility and all painted surfaces.This option, passed to HUD but which is being thus greater efficiency in carrying out however,is not available in public • managed by HUD prior to foreclosure. evaluation and hazard reduction housing, because a lead-based paint The definition of Indian tribe (tribe) activities. inspection has been a statutory has been changed to conform to the (1) Standard treatments.Where requirement for all target housing that is Native American Housing Assistance interim controls are required, the public housing since 1994. and Self Determination Act of 1996 designated party has the option to (3) Lead hazard screen.Where a risk (Pub.L. 104-330).The proposed rule presume that lead-based paint or lead- assessment is required by this rule,the term"paint inspection" has been based paint hazards or both are present designated party may choose to first changed to lead-based paint inspection throughout the property, omit the risk conduct a lead hazard screen to in the final rule to avoid confusion with assessment or lead-based paint determine whether a full risk inspections of paint that are conducted inspection or both,and conduct assessment is necessary.The lead for purposes other than determining the standard treatments in accordance with hazard screen is a limited risk presence of lead-based paint.The requirements set forth in subpart R of assessment activity that involves dust definition of project-based assistance is part 35 in lieu of interim controls. sampling and soil sampling, and may changed for purposes of clarity to Standard treatments are: (a) include paint testing on deteriorated indicate that the term applies to rental Stabilization of all deteriorated paint, paint surfaces (if present).The screen assistance and that it does not include interior and exterior; (b) the provision of must be conducted in accordance with Federal rehabilitation assistance or smooth and cleanable horizontal hard State or tribal work practices standards 1 assistance to public housing surfaces; (c) the correction of dust- under an EPA-authorized program or in developments.In the proposed rule,the generating conditions (i.e.,conditions accordance with EPA standards at 40 definition of risk assessment was causing rubbing,binding, or crushing of CFR part 745,subpart L.Because EPA identical to that in Title X.In the final surfaces known or presumed to be regulations do not include specific rule, the specificity of this definition coated with lead-based paint); and (d) standards for dust lead in lead hazard has been reduced to minimize treatment of bare soil to control known screens,HUD, in this final rule,is regulatory rigidity and to avoid or presumed soil-lead hazards. Safe setting such standards at approximately potential conflict with EPA regulatory work practices and clearance are one-half those of a full risk assessment definitions and work practices required.Individuals performing (see Section III.E.15.a and b of this standards. standard treatments must be trained in preamble,below).The standards for soil Finally,the definition of lead-based ' how to control lead-based paint hazards. are the same for a lead hazard screen as paint has been edited somewhat. The training requirement is identical to for a risk assessment.If State or tribal Although no substantive change has that for interim controls.This option, standards for a lead hazard screen are been made,one modification is worthy which was not provided in the proposed more stringent than those in this rule, of note.The definition in the proposed rule, derives from a recommendation by the State or tribal standards prevail.If rule, after the phrase "equal to or the Task Force on Lead-Based Paint they are less stringent, the standards of exceeding 1.0 milligram per square Hazard Reduction and Financing.The this rule apply. The standard for lead- centimeter or 0.5 percent by weight or Task Force recommended standard based paint is the same for the screen as 5,000 parts per million," included the treatments as an option to the risk for a risk assessment or lead-based paint phrase "or another level that may be assessment/interim control approach inspection. If a dust sample is found to established by the Secretary."The latter because standard treatments "offer the be positive, i.e. have a level of lead phrase has been removed from the advantage of devoting resources directly equal to or greater than the dust-lead definition in the final rule to avoid to hazard control—and their cost may be standards for the lead hazard screen, or possible confusion that might result minimal for units in good condition." there is lead-based paint on a from the absence of such a phrase in Also, the Task Force noted that standard deteriorated paint surface, a full risk other recent regulations promulgated treatments can be carried out by"in- assessment must be performed.If the pursuant to Title X.Its inclusion in the house maintenance staff who have lead hazard screen is negative, the risk proposed rule was based on the sufficient knowledge of lead-based paint assessment is not required. The'lead Federal Register/Vol. 64, No. 178/Wednesday, September 15, 1999/Rules and Regulations 50165 hazard screen option was not provided must be performed by a certified lead- occupants.The sooner occupants are in the proposed rule because the cost based paint inspector or risk assessor. provided with this information, the differential between a full risk d. Notice of Evaluation and Hazard better they can protect their children assessment and a screen was perceived Reduction Activities. Title X requires and themselves. to be small (essentially the cost of soil the provision of notice to occupants The Department requested comment testing and a somewhat more elaborate describing the nature and scope of any on the content, format and distribution report) and because HUD felt that a risk assessment, lead-based paint of the notices. One commenter certified risk assessor would be inspection, or hazard reduction suggested that the notice be provided empowered by EPA and/or State or activities undertaken.In general, the both when evaluation has taken place, tribal regulations to use a screen Department believes that detailed and then again before hazard reduction anyway. HUD is including explicit matters of notice, format and activities are undertaken. HUD has not mention of the screen in the final rule distribution are best determiped by the adopted this suggestion, because it to assure that all parties will be aware property owner or other recipient of believes it should not regulate tenant- that the option is available to try to Federal housing assistance, under the landlord relations this closely.This achieve cost savings, which are most general framework provided in this rule. comment was made to insure that likely in post-1959 properties in good In the final rule as well as the proposed occupants can prepare their units for condition. rule, the Department has interpreted hazard reduction activities. Actually, all (4) Paint testing. Under the proposed this provision to require the following: 'hazard reduction activities require rule the requirements of certain subparts (1) Within 15 calendar days of receiving occupant protection by the owner (or of the rule would not apply for a risk assessment,lead-based paint contractor),who would coordinate these specific deteriorated paint surface to be inspection, or paint testing report,a actions with the occupant even if no disturbed if a"limited paint inspection" written notice must be provided to separate notice is provided. occupants containing a summary of the Some commenters recommended that indicated the absence of lead based notice begiven to each occupant. paint on that surface. EPA objected to nature,scope and results of the the p evaluation and a contact for more HUD continues to believe that it is the proposed ride's definition of information or access to the actual reasonable to expect that occupants can . "limited paint inspection," noting that reports; and (2) within 15 calendar days read the notice if it is posted in central EPA work practices standards for of completing hazard reduction locations. In the final rule, this decision inspections (40 CFR 745.227) do not activities, a notice must be provided to is left to the discretion of the owner or include or envision a "limited" paint occupants of actual hazard reduction other designated party, except that the inspection or any other inspection activities conducted.The notice must notice must be distributed to the activity not including a"comprehensive contain a summary of the nature,scope dwelling unit of a head of a tenant inventory of all of the lead-painted and results of the hazard reduction household if the owner knows that the surfaces in a residential dwelling." activities,a contact for more head of household is a person with a Accordingly,a"limited" paint information, and information on any disability that would make a posted inspection would be a violation of EPA identified remaining lead-based paint notice inaccessible to that person. work practice standards. If a similar on a surface-by-surface basis.This One commenter asked for more time procedure is retained, EPA said,the use notice shall be updated, based on any to provide occupants with the notice of of the word"inspection" in the reevaluation of the dwelling unit or if • evaluation results.The commenter felt definition should be dropped, and HUD additional lead-based paint hazard that 15 days is not enough time for should identify the circumstances under reduction work is conducted.The management to digest the evaluation which this"limited" activity would be notices must be posted in centrally and prepare the documentation needed conducted,set out procedures and located common areas or distributed to to explain the results to residents. In requirements for conducting it,and state each occupied dwelling unit, must be of response,HUD has added to the final the qualifications required for a size and type that are easily read by rule a strong recommendation, but not individuals who would conduct the occupants, and must be made available a requirement,that paint inspectors and activity. Another comment from a legal in a format accessible to persons with risk assessors provide summary services organization recommended disabilities, to the extent practicable. statements of inspections and risk elimination from the regulation of the The proposed rule required that,if assessments suitable for posting or "limited paint inspection" option. possible. the notice must be provided in distribution.This provision is located in In the final rule, the term"limited the occupant's primary language.The §35.1320, in subpart R. For further paint inspection" has been replaced final rule, in response to comments that discussion and sample formats,see with the term"paint testing."Where some apartment projects may have more Section III.E.15.c, of this preamble paint stabilization or interim controls of than a dozen primary languages below, and appendices B through E of a deteriorated paint surface is required represented,deleted the"if possible" the rule. by this rule, paint testing of non-intact phrase and added the option to provide One commenter noted that the paint surfaces may be conducted to the notice in the language of the proposed rule did not include notice determine the presence of lead-based occupant's contract or lease. requirements for HUD-owned paint instead of conducting a complete The statute does not specifically properties.In the final rule, HUD has lead-based paint inspection or require that separate notices be included notice requirements for HUD- presuming the presence of lead-based provided to occupants after an owned properties that are similar to paint.Paint testing may also be evaluation has been conducted and those for other housing programs, even employed to determine if intact paint on again after hazard reduction activities though such a requirement is not called a surface to be disturbed during have been undertaken. In the for by statute. rehabilitation contains lead-based paint. Department's view, however, e. Lead Hazard Information Pamphlet. If the paint testing indicates the absence withholding information of the results Title X requires that the lead hazard of lead-based paint, paint stabilization, of an evaluation until after hazard information pamphlet developed by interim controls or abatement of that reduction activities have been EPA, CPSC and HUD pursuant to TSCA surface is not required. Paint testing performed poses a potential risk to section 406(a) be provided to purchasers v 50166 Federal Register/Vol. 64, No. 178/Wednesday, September 15, 1999/Rules and Regulations and tenants of housing affected by §35.130,states simply that it is not through inhalation, by absorption section 1012 of the statute. Provision of necessary to provide the pamphlet if it through the skin, or through contact the pamphlet is not required for housing can be demonstrated that it has already with the skin."(62 FR 1493,January 10, affected only by section 1013 of Title X. been provided in accordance with the 1997). In response to comments, the disclosure rule or the section 406(b) The Consumer Product Safety Department has made three types of renovation rule.Prior provision of the Commission/EPA consumer notice. changes to the pamphlet-provision pamphlet is best demonstrated by What You Should Know About Using requirement that was in the proposed retaining an acknowledgement by the Paint Strippers (CPSC Document 4423, rule.The first change is largely editorial occupant of receipt of the pamphlet. EPA document EPA 747-F-95-002), and is intended to increase policy Such acknowledgment is required by recommends to persons who "use paint consistency across programs and to the disclosure rule and,with some strippers frequently, (that) it is reduce the length of the rule.HUD has exceptions,by the renovation rule. particularly important that you...Never provided a statement of the general In the proposed rule, the two subparts use any paint stripper in a poorly requirement in subpart B, §35.130, and pertaining, respectively, to ventilated area.If work must be done referenced that section in each of the rehabilitation assistance and to CPD indoors under low ventilation program-specific subparts where non-rehabilitation programs required conditions, consider having the work pamphlet provision is required.Section provision of the pamphlet to the tenant, done professionally instead of 35.130 states that the designated party owner occupant or purchaser regardless attempting it yourself."This is of shall provide the pamphlet to each of whether the pamphlet had been particular importance in lead-based occupied dwelling unit. provided under the disclosure rule. In paint removal work larger than the de Acknowledgment of receipt is not 'the final rule,this has been changed to minimis level (such as 2 sq. ft. per required,but it is recommended.The . conform with the general policy in room). CPSC and EPA recommend that program-specific subparts of the rule §35.130.HUD expects that most local persons who strip paint"cross-ventilate state more explicitly who shall provide and State rehabilitation programs will (the worksite) by opening all doors and the pamphlet—e.g.,the public housing be administered so that provision of the windows (and m)ake sure there is fresh agency, the owner, the sponsor,the pamphlet by the renovator in air movement throughout-the room." grantee,or the participating jurisdiction. compliance with the renovation rule This practice deviates from the worksite Second,HUD has made substantive will also meet the requirements of this protection for larger lead-based paint changes to further minimize duplicative final rule. stripping projects,which typically requirements for the provision of the Third,some commenters requested involves protecting the work area and pamphlet. Section 1012 is one of three that EPA-approved State equivalents to occupants from dispersal of lead debris different sections of Title X that call for the pamphlet be specifically permitted. and dust by sealing off ventilation provision of the pamphlet.The other In the interest of streamlining and systems and/or erecting barriers two are section 1018 (which requires simplicity,the final rule includes such between the work area and the rest of provision of the pamphlet and a provision. the residence to reduce ventilation (see disclosure of known lead-based paint f. Use of Paint Containing Lead.The the HUD Guidelines,chapter 8).The hazards prior to sale or lease), and final rule continues the prohibition CPSC/EPA notice also recommends TSCA section 406(b) (which requires against use of new paint containing precautions for firesafety.eye persons performing renovation for more than 0.06 percent by weight of protection,skin protection. and waste compensation to provide the pamphlet lead in federally owned or assisted disposal for paint strippers. before beginning the renovation).The housing.This provision has been in Some paint strippers are hazardous, proposed rule recognized potential HUD regulations since the late 1970's and are addressed as such by regulatory overlap with the HUD-EPA rule and is based on the 1977 regulation agencies.HUD has considered the type implementing section 1018 (the promulgated by the Consumer Product of work in identifying the applicable disclosure rule) but did not discuss Safety Commission (16 CFR Part 1303). definition to consider. The definition of EPA's then-proposed rule implementing If a State or local jurisdiction banned "hazardous substance" used by the section 406(b) (the renovation rule). the residential use of paint containing CPSC (see 16 CFR 1500.3), based on the For most rental housing,HUD's lead before 1978,the rule allows the Federal Hazardous Substances Act(15 proposed rule required that the Secretary to apply a date earlier than U.S.C. 1261-74), applies to paint pamphlet be provided only if the tenant 1978 to activities covered by this rule in stripping work that does not involve had taken residence before the effective that jurisdiction. employment, such as paint stripping by date of the disclosure rule (which was ' g.Prohibited Methods of Paint the owner of HUD-assisted housing who either September or December 1996, Removal.The final rule includes the performs the work personally.The depending on the number of housing same prohibited practices as in the definition of"hazardous chemical" units owned by the landlord).This proposed rule (open flame burning, used by the Occupational Safety and policy did not address the case of a machine sanding without HEPA exhaust Health Administration, and based on tenant who took residence before the control,abrasive blasting without HEPA the Occupational Safety and Health Act effective date of the disclosure rule but local exhaust control, heat guns (29 U.S.C.655(a)), applies to paint received the pamphlet at the time of operating above 1100 degrees 'stripping that does involve employment. renewal or revision of the lease.The Fahrenheit, dry scraping or sanding OSHA's definition for the general proposed-rule policy also did not except in certain situations), plus one industry at 29 CFR 1910.1200 currently address the case of a landlord who, addition:paint stripping using a applies to building maintenance, acting as a renovator's designated hazardous volatile substance in a poorly custodial,or construction work,because representative, provided the pamphlet ventilated space.OSHA says that adults OSHA's hazard communication to a tenant before renovation in exposed to methylene chloride"are at standard for the construction industry, compliance with the renovation rule. increased risk of developing cancer, at 29 CFR 1926.59, is identical to that Therefore, to allow landlords the adverse effects on the heart,central for general industry. flexibility to minimize duplication of nervous system and liver,and skin or Employers of paint removal workers pamphlet provision,the final rule, in eye irritation. Exposure may occur are expected to know that OSHA Federal Register/Vol. 64, No. 178/Wednesday, September 15, 1999/Rules and Regulations 50167 recently reduced its permissible clarification as to the validity under cases where a risk assessment is exposure limit for methylene chloride in 1-IUD's rule of lead-based paint activities required in response to the 'air from 500 to 25 parts per million (29 conducted prior to the effective date of identification of a child under 6 years of CFR 1910.1052 for general industry, and the rule.In the final rule, conditions age with an environmental intervention the identical 29 CFR 1926.1152 for under which a prior evaluation or blood lead level. In such cases the risk construction. 62 FR 1492-1619,January hazard reduction meets the assessment must be conducted in the 10, 1997).Methylene chloride can not requirements of the rule have been child's dwelling unit shortly after the be detected by odor at the permissible specified. child's blood was last sampled. exposure limit,and organic vapor Section 1013 of Title X gives the Interim controls conducted prior to a cartridge negative pressure respirators Secretary authority to waive the lead- property or unit becoming subject to the are generally ineffective for personal based paint inspection and risk requirements of subparts B, C, D, F protection against it. Alternative paint assessment requirement for federally through M, and R. need not be repeated strippers may be safer but have their owned housing built between 1960 and if such controls were conducted in own safety and/or health concerns, as 1978 if a federally funded risk accordance with a risk assessment that indicated in the CPSC/EPA notice, so assessment by a certified contractor meets the requirements of this rule: caution in the selection and use of any shows an absence of lead-based paint however, ongoing lead-based paint . paint stripper is prudent.Paint stripping hazards.The Department believes case- maintenance and reevaluation must be in a poorly ventilated space using a by-case waivers to be inefficient and conducted as required by this final rule. volatile substance that is hazardous inappropriate and therefore has Abatements conducted before August should be done in accordance with developed a broader policy on prior 30, 1999 and before the property or unit • CPSC regulations (16 CFR 1500.3), and/ activities that covers all properties for becomes subject to the requirements of or OSHA's hazard communications which an acceptable risk assessment, subparts B, C,D,F through M. and R, standards (29 CFR 1010.1200 or 29 CFR lead-based paint inspection,abatement, need not be repeated if conducted by an 1926.59,which are currently identical), or clearance has been performed.The abatement supervisor approved by a and with any substance-specific Department believes that the conditions State or Indian tribe to perform standards applicable to the work. set forth in this section provide the abatement of lead-based paint or lead- h. Compliance With Other State, necessary quality control measures for based paint hazards.It is not necessary Tribal, and Local Laws. In response to prior lead-based paint activities while that the State or tribal approval program comments urging deference to State, avoiding unnecessary duplication. had EPA authorization. Abatements tribal and local laws and regulations, A lead-based paint inspection or a conducted after August 29, 1999, must HUD has added a provision to the final risk assessment conducted at a have been conducted by a lead based rule that makes it clear that HUD may residential property or dwelling unit paint abatement supervisor certified by modify or waive requirements of prior to the property or unit becoming a State or Indian tribe with an EPA- subparts B. C. D, F through M.and R. subject to the requirements of subparts P g authorized lead-based paint certification if the Department determines that a C,D, F through M, and R, need not be program or by EPA in accordance with State,tribal, or local law provides a repeated if it was conducted in the 40 CFR 745.226. law may impose comparable level of protection and that following manner or under the different requirements. A lead based such a modification or waiver will following circumstances: aint abatement project meets the promote efficiency. (1) If the lead-based paint inspection P The final rule also indicates that this or risk assessment was conducted prior requirements of this rule if it was regulation is not intended to relieve to August 30, 1999 (the effective date of accepted by the housing agency in program participants from compliance the EPA regulations at 40 CFR 745.227), fulfillment of the abatement with State,tribal or local law. results of the evaluation may be used if requirement of the public or Indian i. Minimum Requirements.The final it was conducted in accordance with 40 Housing program prior to the effective rule retains the policy included in the CFR 745.227 or by an individual or firm date of this rule. proposed rule that the requirements of otherwise certified under a State or With regard to the policy on prior subparts B, C, D,F through M,and R, Indian tribal lead-based paint inspector lead-based paint inspections in public are intended to be minimum or risk assessor certification program, and Indian housing, it should be requirements. Nothing in this except that the risk assessment must be explained that in the late 1980's, rulemaking is intended to preclude no more than 12 months old to be pursuant to a statutory requirement. designated parties from conducting a considered current; and furthermore a HUD began requiring public and Indian more protective method than the one lead-based paint inspection of public or housing agencies to conduct lead-based required.Thus, for example, if the Indian housing meets the requirements paint inspections in all pre-1978 family requirement is interim controls, a of this rule if it was accepted by the developments. All inspections had to be designated party may choose to use an housing agency in fulfillment of the completed by December 1994. abatement method instead. lead-based paint inspection requirement Abatement of any lead-based paint was Similarly,where more than one of the public and Indian housing required at the time of modernization. requirement covers a condition or program prior to the effective date of HUD estimates that by 1998, virtually activity, the most protective shall apply. this rule. all of the pre-1978 family developments j. Waivers. Also retained from the (2) If the inspection or risk assessment have been inspected, representing proposed rule is the authority of the was conducted after August 29, 1999, approximately 900,000 dwelling units. Secretary of HUD to waive any the results of the evaluation may be Also,HUD estimates that housing provision of this rulemaking,subject to used if it was conducted in accordance agencies have completely abated lead- statutory limitations.This conforms to, with 40 CFR part 745,subparts L and/ based paint in over 200,000 units. The and cites, §5.110, the general waiver or Q, except that the risk assessment Department does not think it would be section for HUD programs under title must have been completed no more than acceptable now to require that all lead- 24. 12 months prior to the date of reference. based paint inspections be redone. k. Prior Evaluation or Hazard The provisions in subpart B regarding However, the rule does recommend that Reduction.Some commenters requested prior risk assessments do not apply in housing agencies conduct quality 50168 Federal Register/Vol. 64, No. 178/Wednesday, September 15, 1999/Rules and Regulations assurance testing for all inspections that at least three years after such activities The Air Force, Army and the General might be questionable. are no longer required.This policy is Services Administration (GSA) all asked 1 1. Enforcement. Every commenter who designed to provide a basis for helping for greater flexibility to permit addressed the question of enforcement ensure that Federal funds have been negotiation with transferees regarding of the rule remarked that penalties,for expended properly. hazard control requirements "built into noncompliance needed to be spelled out 3. Subpart C—Disposition of the contract of sale."These agencies in the rule.The Lead-Based Paint Residential Property Owned by a argued that,while the proposed rule Poisoning Prevention Act does not Federal Agency Other than HUD.This allowed abatement to be made a provide any independent enforcement subpart establishes minimum lead- condition of sale, it required the escrow provisions. Remedies will vary based on based paint requirements for residential of sufficient funds, and it may not be which program's requirements have property built before 1978 that is owned feasible for a bidder on large blocks of been violated.For example,.a and to be sold by a Federal agency other units to escrow large sums for long designated party that is not in than HUD and is consequently subject periods of time.It was pointed out that compliance with this rule may be to the requirements of section 1013 of purchasers do not always know at the considered in default of the regulatory Title X.The subpart basically restates time of transfer what the reuse of a agreement or housing assistance the requirements set out in section 1013 property, or a part thereof,will be.It payments contract with the Department, of Title X,With minimal elaboration. was recommended that other conditions may be debarred from receiving The Department believes that the details be permitted to be attached to the sale— assistance from the Department or of how another Federal agency should denied future participation in HUD carry out the requirements of section for example, certification and programs, may be forced to surrender 1013 are best determined by the affected indemnification requirements not grant funds or may be otherwise subject agency. requiring escrow deposits, and deed to civil money penalties or other The proposed rule required that for restrictions. GSA also complained that sanctions. Recipients of assistance residential property built before 1960, limiting an agency's authority to make under the Community Development the Federal agency shall conduct a lead- abatement a condition of sale to when . Block Grant program will find based paint inspection and a risk the purchaser is not an owner occupant enforcement provisions at 24 CFR assessment, and shall abate all lead- could cause unnecessary complications 570.910, 570.911 and 570.913;those for based paint hazards. In the case of a in the bidding process. Bidders other programs are found in other parts purchaser who is not to be an owner intending not to be owner occupants and sections of the CFR. HUD does not occupant,the agency could make might discount their bids to account for think it necessary to restate each abatement a condition of sale with the cost of the evaluation,while those program's sanctions in this lead-based sufficient funds escrowed. For intending to be owner occupants would paint rule but has included a general properties built after 1959 and before not. provision under§35.160 that states the 1978,the proposed rule required that HUD believes that allowing the consequences of noncompliance With the agency conduct a risk assessment Federal agency a choice of conducting this regulation.HUD intends to and a lead-based paint inspection. the abatement itself or making it a vigorously enforce all requirements of Under the disclosure rule implementing condition of sale facilitates efficiency this regulation. section 1018 of Title X, the agency and timeliness in the disposition m.Records.HUD has retained a would be required to provide the results process. The Department finds the record keeping requirement in this final of the risk assessment and inspection to agencies' comments about making rule for designated parties conducting the purchaser: abatement a condition of sale in pre- lead-based paint activities.The The Department of the Navy 1960 properties to be reasonable and has Department strongly recommends that commented that the requirement that changed the relevant provision to allow designated parties keep for the life of both a risk assessment and a lead-based that"where abatement of lead based the property a copy of each notice to paint inspection be conducted appeared paint hazards is not completed before occupants of the results of evaluation to exceed the statutory requirement. and hazard reduction (including Section 1013 calls for"the inspection the closing of the sale, the Federal clearance) and each report from a and abatement of lead-based paint agency shall be responsible for assuring certified individual or firm performing hazards"in pre-1960 housing and."an that the abatement is carried out by the lead-based paint inspections, risk inspection for lead-based paint and purchaser before occupancy of the assessments, abatement, or clearance. lead-based paint hazards" in housing property as target housing" (emphasis Such notices and reports document ' built between 1960 and 1978.HUD is added) and in accordance with the compliance in case of a legal or calling for both an inspection and a risk requirements of either a State or tribal administrative question; and evaluation assessment because the statutorily program authorized by EPA under and hazard reduction reports provide defined term"inspection" refers to a subpart Q of 40 CFR part 745 or EPA's information on where lead-based paint procedure that identifies the location of requirements at subpart L of 40 CFR part may remain on the property so it can be lead-based paint, if any,on a property 745.This revised wording is intended to managed safely, or, if such reports but does not identify the location of provide agencies more choice,while document that there is no lead-based "lead-based paint hazards,"as that term retaining their responsibility to assure paint remaining on the property, they is defined in the statute. Identification compliance with the statute; and it can be used to support exemption from of lead-based paint hazards is the eliminates the potential for confusion the requirements of this rule and the function of a risk assessment.Thus, . and complications in the bidding 1 disclosure rule. At a minimum,the because lead-based paint hazards must process by removing the provision that Department requires that such be identified to comply with section confined the authority to make documentation be retained for three 1013, a risk assessment must be abatement a condition of sale only to years. Records applicable to a portion of conducted as well as an inspection. those sales in which the purchasers will a residential property for which ongoing HUD expects that the two evaluation not be owner occupants of the property. maintenance and/or reevaluation procedures will be performed Further, it should be noted that it is activities are required shall be kept until concurrently. HUD's interpretation that abatement Federal Register/Vol. 64, No. 178/Wednesday, September 15, 1999/Rules and Regulations 50169 will not be required if the reuse is not costs."Therefore this final rule provides another set out the requirements for to be target housing. in subpart B. at§35.115, that each such property in the absence of • With regard to disposal of military Federal agency other than HUD must sufficient appropriations. In the case of property, HUD recognizes that there are determine whether appropriations are sufficient appropriations, the several statutory, regulatory and policy sufficient. requirements were identical to those of requirements pertaining to the cleanup, With regard to a sale of housing section 1013 of Title X: for housing built disposal and reuse of BRAC (base owned by Federal agencies other than before 1960, a risk assessment and lead- • realignment and closure) properties and HUD and in which more than one based paint inspection followed by that agencies of the Department of Federal agency is party to the sale,HUD abatement of lead-based paint hazards; Defense are using provisions in leaves to the agencies involved the for housing built between 1960 and ' contracts for sale and deeds to assure responsibility to determine which 1978, a risk assessment and lead-based that lead-based paint hazards in target Federal agency is responsible for paint inspection, followed by disclosure housing built before 1960 will be abated compliance with this subpart, as required under the disclosure law. In prior to occupancy. Typical of such 4. Subpart D—Project-Based the case of insufficient appropriations, contract or deed provisions is the Assistance Provided by a Federal the requirements were a visual- following: "Purchaser agrees that Agency Other Than IUD.This subpart assessment for deteriorated paint purchaser will be responsible for the sets out minimum requirements, ,followed by paint repair and cleanup. abatement of any lead-based paint consistent with section 1012, for Federal The Department has removed the hazards (as defined in Title X and agencies other than HUD that have appropriations distinction, and set forth implementing regulations) by a certified housing programs and provide more a single policy under subpart F, as contractor in accordance with Title X than $5,000 of project-based assistance. explained in Section III.A.3 of this and implementing regulations before the The subpart basically restates the preamble,above. use and occupancy of such minimum requirements set out in A childhood lead poisoning improvements as a residential dwelling section 1012.Few comments were prevention advocacy group argued for (as defined in Title X)."To document received on this subpart of the proposed stronger protection in both the single- compliance with such a provision,HUD rule and therefore,the requirements family and multifamily subparts, recommends that Federal agencies remain largely unchanged. asserting that HUD and other Federal include as a contractual condition the HUD has modified the proposed-rule agencies selling residential properties requirement that the purchaser send a requirements for notification of have a "particular responsibility" to copy of the certified abatement report, occupants about the results of ensure that sold properties contain no including clearance,to the agency. evaluation and hazard reduction.In the lead-based paint hazards.The The Department of the Army final rule, the notification requirements commenter declared, "HUD has recommended that the rule be changed that apply to this subpart are basically complete discretion and ample existing to allow the lead-based paint inspection the same as those that apply to HUD- authority to require the evaluation and and risk assessment, as well as the assisted housing instead of the more control of lead hazards before the sale abatement,to be conducted following general proposed version.The of federally owned housing." An the sale of the property. HUD is of the Department believes that this change environmental organization joined in all opinion that evaluation must be will result in more uniform and these points, and r:.marked that"one of conducted by the Government before complete notification practices among the most obvious opportunities for lead the sale for two reasons: (1) Unless the all federally owned and assisted hazard control is during turnover, such evaluation is done prior to bidding, housing,consistent with government- as that accompanying change of bidders will be unable to estimate the wide regulatory streamlining. ownership.HUD can, and should, be a cost of abatement in pre-1960 properties In response to a question from the leader in assuring that hazards are and to consider that amount in Department of Agriculture regarding corrected at the time of sale * * *"The calculating their bids; and (2) for how the"more than $5,000" figure is to groups called for revisions to include properties built after 1959 and before be applied, HUD is indicating in the the requirement of a risk assessment and 1978, the statute explicitly states that final rule that the requirements apply to hazard identification and control for any "the results of such inspections shall be housing that receives annually more ' older structure. made available to prospective than $5,000 per project. In the final rule, the requirements for purchasers." 5. Subpart E reserved.This subpart is HUD-owned single family properties One advocacy organization argued reserved for possible future rulemaking being purchased with a mortgage that the regulations should do away on lead-based paint poisoning insured by HUD are: a visual assessment with the artificial distinction they create prevention requirements in single to identify deteriorated paint, paint between HUD-owned property and family housing covered by an stabilization, and unit-wide clearance. housing owned by some other Federal application for HUD mortgage insurance HUD has added the clearance agency stating that"the Federal or guarantee. Existing requirements at requirement to provide assurance that government must provide consistent 24 CFR part 200,subpart 0,as revised the work is done properly and that no leadership in ensuring that all housing by this final rule,shall continue to hazards remain after paint stabilization. it sells or* * * disposes of is free of apply to housing covered by an Clearance is required only if paint lead hazards."HUD's rationale for application for single family mortgage stabilization is conducted.The distinguishing between HUD Programs insurance. Department has the option to test and those of other Federal agencies is 6. Subpart F—HUD-Qwned Single deteriorated paint and to confine paint discussed under Section III.D.5 of this Family Property.This subpart sets out stabilization only to those surfaces with preamble,above. the requirements for HUD-owned single deteriorated lead-based paint. No As mentioned above, in Section family property. In the proposed rule, requirements are established for III.A.3 of this preamble, the statute two subparts addressed HUD-owned properties being purchased without a states that the requirements of section single family property;one subpart set HUD-insured mortgage, except for the 1013 do not apply"in the absence of out the requirements when sufficient requirements of the disclosure rule. appropriations sufficient to cover the appropriations were available, and Many of the properties purchased 50170 Federal Register/Vol. 64, No. 178/Wednesday, September 15, 1999/Rules and Regulations without HUD-insured mortgages are in hazards than owner-occupied housing multifamily mortgage insurance is need of major rehabilitation.The cost of because tenants have less ability than combined with another HUD program paint stabilization and cleanup would owners to make the repairs necessary to (e.g.,project-based assistance), the be substantial relative to the value of the reduce hazards. The Department has environmental intervention blood lead property, and there is a high likelihood revised,therefore,the procedures of the level requirements for that program that subsequent rehabilitation would proposed rule to ensure,to the extent would apply. negate the effectiveness of the cleanup HUD considers practicable,that pre- A new section has been added to this in removing dust-lead hazards. HUD 1960 units are free of lead-based paint subpart of the final rule to clarify will acquaint purchasers of the risks of hazards and that the risk of lead Departmental mortgage insurance policy generating lead-based paint hazards exposure is minimized in housing built on lead-based paint in buildings being during rehabilitation; this will occur after 1959. converted from nonresidential use to during the notification and disclosure A major housing industry multifamily residential use required by subpart A of 24 CFR part 35. organization pointed out that it would (conversions) and in multifamily Approximately one-half of all HUD- not be practicable to implement the residential properties undergoing major owned single family properties are proposed-rule requirement that rehabilitation.Major rehabilitation is purchased with HUD-insured deteriorated paint in a Multifamily defined as rehabilitation that is mortgages. property be repaired "before the estimated to cost more than 50 percent This subpart does not require specific issuance of a firm commitment," of the estimated replacement cost after action regarding an environmental because it would compel a mortgagor to rehabilitation.The requirement for both intervention blood lead level child.Less expend sums on paint repair"based on types of property is that all lead-based than 1 percent of single family chance and speculation."Other factors paint be abated and that the abatement properties are occupied when HUD could prevent issuance of the methods be, to the extent practicable, acquires ownership,and,in most cases, commitment,or market conditions paint removal or component HUD-owned single family property is might prevent closing on the replacement. Enclosure or vacant within three months of the commitment's terms. It was suggested encapsulation may be used if paint transfer of ownership to HUD. Further, that HUD escrow 125-150%of the removal or component replacement are HUD-owned single family properties are estimated cost of the repair work,and not practicable, as for example if they generally sold within six months after permit the paint to be repaired within would damage substrate material acquisition. Because of the limited 90 days after closing, using a repair considered architecturally significant. If occupancy and relatively short HUD escrow.The Department has addressed the building is an historic property, involvement with these properties, the this comment by providing for a repair interim controls can be used at the Department finds it impracticable to escrow in the final rule. request of the State Historic impose environmental intervention In the final rule, a multifamily Preservation Office (as explained in blood lead level requirements. insured property constructed before Section III.E.2.b of this preamble, 7. Subpart G-Multifamily Mortgage 1960 must have a risk assessment before above). Insurance.This subpart sets out the the issuance of a firm commitment, and HUD considers conversions and major requirements for the Department's interim controls of identified lead-based rehabilitations a special case because multifamily mortgage insurance paint hazards must be completed before they usually involve major renovation of programs.As in the proposed rule, firm commitment or made a condition the interior, including new partitioning, applications for mortgage insurance in of the sale and insurance agreement new heating, ventilating,mechanical connection with a refinancing with sufficient funds escrowed.Also, and electrical systems, plus new transaction are excluded from coverage there must be notices to occupants windows and doors. Also, conversions if an appraisal is not required under the regarding the results of the evaluation are, in effect, newly built housing. Such applicable procedures established by and hazard reduction.The sponsor must major construction activity provides an HUD.This exemption,which affects also agree to incorporate ongoing lead- opportunity to remove lead-based paint applications under section 223(a)(7) of based paint maintenance into regular and thus assure that such properties the National Housing Act,is sensible building operations. Ongoing will be free of any possibility that lead- because the properties are already under maintenance activities in this final rule based paint hazards will be generated in mortgage insurance, the mortgage are comprised of many of the same the future as a result of the disturbance amount is not being changed. there is no elements'as the essential maintenance of paint during building operations, equity-take out, and the processing is practices recommended by the Task maintenance or future renovations.The very streamlined, often involving no on, Force.The Department is not.requiring incremental cost of abatement of all site inspection by HUD. reevaluation in housing covered by this lead-based paint relative to the total The proposed rule required visual subpart, because there is no continuing conversion or rehabilitation cost will, in assessment for deteriorated paint, paint Federal subsidy. For a multifamily most cases, be modest, and, once done, repair and cleanup for these programs. insured property constructed after 1959 the properties will be free of lead-based One commenter said that the HUD and before 1978,no evaluation or paint requirements, except to monitor regulation will serve as"a model hazard reduction is required in the final any encapsulation or enclosure standard of care for the private mortgage rule; but for these properties, the treatments or to engage in ongoing lead- insurance industry"and asked that sponsor must agree to incorporate based paint maintenance if interim HUD require the implementation of ongoing lead-based paint maintenance controls are used in an historic essential maintenance practices,risk practices into regular building property. assessments and lead hazard controls in operations. Due to the limited 8. Subpart H-Project-Based Rental all pre-1960 multifamily insured relationship between the purchaser and Assistance.This subpart sets out the properties, and essential maintenance the Federal government,HUD deemed it requirements for the Department's practices and risk assessments in all impracticable to include in this subpart project-based rental assistance other federally insured properties. HUD requirements for responding to a child programs.The Indian Housing Block agrees that rental housing must receive with an environmental intervention Grant Program has been added as a greater protection from lead-based paint blood lead level.In cases where covered program under this subpart. Federal Register/Vol. 64, No. 178/Wednesday. September 15, 1999/Rules and Regulations 50171 The legislative history of Title X using CPD program funds will be housing assistance payment contracts indicates that it was the intent of covered by subparts J (rehabilitation), K are due to expire close to the required Congress that the requirements of a risk (acquisition, leasing, support services, date for completing risk assessments— assessment and interim controls would and operation). and M (tenant-based an issue,raised by commenters. apply to housing receiving project-based rental assistance). However, a CPD- The final rule does not include the assistance.Therefore these procedures funded program may be covered by proposed rule's requirement that an are required in the final rule, as they subpart H if it is providing rental owner develop a hazard reduction plan. were in the proposed rule.The final rule assistance that is tied to a particular The hazard reduction plan, a concept also requires ongoing maintenance and property through contract or agreement. suggested by the Task Force, was reevaluation to assure that the housing The Department has decided that the intended to provide the owner with remains lead safe,which is similar to term"project-based" should be given its flexibility to design his or her own the monitoring requirement in the traditional meaning of housing schedule for completing interim proposed rule, and it has additional assistance payment programs where the controls. However, it was perceived by requirements to respond to a case of a funding is tied to the residential commenters and by the Department to child with an environmental property and not to the tenant. Further, be a paperwork requirement that could intervention blood lead level,as did the the requirement for risk assessment only be a burden for owners and an proposed rule. . makes sense when it is applied to unsolvable administrative problem for There is ample evidence,however, in traditionally"project-based" housing the Department. HUD has established,. the statute and in legislative history that assistance payment programs,where therefore, the following schedule for Congress felt that evaluation and hazard HUD maintains an ongoing relationship interim controls: Dwelling units reduction requirements should be with the owner and is able to require a occupied by families with children reasonably related to the level of Federal phase-in of risk assessment under 6 years of age and common areas financial assistance.Therefore,as in the requirements. servicing those units shall have interim proposed rule, the requirements of a risk Section 1012 of Title X (at 42 U.S.C. controls completed no later than 90 • assessment and interim controls apply 4822(a)(1)(B)) sets out a schedule in days after the completion of the risk only to multifamily properties receiving which risk assessments and interim assessment for those units. Dwelling more than$5,000 per dwelling unit controls must be performed,i.e.,all pre- units not occupied by families with annually in project-based rental 1960 dwelling units before January 1, children under 6 years of age, common assistance,calculated as an average of 1996; 25 percent of 1960-1978 dwelling areas servicing those units, shall have per assisted unit. For all other units by January 1, 1998; not less than interim controls completed within 12 properties receiving project-based rental 50 percent of 1960-1978 dwelling units months of the completion of the risk assistance under a HUD program, the by January 1, 2000:and the remainder assessment for those units. If the owner initial evaluation and hazard reduction by January 1, 2002.The Department is chooses to conduct standard treatments requirements are:A visual assessment to not issuing a final lead-based paint rule rather than a risk assessment and identify deteriorated paint,stabilization in time to meet the January 1, 1996 interim controls (see "Options"above), of deteriorated paint,and clearance (if deadline.Therefore, the Department has standard treatments for units occupied paint stabilization is required).This less delayed the start of the risk assessment by children of less than 6 years of age stringent requirement applies to schedule but is establishing an must be completed no later than 90 days multifamily properties receiving an expedited phase-in schedule that is . after the final date for completion of a average of up to and including$5,000 somewhat simpler than that in the risk assessment,and for other units no per assisted dwelling unit annually in statute: September 17, 2001,for later than 12 months following the final project-based rental assistance and all properties constructed before 1960, and date for completion of a risk assessment. single family properties receiving September 15. 2003, for properties Completion of standard treatments as . Section 8 Moderate Rehabilitation or constructed after 1959 and before 1978. well as interim controls includes Project-Based Certificate assistance or This risk assessment phase-in clearance testing. project-based rental assistance from . schedule applies only to multifamily These policies regarding interim another HUD program.The stringency properties receiving more than $5,000 controls and the standard treatment . of the requirement is less for these per unit annually in project-based rental option must be complied with only by properties because the amount of assistance.The schedule for all other owners of properties receiving more financial assistance is less and because properties covered by subpart H is based than $5,000 per unit annually in project- the Department wanted to relieve on the schedule of initial or periodic based rental assistance. Other properties owners of single family rental property inspections. must complete paint stabilization and with limited financial resources from The revised schedule for risk clearance, if needed,within 30 days of the more extensive lead-based paint assessments is based on the comments receiving notification of the results of requirements that apply to owners of received on the proposed rule's risk the visual assessment. large multifamily projects with a high assessment schedule, and it also takes •HUD assumed in drafting the level of rental assistance.On average, into account the delay in meeting the proposed rule that multifamily the costs per dwelling unit of evaluation deadlines established by the Congress. It properties receiving more than $5,000 and hazard reduction are significantly is HUD's view that the revised schedule per unit annually in project-based rental higher for single family than for still provides adequate time for assistance would be subject to the same multifamily housing. . education and training in order to lead-based paint requirements that A commenter believed that the rule's implement the new technical standards, currently apply until they are required definition of"project-based assistance" requirements and procedures.The to comply with this new regulation. could be read to include assistance proposed rule provision that allows the Commenters pointed out that more delivered by local governments using Secretary to develop an alternative clarity and precision is needed on HUD's Community Planning and .schedule, if necessary, remains in this requirements during the phase-in Development (CPD) program funds. It is subpart.The provision was included to period.Therefore the Department is the Department's expectation and intent provide the Department with flexibility adding to this subpart a paragraph on that most housing-related programs in working with.HUD clients whose transitional requirements that will be 50172 Federal Register/Vol. 64, No. 178/Wednesday, September 15, 1999/Rules and Regulations effective on September 15, 2000. Until of private owners of assisted to make firm arrangements to conduct the phase-in date that is applicable to a multifamily housing.The Department the treatments; but the duration of time property, or until the owner conducts a must conduct a lead-based paint from the closing date is somewhat less risk assessment,whichever is first, the inspection and risk assessment before than that which HUD must meet in owner must practice ongoing lead-based publicly advertising the property for relation to the risk assessment date paint maintenance.This consists mainly sale,followed by interim controls of all because of concern that the risk of three activities: (1) Visually assessing, identified lead-based paint hazards. A assessment may go out of date. Similar at least once a year, the condition of lead-based paint inspection is required to requirements for multifamily painted surfaces to identify deteriorated as well as a risk assessment so properties receiving project-based paint; (2) stabilizing any deteriorated information on the location of lead- assistance,ongoing maintenance and paint;and (3) using safe work practices based paint can be given to the reevaluation are required under this when performing any maintenance or purchaser pursuant to the disclosure subpart if the Department retains renovation that disturbs paint that may rule at subpart A of 24 CFR part 35,who ownership of the property for more than be lead-based paint: can then use it to assure that lead-based 1 year. As explained in Section III.D.6 of this paint hazards are not generated This subpart requires specific actions preamble,above, environmental inadvertently during future, in response to a child with an I intervention blood lead level maintenance or renovation work. For environmental intervention blood lead requirements that apply to this subpart dwelling units occupied by families level:the requirements are similar to have been revised. with children of less than 6 years of age those for housing receiving project- 9. Subpart I-HUD-Owned and and common areas servicing such units, based rental assistance. Mortgagee-in-Possession Multifamily interim controls shall be completed no 10. Subpart J-Rehabilitation.This Property.In the proposed rule,two later than 90 days after the completion subpart sets out the requirements for the subparts addressed the disposition of of the risk assessment;while dwelling Department's programs which provide HUD-owned multifamily property;one units not occupied by families with assistance for housing rehabilitation. subpart set out the requirements that children younger than 6 and associated The majority of this assistance is would apply when sufficient common areas must have interim provided through programs appropriations were available to comply controls and clearance completed no administered by the Office of with the statutory requirements of later than 12 months after the risk Community Planning and Development section 1013, and another set out the assessment.If a unit becomes newly (CPD),principally the Community requirements in the absence of sufficient occupied by a family with a child of less Development Block Grant program and appropriations.The section 1013 than 6 years of age or such a child the HOME program. Other rehabilitation requirements are:for pre-1960 moves into a unit,interim controls must assistance is provided under the properties,an inspection and risk be completed within 90 days after said assessment followed by abatement of p Y Flexible Subsidy Capital Improvement lead based paint hazards, and,for move-in if they.have not already been Loan Program(CILP) and the Mark-to- properties built after and before completed. The schedule for completion Market Program for multifamily 1978,an inspection and risk assessment of standard treatments is also the same property. Rehabilitation assistance may followed by disclosure.In the absence as for multifamily housing receiving also be provided under the Indian i of sufficient appropriations,the more than$5,000 per unit annually in Community Development Block Grant proposed rule called for a visual project-based rental assistance.The Program and the Indian Housing Block Department must provide a notice to Grant Program.This subpart does not evaluation to identify deteriorated paint followed by repair of deteriorated paint occupants if evaluation or hazard apply to the following HUD programs and cleanup of the worksite.Additional reduction is undertaken. that may have rehabilitation activities: requirements were included in the case If conveyance of the title by the Mortgage insurance programs, the of a child with an environmental Department at a sale of a HUD-owned Section 8 Moderate Rehabilitation intervention blood lead level, and property or a foreclosure sale caused by program, and the public housing monitoring of paint conditions was the Secretary when HUD is mortgagee- modernization programs.Those required for properties retained in the in-possession occurs before the required programs are covered by other subparts. HUD-owned inventory for more than schedule for completion of interim The requirements of Title X one year. No distinction was made for controls or standard treatments,the pertaining to federally assisted the period of construction,e.g.,before or Department must complete the hazard residential rehabilitation are quite after 1960. , reduction before conveyance or specific.The statute sought to take In the final rule, the Department has foreclosure sale,or the Department shall advantage of the rehabilitation event as removed the appropriations distinction, be responsible for assuring that interim a cost-effective opportunity to sharply and set forth a single policy under this controls are carried out by the purchaser reduce lead-based paint hazards in the subpart, as discussed under Section according to the following schedule: (1) assisted stock. Many types of III.A.3 of this preamble, above.The In units occupied by families With rehabilitation,such as window Department's intent in setting lead- children of less than 6 years of age and replacement or installation of new walls based paint policy for HUD-owned and common areas servicing such units, no or doors, often reduce lead-based paint mortgagee-in-possession multifamily less than 90 days after the date of hazards. Section 1012 requires at a property in this final rule is to make the closing of the sale or 90 days after a minimum: (1) Inspection for the requirements similar to those for family with a child less than 6 moves in: presence of lead-based paint prior to multifamily properties receiving more and (2) in all other units and associated federally-funded renovation or than$5,000 per unit annually in project- common areas, no later than 180 days rehabilitation that is likely to disturb based rental assistance while after the closing of the sale.The painted surfaces; (2) interim controls of recognizing the intent of Congress as schedule for completion of hazard lead-based paint hazards in housing expressed in section 1013 of Title X. reduction by the purchaser is keyed to receiving less than $25,000 per unit in HUD finds no reason to require of itself the closing date, because it is only at Federal rehabilitation assistance; and (3) a less stringent standard than it requires that time that the purchaser can begin abatement of lead-based paint hazards • sp.iezeq paseq-peat Tie jo luawalege 3o uors?noad alp ' ired paleaoTlalap MoT Moire of s?aouelstsse jo£roBaleo aiTnbai of luawannbai ainl-pasodoad jo uopezul?gels apnpuT sluawlean sup uT dursnoq 103 sluawannbaa at1 pasrnai seq luawliedaU ail plepuels •pairnbai sr uotleniena Suplas UT wow!s Qnii ain puadxa 'aim Teui3 alp ui•lue3Tgsoxa aq pinoM ou 'pasn an spuawlean plepuels 3i lsapow to uopelITpega1 Jo.;luawlean SuTpTs poom glum Sasnoq pia jo 1oTlalxa 's1Onuoo wualuT pue 1u uiss sse IsTi e luTed.paseq-peaT 3o TaAaI 1aMoi a Moue all uo splezeq lured paseq-peal Supege 2uponpuoo jo pealsu1 (anoge 'aTgweaid of aoueisisse uopeq pgegai Telapag jo lsoo at1 lap pawtep uopelaidiaaut sup 3o£•Q•IIT uopoas•aas:aolod xsel ut 1Tun lad 000'9$ SUTpnpuT pue o1 do aini-pasodold ago jo s1auoddns ag1 icq palsaSSns se) sluawlean plepuels Bu?nraoal Su?snoq 30 Xloaaieo E pappe •uopeui?gegal ail Xq pagln3sTp Swag jo asn.am sMO le uopdo stq j'uopdo set 1uaw11edaQ all 'aim pasodold lou seM 10 SeM aoeJlns ail laglagM luawlean plepuels ail ST lap pue all UI Se Hann Se aIn1 Teur3 alp UI jo ssalpie2ai 'sloafold uopeuT?gegaa '(alnaels,atp,woi3 ICpoalrp an?lap g3TgM) '�Cliadoid ag13o palonpuoa ioCew asapp uT palege aq pinogs splezeq aim pasodold am uT sluawai?nbaa ail of • uaaq seq uopoadsuT lured paseq-peal lured paseq-peal ire 1eg17ueaw ssaiduo3 auego lueo?3luSTs auo salew alnl TeuI,i alaidwoo e 3?,Clessaoau Sou ST Suusal . alp 11.18nogl oqM asogl/q pauopsanb atl 'aoue1S?SSE uot2Eui?gegal TEIapa3 UI lUTEd lured paseq-pear g1TM paleoo WE seM uope1a1dialuT spa•saoej ns 000'SZ$2tiTpnpuT pue o1 dn pue 000'9s saoe3ans paluTed ions Tie legl 8uTwnsaid aaglo uo splezeq lu?ed paseq-pear uegl slow 2tunTaoai BuTsnoq ao3 10❑opelrpgegai Suunp.paoeldai 10 uo palonpuoo aq pinoo (wnw?utw e .shun,(TTunpunw lo3 S T I$ pue paglnls?p aq of saoe3ans paluTed ai13o se slolpuoo wualUt ',Cieiodwal aloes lnq .iclwe3 aiSurs ao3 OS Is ATalewixoidde Su?lsal lured 2uponpuoo lagl!a jo uopdo 'Xnsoo ssaj sapnpu?goTgM),uoponpal aq TT?M aouelsIsse Uope1TT?gegal ago sap?Hold Gm;'alowlaqun3 •(anoge . piezeq alt{M'(paoeu!wrra Xpuauewlad Ielapa3 III 000'S$uegl aiow 'aigweald sTg13o •o•Z•3•III uopoas •a•T) palege aq of aJaM uope1rltgegai ou BUTATaDaa Su?snoq 103 a'na s ICEpo1 • aas) pealsu? 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As in the proposed rule, the other grantees and participating 1978, the lead-based paint requirements grantee or participating jurisdiction jurisdictions in subpart J. for these activities in the proposed rule must provide the lead hazard Finally,subpart J requires that all were visual assessment, paint repair and information pamphlet to all occupants occupants shall be provided with the cleanup. For properties built before except those who have received the lead hazard information pamphlet by 1950, the requirements were visual pamphlet under the disclosure rule. the grantee, participating jurisdiction or assessment, dust testing for the presence Also, each grantee or participating CILP recipient (or their representative). of dust-lead hazards, paint repair, jurisdiction must provide a notice to In all cases where evaluation or hazard cleanup of the dwelling unit if the dust occupants describing the results of the reduction or both are undertaken, each testing finds dust-lead hazards, or clearance examination.The notice grantee, participating jurisdiction or cleanup only of the paint-repair requirement does not apply to the visual CILP recipient shall post or distribute a worksite if the dust testing does not find assessment but does apply to clearance notice to occupants of the results of the dust-lead hazards. In certain instances, results after paint stabilization, because evaluation.The grantee, participating ongoing monitoring of paint conditions the clearance report provides known jurisdiction or CILP recipient shall also was required. For all activities, information about the presence or post or distribute a notice of the results provision of the pamphlet developed by absence of lead based paint hazards. of the hazard reduction activities. EPA under TSCA section 406 was ,Finally, the final rule requires that 11. Subpart K—Acquisition,Leasing, required. ongoing maintenance of painted Some commenters expressed concern surfaces and safe work practices be Support Services, or Operation.This subpart sets out the requirements for regarding the adverse impact that these incorporated into regular building requirements would have on small-grant operations,where appropriate under certain CPD programs and the Indian Community Development Block Grant acquisition assistance programs.The HUD-administered programs. program and the Indian Housing Block Department believes that families The Department has given the grantee Grant program when such programs are receiving such assistance should be able or participating jurisdiction the providing Federal funding for to move into lead-safe housing.HUD discretion to determine whether the cost acquisition, leasing, operating or has a statutory responsibility under the of paint stabilization and clearance is to pport services for a residental Lead-Based Paint Poisoning Prevention be borne by the owner/developer, the su i property.In the proposed rue this Act to establish procedures that achieve grantee or a combination of the owner/ subpart was entitled "Community that objective to the extent practicable. developer and the grantee, based on subpart and Development"Community Non- In the final rule, as in the proposed program requirements and local Planning prule,HUD has set requirements for this program design.This helps to ensure Rehabilitation Programs."The title has subpart that are the same in most maximum flexibility for local been changed because of the addition of aspects as those for tenant-based rental authorities and is consistent with HUD's Indian programs to the coverage of the assistance,which is covered by subpart reinvention initiative. Because the subpart and because the new title is M.The basic strategy set forth in the relationship between the HUD grantee more descriptive than the term, "non- final rule consists of a visual assessment or participating jurisdiction and the rehabilitation," used in the proposed to identify deteriorated paint, property owner or developer is often a rule.The main CPD programs that fund stabilization of deteriorated paint, one-time event, HUD deemed it activities covered by this subpart are the clearance of the dwelling unit, and, impracticable to include special HOME program, the Community where there is a continuing and active requirements in the case of a child with Development Block Grant program,the financial relationship with the property, an environmental intervention blood Supportive Housing program,the ongoing lead-based paint maintenance. lead level. Emergency Shelter Grant program, and This procedure is the minimum needed 12. Subpart L—Public Housing Housing Opportunities for Persons with to assure that the housing is lead-safe. Programs.This subpart sets forth AIDS (HOPWA). Persons with AIDS are Many of the households inhabiting requirements for eliminating lead-based considered persons with disabilities, so residential properties assisted through paint hazards in public housing.The assisted housing for them is exempt programs covered by subpart K include proposed rule included Indian housing from the rule except when there is a young children.Many of the assisted under this subpart, but, as explained child of less than 6 years of age who households are homeless.A basic level above in Section III.A.8.of this resides or is expected to reside in the of protection against exposure to lead- preamble,Indian housing programs are dwelling unit. based paint hazards is essential. now covered under other subparts of Examples of the types of housing In the final rule,HUD has changed the this rule. Section 1012 of Title X does assistance to which subpart K applies proposed rule's requirement of paint not specifically add new requirements are acquisition or leasing of a homeless repair to paint stabilization, as it has to public housing. The Senate facility, downpayment assistance, throughout the final rule.This is Committee Report states that Congress mortgage and utility payments for explained above in Section III.D.9 of did not intend the changes to the Lead- persons with AIDS (if a child under 6 this preamble. Also, the dust testing Based Paint Poisoning Prevention Act resides), and payment of security requirement in pre-1950 housing has introduced by Title X to pose a barrier deposits. Other examples are payment been eliminated, and in its place the to ongoing efforts by public and Indian of the day-to-day operating expenses of Department has required clearance of housing agencies to conduct risk housing for the homeless and assistance the dwelling unit, as it has for all other assessments, lead-based paint for various support services that are HUD-assisted and HUD-owned housing. inspections and abatement activities. provided on site at a residential facility, Clearance is required, however,only if According to the Report, "the changes such as child care, employment paint stabilization is required. Also, the made by Title X to the public housing assistance, outpatient health care final rule eliminates the proposed rule's provision of the LPPPA are intended including drug treatment or counseling, distinction between pre-1950 and post- merely to conform the terminology of case management, nutritional 1949 housing.In the interest of Title X's definition of terms" (Senate counseling,security arrangements, and regulatory streamlining, a single set of Report 102-332, page 118). assistance in getting permanent housing. requirements applies to all pre-1978 Nevertheless, in order to consolidate all 50176 Federal Register/Vol. 64, No. 178/Wednesday, September 15, 1999/Rules and Regulations of the lead-based paint requirements for the environment,one commenter Under this subpart the Department HUD in a single place, the Department asserted that most local housing has included references to the liability is including subpart L for public agencies already had made a good faith insurance provisions found in the pubic housing in this rulemaking.This effort to comply with the requirement to housing program requirements. Also, subpart implements the requirements complete lead-based paint inspections the rule describes the circumstance set out in 42 U.S.C. 4822(d)(1)(3) prior by the end of 1994. under which a PHA may use financial to Title X;where necessary, however, A more specific issue addressed by assistance received under the the Department has modified these some commenters was the acceptance modernization program for the • requirements in order to be consistent by the proposed rule of dust and soil evaluation and reduction of lead-based with the intent of Title X. Such testing by non-certified personnel. Some paint hazards, and references sections of modifications are noted below. commenters objected to this because it the public housing regulations for The Lead-Based Paint Poisoning appeared to violate the requirements of additional information on eligible costs. Prevention Act requires PHAs to EPA's regulations implementing TSCA 13. Subpart M—Tenant-Based Rental complete lead-based paint inspections sections 402 and 404. Others urged HUD Assistance.This subpart sets out lead- of all pre-1978 family developments by to establish a major training activity to based paint requirements for the December 6, 1994.This statutory assure that public housing maintenance Department's tenant-based rental requirement has existed since 1987. staff would be able to conduct such assistance programs,including those HUD has data indicating that most • sampling properly and interpret the operated under the HOME, Housing developments have been inspected, as results accurately. Opportunities for Persons With AIDS mandated by Congress.Those that have In the final rule,HUD is requiring (HOPWA), Shelter Plus Care, and Indian not must be inspected no later than the that, instead of soil and dust testing by Housing Block Grant programs as well effective date of this final rule,which is non-certified personnel,risk as Section 8. Because there are different September 15, 2000.Where a PHA has assessments must be conducted by types of local organizations that not complied with the statutory certified risk assessors in developments administer tenant-based rental requirement to complete lead-based with lead-based paint that has not yet assistance under HUD programs, this paint inspections of pre-1978 family been abated.The Department has subpart uses the general term units,the PHA is eligible only for concluded after careful consideration "designated party"to refer to housing Emergency Modernization or work that it would be wasteful and ineffective agencies,grantees, participating needed to complete the inspections as to allow PHAs to skirt the EPA jurisdictions or Indian Housing Block described in 24 CFR 968.210.The Lead- certification requirements for dust and Grant recipients.Unlike other subparts, Based Paint Poisoning Prevention Act soil testing.For further discussion of this subpart applies only to housing also has required for many years that this issue,see Section III.D.8 of this occupied by families with children of PHAs abate all lead-based paint found preamble, above. less than 6 years of age. in the inspections.This is a continuing Another question has to do with the The lead-based paint requirements for activity conducted at the time of reliability of the lead-based paint tenant-based rental assistance in the modernization. inspections that have already been proposed rule were virtually the same as The Department's primary concern in conducted. In a study of prior those proposed for the subpart now developing this rule is with the safety of inspections in public housing, HUD has titled Acquisition,Leasing, Support occupants of housing developments that found that approximately 13 percent of Services,or Operation (formerly CPD have lead-based paint but have not yet the inspections were of questionable Non-Rehabilitation).For properties built been abated. In such cases, accuracy.In the proposed rule HUD, between 1950 and 1978,visual modernization (and hence abatement) therefore, encouraged PHAs to engage in assessment, paint repair and cleanup; may be years or decades away, and quality control activities to determine for properties built before 1950,visual nothing is required in the interim to whether a lead-based paint inspection is evaluation, dust testing for the presence control lead-based paint hazards. In the reliable.The final rule continues this of dust-lead hazards,paint repair, proposed rule,HUD set forth the policy.HUD's Office of Public and cleanup of the dwelling unit if the dust following additional requirements for Indian Housing issued a detailed Notice testing finds dust-lead hazards,or these developments with the goal of in 1995 (PIH 95-8(HA)) explaining how cleanup only of the paint repair assuring that they are lead-safe:visual quality control can be implemented for worksite if the dust testing does not find assessment for deteriorated paint, lead-based paint inspections that have dust-lead hazards. matching the visual assessment with the already occurred. Comments ranged from declarations lead-based paint inspection to identify. ' The final rule also continues the that it was illegal under the statute to the locations of deteriorated lead-based proposed rule requirement that apply the rule to tenant-based programs paint,dust and soil testing to determine occupants be informed of the results of to assertions that stringent lead-control the presence of dust-lead hazards or all evaluation and hazard reduction standards must be applied, especially in soil-lead hazards, and interim controls activities, and it continues the the case of the tenant-based programs. of lead-based hazards found. additional requirements that are Commenters opposed to the A principal concern of commenters triggered if a child with an requirements argued that there exists a was the financial burden, the asserted environmental intervention blood lead "statutory,program-wide exemption for "unfunded requirement," the rule level is identified in a publichousing housing receiving tenant-based Section would place on public housing development.The basic requirement is 8 assistance." One commenter asserted agencies. Based on these financial that a risk assessment and interim that only landlords agreeing to accept hardships,a group representing public controls be completed in the dwelling assistance under a section 1011 grant housing agency interests recommended 'unit quickly.A more detailed (i.e., the HUD Lead-Based Paint Hazard eliminating the rule's new requirements explanation of the requirements for Control Grant program) are required to (dust and soil testing and interim response to a child with an adhere to requirements associated with controls) as they pertained to public and environmental intervention blood lead lead-based paint testing and control. Indian housing. Acknowledging the level is provided above in Section HUD disagrees.The Department's need for addressing the issue of lead in III.D.6 of this preamble. response to the question of the legality Federal Register/Vol. 64, No. 178/Wednesday, September 15, 1999/Rules and Regulations 50177 of imposing lead-based paint and the inability of participating are doing it,what they should look for, requirements on tenant-based rental families to locate lead-safe units. and why deteriorated paint should be assistance programs is discussed above, Taking the more protective point of stabilized.The course was pilot tested under Section III.A.2. of this preamble. view, other commenters noted that the in 1998 and will be available well before Many commenters discussed the fair rule's requirements for tenant-based the effective date of this final rule. housing implications of the rule because programs were less demanding than The basic concept of treating defective of its focus on families with young those set put for project-based programs paint is being retained, but the final rule children. Some commenters advocated and advocated applying the stricter modifies the details of the standard simply relocating a family to another standards uniformly. Some commenters applying to that requirement. First, as unit upon discovery of a lead hazard urged that HUD impose the same explained above in Section III.D.4 of (leaving the unit available for other protection that the Task Force on Lead- this preamble, the minimum area of families without small children). Others Based Paint Hazard Reduction and defective paint that must be treated has Financing recommended for all private been changed.The minimum that was advocated making special funding available in pilot programs for particular units.A health department believed that promulgated in the Housing Quality localities, to finance any necessary because housing assistance programs Standards in 1995, and was included in were shifting toward tenant-based the proposed rule,is being withdrawn at control or abatement activities, or providing tax or other special incentives assistance,, "the most stringent of ,the request of many housing agencies. to owners faced with unexpected repair requirements probably should be on this hocmth departments eparmenters found and othemplicated, costs arising out of the discovery of a (type) of housing.' lead hazard. Still other commenters In considering how to respond to difficult to administer, and contrary to these comments,HUD took into account the purpose of the regulations.As was advocated coverage for all tenant based units without regard to family makeup. the recommendations of the Task Force. the case before 1995, all deteriorated art believes limiting the In their report,the Task Force paint must be treated. The Department recognized most of the concerns Second, the painted surfaces that are requirements of subpart M to dwelling expressed by commenters on the subject to the rule have changed. units in which a family with a child less proposed rule, not the least of which Current requirements apply to all than age 6 resides is a reasonable policy was the fear that expensive standards interior surfaces within the dwelling because of the unique ability of could reduce participation in the unit, the entrance and hallway serving designated parties to identify changes in prograpn by private landlords.It is the unit in a multi-unit building, and the composition of an assisted family noteworthy that the Task Force exterior surfaces up to five feet from the through the income certification concluded that lead-based paint floor or ground that are readily process.In addition, the designated requirements for tenant-based assistance accessible to children under 6 years of parties are able to monitor the property programs should be similar to the age,but excluding outbuildings. The owner's compliance with lead-based standards recommended by the Task proposed rule was the same as the paint requirements through initial and Force for rental housing in general. current regulations,except for the periodic dwelling unit inspections. Under current regulations,HUD addition of playground equipment and These two safeguards will help'to requires that designated parties fences surrounding an exterior play ensure that a designated party will administering tenant-based rental area.The final rules sets no limits to the know whether a child of less than 6 assistance programs visually inspect surfaces covered by the requirement, years of age resides in a dwelling unit. pre-1978 dwelling units that are to be saying only that the designated party An owner who refuses to rent a occupied by children under the age of shall conduct a visual assessment of"all dwelling unit to a family with a child 6 to identify defective paint,and that painted surfaces."It is HUD's intent that under the age of 6 may be in violation owners correct any defective paint such surfaces shall include all surfaces of the provisions of the Fair Housing surfaces and clean up the worksite within the dwelling unit,all surfaces on Act prohibiting discrimination on the carefully.Except for the explicit the exterior of the structure regardless of basis of familial status.The same cleanup requirement,which was issued height from the ground, and all common possibility applies to a designated party in 1995,these requirements have been areas servicing the dwelling unit.The that requires that a family with a young part of the Housing Quality Standards definition of"common area" in the rule child make an involuntary relocation. (HQS) for over ten years. includes all areas on the property (See the discussion of the requirements In the final rule,as in the proposed available for use by occupants of more of anti-discrimination statutes in rule,HUD is retaining the requirement than one unit, including outbuildings Section III.D.7 of this preamble above.) of a visual assessment to identify such as garages. Comments included repeated deteriorated paint to be performed Third, in the final rule the details expressions of fear that the cost of usually by a housing quality inspector at regarding the method of treatment are compliance with this subpart would initial and periodic inspections. (There somewhat different than those in result in a"shortfall" of housing is no effective difference between the current regulations and in the proposed available to families with tenant-based meaning of"defective paint." the term rule. Current regulations require rental assistance, and assertions that used in the current regulations, and removal of defective paint (using new contractual duties were being "deteriorated paint," which is the term specified acceptable methods) and imposed on owners that were not a part used in Title X.) Also, the final rule covering surfaces"with durable of the owners' existing agreements with retains the proposed rule requirement .materials with joints and edges sealed the designated party. Landlords will be that such inspectors be trained to and caulked as needed to prevent discouraged from participating, perform the activities required of them escape o.dust."The proposed rule commenters claimed, and the rule will by this rule.The Department is called for"paint repair",which was drive up their operating costs,without developing a training course that will repainting with proper surface any certainty of additional enable such inspectors to meet this preparation using safe practices and compensation. Both rural housing requirement.The purpose of the course including occupant protection and authorities and agencies in the largest is to assure that persons performing the cleanup.The final rule requires"paint cities worried about tight rental markets visual assessment understand why they stabilization."which is the same as 50178 Federal Register/Vol. 64, No. 178/Wednesday, September 15, 1999/Rules and Regulations paint repair except that it includes the information on costs and benefits of the lead-based paint inspections, risk additional requirement that any rule, see Section VI. of this preamble, assessments, lead-hazard screens and physical defect in the substrate that is below. abatements, the Department is requiring causing deterioration be repaired. Such Another subject of public comment that Federal standards for lead-based defects include dry-rot, rust, moisture, was the policy on responding to the paint,dust-lead hazards and soil-lead crumbling plaster, and missing siding or existence of an environmental hazards be used when conducting l other components that are not securely intervention blood lead level child in evaluations and hazard reductions in fastened. As discussed above in Section the horde of a family receiving tenant- housing covered by this final rule unless III.D.9 of this preamble,HUD is based rental assistance. Some a State, tribal or local government uniformly requiring paint stabilization commenters felt that the proposed requirement is more protective. across this final rule,because otherwise policy of requiring a risk assessment the treatment of the deteriorated paint and interim controls would reduce As explained above in Section III.D.4 in the ro ram byof this preamble,above, the standard for will be ineffective. participation program The fourth change to the standard for owners.HUD believes that compliance deteriorated paint in the proposed rule treating deteriorated paint is the with the basic policy of paint contained de minimis areas that are not requirement in the final rule that there stabilization and unit clearance, included in the final rule.The be clearance of the dwelling unit if paint combined with ongoing maintenance is definition of lead based paint, however, stabilization is conducted.As explained so inexpensive and will so reduce the is the same. HUD is including interim above,this is also a uniform likelihood of environmental standards for dust-lead hazards and soil- requirement across this rule whenever intervention blood lead level cases in lead hazards pending effective EPA • hazard reduction is conducted.It does these dwellings that landlords will not standards pursuant to TSCA section not exist in current regulations nor was leave the program.To ensure that the 403.The interim standard for soil-lead it required for tenant-based rental designated party is aware of hazards, and the concentration for assistance programs in the proposed environmental intervention blood lead abating bare soil, are unchanged from rule.HUD believes unit-wide clearance level cases in assisted families,,the final the proposed rule;but the interim dust- is an essential factor in establishing that rule clarifies the requirements of the lead standards have changed.The a dwelling unit is lead safe, and proposed rule for exchanging proposed dust-lead standard for risk therefore is requiring that clearance tests information between public health assessments and reevaluations was 100 be conducted by certified risk assessors departments and designated parties and µg/sq.ft(micrograms per square foot) for or certified lead-based paint inspectors. matching environmental intervention interior floors (both hard and carpeted) The final rule eliminates the dust testing blood lead level addresses with those of and 500 µg/sq.ft for interior window requirement for pre-1950 housing that assisted families. (See further discussion sills;there was no proposed standard for was in the proposed rule and the in Section III.D.6 of this preamble, window troughs (sometimes called distinction between pre-1950 and post- above.)Also,for purposes of clarity, the window wells);the standards for 1949 housing. In the interest of rule states that if a dwelling unit does clearance were the same as for risk regulatory streamlining, a single set of not comply with the requirements of assessments; and there was no standard requirements applies to all pre-1978 this rule,the unit does not meet for lead hazard screens, which were not housing. Housing Quality Standards (HQS).If a recognized in the proposed rule.In the All occupants shall be provided the family is occupying a unit that is out of final rule,the interim dust-lead lead hazard information pamphlet by compliance, the designated party may standard for risk assessments and the owner, except that a pamphlet does offer the family the right to move to reevaluations is 40 µg/sq.ft for interior not have to be provided if it has already another unit.If the family refuses to floors (both hard and carpeted) and 250 been provided by the owner or other move,the designated party may curtail µg/sq.ft for interior window sills. Risk designated party pursuant to the assistance. assessments and reevaluations do not 'disclosure rule.Also, the owner must 14. Subparts N-Q reserved. ' have a standard for window troughs. provide a notice to occupants describing 15. Subpart R—Methods and Standards for clearance and lead hazard the results of the clearance examination. Standards for Lead—Based Paint screens are also provided. Exterior Finally, the final rule requires that Hazard Evaluation and Reduction floors,such as unenclosed porches,and ongoing maintenance of painted Activities.This subpart replaces part 37 patios, do not have a standard;the floor surfaces and safe work practices be of the proposed rule.It is shorter than standard applies to enclosed porches. A incorporated into regular building the proposed part 37 because it complete discussion of dust lead operations,where appropriate under references methods and standards standards is provided below in Section HUD-administered programs. established by EPA-authorized State or III.E.15.b of this preamble, "Adequacy HUD estimates in the Economic tribal programs or by EPA itself for risk of Dust Lead Standards." Analysis for this rule that the average assessment, lead-based paint inspection cost of the new requirements imposed and abatement. Revised,streamlined One commenter questioned the by this subpart will be approximately sections are provided on interim advisability of HUD specifying a dust $250 per unit in single family units and controls (including paint stabilization), standard in the proposed rule for $100 per unit in multifamily units occupant protection and worksite carpets, arguing that there is no during the first year after the effective preparation,and ongoing lead-based consensus about how to test for dust date.In subsequent years,costs will paint maintenance and reevaluation hazards in carpets or what level of lead doubtless be less. Net benefits are (called"monitoring" in the proposed is dangerous. HUD agrees with the clearly positive.For single family units, rule). New sections are provided on commenter that research on this the estimated average net benefit standard treatments and safe work question is needed, and it initiated such (benefits minus costs) is$850 per unit practices, concepts recommended by the studies in 1997. It is known, however, using a discount rate of three percent for Task Force(see Section I.D.2 of this that carpeting can be a dust reservoir increased lifetime earnings and$125 per preamble, above), with significant amounts of lead unit using a seven percent rate. For a. Standards.Although HUD defers to (Battelle 1997).The Department believes multifamily units, the comparable net a large extent to methods and standards that it would be wrong to do nothing to benefits are$840 and$150. For further set by States,Indian tribes or EPA for protect children in this situation`The - Federal Register/Vol. 64, No. 178/Wednesday, September 15', 1999/Rules and Regulations 50179 effect of failing to provide a standard for intervention dust-lead loading on attractions, collections of toys or other carpeted floors would mean that the troughs for occupied dwelling units was children's possessions. or observations children who happen to be living in over 11,500 µg/sq.ft, and 10 percent of of children's play patterns. homes that are covered by the rule and the units had loadings over 100,000 µg/ EPA questioned the basis for the have wall-to-wall carpeting would sq.ft. Comments were both for and proposed rule standard of no more than remain unprotected from floor dust-lead against sampling troughs. A large city 200 pg/g for material used to cover soil- hazards, and the children living with housing agency agreed with the policy lead hazards. While conclusive area rugs would be only partially • on troughs in the proposed rule.A State scientific data on which to base the protected.Preliminary data from the agency disagreed, pointing out that, in standard are not available, HUD believes HUD Evaluation of the Lead-Based Paint the Rochester study of the relationship that a standard is needed and that Hazard Control Grant program indicate between dust lead and childhood blood making it one-half of the level that about 25-30 percent of the lead,dust lead in troughs correlated considered to be a soil-lead hazard in bedrooms and living rooms in the study well with blood lead. • children's play areas is reasonable. had carpeting, with the percentage In the final rule HUD has included an Throughout the rule, units of much higher in certain areas. option to conduct a lead hazard screen, measurement are provided in metric HUD acknowledges that the proposed and, as in the HUD Guidelines,the dust- forms as well as corresponding EPA rule implementing TSCA section lead standard is set at approximately conventional unit values, in accordance 403 did not include a dust-lead standard one-half the risk assessment standard: with the Metric Conversion Act of 1975, for carpets because EPA felt that 25 µg/sq.ft. for floors and 125 µg/sq.ft. as amended by Public Law 100-418, at currently available data are insufficient for interior window sills.The floor 15 U.S.C. 205b;and Executive Order . for establishing a health-based standard standard for the lead hazard screen was 12770, "Metric Usage in Federal and because it is not clear what hazard set at 25 µg/sq.ft. instead'of 20, Government Programs" (56 FR 35801, reduction methods are effective.EPA reflecting practical laboratory detection July 25, 1991). Persons covered by the acknowledged that"the lack of a limits. rule should consistently apply the units standard for carpeted floors is a Several commenters addressed they use routinely in their work. For. significant limitation" and requested • aspects of the proposed rule's treatment example,lead-based paint professionals comment on the impact of not having a of soil-lead standards or soil treatments. who use conventional units (such as standard and on information that would EPA questioned HUD's interpretation of feet) in their work should use the risk be helpful in setting such a standard. the soil-lead levels in EPA's guidance assessment standards of micrograms per As explained below under"Adequacy on lead in soil (60 FR 47248, September square foot(µg/ft2);professionals who of Dust-Lead Standards,"a study by the 11. 1995).In its guidance.EPA use metric units (such as meters) in University of Rochester(Lanphear 1996) recommended that when lead levels in their work should use the fully metric shows a significant correlation between bare soil exceed 400 ppm at"areas standards of micrograms per square dust lead in carpets and children's expected or intended to be used by • meter (µg/m 2). • blood lead. Furthermore,HUD provides children," interim controls be 1-HUD is aware of efforts by voluntary in subpart R of the rule a method for undertaken to change use patterns and/ consensus standards bodies to develop dust-lead hazard control in carpets or or create barriers between children and private-sector standards in the lead- rugs.This method relies on thorough contaminated soil. "Where bare soil- based paint hazard evaluation, vacuuming and is based on the HUD lead levels are found to be 2,000 ppm management and control areas,and on Guidelines and on recent data from the or more, interim controls should be related subjects. HUD has been Evaluation of the HUD Lead-Based Paint implemented even if the area is not supportive of, and participated in,some Hazard Control Grant program.The frequented by children." At 5,000 ppm of these efforts.For example, over a feasibility of removing dust lead from or more, EPA recommended abatement dozen standards of the American carpets to achieve the interim standard of bare soil.In the proposed rule,HUD Society for Testing and Materials is discussed below in Section III.E.15.b. applied the 400 ppm standard to bare (ASTM,West Conshohocken,PA of this preamble.Therefore,HUD is soil "in play areas:" the 2,000 ppm 19428-2392) are cited in the HUD including in the final rule an interim standard was applied to bare soil in Guidelines.The Guidelines, in turn, are standard for dust lead in carpeting using "other areas."EPA called this cited by subpart R itself and in the EPA a wipe sampling method, pending the interpretation incorrect, indicating that rule on lead hazard control work issuance by EPA of a health-based permitting 2000 ppm levels anywhere practices (40 CFR 745.227(a)(3)),which standard pursuant to TSCA section 433. near areas occupied by children "may is cited by subpart R.ASTM and other • The HUD interim standard for present an unreasonable risk." The committees are continuing to develop clearance in the final rule is the same as Agency recommended that the 400 ppm standards in the lead-based paint hazard for risk assessments on floors and standard apply to the entire yard.HUD . field (such as occupant notices with interior window sills, but a clearance believes that its interpretation of the more detail).The Department will standard of 800 µg/sq.ft is added for • guidance is reasonable and also that it review these standards,when issued, for window troughs.The Department's reflects the guidance on this matter their applicability to and practicality for intent in setting a clearance standard for given in the HUD Guidelines,which is the programs covered by this rule. window troughs is to encourage their referenced in the EPA regulation. In the b. Adequacy of Dust-Lead Standards. cleaning.It is not unusual for window final rule. HUD has retained,therefore, One commenter stated that the troughs to have very high loadings of the same interpretation as in the permissible levels of lead in dust lead in dust, perhaps because they are proposed rule.The standard for soil- referenced in the proposed rule would perceived as an exterior surface and are lead hazards addresses bare soil in play not be sufficiently protective of children rarely cleaned, and perhaps because areas frequented by children under 6 and cited several recent scientific lead-based paint on window friction years of age. HUD intends that these studies as evidence.Other commenters surfaces contributes to the dust lead play areas include those intended for stated that HUD failed to require loading in the trough.In the evaluation these children's routine use, as clearance testing in all programs to of HUD's Lead-Based Paint Hazard demonstrated by such evidence as the determine if housing units undergoing Control Grant Program,the median pre- presence of play equipment or similar lead hazard reduction activities were 50180 Federal Register/Vol. 64, No. 178/Wednesday, September 15, 1999/Rules and Regulations safe to reoccupy.The proposed rule These studies demonstrate that Dust-lead standards in this rule will contained standards for lead in dust of without clearance testing and without be used in risk assessments to determine 100 µg/ft2 on floors and 500 µg/ft2 on adequate dust-lead standards, children's whether hazard reduction should be window sills for both risk assessment blood lead levels may worsen as a result conducted and in clearance and clearance purposes.The proposed of lead-based paint hazard control work examinations to determine whether dust rule eliminated an earlier standard of in housing.Therefore,HUD has in housing units, common areas and/or 800 µg/ft2 for window troughs.In provided for clearance testing when work sites has been properly cleaned preparing the final rule, HUD lead hazard control work is done in and removed after hazard reduction considered the health benefits and housing covered by this rule. activities.The goal of these activities is feasibility of lead dust standards for Although each of the studies cited to protect children from exposure to both clearance and risk assessment above have limitations, it is clear that lead at or above the CDC level of purposes. the weight of the scientific evidence concern, 10 µg/dL. As explained below, (1) Health Benefits. Clark and suggests that children may not be HUD has considered both cost and coworkers reported a study of 23 homes adequately protected under the dust- feasibility in setting the interim in Cincinnati where the floor dust-lead lead standards in HUD's proposed rule. standards. level requited to prevent 95%of the As a result of such studies,HUD has_ To better understand the existing children from exceeding a blood lead progressively lowered its dust-lead • science, HUD conducted a study level of 10 µg/dL was found to be almost standard over the years.In 1990,HUD pooling the data from virtually all an order of magnitude lower than the used a floor dust-lead standard of 200 available epidemiological datafr studies that existing standard of 100 µg/ft 2 (Clark µg/ft2 in its Interim Guidelines,based 1996).In a study of 205 children in primarily on a standard adopted by the examined the relationship between Rochester,NY,Lanphear et al. found State of Maryland and research dust lead and blood lead levels,taking that approximately 20%of children conducted at Johns Hopkins University into account differences across the studies (Lanphear et al. 1998). After exposed to a floor dust-lead level of 40 (Farfel 1990). combinin data sets from each study, a µg/ft2 had blood lead levels greater than At that time, the Centers for Disease g 10 µg/dL(Lanphear 1996). Control and Prevention(CDC) had cohort of 1,861 children aged 6 to 36 Earlier studies have demonstrated the established a blood lead level of concern months was created.This age group has importance of establishing adequate of 25 µg/dL.In 1991, CDC adopted a been found to have the clearest dust-lead standards. From data collected new multi-tier blood lead level response relationship between dust lead and in 1990, Ashengrau reported an increase system.That system indicated that blood lead.The pooled analysis in blood lead level of 6.5 µg/dL(p=0.05) blood lead levels of 10-14 µg/dL in excluded children who had been in children who had baseline blood lead many children in a community should individually selected for study on the levels below 20 µg/dL and whose trigger community-wide childhood lead basis of high blood lead, due to the bias houses were treated for lead-based paint poisoning prevention activities.A blood this could introduce. Environmental hazards using a floor clearance standard lead level of 15-19 µg/dL that persists lead measurements and other variables of 200 µg/ft2 (Ashengrau 1997).These in an individual child Should result in (season, presence of industrial sources houses were also treated mainly through an environmental investigation and of exposure,year of study, race,sex, extensive dry scraping,which under intervention.Higher blood lead levels socioeconomic status and measurement this rule is now a prohibited method of require more intensive medical error) were standardized across all paint removal in federally-assisted or evaluation and pharmacologic studies. federally-owned housing. treatment. Because CDC lowered the The pooled analysis of In a study conducted between 1987 blood lead level of concern,it is logical epidemiological studies estimated the and 1990 where clearance testing may that dust-lead standards would also expected prevalence rate of blood lead not have been conducted at all and need to be reduced. Consequently,HUD levels greater than or equal to 10 and 15 where children had baseline blood lead reduced its floor dust-lead standard to µg/dL in young children using a number levels less than 20 µg/dL,only 35%of 100 µg/ft2 in its 1994 draft Guidelines, of different candidate dust-lead the children had lower blood lead levels . which was released in final form in standards and holding all other following hazard control work.The 1995.EPA adopted the same guidance environmental variables and other mean blood lead level increased dust-lead Ievel in 1994 and published it covariates at their national averages. significantly from 16.8 µg/dL to 19.3 µg/ the next year(60 FR 47248, September Table 1 shows the results of this dL (p<0.05) (Swindell 1990). , 11, 1995). analysis. TABLE 1.—FLOOR DUST LEAD AND CHILDREN'S BLOOD LEAD LEVELS Percentage of Percentage of • children with children with blood lead levels blood lead levels Floor dust-lead loading greater than or greater than or (1,g/ft2) Equal to 10 µg/ equal to 15 µg/ dL dL (95%confidence (95%confidence intervals) intervals) • 1 • 1.0(0.3-3.8) 0.1 (0.0-0.6) 5 4.4(1.7-11.0) 0.7(0.4-2.6) 10 7.4(3.1-16.5) 1.4(0.4-4.6) 20 - 12 (5-24) 2.7(0.9-7.8) 25 14(6-27) 3.2(1-9) 40 18 (9-33) 4.7(2-13) 70 24(12-42) 7.2(3-18) • Federal Register/Vol. 64, No. 178/Wednesday, September 15, 1999/Rules and Regulations 50181 TABLE 1.—FLOOR DUST LEAD AND CHILDREN'S BLOOD LEAD LEVELS—Continued Percentage of Percentage of children with children with blood lead levels blood lead levels . Floor dust-lead loading greater than or greater than or (µg/ft2) Equal to 10 µg/ equal to 15 µg/ dL dL (95%confidence (95%confidence intervals) intervals) 100 28 (14-48) 9.3 (4-23) The pooled analysis indicates that, standard: and (2) the ability to measure hazard reduction techniques do not • using the old standard (i.e., 100 µg/sq.ft. dust-lead levels in the range of interest appear to be capable of reaching a floor on floors), 28 percent of young children using readily available analytical dust-lead level of 5 µg/ft2 routinely, may have a blood lead level greater than techniques (and the increased cost of since the median level following hazard or equal to.10 µg/dL, and nearly 10 using more sensitive detection methods control work is three to four times percent may have a blood lead level if needed). greater (see also the discussion below equal to or greater than 15 µg/dL.Using The largest study of residential lead about detection limits). a floor dust-lead standard of 40 µg/sq.ft., hazard control conducted to date is Importantly, many of the units treated 18 percent of young children may have HUD's on-going evaluation of its first 14 under the HUD lead hazard control a blood level of 10 µg/dL or greater, and grantees under the Lead-Based Paint grant program are high-risk houses and less than 5 percent will be a 15 µg/dL Hazard Control Grant program.These often initially contain children with or greater.To achieve a prevalence of grantees are State and local governments seriously elevated blood lead levels.In only 5 percent of young children with receiving grants to address lead-based more typical dwelling units, it is likely blood levels at 10 µg/dL or greater, the paint hazards in low-income,privately that even lower dust-lead levels can be analysis indicates that dust-lead owned dwelling units.Almost 3,000 achieved. Indeed, HUD's 1990 National loadings on floors would have to be at dwelling units are enrolled in this Survey of Lead-Based Paint Hazards in 5 µg/sq.ft. evaluation. Using modern hazard Private Housing found that the average For reasons of feasibility,HUD is control techniques, this study provides dust-lead loading on floors (converted to setting an interim dust-lead standard for important insights into the degree of wipe sampling)was estimated to be floors of 40 µg/sq.ft.The feasibility cleanliness that is feasible using current only 5 µg/ft2.This survey did not issues are discussed in the following measurement,cleaning and hazard include houses where lead hazard paragraphs.It is noteworthy that, based reduction technologies.The final report reduction had occurred. on Table 1,a standard of 40 µg/sq.ft.is will not be issued until after the year The HUD Evaluation Study data show expected to protect more than 95 2000 due to on-going evaluation of the that 17.4 percent of these high risk percent of young children against dwellings and the children who live in houses have floor dust-lead levels above exposure to lead in blood equal to or them. 100 µg/ft2 (the existing standard). A greater than 15 µg/dL, which is the level Interim results show that, on average, dust-lead standard of 40 µg/ft2 would recommended by CDC at which initial floor dust-lead levels are below increase the percentage of"high risk" environmental intervention should be 20 µg/ft2 (National Center 1998). houses above the standard to about 26 conducted.This is also the Furthermore, the data show that dust- percent. This is fairly consistent with environmental intervention blood lead lead levels on floors do not the blood lead levels found in this level used in this rule, as explained reaccumulate continuously,as assumed population, because 28.9%of the above in Section III.D.6 of this in the Economic Analysis for the children enrolled had environmental preamble. proposed rule,which was prepared intervention blood lead levels. With regard to carpeted floors, before these reaccumulation data were More typical houses that are served by Lanphear et al. found a significant available.The new data show that other HUD programs are likely to have correlation between dust lead in carpets median dust-lead levels on floors a far lower percentage failing the (using wipe sampling) and children's continue to drop for at least the first reduced dust-lead interim standard, blood lead levels (Lanphear 1996). . year following the hazard control work, because these programs do not target Furthermore, the study showed that from 19 µg/ft2 to 14 µg/ft2 twelve • housing with lead-poisoned children. about 19.8 percent of children would months later.The average dwelling unit For example, data from HUD's National have blood lead levels at or above 10 µg/ undergoing lead hazard control had a Survey show that the percentage of all dL with carpeted floors at 40 µg/sq.ft., median floor dust-lead level of 17 µg/ft2 U.S. housing exceeding a floor dust-lead a percentage that is not significantly immediately following hazard control level of 100 µg/ft2 is 7.6 percent in different from the 18 percent found with work.That level declined to 14 µg/ft2 "dry" rooms (i.e., rooms without hard-floor dust lead at 40 µg/sq.ft. six months later and remained at the plumbing fixtures).The percentage Therefore HUD is setting an interim same level one year following the work. exceeding a floor dust-lead level of 40 dust lead standard for carpeted floors Therefore, it is feasible to reach and µg/ft2 is 10.2 percent in dry rooms. In that is the same as that for hard floors. maintain a floor dust-lead standard of short. the lower floor dust-lead interim (2) Feasibility.There are two issues 40 µg/ft2. standard of 4Q µg/ft2 will increase the that affect the feasibility and cost of any The pooled epidemiological analysis percentage of houses requiring hazard given dust-lead standard: (1)The ability also shows that a floor dust-lead control by a modest 2.6 percent. of cleaning techniques to meet a given standard of.5 µg/ft2 would be required With regard to carpeted floors, level of cleanliness and the percentage to ensure that 95 percent of children do preliminary data from the HUD of houses that can be expected to pass not have a blood lead level greater than Evaluatiop indicate that only 15 percent and maintain a given dust-lead or equal to 10 µg/dL.However, modern of carpeted entry areas and 8 percent of 50182 Federal Register/Vol. 64, No. 178/Wednesday, September 15, 1999/Rules and Regulations other carpeted rooms had dust-lead µg/ft2 would increase by a modest 5.4 purposes. This ensures that the screen loadings equal to or greater than 40 µg/ percent(compared to the current will be sufficiently sensitive to uncover sq.ft. based on wipe sampling.The standard of 500 µg/ft2). those houses that should have a full risk Evaluation data also indicate that In short, the window sill standard is. assessment. grantees were able to reduce dust-lead both feasible and health-based. It is Lead hazard screens are a form of risk loadings in carpets, but the data are feasible because dust-lead levels at the assessment applied to housing in good limited by the fact that grantees were new interim standard can be reached, condition where lead-based paint working with a clearance standard of and maintained and because the hazards are unlikely to be present.The 100 µg/sq.ft. instead of 40 µg/sq.ft. increase in the percentage of houses protocol for a lead hazard screen (3) Detection Limits. Detection limits failing the new standard is small.It is referenced in the HUD Guidelines of dust wipe analysis also have an effect health-based because the percentage of involves (among other things) collection on the feasibility of lower dust-lead houses failing the standard is about the of two composite dust samples: one standards. A standard cannot be set at same as the percentage of children with from floors and a second from window a level that cannot be measured reliably. blood lead levels greater than 10 µg/dL troughs. Each composite sample Many analytical laboratories currently in the HUD Evaluation Study. consists of 4 individual samples report method detection limits of 25 µg/ In the proposed rule,HUD did not collected from a like surface. If a level wipe. For floors, this'Means a method include the window trough standard of found in the screen is more than one detection limit of 25 µg/ft2,since a one 800 µg/ft2 it had established in the HUD half of the applicable risk assessment square foot area is typically sampled.A Guidelines and the 1990 Interim dust-lead standard, then a full risk method detection limit at least 4 times Guidelines. However,several assessment is to be conducted to lower than the regulatory standard is commenters indicated that a window determine if lead-based paint hazards desirable to ensure reliable results, trough standard should be retained for are actually present. For all laboratories in the HUD clearance purposes, as a way of ensuring In this final regulation,HUD has Evaluation Study, the average method that window troughs are cleaned and/or modified slightly the lead hazard screen detection limit is currently 11 µg/wipe. treated during.hazard reduction work. protocol of the HUD Guidelines Therefore,HUD believes that The HUD Evaluation Study shows that regarding dust.In the final rule, interior laboratories will be able to report median dust-lead levels in window window sills are sampled instead of detection limits of 10 µg/wipe without troughs immediately following hazard window troughs for three reasons: (1) having to resort to more sensitive and reduction work is 72 µg/ft2,indicating Interior window sills are easier to wipe- more expensive types of analytical that it is feasible to implement a sample than troughs: (2) dust-lead procedures. In short, no increase in window trough clearance standard of loadings on troughs may reflect exterior analytical cost is expected in order to 800 µg/fti. sources not related to the residential achieve a detection limit of 10 µg/wipe, On the other hand, development of a structure itself;and (3) dust-wipe which is one-fourth the new floor dust- feasible window trough risk assessment loadings on sills and troughs are highly lead standard of 40 µg/ft2.This will standard is more problematic, because correlated (the correlation coefficient of ensure that reliable measures of dust- nearly all pie-1978 dwellings have very the logarithms of the loadings is 0.60, lead loading can be made. high window trough dust-lead levels. which is higher than that for any other A floor dust-lead standard of 5 µg/ft2 For example,data from HUD's pairs of paint-or dust-lead is well below method detection limits Evaluation Study indicate that the measurements (Lanphear 1995)). EPA reported by most laboratories and is median window trough dust-lead level made a similar judgment in deciding not therefore not feasible to implement. for occupied dwelling units prior to to propose a window trough dust-lead (4) Window Dust Standards.For hazard control work is more than 11,500 hazard standard in the proposed interior window sills and window µg/ft2.Because HUD believes it is , regulations pursuant to TSCA section troughs, epidemiological data are less important to have a reliable way to 403 (63 FR 30335-6,June 3, 1998). available than for floors, because only a determine whether or not window Future research or technological few studies have collected samples from troughs were cleaned during hazard advances may result in different these areas. For interior window sills, reduction work, and because window recommendations,which the the final rule establishes a dust-lead trough lead dust does appear to Department will review. standard of 250 µg/ft2,which is based contribute to children's exposure,HUD Similarly, HUD is noting that single- on a study in Rochester, NY (Lanphear has reestablished a window trough wipe samples may be used instead of 1996).This standard also should protect clearance standard of 800 µg/ft2 in the composite samples as part of the lead virtually all children from developing final rule. Because most dwelling units hazard screen.When two or more an environmental intervention blood have window trough levels above 800 single-wipe samples are used for a lead level.In the high risk houses µg/ft2,HUD believes it is not feasible to single building component type (such as enrolled in the HUD Evaluation Study, establish a window trough dust-lead two or more interior widow sills), the 47.5 percent of the units had baseline standard for risk assessment and dust loadings for that component type window sill dust lead levels below 250 reevaluation purposes at this time. are averaged to give the equivalent µg/ft2,which is close to the percentage Therefore, the window trough dust composite sample result.Users may of children who had blood lead levels standard of 800 µg/ft2 is used for wish to take single-wipe samples, rather below 10 µg/dL in the evaluation (54.3 clearance purposes only.To meet this than composite samples, as part of lead percent). At clearance following lead clearance requirement,window troughs hazard screens for several reasons: the hazard control work, the median dust- should be cleaned as a routine part of cost of laboratory analyses is low lead level on window sills was 44 µg/ all lead hazard control work. enough for many users that they may ft2 at the time of clearance, 83 µg/ft2 six (5) Lead Hazard Screen Standards. perceive little economic benefit to months later, and 88 µg/ft2 12 months The lead hazard screen levels for floor analyzing composite samples instead of later. For more typical houses, the HUD and interior window sill dust lead in single-wipe samples, and the EPA's National Survey found that the this rule are 25 µg/ft2 and 125 µg/ft2, National Lead Laboratory Accreditation percentage of interior window sills respectively.These are about half of the Program (NLLAP) does not, at the time failing a new dust-lead standard of 250 standards used for risk assessment of issuance of this rule, have a formal Federal Register/Vol. 64, No. 178/Wednesday, September 15, 1999/Rules and Regulations 50183 quality assurance program for composite shows that dust-lead is present at a level condition undergoing rehabilitation dust samples. EPA is working on this equal to or greater than 125 µg/ft2 on above $5,000 per unit (the cases where latter issue, and will advise NLLAP interior window sills or equal to or the lead hazard screens are likely to be participants and others if and when greater than 25 µg/ft2 on floors, a lead- used) has become insignificant; the such a program becomes available. based paint hazard may be present and additional time associated with the Potential users of composite dust wipe a full risk assessment should be samples, for lead professionals already analyses may contact the National Lead conducted to confirm or reject the at the site, is also insignificant. Information Center Clearinghouse toll- results of the screen. free at 1-800-424-LEAD for information HUD has also modified slightly the To summarize, the final rule on this subject. lead hazard screen protocol of the HUD establishes the dust-lead standards in If less than 125 µg/ft2 (half of 250 µg/ Guidelines regarding soil.In the final Table 2.The dust-lead standards in this ft2) of lead dust is detected on the rule,soil is to be sampled and analyzed, rule are interim standards until EPA composite interior window sill sample, and the analyses evaluated,using the promulgates and makes effective dust- and the composite floor sample shows same protocol as for a risk assessment. lead hazard standards under TSCA that less than 25 1.1.g/ft2 is present, the With analytical costs having dropped section 403. When the TSCA 403 rule is screen shows that lead-based paint since the publication of the HUD effective,HUD will issue any technical hazards are not present.In this case, a Guidelines, the cost of performing soil amendments that are needed to make full risk assessment is not needed. analyses as part of lead hazard screens clear what standards are applicable to Conversely, if a lead hazard screen for single family housing in good this rule at that time. TABLE 2.—INTERIM DUST-LEAD STANDARDS Surface Evaluation method Interior Win- Window troughs Floors (µg/ftz) dow Sills (µg/n2) (µg/ Risk Assessment Screen 25 125 Not Applicable. Risk Assessment 40 250 Not Applicable. Reevaluation 40 250 Not Applicable. Clearance 40 250 800. Note: "Floors" includes carpeted and uncarpeted interior floors. c. Summary Notice Formats. Subparts clearance).These formats include the beginning;HUD will evaluate any D, and F through M of the final rule information described in Subpart B and standards,when issued, for their require that occupants be notified of the are based on: (1) The sample formats applicability to, and practicality for, the results of evaluations and hazard developed by HUD and EPA for the programs covered by this rule. reduction activities (including clearance disclosure rule (see 61 FR 9074-,5, d.Interim Contruis.The section on examinations). Also,if lead-based paint March 6, 1998, in the preamble to the interim controls in the final rule is or lead-based paint hazards are final rules implementing section 1018 of similar to that of the proposed rule.As presumed to exist, notification must be Title X, 24 CFR 35.80-98 and 40 CFR mentioned above in Section III.D.8 of made.The major elements of these 745.100-119);and (2) formats this preamble, the proposed rule notices are described in Subpart B. developed by the California Department required that workers performing Subpart B places responsibility for of Health Services (Emeryville, CA interim controls be supervised by a any required occupant notification on 94608-1939) for notices of abatement of certified abatement supervisor, and this the designated party.HUD recognizes lead hazards (DHS form 8551) and lead was met with criticism by several that many designated parties may not hazard evaluation (DHS form 8552). commenters, In response to these have the expertise from staff or Requirements for reports of evaluation comments, in the final rule HUD is consultants to extract the pertinent or abatement clearance used to develop following the Task Force information from the inspection,risk the corresponding notices to occupants recommendation that such workers be assessment or clearance reports to are found in EPA's TSCA section 402/ trained in the basic requirements of safe prepare the notices.As a result,the 404 rule (40 CFR 745.227) and are cited lead-based paint hazard reduction, and Department, in subpart R, makes a by subpart R. Requirements for reports several choices of acceptable training strong recommendation that the lead- on hazard reduction activities other courses are mentioned. All such training based paint professional who prepares than abatement are in subpart R itself. is designed to meet OSHA requirements; such a report provide the designated Guidance.on preparing these reports is several choices meet EPA requirements party with the summary notice of the found in the HUD Guidelines, chapters as well. results suitable for posting or 5 (risk assessment), 7 (inspection), and Another significant modification of distribution to occupants. 15 (clearance).There are currently no the proposed-rule section on interim Sample (i.e., non-mandatory) notice detailed standards for preparing these controls is the addition of explicit formats that can be used are provided in reports, and HUD-funded research on factors that must be present for interim Appendix A for a lead-based paint lead-based paint inspection reports has controls to be required under this rule inspection, Appendix B for a risk found considerable variability in them, for friction, impact and chewable assessment, Appendix C for in both format and measures of surfaces. HUD developed these factors presumption of the presence of lead- completeness and accuracy (HUD 1998). in response to comments that greater based paint or lead-based paint hazards, ASTM committee work developing specificity is needed to prevent and Appendix D for completion of detailed voluntary consensus standard unnecessary, ineffective and wasteful hazard reduction activities (including protocols for report preparation is hazard reduction actions. Friction 50184 Federal Register/Vol. 64, No. 178/Wednesday, September 15, 1999/Rules and Regulations surfaces are required to be treated only equivalent efficacy." One of the main abatement at 40 CFR 745.227(e) but also if: (1) Dust-lead levels on the nearest reasons for revision of required cleaning specify the dust-lead loading levels to horizontal surface (i.e., the surface on methods is that the final rule requires be used for clearance.To pass clearance, which the dust settles that is nearest to clearance after all hazard reduction dust-lead levels, using wipe sampling, the friction surface) are greater than the activities,whereas the proposed rule must be less than 40 µg/ft2 for interior risk assessment dust-lead standards; (2) omitted the clearance requirement for floors, 250 µg/ft2 for interior window there is evidence that the surface is some housing programs.In the context sills,and 800 µg/ft2 for window troughs. subject to abrasion; and (3) lead-based of this rule, the goal of cleaning should The rule also specifies the content of paint is known or presumed to be be to achieve clearance,not to comply clearance reports that must be prepared present on the surface. Impact surfaces with prescriptive regulations on how to for clearances after hazard reduction are required to be treated only if: (1) clean. Making surfaces smooth and activities other than abatement. For Paint on the surface is damaged; (2) the cleanable is an important objective, clearance of the worksite only,which is damaged paint is caused by impact from because it makes it possible for required in subpart J after rehabilitation a related building component (such as a occupants to maintain their dwellings receiving no more than$5,000 per unit door knob that knocks into a wall, or a safe from dust-lead hazards in the and also in some ongoing maintenance door that knocks against its door frame); future. Revision of the HEPA filter activities, dust samples must be taken and (3) lead-based paint is known or requirement will facilitate the from the floor and windows (if presumed to be present on the surface. application of advances in technology available) that represent the area within HUD intends that impact as a result of resulting from ongoing research on the dust containment area of the misuse by occupants is not necessarily cleaning lead-contaminated surfaces. worksite.Worksite clearance is not an acceptable basis for requiring Information on the status of this field of required if the rehabilitation or treatment. Chewable surfaces are technology is provided in Section maintenance does not disturb painted required to be treated only if: (1) There III.E.2.a of this preamble, in the surfaces totaling more than the safe is evidence that a child of less than 6 discussion of HEPA vacuums. . work practices de minimis levels (see years of age has chewed on the surface; A commenter recommended that Section III.D.4 of this preamble, above). and (2) lead-based paint is known or clearance not be required after"basic For a discussion of qualification presumed to be present on the surface. interim controls,"because many interim requirements for persons performing As in the proposed rule, interim controls are like routine maintenance clearance,see Section III.D.8 of this control methods, when required, must activities that will be performed preamble,above. be selected from among those identified frequently by in-house staff.In the final While subpart R allows recleaning as acceptable in a current risk rule, the Department has retained the immediately after a clearance failure. assessment report. (As noted in subpart clearance requirement for initial interim owners, designated parties and B, abatement is also acceptable when controls,because clearance is the only contractors are urged to consider the interim controls are required.)When method of determining whether a cause of the failure,.and to address the interim controls are required and no risk dwelling unit is free of lead-based paint cause,if identified,before recleaning assessment has been done or no risk hazards.HUD, however,is not requiring the affected area. assessment that has been done is clearance after ongoing lead-based paint A commenter recommended that current, a new risk assessment must be maintenance activities that are property owners (or other designated conducted (except when only paint conducted after interim controls and parties) be.allowed to retain a certified stabilization of deteriorated paint is that do not disturb painted surfaces of inspector or risk assessor to perform the required, because the response has been a total area greater than 20 square feet clearance examinations.In the final specified in the rule). Techniques for on exterior surfaces, 2 square feet in any rule,HUD has allowed this, provided repairing physical defects in a stibstrate one interior room or space, or 10 the clearance examiner is independent before performing paint stabilization are percent of the total surface area on an from any contractor used to perform the discussed in the HUD Guidelines, interior or exterior component with a hazard reduction work.The property chapter 11. small surface area such as window sills, owners (or other designated parties) The proposed rule required a baseboards and other trim. may,however, use in-house employees minimum two-stage cleaning process for e. Standard Treatments.As explained for both hazard reduction and clearance the control of dust-lead hazards on hard above in Section III.E.2.c of this examination, provided that the same surfaces:first HEPA vacuuming,then preamble,standard treatments,when employee does not do hazard reduction wet cleaning.Also,HEPA vacuuming used, must include: (1) Stabilization of and clearance. was required for surfaces covered by . all deteriorated paint, interior and After clearance, a report is to be carpeting or rugs. One commenter noted exterior; (2) the provision of smooth and prepared that documents the hazard that recent research has indicated that a cleanable horizontal hard surfaces; (3) reduction or maintenance activity as variety of cleaning methods may the correction of dust-generating well as the results of the clearance achieve clearance levels. and that one of conditions (i.e., conditions causing examination. It is the responsibility of the critical variables affecting the rubbing,binding,or crushing of surfaces the designated party to ensure that this difficulty of cleaning is the condition of known or presumed to be coated with report is prepared,signed, and kept for the surface.To avoid rigidity,HUD has lead-based paint);and (4) treatment of at least three years. For an abatement modified the dust-lead hazard control bare soil to control known or presumed activity, the report is an abatement requirements in the interim controls soil-lead hazards.Safe work practices report as described in EPA regulations section of subpart R of the final rule in and clearance are required.Individuals at 40 CFR 745.227(e)(10).The abatement three ways. First, the two-stage process performing standard treatments must be report includes the results of the is no longer required;second, if hard trained in how to control lead-based clearance examination as well as a surfaces are rough and pitted, they must paint hazards.The training requirement detailed written description of the be made smooth and cleanable;and is identical to that for interim controls, abatement, and its preparation is the third,rather than requiring HEPA f. Clearance. Methods and standards responsibility of the abatement vacuuming, HUD is requiring the lase of for clearance in this rule refer to the supervisor. For another hazard a"HEPA vacuum or other method of EPA requirements for clearance after reduction activity requiring a clearance • Federal Register/Vol. 64, No. 178/Wednesday, September 15, 1999/Rules and Regulations 50185 report (including interim controls, paint interagency regulatory consistency. Ongoing lead-based paint stabilization, standard treatments, lead- Based on the approach used in subpart maintenance is required in specified based paint maintenance, or B for occupant notification, the warning situations in subparts F through M.This rehabilitation), the EPA rule does not sign is to be provided in the occupants' can involve such activities as visual apply;so the final rule provides an primary language or in the language of assessment,stabilizing deteriorated outline of the required report that the occupants' lease or contract. paint,standard treatments, interim parallels the EPA abatement report h. Safe Work Practices.A section on controls, repair of failed lead-based outline. However, the designated party safe work practices has been added to paint hazard controls, and notifications must make sure: (1) That a report this final rule to specify the practices to of evaluation and hazard reduction describing the hazard reduction activity be observed during paint stabilization, activities. (Sample formats and language is prepared:and (2) that the clearance ongoing lead-based paint maintenance, requirements for notices are discussed examiner provides a signed clearance and rehabilitation receiving no more above in Sections III.E.15.c and g of this report with the information required by than $5,000 per unit in Federal preamble, respectively.) the rule. rehabilitation assistance. Safe work Reevaluation is required for housing Designated parties should also bear in practices include occupant protection receiving project-based assistance mind that HUD has requirements in and worksite preparation,specialized greater than $5,000 per unit per year subparts D, and F through M for cleanup, and the prohibition of certain and for public housing.The strategy for occupant notification following hazard methods of paint removal (see Section selecting portions of residential reduction activities.The major elements III E.2.g of this preamble, above). Safe properties to reevaluate considers two of this notice are described in Subpart work practices are not required if the factors: How many dwelling units and • B. A sample (i.e., non-mandatory) total area of paint surfaces being common areas are present, and at how format that can be used for notification disturbed is no more than the de many worksites hazard reduction of the completion of hazard reduction activities were performed previously. minimis exemption levels of 20 square activities, including clearance,is feet on exterior surfaces,or 2 square feet The selection and reevaluation provided in Appendix D (see in any one interior room or space,or 10 procedures for dwelling units and discussion, above, in Section III.E.15.e common areas are the same as for risk percent of the total surface area on an of this preamble). interior or exterior component with a assessment, as provided in subpart R. g. Occupant Protection and Worksite and as detailed in the HUD Guidelines, Preparation. Requirements for occupant small surface area (such as window chapter 5. Similar dwelling units are protection and worksite preparation in sills,baseboards, and other trim). grouped, and the number to be i. Ongoing Lead-Based Paint this final rule are similar to those in the reevaluated in each such group is proposed rule,which were based largely Maintenance and Reevaluation.The determined from tables in the on the HUD Guidelines. proposed monitoring of housing after Guidelines. Many hazard reduction activities can interim controls was the subject of For a targeted sample of units with be completed in one work shift.As a several comments. Commenters the highest likelihood for finding lead- result, the Department has streamlined expressed doubts about the efficacy of based paint hazards,there is a table in the requirements for occupant the proposed monitoring requirements, chapter 5:for a random sample of units, relocation for work that will be regarded them as expensive to maintain chapter 5 refers users to a table in completed within one period of 8 and enforce, and questioned the ability chapter 7. Separately,the number of daytime hours. For work lasting longer, of designated parties to assure, into the worksites of previous hazard reduction the rule provides for either occupant future, that monitoring responsibilities activities to be reevaluated is relocation or, for work lasting up to five assigned to owners would be carried determined using the same procedure as days, occupancy of parts of the dwelling out.Monitoring, as proposed,consisted for selecting the number of units. unit outside the worksite. The five-day of a visual survey by the owner at least Specifically,worksites are grouped on de minimis criterion is used in chapter annually, repair of any deteriorated the basis of similarities of their original 8 of the HUD Guidelines: the regulation paint,and a professional reevaluation lead-based paint hazards (e.g., closely parallels,but streamlines the by a risk assessor for the presence of similarities in the type of location, guidance in tables 8.1, 8.2, and 8.3 of lead-based paint on a schedule based on original condition and, as applicable, the Guidelines. the hazards found and the action taken. building component type,of the lead- At rooms where hazard reduction In the final rule,the monitoring based paint hazards),and types of activities are conducted when requirement has been changed in hazard reduction'activities performed occupants are present; or buildings from several ways.The term, "monitoring," is on them.The number of such similar which occupants have been relocated, a no longer used in the rule;the visual worksites to be reevaluated is warning sign shall be posted at each assessment by the owner is now part of determined using the tables in chapters entry. For exterior hazard reduction the ongoing maintenance requirement, 5 or 7,and worksites are selected. activities, the sign placement is based which has been patterned after the Reevaluations are not to be duplicated 1 on the HUD Guidelines, chapter 8, but "essential maintenance practices" in locations selected by both processes the rule is somewhat more flexible, in recommended by the Task Force;and (that is,selecting units and common that the position of the sign for exterior the reevaluation schedule has been areas, and selecting worksites). work is not specified beyond the simplified so that all reevaluations are When a risk assessor performing a performance requirement of its being on the same schedule.The new reevaluation finds deteriorated paint or easily read at 20 feet (6 meters) from the schedule calls for reevaluation at deteriorated or failed interim controls, edge of the worksite.The wording of the intervals of two years, plus or minus 60 encapsulations or enclosures, the sign is that of the four-line warning sign days. If two consecutive reevaluations at designated party shall respond, in the OSHA lead in construction two-year intervals find no lead-based selecting from among the acceptable standard (29 CFR 1926.62(m)), paint hazards, no further reevaluation is options for controlling the hazard "WARNING/LEAD WORK AREA/ required.Similarly, if the initial risk identified in the risk assessor's report of POISON/NO SMOKING OR EATING." assessment found no lead-based paint the reevaluation. When the risk assessor The OSHA wording is used by HUD for hazards, no reevaluation is required. reports newly-identified lead-based v 50186 Federal Register/Vol: 64, No. 178/Wednesday, September 15, 1999/Rules and Regulations paint hazards, the designated party shall to the Office of Lead Hazard Control, after initial hazard evaluation and treat each dust-lead hazard by cleaning Department of Housing and Urban reduction is completed.There is a two- or hazard reduction measures, and each Development, 451 Seventh Street, SW, year phase-in of requirements in the soil-lead hazard by hazard reduction Room P-3206,Washington,DC 20410- public housing program and a four-year measures. 0500. phase-in for housing with project-based IV. Deletions of Current Regulations VI.Regulatory Assessment assistance of more than $5,000 per unit per year. HUD estimates that the total Most of the regulatory changes in A.Economic Analysis number of dwelling units newly covered parts of title 24 other than part 35 An Economic Analysis (EA) has been by the rule will be approximately consist, as noted in Section III.A.7 of prepared that examines the costs and this preamble,above, of replacing 1,289,000 in the first year, 513,000 in the second year, 341,000 in years three explicit descriptions of lead basedpaint benefits of this final 'rule. This P P and four, and 314,000 per year after the requirements with references to part 35. document fulfills the requirements of fourth year.The estimated present value Retaining mention of lead-based paint Executive Order 12866,which requires of costs associated with the first five in each HUD program's part of title 24 HUD to prepare an EA for all significant ears of the rule is $564.2 million. Using maintains the visibilityof the lead- rulemakings.A discussion of public y a seven percent discount rate for basedpaint requirements,andpromotes comments on the EA of the proposed q increased lifetime earnings, HUD compliance with requirements under rule is provided below in Section VI.A.6 estimates the present value of total Title X and the Lead-Based Paint of this preamble. benefits associated with the first five Cost- PoisoningPrevention Act. Consolidating1.Summary and Methodology of referencs in affected programparts will Benefit Analysis.HUD estimates the years to be $715.6 million,with net P g benefits for the same period at$151.4 helpprogram managers, roe costs associated with this rule to be p g g property $253.2 million for the first year,and the million. Using a three percent discount owners and other users recognize that benefits to be $1,143.3emillion , a rate,total benefits over five years are they can apply the same•procedures tousing $2.65 billion, and net benefits are $2.08 the same situations,even if they arise three percent discount rate for increased billion. under different HUD programs.The lifetime earnings and$324.2 million The primary monetized benefit of consolidation also shortens these other using a seven percent discount rate (see childhood lead poisoning prevention is discussion of discount rates below).The parts of title 24. increased lifetime earnings associated To aid users, the relevant program- analysis in the EA reflects costs and with the higher cognitive abilities of oriented subpart of part 35 is identified benefits associated with the first year of persons not lead poisoned as children. in the other parts of title 24,as is hazard evaluation and reduction The present value of lifetime earnings subpart A, the Disclosure Rule.Each • activities in housing units affected benefits is particularly sensitive to program-oriented subpart in part 35 under the final rule.The estimated discount rate assumptions in the describes and cites applicable annual number of HUD-assisted and analysis, because these benefits reflect requirements elsewhere in that part. HUD owned units affected reflect an lifetime earnings many decades into the References to Title X are added to the annual flow of units under HUD future.The EA presents estimated existing references to the Lead-Based programs (e.g., insurance and benefits using two different discount Poisoning Prevention Act, as bases for rehabilitation programs), except in the rates for lifetime earnings-three the regulations in part 35.The case of project-based assistance and percent and seven percent. For all other terminology of Title X regarding public housing, for which the affected benefit and cost estimates, the EA uses evaluation and hazard reduction units are divided by the number of years only a seven percent rate.The analysis replaces previous wording regarding allowed under the final rule for assumes that preventing a one µg/dL inspection and abatement, respectively, completion of required activities.The increase in a one-year old child's blood which were used in accordance with the costs and benefits for each year's lead level saves$2,367 in lifetime earlier LPPPA. activities include the present value of earnings discounted at three percent, For public housing, the regulations on future costs and benefits associated with and$544 at seven percent. liability insurance coverage found at first year hazard reduction activities. While the Office of Management and §965.215 fit better in their original .For example,the costs associated with Budget(OMB) specifies seven percent as location than they would in part 35, and first year activities include the present the appropriate discount rate for most their substantive text remains in place. value of future reevaluation costs. regulatory analyses, a special social rate The section has been modified, as Similarly,the benefits of first year of time preference is appropriate when described above for other sections, to , activities include the present value of conducting intergenerational analysis. reflect Title X terminology and lifetime earnings benefits for children HUD believes that an intergenerational requirements. living in or visiting the affected unit discount rate is applicable to the final V.Additional Public Comment during the first year, and for children rule because the costs will be borne by living in or visiting that unit during the adult taxpayers, and lifetime earnings As noted earlier in this preamble, the second and subsequent years after benefits will be realized by the children rule will not take effect for a period of hazard reduction activities. and grandchildren of these adult one year.If in the review of this rule, After the first year, the number of taxpayers.The analysis of this issue by there are questions,concerns or other units for which initial hazard evaluation the Environmental Protection Agency, comments,HUD welcomes these and reduction must be done will decline in the 1996 EA for the regulations questions,concerns and comments. It is significantly because some large implementing sections 402(a) and 404 of HUD's intention that the rule achieve housing assistance programs,such as the Toxic Substances Control Act, the objectives of the statute in the least public housing and project-based concluded that a three percent discount burdensome manner.If there are any assistance, have a relatively stable stock rate best reflects the social rate of time serious inconsistencies or deficiencies and do not experience a large annual preference for annualized, non-capital in the rule,HUD will make every effort inflow of new units.In these programs, costs and benefits. to correct these before the rule takes owners will need only to engage in An intermediate approach, not effect. Comments should be submitted ongoing maintenance and reevaluation quantified in the EA, could have,used • . , • Federal Register/Vol. 64, No. 178/Wednesday, September 15, 1999/Rules and Regulations 50187 • . a real discount rate based on the long- 2. Regulatory Costs.The cost associated market values and explains term borrowing costs of the Federal estimates used in the.EA reflect the the available data on occurrence government.The seven percent rate estimated average cost per unit for LBP frequencies and the number of housing used in most regulatory analyses is hazard evaluation and reduction units affected by the final rule. intended to reflect OMB's estimate of activities in single and multifamily 3. Monetized Benefits. Although many the opportunity cost of capital, based on units affected by the final rule.In the benefits of lead-based paint hazard the average real rates of return on case of rehabilitation programs, the reduction cannot be quantified or private investments.This rate is regulatory cost estimates for paint monetized. the EA does provide appropriate for most regulatory analyses stabilization and LBP hazard abatement monetized estimates of the benefits of because most regulations impose costs activities reflect only the incremental preventing children from developing on the private sector.The final rule, costs of the final rule. For example, the elevated blood lead levels (EBLs). Such however, imposes costs on federally unit cost of stabilizing paint that would benefits include avoiding the costs of • assisted housing. Most of these costs not otherwise have been repaired is special education and medical treatment will be funded directly or indirectly by significantly greater than the for EBL children, as well as increasing Federal expenditures.If these incremental cost of safe work practices lifetime earnings associated with higher expenditures increase the national debt, and cleanup to reduce lead-based paint IQs for children with lower blood lead then the real cost of that debt to future hazards in the course of scheduled levels.The monetized benefit of generations will compound at the real repainting.The full cost of lead-based 'increased lifetime earnings due to lower long-term Federal rate.The Internal paint hazard abatement includes a blood lead levels accounts for 99 Revenue Service's Applicable Federal variety of activities that are also • percent of all monetized health benefits • Rate (AFR) measures the nominal cost of associated with housing rehabilitation of the rule. government borrowing over obligations activities.Therefore, housing The benefits quantified in this with different maturities.The long-term rehabilitation programs affected by the analysis reflect the benefits of AFR adjusted for the implicit price final rule incur only incremental costs preventing EBLs in children rather than deflator results in real AFRs of for paint stabilization and abatement. the benefits of lowering the blood lead approximately four to five percent over Under non-rehabilitation programs, levels of children already affected by recent years.Therefore,benefits could the full costs of paint stabilization are lead poisoning.As shown in the be discounted at this real AFR rate (i.e., recognized as regulatory costs, but these analysis, the benefits associated with 4 to 5 percent). costs are substantially offset by the avoiding childhood lead poisoning By presenting results using both thfee market value of housing-related benefits substantially exceed the benefits of and seven percent, HUD is providing for paint stabilization.The EA assumes reducing hazards for children already the broadest view of costs and benefits. that the full market value of paint affected by lead poisoning.The EA Additional information on the stabilization is realized whenever paint details the basis for the health benefit methodology and results of the cost- stabilization is required under the final estimates. benefit analysis is provided below. rule.Therefore, the incremental costs of 4. Monetized Net Benefits.The paint stabilization a safe work analysis of net benefits in the EA The methodology used in this ( •g•� analysis to estimate annual costs and practices) are the only costs of these reflects costs and benefits associated benefits for the final rule is based on the activities that are not offset by market with the first year of hazard evaluation following simple formulas: value benefits. and reduction activities under the final Regulatory Costs = (dwelling unit cost) Although the final rule only requires rule.These costs and benefits, however, hazard abatement in rehabilitation units include the present value of future costs x (unit cost frequency) x(number of receiving more than$25,000 of Federal and benefits associated with first year affected units); and assistance, the EA anticipates that some hazard reduction activities. Regulatory Benefits= (dwelling unit units subject to interim control Tables 3a and 3b present net benefits benefit) x(unit benefit frequency) x requirements will find it economical to or costs by housing program at three (number of affected units). treat friction impact surfaces in part by percent and seven percent discount The unit cost estimates reflect the replacing old windows with new energy rates respectively for increased lifetime . average costs associated with specific efficient (low-e) windows. In such cases, earnings. All programs have a net hazard evaluation and reduction the EA recognizes the market value of benefit at three percent.The following activities in a single housing unit. new windows based on the present programs have a net cost at seven The unit benefit estimates are the value of estimated fuel savings percent: HUD-owned single family and benefits achieved by conducting hazard (discounted at seven percent). It is multifamily housing,housing with reduction activities in a single housing possible, however,that the market value project-based assistance, single family unit. Unit cost frequencies reflect the estimates for painting and window housing receiving rehabilitation extent of required hazard evaluation replacement may overstate the market assistance of more than $5,000 per unit, activities under the final rule,and the benefits of the final rule. For example, and housing receiving assistance for occurrence frequencies of different lead- the market value of paint stabilization acquisition, leasing,support services or based paint hazards that trigger hazard required for HUD-owned housing may operation.The specificity of statutory reduction requirements. Unit benefit not be fully recovered when these requirements limits the Department's frequencies are also determined by the repainted units are sold by HUD. ability to devise policies with net occurrence frequencies of lead-based Therefore, the cost-benefit analysis for benefits for these programs at a seven paint hazards, because benefits are non-rehabilitation programs explicitly percent discount rate. realized by hazard reduction activities. separates the estimated market value Table 3c presents a summary of the Frequencies are estimated by three benefits of the final rule from the costs, benefits, and net benefits of the periods of construction:Pre-1940, 1940— monetized health benefits of LBP hazard first year activities under the final rule. 1959, and 1960-1977.The affected reduction to facilitate recalculations of using a three percent and seven percent units, for regulatory costs and benefits, net benefits under alternative market discount rate for lifetime earnings. The are federally assisted and federally value assumptions.The EA details the total cost of first year hazard evaluation owned units affected by the final rule. basis for unit cost estimates and • and reduction activities is $253.2 50188 Federal Register/Vol. 64, No. 178/Wednesday, September 15, 1999/Rules and Regulations million.The total benefit of first year cleanup) the cost components are not soil cover, to the extent required by the activities is $1.14 billion using a three directly comparable to the benefit rule.The monetized benefits in the table percent discount rate,and$324 million components. For example,dust-cleanup for paint stabilization and abatement using a seven percent discount rate. Net costs reflect only the costs of cleanup. reflect only the health benefits of benefits of first year activities are Cleanup benefits,however,reflect the avoided paint chip ingestion.The cost therefore either$890 million or$71 assumption that low dust-lead levels of paint stabilization includes the million, depending on the discount rate have a benefit duration of five years incremental cost for rehabilitation used.The EA details the costs and with paint stabilization and ten years programs,and the full cost for non- benefits of the final rule by subpart of with lead-based paint hazard abatement. rehab programs.Paint stabilization the rule and by period of construction. The duration of dust removal benefits market value benefits reflect the The individual rows of Table 3c detail reflects the anticipated benefits over five estimated market value for non- the components of hazard evaluation or ten years to a new population of and reduction costs and monetized young children,associated with births rehabilitation programs.Subtracting hazard reduction benefits.Although the and unit turnover.This estimated paint stabilization market value benefits components of hazard reduction costs duration of benefits could not be from paint stabilization costs yields the and monetized benefits are often realized without the hazard reduction incremental cost of all paint identified by the same brief descriptors activities of paint stabilization or stabilization required under the rule. (e.g.,paint stabilization,soil cover,dust abatement, friction/impact work,and TABLE 3a.—NET BENEFIT (COST) BY PROGRAM FOR FIRST YEAR ACTIVITIES [Three percent discount rate for lifetime earnings] Subparts Pre-1940 1940-1959 1960-1977 Total for subpart Single Family Insured Housing (E) • $0 $0 $0 $0 HUD-Owned Single Family Housing(F) 804,349 (104,790) (267,451) 432,108 Multifamily Insured Housing (G) • 3,712,523 2,981,836 0 6,694,360 Multifamily Housing With Project-Based Assistance>5K(Hm1) 7,858,982 6,284,595 4,395,518 18,539,094 Multifamily Housing With Project-Based Assistance>5K(Hm2) 22,150,600 7,055,126 4,798,460 34,004,186 Single Family Housing With Project-Based Assistance(Hs) 5,359,054 1,570,456 848,160 7,777,670 HUD-Owned and Mortgagee-in-Possession Multifamily Housing (1) 221,666 551,460 316,903 1,090,029 Single Family Rehab<5K (J1s) 26,705,720 19,813,315 3,103,588 49,622,624 Single Family Rehab 5K-25K(J2s) 40,365,551 29,115,276 4,186,525 73,667,352 Single Family Rehab 25K(J3s) 3,192,504 8,466,423 421,773 12,080,700 Multifamily Rehab<5K(J1m) 3,103,001 2,488,518 491,894 6,083,413 Multifamily Rehab 5K-25K(J2m) - 12,303,357 9,541,269 3,316,929 25,161,554 Multifamily Rehab>25K(J3m) 8,536,151 6,932,896 1,504,944 16,973,991 Single Family Acquisition, Leasing, Operating, and Support(Ks) 318,545 124,334 20,862 463,741 Multifamily Acquisition, Leasing,Operating, and Support(Km) 608,761 146,925 47,221 802,907 Multifamily Public Housing (Lm) 58,623,013 188,764,843 34,665,629 282,053,485 Single Family Public Housing(Ls) 13,930,634 44,625,006 7,001,718 65,557,359 Single Family Tenant-Based Rental Assistance (Ms) 68,354,171 31,214,436 15,578,130 115,146,737 Multifamily Tenant-Based Rental Assistance (Mm) 102,509,490 46,573,257 24,862,934 173,945,681 • Total Net Benefit • 378,658,072 406,145,182 105,293,738 890,096,991 TABLE 3b.NET BENEFIT (COST) BY PROGRAM FOR FIRST YEAR ACTIVITIES [Seven percent discount rate for lifetime earnings] • Subparts Pre-1940 1940-1959 1960-1977 Total for Subpart Single Family Insured Housing (E) - $0 $0 $0 $0 HUD-Owned Single Family Housing(F) (1,927,841) (689,268) (539,603) (3,156,712) Multifamily Insured Housing(G) 246,690 176,627 0 423,317 Multifamily Housing With Project-Based Assistance>5K(Hm1) 391,267 240,304 (3,053,108) (2,421,537) Multifamily Housing With Project-Based Assistance<5K(Hm2) (2,093,138) (2,104,432) (5,644,938) (9,842,508) Single Family Housing With Project-Based Assistance(Hs) (1,667,495) (1,102,037) (3,184,370) (5,953,901) HUD-Owned and Mortgagee-in-Possession Multifamily Housing (I) (15,690) (40,308) (368,895) (424,892) Single Family Rehab<5K(J1s) 3,659,065 2,291,784 (2,361,222) 3,589,628 Single Family Rehab 5K-25K(J2s) 332,951 (564,095) (4,419,314) (4,650,458) Single Family Rehab>25K(J3s) (202,701) (259,968) (467,775) (930,445) Multifamily Rehab<5K(J1m) 506,967 370,441 (153,853) 723,554 Multifamily Rehab 5K-25K(J2m) 1,820,172 1,315,448 (76,463) 3,059,158 Multifamily Rehab>25K(J3m) , 1,191,958 963,529 (42,968) 2,112,520 Single Family Acquisition, Leasing, Operating, and Support(Ks) (99,117) (87,249) (78,325) (264,691) Multifamily Acquisition, Leasing, Operating, and Support(Km) (57,525) (43,825) (55,551) (156,902) Multifamily Public Housing (Lm) 8,942,287 27,902,848 (1,523,858) 35,321,277 Single Family Public Housing(Ls) 1,380,411 4,213,020 (2,151,524) 3,441,908 Single Family Tenant-Based Rental Assistance(Ms) 11,717,061 4,619,772 1,484,946 17,821,779 Multifamily Tenant-Based Rental Assistance (Mm) 10,667,574 7,933,157 4,751,523 32,352,254 • - '` Federal Register/Vol. 64, No. 178/Wednesday, September 15, 1999/Rules and Regulations 50189 TABLE 3b.NET BENEFIT (COST) BY PROGRAM FOR FIRST YEAR ACTIVITIES-Continued [Seven percent discount rate for lifetime earnings] Subparts Pre-1940 1940-1959 1960-1977 Total for Subpart Total Net Benefit 43,792,895 45,135,748 (17,885,295) 71,043,348 TABLE 3C.-COST-BENEFIT SUMMARY Regulatory Impact Analysis," prepared below 10 µg/dL, has been approved by FOR FIRST YEAR ACTIVITIES USING A by Abt Associates for EPA,August 1906. EPA, the EPA external peer review THREE PERCENT AND A SEVEN PER- • The Evaluation of the HUD Lead- process, CDC, the HHS internal peer CENT DISCOUNT RATE FOR LIFETIME Based Paint Hazard Control Grant review process and the National EARNINGS program-interim data collected Academy of Sciences. It is clear that through March 1998. HUD's analysis is consistent with the [$millions] • National Academy of Sciences, consensus of the scientific community. National Research Council Committee The group also stated that the EA Three per- Seven per- on Measuring Lead in Critical cited the correlation between blood lead cent cent Populations, "Measuring Lead Exposure ,and low IQ, but erred in suggesting that Hazard Evaluation in Infants, Children, and Other Sensitive correlation could be used to establish Costs $ 99.5 $99.5 Populations," October 1993. causality and that the available Hazard Reduction • Third National Health and scientific studies failed to control for a Costs: Nutrition Examination Survey, as variety of confounding variables. HUD Paint Stabiliza- reported in "Blood Lead Levels in the agrees that correlation alone cannot tion 75.7 75.7 U.S. Population" and"The Decline in establish causality.The idea that lead Window Re- Blood Lead Levels in the United States," exposure causes a reduction in IQ is placement 4.6 4.6 Friction/Impact Journal of the American Medical supported by not only correlation, but Work 8.5 8.5 Association,July 27, 1994; and"Update also by time precedence,biological Soil Cover 2.3 2.3 Blood Lead Levels-United States, plausibility, dose-effect relationship, Paint Hazard 1991-1994,"MMWR, February 21, and animal studies. When taken Abatement 2.0 2.0 1997: and additional detail obtained together, HUD believes that all these Dust Cleanup 60.5 60.5 from NHANES III data on CD-ROM. factors establish conclusively that lead Total First 6.Public Comments. An industry exposure does in fact cause reductions Year Costs 253.2 253.2 group criticized the EA for the proposed in IQ.Time precedence has been rule on several grounds.The group established by those studies that Monetized Bene- stated that population blood lead levels measure blood lead level at birth, fits: may have declined further since the showing that the cause exists before the Paint Stabilize- • NHANES III Phase 1.data were released. consequence. Biological plausibility has tion 71.2 20.3 For the final rule,HUD has used the been established by the studies showing Paint Hazard most current data available,which is the anatomical, physi3iogical, and Abatement 1.1 0.3 NHANES III,Phase 2 data covering the biochemical changes in the brain due to Soil Cover 88.0 20.2 years 1992-1994. lead exposure.Dose-response has also Dust Cleanup 908.6 209.0 The group also suggested that HUD's been clearly established in the Paint Stabilize- conclusion that declining dust lead literature. Finally, all modern lead Market Value 70.2 70.2 levels will reduce blood,lead levels in studies have in t controlled for Window Re- children is not supportable because it is confounding variables, such as socio- placement 4.2 4.2 based on a single study.In fact, there are economic status, parent's education and • at least 18 epidemiological studies race. Total First which have estimated the blood lead/ The group also suggested that the lead Year Bene- dust lead relationship;HUD has not studies upon which the EA relied used fits 1,143.3 324.2 relied on a single study in developing imprecise or incomplete methods of Total First the final EA, but has conducted an measuring IQ.However, if IQ was in fact Year Net extensive pooled analysis of virtually all measured inappropriately, one would Benefits 890.1 71.0 available epidemiological data expect to see the studies equally (Lanphear 1998). • distributed between those showing no 5. Data Sources.The following data The group stated that HUD's EA relied effect and those that did.In fact, sources are referenced extensively in the on a 1991 CDC finding that 10 µg/dL virtually all of the studies on lead show EA: represents a threshold level, below the same IQ effect. While the size of the which there are no adverse effects,and effect and degree of statistical • The HUD national survey of lead- that therefore the EA should not have significance may vary from one study to based paint in housing, conducted in calculated benefits below 10 µg/dL. This another, the basic conclusion remains 1989 and 1990. is an incorrect interpretation of CDC's the same: increased lead exposure is • "Comprehensive and Workable position. In fact, the 1991 CDC guidance related to reduced IQ. Plan for the Abatement of Lead-Based document indicated that there was Another industry group suggested that Paint in Privately Owned Housing: a evidence of adverse health effects below HUD's EA for the proposed rule had Report to Congress," prepared by HUD, 10 µg/dL. Neither HUD nor CDC have overestimated the benefits, because December 7, 1990. stated that 10 µg/dL is a "threshold." children living in HUD-assisted housing • "TSCA Title IV, Sections 402(a) and The conclusion that it is reasonable to will grow up to earn less than the 404:Target Housing and Child- assume cognitive benefits to reducing average income,and thus the calculated Occupied Facilities Final Rule childhood blood lead levels, including loss in lifetime earnings was too great. 50190 Federal Register/Vol. 64, No. 1/8/Wednesday, September 15, 1999/Rules and Regulations First,HUD does not believe it is C. Regulatory Flexibility Act—Final (this is not a toll-free number). E-Mail: appropriate to declare that the value of Regulatory Flexibility Analysis stevenson_p._weitz@hud.gov. Hearing damage to children in one When the proposed rule was or speech-impaired persons may access socioeconomic group is less than the published on June 7 1996, HUD certified the above telephone number via TTY by value of damage to children in another that the proposed regulatory calling the toll-free Federal Information socioeconomic group. Furthermore, requirements would not have a Relay Service at 1-800-877-8339. there is evidence that earnings may have significant economic impact on a 1. Need For and Objectives of the in fact been underestimated, because substantial number of small entities. On Final Rule.The Lead Based Paint per capita productivity has increased in October 9, 1998 (63 FR 54422),HUD Poisoning Prevention Act of 1971, as recent ears, which often results in amended, directs the U.S.Department of Y published a Notice in the Federal Housingand Urban Development (HUD) increased wages.HUD used data Register containing additional p covering the past 20 years to estimate information about its determination that to establish procedures to eliminate to growth in real wages, which has been the proposed rule would not have a the extent practicable lead based paint low.If in fact the country returns to the significant impact on a substantial hazards in federally associated housing. growth rate over the past century. number of small entities. HUD has HUD issued implementing regulations HUD's EA would underestimate the sizein 1976 and made Department-wide concluded, upon further consideration, revisions in 1986, 1987, and 1988. In of the lost lifetime earnings.HUD has that its certification that the rule will 1992, Congress passed the Residential used an updated estimate of the size of not have a significant economic impact Lead Based Paint Hazard Reduction Act, the lost lifetime earnings benefit on a substantial number of small entities which was Title X of the Housing and (Salkever 1995) in the EA for this final could reasonably be questioned. Community Development Act of 1992 rule to respond to this criticism. Although the Department continues to (Title X). Sections 1012 and 1013 of Salkever updated the analysis of labor believe that the certification was Title X amend the Lead-Based Paint force participation and other pathways reasonable and justified, the degree of Poisoning Prevention Act to require by which lead can reduce expected uncertainty as to what constitutes a specific new procedures for lead-based future earnings.Finally,HUD's EA "significant" impact and a"substantial" paint notification,evaluation, and assumed that there would be no benefit number of small entities in the housing hazard reduction activities in housing to reducing lead exposure in adults, industry has led to the decision not to receiving Federal assistance (section even though a number of studies have make such a certification at this timd. 1012) and federally owned housing at demonstrated that lead can increase HUD is seeking to comply fully with the the time of sale.(section 1013). blood pressure and cause a decline in intent of the Regulatory Flexibility Act In enacting Title X,the Congress both kidney function and cognition in and is publishing this Final Regulatory found that low-level lead poisoning is adults. In short,HUD's EA is likely to Flexibility Analysis to describe the widespread among American children, underestimate the total benefit involved, likely impact.This analysis expands on with minority and low-income not overestimate it. the analysis published on October 9, communities disproportionately 1998 and summarizes and responds to affected.The Congress also found that, An industry group suggested that HUD should use the lower confidence public comments.HUD requests written at low levels, lead poisoning in children bound of the scientific studies,which public comment on this analysis of the causes IQ deficiencies, reading and would reduce the benefits of the impact of the rule on small entities.The learning disabilities,impaired hearing, final rule does not take effect until one reduced attention span, hyperactivity,proposed rule.HUD agrees that this would reduce the benefits,but notes year after publication,so there is time and behavior problems. In addition the for the Department to arrange for Congress found that the health and that if it chose to use the upper bound g as a health protective measure, the responses to economic impacts that it development of children living in as benefit would increase. On balance, believes would significantly diminish many as 3.8 million homes is HUD believes that measures of central the effectiveness of its housing endangered by chipping or peeling lead assistance programs in providing paint or excessive amounts of lead- tendency appear to be best when faced affordable housingto families of low with the need to make public policy in contaminated dust in their homes. face of scientific which and moderate income. Among the stated purposes of Title X the always present some uncertainty, HUD Comments on this notice must be are to implement,on a priority basis, a is always s publtc to socomextent.e o the EA received on or before November 1, 1999. broad program to evaluate and reduce ande the final rule and wille n Interested persons are invited to submit lead-based paint hazards in the Nation's th revisions t both documents makeas new ' comments to the Rules Docket Clerk, housing stock;to ensure that the evidene comes tod light. Office of General Counsel, room 10276, existence of lead-based paint hazards is Department of Housing and Urban taken into account in the development B. Paperwork Reduction Act Statement Development, 451 7th Street, SW., of Government housing policies and in Washington,DC 20410-0500. the sale, rental, and renovation of homes The information collection Comments should refer to the above and apartments;and to reduce the threat requirements contained in this final rule docket number and title.A copy of each of childhood lead poisoning in housing have been approved by the Office of comment submitted will be available for owned, assisted, or transferred by the Management and Budget (OMB) in public inspection and copying between Federal Government. accordance with the requirements of the 7:30 a.m. and 5:30 p.m.weekdays at the The final rule sets forth new Paperwork Reduction Act of I995 (44 above address. Facsimile (FAX) requirements for lead-based paint U.S.C. 2501-3520), and have been comments are not acceptable. For hazard notification, evaluation,and assigned OMB Control number 2539- further information, contact: Steve reduction for federally owned 0009.An agency may not conduct or Weitz,Office of Lead Hazard Control, residential property and housing sponsor, and a person is not required to Department of Housing and Urban receiving Federal assistance.The rule respond to, a collection of information Development, 451 7th Street, SW., takes into consideration the substantial unless the collection displays a valid Washington, DC 20410-0500. advancement of lead-based paint control number. Telephone: (202) 755-1785, ext. 106 remediation technologies and the • • • ' Federal Register/Vol. Y 64, No. 178/Wednesda , September 15, 1999/Rules and Regulations 50191 improved understanding of the causes on the Notice until supporting materials paint varies as well. Also, the anecdotal of childhood lead poisoning by the are available for public review. Another costs reported in some jurisdictions may scientific and medical communities. requested that HUD prepare a more not be for the same activities as those Perhaps the most important results of detailed analysis and submit it for required in this rule. Furthermore, the research on this subject during the last comment before publishing a final rule. costs used in the analysis for 10-12 years have been: (1) The finding In response, HUD is providing more rehabilitation are incremental costs. For that lead in house dust is the most detailed information in this analysis and example, if it is estimated that common pathway of childhood lead welcomes further comment. However, rehabilitation will replace windows for exposure; and (2) the measurement of HUD is not delaying further the other reasons, that cost is not charged to the statistical relationship between publication of this important regulation, lead-based paint hazard reduction. levels of lead in house dust and lead in which is expected to significantly Finally,HUD believes that the cost of the blood of young children.The final reduce lead poisoning among children lead-based paint hazard evaluation and rule updates the existing HUD living in Federally owned housing that reduction will decline as program. regulations to reflect this knowledge, is sold and in housing that receives managers learn how to administer the giving importance to procedures that Federal assistance. requirements efficiently and as staff and identify and remove dust-lead hazards b. Capital vs. Operating Costs.One contractors become experienced in the as well as chipping, peeling or flaking commenter stated that the analysis was work. lead-based paint. "confusing," because it compared the ' HUD has estimated unit costs for lead- The rule also offers a consolidated, cost of lead-based paint hazard based paint hazard evaluation and uniform approach to addressing lead- reduction to current rent revenue. reduction based on interviews with based paint hazards.Currently, each According to this commenter, lead- contractors and data from the ongoing individual HUD program has a separate based paint activities are major capital Evaluation of HUD's Lead-Based Paint set of lead-based paint requirements improvement costs that would be Hazard Control Grant Program (National incorporated into its program • financed from reserves or through a Center 1998). It has estimated the regulations.The final regulation loan. frequencies of hazard occurrence based consolidates the HUD lead-based paint HUD agrees that some property on both the Evaluation and the 1990 regulations and groups requirements by managers may budget the required work National Survey of Lead-Based Paint in type of housing assistance,rather than out of reserves, some may have to Housing (EPA 1995).Also, it used by individual program. For example,the finance it through a loan,while others American Housing Survey data to rule contains subparts that address will be able to handle it as an operating estimate the frequency with which multifamily mortgage insurance; expense. Regardless of how the work is rehabilitation involves activities like project-based assistance;rehabilitation budgeted and financed,HUD believes repainting or window replacement that assistance; assistance for acquisition, that comparison to annual rent revenues overlap the requirements of lead-based leasing,support services and operation; is a reasonable method of gaining a paint hazard reduction.These estimates public,housing: and tenant-based general understanding of the are explained in the HUD EA for the assistance.Moreover, the final rule uses significance of the costs.However, final rule (HUD 1999). a clear and consistent set of terms to Section 3 of this Notice includes d. There Will Be a Significant Impact. specify notification, evaluation,and additional financial statistics for HUD- Many commenters stated or implied that hazard reduction requirements. insured multifamily housing with }-HUD was incorrect in its determination Organizing the requirements by the type project-based rental assistance;these that the rule will not have a significant of housing assistance and using new statistics are net annual cash flow per economic impact on a substantial terminology will avoid subjecting unit before income taxes, total reserves number of small entities.While the properties receiving assistance from per unit,and backlog of physical needs Department has chosen not to make more than one program to inconsistent per unit. such a determination for this final rule, or redundant HUD lead-based paint c. Costs Will Be Higher Than HUD it continues to think that the cost of requirements.These changes will also Assumes.Three commenters thought compliance,•and therefore the impact, ease the burden on HUD clients in HUD underestimated the cost of will not be as significant as many locating and understanding the complying with the requirements.All of commenters believe. applicable requirements and help these commenters were concerned As explained below, in section 4 of ensure that lead hazards are identified primarily with rehabilitation programs. this Analysis, HUD has written and safely reduced. One commenter stated,that the cost provisions into the rule, consistent with 2. Public Comments.The Notice would be between$2,000 and$4,000 Title X, designed to alleviate the impact published in the Federal Register on per unit,while the others claimed that of the lead-based paint evaluation and October 9, 1998 outlined the impact of rehabilitation costs are 35-50 percent reduction requirements on entities the proposed rule on small entities. more when lead-based paint is involved. receiving limited Federal assistance.For Eight comments were received. While it is possible that the costs in example,for most housing affected by Following is a summary of the some jurisdictions may exceed those this regulation, all that is required is significant issues raised by the estimated for this analysis.HUD stabilization of deteriorated paint, if any comments and a description of the believes it has estimated the national is present, followed by cleanup and Department's assessment of and average costs of the requirements in the clearance. response to such issues. rule as accurately as possible,given In multifamily housing,HUD a. Information Not Adequate.Two available data.It is important to estimates that compliance with this commenters requested additional remember that average costs may be requirement costs only about$100 per information. One commenter said they much lower than costs one may have unit more than routine repainting, and were unable to assess the impact of the heard reported for heavily contaminated less if only a small amount of proposed regulations with the housing. Even in older housing,some deteriorated paint is.present.This information provided in the published structures have a great deal of lead- requirement pertains to housing that Notice and requested that the based paint while others have only a receives tenant-based rental assistance Department extend the comment period small amount, and the condition of the and is occupied by children of less than 50192 Federal Register/Vol. 64, No. 178/Wednesday, September '15, 1999/Rules and Regulations six years of age, and it applies to housing program), no hazard reduction housing receiving rehabilitation housing receiving project-based rental is required.Thus,owners can minimize assistance, and about 1,400 will be local assistance averaging less than $5,000 the cost effect of the rule through good public housing authorities. HUD per unit per year (which includes most maintenance of paint surfaces and believes that the great majority of local housing that is affected by this rule and careful cleanup at turnover.In the case public housing authorities are not is receiving project-based assistance). of units with tenant-based assistance, covered by the Regulatory Flexibility The requirements are greater for the rule applies only to units occupied Act,because they are not agencies of multifamily housing receiving project- by families with children of less than local governments with populations of based assistance of more than$5,000 six years of age. Many properties with less than 50,000. Nevertheless, public per unit per year; but that is a relatively project-based assistance have only part housing data are included in this small percentage of the assisted stock. of their units under housing assistance analysis for completeness. that was built before 1978, and most of payments contracts. For all of these it is professionally managed, in reasons, the total annual rental revenue (r Housing With Multifamily relatively good physical and financial for affected small entities may Mortgage Insurance and/or Project condition, and not expected to have a substantially exceed the total annual. Based Rental Assistance.The first and high prevalence of lead-based paint rental revenue associated with just those second rows of Table 4 pertain to hazards. For housing receiving Federal units subject to the rule. multifamily housing that has HUD rehabilitation assistance of$5,000 per 3.Impact on Small Entities. a. mortgage insurance but not HUD unit or less (which is almost one-half of Number of Small Entities Affected by subsidies.For this program group,the the housing receiving such assistance), the Rule. For this analysis, HUD defines rule will apply only to properties built the rule requires only that the - a small entity as one with less than $5 before 1978 that are covered by a new rehabilitation be done in a lead-safe million in total revenues per year.This application for mortgage insurance. manner so that it causes no standard is based on the report, "Small These properties tend to be relatively contamination. Business Administration Standard large,with an average of 160 units per For these reasons and because there Industrial Code (SIC) Size Standards," property.Twenty-one percent of the currently exist lead-based paint dated January 1998. properties have more than 200 units regulations for virtually all HUD Table 4 provides, for each program (Abt Associates 1999), Average annual programs prescribing notice, evaluation group, an estimate of the number of total revenues for unassisted HUD- and treatment procedures HUD small entities that will be affected by the insured multifamily properties are continues to believe that the economic first effective year of the rule.Although assumed for purposes of this analysis to impact of the rule will be much less some additional housing units and be $8,000 per unit. (This assumption is than many of the commenters believe. ownership entities will become subject based on Abt Associates 1999, Exhibit e. Owners Whose Entire Portfolio Is to the rule after the first effective year, 3-1,which reports a mean average Affected May Be Impacted Especially focusing on the first year facilitates annual total revenue for all unassisted Hard.One organization stated that analysis of impact on an annual basis. insured properties of$7,978.)To earn "small property owners whose portfolio Estimates are given for the same $5 million per year in total revenues, a may only contain target properties and program groups used in the EA for the property with per unit annual revenue will have to bear this additional expense rule, and the number of housing units of$8,000 would have to have 625 throughout their portfolio, may well be for each program is taken from the EA. housing units. Few projects are of this forced out of business by such extreme For all program groups, it is estimated size.However,it is well known that financial requirements." that approximately 203,000 small many of these projects are part of HUD agrees that the impact on an entities will be affected in the first year multiproperty portfolios. Of all rental owner may depend to some extent on of the rule. Of these, about 122,000, or housing in properties with 50 or more the percentage of his or her portfolio 60 percent, are owners of single-family units, 25 percent of the properties and that is affected by the rule. However, housing being rehabilitated with HUD 50 percent of the units are owned by many if not most housing owned by rehabilitation assistance. limited partnerships,general small entities will be only partially The vast majority of these owners are partnerships, real estate corporations or affected by the rule.A dwelling unit is expected to be individuals who are other corporations, or joint ventures not covered if it was built after 1977, or rehabilitating their own residences. (HUD 1996).Therefore it is assumed for designated exclusively for the elderly or They are not businesses, organizations this analysis that 25 percent of the persons with disabilities (unless a child or units of local government,which are unassisted multifamily properties with of less than 6 years of age resides or is ' the entities of concern under the HUD mortgage insurance are owned by expected to reside), or is a zero bedfoom Regulatory Flexibility Act. Nevertheless large entities and 75 percent are owned dwelling (e.g.,efficiency,studio,or data are provided for these owners for by small entities.It is also assumed that single-room occupancy unit),or'is completeness of analysis. Of the none of the properties owned by small found to be free of lead-based paint, or remaining 81,000 small entities,the entities are part of a multiproperty all lead-based paint has been removed. great majority will be owners of rental portfolio.This assumption may Many residential properties, especially housing;and, of those,about 56.000 will overstate the number of small entities those built after 1960, have little or no be owners of housing with tenant-based somewhat. Based on this analysis, it is lead-based paint hazards. If a unit has rental assistance. 17,000 will be owners estimated that each year 70 applicants no deteriorated paint or no lead-based of housing with project-based rental for unassisted multifamily mortgage paint hazards (depending on the assistance, 1,500 will own multifamily insurance will be small entities. • Federal Register/Vol. .6.4, No. 178/Wednesday, September 15, 1999/Rules and Regulations 50193 TABLE 4.-NUMBER OF SMALL ENTITIES AFFECTED BY THE FIRST YEAR OF THE HUD LEAD-BASED PAINT REGULATIONS, FINAL RULE Small owner Number of entities as Pro ram group Number of Units per Nurnber of small own- unitsram rou percent of property properties P ership enti- number of ties properties Pre-1960 Housing w/Multifamily(MF) Mortgage Insurance 3,750 160 23 75 17 Post-1959 Housing w/MF Mortgage Insurance 11,250 160 70 75 53 MF Housing w/Project-Based Assistance, >$5K/Unit 35,750 115 311 • 75 233 MF Housing w/Project-Based Assistance, <$5K/Unit 408,690 115 3,554 85 3,021 Single Family(SF) Housing w/Project-Based Assistance 134,280 2 67,140 20 13,428 MF Housing w/Tenant-Based Assistance 207,050 7 29,579 99 29,283 SF Housing w/Tenant-Based Assistance 134,500 1 134,500 20 26,900 Public Housing 164,000 N/A 1,500 96 1,440 SF Housing w/Rehab Assistance, <$5K/Unit 66,836 1 66,836 100 66,836 MF Housing w/Rehab Assistance,<$5K/Unit 7,834 20 392 99 •388 SF Housing w/Rehab Assistance,$5K-$25K 48,998 1 48,998 100 48,998 MF Housing w/Rehab Assistance, $5K-$25K 15,877 20 794 • 98 778 SF Housing w/Rehab Assistance,>$25K 5,817 1 5,817 100 5,817 MF Housing w/Rehab Assistance,>$25K 7,306 20 365 98 358 SF Housing w/Acquisition, Leasing, etc.Assistance 5,093 1 5,093 100 5,093 MF Housing w/Acquisition, Leasing, etc.Assistance 6,103 20 305 99 302 Total 1,263,134 365,277 202,945 The third and fourth rows of Table 4 properties and that virtually all of the HUD-FHA definition of"single family present estimates for multifamily housing receiving less than$5,000 are property" is one-to-four units.) It is housing with project-based rental in the older assisted category.) A project further assumed that owners of single- assistance.These are somewhat smaller with $10,000 in annual revenue per unit family housing with project-based properties,with an average of 115 units would have to have 500 units to earn$5 assistance own an average of five per project;only 13 percent have more million in total revenue. A project with properties.This assumption recognizes than 200 units (Abt Associates 1999). $6,000 in annual revenue per unit that it requires a certain additional For this analysis it is assumed that would need 834 units.It is assumed that amount of managerial knowledge to average annual total revenues are 75 per cent of the owners of properties participate in project-based assistance $10,000 per unit for properties receiving receiving more than$5,000 per unit in programs compared to owning an an average of more than$5,000 in rental assistance will be small entities-the unassisted rental unit, and that such • assistance per unit per year and$6,000 same as for unassisted insured owners tend to try co maximize the for those with less than$5,000. (The Abt properties.However, recognizing the benefits of such knowledge by owning Associates 1999 report estimates that sharp difference in average revenues several homes.HUD also assumes, - mean annual total revenues were $5,868 between properties receiving more than• . however,that 100 percent of the owners in 1995 for all "older assisted" and less than$5,000 per unit per year, of such housing are small entities. It is multifamily properties and $10,057 for it is assumed that 85 percent of the less- estimated that 13,428 small entities will "newer assisted" properties. Older than-$5,000 group will be small entities. own single family housing with project- assisted properties receive either Based on this analysis, it is estimated based assistance'that is affected by the mortgage interest subsidies (under that 3,254 small entities will own first year of the rule.After that, only section 236 or 221(d)(3) Below Market multifamily properties with project- ongoing maintenance is required. No Interest Rate insurance programs) or based assistance that will be affected by additional entities are expected to be rental assistance under the Section 8 the rule in its first year. All of these affected in later years. Loan Management Set Aside,Rent should complete initial work in the first (2) Tenant-Based Rental Assistance. Supplement, Rental Assistance year,with only ongoing maintenance Families assisted by tenant-based rental Payment, Section 8 Property - and some reevaluation required after assistance programs are living in Disposition, or Preservation programs. that. In each of the second, third and housing that is similar in size and age Newer assisted properties receive rental fourth years, it is expected that 233 to the nation's entire non-luxury rental assistance under one of the following additional small entities will be housing stock.Therefore HUD assumes Section 8 programs: New Construction, affected. that the average number of units per Substantial Rehabilitation, or Moderate The fifth row in Table 4 presents multifamily property is 20. which is Rehabilitation. Older assisted properties estimates for all single family housing much smaller than the projects with had mean assistance payments of$2,576 receiving project-based assistance.HUD mortgage insurance and project-based per unit per year.with a median of assumes for the purposes of this assistance.However, in the tenant-based $2,310. Newer assisted properties had analysis of ownership that there is an assistance programs,HUD lead-based mean assistance payments of$7,448, average of two units per property in this paint regulations apply only to housing with a median of$7,106.Thus HUD inventory. This assumption derives occupied by children of less than 6 assumes for purposes of this Regulatory from American Housing Survey data years of age.Therefore, based on Flexibility Analysis that virtually all of which indicates that there are a large occupancy data from a subsample of the the housing receiving more than $5.000 number of three-and four-unit American Housing Survey, it is assumed per unit per year in project-based properties with project-based assistance that 35 percent of the 20 units (or seven) assistance are in the newer assisted as well as single unit properties. (The are occupied by such children. Because 50194 Federal Register/Vol. 64, No. 178/Wednesday, September 15, 1999/Rules and Regulations . of the small average property size,HUD three,the greatest concern of those insured stock that is unassisted or assumes that only one percent of the commenting on the proposed rule was assisted with project-based subsidies: owners of multifamily housing assisted with the potential economic impact on they are not available for housing under tenant-based programs are large private owners.Therefore this analysis receiving tenant-based assistance or for entities. focuses on that group. • public housing. For single-family housing with tenant- 'The number of small-owner entities Two sets of compliance cost estimates based assistance, it is assumed that an participating in the rehabilitation are provided for each program group in average of one unit per property will programs is estimated to be large, Table 5.The first column is the mean house families with children of less because many local programs incremental cost per unit for all than six years of age, that owners will concentrate on the rehabilitation of properties. Incremental costs are new own an average of five properties, and single family, owner-occupied homes. costs incurred in compliance with this that 100 percent of the properties are HUD assumes for purposes of this rule over and above the costs of owned by small entities. analysis that in any given year all single compliance with existing regulations. Counting owners of both multifamily family units assisted by rehabilitation There is a great deal of variation around and single family housing,it is programs are individually owned,i.e., this mean that is associated with the estimated that 56,183 small entities will that the number of owners equals the age,size and condition of the housing. own housing with tenant-based number of units. While this may Many properties will have no cost at all. assistance affected by the first year of produce an overestimate of the actual Therefore, the second column of Table the rule.In future years,because of number of owners, the error is expected 5 provides the estimated incremental housing turnover in these programs,it is to be small.For multifamily units,the cost per unit for"high-cost properties." expected that about 20,000 small same average number of 20 units per This is an approximation of the average entities will become newly affected each property is used as was used in the cost that may be incurred by properties year. tenant-based assistance programs:and that have all the hazards for which the (3) Public Housing.HUD estimates 98 to 99 percent of the owners are rule requires remediation for a given that approximately 1,500 public housing assumed to be small entities. In total, it program.The frequency of such high- agencies will be affected by the rule. is estimated that 125,028 small-owner cost cases is not known but is expected Although HUD believes that the entities will be affected by the to be between one and eight percent of Regulatory Flexibility Act does not rehabilitation assistance programs each all properties, depending on the apply to the vast majority of public year. _ program group.All compliance cost housing authorities, data are presented (5) Acquisition, Leasing, Support estimates are incremental, i.e., over and here for completeness.Many public Services, or Operation.Assumptions for above the costs of current HUD lead- housing agencies own both multifamily the Acquisition,Leasing, Support based paint regulations.The cost and single family units, so no atterrlpt is Services or Operation group are the estimates are derived from the EA, made in Table 1 to distinguish between same as for Rehabilitation.The number which in turn is based on data collected agencies owning one or the other. of small entities affected is estimated to from discussions with lead-based paint Although rents paid by tenants of public be 5,3135. inspectors and hazard reduction housing are relatively low,HUD b.Economic Impact.This section contractors in 1995 and the evaluation estimates that subsidies boosted public examines, for each program group,the of the HUD Lead-Based Paint Hazard housing agency revenues to an average financial impact of the rule on small Control Grant Program (data collected of approximately $7,400 per unit per entities. 1994-1997). No cost estimates are year in 1995. A public housing agency (1) Housing With Multifamily shown for post-1959 unassisted housing with average revenues per unit would Mortgage Insurance,Project-Based with HUD multifamily mortgage have to have 676 units to have revenues Rental Assistance, Tenant-Based Rental insurance because the rule requires only of$5 million. Only about 2 percent of Assistance, or Public Housing.Table 5 that sponsors agree to conduct ongoing public housing agencies have that many provides a comparison of the lead-based paint maintenance. units. However, many housing agencies incremental cost of compliance with Estimates of mean annual total have revenues from sources other than total revenues for most of the rental revenues per unit are based on a 1995 the public housing program, including housing programs affected by the rule. survey of HUD-insured multifamily the project-based and tenant-based Table 6 provides the following rental housing (Abt Associates 1999, rental assistance programs.Therefore additional financial statistics that are exhibit 3-1) and estimates by HUD staff. HUD assumes for this analysis that 4 available from a study of the insured As with Table 4.all estimates pertain to percent of the public housing agencies ' multifamily inventory:annual net cash housing affected by the first year of the are large entities and that 96 percent, or flow, total reserves, and backlog of rule. 1,440, are small entities. physical needs—all per unit(Abt In comparing compliance costs with (4) Rehabilitation Assistance.There Associates 1999, exhibits 2-2, 3-3, and revenue or with other financial data, it are at least three types of entities that 3-7). Annual net cash flow equals is important to remember that the will be affected by the lead-based paint revenueS less expenses before income compliance costs are not continuing requirements for housing receiving taxes.Expenses include deposits to annual costs. Rather they are one-time rehabilitation assistance.They are: (1) reserve accounts and debt service as costs of hazard evaluation and control, The State and local governmental well as operating expenses.Total after which the owner must simply agencies and tribal agencies that are the reserves include replacement reserves maintain the paint surfaces and conduct grantees and participating jurisdictions and, for some properties, residual maintenance and repair activities in a that receive funding from HUD; (2) receipts accounts.The physical needs lead-safe manner. For some program nonprofit organizations that are backlog is the estimated cost of repairs groups, owners will have to conduct at subrecipients or funded directly by and replacements beyond ordinary least two reevaluations in two-year HUD and that operate housing maintenance required to restore a intervals after the initial hazard development and rehabilitation property to its original condition.The reduction activity to assure that lead- programs: and (3) private owners of financial statistics in Table 6 are based paint hazards have not housing being rehabilitated. Of these available only for the multifamily HUD- reoccurred.Also,many owners have Federal Register/Vol. 64, No. 178/Wednesday, September 15, 1999/Rules and Regulations 50195 • properties that are not covered by the Table 6 provides additional financial high backlog needs.Also, 13.percent of rule as well as those that are affected. statistics from the Abt Associates report the newer assisted properties had The financial impact on such owners on the multifamily insured stock.Data negative cash flow,again indicating that will be less than on those whose from the Abt study for unassisted some properties are in financial distress. portfolios consist solely of pre-1978 properties are not included in this table. For the older assisted properties, HUD-associated housing. because they are not necessarily which correspond to housing with Table 5 indicates that,in the first representative of properties that will project based assistance of less than effective year of the rule, the mean apply for mortgage insurance when the $5A00 per unit, mean annual net cash incremental cost of compliance is rule becomes effective. For newer flow per unit was $283, compared with expected to vary from 1.0 to 6.9 percent assisted properties (defined as compliance costs of$60-$82 per unit of total annual revenues for the insured properties receiving Section 8 New (average for all properties) and $570 multifamily stock and housing receiving Construction, Substantial $870 (high cost properties). The Abt project-based rental assistance.Public Rehabilitation, or Moderate housing and unassisted insured Rehabilitation), the average (mean) cash study found that 33 percent of the older multifamily housing built before 1960 flow was a substantial $1,105 per unit. assisted properties had a negative cash have the highest average costs and the This compares to lead-based paint flow and that another 42 percent had a highest percentage of revenue,because regulatory compliance costs of$255 cash flow of$0-$500 per unit. Further, of the stringency of the requirements (average for all properties) and $1,120 the study found $3,929 in average and the age of the stock.High-cost (high-cost properties) for housing with (mean) backlog of physical needs per properties have ratios of cost to revenue project-based assistance of more than unit,with a median of$2,096, of 9.0 to 28 percent; but these $5,000 per unit. While reserves also indicating that some properties have percentages should be used only as appeared respectable for most of these very high deferred needs.Thus it rough indicators, because the universe newer assisted prpp.erties, the mean appears that a certain percentage of this '— of the revenue estimate (all properties) backlog of physical needs was $3,214 older stock is in financial distress, even does not correspond to that of the high- compared to a median of$1,324, more than with the newer assisted cost properties. indicating that a few properties had very properties. TABLE 5.—INCREMENTAL COST OF COMPLIANCE AS A PERCENTAGE OF ANNUAL REVENUE, BY PROGRAM GROUP: NONFEDERAL RENTAL HOUSING AFFECTED BY THE FIRST YEAR OF THE RULE [Not including housing receiving assistance for rehabilitation or acquisition, leasing, support services or operation. Cost and revenue data as of 1995-19961 Average in Average in- Average in- Average in- cremental Average an- cremental cremental cremental compliance nual total compliance compliance Program group compliance cost per revenue per cost as a cost as a cost per unit, high- unit,all percent of percent of unit,all cost prop- properties revenue,all revenue, properties erties properties high cost properties Pre-1960 Housing w/Multifamily(MF) Mortgage Insurance $414 $1,120 $8,000 5.2 14 Post-1959 Housing w/MF Mortgage Ins. 0 0 8,000 0 0 MF Housing w/Project-Based Assistance, >$5K/Unit 255 1,120 10,000 2.6 11 MF Housing w/Project-Based Assistance, 45K/Unit 60 570 6,000 1.0 9.5 SF Housing w/Project-Based Assistance 82 870 6,500 1.3 13 MF Housing w/fenant-Based Rental Assistance 59 560 6,200 1.0 9.0 SF Housing w/Tenant-Based Rental Assistance 103 870 6,200 1.7 14 MF Public Housing 311 1,120. 7,400 4.2 15 SF Public Housing • 511 2,095 7,400 6.9 28 TABLE 6.—FINANCIAL STATISTICS FOR MULTIFAMILY PROPERTIES WITH HUD-INSURED MORTGAGES 1995 [In 1995 dollars per 2-bedroom equivalent unit] Newer assisted Older assisted properties properties Annual Net Cash Flow Per Unit: Mean $1,105 $283 Median $742 $162 Percentage of Properties With Negative Cash Flow 13% 33% Percentage of Properties With Cash Flow of$0-$500 22% 42% Total Reserves Per Unit: Mean $1,924 $1,766 Median $1,163 $1,240 Backlog of Physical Needs Per Unit:Mean 1 $3,214 $3,929 Median $1,324 $2,096 v • 50196 Federal Register/Vol. 64, No. 178/Wednesday, September 15, 1999/Rules and Regulations It is apparent from these statistics that based paint requirements in the vary from 1.1 to 4.2 percent of these some properties will not be able to fund restructuring commitment. Other total project costs. Costs for high- lead-based paint compliance out of possible sources of funds include compliance-cost projects vary from 3.3 current income. HUD estimates that no replacement reserves, grants, and to 9.3 percent of total rehabilitation cost. more than half of the housing with Community Development Block Grant Single family properties tend to have a project-based assistance will be able to funds. higher cost impact than multifamily, obtain an adjustment in assistance (2) HousingReceivingRehabilitation because they are larger units on average levels to finance the cost of the lead- Assistance. For housing receiving and usually require more exterior work. basedpaint requirements.For projects rehabilitation assistance,Table 7 q compares the cost of compliance to an Virtually all HUD rehabilitation • that do not qualify for a rent adjustment assumed average total cost of assistance is administered by State, and do not have sufficient income to rehabilitation. Assumed average total local and tribal agencies, and many, if cover the cost of compliance with the rehabilitation costs are $4,000 for not most,of these programs are operated rule,HUD will work with owners to projects receiving$5,000 or less in as low-interest loans.If property owners find funds from other sources. rehabilitation assistance, $15,000 for are unable to finance loans for the Depending on the property, this process those receiving:between$5,000 and incremental cost of lead hazard control, may include the financial restructuring $25,000 in assistance,and $30,000 for the administering agencies have the known as Mark to Market.Mark-to- those receiving more than$25,000 in option to finance such costs with a grant Market processing will address lead- assistance.Average compliance costs out of program funds. TABLE 7.—INCREMENTAL COST OF COMPLIANCE AS A PERCENTAGE OF AVERAGE REHABILITATION COST, BY PROGRAM GROUP HOUSING RECEIVING FEDERAL REHABILITATION ASSISTANCE 11 [Cost data as of 1995-1996] . • Average in- Average in- Average in- cremental cremental Average in-al cremental Average compliance compliance crcompliance Compliance cost of re- cost as a cost as a Program group cost per cost per habilitation, percentage percentage unit,all unit, high- all prop- of average of average properties cost prop- erties rehab cost, rehab cost, erties all prop- high-cost erties properties Single Family(SF) Housing w/Rehab Assistance, <$5K/Unit $153 $170 $4,000 3.8 4.3 Multifamily(MF)Housing w/Rehab Assistance, <$5K/Unit 113 130 4,000 2.8 3.3 SF Housing w/Rehab Assistance,$5K-$25K 627 1,275 15,000 4.2 8.5 MF Housing w/Rehab Assistance, $5K-$25K 265 720 15,000 1.8 4.8 SF Housing w/Rehab Assistance,>$25K/Unit 891 2,775 30,000 3.0 9.3 MF Housing w/Rehab Assistance, >$25K/Unit 342 1,140 30,000 1.1 3.8 (3) Acquisition, Leasing, Support a. Lead Hazard Information Pamphlet. undertaken at the property.This is a Services, and Operation.This program The rule, in accordance with the statute, new requirement in HUD regulations. group does not appear on Table 5, requires the distribution of the EPA The required notice following risk because HUD has no aggregate financial pamphlet entitled, "Protect Your Family assessment or inspection provides information for the housing affected by From Lead in Your Home"to all information to occupants about the this subpart of the rule. For single existing tenants or owner-occupants nature,scope,and results of the family properties,the average cost of who have not already received it in evaluation and a name and phone compliance is estimated at$251 per unit compliance with the lead-based paint number to contact for more information for all properties; the high cost is $870. disclosure rule (24 CFR part 35,subpart or for access to the actual evaluation For multifamily properties,the average H) or the EPA rule implementing TSCA reports. Notices to tenants regarding cost per unit is$122 for all properties , section 406(b) (40 CFR part 745,subpart hazard reduction activities must contain and$460 for high-cost properties.These E).Since the disclosure rule was information about the treatments costs are similar to those of housing effective in the Fall of 1996,HUD performed and the location of any with tenant-based assistance, and the expects that most tenants will have remaining lead-based paint. HUD is financial impact is likely to be similar already received the pamphlet when the providing a sample format for resident also. rule becomes effective in year 2000 (see notices in the final rule. 4.Final Rule Requirements.The final discussion of effective date below). c. Evaluation.The rule establishes rule establishes the following types of Current HUD regulations require four types of evaluation procedures: (1) lead-based paint requirements: (1) provision of information similar to that A lead-based paint inspection,which is Distribution of a lead hazard in the EPA pamphlet,so this is not a a surface-by-surface investigation to information pamphlet; (2) notice to totally new requirement. determine the presence of lead-based . occupants of evaluation and hazard b. Resident Notice.The rule, in paint on painted surfaces of a dwelling, reduction activities; (3) evaluation of accordance with Title X,requires that typically through the use of a portable lead-based paint hazards; (4) reduction occupants of rental housing receiving X-ray fluorescence (XRF)analyzer; (2) of lead-based paint hazards; (5) ongoing Federal assistance be provided written paint testing,which is a limited form of monitoring and reevaluation; (6) notice of risk assessments, paint lead-based paint inspection aimed at response to a child with an elevated inspections,or hazard reduction determining the lead content of blood lead level;and (7) record keeping. activities required by this regulation and deteriorated paint or paint to be Federal Register/Vol. 64, No. 178/Wednesday, September 15, 1999/Rules and Regulations 50197 disturbed by rehabilitation; (3) a risk deteriorated paint, repair of any designated parties are responsible for assessment, which is an on-site physical defect in the substrate that may keeping a copy of each notice, investigation to determine and report be causing paint deterioration, and evaluation, clearance or hazard the existence, nature,severity,and repainting. Specialized cleanup and reduction report for at least three years. location of lead-based paint hazards, clearance are required after all these If ongoing lead-based paint maintenance which, in accordance with Title X, activities. • and/or reevaluation is required. such include dust-lead and soil-lead hazards As with the requirements for records must be kept and made as well as deteriorated lead-based paint, evaluation, the final rule requires available for HUD review until at least as well as lead-based paint on friction, different types of hazard reduction three years after such ongoing activities impact and chewable surfaces; and (4) activities for different types of housing are no longer required. clearance,which is an examination assistance programs and different 5. Description of Alternatives and conducted after hazard reduction, periods of construction. In the case of Minimization of Economic Impact.The rehabilitation,or maintenance activities public housing, abatement of lead-based specificity of the statute left HUD with (a) to visually determine that paint and lead-based paint hazards is no alternative to issuing an deteriorated surfaces that are known or required during the course of implementing regulation.However, in presumed to be lead-based paint have modernization under the current developing the final rule,HUD been controlled or abated and that regulation.Under the final rule, the considered several alternative policies visible dust, debris, paint chips,or other public housing requirements would related to minimizing the burden of the residue have been cleaned up;and (b) remain essentially the same,with the rule on grantees, property owners and to collect samples of settled dust and additional requirement of interim other parties responsible for complying test them for lead content to determine controls to reduce identified lead-based with its requirements. Other alternatives that no dust-lead hazards remain.A risk hazards before scheduled abatement can were suggested by commenters on the assessment includes limited dust wipe occur. proposed rule.In many cases,the public sampling or other environmental e. Ongoing Lead-Based Paint comments on the proposed rule sampling techniques, identification of Maintenance and Reevaluation.If articulated the issues discussed within hazard reduction options. and a report temporary hazard reduction measures the Department and at meetings with explaining the results of the are used and there is a continuing interested parties. investigation.In some housing financial relationship between HUD and .a. Effective Date. One consideration programs,the rule calls for a visual the residential property, the final rule pertained to the effective date of the assessment instead of a lead-based paint requires that owners conduct an annual rule. On the one hand, an early effective inspection or risk assessment.A visual check to identify any new deteriorated date (such as 30 or 60 days after assessment does not require paint and to ensure that prior hazard publication) seemed appropriate environmental sampling but requires reduction treatments are still intact.If because the health of young children the visual examination of interior and there is new deteriorated paint,it is to was at stake and the rule was delayed exterior painted surfaces for signs of be repaired: if old treatments are failing, relative to the statutory schedule. On deterioration.The rule requires different they are to be fixed. For some housing the other hand,HUD was aware that types of evaluation for different types of programs, the rule requires that a property owners, State and local housing assistance programs and certified risk assessor conduct a agencies and other responsible parties different ages of housing.The reevaluation of the property at specified needed time to prepare for compliance. differences in the requirements largely intervals to identify any reaccumulation The Department has concluded that reflect the extent of Federal involvement of lead-contaminated dust and any such preparation is essential for safe, in the property or the availability of failure of prior hazard reductions. effective compliance and therefore is funding. f. Response To a Child With an setting the effective date as one year Existing HUD lead-based paint Elevated Blood Lead Level.In some after publication. regulations require a visual inspection HUD programs, existing regulations use Commenters also urged HUD to make for defective paint surfaces and,in some the presence of a child under age seven it clear that projects for which financing cases,testing of and abatement of any with an elevated blood lead level (EBL) had been committed prior to the lead-based paint on chewable paint as a trigger to initiate testing for and effective date should not have to be surfaces.These methods are similar in abatement of lead-based paint on redesigned or refinanced in midstream. kind to the visual assessment and paint chewable surfaces.The final rule In response, HUD is including in the testing requirements under the proposed changes the cutoff age from seven to six, rule provisions that clarify exactly when rule. to conform to guidance from the Centers projects in the pipeline are affected by d. Hazard Reduction Activities.Three for Disease Control and Prevention the new requirements. types of hazard reduction activities are (CDC). The rule also changes the In addition to the phase-in period of required in the rule: (1) Abatement, response requirement to a risk one year, the final rule, in accordance which is a set of measures designed to assessment and interim controls of any with the statute,provides a more permanently eliminate lead-based paint identified lead-based paint hazards,and extended phase-in period for or lead-based paint hazards through changes the definition of an elevated multifamily housing receiving project- removal, permanent enclosure or blood lead level for the purposes of this based assistance of more than$5,000 encapsulation, replacement of rule from equal to or exceeding 25 per unit per year and was constructed components, or removal or covering of micrograms per deciliter (µg/dL) to 20 after 1959. For some housing, this lead-contaminated soil: (2) interim µg/dL for a single venous test or of 15— phase-in could last for 4 years after controls,which are designed to reduce 19 µg/dL in two tests taken at least 3 publication of the final rule. temporarily human exposure to lead- months apart.This definitional change b. Stringency of Requirements in based paint hazards through repairs, was made in consultation with CDC to Relation to Amount of Federal maintenance, painting, temporary conform to their existing.medical Assistance and Nature of Program.The containment, specialized cleaning, and guidelines. Department recognizes that the statute ongoing monitoring;and (3) paint g. Record Keeping. Grantees, owners, and the legislative history indicates a stabilization,which is the removal of public housing authorities,and other desire on the part of Congress to make 50198 Federal Register/Vol. 64, No. 178/Wednesday, September 15, 1999/Rules and Regulations the stringency of requirements made effective in 1995) indicates that it Financing as an option to conducting a reasonable in relation to the amount of is a cause of confusion. risk assessment and interim controls. Federal assistance, the type and size of d. Qualifications. Another subject of Such options would allow owners to property,and the nature of the program. concern to HUD and to commenters on select the procedure that is most cost- HUD considered various ways to the proposed rule was the qualifications effective for them to achieve the goal of achieve this goal and concluded with of individuals performing the hazard lead-based paint hazard control. The three important policies: (1) Multifamily evaluation and reduction activities standard treatments option has been properties receiving no more than requited by the rule.The proposed rule incorporated into today's final rule. $5,000 per unit per year in project-based allowed dust and soil testing by persons assistance and all single family employed by local housing agencies that In the proposed rule, HUD included a properties receiving project-based are trained but not certified.Two provision requiring owners of assistance have less stringent commenters felt that it would be a multifamily housing with project-based requirements than multifamily mistake to allow uncertified individuals rental assistance to prepare a lead properties receiving more than$5,000 in to take dust and soil tests,indicating hazard reduction plan.The hazard project-based assistance; (2) housing that this appeared to be an avoidance of reduction plan was a suggestion of the receiving no more than $5,000 per unit the certification law established by EPA Task Force on Lead-Based Paint Hazard in Federal rehabilitation assistance have regulations. EPA agreed with this point Reduction and Financing. Its purpose much less stringent requirements than of view.HUD concluded that,because was to give owners flexibility in those receiving more than$5,000;and of the importance of dust and soil prioritizing hazard reduction work. (3) the requirements for housing testing to the effectiveness of the Several commenters, however,noted occupied by families with tenant-based regulation, there must be an established that it would be a paperwork rental assistance apply only to units set of qualifications for those doing such "nightmare," not only for the owners occupied by families with children of testing. At this time,the only such but for HUD as well.Therefore the final less than 6 years of age. By applying the program is that administered by EPA rule requires simply that the hazard rule narrowly to tenant-based rental under authority of sections 402 and 404 reduction work be completed within 90 assistance programs,HUD has mitigated of the Toxic Substances Control Act. days after completion of the risk some of the cost and burden on small Therefore HUD requires in the final rule businesses,while still realizingthat all dust and soil testing, as well as assessment report in units occupied by lead-basedpaint inspections, risk children of less than six years of age and significant benefits by targeting units p within 12 months in all other units. that house families with young children. assessments, clearances and.abatements, HUD believes this change rovides c. De Minimis Area of Deteriorated be performed or approved by people g p certified in accordance with EPA flexibility without unnecessary Paint.In the proposed rule, in an regulations or a State or tribal program paperwork. attempt to make the requirements of the authorized by EPA.To increase the HUD recognizes that some States, rule as cost-effective as possible, the availability of persons qualified to tribes, or local governments may have Department proposed a certain area of perform clearance examinations,HUD allowsestablished procedures for lead based deteriorated paint that had to be present before treatment was required under the certified clearance technicians to paint evaluation and hazard reduction rule.This"de minimis"was drawn perform clearances;rtifie .and HUD also that may be somewhat different than but allows uncertified but trained as those in this rule. from the HUD Guidelines,where it was as technicians to perform clearances, protective established as a way to focus resources provided the clearance report is signed Therefore the rule provides that HUD on the highest priority hazards while by a certified lead based paint inspector may waive or modify certain maintaining effectiveness in hazard requirements if the Department or risk assessor. reduction.The de minimis areas were as The proposed rule also required determines that such local provisions follows: More than 10 square feet On an workers performing interim controls to are as protective as those of the HUD exterior wall; more than two square feet be supervised by a person who is rule. on a component with a large surface certified under EPA procedures as an f.Avoidance of Duplication.The final area other than an exterior wall (stich aS abatement supervisor. Some rule was written with careful interior walls,ceilings, floors and commenters felt that it was unnecessary consideration of existing regulations doors):or more than 10 percent of the to require that interim controls workers developed by other Federal agencies, total surface area on an interior or be supervised by a certified abatement States,Indian tribes and localities.To exterior component with a small surface. supervisor, suggesting that such workers minimize duplication and avoid area including, but not limited to could simply be trained in safe work confusion,HUD has ex licitl stated window sills, baseboards,and trim. practices. HUD agrees and requires in p y Comments on this proposal were mixed. the final rule that workers performing that this Indian tribes does not preclude Some commenters found it difficult to lead-based paint maintenance and States, tribes or localities from understand and put in practice, interim controls, including paint conducting a more protective procedure indicating that people would Spend too stabilization, only be trained in safe than the minimum requirements set out much time measuring the exact areas of work practices. A Series of optional in the proposed rule.Similarly, if more deteriorated paint instead of focusing on acceptable training programs is listed. than one requirement covers a condition making housing lead safe.Others e. Options to Provide Greater or activity, the most protective method welcomed the proposal as a reasonable Flexibility. Several commenters on the shall apply. HUD has worked and way to target hazard reduction proposed rule urged that HUD allow continues to work closely with the EPA resources.In preparing the final rule, greater flexibility in ways to meet the and CDC to ensure that regulations from HUD has removed the de minimis goals of the rule.In particular, it was two or more Federal agencies are provision with regard to deteriorated suggested that options be provided, consistent and not duplicative. paint,after concluding that experience such as the standard treatments Wherever possible, HUD has referenced in the tenant-based assistance programs recommended by the Task Force on relevant requirements established by 1 (where the de minimis provision was Lead-Based Hazard Reduction and EPA. - - ' • Federal Register/Vol. 64, No. 178/Wednesday, September 15, 1999/Rules and Regulations 50199 VII.Findings and Certifications lead-based paint hazards to young 10.Farfel 1990.Farfel MR,Chisolm JJ Jr. A. Unfunded Mandates Reform Act children. It implements Title X of the Health and environmental outcomes of Housing and Community Development traditional and modified practices for Title II of the Unfunded Mandates Act of 1992. No programmatic or policy abatement of residential lead based paint. Reform Act of 1995 (2 U.S.C. 1531- change will result from this rule that American Journal of Public Health 80:1240- 1245. 1538) establishes requirements for will affect the relationship between the 11.HUD 1996.U.S.Department of Housing Federal agencies to assess the effects of Federal government and State and local and Urban Development and Bureau of the their regulatory actions on State, local, governments. Census. Department of Commerce.Property and tribal governments and the private E. Executive Order 13045, Protection of Owners and Managers Survey, 1996. sector.This final rule does not impose 12.HUD 1997.Moving Toward a Lead-Safe any Federal mandates on any State, Children From Environmental Health America:A Report to the Congress of the local, or tribal governments or the Risks and Safety Risks United States.U.S.Department of Housing private sector within the meaning of This rule will not pose an and Urban Development,Office of Lead 1997. Unfunded Mandates Reform Act of environmental health risk or safety risk ha 1 3 Control.February 1995. for children. 3.HUD 1998.U.S.Department of Housing and Urban Development,Office of Lead B. Environmental Impact F. Congressional Review of Major Final Hazard Control.Field Evaluation of Lead- Rules Based Paint Inspections.Washington, 1998. A Finding of No Significant Impact , 14.HUD 1999.Regulatory Impact Analysis with respect to the environment has This final rule is a "major rule" as of the Final Rule on Lead-Based Paint: been made in accordance with HUD defined in the Congressional Review Requirements for Notification,Evaluation regulations at 24 CFR part 50, which Act (5 U.S.C. Chapter 8). and Reduction of Lead-Based Paint Hazards implement section 102(2)(C) of the in Federally Owned Residential Property and VIII.References Housing Receiving Federal Assistance. National Environmental Policy Act of Prepared by ICF,Inc.for U.S.Department of 1969 (42 U.S.C. 4223).The Finding of 1.Abt Associates 1999.Abt Associates, Housing and Urban Development,Office of No Significant Impact is available for Inc.,Status of HUD-Insured(or Held) Lead Hazard Control, 1999. public inspection between the hours of Multifamily Rental Housing in 1995,Final 15.Lanphear 1996.Lanphear BP, 7:30 a.m. and 5:30p.m.weekdays in the Report.Prepared for U.S.Department of Weitzman M,Winter NL,Tanner M.Yakir B, a Y Housing and Urban Development,Office of Eberly S.Emond M,Matte TD.Lead- Office of the Rules Docket Clerk, Office Policy Development and Research,May 1999. contaminated house dust and urban of General Counsel, Room 10276, 2.Ashengrau 1997.Aschengrau A,Beiser children's blood lead levels.American • Department of Housing and Urban A.Bellinger D,Copenhafer D.Weitzman M. Journal of Public Health,86:1416-1421, Development, 451 Seventh Street, SW, Residential lead-based paint hazard 1996. Washington,DC. remediation and soil lead abatement arpong 16.Lanphear 1998.Lanphear BP,Matte children with mildly elevated blood lead TD,Rogers J.Clickner R.Dietz B,Bornschein C. Executive Order 12866, Regulatory levels,American Journal of Public Health RL,Succop P,Mahaffey KR,Dixon S,Galke Planning and Review 87:1698-1702, 1997.. W,Rabinowitz M.Farfel M.Rohde C, 3.ATSDR 1988.Agency for Toxic J This rule was reviewed by the Office Substances and Disease Registry,Public Schwartz. ,Ashley P,Jacobs DE. The of Management and Budget(OMB) Health Service,U.S.Department of Health contribution of lead-contaminated house chunder Executive Order 12866 on and Human Services. The Nature and Extent dust and residential soil to Resel r chi blood Regulatory Planning and Review,issued of Lead Poisoning in Children in the United lead levels,Environmental Research; bythe President on September 30. 1993. States:A Report to Congress.Atlanta,GA, 79(1):51-68.7.National OctoberAcademy 1998. P 17. of Sciences 1993. OMB determined that this rule is an 1988. Measuring Lead Exposure in Infants, 4.Battelle 1997.Summary and Assessment economically significant regulatory Children and Other Sensitive Populations. action, as defined in section 3(f)(1) of of Published Information on Determining Committee on Measuring Lead in Critical Lead Exposures and Mitigating Lead Hazards Populations,Board on Environmental the Order.As described in section VI of Associated With Dust and Soil in Residential Studies and Toxicology,Commission on Life this preamble,an Economic Analysis Carpets,Furniture and Forced Air Ducts. Sciences.National Academy of Sciences, (EA) has been prepared that examines Prepared for U.S.Environmental Protection 1993. the economic costs and benefits of the Agency,December 1997 (EPA 747-S-97- 18.National Center 1998.Evaluation of the final rule.The EA is available for 001). HUD Lead-Based Paint Hazard Control Grant inspection and copying in the office of 5.CDC 1990.Centers for Disease Control, Program.'Fifth Interim Report.Prepared for Public Health Service,U.S.Department of the Departments' Rules Docket Clerk, HUD by the National Center for Lead-Safe Room 10276, 451 Seventh Street, SW, Health and Human Services.StrategicPlan Housing and the University of Cincinnati for the Elimination of ChildhoododLead Department of Environmental Health,March Washington, DC 20410. Any changes Poisoning.November 1990. 1998 made to the final rule subsequent to its 6.CDC 1997a.Centers for Disease Control 19.Salkever 1995.Salkever DS. Updated submission to OMB are identified in the and Prevention. Update:Blood Lead Levels- Estimates of Earnings Benefits From Reduced docket file,which is also available for United States, 1991-19.94.Morbidity and Exposure of Children to Environmental Lead. public inspection in the office of the Mortality Weekly Report 46: 141-146. 1997. Environmental Research,70, 1995. Rules Docket Clerk. 7.CDC 1997b.Centers for Disease Control 20.Swindell 1994.Swindell SL,Charney and Prevention.Screening Young Children E,Brown MJ,Delaney J.Home abatement D. Executive Order 12612, Federalism for Lead Poisoning:Guidance for State and and blood lead changes in Children with The General Counsel, as the Local Public Health Officials.Atlanta, 1997. Class III lead poisoning,Clinical Pediatrics. 8.Clark 1996.Clark S.Bornschein RL,Pan 536-541,September 1994. Designated Official under section 6(a) of W,Menrath W,Roda S.Grote J. The Executive Order 12612, Federalism, has relationship between surface dust-lead List of Subjects determined that this rule will not have loadings on carpets and the blood lead of federalism implications concerning the young children,Environmental Geochemistry 24 CFR Part 35 division of local.State,and Federal and Health(18) 143-146, 1996. Grant programs-housing and responsibilities.The purpose of this rule 9.EPA 1995.U.S.Environmental community development, Lead is to ensure that housingreceivingProtection Agency,Office pof Pollution poisoning,Mort a e insurance,Rent Prevention and Toxics,Report on the P g� g g Federal assistance and federally owned National Survey of Lead-Based Paint in subsidies,Reporting and recordkeeping housing that is to be sold does not pose Housing.April 1995 (EPA 747-R95-005). requirements. • 50200 Federal Register/Vol. 64, No. 178/Wednesday, September 15, 1999/Rules and Regulations 24 CFR Part 91 housing,Reporting and recordkeeping 24 CFR Part 585 Aged. Grant programs—housing and requirements,Technical assistance. Grant programs—housing and community development, Homeless, 24 CFR Part 570 community development, Homeless. Individuals with disabilities, Low and Administrative practice and Low and very low-income families, moderate income housing, Reporting procedure, American Samoa, Reporting and recordkeeping and recordkeeping requirements. requirements. Community development block grants, 24 CFR Part 92 Grant programs—education,Grant 24 CFR Part 761 Administrative practice and programs—housing and community Drug abuse, Drug traffic control, Grant procedure, Grant programs—housing development, Guam, Indians, Lead programs—housing and community and community development,Grant poisoning. Loan programs—housing and development. Grant programs—low- programs—Indians,Indians, Low and community development,Low and and moderate-income housing, moderate income housing, moderate income housing,New Reporting and recordkeeping Manufactured homes,Rent subsidies, communities,Northern Mariana Islands, requirements. Reporting and recordkeeping Pacific Islands Trust Territory, Pockets requirements. of poverty.Puerto Rico,Reporting and 24 CFR Part 881 recordkeeping requirements. Small Grant programs—housing and 24 CFR Part 200 cities, Student aid, Virgin Islands. community development, Rent Administrative practice and 24 CFR Part 572 subsidies, Reporting and recordkeeping procedure,Claims. Equal employment requirements. opportunity,Fair housing,Home Condominiums, Cooperatives,Fair 24 CFR Part 882 improvement.Housing standards, housing, Government property, Grant Incorporation by reference,Lead programs—housing and community Grant programs—housing and poisoning,Loan programs—housing and development,Low and moderate community development,Homeless, community development,Minimum income housing, Nonprofit Lead poisoning,Manufactured homes, property standards,Mortgage insurance, organizations, Reporting and Rent subsidies,Reporting and Organization and functions recordkeeping requirements. recordkeeping requirements. (Government agencies),Penalties, 24 CFR Part 573 Reporting and recordkeeping 24 CFR Part 883 Condominiums, Fair housing, Grant programs—housing and requirements,Social security, Government property,Grant programs— community development.Rent Unemployment compensation,Wages. housing and community development, subsidies, Reporting and recordkeeping 24 CFR Part 203 Low and moderate income housing, requirements. Hawaiian Natives,Home Nonprofit organizations, Reporting and 24 CFR Part 886 improvement,Indians—lands, Loan recordkeeping requirements. programs—housing and community 24 CFR Part 574 Grant programs—housing and development,Mortgage insurance, community development, Lead Reporting and recordkeeping AIDS, Community facilities, Disabled, poisoning,Rent subsidies, Reporting requirements, Solar energy. Emergency shelter, Grant programs— and recordkeeping requirements. 24 CFR Part 206 health programs, Grant programs— 24 CFR Part 891 housing and community development, Aged, Condominiums,Loan Grant programs—social programs, Aged, Capital advance programs,Civil programs—housing and community Homeless,Housing, Low and moderate rights, Grant programs—housing and development,Mortgage insurance, income housing, Nonprofit community development,Individuals Reporting and recordkeeping organizations,Rent subsidies, Reporting with disabilities,Loan programs— requirements. and recordkeeping requirements, housing and community development, 24 CFR Part 280 Technical assistance. Low-and moderate-income housing, 24 CFR Part 576 Mental health programs,Rent subsidies, Community development, Grant Reporting and recordkeeping programs—housing and community Community facilities,Emergency requirements. development,Loan programs—housing , shelter grants, Grant programs—housing and community development,Low and and community development, Grant 24 CFR Part 901 moderate income housing,Nonprofit programs—social programs,Homeless, Administrative practice and organizations, Reporting and Reporting and recordkeeping procedure,Public housing, Reporting recordkeeping requirements. requirement's. and recordkeeping requirements. 24 CFR Part 291 24 CFR Part 582 24 CFR Part 906 Community facilities, Conflict of Homeless,Rent subsidies, Reporting Grant programs—housing and interests,Homeless, Lead poisoning, and recordkeeping requirements, community development,Low and Low and moderate income housing, Supportive housing programs—housing moderate income housing. Public Mortgages, Reporting and recordkeeping and community development, housing, Reporting and recordkeeping requirements, Surplus government Supportive services. requirements. property. 24 CFR Part 583 24 CFR Part 941 24 CFR Part 511 Homeless, Rent subsidies,Reporting Grant programs—housing and Administrative practice and and recordkeeping requirements, community development, Loan procedure,Grant prograhs-=housing Supportive housing programs—housing programs—housing and community and community development, Lead and community development, development,Public housing, Reporting poisoning,Low and moderate income Supportive services. and recordkeeping requirements. ' Federal Register/Vol. 64, No. 178/Wednesday, September 15, 1999/Rules and Regulations 50201 24 CFR Part 965 through 35.98, as subpart A, consisting Subpart E[Reserved] ' Energy conservation, Government of§§35.1 through 35.19.The table of Subpart F-HUD-Owned Single Family procurement, Grant programs-housing contents to redesignated subpart A is Property and community development, Lead revised to read as follows: 35.500 Purpose and applicability. poisoning,Loan programs-housing and Subpart A-Disclosure of Known Lead- 35.505 Definitions and other general community development,Public Based Paint Hazards Upon Sale or Lease of requirements. housing, Reporting and recordkeeping Residential Property 35.510 Required procedures. requirements, Utilities. Sec. Subpart G-Multifamily Mortgage Insurance 35.1 Purpose. 35.600 Purpose and applicability. 24 CFR Part 968 35.3 Scope and applicability. 35.605 Definitions and other general Grant programs-housing and 35.5 Effective dates. requirements. community development,Indians, Loan 35.7 Definitions. p 35.610 Exemption. programs-housing and community 35.9 Disclosure requirements for sellers and lessors. 35.615 Notices and pamphlet. development, Public housing,Reporting 35.11 Opportunity to conduct an 35.620 Multifamily insured property and recordkeeping requirements. evaluation. constructed before 1960. 35.13 Certification and acknowledgement of 35.625 Multifamily Insured Property 24 CFR Part 970 disclosure. constructed after 1959 and before 1978. Grant programs-housing and 35.15 Agent responsibilities. 35.630 Conversions and Major community development,Public 35.17 Enforcement. Rehabilitations housing, Reporting and recordkeeping 35.19 Impact on State and local Subpart H-Project-Based Rental requirements. requirements. Assistance 24 CFR Part 982 3.Revise subparts B through G and 35.700 Purpose and applicability. add subparts H through R to read as 35.705 Definitions and other general Grant programs-housing and follows: requirements. community development,Housing, Rent 35.710 Notices and pamphlet. subsidies,Reporting and recordkeeping Subpart B-General Lead-Based Paint 35.715 Multifamily properties receiving p g p g Requirements and Definitions for.All more than$5,000 per unit. requirements. Programs 35.720 Multifamily properties receiving up 24 CFR Part 983 35.100 Purpose and applicability. to$5,000 per unit,and single-family Grant programs-housing and 35.105 Effective dates. properties. ' communitydevelopment, Rent 35.106 Information collection requirements. 35,725 Section 8 rent adjustments. p 35.110 Definitions. 35.730 Child with an environmental subsidies,Reporting and recordkeeping 35.115. Exemptions. intervention blood lead level. requirements. 35.120 Options. 24 CFR Part 1000 35.125 Notice of evaluation and hazard Subpart I-HUD-Owned and Mortgagee-in- reduction activities. Possession Multifamily Property. Aged. Community development block 35.130 Lead hazard information pamphlet. 35.800 Purpose and applicability. grants, Grant programs-housing and 35.135 -Use of paint containing lead. 35.805 Definitions and other general community development. Grant 35.140 Prohibited methods of paint requirements. programs-Indians,Indians,Individuals removal. 35.810 Notices and pamphlet. with disabilities, Low and moderate 35.145 Compliance with Federal laws and 35.815 Evaluation. authorities. 35.820 Interim controls. income housing,Public housing, 35.150 Compliance with other State,tribal, 35.825 Ongoing lead based paint Reporting and recordkeeping and local laws. maintenance and reevaluation. requirements. 35.155 Minimum requirements. 35.830 Child with an environmental 24 CFR Part 1003 35.160 Waivers. intervention blood lead level. 35.165 Prior evaluation or hazard Alaska, Community development reduction. Subpart J-Rehabilitation block grants, Grant programs-housing 35.170 Noncompliance with the 35.900 Purpose and applicability. requirements of subparts B through R. 35.905 Definitions and other general and community development,Indians, Reporting and recordkeeping 35.175 Records requirements. requirements. Subpart C-Disposition of Residential 35.910 Notices and pamphlet. Property Owned by a Federal Agency Other 35.915 Calculating rehabilitation costs, 24 CFR Part 1005 Than HUD except for the CILP program. Indians, Reporting and recordkeeping 35.200 Purpose and applicability. 35.920 Calculating rehabilitation costs for requirements. 35.205 Definitions and other general the Flexible-Subsidy-CILP Program. requirements. 35.925 Examples of determining applicable For the reasons discussed in the re q requirements. preamble,HUD is amending title 24 of 35.210 Disposition of residential property constructed before 1960. 35.930 Evaluation and hazard reduction the Code of Federal Regulations as 35.215 Disposition of residential property requirements. follows: constructed after 1959 and before 1978. 35.93.5 Ongoing lead-based paint maintenance activities. PART 35-LEAD-BASED PAINT Subpart D-Project-Based.Assistance 35.940 Special requirements for insular POISONING PREVENTION IN CERTAIN Provided by a Federal Agency Other Than areas. RESIDENTIAL STRUCTURES HUD Subpart K-Acquisition,Leasing,Support 35.300 Purpose and applicability. Services,or Operation. 1.The authority citation for 24 CFR 35.305 Definitions and other general part 35 is revised to read as follows: requirements. 35.1000 Purpose and applicability. 35.310 Notices and pamphlet. 35.1005 Definitions and other general Authority:42 U.S.C.3535(d),4821,and 35.315 Risk assessments. requirements. 4851. 35.1010 Notices and pamphlet. 35.320 Hazard reduction. p p 2. Remove Subpart A and redesignate 35.325 Child with an environmental 35.1015 Visual assessment,paint subpart H, consisting of§§35.80 intervention blood lead level. stabilization,and maintenance. 50202 Federal Register/Vol. 64, Na 178/Wednesday, September 15, 1999/Rules and Regulations 35.1020 Funding for evaluation and hazard promulgated to implement.the Lead- or section with the most protective reduction. Based Paint Poisoning Prevention Act, initial hazard reduction requirements Subpart L-Pubtic Housing Programs as amended (42 U.S.C. 4821 et seq.), and applies. Paragraph (c) of this section 35.1100 Purpose and applicability. the Residential Lead-Based Paint Hazard provides a table that lists the subparts 35.1105 Definitions and other general Reduction Act of 1992 (42 U.S.C. 4851 and sections of this part in order from requirements. et seq.). the most protective to the least 35.1110 Notices and pamphlet. (b) Applicability.-(1) This subpart. protective. (This list is based only on 35.1115 Evaluation. This subpart applies to all target the requirements for initial hazard 35.1120 Hazard reduction. housing that is federally owned and reduction.The summary of 35.1125 Evaluation and hazard reduction target housing receiving Federal requirements on this list is not a before acquisition and development. assistance to which subparts C,D,F complete list of requirements.It is 35.1130 Child with an environmental intervention blood lead level. through M, and R of this part apply, necessary to refer to the applicable 35.1135 Eligible costs. except where indicated: subparts and sections to determine all 35.1140 Insurance coverage (2) Other subparts.-(i) General. applicable requirements.) • Subparts C,D, and F.through M of this Subpart M-Tenant-Based Rental (iv) Example.A multifamily building Assistance part each set forth requirements for a has 100 dwelling units and was built in 35.1200 Purpose and applicability. specific type of Federal housing activity 1965.The property is financed with or assistance,such as multifamily 35.1205 Definitions and other general mortgage insurance, project-based rental HUD multifamily mortgage insurance. requirements. assistance, rehabilitaon, or tenant This building is covered by subpart G of 35.1210 Notices and pamphlet. this part (see §35.625-Multifamily 35.1215 Activities at initial and periodic based rental assistance.Subpart R of mortgage insurance for properties inspections. this part provides standards and constructed after 1959),which is at 35.1220 Ongoing lead-based paint methods for activities required in maintenance activities subparts B, C,D, and F through M of protectiveness level 5 in the table set 35.1225 Child with an environmental this part. forth in paragraph (c) of this section.In intervention blood lead level. the same building, however, 50 of the (ii) Application to programs.Most 100 dwelling units are receiving project- Subparts N-Q[Reserved] HUD Housing programs are covered by only one subpart of this part, but some based assistance, and the average annual Subpart R-Methods and Standards for ro can be used for more than one assistance per assisted unit is $5,500. Lead-Based Paint Hazard Evaluation and programs Those 50 units.and common areas Hazard Reduction Activities. type of assistance and therefore are servicingthose units, are covered bythe 35.1300 Purpose and applicability covered by more than one subpart of 35.1305 Definitions and other general this part.A current list of programs requirements of subpart H of this part requirements. covered by each subpart of this part is (see§35.715-Project-based assistance 35.1310 References. available on the internet at for multifamily properties receiving 35.1315 Collection and laboratory analysis www.hud.gov, or by mail from the more than$5,000 per unit),which are of samples. National Lead Information Center at 1- at protectiveness level 3.Therefore, 35.1320 Lead-based paint inspections and $00_424-LEAD. Examples of flexible because level 3 is a higher level of risk assessments. programs that can provide more than protectiveness than level 5,the units 35.1325 Abatement. one type of assistance are the HOME receiving project-based assistance, and 35.1330 Interim controls. common areas servicing those units, 35.1335 Standard treatments. Investment Partnerships program,the 35.1340 Clearance. Community Development Block Grant must comply at level 3,while the rest 35.1345 Occupant protection and worksite program,and the Indian Housing Block of the building can be operated at level preparation Grant Program. Grantees, participating 5.The owner may choose to operate the 35.1350 Safe work practices. jurisdictions,Indian tribes and other entire building at level 3 for simplicity. 35.1355 Ongoing lead-based paint entities administering such flexible (c) Table One.The following table maintenance and reevaluation activities. programs must decide which subpart lists the subparts and sections of this Subpart B-General Lead-Based Paint applies to the type of assistance being part applying to HUD programs in order Requirements and Definitions for All provided to a particular dwelling unit or from most protective to least protective Programs. residential property. hazard reduction requirements.The (iii) Application to dwelling units.In summary of hazard reduction • §35.100 Purpose and applicability. , some cases, more than one type of requirements in this table is not (a) Purpose.The requirements of assistance may be provided to the same complete. Readers Must refer to relevant subparts B through R of this part are dwelling unit.In such cases,the subpart subpart for complete requirements. Level of tion rotec- Subpart, section, and type of assistance Hazard reduction re- quirements 1 Subpart L, Public housing. Subpart G, §35.630, Multifamily mortgage insurance for conversions Full abatement of lead- and major rehabilitations. based paint. 2 Subpart J, §35.930(d), Properties receiving more than $25,000 per unit in rehabilitation assist- Abatement of lead- ance. based paint hazards. 3 Subpart G,§35.620, Multifamily mortgage Insurance for properties constructed before 1960, other Interim controls. than conversions and major rehabilitations. Subpart H, §35.715, Project-based assistance for multifamily properties receiving more than $5,000 per unit. Subpart I, HUD-owned Multifamily property. Subpart J, §35.930(c), Properties receiving more than $5,000 and up to$25,000 per unit in rehabilitation assistance. 4 Subpart F, HUD-owned single family properties. Subpart H, §35.720, Project-based rental assist- Paint stabilization. ance for Multifamily properties receiving tip to$5,000 per unit and single family properties. Sub- part K, Acquisition, leasing, support services, or operation. Subpart M,Tenant-based rental as- sistance. • • • ' Federal Register/Vol. 64, No. 178/Wednesday, September 15, 1999/Rules and Regulations 50203 Level of protec- Subpart,section, and type of assistance Hazard reduction re - Subpart, quirements 5 Subpart G,§35.625, Multifamily mortgage insurance for properties constructed after 1959 Ongoing lead-based paint maintenance. 6 Subpart J, §35.930(b), Properties receiving up to and including$5,000 in rehabilitation assistance Safe work practices dur- ing rehabilitation. §35.105 Effective dates. or abatement supervision, either by a debris created or released during lead- The effective date for subparts B State or Indian tribe with a lead-based based paint hazard reduction are not through R of this part is September 15, paint certification program authorized spread, blown or tracked from inside to 2000, except that the effective date for by the Environmental Protection Agency outside of the worksite. prohibited methods of paint removal, (EPA), or by the EPA, in accordance Designated party means a Federal described in§35.140, is November 15, with 40 CFR part 745,subparts L or Q. agency,grantee, subrecipient, 1999. Subparts F through M of this part Chewable surface means an interior or participating jurisdiction,housing provide further information on the exterior surface painted with lead-based agency, CILP recipient, Indian tribe, application of the effective date to paint that a young child can mouth or tribally designated housing entity specific programs. Before September 15, chew. A chewable surface is the same as (TDHE), sponsor or property owner 2000, a designated party has the option an "accessible surface" as defined in 42 responsible for complying with of following the procedures in subparts U.S.C. 4851b(2)). Hard metal substrates applicable requirements. B through R of this part, or complying and other materials that cannot be Deteriorated paint means any interior with current HUD lead-based paint dented by the bite of a young child are or exterior paint or other coating that is regulations. not considered chewable. peeling, chipping, chalking or cracking, Clearance examination means an or any paint or coating located on an §35.106 Information collection activity conducted following lead-based interior or exterior surface or fixture that requirements. paint hazard reduction activities to is otherwise damaged or separated from The information collection determine that the hazard reduction the substrate. requirements contained in this part have activities are complete and that no soil- Dry sanding means sanding without been approved by the Office of lead hazards or settled dust-lead moisture and includes both hand and Management and Budget (OMB) in hazards, as defined in this part, exist in machine sanding. accordance with the requirements of the the dwelling unit or worksite.The • Dust-lead hazard means surface dust Paperwork Reduction Act of 1995 (44 clearance process includes a visual that contains a dust-lead loading (area U.S.C. 2501-3520), and have been assessment and collection and analysis concentration of lead) at or exceeding assigned OMB control number 2539— of environmental samples. Dust-lead. the levels promulgated by the EPA 0009. An agency may not conduct or standards for clearance are found at pursuant to section 403 of the Toxic sponsor,and a person is not required to §35.1320. Substances Control Act or,if such levels respond to, a collection of information CILP recipient means an owner of a . are not in effect, the standards in unless the collection displays a valid multifamily property which is §35.1320. control number. undergoing rehabilitation funded by the Dwelling unit means a: Flexible Subsidy-Capital Improvement (1) Single-family dwelling, including §35.110 Definitions. Loan Program (CILP). attached structures such as porches and Abatement means any set of measures Common area means a portion of a stoops; or designed to permanently eliminate lead- residential property that is available for (2) Housing unit in a structure that based paint or lead-based paint hazards use by occupants of more than one contains more than 1 separate housing (see definition of"permanent"). dwelling unit. Such an area may unit,and in which each such unit is Abatement includes: include, but is not limited to, hallways, used or occupied, or intended to be (1)The removal of lead-based paint stairways, laundry and recreational used or occupied, in whole or in part. and dust-lead hazards, the permanent rooms,playgrounds, community as the home or separate living quarters enclosure or encapsulation of lead- centers,on-site day care facilities, of 1 or more persons. based paint, the replacement of garages and boundary fences. Encapsulation means the application components or fixtures painted with Component means an architectural of a covering or coating that acts as a lead-based paint, and the removal or element of a dwelling unit or common barrier between the lead-based paint permanent covering of soil-lead hazards; area identified by type and location, and the environment and that relies for and such as a bedroom wall,an exterior its durability on adhesion between the (2) All preparation, cleanup, disposal, window sill, a baseboard in a living encapsulant and the painted surface, and post abatement clearance testing room, a kitchen floor, an interior and on the integrity of the existing activities associated with such window sill in a bathroom, a porch bonds between paint layers and between measures. floor, stair treads in a common stairwell, the paint and the substrate. Act means the Lead-Based Paint or an exterior wall. Encapsulation may be used as a method Poisoning Prevention Act,as amended, Composite sample means a collection of abatement if it is designed and 42 U.S.C. 4822 et seq. of more than one sample of the same performed so as to be permanent (see Bare soil means soil or sand not medium (e.g., dust,soil or paint) from definition of"permanent"). covered by grass,sod, other live ground the same type of surface (e.g.,floor, Enclosure means the use of rigid. 1 covers,wood chips. gravel,artificial interior window sill, or window trough), durable construction materials that are turf,or similar covering. such that multiple samples can be mechanically fastened to the substrate Certified means licensed or certified analyzed as a single sample. in order to act as a barrier between lead- to perform such activities as risk Containment means the physical based paint and the environment. assessment, lead-based paint inspection, measures taken to ensure that dust and Enclosure may be used as a method of 50204 Federal Register/Vol. 64, No. 178/Wednesday, September 15, 1999/Rules and Regulations abatement if it is designed to be subparts J and K of this part, except the Indian tribe means a tribe as defined permanent(see definition of HOME program or the Flexible Subsidy- in the Native American Housing "permanent"). Capital Improvement Loan Program Assistance and Self-Determination Act Environmental intervention blood (CILP). of 1996 (25 U.S.C. 4101 et seq.) lead level means a confirmed Hard costs of rehabilitation means: Inspection (See Lead-based paint concentration of lead in whole blood (1) Costs to correct substandard inspection). equal to or greater than 20 µg/dL conditions or to meet applicable local Insular areas means Guam, the (micrograms of lead per deciliter) for a rehabilitation standards: Northern Mariana Islands, the United single test or 15-19 p.g/dL in two tests (2) Costs to make essential States Virgin Islands and American taken at least 3 months apart. improvements, including energy-related Samoa. Evaluation means a risk assessment, a repairs, and those necessary to permit Interim controls means a set of lead hazard screen, a lead-based paint use by persons with disabilities;and measures designed to reduce inspection, paint testing, or a costs to repair or replace major housing temporarily human exposure or likely combination of these to determine the systems in danger of failure;and exposure to lead-based paint hazards. presence of lead-based paint hazards or (3) Costs of non-essential Interim controls include,but are not lead-based paint. improvements, including additions and limited to, repairs, painting, temporary Expected to reside means there is alterations to an existing structure; but containment,specialized cleaning, actual knowledge that a child will clearance, ongoing lead-based paint reside in a dwellingunit reserved for (4) Hard costs do not include g g administrative costs (e.g., overhead for maintenance activities, and the the elderly or designated exclusively for establishment and operation of administering a rehabilitation program, persons with disabilities.If a resident processing fees, etc.). management and resident education woman is known to be pregnant,there Hazard reduction means measures programs. is actual knowledge that a child will designed to reduce or eliminate human Interior window sill means the portion reside in the dwelling unit. exposure to lead based paint hazards Federal agency means the United of the horizontal window ledge that through methods including interim protrudes into the interior of the room, States or any executive department, controls or abatement or a combination adjacent to the window sash when the independent establishment, of the two. window is closed.The interior window administrative agency and HEPA vacuum means a vacuum sill is sometimes referred to as the instrumentality of the United States, window stool. a corporation in which all or cleaner device with an included high- including P efficiency particulate air (HEPA)filter Lead based paint means paint or a substantial amount of the stock is other surface coatings that contain lead through which the contaminated air amna beneficially owned by the United States flows, operated in accordance with the equal to or exceeding 1.0 milligram per or by any of these entities.The term square centimeter or 0.5 percent by agency" includes, but is not instructions of its manufacturer.A "Federal a g Y HEPA filter is one that captures at least weight or 5.000 parts per million (ppm) limited to.Rural Housing Service 99.97airborne particles of at percent of b wei ht. (formerly Rural Housing and least 0.3 micrometers in diameter. Lead based paint hazard means any I Community Development Service that Housing for the elderly means condition that causes exposure to lead was formerly Farmer's Home from dust-lead hazards,soil-lead Administration), Resolution Trust retirement communities or similar types hazards,or lead-based paint that is Corporation, General Services of housing reserved for households P deteriorated or present in chewable Administration,Department of Defense, composed of one or more persons 62 surfaces, friction surfaces, or impact Department of Veterans Affairs, years of age or more, or other age if surfaces, and that would result in Department of the Interior, and recognized as elderly by a specific adverse human health effects. Federal housing assistance program. Department of Transportation. Lead-based paint inspection means a Federally owned property means Housing receiving Federal assistance surface-by-surface investigation to residential property owned or managed means housing which is covered by an determine the presence of lead-based bya Federal agency, or for which a application for HUD mortgage g Y. paint and the provision of a report I Federal agency is a trustee or insurance, receives housing assistance explaining the results of the conservator. payments under a program administered investigation. Firm commitment means a valid by HUD,or otherwise receives more Lead hazard screen means a limited commitment issued by HUD or the than $5,000 in project-based assistance risk assessment activity that involves Federal Housing Commissioner setting ' under a Federal housing program paint testing and dust sampling and forth the terms and conditions upon administered by an agency other than analysis as described in 40 CFR which a mortgage will be insured or HUD. 745.227(c)and soil sampling and guaranteed. HUD means the United States analysis as described in 40 CFR Friction surface means an interior or Department of Housing and Urban 745.227(d). exterior surface that is subject to Development. J Mortgagee means a lender of a abrasion or friction, including, but not HUD-owned property means mortgage loan. limited to, certain window,floor,and residential property owned or managed Mortgagor means a borrower of a stair surfaces. by HUD,or for which HUD is a trustee mortgage loan. g means gram, mg means milligram or conservator. Multifamily property means a (thousandth of a gram), and µg means Impact surface means an interior or residential property containing five or 1 microgram (millionth of a gram). exterior surface that is subject to damage more dwelling units. Grantee means any State or local by repeated sudden force, such as Occupant means a person who government, Indian tribe,IHBG certain parts of door frames. inhabits a dwelling unit. recipient, insular area or nonprofit Indian Housing Block Grant(IHBG) Owner means a person,firm, organization that has been designated by recipient means a tribe or a tribally corporation, nonprofit organization, HUD to administer Federal housing designated housing entity (TDHE) partnership, government,guardian, assistance under a program covered by receiving IHBG funds. conservator, receiver, trustee,executor. - • ' ' Federal Register/Vol. 64, No. 178/Wednesday, September 15, 1999/Rules and Regulations 50205 or other judicial officer, or other entity based paint hazard reduction where jurisdiction. An owner or developer which, alone or with others, owns, lead-based paint is still present. receiving Federal rehabilitation holds, or controls the freehold or Rehabilitation means the assistance or other assistance for a leasehold title or part of the title to improvement of an existing structure residential property is not considered a property, with or without actually through alterations, incidental additions subrecipient for the purposes of carrying possessing it.The definition includes a or enhancements. Rehabilitation out that project. •vendee who possesses the title, but does includes repairs necessary to correct the Standard treatments means a series of not include a mortgagee or an owner of results of deferred maintenance, the hazard reduction measures designed to a reversionary interest under a ground replacement of principal fixtures and reduce all lead-based paint hazards in a rent lease. components, improvements to increase dwelling unit without the benefit of a Paint stabilization means repairing the efficient use of energy, and risk assessment or other evaluation. any physical defect in the substrate of installation of security devices. Substrate means the material directly a painted surface that is causing paint Replacement means a strategy of beneath the painted surface out of deterioration, removing loose paint and abatement that entails the removal of which the components are constructed, other material from the surface to be building components that have surfaces including wood, drywall, plaster, treated, and applying a new protective coated with lead-based paint and the concrete, brick or metal. coating or paint. installation of new components free of , Target housing means any housing Paint testing means the process of lead-based paint. constructed prior to 1978, except determining, by a certified lead-based Residential property means a dwelling housing for the elderly or persons with paint inspector or risk assessor,the unit, common areas, building exterior disabilities (unless a child of less than presence or the absence of lead-based surfaces,and any surrounding land, 6 years of age resides or is expected to paint on deteriorated paint surfaces or including outbuildings, fences and play reside in such housing for the elderly or painted surfaces to be disturbed or equipment affixed to the land, belonging persons with disabilities) or any zero- replaced. to an owner and available for use by bedroom dwelling.In the case of Paint removal means a method of residents,but not including land used jurisdictions which banned the sale or abatement that permanently eliminates for agricultural, commercial,industrial use of lead-based paint prior to 1978, lead-based paint from surfaces. or other non-residential purposes,and HUD may designate an earlier date. Painted surface to be disturbed means not including paint on the pavement of Tenant means the individual named a paint surface that is to be scraped, parking lots, garages, or roadways. as the lessee in a lease, rental agreement sanded, cut, penetrated or otherwise Risk assessment means: affected by rehabilitation work in a (1) An on-site investigation to or occupancy agreement for a dwelling manner that could potentially create a determine the existence, nature, unit. lead-based paint hazard by generating severity,and location of lead-based Visual assessment means looking for, dust, fumes,orpaint chips. as applicable: p paint hazards; and (1) Deterioratedpaint: Participating jurisdiction means any (2) The provision of a report by the State or local government that has been individual or firm conducting the risk (2) Visible surface dust, debris and designated by HUD to administer a assessment explaining the results of the residue as part of a risk assessment or HOME program grant. investigation and options for reducing clearance examination; or Permanent means an expected design lead-based paint hazards. (3)The completion or failure of a life of at least 20 years. Single family property means a hazard reduction measure. Play area means an area of frequent residential property containing one Wet sanding or wet scraping means a soil contact by children of less than 6 through four dwelling units. process of removing loose paint in years of age, as indicated by the Single room occupancy(SRO)housing which the painted surface to be sanded presence of play equipment (e.g. means housing consisting of zero- or scraped is kept wet to minimize the sandboxes, swing sets,sliding boards, bedroom dwelling units that may dispersal of paint chips and airborne etc.) or toys or other children's contain food preparation or sanitary dust. possessions,observations of play facilities or both (see Zero-bedroom Window trough means the area patterns,or information provided by dwelling). between the interior window sill (stool) parents, residents or property owners. Soil-lead hazard means bare soil on and the storm window frame.If there is Project-based rental assistance means residential property that contains lead no storm window, the window trough is Federal rental assistance that is tied to equal to or exceeding levels the area that receives both the upper a residential property with a specific promulgated by the U.S. Environmental and lower Window sashes when they are location and remains with that Protection Agency pursuant to section both lowered. particular location throughout the term 403 of the Toxic Substances Control Act Worksite means an interior or exterior of the assistance. or, if such levels are not in effect,the area where lead-based paint hazard Public health department means a following levels: 400 µg/g in play areas; reduction activity takes place.There State, tribal, county or municipal public and 2000 µg/g in other areas with bare may be more than one worksite in a health department or the Indian Health soil that total more than 9 square feet dwelling unit or at a residential Service. (0.8 square meters) per residential property. Public housing development means a property. Zero-bedroom dwelling means any residential property assisted under the Sponsor means mortgagor (borrower), residential dwelling in which the living United States Housing Act of 1937 (42 Subrecipient means any nonprofit areas are not separated from the U.S.C. 1437 et seq.), but not including organization selected by the grantee or sleeping area.The term includes housing assisted under section 8 of the participating jurisdiction to administer efficiencies,studio apartments, 1937 Act. all or a portion of the Federal dormitory or single room occupancy Reevaluation means a visual rehabilitation assistance or other non- housing, military barracks, and rentals assessment of painted surfaces and rehabilitation assistance, or any such of individual rooms in residential limited dust and soil sampling organization selected by a subrecipient dwellings (see Single room occupancy conducted periodically following lead- of the grantee or participating (SRO)). • 50206 Federal Register/Vol. 64, No. 178/Wednesday, September 15, 1999/Rules and Regulations §35.115 Exemptions, the extent practicable,and the completed only when clearance is (a) Subparts B through R of this part requirements of subparts B through R of achieved in accordance with§35.1340. do not apply to the following: this part shall not apply.This (b) Abatement. Where abatement is (1) A residential property for which exemption applies only to repairs required by this part. the designated construction was completed on or after necessary to respond to the emergency. party may presume that lead-based January 1, 1978, or, in the case of The requirements of subparts B through paint or lead-based paint hazards or jurisdictions which banned the sale or R of this part shall apply to any work both are present throughout the residential use of lead-containing paint undertaken subsequent to, or above and residential property.In such a case, prior to 1978, an earlier date as HUD beyond,such emergency actions. evaluation is not required. Abatement may designate (see§35.160). (10) If a Federal law enforcement shall then be conducted on all (2) A zero-bedroom dwelling unit, agency has seized a residential property applicable surfaces. including soil, in including a single room occupancy and owns the property for less than 270 accordance with§35.1325, and (SRO) dwelling unit. days, §§35.210 and 35.215 shall not completed when clearance is achieved (3) Housing for the elderly, or a apply to the property. in accordance with§35.1340.This residential property designated (111) The requirements of subpart K of option is not available in public exclusively for persons with disabilities: this part do not apply if the assistance housing,where inspection is required. except this exemption shall not apply if being provided is emergency rental (c) Lead hazard screen.Where a risk a child less than age 6 resides or is assistance or foreclosure prevention assessment is required, the designated expected to reside in the dwelling unit assistance, provided that this exemption party may choose first to conduct a lead (see definitions of"housing for the shall expire for a dwelling unit no later hazard screen in accordance with elderly" and "expected to reside" in than 100 days after the initial payment §35.1320(b). If the results of the lead §35.110). or assistance. (4) Residential property found not to (12) Performance of an evaluation or hazard screen indicate the need for a have lead-based paint by a lead-based lead-based paint hazard reduction or full risk assessment (e.g., if the paint inspection conducted in lead-based paint abatement on an environmental measurements exceed levels established for lead hazard accordance with§35.1320(a) (for more exterior painted surface as required screens in§35.1320(b)(2)), a complete information regarding inspection under this part may be delayed for a risk assessment shall be conducted. procedures consult the 1997 edition of reasonable time during a period when Environmental samples collected for the Chapter 7 of the HUD Guidelines). weather conditions are unsuitable for lead hazard screen may be used in the Results of additional test(s) by a conventional construction activities. risk assessment. If the results of the lead certified lead-based paint inspector may (13) Where abatement of lead-based hazard screen do not indicate the need be used to confirm or refute a prior paint hazards or lead-based paint is for a follow-up risk assessment, a risk finding. required by this part and the property is no(5) Residential property in which all listed-or has been determined to be assessment is tin required. lead-based paint has been identified, eligible-for listing in the National (b Paint testing.Where paint removed,and clearance has been Register of Historic Places or stabilization or interim controls of achieved in accordance with 40 CFR contributing to a National Register deteriorated paint surfaces are required 745.227(b)(e) before September 15, Historic District, the designated party by this rule, the designated party has the 2000,or in accordance with§§35.1320, may, if requested by the State Historic option to conduct paint testing of all 35.1325 and 35.1340 on or after Preservation Office, conduct interim surfaces with non-intact paint. If paint September 15, 2000.This exemption controls in accordance with§35.1330 testing indicates the absence of lead does not apply to residential property instead of abatement.If interim controls based paint on a specific surface, paint where enclosure or encapsulation has ' are conducted, ongoing lead-based paint stabilization or interim controls are not been used as a method of abatement. maintenance and reevaluation shall be required on that surface. (6) An unoccupied dwelling unit or conducted as required by the applicable §35.125 Notice of evaluation and hazard residential property that is to be subpart of this part in accordance with reduction activities. demolished, provided the dwelling unit §35.1355. The following activities shall be or property will remain unoccupied (b) For the purposes of subpart C of conducted if notice is required until demolition. this part, each Federal agency other than q by (7) A property or part of a property HUD will determine whether subparts D and F through M of this part. that is not used and will not be used for , appropriations are sufficient to (a) Notice of evaluation or human residential habitation, except implement this rule. If appropriations presumption.When evaluation is that spaces such as entryways,hallways, are not'sufficient,subpart C of this part undertaken and lead based paint or corridors, passageways or stairways shall not apply to that Federal agency. lead based paint hazards are found to be serving both residential and If a ro riations are sufficient,subpart present, or if a presumption is made that nonresidential uses in a mixed use C of pp this shall apply. p lead-based paint or lead-based paint property shall not be exempt. hazards are present in accordance with (8) Any rehabilitatio0 that does not §35.120 Options. the options described in§35.120, the disturb a painted surface. (a) Standard treatments. Where designated party shall provide a notice (9) For emergency actions interim controls are required by this to occupants within 15 calendar days of immediately necessary to safeguard part, the designated party has the option the date when the designated party against imminent danger to human life, to presume that lead-based paint or receives the report or makes the health or safety, or to protect property lead-based paint hazards or both are presumption. from further structural damage (such as present throughout the residential (1)The notice of the evaluation shall when a property has been damaged by property.In such a case, evaluation is include: a natural disaster, fire, or structural not required.Standard treatments shall (i)A summary of the nature, scope collapse), occupants shall be protected then be conducted in accordance with and results of the evaluation; from exposure to lead in dust and debris §35.1335 on all applicable surfaces, (ii) A contact name,address and generated by such emergency actions to including soil. Standard treatments are telephone number for more information, • ' ' ' Federal Register/Vol. 64, No. 178/Wednesday, September 15, 1999/Rules and Regulations 50207 and to obtain access to the actual subparts D and F through M of this part, at 16 CFR 1500.3, and/or a hazardous evaluation report; and the designated party shall provide to chemical in accordance with the (iii)The date of the notice. each occupied dwelling unit to which . Occupational Safety and Health (2) The notice of presumption shall subparts D and F through M of this part Administration regulations at 29 CFR include: apply, the lead hazard information 1910.1200 or 1926.59, as applicable to (i)The nature and scope of the pamphlet developed by EPA. HUD and the work. presumption: the Consumer Product Safety (ii) A contact name, address and Commission pursuant to section 406 of §35.145 Compliance with Federal laws telephone number for more information; the Toxic Substances Control Act(15 and authorities. and U.S.C. 2686), or an EPA-approved All lead-based paint activities, (iii)The date of the notice, alternative; except that the designated including waste disposal, performed (b) Notice of hazard reduction party need not provide a lead hazard under this part shall be performed in activity. When hazard reduction information pamphlet if the designated accordance with applicable Federal activities are undertaken, each party can demonstrate that the pamphlet laws and authorities. For example, such designated party shall: has already been provided in activities are subject to the applicable (1) Provide a notice to occupants no accordance with the lead based paint environmental review requirements of more than 15 calendar days after the the National Environmental PolicyAct hazard reduction activities have been notification and disclosure requirements at§35.88(a)(1), or 40 CFR 745.107(a)(1) of 1969 (42 U.S.C. 4321 et seq.), the completed. Notice of hazard reduction Toxic Substances Control Act,Title IV shall include, but not be limited to: or in accordance with the requirements for hazard education before renovation (15 U.S.C. 2860 et seq.), and other (i) A summary of the nature,scope environmental laws and authorities (see, and results (including clearance), of the at 40 CFR part 745,subpart E. e.g., laws and authorities listed in 50.4 hazard reduction activities. g (ii) A contact name, address and §35.135 Use of paint containing lead. of this title). (a) New use prohibition.The use of telephone number for more information; paint containing more than 0.06 percent §35.150 Compliance with other State, and dry weight of lead on any interior or tribal,and local laws. (iii) Available information on the exterior surface in federallyowned (a) HUD responsibility.If HUD location of any remaining lead-based determines that a State, tribal or local aint in the rooms, s aces or areas housing or housing receiving Federal p p assistance is prohibited. As appropriate, law, ordinance, code or regulation where hazard reduction activities were each Federal agency shall include the , provides for evaluation or hazard conducted, on a surface-by-surface reduction in a manner that provides a basis: prohibition in contracts,grants, (2) Update the notice,based on cooperative agreements,insurance comparable level of protection from the p agreements,guarantyagreements,trust hazards of lead-based paint poisoning to reevaluation of the residential property g g that provided by the requirements of and as any additional hazard reduction agreements,or other similar documents. work is conducted. (b) Pre-1978 prohibition. In the case of subparts B, C, D,F through M and R of (c) Availability of notices of a jurisdiction which banned the sale or this part and that adherence to the evaluation,presumption, and hazard residential use of lead-containing paint. requirements of subparts B, C,D, F reduction activities. (1) The notices of before 1978,HUD may designate an through M, and R of this part,would be or evaluation, presumption, and hazard earlier date for certain provisions of dupficativience s, HUD mae causemodi or reduction shall be of a size and type that subparts D and F through M of this part. waive some or all of the requirements of is easily read by occupants. §35.140 Prohibited methods of paint the subparts in a manner that will (2) To the extent practicable, each removal. promote efficiency while ensuring a notice shall be made available, upon The following methods shall not be comparable level of protection. request,in a format accessible to used to remove paint that is,or may be, (b) Participant responsibility. Nothing persons with disabilities (e.g.,Braille, lead-based paint: in this part is intended to relieve any large type, computer disk, audio tape). (3) Each notice shall be provided in (a) Open flame burning or torching. participant in a program covered by this the occupants'primary language or in (b) Machine sanding or grinding subpart of any responsibility for the language of the occupants' contract without a high-efficiency particulate air compliance with State, tribal or local or lease. (HEPA) local exhaust control. laws,ordinances, codes or regulations (4)The designated party shall provide (c) Abrasive blasting or sandblasting governing evaluation and hazard each notice to the occupants by: without HEPA local exhaust control. reduction. If a State,tribal or local law, (i) Posting and maintaining it in (d) Heat guns operating above 1100 ordinance, code or regulation defines degrees centrally located common areas and Fahrenheit or charring the lead-based paint differently than the distributing it to any dwelling unit if paint. Federal definition, the more protective necessary because the head of (e) Dry sanding or dry scraping, definition (i.e., the lower level) shall be household is a person with a known except dry scraping in conjunction with followed in that State, tribal or local disability;or heat guns or within 1.0 ft. (0.30 m.) of jurisdiction. (ii) Distributing it to each occupied electrical outlets, or when treating dwelling unit affected by the evaluation, defective paint spots totaling no more §35.155 Minimum requirements. presumption, or hazard reduction than 2 sq.ft. (0.2 sq. m.) in any one . (a) Nothing in subparts B, C,D, F activity or serviced bycommon areas in interior room or space,or totaling no through M. and R of this part is more than 20 sq. ft. (2.0 sq. m.) on intended to preclude a designated party which an evaluation, presumption or hazard reduction has taken place. exterior surfaces. or occupant from conducting additional (f) Paint stripping in a poorly evaluation or hazard reduction §35.130 Lead hazard information ventilated space using a volatile stripper measures beyond the minimum pamphlet. that as a hazardous substance in requirements established for each If provision of a lead hazard accordance with regulations of the program in this regulation. For example. information pamphlet is required in Consumer Product Safety Commission if the applicable subpart requires visual 50208 Federal Register/Vol. 64, No. 178/Wednesday, September 15, 1999/Rules and Regulations assessment, the designated party may - authorization at the time of the risk may be subject to other penalties choose to perform a risk assessment in assessment. authorized by law. accordance with§35.1320. Similarly, if (3) A risk assessment conducted after (b) A property owner who informs a the applicable subpart requires interim August 29, 1999 must have been potential purchaser or occupant of lead- controls, a designated party or occupant conducted by a certified risk assessor. based paint or possible lead-based paint may choose to implement abatement in (4) Paragraph (b) of this section does hazards in a residential property or accordance with§35.1325. not apply in a case where a risk dwelling unit, in accordance with (b)To the extent that assistance from assessment is required in response to subpart A of this part. is not relieved of any of the programs covered by subparts the identification of a child with an the requirements to evaluate and reduce B, C, D, and F through M of this part is environmental intervention blood lead lead-based paint hazards in accordance used in conjunction with other HUD level. In such a case, the requirements with subparts B through R of this part program assistance, the most protective in the applicable subpart for responding as applicable. requirements prevail. to a child with an environmental §35.175 Records. intervention blood lead level shall §35.160 Waivers. apply. The designated party, as specified in In accordance with§5.110 of this (c) Interim controls.If a residential subparts C, D, and F through M of this title, on a case-by-case basis and upon property is under a program of interim part,shall keep a copy of each notice, determination of good cause,HUD may, controls and ongoing lead-based paint evaluation, and clearance or abatement subject to statutory limitations,waive maintenance and reevaluation activities report required by subparts C,D, and F any provision of subparts B,C,D, F established pursuant to a risk through M of this part for at least three through M, and R of this part. assessment conducted in accordance years.Those records applicable to a §35.165 Prior evaluation or hazard with paragraph (b) of this section, the portion of a residential property for reduction. interim controls that have been which ongoing lead based paint conducted meet the requirements of this maintenance and/or reevaluation If an evaluation or hazard reduction part if clearance was achieved after such activities are required shall be kept and was conducted at a residential property controls were implemented.In such a made available for the Department's or dwelling unit before the property or case, the program of interim controls review, until at least three years after dwelling unit became.subject to the and ongoing activities shall be such activities are no longer required. requirements of subparts B, C,D,F continued in accordance with the through M, and R of this part,such an requirements of this part. Subpart C—Disposition of Residential evaluation, hazard reduction or Property Owned by a Federal Agency abatement meets the requirements of (d)Abatement. (1) An abatement Other Than HUD subparts B, C,D,F through M,and R of conducted before August 30, 1999 meets part and need nor e repeated ed under the requirements of this part if: §35.200 Purpose and applicability. this (i) At the time of the abatement the The purpose of this subpart C is to the following conditions: P P P abatement supervisor was approved by (a) Lead-based paint inspection. (1) A establish procedures to eliminate as far a State or Indian tribe to perform lead aspracticable lead based paint hazards lead-based paint inspection conducted based paint abatement.It is not prior to the sale of a residential property before August 30, 1999,meets the necessar that the State or tribal p P y requirements of this rule if: y that is owned by a Federal agency other approval program had EPA than HUD.The re uirements of this (i) At the time of the inspection the authorization at the time of the q lead-based paint inspector was subpart apply to any residential approved by a State or Indian tribe to abatement. property offered for sale on or after perform lead based paint inspections.It (ii) Notwithstanding paragraph September 15, 2000. is not necessary that the State or tribal (d)(1)(1) of this section, it was conducted program had EPA and accepted by a housing agency in §35.205 Definitions and other general approvalp g fulfillment of the Iead-based paint requirements. authorization at the time of the abatement requirement of the public Definitions and other general inspection. housing program or by an Indian requirements that apply to this subpart (ii) Notwithstanding paragraph housing authority (as formerly defined are found in subpart B of this part. (a)(1)(i) of this section,the inspection under the U.S.Housing Act of 1937) in was conducted and accepted as valid by fulfillment of the lead based paint §35.210 Disposition of residential a housing agency in fulfillment of the . property constructed before 1960. requirement of the Indian housing lead-based paint inspection requirement program formerly funded under the U.S. (a) Evaluation.The Federal agency of the public and Indian housing Housing Act of 1937. shall conduct a risk assessment and a program. • (2) An abatement conducted after lead-based paint inspection in (2) A lead-based paint inspection accordance with 40 CFR 745.227 before August 29. 1999 must have been conducted after August 29, 1999 must conducted under the supervision of a the closing of the sale. have been conducted by a certified lead- certified lead based paint abatement (b)Abatement of lead-based paint based paint inspector. hazards.The risk assessment used for 1 supervisor. (b) Risk assessment. (1) A risk the identification of hazards to be assessment must be no more than 12 §35.170 Noncompliance with the abated shall have been performed no months old to be considered current. requirements of subparts B through R of more than 12 months before the (2)A risk assessment conducted this part. beginning of the abatement. The Federal before August 30, 1999 meets the (a) Monitoring and enforcement.A agency shall abate all identified lead- requirements of this part if at the time designated party who fails to comply based paint hazards in accordance with of the risk assessment the risk assessor with any requirement of subparts B,C, 40 CFR 745.227. Abatement is was approved by a State or Indian tribe' D.F through M, and R of this part shall completed when clearance is achieved to perform risk assessments.It is not be subject to the sanctions available in accordance with 40 CFR 745.227. necessary that the State or tribal under the relevant Federal housing Where abatement of lead-based paint approval program had EPA assistance or ownership program and hazards is not completed before?he • . .' Federal Register/Vol. 64, No. 178/Wednesday, September 15, 1999/Rules and Regulations 50209 closing of the sale, the Federal agency §35.325 Child with an environmental as practicable lead-based paint hazards shall be responsible for assuring that ,intervention blood lead level. in a multifamily residential property for abatement is carried out by the If a child less than 6 years of age which HUD is the owner of the purchaser before occupancy of the living in a federally assisted dwelling mortgage or the owner receives property as target housing and in . unit has an environmental intervention mortgage insurance, under a program accordance with 40 CFR 745.227. blood lead level, the owner shall administered by HUD. immediately conduct a risk assessment§35.215 Disposition of residential in accordance with 40 CFR 745.227(d). §35.605efinitions and other general requirements. property constructed after 1959 and before Interim controls of identified lead-based 1978. paint hazards shall be conducted in Definitions and other general accordance with§35.1330.Interim requirements that apply to this subpart The Federal agency shall conduct a are found in subpart B of this part. risk assessment and a lead-based paint controls are complete when clearance is inspection in accordance with 40 CFR achieved in accordance with§35.1340. §35.610 Exemption. 745.227. Evaluation shall be completed The Federal agency shall establish a An application for insurance in before closing of the sale according to a timetable for completing risk connection with a refinancing schedule determined by the Federal assessments and hazard reduction when transaction where an appraisal is not an environmental intervention blood agency.The results of the riskrequired under the applicable assessment and lead-based paint lead level child is identified. procedures established by HUD is inspection shall be made available to excluded from the coverage of this prospective purchasers as required in Subpart E[Reserved] subpart. subpart A of this part. Subpart F—HUD-Owned Single Family §35.615 Notices and pamphlet. Subpart D—Project-Based Assistance Property (a) Not,ice.If evaluation or hazard Provided by a Federal Agency Other §35.500 Purpose and applicability. reduction is undertaken, the sponsor Than HUD The purpose of this subpart F is to shall provide a notice to occupants in establishprocedures to eliminate as far accordance with§35.125. §35.300 Purpose and applicability. (b) Lead hazard information as practicable lead-based paint hazards pamphlet.The sponsor shall provide The purpose of this subpart D is to in HUD-owned single family properties establish procedures to eliminate as far that have been built before 1978 and are the lead hazard information pamphlet in as practicable lead-based paint hazards sold with mortgages insured under a accordance with§35.130. in a.residential property that receives program administered by HUD.The §35.620 Multifamily insured property more than$5,000 annually per project requirements of this subpart apply to constructed before 1960. in project-based assistance on or after any such residential properties offered Except as provided in§35.630, the September 15, 2000, under a program for sale on or after September 15,2000. following requirements apply to administered by a Federal agency other i f ultiamly insured property than HUD. §35.505 Definitions and other general m ltifam ly before 196o: requirements. §35.305 Definitions and other general Definitions and other general (a) Risk assessment. Before the requirements. that a 1 to this sub art issuance of a firm commitment the requirementspp Y p sponsor shall conduct a risk assessment Definitions and other general are found in subpart B of this part. in accordance with§35.1320(b). requirements that apply to this subpart §35.510 Required procedures. (b) Interim controls. (1) The sponsor are found in subpart B of this part. (a) The following activities shall be shall conduct interim controls in §35.310 Notices and pamphlet. conducted for all properties to which accordance with§35.1330 to treat the lead-based paint hazards identified in this subpart is applicable: (a) Notice.A notice of evaluation or (1) A visual assessment of all painted the risk assessment.Interim controls are hazard reduction shall be provided to surfaces in order to identify deteriorated considered completed when clearance is the occupants in accordance with paint: achieved in accordance with§35.1340. §35.125. (2) Paint stabilization of all (2)The sponsor shall complete (b) Lead hazard information deteriorated paint in accordance with interim controls before the issuance of pamphlet.The owner shall provide the §35.1330(a) and (b); and the firm commitment or interim controls lead hazard information pamphlet in (3) Clearance in accordance with may be made a condition of the Federal accordance with§35.130. §35.1340. Housing Administration (FHA) firm (b) Occupancy shall not be permitted commitment,with sufficient repair or §35.315 Risk assessment. until all required paint stabilization is rehabilitation funds escrowed at initial Each owner shall complete a risk complete and clearance is achieved. endorsement of the FHA insured loan. assessment in accordance with 40 CFR (c) If paint stabilization and clearance (c) Ongoing lead-based paint are not completed before the closing of maintenance activities. Before the 745.227(d).completed Each ccok danassece with shall the sale,the Department shall assure issuance of the firm commitment, the be in accordance the sponsor shall agree to incorporate schedule established by the Federal that paint stabilization and clearance are sp nso lead-based agree paint maintenance agency. carried out pursuant to subpart R of this ongoing part by the purchaser before occupancy. into regular building operations and §35.320 Hazard reduction. maintenance activities in accordance Subpart G—Multifamily Mortgage with§35.1355(a). Each owner shall conduct interim Insurance controls consistent with the findings of §35.625 Multifamily insured property the risk assessment report.Hazard §35.600 Purpose and applicability. constructed after 1959 and before 1978. reduction shall be conducted in The purpose of this subpart G is to Except as provided in§35.630, before accordance with subpart R of this part. establish procedures to eliminate as far the issuance of the firm commitment, 50210 Federal Register/Vol. 64, No. 178/Wednesday, September 15, 1999/Rules and Regulations the sponsor shall agree to incorporate 11389) and the Shelter Plus Care paint hazards identified in the risk ongoing lead-based paint maintenance Program project-based rental assistance assessment. Interim controls are practices into regular building and sponsor-based rental assistance considered completed when clearance is operations, in accordance with components (42 U.S.C. 11402-11407), achieved in accordance with §35.1340. §35.1355(a). the requirements of this subpart shall Interim controls shall be completed no §35.630 Conversions and major apply to grants awarded pursuant to later than the following schedule: rehabilitations. Notices of Funding Availability published on or after October 1, 1999. (1) In units occupied by families with The procedures and requirements of For the purposes of formula grants children of less than 6 years of age and this section apply when a awarded under the Housing in common areas servicing those units, . nonresidential property constructed Opportunities for Persons with AIDS interim controls shall be completed no before 1978 is to be converted to Program(HOPWA) (42 U.S.C. 12901 et later than 90 days after the completion residential use,or a residential property seq.), the requirements of this subpart of the risk assessment. In units in which constructed before 1978 is to undergo shall apply to activities for which a child of less than 6 years of age moves rehabilitation that is estimated to cost program funds are first obligated on or in after the completion of the risk more than 50 percent of the estimated after September 15, 2000. assessment, interim controls shall be replacement cost after rehabilitation. completed no later than 90 days after (a) Lead-based paint inspection. §35.705 Definitions and other general the move-in. Before issuance of a firm FHA requirements. (2) In all other dwelling units, commitment, the sponsor shall conduct Definitions and other general common areas,and the remaining a lead-based paint inspection in requirements that apply to this subpart portions of the residential property, accordance with§35.1320(a). are found in subpart B of this part, interim controls shall be completed no (b) b shall conductPrr to occupancy, §35.710 Notices and pamphlet. later than 12 months after completion of the sponsor shall abatement of p all lead-based paint on the property in (a) Notice.If evaluation or hazard the risk assessment for those units. accordance with§35.1325.Whenever reduction is undertaken, each owner (c) Ongoing lead-based paint practicable, abatement shall be achieved shall provide a notice to occupants in maintenance and reevaluation through the methods of paint removal or accordance with§35.125. activities.Effective immediately after component replacement.If paint (b) Lead hazard information completion of the risk assessment removal or component replacement are pamphlet.The owner shall provide the required in§35.715(a), the owner shall not practicable,that is if such methods lead hazard information pamphlet in incorporate ongoing lead based paint would damage substrate material accordance with§35.130. maintenance and reevaluation into the considered architecturally significant, permanent encapsulation or enclosure §35.715 Multifamily properties receiving regular building operations in may be used as methods of abatement. more than$5,000 per unit accordance with§35.1355, unless all The requirements of this section shall lead-based paint has been removed.If Abatement is considered complete when clearance is achieved in apply to a multifamily residential the reevaluation identifies new lead- accordance with§35.1340.If property that is receiving an average of based paint hazards,the owner shall encapsulation or enclosure is used, the more than$5,000 per assisted dwelling conduct interim controls in accordance sponsor shall incorporate ongoing lead- unit annually in project-based with§35.1330. basedpaint maintenance into regular assistance. g (a) Risk assessment. Each owner shall (d) Transitional requirements—(1) building operations maintenance Effective date.The requirements of this complete a risk assessment in activities in accordance with§35.1355. accordance with§35.1320(b).A risk paragraph shall apply effective (c) Historic properties. Section September 15, 2000, and continuing 35.115(a)(13) applies to this section. assessment is considered complete until the applicable date specified in when the owner receives the risk Subpart H—Project-Based Rerital assessment report,Until the owner §35.715(a) (1) or (2) or until the owner Assistance conducts a risk assessment as required conducts a risk assessment,whichever by this section, the requirements of is first. §35.700 Purpose and applicability, paragraph (d) of this section shall apply. (2) Definitions and other general (a) This subpart H establishes After the risk assessment has been requirements that apply to this procedures to eliminate as far as ' conducted the requirements of paragraph are found in subpart B of this practicable lead-based paint hazards in paragraphs (b) and (c) of this section part. residential properties receiving project- shall apply.Each risk assessment shall (3) Ongoing lead-based paint based assistance under a HUD program. be completed no later than the following maintenance.The owner shall The requirements of this subpart apply schedule or a schedule otherwise incorporate ongoing lead-based paint only to the assisted dwelling units in a determined by HUD: maintenance activities into regular covered property and any common areas (1) Risk assessments shall be building operations, in accordance with servicing those dwelling units.This completed on or before September 17, §35.1355(a), except that clearance is not subpart does not apply to housing 2001,in a multifamily residential required. receiving rehabilitation assistance or to property constructed before 1960. public housing, which are covered by (2) Risk assessments shall be (4) Child with an environmental subparts J and M of this part, completed on or before September 15, intervention blood lead level. If a child respectively. 2003, in a multifamily residential of less than 6 years of age living in a (b) For the purposes of competitively property constructed after 1959 and dwelling unit covered by this paragraph awarded grants under the Housing before 1978. has an environmental intervention Opportunities for Persons with AIDS (b) Interim controls. Each owner shall blood lead level, the owner shall Program (HOPWA), the Supportive conduct interim controls in accordance comply with the requirements of, Housing Program (42 U.S.C. 11381- with §35.1330 to treat the lead-based §35.730. • • • Federal Register/Vol. 64, No. 178/Wednesday, September 15, 1999/Rules and Regulations 50211 §35.720 Multifamily properties receiving §35.730 Child with an environmental department certifies that the lead-based up to$5,000 per unit,and single family intervention blood lead level. paint hazard reduction is complete. The properties. (a) Risk assessment.Within 15 days requirements of this paragraph do not Effective September 15, 2000, the after being notified by a public health apply if the owner, between the date the requirements of this section shall apply department or other medical health care child's blood was last sampled and the to a multifamily residential property provider that a child of less than 6 years date the owner received the notification that is receiving an average of up to and of age living in a dwelling unit to which of the environmental intervention blood including$5,000 per assisted dwelling this subpart applies has been identified lead level,already conducted a risk unit annually in project-based as having an environmental intervention assessment of the unit and common assistance and to a single family blood lead level, the owner shall areas servicing the unit and completed residential property that is receiving complete a risk assessment of the reduction of identified lead-based paint project-based assistance through the dwelling unit in which the child lived hazards. Section 8 Moderate Rehabilitation at the time the blood was last sampled (d) Notice. If evaluation or hazard program, the Project-Based Certificate and of common areas servicing the reduction is undertaken, each owner program, or any other HUD program dwelling unit.The risk assessment shall shall provide a notice to occupants in providing project-based assistance. be conducted in accordance with accordance with§35.125. (a) Activities at initial and periodic 35.1320(b) and is considered complete (e) Reporting requirement.The owner inspection.—(1) Visual assessment. when the owner receives the risk shall report the name and address of a During the initial and periodic assessment report.The requirements of child identified as having an inspections, an inspector trained in this paragraph apply regardless of environmental intervention blood lead visual assessment for deteriorated paint whether the child is or is not still living level to the public health department. surfaces in accordance withprocedures in the unit when the owner receives the within 5 working days of being so P established by HUD shall conduct a notification of the environmental notified by any other medical health 1 visual assessment of all painted surfaces intervention blood lead level.The care professional. in order to identify any deteriorated requirements of this paragraph (a) shall Subpart 1—HUD-Owned and. paint. not apply if the owner conducted a risk P assessment of the unit and common Mortgagee-in-Possession Multifamily (2) Paint stabilization.The owner areas servicing the unit between the Property shall stabilize each deteriorated paint date the child's blood was last sampled surface in accordance with§35.1330(a) §3$.800 Purpose and applicability. and the date when the owner received and§35.1330(b) before occupancy of a The purpose of this subpart I is to vacant dwelling unit or,where a unit is the notification of the environmental establish procedures to eliminate as far intervention blood lead level. If a public occupied,within 30 days of notification as practicable lead-based paint hazards health department has already of the results of the visual assessment. conducted an evaluation of the dwelling in a HUD-owned multifamily residential Paint stabilization is considered unit,the requirements of this paragraph property or a multifamily residential complete when clearance is achieved in shall not apply. property for which HUD is identified as accordance with§35.1340. (b) Verification.After receiving mortgagee-in-possession.The (3) Notice.The owner shall provide a information from a person who is not a requirements of this subpart apply to notice to occupants in accordance with medical health care provider that a any such property tliat is offered for sale §§35.125(b) (1) and (c) describing the child of less than 6 years of age living or held or managed on or after results of the clearance examination. in a dwelling unit covered by this September 15, 2000. (b) Ongoing lead-based paint subpart may have an environmental §35.805 Definitions and other general maintenance activities.The owner shall intervention blood lead level, the owner requirements. incorporate ongoing lead-based paint shall immediately verify the information Definitions and other general maintenance activities into regular with the public health department or requirements that apply to this subpart building operations in accordance with other medical health care provider.If §35.1355(a), unless all lead-based paint that department or provider verifies that are found in subpart B of this part. has been removed. the child has an environmental §35.810 Notices and pamphlet. (c) Child with an environmental intervention blood lead level,such (a) Notices.When evaluation or intervention blood lead level.If a child verification shall constitute notification, hazard reduction is undertaken, the - of less than 6 years of age living in a and the owner shall take the action Department shall provide a notice to dwelling unit covered by this section required in paragraphs (a) and (c) of this occupants in accordance with§35.125. has an environmental intervention section. (b) Lead hazard information blood lead level, the owner shall (c) Hazard reduction.Within 30 days pamphlet.HUD shall provide the lead comply with the requirements of after receiving the report of the risk hazard information pamphlet in §35.730. assessment conducted pursuant to accordance with§35.130. paragraph (a) of this section or the §35.725 Section 8 Rent adjustments. evaluation from the public health §35.815 Evaluation. HUD may,subject to the availability department, the owner shall complete HUD shall conduct a risk assessment of appropriations for Section 8 contract the reduction of identified lead-based and a lead-based paint inspection in amendments, on a project by project paint hazards in accordance with accordance with§35.1320(a) and (b). basis for projects receiving Section 8 §35.1325 or§35.1330. Hazard For properties to which this subpart project-based assistance, provide reduction is considered complete when applies on September 15, 2000, the lead- adjustments to the maximum monthly clearance is achieved in accordance based paint inspection and risk rents to cover the costs of evaluation for with§35.1340 and the clearance report assessment shall be conducted no later and reduction of lead-based paint states that all lead-based paint hazards than December 15, 2000, or before hazards, as defined in section 1004 of identified in the risk assessment have publicly advertising the property for the Residential Lead-Based Paint Hazard been treated with interim controls or sale, whichever is sooner. For properties Reduction Act of 1992. abatement or the public health to which this subpart becomes • • 50212 Federal Register/Vol. 64, No. 178/Wednesday, September 15, 1999/Rules and Regulations applicable after September 15, 2000, the §35.825 Ongoing lead-based paint reduction of lead-based paint hazards lead-based paint inspection and risk maintenance and reevaluation. identified in the risk assessment in assessment shall be conducted no later HUD shall incorporate ongoing lead- accordance with §35.1325 or§35.1330. than 90 days after this subpart becomes based paint maintenance and Hazard reduction is considered applicable or before publicly advertising reevaluation, in accordance with complete when clearance is achieved in the property for sale,whichever is §35.1355, into regular building accordance with§35.1340 and the sooner. operations if HUD retains ownership of clearance report states that all lead- the residential property for more than based paint hazards identified in the §35.820 Interim controls. 12 months. risk assessment have been treated with HUD shall conduct interim controls in §35.830 Child with an environmental interim controls or abatement or the accordance with§35.1330 to treat the intervention blood lead level. public health department certifies that lead basedpaint hazards identified in the lead-based paint hazard reduction is (a) Risk assessment.Within 15 days complete.The requirements of this the evaluation conducted in accordance after being notified by a public health P q with§35.815.Interim controls are department or other medical health care paragraph do not apply if HUD, between considered completed when clearance is the date the child's blood was last P provider that a child of less than 6 years achieved in accordance with§35.1340. of age living in a multifamily dwelling sampled and the date HUD received thenotification of the environmental Interim controls of all lead-based paint unit owned by HUD (or where HUD.is intervention blood lead level, conducted hazards shall be completed no later than mortgagee-in-possession) has been a risk assessment of the unit and the following schedule: identified as having an environmental (a) In units occupied by families with intervention blood lead level,HUD shall common areas servicing the unit and fete a risk assessment of the completed reduction of identified lead- children of less than 6 years of age and complete based paint hazards. in common areas servicing those units, dwelling unit in which the child lived interim controls shall be completed no at the time the blood was last sampled (d) Reporting requirement. HUD shall P report the name and address of a child later than 90 days after the completion and of common areas servicing the identified as having an environmental of the risk assessment. In units in which dwelling unit.The risk assessment shall intervention blood lead level to the of age moves be conducted in accordance with a child of less than 6 years §35.1320(b7 and is considered complete public health department within 5 in after the completion of the risk working days of being so notified by any assessment, interim controls shall be when HUD receives the risk assessment other health professional. completed no later than 90 days after report.The requirements of this the move in. paragraph apply regardless of whether (e) Closing.If the closing of a sale is the child is or is not still living in the scheduled during the period when HUD (b)In all other dwelling units, unit when HUD receives the notification is responding to a case of a child with common areas,and the remaining of the environmental intervention blood an environmental intervention blood portions of the residential property, lead level.The requirements of this lead level, HUD may arrange for the interim controls shall be completed no paragraph do not apply if HUD completion of the procedures required later than 12 months after completion of conducted a risk assessment of the unit by§35.830(a)-(d) by the purchaser within a reasonable period of time. the risk assessment for those units. and common areas servicing the unit (c) If conveyance of the title by HUD between the date the child's blood was (0 HEousing-Federal The Assistant Secretary at a sale of a HUD-owned property or a last sampled and the date when HUD for mi s loner or designees Housing foreclosure sale caused by HUD when received the notification of the Commissioner approve a e uforan mayx exteconsnsion and approve a request for extension HUD is mortgagee-in-possession occurs environmental intervention blood lead of deadlines established by this section before the schedule in paragraphs (a) level.If a public health department has for a lead-based paint inspection, risk and (b) of this section, HUD shall already conducted an evaluation of the assessment, hazard reduction, and complete interim controls before dwelling unit, the requirements of this reporting. Such a tequest may be conveyance or foreclosure, or HUD shall paragraph shall not apply. considered, however,only during the be responsible for assuring that interim (b) Verification.After receiving first six months during which HUD is controls are carried out by the information from a person who is not a owner or mortgagee-in-possession of a purchaser.If interim controls are made medical health care provider that a multifamily property. a condition of sale,such controls shall child of less than 6 years of age living be completed according to the following in a multifamily dwelling unit owned Subpart J—Rehabilitation schedule: by HUD (or where HUD is mortgagee-in- possession) may have an environmental §35.900 Purpose and applicability. (1) In units occupied by families with children of less than 6 years of age and intervention blood lead level, HUD shall (a) Purpose and applicability. (1) The in areas those units, immediately verify the information'with purpose of this subpart J is to establish interimcommonareas shall servicing completeds is the public health department or other procedures to eliminate as far as controls after bet date oe no e medical health care provider. If that practicable lead-based paint hazards in later than 90dayss.In e in which a department or provider verifies that the a residential property that receives cloing of of theess than 6 unitso mOvesha child has an environmental intervention Federal rehabilitation assistance under a child closing ofyearsths fageinterim blood lead level,such verification shall program administered by HUD. in after the shall be completed sale, later constitute notification,and HUD shall Rehabilitation assistance does not than controls90 days after themovd noin. take the action required in paragraphs include project-based rental assistance, (a) and (c) of this section. rehabilitation mortgage insurance or . (2)In all other dwelling units, in (c) Hazard reduction.Within 30 days assistance to public housing. common areas servicing those units, and after receiving the report of the risk (2) The requirements of this subpart in the remaining portions of the assessment conducted pursuant to shall not apply to HOME funds which residential property, interim controls paragraph (a) of this section or the are committed to a specific project in shall be completed no later than 180 evaluation from the public health accordance with§92.2 of this title days after the closing of the sale. department,HUD shall complete the before September 15,2000. Such • Federal Register/Vol. 64, No. 178/Wednesday, September 15, 1999/Rules and Regulations 50213 projects shall be subject to the (b) Lead hazard information §35.920 Calculating rehabilitation costs requirements of§92.355 of this title that pamphlet.The grantee, participating for the Flexible Subsidy-CILP program. were in effect at the time of project jurisdiction, or CILP recipient,shall All dwelling units and common areas commitment or the requirements of this provide the lead hazard information in a residential property are considered subpart. pamphlet in accordance with§35.130. to be assisted under the CILP program. (3) For the purposes of the Indian §35.915 Calculating rehabilitation costs, The cost of rehabilitation is calculated Housing Block Grant program and the except for the CILP Program. as follows: CDBG Entitlement program, the Per Unit Rehab$=Federal Rehab requirements of this subpart shall apply (a) Applicability.This section applies Assistance/Total Number of Units. to all residential rehabilitation activities to recipients of Federal rehabilitation (except those otherwise exempted) for assistance, except for CILP recipients, §35.925 Examples of determining which funds are first obligated on or for which§35.920 applies. applicable requirements. Lead- after September 15, 2000. For the (b) Rehabilitation assistance. (1) Lead The following examples illustrate based paint requirements for purposes of the State.HUD rehabilitation fall into three categories how to determine whether the Administered Small Cities,and Insular requirements of§§35.930(b), (c), or(d) which depend on the amount of Areas CDBG programs, the requirements rehabilitation assistance provided.The apply to a dwelling unit receiving of this subpart shall apply to all covered three categories are: Federal rehabilitation assistance (dollar activities (except those otherwise (i) Assistance of up to and including amounts are on a per unit basis): exempted) for which grant funding is (a) If the total amount of Federal awarded to the unit of local government $5,000(i) per unit; assistance for a dwellingis$2,000, and by the State or HUD,as applicable. on per unit upAssis to ande of more thann $5,000 the hard costs of rehabiitation are up to including$25,000 or after September 15, 2000.For the per unit;and $10,000, the lead-based paint purposes of the Emergency Shelter (iii) Assistance of more than$25,000 requirements would be those described Grant Program (42 U.S.C. 11371-11378) per unit. in§35.930(b), because Federal and the formula grants awarded under (2) For purposes of implementing rehabilitation assistance is up to and the Housing Opportunities for Persons §§35.930-35.935, the amount of including$5,000. with AIDS Program (HOPWA) (42 rehabilitation assistance is the average (b) If the total amount of Federal U.S.C. 12901 et.seq.), the requirements per unit amount of Federal funds for the assistance for a dwelling unit is $6,000, of this subpart shall apply to activities hard costs of rehabilitation,excluding and the hard costs of rehabilitation are for which program funds are first lead-based paint hazard evaluation and $2,000, the lead-based paint obligated on or after September 15, hazard reduction activities.Costs of site requirements would be those described 2000. preparation, occupant protection, in §35.930(b). Although the total (4) For the purposes of competitively relocation, interim controls,abatement, amount of Federal dollars is more than awarded grants under the HOPWA clearance and waste handling $5,000, only the $2,000 of that total can Program and the Supportive Housing attributable to lead-based paint hazard be applied to rehabilitation. Therefore, Program (42 U.S.C. 11481-11389),the reduction are not to be included in the the Federal rehabilitation assistance is requirements of this subpart shall apply hard costs of rehabilitation. $2,000 which is not more than$5,000. to grants awarded under Notices of (c) Calculating rehabilitation (c) If the total amount of Federal Funding Availability published on or assistance. For a residential property assistance for a unit is $6,000, and the after September 15, 2000. that includes both federally assisted and hard costs of rehabilitation are $6,000, (5) For the purposes of the Indian non-assisted units,the rehabilitation the lead-based paint requirements are CDBG program (§1003.607 of this title), costs of non-assisted units are not those described in§35.930(c),because the requirements of this subpart shall included in the calculation. the amount of Federal rehabilitation not apply to funds whose notice of (1)The average cost of rehabilitation assistance is more than $5,000 but not funding availability is announced or for the assisted units is calculated as more than$25,000. funding letter is sent before September follows: §35.930 Evaluation and hazard reduction 15. 2000. Such project grantees shall be Per Unit Rehabilitation$ = (a/c) + (b/d) requirements. subject to the regulations in effect at the Where: time of announcement or funding letter. a=Federal Rehabilitation Assistance for (a) Paint testing.The grantee. (b) The.grantee or participating all assisted units participating jurisdiction,or CILP jurisdiction may assign to a subrecipient b=Federal Rehabilitation Assistance for recipient shall either perform paint or other entity the responsibilities set common areas and exterior painted testing on the painted surfaces to be • forth in this subpart. surfaces disturbed or replaced during c=Number of federally assisted units rehabilitation activities, or presume that §35.905 Definitions and other general d=Total number of units all these painted surfaces are coated requirements. (2) Eight out of 10 dwelling units in with lead-based paint. Definitions and other general a residential property receive Federal (b) Residential property receiving an requirements that apply to this subpart rehabilitation assistance.The total average of up to and including$5.000 are found in subpart B of this part. amount of Federal rehabilitation per unit in Federal rehabilitation §35.910 Notices and pamphlet. assistance for the dwelling units is assistance.Each grantee, participating $90,000, and the total amount of Federal jurisdiction, or CILP recipient shall:. (a) Notices.In cases where evaluation rehabilitation assistance for the common (1) Conduct paint testing or presume or hazard reduction or both are areas and exterior surfaces is$10,000. the presence of lead-based paint, in undertaken as part of federally funded Based on the formula above,the average accordance with paragraph (a) of this rehabilitation, the grantee, participating per unit amount of Federal section.If paint testing indicates that jurisdiction,or CILP recipient.shall rehabilitation assistance is$12,250.This the painted surfaces are not coated with provide a notice to occupants in is illustrated as follows: $12,250= lead-based paint,safe work practices , accordance with§35.125. ($90.000/8) + ($10,000/10). and clearance are not required. c 50214 Federal Register/Vol. 64, No. 178/Wednesday, September 15, 1999/Rules and Regulations (2) Implement safe work practices CILP recipient shall require the property programs for acquisition, leasing, during rehabilitation work in owner to incorporate ongoing lead- support services,or operation. accordance with§35.1350 and repair based paint maintenance activities into Acquisition, leasing,support services, any paint that is disturbed. regular building operations, in and operation do not include mortgage (3) After completion of any accordance with§35.1355(a). insurance,sale of federally-owned rehabilitation disturbing painted housing, project-based or tenant based surfaces, perform a clearance §35.940 Special requirements for insular rental assistance, rehabilitation areas. examination of the worksite(s) in assistance, or assistance to public accordance with§35.1340. Clearance is If a dwelling unit receiving Federal , housing. For requirements pertaining to not required if rehabilitation did not assistance under a program covered by those activities or types of assistance, disturb painted surfaces of a total area this subpart is located in an insular area, see the applicable subpart of this part. more than that set forth in§35.1350(b). the requirements of this section shall (b)The grantee or participating (c) Residential property receiving an apply and the requirements of§35.930 jurisdiction may assign to a subrecipient average of more than$5,000 and up to shall'not apply. All other sections of or other entity the responsibilities set and including$25,000 per unit in this subpart J shall apply.The insular forth in this subpart. Federal rehabilitation assistance. Each area shall conduct the following (c)(1) The requirements of this subpart grantee, participating jurisdiction, or activities for the dwelling unit, common shall not apply to HOME funds which CILP recipient shall: areas servicing the dwelling unit, and are committed to a specific project in (1) Conduct paint testing or presume •the exterior surfaces of the building in accordance with§92.2 of this title the presence of lead-based paint,in which the dwelling unit is located: before September 15, 2000. Such accordance with paragraph (a) of this (a) Residential property receiving an projects shall be subject to the section. average of up to and including$5,000 requirements of§92.355 of this title that (2) Perform a risk assessment in the per unit in Federal rehabilitation were in effect at the time of project dwelling units receiving Federal assistance. (1) Implement safe work commitment, or the requirements of this assistance,in common areas servicing practices during rehabilitation work in subpart. those units, and exterior painted accordance with§35.1350 and repair (2) For the purposes of the CDBG surfaces,in accordance with any paint that is disturbed by Entitlement program and the Indian §35.1320(b), before rehabilitation rehabilitation. Housing Block Grant program, the begins. (2) After completion of any requirements of this subpart shall apply (3) Perform interim controls in rehabilitation disturbing painted to all residential rehabilitation activities accordance with§35.1330 of all lead- surfaces, perform a clearance (except those otherwise exempted) for based paint hazards identified pursuant examination of the worksite(s) in which funds are first obligated on or to paragraphs (c)(1) and (c)(2) of this accordance with§35.1340. Clearance after September 15, 2000.For the section and any lead-based paint shall be achieved before residents are purposes of the State.HUD- hazards created as a result of the allowed to occupy the worksite(s). Administered Small Cities, and Insular rehabilitation work. Clearance is not required if Areas CDBG programs, the requirements (d) Residential property receiving an rehabilitation did not disturb painted of this subpart shall apply to all covered average of more than$25,000 per unit surfaces of a total area more than that activities (except those otherwise in Federal rehabilitation assistance. set forth in§35.1350(b). exempted) for which grant funding is Each grantee, participating jurisdiction, (b) Residential property receiving an awarded to the unit of local government or CILP recipient shall: average of more than$5,000 per unit in by the State or HUD, as applicable, on (1) Conduct paint testing or presume Federal rehabilitation assistance. (1) or after September 15, 2000. For the the presence of lead-based paint in Before beginning rehabilitation,perform purposes of the Emergency Shelter accordance with paragraph (a) of this a visual assessment of all painted Grant Program (42 U.S.C. 11371-11378) section. surfaces in order to identify deteriorated and the formula grants awarded under (2) Perform a risk assessment in the paint. the Housing Opportunities for Persons dwelling units receiving Federal (2)Perform paint stabilization of each with AIDS Program (HOPWA) (42 assistance and in associated common deteriorated paint surface and each U.S.C. 12901 et.seq.), the requirements areas and exterior painted surfaces in painted surface being disturbed by of this subpart shall apply to activities accordance with§35.1320(b) before rehabilitation,in accordance with for which program funds are first i rehabilitation begins. , §§35.1330(a) and (b). obligated on or after September 15, (3) Abate all lead-based paint hazards (3) After completion of all paint 2000. identified by the paint testing or risk stabilization, perform a clearance (3) For the purposes of competitively assessment'conducted pursuant to examination of the affected dwelling awarded grants under the HOPWA I paragraphs (d)(1) and (d)(2) of this units and common areas in accordance Program and the Supportive Housing section. and any lead-based paint with§35.1340. Clearance shall be Program (42 U.S.C. 11481-11389), the hazards created as a result of the achieved before residents are allowed to requirements of this subpart shall apply rehabilitation work, in accordance with occupy rooms or spaces in which paint to grants awarded under Notices of §35.1325,except that interim controls stabilization has been performed. Funding Availability published on or are acceptable on exterior surfaces that after September 15, 2000. are not disturbed by rehabilitation. Subpart K—Acquisition, Leasing, (4) For the purposes of the Indian Support Services,or Operation. CDBG program (§1003.607 of this title), §35.935 Ongoing lead-based paint the requirements of this subpart shall maintenance activities. §35.1000 Purpose and applicability. not apply to funds whose notice of In the case of a rental property (a) The purpose of this subpart K is to funding availability is announced or receiving Federal rehabilitation establish procedures to eliminate as far funding letter is sent before September assistance under the HOME program or as practicable lead-based paint hazards 15, 2000. Such project grantees shall be the Flexible Subsidy-CILP program, the in a residential property that receives subject to the regulations in effect at the grantee, participating jurisdiction or Federal assistance under certain HUD time of announcement or funding letter. • • ' ' Federal Register/Vol. 64, No. 178/Wednesday, September 15, 1999/Rules and Regulations 50215 §35.1005 Definitions and other general in residential property assisted under necessary abatement is included in the requirements. the U.S. Housing Act of 1937 (42 U.S.C. modernization budget, except for Definitions and other general 1437 et seq.) but not including housing contracts solely for emergency work in requirements that apply to this subpart assisted under section 8 of the 1937 Act. accordance with§35.115(a)(9). are found in subpart B of this part. (d) The five-year fundingrequest plan §35.1105 Definitions and other general Y q §35.1010 Notices and pamphlet requirements. for CIAP and CGP shall be amended to (a) Notice.In cases where evaluation Definitions and other general include the schedule and funding for or hazard reduction, including paint requirements that apply to this subpart lead-based paint activities. stabilization, is undertaken,each are found in subpart B of this part. §35.1120 Hazard reduction. grantee or participating jurisdiction §35.1110 Notices and pamphlet. shall provide a notice to residents in (a) Each PHA shall, in accordance accordance with§35.125. A visual (a) Notice.In cases where evaluation with§35.1325, abate all lead-based assessment is not considered an or hazard reduction is undertaken, each paint and lead-based paint hazards 1 evaluation for purposes of this part. public housing agency (PHA) shall identified in the evaluations conducted (b) Lead hazard information provide a notice to residents in pursuant to§35.1115.The PHA shall pamphlet.The grantee or participating accordance with§35.125. abate lead-based paint and lead-based jurisdiction shall provide the lead (b) Lead hazard information paint hazards in accordance with hazard information pamphlet in pamphlet.The PHA shall provide the §35.1325 during the course of physical accordance with§35.130. lead hazard information pamphlet in improvements conducted under the accordance with§35.130. modernization. §35.1015 Visual assessment,paint stabilization,and maintenance. §35.1115 Evaluation. . (b) In all housing where abatement of If a dwelling unit receives Federal (a) A lead-based paint inspection shall all lead-based paint and lead-based assistance under a program covered by be conducted in all public housing paint hazards required in paragraph (a) this subpart, each grantee or unless a lead-based paint inspection of this section has not yet occurred, participating jurisdiction shall conduct that meets the conditions of§35.165(a) each PHA shall conduct interim the following activities for the dwelling has already been completed.If a lead- controls, in accordance with §35.1330, unit,common areas servicing the based paint inspection was conducted of the lead-based paint hazards dwelling unit, and the exterior surfaces by a lead-based paint inspector who was identified in the most recent risk of the building in which the dwelling not certified, the PHA shall review the assessment. unit is located: quality of the inspection, in accordance (a) A visual assessment of all painted with quality control procedures (1) Interim controls of dwelling units surfaces in order to identify deteriorated established by HUD, to determine in which any child who is less than 6 paint; whether the lead-based paint inspection years of age resides and common areas (b)Paint stabilization of each has been properly performed and the servicing those dwelling units shall be deteriorated paint surface,and results are reliable.Lead-based paint completed within 90 days of the clearance, in accordance with inspections of all housing to which this evaluation under§35.1330. If a unit §§35.1330(a) and (b), before occupancy subpart applies shall be completed no becomes newly occupied by a family of a vacant dwelling unit or,where a later than September 15, 2000. with a child of less than 6 years of age unit is occupied, immediately after Revisions or augmentations of prior or such child moves into a unit,interim receipt of Federal assistance;and inspections found to be of insufficient controls shall be completed within 90 (c)The grantee or participating quality shall be completed no later than days after the new occupancy or move- 1 jurisdiction shall incorporate ongoing September 17, 2001. in if they have not already been lead-based paint maintenance activities (b) If a lead-based paint inspection completed. into regular building operations, in has found the presence of lead-based (2) Interim controls in dwelling units accordance with§35.1355(a). paint, or if no lead-based paint not occupied by families with one or (d)The grantee or participating inspection has been conducted,the PHA more children of less than 6 years of jurisdiction shall provide a notice to shall conduct a risk assessment occupants in accordance with accordingto the followingschedule, units,common areas fininservg portionsg those §§35.125(b)(1) and (c), describingthe and the remaining of the unless a risk assessment that meets the residential property shall be completed results of the clearance examination. conditions of§35.165(b) has already no later than 12 months after §35.1020 Funding for evaluation and been completed: completion of the evaluation conducted hazard reduction. (1) Risk assessments shall be under§35.1115. Thegrantee or participating completed on or before March 15, 2001, p p g in a multifamily residential property (c) The PHA shall incorporate ongoing jurisdiction shall determine whether the constructed before 1960. lead-based paint maintenance and cost of evaluation and hazard reduction reevaluation activities into regular is to be borne by the owner/developer, (2) Risk assessments shall be operations in accordance with the grantee or a combination of the completed on or before March 15, 2002, building owner/developer and thegrantee, based in a multifamily residential property §35.1355.In accordance with p constructed after 1959 and before 1978. §35.115(a) (6) and (7), this requirement on program requirements and local does not apply to a development or part program design. (c) A PHA that advertises a pP Y P construction contract(including thereof if it is to be demolished or Subpart L—Public Housing Programs architecture/engineering contracts) for disposed of in accordance with bid or award or plans to start force disposition requirements in part 970 of §35.1100 Purpose and applicability. account work shall not execute such this title, provided the dwelling unit The purpose of this subpart L is to contract until a lead-based paint will remain unoccupied until establish procedures to eliminate as far inspection and, if required, a risk demolition, or if it is not used and will as practicable lead-based paint hazards assessment, has taken place and any not be used for human habitation. 50216 Federal Register/Vol. 64, No. 178/Wednesday, September 15, 1999/Rules and Regulations §35.1125 Evaluation and hazard reduction the public health department or other §35.1135 Eligible costs. before acquisition and development medical health care provider.If that A PHA may use financial assistance (a) For each residential property department or provider verifies that the received under the modernization constructed before 1978 and proposed child has an environmental intervention program (CLAP or CGP) for the notice, to be acquired for a family project blood lead level, such verification shall evaluation and reduction of lead-based (whether or not it will need constitute notification,and the housing paint hazards in accordance with rehabilitation) a lead-based paint agency shall take the action required in §968.112 of this title. Eligible costs inspection and risk assessment for lead- paragraphs (a) and (c) of this section. include: based paint hazards shall be conducted in accordance with§35.132D. (c) Hazard reduction.Within 30 days (a) Evaluation and insurance costs. after receivingthe reportof the risk Evaluation and hazard reduction (b) If lead based paint is found in a activities, and costs for insurance residential property to be acquired, the assessment conducted pursuant to coverage associated with these cost of evaluation and abatement shall paragraph (a) of this section or the evaluation from thepublic health activities. be considered when making the cost (b) Planning costs.Planning costs are comparison to justify new construction, department,the PHA shall complete the costs that are incurred before HUD as well as when meeting maximum total reduction of lead-based paint hazards approval of the CGP or CIAP application development cost limitations. identified in the risk assessment in P and that are related to developing the (c) If lead-based paint is found, accordance with§35.1325 or§35.1330. CIAP application or carrying out eligible compliance with this subpart is Hazard reduction is considered modernization planning,such as required,and abatement of lead-based complete when clearance is achieved in planning for abatement, detailed design paint and lead-based paint hazards shall accordance with§35.1340 and the work,preparation of solicitations, and be completed in accordance with clearance report states that all lead- evaluation.Planning costs may be §35.1325 before occupancy. based paint hazards identified in the funded as a single work item.Planning §35.1130 Child with an environmental risk assessment have been treated with costs shall not exceed 5 percent of the intervention blood lead level. interim controls or abatement or the CIAP funds available to a HUD Field (a) Risk assessment.Within 15 days local or State health department certifies Office in a particular fiscal year. after being notified by a public health that lead-based paint hazard reduction (c) Architectural/engineering and department or other medical health care is complete.The requirements of this consultant fees. Eligible costs include provider that a child of less than 6 years paragraph do not apply if the PHA, fees for planning, identification of of age living in a public housing between the date the child's blood was needs, detailed design work, development has been identified as last sampled and the date the owner preparation of construction and bid having an environmental intervention received the notification of the documents and other required blood lead level, the PHA shall environmental intervention blood lead documents,evaluation, planning and complete a risk assessment of the level,already conducted a risk design for abatement,and inspection of dwelling unit in which the child lived assessment of the unit and common work in progress. at the time the blood was last sampled areas servicing the unit and completed (d) Environmental intervention blood and of common areas servicing the reduction of identified lead-based paint lead level response costs.The PHA may dwelling unit, the provisions of hazards. use its operating reserves and,when §35.1115(b) notwithstanding.The risk (d) Notice of evaluation and hazard necessary,may request reimbursement assessment shall be conducted in reduction.The PHA shall notify from the current fiscal year CIAP funds, accordance with§35.1320(b) and is building residents of any evaluation or or request the reprogramming of considered complete when the PHA hazard reduction activities in previously approved CIAP funds to receives the risk assessment report.The accordance with 535.125. cover the costs of evaluation and hazard requirements of this paragraph apply reduction. (e) Reporting requirement.The PHA regardless of whether the child is or is shall report the name and address of a §35.1140 Insurance coverage. not still living in the unit when the PHA child identified as having an For the requirements concerning the receives the notification of the environmental intervention blood lead obligation of a PHA to obtain reasonable environmental intervention blood lead level to the public health department insurance coverage with respect to the level.The requirements of this within 5 working days of being so hazards associated with evaluation and paragraph shall not apply if the PHA , notified by any other medical health hazard reduction activities, see conducted a risk assessment of the unit care professional.The PHA shall also §965.215 of this title. and common areas servicing the unit report each known case of a child with between the.date the child's blood was an environmental intervention blood Subpart M—Tenant-Based Rental last sampled and the date when the lead level to the HUD field office. Assistance PHA received the notification of the environmental intervention blood lead (f) Other units in building.If the risk §35.1200 Purpose and applicability. level. If the public health department assessment conducted pursuant to (a) Purpose.The purpose of this has already conducted an evaluation of paragraph (a) of this section identifies subpart M is to establish procedures to the dwelling unit, the requirements of lead-based paint hazards and previous eliminate as far as practicable lead- this paragraph shall not apply. evaluations of the building conducted based paint hazards in housing (b) Verification. After receiving pursuant to§35.1320 did not identify occupied by families receiving tenant- information from a person who is not a lead-based paint or lead-based paint based rental assistance. Such assistance medical health care provider that a hazards,the PHA shall conduct a risk includes tenant-based rental assistance child of less than 6 years of age living assessment of other units of the building under the Section 8 certificate program, in a public housing development may in accordance with§35.1320(b) and .the Section 8 voucher program,the have an environmental intervention shall conduct interim controls of HOME program, the Shelter Plus Care blood lead level, the PHA shall identified hazards in accordance with program, the Housing Opportunities for immediately verify the information with the schedule provided in§35.1120(c). Persons With AIDS (HOPWA) program, • • • Federal Register/Vol. 64, No. 178/Wednesday, September 15, 1999/Rules and Regulations 50217 and the Indian Housing Block Grant recipient may assign to a subrecipient or intervention blood lead level, the program. Tenant-based rental assistance other entity the responsibilities of the designated party shall complete a risk means rental assistance that is not designated party in this subpart. assessment of the dwelling unit in attached to the structure. which the child lived at the time the (b) Applicability. (1) This subpart §35.1205 Definitions and other general blood was last sampled and of the applies only to dwelling units occupied requirements. common areas servicing the dwelling or to be occupied by families or Definitions and other general unit.The risk assessment shall be households that have one or more requirements that apply to this subpart conducted in accordance with children of less than 6 years of age, are found in subpart B of this part. §35.1320(b).When the risk assessment common areas servicing such dwelling §35.1210 Notices and pamphlet. is complete, the designated party shall units, and exterior painted surfaces immediately provide the report of the (a) Notice. In cases where evaluation risk assessment to the owner of the associated with such dwelling units or orpaint stabilization is undertaken, the common areas. Common areas servicing dwelling unit. If the child identified as a dwelling unit include those areas owner shall provide a notice to having an environmental intervention 1 • through which residents pass to gain residents in accordance with§35.125.A blood lead level is no longer living in access to the unit and other areas visual assessment is not an evaluation. the unit when the designated party frequented by resident children of less (b) Lead hazard information receives notification from the public than 6 years of age, including on-site pamphlet.The owner shall provide the health department or other medical lead hazard information pamphlet in health care provider, but another play areas and child care facilities. (2) For the purposes of the Section 8 accordance with§35.130. household receiving tenant-based rental tenant-based certificate program and the §35.1215 Activities at initial and periodic assistance is living in the unit or is Section 8 voucher program: inspection. planning to live there,the requirements (i) The requirements of this subpart (a) (1) During the initial and periodic of this section apply just as they do if are applicable where an initial or inspections, an inspector acting on the child still lives in the unit.If a periodic inspection occurs on or after behalf of the designated party and public health department has already September 15, 200:and conducted an evaluation of the dwelling trained in visual assessment for (ii) The PHA shall be the designated deteriorated paint surfaces in unit, or the designated party conducted party. accordance with procedures established a risk assessment of the unit and (3) For the purposes of formula grants by HUD shall conduct a visual common areas servicing the unit awarded under the Housing assessment of all painted surfaces in between the date the child's blood was Opportunities for Persons with AIDS last sampled and the date when the Program (HOPWA) (42 U.S.C. 12901 et order to identify any deteriorated paint. designatedpartyreceived the .): (2) For tenant-based rental assistance se g notification of the environmental �i)The requirements of this subpart provided under the HOME program, intervention blood lead level, the shall apply to activities for which visual assessment shall be conducted as pp y program funds are first obligated on or part of the initial and periodic requirements of this paragraph shall not1 after September 15, 2000; and inspections required under§92.209(i) of a ppl Verification. After receiving (ii) The grantee shall be the this title. information from a source other than a designated party. (b) The owner shall stabilize each g thedeterioratedpaint surface in accordance public health department or other (4) For purposes of competitively medical health care provider that a awarded grants under the HOPWA with§35.1330(a) and (b) before child of less than 6 years of age living Program and the Shelter Plus Care commencement of assisted occupancy. i; in an assisted dwelling unit may have program (42 U.S.C. 11402-11407) If assisted occupancy has commenced an environmental intervention blood tenant-based rental assistance prior to a periodic inspection,such leadan level,the designated party shall component: paint stabilization must be completed immediately verify the information with (i) The requirements of this subpart within 30 days of notification of the a public health department or other shall apply to grants awarded pursuant owner of the results of the visual medical health care provider.If that to Notices of Funding Availability assessment. Paint stabilization is department or provider verifies that the published on or after October 1, 1999; considered complete when clearance is child has an environmental intervention and achieved in accordance with§35.1340. blood lead level,such verification shall (ii)The grantee shall be the (c)The owner shall provide a notice constitute notification to the designated designated party. to occupants in accordance with (5) For the purposes of the HOME §35.125(b)(1) and (c) describing the party as provided in paragraph (a) of program: results of the clearance examination. this section, and the designated party (i) The requirements of this subpart shall take the action required in shall not apply to funds which are §35.1220 Ongoing lead-based paint paragraphs (a) and (c) of this section. committed in accordance with§92.2 of maintenance activities. (c) Hazard reduction.Within 30 days this title before September 15, 2000; and The owner shall incorporate ongoing after receiving the risk assessment (ii) The participating jurisdiction shall lead-based paint maintenance activities report from the designated party or the be the designated party. into regular building operations in evaluation from the public health (6) For the purposes of the Indian accordance with §35.1355(a). department, the owner shall complete Housing Block Grant program: the reduction of identified lead-based (i) The requirements of this subpart §35.1225 Child with an environmental paint hazards in accordance with shall apply to activities for which funds intervention blood lead level. §35.1325 or§35.1330. Hazard are first obligated on or after September (a) Within 15 days after being notified reduction is considered complete when 15, 2000; and by a public health department or other clearance is achieved in accordance (ii) The IHBG recipient shall be the medical health care provider that a with§35.1340 and the clearance report designated party. child of less than 6 years of age living states that all lead-based paint hazards (7)The housing agency, grantee, in an assisted dwelling unit has been identified in the risk assessment have participating jurisdiction, or IHBG identified as having an environmental been treated with interim controls or 50218 Federal Register/Vol. 64, No. 178/Wednesday, September 15, 1999/Rules and Regulations abatement or when the public health names arid addresses of families §35.1315 Collection and laboratory department certifies that the lead-based receiving tenant-based rental assistance, analysis of samples. paint hazard reduction is complete. If unless the public health department All paint chip, dust, or soil samples the owner does not complete the hazard performs such a matching procedure. If shall be collected and analyzed in reduction required by this section, the a match occurs, the designated party accordance with standards established dwelling unit is in violation of Housing shall carry out the requirements of this either by a State or Indian tribe under Quality Standards (HQS). section.. a program authorized by EPA in (d) Notice of evaluation and hazard accordance with 40 CFR part 745. reduction.The owner shall notify Subparts N-0—(Reserved] subpart Q, or by the EPA in accordance building residents of any evaluation or with 40 CFR 745.227, and as further hazard reduction activities in Subpart R—Methods and Standards provided in this subpart. accordance with§35.125. for Lead-Paint Hazard Evaluation and (e) Reporting requirement.The Hazard Reduction Activities §35.1320 Lead-based paint inspections designated party shall report the name and risk assessments. and address of a child identified as §35.1300 Purpose and applicability. (a) Lead-based paint inspections. having an environmental intervention The purpose of this subpart 12'is to Lead-based paint inspections shall be blood lead level to the public health of provide standards and methods for department within 5 workingdaysperformed in accordance with methods and standards established either by a evaluation and hazard reduction being so notified by any other medical State or Indian tribe under a program activities required in subparts B,C,D, health care professional. •authorized by EPA, or by EPA at 40 CFR (f) Data collection and record keeping and F through M of this part. p g 745.227(b), except that the definition of responsibilities.At least quarterly, the §35.1305 Definitions and other general lead-based paint shall not include a designated party shall attempt to obtain requirements. loading (area concentration) or mass from the public health department(s) concentration greater than that in the with area(s) of jurisdiction similar to Definitions and other general definition at§35.110 of this part. that of the designated party the names requirements that apply to this subpart (b) Risk assessments. (1) Risk and/or addresses of children of less than are found in subpart B of this part. assessments shall be performed in 6 years of age with an identified §35.1314) References. accordance with methods and standards environmental intervention blood lead established either by a State or Indian level.At least quarterly, the designated Further guidance information tribe under a program authorized by party shall also report an updated list of regarding evaluation and hazard EPA,or by EPA at 40 CFR 745.227(d), the addresses of units receiving reduction activities described in this and paragraph (b)(2) of this section. assistance under a tenant-based rental subpart is found in the following: . (2) Risk assessors shall use levels assistance program to the same public (a) The HUD Guidelines for the defining dust-lead hazards and soil-lead health department(s),except that the Evaluation and Control of Lead-Based hazards that are no greater than those report(s) to the public health Paint Hazards in Housing (Guidelines); promulgated by EPA pursuant to section department(s) is not required if the 403 of the Toxic Substances Control Act health department states that it does not (b) The EPA Guidance on Residential (15 U.S.C. 2683), or, if such levels are wish to receive such report. If it obtains Lead Based Paint, Lead-Contaminated not in effect,the following for dust or names and addresses of environmental Dust, and Lead Contaminated Soil; soil: intervention blood lead level children (c) Guidance, methods or protocols (i) Dust.A dust-lead hazard shall be from the public health department(s), issued by States and Indian tribes that a dust-lead level equal to or greater than the designated party shall match have been authorized by EPA under 40 the applicable loading (area information on cases of environmental CFR 745.324 to administer and enforce concentration),based on wipe samples, intervention blood lead levels with the lead-based paint programs. in the following table: INTERIM DUST LEAD STANDARDS Surface Interior win- Evaluation method dow sills,µg/ Window troughs, Floors,µg/ft 2 ft2 µg/ft 2 (mg/m 2) (mg/m 2) (mg/m 2) Lead Hazard Screen 25 (0.27) 125 (1.4) Not Applicable. Risk Assessment 40 (0.43) 250 (2.7) Not Applicable. Reevaluation 40 (0.43) 250 (2.7) Not Applicable. Clearance 40 (0.43) 250 (2.7) 800(8.6). Note: "Floors"includes carpeted and uhcarpeted interior floors. (ii) Soil. (A) A soil-lead hazard for property with lead equal to or exceeding screen indicates the need for a follow- play areas frequented by children under 2,000 micrograms per gram. up risk assessment (e.g., if dust-lead 6 years of age shall be bate soil with (3) Lead hazard screens shall be measurements exceed the levels lead equal to or exceeding 400 performed in accordance with the established for lead hazard screens in micrograms per gram. methods and standards established this section), a risk assessment shall be (B) For other areas,soil-lead hazards either by a State or Indian tribe under conducted in accordance with shall be bare soil that totals more than a program authorized by EPA, or by EPA paragraphs (b)(1) and (b)(2) of this 9 square feet (0.8 square meters) per at 40 CFR 745.227(c), and paragraph section. Dust, soil, and paint samples (b)(2) of this section.If the lead hazard collected for the lead hazard screen may • f ` Federal Register/Vol. 64, No. 178/Wednesday, September 15, 1999/Rules and Regulations 50219 be used in the risk assessment.If the (i) A lead-based paint abatement (c) Friction and impact surfaces. (1) lead hazard screen does not indicate the supervisor course accredited in Friction surfaces are required to be need for a follow-up risk assessment, no accordance with 40 CFR 745.225; treated only if: further risk-assessment is.required. (ii) A lead-based paint abatement (i) Lead dust levels on the nearest (c) It is strongly recommended, but worker course accredited in accordance horizontal surface underneath the not required, that lead-based paint with 40 CFR 745.225; friction surface (e.g.. the window sill, inspectors and risk assessors provide a (iii)The Lead-Based Paint window trough,or floor) are equal to or summary of the results suitable for Maintenance Training Program, "Work greater than the standards specified in posting or distribution to occupants in Smart,Work Wet, and Work Clean to 35.1320(b); compliance with§35.125. Work Lead Safe," prepared by the (ii)There is evidence that the paint National Environmental Training surface is subject to abrasion; and §35.1325 Abatement. Association for EPA and HUD; Abatement shall be performed in (iv) "The Remodeler's and (iii) Lead based paint is known or accordance with methods and standards Renovator's Lead-Based Paint Training presumed to be present on the friction established either by a State or Indian Program," prepared by HUD and the surface. tribe under a program authorized by National Association of the Remodeling (2) Impact surfaces are required to be EPA, or by EPA at 40 CFR 745.227(e), Industry;or treated only if: and shall be completed by achieving (v)Another course approved by HUD ' (i) Paint on an impact surface is clearance in accordance with§35.1340. for this purpose after consultation with damaged or otherwise deteriorated; If encapsulation or enclosure is used as EPA. (ii)The damaged paint is caused by a method of abatement, ongoing lead- (b) Paint stabilization. (1) Interim impact from a related building based paint maintenance activities shall control treatments used to stabilize component (such as a door knob that be performed as required by the deteriorated lead-based paint shall be knocks into a wall, or a door that knocks applicable subpart of this part in performed in accordance with the against its door frame); and accordance with§35.1355..Abatement requirements of this section.Interim (iii) Lead-based paint is known or of an intact, factory-applied prime control treatments of intact,factory presumed to be present on the impact coating on metal surfaces is not required applied prime coatings on metal surface. . surfaces are not required. Finish unless the surface is a friction surface. (3) Examples of building components coatings on such surfaces shall be that may contain friction or impact §35.1330 Interim controls. treated by interim controls if those surfaces include the following: Interim controls of lead-based paint coatings contain lead-based paint. hazards identified in a risk assessment (4) Any physical defect in the (i) Window systems; shall be conducted in accordance with substrate of a painted surface or (ii) Doors; the provisions of this section. Interim component that is causing deterioration (iii) Stair treads and risers; control measures include paint of the surface or component shall be (iv) Baseboards; stabilization of deteriorated paint, repaired before treating the surface or (v) Drawers and cabinets; and treatments for friction and impact component.Examples of defective (vi) Porches, decks, interior floors, surfaces where levels of lead dust are substrate conditions include dry rot, and any other painted surfaces that are above the•levels specified in§35.1320, rust, moisture-related defects, crumbling abraded, rubbed, or impacted. dust control, and lead-contaminated soil plaster, and missing siding or other (4) Interim control treatments for control. As provided by§35.155, components that are not securely friction surfaces shall eliminate friction fastened. interim controls may be performed in (3) Before applying new paint,all points or treat the friction surface so combination with, or be replaced by, that paint is not subject to abrasion. loose paint and other loose material abatement methods. Examples of acceptable treatments shall be removed from the surface to be (a) General requirements. (1) Qnly treated. Acceptable methods for include rehanging and/or planing doors those interim control methods identified preparing the surface to be treated so that the door does not rub against the as acceptable methods in a current risk include wet scraping,wet sanding, and door frame, and installing window assessment report shall be used to channel guides that reduce or eliminate control identified hazards,except that. Power sanding performed in abrasion of painted surfaces. Paint on . conjunction with a HEPA filtered local if only paint stabilization is required in stair treads and floors shall be protected exhaust attachment operated according wi accordance with subparts F,H. K or M th a durable cover or coating that will to the manufacturer's instructions. of this part, it shall not be necessary to (4) Dry sanding or dry scraping is prevent abrasion of the painted surfaces. have conducted a risk assessment. Examples of acceptable materials permitted only in accordance with (2) Occupants of dwelling units where §35.140(e) (i.e., for electrical safety include carpeting,tile, and sheet interim controls are being performed reasons or for specified minor amounts flooring. shall be protected during the course of of work). (5) Interim control treatments for the work in accordance with§35.1345. (5) Paint stabilization shall include impact surfaces shall protect the paint (3) Clearance testing shall be the application of a new protective from impact. Examples of acceptable performed at the conclusion of interim coating or paint.The surface substrate treatments include treatments that control activities in accordance with shall be dry and protected from future eliminate impact with the paint surface, §35.1340. moisture damage before applying a new such as a door stop to prevent a door (4) A person performing interim protective coating or paint. All from striking a wall or baseboard. controls must be trained in accordance protective coatings and paints shall be (6) Interim control for impact or with 29 CFR 1926.59 and either be applied in accordance with the frictiop surfaces does not include supervised by an individual certified as manufacturer's recommendations. covering such a surface with a coating a lead-based paint abatement supervisor (6) Paint stabilization shall or other treatment, such as painting over or have successfully completed one of incorporate the use of safe work the surface.that does not protect lead- the following courses: practices in accordance with§35.1350. based paint from impact or abrasion. 50220 Federal Register/Vol. 64, No. 178/Wednesday, September 15, 1999/Rules and Regulations (d) Chewable surfaces. (1) Chewable lead shall be abated in accordance with requirements of§35.1330. unless it is surfaces are required to be treated only 40 CFR 745.227(e). found not to be a soil-lead hazard in if there is evidence that a child of less (3) Acceptable interim control accordance with§35.1320(b). than 6 years of age has chewed on the methods for soil lead are impermanent (e) Safe work practices.All standard painted surface, and lead-based paint is surface coverings and land use controls. treatments described in paragraphs (a) known or presumed to be present on the (i) Impermanent surface coverings through (d) of this section shall surface. may be used to treat lead-contaminated incorporate the use of safe work (2) Interim control treatments for soil if applied in accordance with the practices in accordance with§35.1350. chewable surfaces shall make the lead- following requirements.Examples of (f) Clearance. A clearance based paint inaccessible for chewing by acceptable impermanent coverings examination shall be performed in children of less than 6 years of age. include gravel, bark,sod, and artificial accordance with§35.1340 at the Examples include enclosures or coatings turf, conclusion of any lead hazard reduction that cannot be penetrated by the teeth of (A) Impermanent surface coverings activities. such children. selected shall be designed to withstand (g) Qualifications.An individual (e) Dust-lead hazard control. (1) the reasonably-expected traffic. For performing standard treatments must Interim control treatments used to example, if the area to be treated is meet the training and/or supervision control dust-lead hazards shall be heavily traveled,neither grass or sod requirements of§35.1330(a)(4). performed in accordance with the shall be used. requirements of this section. Additional (B) When loose impermanent surface §35.1340 Clearance. information on dust removal is found in coverings such as bark or gravel are Clearance examinations required the HUD Guidelines,particularly used, they shall be applied in a under subparts B, C, D, F.through M, Chapter 11 (see§35.1310). thickness not less than six inches deep. and R, of this part shall be performed in (2) Dust control shall involve a (C) The impermanent surface covering accordance with the provisions of this material shall not contain more than 200 section. thorough cleaning of all horizontal surfaces,such as interior window sills. µg/g of lead. (a) Clearance following abatement. window troughs, floors, and stairs,but (D) Adequate controls to prevent Clearance examinations performed excluding ceilings.All horizontal erosion shall be used in conjunction following abatement of lead-based paint with impermanent surface coverings, or lead-based paint hazards shall be surfaces,such as floors,stairs,window sills and window troughs,that are (ii) Laud use controls may be used to performed in accordance with 40 CFR rough, pitted, or porous shall be covered reduce exposure to soil-lead hazards 745.227(e) and paragraphs (c)—(f) of this only if they effectively control access to section. Such clearances shall be with a smooth, cleanable covering or areas with soil-lead hazards.Examples performed by a person certified to coating,such as metal coil stock, plastic, polyurethane, or linoleum. of land use controls include:fencing, perform risk assessments or lead-based (3) Surfaces covered by a rug or warning signs, and landscaping. paint inspections. carpeting shall be cleaned as follows: (A) Land use controls shall be (b) Clearance following activities (i)The floor surface under a rug or implemented only if residents have other than abatement. Clearance carpeting shall be cleaned where reasonable alternatives to using the area examinations performed following feasible, including upon removal of the to be controlled. interim controls,paint stabilization, rug or carpeting,with a vacuum (B) If land use controls are used for a standard treatments,ongoing lead-based or other method of equivalent efficacy. soil area that is subject to erosion, paint maintenance, or rehabilitation (ii) unattached rug or an attached measures shall be taken to contain the shall be performed in accordance with carpet that is to be removed, and soil and control dispersion of lead, the requirements of this paragraph (b) padding associated with such rugor and paragraphs (c)—(g) of this section. §35.1335 Standard treatments. (1) Qualified personnel.Clearance carpet, located in an area of the Standard treatments shall be examinations shall be performed by: dwelling unit with dust-lead hazards on conducted in accordance with this (i) A certified risk assessor; the floor,shall be thoroughly vacuumed section. (ii)A certified lead-based paint with a HEPA vacuum or other method (a) Paint stabilization.All deteriorated inspector; of equivalent efficacy.protective paint on exterior and interior surfaces (iii) A person who has successfully measures shall be used to prevent the located on the residential property shall completed a training course for spread of dust during removal of a rug, be stabilized in accordance with clearance technicians (or a discipline of carpet or padding from the dwelling. ' §35.1330(a)(b), or abated in accordance similar purpose and title)that is For example, it shall be misted to with§35.1325. developed or accepted by EPA or a State reduce dust generation during removal. (b) Smooth and cleanable horizontal or tribal program authorized by EPA The item(s) being removed shall be surfaces. All horizontal surfaces,such pursuant to 40 CFR part 745,subpart Q, wrapped or otherwise sealed before as uncarpeted floors,stairs,interior and that is given by a training provider removal from the worksite. window sills and window troughs,that accredited by EPA or a State or Indian 1 (iii) An attached carpet located in an are rough,pitted, or porous,shall be tribe for training in lead-based paint area of the dwelling unit with dust-lead covered with a smooth, cleanable inspection or risk assessment,provided hazards on the floor shall be thoroughly covering or coating,such as metal coil a certified risk assessor or a certified vacuumed with a HEPA vacuum or stock, plastic, polyurethane, or lead-based paint inspector approves the other method of equivalent efficacy if it linoleum. work of the clearance technician and is not to be removed. (c) Correcting dust generating signs the report of the clearance (f) Soil-lead hazards. (I) Interim conditions. Conditions causing friction examination; or control treatments used to control soil- or impact of painted surfaces shall be (iv) A technician licensed or certified lead hazards shall be performed in corrected in accordance with by EPA or a State or Indian tribe to accordance with this section. §35.1330(c)(4)—(6). perform clearance examinations without (2) Soil with a lead concentration (d) Bare residential soil. Bare soil the approval of a certified risk assessor equal to or greater than 5,000 µg/g of shall be treated in accordance with the or certified lead-based paint inspector, ' Federal Register/Vol. 64, No. 178/Wednesday, September 15, 1999/Rules and Regulations 50221 provided that a clearance examination shall be collected and analyzed in the hazard reduction activity and the by such a licensed or certified accordance with §35.1315 of this part, method(s) used. technician shall be performed only for (iv) Clearance reports shall be (d) Standards.The clearance a single-family property or individual prepared in accordance with paragraph standards in§35.1320(b)(2) shall apply. dwelling units and associated common (c) of this section. If test results equal or exceed the areas in a multi-unit property, and (c) Clearance report.When clearance standards, the dwelling unit. worksite, provided further that a clearance is required, the designated party shall or common area represented by the examination by a such a licensed or ensure that a clearance report is sample fails the clearance examination. certified clearance technician shall not prepared that provides documentation (e) Clearance failure. All surfaces be performed using random sampling of of the hazard reduction or maintenance represented by a failed clearance sample dwelling units or common areas in activity as well as the clearance shall be recleaned or treated by hazard multifamily properties, except that a examination. When abatement is reduction, and retested, until the clearance examination performed by performed, the report shall be an applicable clearance level in such a licensed or certified clearance abatement report in accordance with 40 §35.1320(b)(2) is met. technician is acceptable for any CFR 745.227(e)(10). When another (f) Independence. Clearance residential property if the clearance hazard reduction or maintenance examinations shall be performed by examination is approved and the report activity requiring a clearance report is persons or entities independent of those signed by a certified risk assessor or a performed, the report shall include the performing hazard reduction or certified lead-based paint inspector. following information: maintenance activities, unless the (1)The address of the residential designated partyuses qualified in-house (2) Required activities. (i) Clearance g examinations shall include a visual property and,if only part of a employees to conduct clearance. An in- assessment, dust sampling,submission multifamily property is affected,the house employee shall not conduct both of samples for analysis for lead, specific dwelling units and common a hazard reduction or maintenance interpretation of sampling results, and areas affected. activity and its clearance examination. preparation of a report. Clearance (2) The following information on the (g) Worksite clearance. When examinations shall be performed in clearance examination: clearance is of an interior worksite, not dwelling units, common areas and (i) The date(s) of the clearance. an entire dwelling unit or residential exterior areas in accordance with this examination; property, dust samples taken for section and the steps set forth at 40 CFR (ii)The name, address, and signature paragraph (b) of this section shall be p of each person performingthe clearance taken from the floor and window (if 745.227(e)(8).If clearance is being . . . examination, including certification available) to represent the area within performed for more than 10 dwelling number; the dust containment area. Clearance is units of similar construction and (iii) results ofvisual maintenance, as in a multifamily ( )The the not required if maintenance or hazard property, random sampling for the assessment for the presence of reduction activities in the worksite do purposes of clearance may be conducted deteriorated paint and visible dust, not disturb painted surfaces of a total in accordance with 40 CFR debris, residue or paint chips; area more than that set forth in (iv)The results of the analysis of dust §35.1350(d) 745.227(e)(9). samples, in µg/sq.ft., by location of (ii) The visual assessment shall be sample;and §35.1345 Occupar.'protection and performed to determine if deteriorated (v) The name and address of each worksite preparation. paint surfaces and/or visible amounts of laboratory that conducted the analysis This section establishes procedures dust, debris, paint chips or other residue of the dust samples, including the for protecting dwelling unit occupants are still present.Both exterior and identification number for each such and the environment from interior painted surfaces shall be laboratory recognized by EPA under contamination from lead-contaminated examined for the presence of section 405(b) of the Toxic Substances or lead-containing materials during deteriorated paint.If deteriorated paint Control Act(15 U.S.C. 2685(b)). hazard reduction activities. or visible dust, debris or residue are (3) The following information on the (a) Occupant protection. (1) present in areas subject to dust hazard reduction or maintenance Occupants shall not be permitted to sampling,they must be eliminated prior activity for which clearance was , enter the worksite during hazard to the continuation of the clearance performed: reduction activities (unless they are examination, except elimination of (i)The start and completion dates of employed in the conduct of these deteriorated paint is not required if it the hazard reduction or maintenance activities at the worksite), until after has been determined,through paint activity; hazard reduction work has been testing or a.lead-based paint inspection, (ii)The name and address of each completed and clearance,if required, that the deteriorated paint is not lead- firm or organization conducting the has been achieved. based paint.If exterior painted surfaces hazard reduction or maintenance ' (2) Occupants shall be temporarily have been disturbed by the hazard activity and the name of each supervisor relocated before and during hazard reduction, maintenance or rehabilitation assigned; reduction activities to a suitable, decent, activity, the visual assessment shall (iii) A detailed written description of safe, and similarly accessible dwelling include an assessment of the ground the hazard reduction or maintenance unit that does not have lead-based paint and any outdoor living areas close to the activity, including the methods used, hazards. except if: affected exterior painted surfaces. locations of exterior surfaces, interior (i) Treatment will not disturb lead- Visible dust or debris in living areas rooms, common areas, and/or based paint, dust-lead hazards or soil- shall be cleaned up and visible paint components where the hazard reduction lead hazards; chips on the ground shall be removed. activity occurred, and any suggested (ii) Only the exterior of the dwelling (iii) Dust samples shall be wipe monitoring of encapsulants or unit is treated, and windows, doors, samples and shall be taken on floors enclosures; and ventilation intakes and other openings and, where practicable, interior window (iv) If soil hazards were reduced, a in or near the worksite are sealed during sills and window troughs.Dust samples detailed description of the location(s) of hazard control work and cleaned 50222 Federal Register/Vol. 64, No. 178/Wednesday, September 15, 1999/Rules and Regulations afterward, and entry free of dust-lead §35.1350 Safe work practices. (ii) Bare soil. All bare soil shall be hazards,soil-lead hazards, and debris is (a) Prohibited methods. Methods of treated with standard treatments in provided; paint removal listed in§35.140 shall accordance with§35.1335(d) through (iii)Treatment of the interior will be not be used. (g), or interim controls in accordance completed within one period of 8- (b) Occupant protection and worksite with§35.1330(a) and (f);except for any daytime hours, the worksite is preparation.Occupants and their bare soil that a current evaluation has contained so as to prevent the release of belongings shall be protected, and the found is not a soil-lead hazard. leaded dust and debris into other areas, worksite prepared, in accordance with (4) Safe work practices,in accordance and does not create other §35.1345. with sec. 35.1350,shall be used when treatment n or environmental hazards (c) Specialized cleaning. After hazard performing any maintenance or safereduction activities have been renovation work that disturbs paint that (e.g.,exposed live electrical wiring, completed, the worksite shall be may be lead-based paint. release of toxic fumes,or on-site cleaned using cleaning methods, (5) Any encapsulation or enclosure of disposal of hazardous waste); or, products, and devices that are lead-based paint or lead-based paint (iv)Treatment of the interior will be successful in cleaning up dust-lead hazards which has failed to maintain its completed within 5 calendar days, the hazards,such as a HEPA vacuum or effectiveness shall be repaired, or worksite is contained so as to prevent other method of equivalent efficacy, and abatement or interim controls shall be the release of leaded dust and debris lead-specific detergents or equivalent. performed in accordance with into other areas, treatment does not (d) De minimis levels. Safe work §§35.1325 or 35.1330, respectively. create other safety, health or practices are not required when (6) Clearance testing of the worksite environmental hazards; and, at the end maintenance or hazard reduction shall be performed at the conclusion of of work on each day, the worksite and activities do not disturb painted repair, abatement or interim controls in the area within at least 10 feet(3 meters) surfaces that total more than: accordance with§35.1340. of the containment area is cleaned to (1) 20 square feet (2 square meters) on (7) Each dwelling unit shall be remove any visible dust or debris, and exterior surfaces; provided with written notice asking occupants have safe access to sleeping (2) 2 square feet(0.2 square meters) in occupants to report deteriorated paint areas, and bathroom and kitchen any one interior room or space; or and, if applicable, failure of facilities. (3) 10 percent of the total surface area encapsulation or enclosure, along with on an interior or exterior type of the name, address and telephone (3)The dwelling unit and the component with a small surface area. number of the person whom occupants worksite shall be secured against Examples include window sills, should contact.The language of the unauthorized entry, and occupants' baseboards,and trim. notice shall be in accordance with belongings protected from §35.125(c)(3).The designated party contamination by dust-lead hazards and §35.1355 Ongoing lead-based paint shall respond to such report and debris during hazard reduction maintenance and reevaluation activities. stabilize the deteriorated paint or repair activities. Occupants' belongings in the (a) Maintenance.Maintenance the encapsulation or enclosure within containment area shall be relocated to a activities shall be conducted in • 30 days. safe and secure area outside the accordance with paragraphs(a)(2)—(6) of (b) Reevaluation..Reevaluation shall containment area, or covered with an this section,except as provided in be conducted in accordance with this with all seams paragraph (a)(1) of this section. paragraph (b),and the designated party edgesimpermeable taped coveringo otherwisewith sealed. (1) Maintenance activities need not be shall conduct interim controls of lead- andconducted in accordance with this based paint hazards found in the (b) Worksite preparation. (1)The section if both of the following reevaluation. worksite shall be prepared to prevent conditions are met,as applicable: (1) Reevaluation shall be conducted if the release of leaded dust, and contain (i) Either a lead-based paint hazard reduction has been conducted to lead-based paint chips and other debris inspection indicates that no lead-based reduce lead-based paint hazards found from hazard reduction activities within paint is present in the dwelling units, in a risk assessment or if standard the worksite until they can be safely common areas, and on exterior surfaces, treatments have been conducted, except removed.Practices that minimize the or a clearance report prepared in that reevaluation is not required if any spread of leaded dust, paint chips,soil accordance with§35.1340(a) indicates of the following cases are met: and debris shall be used during worksite that all lead-based paint has been (i) An initial risk assessment found no preparation. ' removed;and lead-based paint hazards; (2) A sign shall be posted at (ii)If a risk assessment is required by (ii) A lead-based paint inspection each warning room where hazard the applicable subpart of this part, a found no lead-based paint;or each entry activities a s arew when current risk assessment indicates that no (iii) All lead-based paint was abated reduction ts are sties presenr; conducted at each main soil-lead hazards and no dust-lead in accordance with§35.1325, provided occhazards are resent. that no failures of encapsulations or and secondary entryway to a building (2) A visual assessment for enclosures have been found during from which occupants have been deteriorated paint, bare soil,and the visual assessments conducted in relocated;or, for an exterior hazard failure of any hazard reduction accordance with§35.1355(a)(2) or reduction activity,where it is easily measures shall be performed at unit during other observations by read 20 feet (6 meters) from the edge of turnover and every twelve months. maintenance and repair workers in the hazard reduction activity worksite. (3) (i) Deteriorated paint. All accordance with§35.1355(a)(5)since Each warning sign shall be as described deteriorated paint on interior and the encapsulations or inclosures were in 29 CFR 1926.62(m), except that it exterior surfaces located on the performed. shall be posted irrespective of residential property shall be stabilized (2) Reevaluation shall be conducted to employees' lead exposure and,to the in accordance with§35.1330(a)(b), identify: extent practicable, provided in the except for any paint that an evaluation (i) Deteriorated paint surfaces with occupants' primary language. has found is not lead-based paint. known or suspected lead-based paint; • • Federal Register/Vol. 64, No. 178/Wednesday, September 15, 1999/Rules and Regulations 50223 • (ii) Deteriorated or failed interim known or suspected lead-based paint, lead-based paint hazards, the current controls of lead-based paint hazards or any deteriorated paint, and each exterior status of any hazard reduction and encapsulation or enclosure treatments; site, and shall identify any new areas of standard treatment measures used (iii) Dust-lead hazards; and bare soil; previously and any newly-conducted (iv) Soil that is newly bare with lead (B) Determine acceptable options for evaluation and hazard reduction levels equal to or above the standards in controlling the hazard; and activities. The report shall include the §35.1320(b)(2). (C) Await the correction of any hazard information in 40 CFR 745.227(d)(11), (3) Each reevaluation shall be reduction omission or failure and the and shall: performed by a certified risk assessor. reduction of any lead-based paint (i) Identify any lead-based paint (4) Each reevaluation shall be hazard before sampling any dust or soil hazards previously detected and discuss conducted in accordance with the the risk assessor determines may the effectiveness of any hazard following schedule if a risk assessment reasonably be associated with such reduction or standard treatment or other evaluation has found hazard. measures used,and list those for which deteriorated lead-based paint in the (iii) Reaction to hazard reduction no measures have been used. residential property, a soil-lead hazard, omission or failure.If any hazard (ii) Describe any new hazards found or a dust-lead hazard on a floor or reduction control has not been and present the owner with acceptable interior window sill. (Window troughs implemented or is failing (e.g., an control options and their accompanying are not sampled during reevaluation). encapsulant is peeling away from the reevaluation schedules. The first reevaluation shall be wall, a paint-stabilized surface is no (iii) Identify when the next conducted no later than two years from longer intact, or gravel covering an area reevaluation, if any, must occur, in completion of hazard reduction. of bare soil has worn away),or accordance with the requirements of Subsequent reevaluation shall be deteriorated lead-based paint is present, paragraph (b)(4) of this section. conducted at intervals of two years, plus the risk assessor shall: (c) Response to the reevaluation. (1) or minus 60 days.To be exempt from (A) Determine acceptable options for Hazard reduction omission or failure additional reevaluation,at least two controlling the hazard;and found by a reevaluation.The designated consecutive reevaluations conducted at (B) Await the correction of any hazard party shall respond in accordance with such two-year intervals must be reduction omission or failure and the paragraph (b)(6)(iii)(A) of this section to conducted without finding lead-based reduction of any lead-based paint a report by the risk assessor of a hazard paint hazards or a failure of an hazard before sampling any dust or soil reduction control that has not been encapsulation or enclosure.If,however, the risk assessor determines may implemented or is failing,or that a reevaluation finds.lead-based paint reasonably be associated with such deteriorated lead-based paint is present. hazards or a failure, at least two more hazard. (2) Newly-identified lead-based paint consecutive reevaluations conducted at (iv) Selected paint, soil and dust hazard found by a reevaluation. The such two year intervals must be evaluation. (A) The risk assessor shall designated party shall treat each: conducted without finding lead-based sample deteriorated paint surfaces (i) Dust-lead hazard or paint lead paint hazards or a failure. identified during the visual assessment hazard by cleaning or hazard reduction (5) Each reevaluation shall be and have the samples analyzed, in measures,which are considered performed as follows: accordance with 40 CFR completed when clearance is achieved (i) Dwelling units and common areas 745.227(b)(3)(4), but only if reliable in accordance with§35.1340. shall be selected and reevaluated in information about lead content is (ii) Soil lead hazard by hazard accordance with§35.1320(b). unavailable. reduction measures,which are (ii) The worksites of previous hazard (B)The risk assessor shall evaluate considered completed when clearance is reduction activities that are similar on new areas of bare soil identified during achieved in accordance with§35.1340. the basis of their original lead-based the visual assessment. Soil samples PART 91—CONSOLIDATED paint hazard and type of treatment shall shall be collected and analyzed in SUBMISSIONS FOR COMMUNITY be grouped.Worksites within such accordance with 40 CFR 745.227(d)(8)- PLANNING AND DEVELOPMENT groups shall be selected and reevaluated (11), but only if the soil lead levels have PROGRAMS in accordance with§35.1320(b). not been previously measured. (6) Each reevaluation shall include (C) The risk assessor shall take 4.The authority citation for part 91 reviewing available information, selected dust samples and have them continues to read as follows: conducting selected visual assessment, analyzed. Dust samples shall be Authority:42 U.S.0 3535(d), 3601-3619, recommending responses to hazard collected and analyzed in accordance 5301-5315, 11331-11388, 12701-12711. reduction omissions or failures, with§35.1320(b).At least two 12741-12756, 12901-12912. • performing selected evaluation of paint, composite samples,one from floors and 5. Revise§91.2(t)(15) to read as soil and dust,and recommending the other from interior window sills, follows: • response to newly-found lead-based shall be taken in each dwelling unit and paint hazards. common area selected. Each composite §91.2 Applicability. (i) Review of available information. sample shall consist of four individual * * * * * The risk assessor shall review any samples, each collected from a different (b) * * * available past evaluation, hazard room or area.If the dwelling unit (15)The "Lead-Based Paint Hazard reduction and clearance reports, and contains both carpeted and uncarpeted Reduction Program (see 42 U.S.C. any other available information living areas,separate floor samples are 4852(o));" describing hazard reduction measures, required from the carpeted and * * * * * ongoing maintenance activities, and uncarpeted areas. Equivalent single- 6. In§91.5, revise the definition of relevant building operations. surface sampling may be used instead of "Lead-based paint hazards" to read as (ii) Visual assessment.The risk composite sampling. follows: assessor shall: (7) The risk assessor shall provide the (A) Visually evaluate all lead-based designated party with a written report §91.5 Definitions. • paint hazard reduction treatments, any documenting the presence or absence of * * * * * 50224 Federal Register/Vol. 64, No. 178/Wednesday, September 15, 1999/Rules and Regulations Lead-based paint hazards means lead- funds to maintain the housing before 1978 and is the subject of an based paint hazards as defined in part compliance with§92.251 for the application for mortgage insurance 35, subpart B of this title. duration of the affordability period. under section 203(b) or other sections of * * * * * * * * * * the National Housing Act relating to the 7. Revise§91.225(b)(7) to read as 12. Revise§92.508(a)(7)(vi) to read as insurance or coinsurance of mortgages follows: follows:. on one-to-four-family dwellings. Such other sections include: §91.225 Certifications. §92.508 Recordkeeping. (i) Section 244 (coinsurance); * * * * * * * * * * (ii)Section 213 (cooperative housing (b) * * * (a) * * * insurance); (7) Compliance with lead-based paint (7) * * * (iii) Section 220 (rehabilitation and procedures.The jurisdiction must (vi) Records demonstrating neighborhood conservation housing submit a certification that its activities compliance with the lead-based paint insurance); concerning lead-based paint will requirements of part 35, subparts A,B, (iv) Section 221 (housing for moderate comply with the requirements of part J, K,M and R of this title. income and displaced families); 35,subparts A,B,J,K, and R of this * * * * * (v)Section 222 (mortgagor insurance title. for servicemen); * * * * * PART 200—INTRODUCTION TO FHA (vi) Section 809 (armed services 1 PROGRAMS housing for civilian employees); 1 PART 92—HOME INVESTMENT (vii) Section 810 (armed services PARTNERSHIPS PROGRAM 13.The authority citation for part 200 housing in impacted areas); continues to read as follows: (viii) Section 234 (mortgage insurance 8.The authority citation for part 92 Authority: 12 U.S.C. 1701-1715z-18:42 for condominiums); continues to read as follows: U.S.C.3535(d). (ix) Section 235 (mortgage assistance Authority:42 U.S.C.3535(d)and 12701- 14. Revise subpart 0 to read as payments for home ownership and 12839. project rehabilitation); follows: (x) Section 237 (special mortgage 9. Revise 5 92.206(a)(2)(ii) to read as Subpart 0—Lead-Based Paint Poisoning insurance for low and moderate income follows: Prevention families);and §92.206 Eligible project costs. Sec. (xi) Section 240 (mortgage insurance * * * * * 200.800 Lead-based paint. on loans for purchase of fee simple title (a) * * * 200.805 Definitions. from lessors). (2) * * * 200.810 Single.family insurance and (2)This section is also applicable to coinsurance. single family insurance on (ii)To make essential improvements, g 1715z- includingever related repairs orIndian reservations (12 U.S.C.energy-related P Subpart 0—Lead-Based Paint 13) and loan guarantees for Indian improvements,improvements necessary Prevention housing (25 U.S.C. 4191). to permit use by persons with disabilities, and lead-based paint §200.800 Lead-based paint. (3)Applications for insurance in activities, as required by part 35 of this The Lead-Based Paint Poisoning connection with a refinancing title. Prevention Act (42 U.S.C. 4821-4846), transaction where an appraisal is not * * * * * the Residential Lead-Based Paint Hazard required under the applicable 10.Revise§92.355 to read as follows: Reduction Act of 1992 (42 U.S.C. 4851- procedures established by the 4856),and implementing regulations at Commissioner are excluded from the §92.355 Lead-based paint. part 35,subparts A,B,F, G,I,and R of coverage of this section. Any housing Housing assisted with HOME funds is this title,apply to activities under these assisted under the programs set out in subject to the Lead-Based Paint programs, except for single family this section for which no new activity Poisoning Prevention Act(42 U.S.C. mortgage insurance and guarantee is applied for or required is not covered 4821-4846), the Residential Lead-Based programs. Sections 209.805 and 200.810 by this section. Paint Hazard Reduction Act of 1992 (42 apply to single family mortgage (b)Appraisal.The appraiser shall, U.S.C. 4851-4856), and implementing insurance and guarantee programs when appraising a dwelling constructed regulations at part 35, subparts A, B.J, administered by HUD. prior to 1978, inspect the dwelling for K, M and R of this title. defective paint surfaces. 11. Revise§92.504(c)(3)(iv) to read as §200.805 Definitions. (c) Treatment of defective paint follows: Applicable surface.All intact and surfaces. For defective paint surfaces, nonintact interior and exterior painted treatment shall be provided to defective §92.504 Participating jurisdiction surfaces of a residential structure. areas.Treatment of hazards shall consist responsibilities;written agreements; on-site Defective paint surface.Paint on of covering or removing defective paint inspection. applicable surfaces that is cracking. surfaces. Covering may be accomplished * * * * * bysuch means as addinga layer of (c) * * * scaling,chipping, peeling or loose. Y (3) * * * Lead-based paint surface.A paint wallboard to the wall surface. surface,whether or not defective, Depending on the wall condition, (iv) Property standards.The identified as having a lead content wallcoverings which are permanently agreement must require the housing to greater than or equal to 1 mg/cm2. attached may be used. Covering or meet the property standards In§92.251 replacing trim surfaces is also and the lead-based paint requirements §200.810 Single family insurance and permitted.Paint removal may be in part 35,subparts A,B,J, K,M and coinsurance. accomplished by such methods as R of this title, upon project completion. (a) General. (1) The requirements of scraping,heat treatment (infra-red or The agreement must also require owners this section apply to any one-to four- coil type heat guns) or chemicals. of rental housing assisted with HOME family dwelling which was constructed Machine sanding and use of propane or • • Federal Register/Vol. 64, No. 178/Wednesday, September 15, 1999/Rules and Regulations 50225 gasoline torches (open-flame methods) relocation of the occupant is necessary Authority:42 U.S.C.1437o and 3535(d). are not permitted. Washing and during repairs. no reimbursement for 23. Revise§511.10(f)(1)(ii) to read as repainting without thorough removal or relocation expenses will be provided to follows: covering does not constitute adequate the occupant. treatment. In the case of defective paint §511.1&. General requirements. spots.scraping and repainting the PART 280-NEHEMIAH HOUSING * * * * * defective area is considered adequate OPPORTUNITY GRANTS PROGRAM (0 * * * treatment.Treatment of a defective 17.The authority citation for part 280 (1) paint surface is not required if such a continues to read as follows: (ii) Make essential improvements, as surface is found to not be a lead-based reasonably defined by the grantee or paint surface by a lead-based paint Authority: 12 U.S.C. 17151 note:42 U.S.C. State recipient in its rehabilitation inspector certified pursuant to 3535(d). standards adopted under§511.10(e), procedures of the U.S. Environmental 18. Revise§280.25(e) to read as including energy-related repairs, Protection Agency at 40 CFR part 745. follows: improvements necessary to permit the (d) Home equity conversion mortgage use of rehabilitated projects by insurance.The requirements of this 280.25 Other Federal requirements. handicapped persons, and activities of * * * * * section, as modified by the following lead based paint hazards, as required by sentence, apply to a dwellingwhich is (e) Lead-based paint.The Lead-Based PP Y . part 35 of this title; the subject of an application for Paint Poisoning Prevention Act (42 * * * * * mortgage insurance under section 255 of U.S.C.4821-4846),the Residential the National Housing Act(home equity Lead-Based Paint Hazard Reduction Act 24. Revise§511.15 to read as follows: conversion insurance) unless the of 1992 (42 U.S.C. 4851-4856), and §511.15 Lead-based paint. mortgagor provides the certification implementing regulations at part 35, The Lead Based Paint Poisoning described in§206.45(d) of this title.The subparts A, B, K, and R, of this title Prevention Act (42 U.S.C. isonin846), defective paint surface may be treated apply to the program. the Residential Lead Based Paint Hazard after the mortgage is endorsed for * * * * * Reduction Act of 1992 (42 U.S.C. 4851- insurance, provided that the defective paint surface is treated as expeditiously PART 291-DISPOSITION OF HUD- 4856),and implementing regulations at as possible in accordance with the ACQUIRED SINGLE FAMILY part 35,subparts A, B,J, K, and R of this repair work provisions contained in PROPERTY title apply to activities under these §206.47 of this title programs. 19.The authority citation for part 291 PART 203-SINGLE FAMILY continues to read as follows: PART 570-COMMUNITY MORTGAGE INSURANCE Authority: 12 U.S.C. 1701 etseq.;42 U.S.C. DEVELOPMENT BLOCK GRANTS 1441, 1441a,and 3535(d). 25.The authority citation for part 570 15.The authority citation for part 203 20. Revise§291.100(g) to read as continues to read as follows: continues to read as follows: follows: Authority: 12 U.S.C. 1709, 1710. 17151). 5320. 42 U.S.C.3535(d) and 5300- and 1715u:42 U.S.C.3535(d). §291.100 General policy. 5320. 16. In§203.673, revise paragraphs (a) * * * * * 26. Revise§570.202(f) to read as and (c) to read as follows: (g) Lead-based paint poisoning follows: prevention.Properties constructed §203.673 Habitability. before 1978 are subject to the §570.202 Eligible rehabilitation and (a) For purposes of§203.670,a requirements of the Lead-Based Paint preservation activities. * * * * * property is habitable if it meets the Poisoning Prevention Act (42 U.S.C. (f) Lead based paint activities. Lead requirements of this section in its 4821-4846), the Residential Lead-Based based paint activities as set forth in part present condition,or will meet these Paint Hazard Reduction Act of 1992 (42 35 of this title. requirements with the expenditure of U.S.C. 4851-4856), and implementing 27.Revise 5 570.461 to read as not more than five percent of the fair regulations at part 35, subparts A,B, F, follows: market value of the property.The cost and R,of this title, of hazard reduction or abatement of * * * * * §570.461 Post-preliminary approval lead-based paint hazards in the 21. Revise§291.430 to read as requirements; lead-based paint. property, as required by the Lead-Based follows: The recipient may receive preliminary Paint Poisoning Prevention Act (42 approval prior to the accomplishment of U.S.C. 4821-4846), and the Residential §291.430 Elimination of lead-based paint Lead-Based Paint Hazard Reduction Act hazards. lead based paint activities conducted of 1992 (42 U.S.C. 4851-4856), and The Lead-Based Paint Poisoning pursuant to part 35, subparts A, B,J,K, implementing regulations inpart 35 of Prevention Act (42 U.S.C. 4821-4846), and R of this title, but no funds will be p g g the Residential Lead Based Paint Hazard released until such actions are complete this title,is excluded from these. repair and of compliance is cost limitations. Reduction Act of 1992 (42 U.S.C. 4851- n evidence o HUD. * * * * * 4856), and implementing regulations at 28.Revise 5 570.487(c) to read as (c) If repairs, including lead-based part 35,subparts A,B, F, and R of this follows: paint hazard reduction or abatement, are title, apply activities covered by this to be made while the property is subpart. §570.487 Other applicable laws and occupied, the occupant must hold the related program requirements. Secretary and the Department harmless PART 511-RENTAL REHABILITATION * * * * * against any personal injury or property GRANT PROGRAM (c) Lead-Based Paint Poisoning damage that may occur during the 22.The authority citation for 24 CFR Prevention Act. States shall devise, process of making repairs.If temporary part 511 continues to read as follows: adopt and carry out procedures with 50226 Federal Register/Vol. 64, No. 178/Wednesday, September 15, 1999/Rules and Regulations 'respect to CDBG assistance that fulfill §572.420 Miscellaneous requirements. 4856),and implementing regulations at the objectives and requirements of the * * 4 * * part 35,subparts A,B,J, K, and R of this Lead-Based Paint Poisoning Prevention (h) Lead-based paint activities.The title apply to activities under this Act(42 U.S.C. 4821-4846), the Lead-Based Paint Poisoning Prevention program. Residential Lead-Based Paint Hazard Act(42 U.S.C. 4821-4846),the * * * * * Reduction Act of 1992 (42 U.S.C. 4851- Residential Lead-Based Paint Hazard 4856), and implementing regulations at Reduction Act of 1992 (42 U.S.C. 4851- PART 582-SHELTER PLUS CARE part 35, subparts A, B,J,K. and R of this 4856), and implementing regulations at title. part 35,subparts A, B,J,K and R of this 40.The authority citation for part 582 * * * * * title apply to activities under these continues to read as follows: 29. Revise§570.608 to read as programs. Authority 42 U.S.C.3535(d) and 11403- follows: 11407b. PART 573-LOAN GUARANTEE §570.608 Lead-based paint. RECOVERY FUND 41. Revise the first sentence of §582.305(a) to read as follows: The Lead-Based Paint Poisoning 34.The authority citation for part 573 Prevention Act (42 U.S.C. 4821-4846), continues to read as follows: §582.305 Housing quality standards;rent the Residential Lead Based Paint Hazard reasonableness. Authority:Pub.L. 104-155, 110 Stat. 1392, Reduction Act of 1992 (42 U.S.C. 4851- 18 U.S.C.241 note;42 U.S.C.3535(d). (a) Housing quality standards. 4856),and implementing regulations at Housing assisted under this part must part 35, subparts A, B,J,K, and R of this 35. Revise§573.9(c) to read as meet the applicable housing quality part apply to activities under this follows: standards (HQS) under§982.401 of this program. title-except that§982.401 §573.9 Other requirements. p of this PART 572-HOPE FOR * * * * * title does not apply and instead part 35, subparts A,B. K and R of this title HOMEOWNERSHIP OF SINGLE (c) Lead-based paint.Housing assisted p under this part is subject to the lead- apply-and, for SRO under§882.803(b) FAMILY HOMES PROGRAM(HOPE 3) based paint requirements described in of this title. * * * * 30.The authority citation for part 572 part 35, subparts A,B,E,G,and R of * * * * continues to read as follows: this title. PART 583-SUPPORTIVE HOUSING Authority:42 U.S.C.3535(d)and 12891. * * * * * PROGRAM 31. Revise§572.100(d)(1) to read as PART 574-HOUSING. 42.The authority citation for part 583 follows: OPPORTUNITIES FOR PEOPLE WITH continues to read as follows: AIDS §572.100 Acquisition and rehabilitation of Authority:42 U.S.C. 11389 and 3535(d). eligible properties; rehabilitation standards. 36.The authority citation for part 574 43. Revise 5583.330(d) to read as * * * * * continues to read as follows: follows: (d) * * * Authority:42 U.S.C.3535(d)and 12901- (1)The recipient is responsible to 12912. §583.330 Applicability of other Federal assure that rehabilitation of eligible 37. Revise§574.635 to read as requirements. property meets local codes applicable to follows: * * * * * rehabilitation of work in the jurisdiction (d)Lead-based paint.The Lead-Based (but not less than the housing quality §574.635 Lead-bated paint. Paint Poisoning Prevention Act (42 standards established under the Section The Lead-Based Paint Poisoning U.S.C.4821-4846), the Residential 8 rental voucher program,described in Prevention Act (42 U.S.C. 4821-4846), Lead-Based Paint Hazard Reduction Act §982.401 of this title).Rehabilitation the Residential Lead-Based Paint Hazard of 1992 (42 U.S.C. 4851-4856), and must also include work necessary to Reduction Act of 1992 (42 U.S.C. 4851- implementing regulations at part 35, meet applicable federal requirements. 4856), and implementing regulations at subparts A, B,J, K, and R of this title including lead-based paint requirements part 35,subparts A, B,H,J,K,M,and apply to activities under this program. set forth at part 35,subparts A,B,J, K, R of this part apply to activities under * * * * * and R of this title. this program. * * * * * PART 585- YOUTHBUILD PROGRAM PART 576-EMERGENCY SHELTER 32. Revise§572.215(e) to read as GRANTS PROGRAM:STEWART B. 44.The authority citation for part 585 follows: McKINNEY HOMELESS ASSISTANCE continues to read as follows: • §572.215 Implementation grants eligible ACT Authority:42 U.S.C.3535(d) and 8011. activities. 38.The authority citation for part 576 * * * * * continues to read as follows: 45. Revise 5 585.305(d) to read as follows: (e) Architectural and engineering Authority:42 U.S.C.3535(d)and 11376. work.Architectural and engineering §585.305 Eligible activities. work,and related professional services 39. Revise§576.57(c) to read as * * * * * required to prepare architectural plans follows: and or drawings,write-ups,specifications or q (d)related Rehabilitationcestof housingefr he §576.57 Other Federal Requirements. facilities to be used for the inspections,including lead-based paint * * * * * purposes of providing homeownership, evaluation. * * * * * (c)The Lead-Based Paint Poisoning residential rental housing, or Prevention Act (42 U.S.C. 4821-4846), transitional housing for the homeless 33.Revise§572.420(h) to read as the Residential Lead-Based Paint Hazard and low-and very low-income persons follows: Reduction Act of 1992 (42 U.S.C. 4851- and families, including lead-based paint Federal Register/Vol. 64, No. 178/Wednesday, September 15, 1999/Rules and Regulations 50227 activities; in accordance with part 35 of 52. Revise§882.404(d) to read as part 35, subparts A, B, H, and R of this this title; follows: title. * * * * * * * * * * 46. Revise§585.502(h) to read as §882.404 Physical condition standards; physical inspection requirements. PART 886—SECTION 8 HOUSING follows: * * ASSISTANCE PAYMENTS §585.502 Certifications. (d) Lead-based paint.The Lead-Based PROGRAM—SPECIAL ALLOCATIONS * * * * * Paint Poisoning Prevention Act (42 U.S.C. 4821-4846), the Residential 58.The authority citation for part 886 (h) Lead based paint. A certification Lead-Based Paint Hazard Reduction Act continues to read as follows: that the applicant will comply with the requirements of the Lead Based Paint of 1992 (42 U.S.C. 4851 4856),and Authority:42 U.S.C. 1437a, 1437c, 1437f Poisoning Prevention Act(42 U.S.C. implementing regulations at part 35, and 3535(d)and 13611-13619. 4821-4846), the Residential Lead Based subparts A, B, H, and R of this title 59. Revise§886.113(i) to read as Paint Hazard Reduction Act of 1992 (42 apply to the Section 8 moderate follows: U.S.C. 4851-4856), and im lementin rehabilitation program, • p g 53. Revise §882.507(b)(2)(iv) to read §886.113 Physical condition standard; regulations at part 35, subparts A. B,1, as follows: physical inspection requirements. K, and R of this title. * * * * * * * * * * §882.507 Completion of rehabilitation. p (i) Lead based paint.The Lead-Based * * * * * Paint Poisoning Prevention Act (42 PART 761—DRUG ELIMINATION (b) * * * U.S.C. 4821-4846), the Residential PROGRAMS (2) Lead-Based* * Paint Hazard Reduction Act 1992 (42 U.S.C. 51-4856 and of , 47.The authority citation for part 761 (iv)The unit(s) are in compliance ) continues to read as follows: with part 35, subparts A, B, H. and R of implementing regulations at part 35, Authority:42 U.S.C.3535(d)and 11901 et this title. subparts A,B,H, and R of this title * * * * * apply to activities under this program. seq. 54.Revise §882.514(d)(1)(vi) to read * * * * * 48. Revise§761.40(c) to read as as follows: 60. Revise§886.307(i) to read as follows: follows: §882.514 Family participation. §761.40 Other Federal requirements. * * * * * §886.307 Physical condition standards; * * * * * d) * * * physical inspection requirement. ( * * * * * (c) Lead-basedpaint.The Lead-Based * * (1) Paint Poisoning Prevention Act (42 (vi) The advisability and availability (i) Lead-based paint.The Lead-Based U.S.C. 4821-4846),the Residential of blood lead level screening for Paint Poisoning Prevention Act (42 Lead-Based Paint Hazard Reduction Act children under 6 years of age and HUD's U.S.C. 4821-4846),the Residential of 1992 (42 U.S.C. 4851-4856), and lead-based paint requirements in part Lead-Based Paint Hazard Reduction Act implementing regulations at part 35, 35, subparts A, B,H,and R of this title. of 1992 (42 U.S.C. 4851-4856), and subparts A, B,H,and R of this title. * * * * * implementing regulations at part 35, * * * * * 55. Revise§882.803(b)(1)to read as subparts A,B,H, and R of this title follows: apply to activities under this program. PART 881—SECTION 8 HOUSING * * * * * ASSISTANCE PAYMENTS PROGRAM §882.803 Project eligibility and other 61. Revise§886.333(b)(2)(iv) to read 1 9 tY FOR SUBSTANTIAL REHABILITATION requirements. as follpws: 49.The authority citation for part 881 * * * * * §886.333 Completion of rehabilitation. continues to read as follows: (b)(1) Physical condition standards. * * * * * Section 882.404 applies to this program. (b) * * * Authority:42 U.S.C. 1437a, 1437c, 1437f, * * * * * 2 3535(d), 12701,and 13611-13619. ) * * * (iv)The project was in compliance 50. Revise§881.207(e) to read as PART 883—SECTION 8 HOUSING with applicable HUD lead-based paint follows: ASSISTANCE PAYMENTS regulations at part 35,subparts A, B,H, PROGRAM—STATE HOUSING and R of this title. §881.207 Property standards. AGENCIES * * * * * * * * * * (e)The Lead-Based Paint Poisoning 56.The authority citation for part 883 PART 891—SECTION 8—SUPPORTIVE Prevention Act (42 U.S.C. 4821-4846), continues to read as follows: HOUSING FOR THE ELDERLY AND the Residential Lead-Based Paint Hazard Authority:42 U.S.C. 1437a, 1437c, 1437f, PERSONS WITH DISABILITIES Reduction Act of 1992 (42 U.S.C. 4851- 3535(d),and 13611-13619. 4856), and implementing regulations at 57. Revise §883.310(b)(5) to read as 62.The authority citation for part 891 part 35, subparts A, B,H, and R of this follows: continues to read as follows: title; and Authority: 12 U.S.C. 1701q;42 U.S.C. * * * * * §883.310 Property standards. 1437f,3535(d)and 8013. * * * * * 63. Revise§891.155(g) to read as PART 882—SECTION 8 MODERATE (b) * * * follows: • REHABILITATION PROGRAMS (5) The Lead-Based Paint Poisoning Prevention Act (42 U.S.C. 4821-4846), §891.155 Other Federal requirements. 51.The authority citation for part 882 the Residential Lead-Based Paint Hazard * * * * * continues to read as follows: Reduction Act of 1992 (42 U.S.C. 4851- (g) Lead-based paint.The Authority:42 U.S.C. 1437f and 3535(d). 4856), and implementing regulations at requirements of the Lead-Based Paint 50228 Federal Register/Vol. 64, No. 178/Wednesday, September 15, 1999/Rules and Regulations Poisoning Prevention Act(42 U.S.C. part 35,subparts A, B,L, and R of this (b) Insurance coverage requirements. 4821-4846), the Residential Lead-Based title. * * * When the PHA undertakes lead-based Paint Hazard Reduction Act of 1992 (42 paint activities, it must assure that it has' U.S.C. 4851-4856), and implementing PART 941—PUBLIC HOUSING reasonable insurance coverage for itself regulations at part 35,subparts A. B, H, DEVELOPMENT for potential personal injury liability and R of this title apply to these 69.The authority citation for part 941 associated with those activities.If the programs. continues to read as follows: work is being done by PHA employees, 64.Revise §891.325 to read as the PHA must obtain a liability follows: Authority:42 U.S.C. 1437b, 1437c, 1437g insurance policy directly to protect the and 3535(d). PHA.If the work is being done by a §891.325 Lead-based paint requirements. 70. Revise§941.208(b) to read as contractor, the PHA must obtain, from The requirements of the Lead-Based follows: the insurer of the contractor performing Paint Poisoning Prevention Act (42 this type of work in accordance with a §941.208 Other Federal requirements. U.S.C. 4821-4846),the Residential contract, a certificate of insurance Lead-Based Paint Hazard Reduction Act * * * * * providing evidence of such insurance of 1992 (42 U.S.C. 4851-4856),and (b) Lead-based paint.The relevant and naming the PHA as an additional implementing regulations at part 35, requirements of the Lead-Based Paint insured; or obtain such insurance subparts A, B,H, and R of this title Poisoning Prevention Act(42 U.S.C. directly. Insurance must remain in effect apply to the Section 811 program and to 4821-4846),the Residential Lead-Based during the entire period of lead-based projects funded under§§891.655 Paint Hazard Reduction Act of 1992 (42 paint activity and must comply with the through 891.790. U.S.C.4851-4856), and implementing following requirements: regulations at part 35,subparts A,B, L, (1) Named insured.If purchased by PART 901—PUBLIC HOUSING and R of this title apply to the program. the PHA, the policy shall name the PHA MANAGEMENT ASSESSMENT 71. Revise the second sentence of . as insured.If purchased by an PROGRAM §941.606(m) to read as follows: independent contractor,the policy shall 65.The authority citation for part 901 §941.606 Proposal. name the contractor as insured and the continues to read as follows: * * * * * PHA as an additional insured, in Authority:42 U.S.C. 1437d'):42 U.S.C.. (m) New construction. * * *This connection with performing work under 6 the PHA's contract pertaining to lead- 3535(d). may be accomplished by the PHA's based paint activities.If the PHA has 66.In 5 901.5,revise the definition of submission of a comparison of the cost executed a contract with a Resident of new construction in the (RMC)Corporation "HQS"to read as follows: neighborhood where the housing is Management ( ) to §901.5 Definitions. proposed to be constructed and the cost manage a building/project on behalf of * * * * * of acquisition of existing housing(with the PHA, the RMC shall be an additional or without rehabilitation) in the same insured under the policy in connection HQS means Housing Quality with the PHA's contract related to lead- Standards as set forth at§982.401 of neighborhood(including estimated based paint activities. (The duties of the this title, except that§982.401(j) of this costs of lead based paint activities). RMC are similar to those of a real estate title does not apply and instead part 35, * * * * management firm.) subparts A, B,L, and R of this title * * * * * apply. PART 965—PHA=OWNED OR LEASED (c) Exception to requirements. * * * * * PROJECTS—GENERAL PROVISIONS Insurance already purchased by the PHA or contractor and enforced on the PART 906—SECTION 5(h) 72.The authority citation for part'965 day this section is effective which HOMEOWNERSHIP PROGRAM continues to read as follows: provides coverage for lead-based paint 67.The authority citation for part 906 Authority:42 U.S.C. 1437, 1437a, 1437d, activities shall be considered as meeting continues to read as follows: 1437g,and 3535(d).Subpart H is also issued the requirements of this section until under 42 U.S.G.4821-4846. the expiration of the policy. This section Authority:42 U.S.C. 1437c, 1437d and 73.Amend§965.215 as follows: is not applicable to architects, engineers 3535(d). or consultants who do not physically a.Revise paragraph (a): p y y 68.Revise the first sentence of b.Revise the introductory text of perform lead-based paint activities. §906.6(b) to read as follows: paragraph (b);and (d) Insurance for the existence of lead- c.Revise paragraphs (b)(1), (c),and based paint hazards.A PHA may also 906.6 Property that may be sold. * (d) purchase special liability insurance * * * against the existence of lead-based paint (b) Physical condition of property. §965.215 Lead-based paint liability hazards, although it is not a required The property must meet local code insurance coverage. • coverage. A PHA may purchase this requirements (or, if no local code exists, (a) General.The purpose of this coverage if, in the opinion of the PHA, the housing quality standards section is to specify what HUD deems the policy meets the PHA's established by HUD for the Section 8 reasonable insurance coverage with requirements,the premium is Housing Assistance Payments Program respect to the hazards associated with reasonable and the policy is obtained in for Existing Housing, under part 882 of lead-based paint activities that the PHA accordance with applicable this title) and the relevant requirements undertakes,in accordance with the procurement standards. (See part 85 of of the Lead-Based Paint Poisoning PHA's ACC with HUD.The insurance this title and§965.205 of this title.)If Prevention Act(42 U.S.C. 4821-4846), coverage does not relieve the PHA of its this coverage is purchased, the premium the Residential Lead-Based Paint Hazard responsibility for assuring that lead- must be paid from funds available under Reduction Act of 1992 (42 U.S.C. 4851- based paint activities are conducted in the Performance Funding System or 4856),and implementing regulations a responsible manner. from reserves. Federal Register/Vol. 64, No. 178/WednesdaY, September 15, 1999/Rules and Regulations 50229 74. Revise subpart H,consisting of §968.205 Definitions. PART 970—PUBLIC HOUSING §965.701, to read as follows: * * * * * PROGRAM—DEMOLITION OR Other Modernization (modernization DISPOSITION OF PUBLIC HOUSING Subpart H—Lead-based Paint other than emergency).A type of PROJECTS Poisoning Prevention modernization program fore development that includes one or more 83.The authority citation for part 970 continues to read as follows: § 1 Lead-based paint poisoning physical work items.where HUD prevention. determines that the physical Authority:42 U.S.C. 1437p and 3535(d). The requirements of the Lead Based improvements are necessary and 84. Revise 970.13(d)(1)(i) to read as Paint Poisoning Prevention Act(42ial sufficient to extend substantially the follows: U.S.C. 4821-4846), the Residential useful life of the development, and/or Lead-Based Paint Hazard Reduction Act one or more development specific or §970.13 Resident organization of pie (42 U.S.C. 4851-4856),ations and PHA-wide management work items opportunity to purchase. implementing regulations at part 35, (including planning costs), and/or lead- * * * * * subparts A, B,L, and R of this title based paint activities. (d) apply to this program. * * * * * (1) PART 968—PUBLIC HOUSING 80.Revise§968.210(e)(2)(ii) to read as , (i) An identification of the MODERNIZATION follows: development, or portion of the development, in the proposed 75.The authority citationo for part 968 a968.210 oval of a modern ati ns for bprrogram. demolition or disposition, including the continues to read as follows: *pp * * * * development number and location,the Authority:42 U.S.C. 1437d, 14371,and (e) * * * number of units and bedroom 3535(d). (2) * * * configuration, the amount of space and 76. Revise the first sentence of (ii) Lead-based paint inspection use for non-dwelling space,the current §968.102(c) to read as follows: compliance.Where a PHA has not physical condition (e.g., fire damaged, §968.102 Special requirements for complied with the statutory requirement friable asbestos,lead-based paint Turnkey III developments. to complete lead-based paint inspectionstatus evaluation results), unt and u c pancy e * ce g.•p * * p y). (c) Other.The homebuyer family must eligible for processing only for be in compliance with its financial Emergency Modernization or work obligations under its homebuyer needed to complete the lead-based paint PART 9 2_SECTION 8 TENANT E A T BASED G agreement in order to be eligible for inspection. CHOICE VOUCHER PROGRAM non-emergency physical improvements, * * * * * 85,The authority citation for part 982 meeth the statutoryo and regulatoryof work necessary to §968 315(e)(2)(i)vise the f to read as follows: continues to read as follows: and requirements, (e.g., accessibility for §968.315 Comprehensive Plan(including Authority:42 U.S.C. 1437f and 3535(d). (' 9 persons with disabilities and lead-based five-year action plan). 86,Revise §882.158(f)(5) to read as paint activities) and the correction of * * * * * follows: development deficiencies. * * * (e) * * 77. Revise§968.110(k) to read as (2).* * * §982.158 Program accounts and records. follows: (i) Requirements.The physical needs * * * * * §968.110 Other program requirements. ntifies all of the work (0 * * * * * * * * that a PHA would need d to undertake to (k) Lead based paint poisoning bring each of its developments up tothe (5) Lead-based paint records as re uired by part 35,subpart B of this prevention.The PHA shall comply with modernization and energy conservation ti 9e the relevant requirements of the Lead- standards, as required by the Act,to * Based Paint Poisoning Prevention Act comply with the lead-based paint (42 U.S.C. 4821-4846),the Residential requirements in part 35,subparts A,B, 5982 301 [Amended] Lead-Based Paint Hazard Reduction Act L,and R of this title,and to comply with 87.In§982 301, paragraph of 1992 (42 U.S.C. 4851-4856),and other program requirements under (b)( I 5 82. 01,removee paragraphs implementing regulations at part 35, §968.110. * * * (b)(11)0 throughand red si n t as paragraphs * * * * raphs subparts A,.B.L,and R of this title. * * * * * 82.Revise§968.435(b) to read as (b)(10) through (b)(15), respectively. 88.Revise §982.305(b)(3) to read as 78.Revise§968.112(i) to read as follows: follows: follows: §968.435 Other program requirements.§968.112 Eligible costs. * * * * * §982.305 PHA approval of assisted tenancy. * * * * (b) Certify that activities undertaken * * * * * (i) Lead-based paint costs. Eligible within vacant units will bring the costs include lead-based paint activities, affected units into compliance with the (b) * he lease is approvable and such as insurance coverage and cleanup Housing Quality Standards,as set forth inc3u Tes the lease addendum and the and disposal, in accordance with part 35 in§982.401 of this title,except that 5982.401(0 of this title shall not apply: lead-based paint disclosure information * this title. the applicable lead-based paint as required in§35.92(b) of this title. 79.In§968.205, revise the definition requirements in part 35 subparts A,B, * * * * * of the term"Other modernization"to L and R,of this title shall apply. 89.Revise§982.401(0 to read as read as follows: , 50230 Federal Register/Vol. 64, No. 178/Wednesday, September 15, 1999/Rules and Regulations §982.401 Housing quality standards unit,the PHA must provide the family PART 1005—LOAN GUARANTEES (HQS). with information concerning the tenant FOR INDIAN HOUSING * * * * * rent and any applicable utility 100.The authority citation for part (j) Lead-based paint performance allowance and a copy of the lead hazard 1005 continues to read as follows: requirement.The Lead-Based Paint information pamphlet,as required by Poisoning Prevention Act(42 U.S.C. part 35,subpart A of this title. * * * Authority: 12 U.S.C. 1715z-13a and 4821-4846), the Residential Lead-Based * * * * * 3535(d). Paint Hazard Reduction Act of 1992 (42 101.In§1005.111, redesignate the U.S.C.4851-4856), and implementing PART 1000—NATIVE AMERICAN existing text as paragraph (a) and add regulations at part 35,subparts A, B.M, HOUSING ACTIVITIES paragraph (b) to read as follows: and R of this title apply to units assisted under this part. 95.The authority citation for part §1005.111 What safety and quality * * * * * 1000 continues to read as follows: standards apply? * * * * * Authority. 12 U.S.C. 1715z-13a and (b)The relevant requirements of the PART 983—SECTION 8 PROJECT- 3535(d). q BASED CERTIFICATE PROGRAM Lead-Based Paint Poisoning Prevention 96. Revise§1000.4©to read as Act(42 U.S.C. 4821-4846), the 90.The authority citation for part 983 follows: Residential Lead-Based Paint Hazard continues to read as follows: Reduction Act of 1992 (42 U.S.C. 4851- Authority:42 U.S.C. 1437f and 3535(d). §1000.40 Do lead-based paint poisoning 4856), and implementing regulations at prevention requirements apply to affordable part 35,subparts A, B,H.J, K,M, and 91.Revise§983.1(b)(2)(vii) to read as housing activities under NAHASDA? R of this title apply to this part. follows: Yes, lead-based paint requirements Dated:August 26, 1999. §983.1 Purpose and applicability. apply to housing activities assisted Andrew Cuomo, * * * * * under NAHASDA.The applicable (b) * * * requirements for NAHASDA are HUD's Secretary. (2) * * * regulations at part 35,subparts A,B, E, Appendix A—Sample Summary (vii) In subpart I of this part, G,H,K,M and R of this title,Which Inspection Notice Format §982.401(j), §982.402(a)(3), §982.402(c) implement the Lead-Based Paint Note:The following appendix will not and (d) (effect of family unit size— Poisoning Prevention Act(42 U.S.C. appear in the Code of Federal Regulations subsidy and size of unit): and§982.403 4822-4846) and the Residential Lead- Summary Notice of Lead Based Paint (termination of HAP contract when unit Based Paint Hazard Reduction Act of Inspection 1992 (42 U.S.C. 4851-4856 is too big or too small): ). Address/location of property or structure(s) * * * * * PART 1003—COMMUNITY this summary notice applies to: 92.Revise§983.5(c) to read as DEVELOPMENT BLOCK GRANTS FOR follows: INDIAN TRIBES AND ALASKAN §983.5 Physical condition standards; NATIVE VILLAGES Lead-based paint inspection description: physical inspection requirements. Date(s) of inspection: * * * * * 97.The authority citation for part 1003 continues to read as follows: Summary of inspection results(check all that (c) The Lead-Based Paint Poisoning apply): Prevention Act(42 U.S.C. 4821-4846), Authority:42 U.S.C.3535(d)and 5301 et (a)_No lead-based paint was found. the Residential Lead-Based Paint Hazard seq. (b)_Lead-based paint was found. Reduction Act of 1992 (42 U.S.C. 4851- (c) A brief summary of the findings of 98. Revise§1003.2b2(b)(7)(iv) to read the inspection is provided below 4856),and implementing regulations at part 35, subparts A, B,H, and R of this as follows: (required if lead based paint found). title apply to units assisted under this §1003.202 Eligible rehabilitation and Summary of where lead-based paint was found.List at least the housing unit numbers part. preservation activities. 93. Revise§983.104(b)(2)(iv) to read * * * * * and common areas(for multifamily housing), as follows: and building components (including type of (b) * * * room or space,and the material underneath §983.104 New construction or (7) * * * the paint): . rehabilitation completion. (iv) Lead-based paint activities in part * * * * * (b) * * * 35 of this title. (2) * * * * * * * * (iv) Units are in compliance With the 99. Revise§1003.607 to read as lead-based paint requirements in part follows: 35,subparts A,B, H, and R of this title; §1003.607 Lead-based paint. and * * * * * The requirements of the Lead-Based 94.In 5983.203(d), revise the first Paint Poisoning Prevention Act (42 sentence of the introductory paragraph U.S.G. 4821-4846), the Residential . to read as follows: Lead-Based Paint Hazard Reduction Act of 1992 (42 U.S.C. 4851-4856),and Contact person for more information about §983.203 Family participation. implementing regulations part 35, the ispection: * * * * * subparts A,B,J, K,and R of this title Printed name: (d) Briefing of families.When a family apply to activities conducted under this Organization: is selected to occupy a project-based program. Street and city: 1 Federal Register/Vol. 64, No. 178/Wednesday, September 15, 1999/Rules and Regulations 50231 State:_ZIP:_ Date: Street and city: Phone number:U State:_ZIP:_Phone number: ( ) Person who prepared this summary notice: Organization: Printed name: Street and city: Signature: Appendix D—Sample Hazard Date: Reduction Completion Notice Format Organization: State:_ZIP:_Phone number: ( ) p Street and city: Note:The following appendix will not State:_ZIP: Appendix C—Sample Summary appear in the Code of Federal Regulations. Phone number: ( ) • Presumption Notice Format Summary Notice of Completion of Lead- Appendix B—Sample Summary Risk Note:The following appendix will not Based Paint Hazard Reduction Activity Assessment Notice Format • • appear in the Code of Federal Regulations Address/location of property or structure(s) Note:This followingappendix Will not this summary notice applies to: ppNotice That Lead-Based Paint or Lead-Based appear in the Code of Federal Regulations Paint Hazards Are Presumed to be Present Summary Notice of Lead-Based Paint Risk Address/location of property or structure(s) Assessment this notice of presumption applies to: Summary of the hazard reduction activity: Address/location of property or structure(s) , Start and completion date(s): _ this summary notice applies to: Activity locations and types.List at least the Type of presumption(check all that apply): housing unit numbers and common areas(for (a)_Lead-based paint is presumed to be multifamily housing),bare soil locations, Lead-based paint risk assessment description: present. dust-lead locations,and/or building Date(s) of risk assessment: (b)_Lead-based paint hazard(s)is(are). components(including type of room or Summary of risk assessment results(check presumed to be present. space,and the material underneath the all that apply): Summary of presumption.List at least the paint),and types of hazard reduction (a)_No lead-based paint hazards were housing unit numbers and common areas(for activities performed at the locations listed: found. . multifamily housing),bare soil locations, (b)_Lead-based paint hazards were dust-lead locations,and/or building found. components(including type of room or (c)_A brief summary of the findings of space,and the material underneath the the risk assessment is provided below paint),and types of lead-based paint hazards (required if any lead-based paint hazards presumed to be.present: , were found). Dates)of clearance testing and/or soil Summary of types and locations of lead- analyses:_ based paint hazards.List at least the housing Locations of building components with lead- unit numbers and common areas(for • based paint remaining in the rooms,spaces multifamily housing),bare soil locations, • or areas where activities were conducted: dust-lead locations.and/or building . components(including type of room or space,and the material underneath the paint),and types of lead-based paint hazards found: Summary of results of clearance testing and soil analyses: (a) No clearance testing was performed. (b)_Clearance testing showed • • clearance was achieved. (c)_Clearance testing showed clearance Contact person for more information about was not achieved. the presumption: Contact person for more information about Printed name: the hazard reduction: Printed name: Organization: Organization: Contact person for more information about Street and city: the risk assessment: Street and city: State: ZIP: • Printed name: Phone number: ( ) State: ZIP: Phone number: (-._) Person who prepared this summary notice: Organization: Printed name: , Person who prepared this notice of Signature: Street and city: presumption: Date: Printed name: Organization: State:_ZIP:_Phone number: ( ) Street and city: Signature: State:_ZIP: Person who prepared this summary notice: Date: Phone number: U,. Printed name: • Organization: [FR Doc.99-23016 Filed 9-14-99: 8:45 am) Signature: BIWNG CODE 4210-32-P . 69rii y ca, z .0 z a a .. o,� C, 0 O .. 5 W N `O Do J a1 Cn P W N f?7 " O `° 5 O CD 0 0 CD A o N O CD o .0 CD cn o Cco Pa cn AD AD COD Co w - w wC• co • r at. -L. 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Cr 69 5 a m 0 69 69 69 69 69 69 0'' n pCD 0. e--• 1--' '--• 1-` 1-' 69 69 69 69 69 69 69 N C,D O C) co c+•w N N.) o O s-O 00 00 v 01 D1 Cn o CD 0 N.) 01 CD00 ND VI \O w �l usO " VP c a O .� ID �1 01 W N O v.�O 01 In laD\ Oo - AD O (...nO O (..n (..n co o Cn O co o co O Cr' 5. O o O O O O o O O O O O O t-C Co CD Exhibit D FAIR MARKET RENTS FOR EXISTING HOUSING OMAHA, NE-IA METROPOLITAN STATISTICAL AREA Effective October 1, 2003 Single Room Occupancy(SRO) $272 0 Bedrooms $362 1 Bedroom $496 2 Bedrooms $626 3 Bedrooms $821 4 Bedrooms $922 5 Bedrooms $1,060 6 Bedrooms $1,219 NOTES: Fair Market Rents (FMR) include utilities. The FMR for unit sizes larger than 4 bedrooms are calculated by adding 15%to the 4-bedroom FMR for each additional bedroom. EXAMPLE: The FMR for a 5- Bedroom unit is 1.15 times the 4-bedroom FMR or $922 x 1.15 = $1,060. A 7-bedroom is 1.45 times the 4-bedroom FMR or $922 x 1.45 = $1,337 SRO United Defined — These units are typically smaller size than a studio and are designed for occupancy by one person only. The units often do not contain food preparation or sanitary facilities; however, they may contain either or both. Revised October 23, 2003 EXHIBIT "E" Tenant Based Rental Assistance U.S.Department of Housing OMB Approval No.2506-0171 and Urban Development (Exp.03/31/2005) Set-up Report Office of Community Planning HOME Program and Development Note:Complete for all Tenant Based Rental Assistance Activities. Mark Appropriate Box: 0 Original Submission 0 Revision Part A: 1.Name Participant 5.HOME Funds for Activity a.Total Funds Requested $ 2.Activity Number 3.Participant Tax ID Number b.Participant Number c.Dollar Amount of Funds $ 4.Name&Phone Number of person completing form $ $ Part B:Activity Information. 1.Term of Contract 2.County Code 3.Number of Tenants Assisted Part C: Household Characteristics. Enter one code only in each block. No. Tenant's Last No. Tenant Subsidy Total Rent %of Hisp Race of Head Size of Head of Type of Is HOME As- Name or First 5 of Payment Amount (a+b) Area of Household House House Contract sisted Tenant Letters of Last BRs (a) (b) Median hold hold 0=Owner in HOME As- Name Income T=Tenant sisted Project 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 No.of Bedrooms Code Hispanic Race of Head of Household Code Size of Household Code Head of Household Code 1—1 Bedroom y—yes 11—White 1—1 Person 1—Single/Non Elderly 2—2 Bedrooms n—no 12—Black or African American 2-2 Persons 2—Elderly 3—3 Bedrooms 13—Asian 3—3 Persons 3—Related/Single Parent 4—4 Bedrooms 14—American Indian or Alaska Native 4—4 Persons 4—Related/Two Parent 5—5 or more Bedrooms 15—Native Hawaiian or Other Pacific Islander 5—5 Persons 5—Other 16—American Indian or Alaska Native&White 6—6 Persons %of Area Median Code 17—Asian&White 7—7 Persons 1— 0-30% 18—Black or African American&White 8-8or more Persons 2—30—50% 19—American Indian or Alaska Native& 3—50—60% Black or African American 4—60—80% 20—Other Multi Racial Page 1 of 4 form HUD-40095(02/2003) Part C: (con't.) Household Characteristics. Enter one code only in each block. No. Tenant's Last No. Tenant Subsidy Total Rent %of Hisp Race of Size of Head of Type of Is HOME As- Name or First 5 of Payment Amount (a+b) Area Head of House House Contract sisted Tenant Letters of Last BRs (a) (b) Median Household hold hold 0=Owner in HOME As- Name Income T=Tenant sisted Project 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 No.of Bedrooms Code Hispanic Race of Head of Household Code Size of Household Code Head of Household Code 1—1 Bedroom y—yes 11—White 1—1 Person 1—Single/Non Eldedy 2-2Bedrooms n—no 12—Black or African American 2-2Persons 2—Elderly 3—3 Bedrooms 13—Asian 3—3 Persons 3—Related/Single Parent 4—4 Bedrooms 14—American Indian or Alaska Native 4—4 Persons 4—Related/Two Parent 5—5 or more Bedrooms 15—Native Hawaiian or Other Pacific Islander 5—5 Persons 5—Other 16—American Indian or Alaska Native&White 6—6 Persons To of Area Median Code 17—Asian&White 7—7 Persons 1— 0-30% 18—Black or African American&White 8-8or mom Persons 2—30—50% 19—American Indian or Alaska Native& 3—50—60% Black or African American Page 2 of 4 form HUD-40095(02/2003) 4—60—80% 20—Other Multi Racial Public reporting burden for this collection of information is estimated to average 15 minutes per response,including the time for reviewing instructions,searching existing data sources,gathering and maintaining the data needed,and completing and reviewing the collection of information. This agency may not conduct or sponsor,and a person is not required to respond to,a collection of information unless that collection displays a valid OMB control number. The HOME statute imposes a significant number of data collection and reporting requirements. This includes information on assisted properties,on the owner or tenants of the properties, and on other programmatic areas. The information will be used: 1)to assist HOME participants in managing their programs;2)to track performance of participants in meeting fund commitment and disbursement deadlines;3)to permit HUD to determine whether each participant meets the HOME statutory income targeting and affordability requirements;and 4)to permit HUD to determine compliance with other statutory and regulatory program requirements. This data collection is authorized under Title 11 of the Cranston-Gonzalez National Affordable Housing Act or related authorities. Access to Federal grant funds is contingent on the reporting of certain activity- specific elements. Records of information collected will be maintained by the recipients of the assistance. Information on activities and disbursements of grant funds is public information and is generally available for disclosure. Recipients are responsible for ensuring confidentially when public disclosure is not required. Sensitive Information:Some of the information collected on this form is considered sensitive and is protected by the Privacy Act. The Privacy Act requires that these records be maintained with appropriate administrative,technical,and physical safeguards to ensure their security and confidentiality. In addition,these records should be protected against any anticipated threats or hazards to their security or integrity which could result in substantial harm,embarrassment,inconvenience,or unfairness to any individual on whom the information if maintained. Recipients are responsible for ensuring confidentiality when public disclosure is not required. Instructions for Completing the Tenant-Based Rental Assistance Set-Up Report HOME Program Read the instructions for each item carefully before completing Part C. Household Characteristics. the form. Use a typewriter or print carefully with a ballpoint pen. Complete one line for each tenant receiving HOME tenant-based Prepare an original and one copy. Retain the copy. rental assistance from HOME funds. Applicability. This report is to be completed for each rental Tenant's Last Name or First 5 Letters of Last Name. Enter the activity assisted with HOME funds. A single set-up report form tenant's last name if the name is 5 letters or less. Enter the first may include up to 99 tenants so long as the term of the contract is five letters of the last name if the name is more than five letters. the same for all of the tenants in the report form. For centralized State projects,the tenants must be in the same country. Number of Bedrooms. Enter "0" for a single room occupancy (SRO) unit or for an efficiency unit, 1 for 1 bedroom, 2 for 2 Timing. Data is to be entered into IDIS before funds may be bedrooms, 3 for 3 bedrooms, 4 for 4 bedrooms, and 5 for 5 or drawn down for an activity. An amended set-up report form more bedrooms. should be submitted to increase or decrease HOME funding for the activity. Monthly Rent(Including Utilities). Tenant Payment. Enter the actual rent to the nearest dollar, Part A: Activity Information including utilities, paid by the tenant at the time of activity completion. If the rent includes utilities, or if the rent includes 1. Name of Participant. Enter the name of the jurisdiction. partial utilities, e.g., heat, but not electricity, these utility costs 2. Project Number. Enter the activity number assigned by must be added to the rent. Compute utility costs for the area(and IDIS. in the case of partial utilities, compute costs for utilities excluded 3. Participant's Tax ID Number. Enter the Tax from the rent), by using the utility allowance schedule by the local (Employer)Identification Number for the participant. Public Housing Authority (PHA) in accordance with form HUD- 4. Name& Phone Number of Person Completing Form. 52667, Allowance for Tenant Furnished Utilities and Other Enter the name and phone number,including area code, Services. of the person to contact for further information regarding this project. HOME Subsidy Amount. Enter the amount from HOME funds 5. HOME Funds for Activity. that will be paid to the tenant or owner as a rent subsidy payment a. Enter the total amount of HOME (including any utility allowances)to the nearest dollar. funds requested for the activity. b. Enter the participant number (from Total Rent. Enter the total monthly rent (tenant payment plus item 2 of the HOME Investment HOME subsidy amount). Note:This amount may exceed the rent Partnership Agreement for Project paid to the owner if it includes tenant-paid utilities. Areas)for each fiscal year source of HOME project funds committed for Income Data. the activity. Percent of Area Median. For each occupied residential unit, c. Enter the amount of HOME funds enter one code only based on the following definitions: from each fiscal year by participant 1. 0-30 Percent of Area Median means a household whose number. adjusted income is at or below 30 percent of the median family income for the area, as determined by HUD with Part B: Activity Information adjustments for smaller and larger families. Items 1 and 2 must be the same for all tenants included in a 2. 30-50 Percent of Area Median means a household single activity set-up. whose adjusted income exceeds 30 percent and does 1. Term of Contract. Enter the term in months of tenant- not exceed 50 percent of the median family income for based rental assistance activity. the area, as determined by HUD with adjustments for 2. County Code. To be completed only by States that are smaller and larger families. being administered in a centralized State HOME 3. 50-60 Percent of Area Median means a household Program. Enter the 3-digit county code for the county in whose adjusted income exceeds 50 percent and does which the project is located. not exceed 60 percent of the median family income for 3. Number of Tenants Assisted. Enter the total number the area, as determined by HUD with adjustments for of tenants to be assisted by this activity. smaller and larger families. Page 3 of 4 form HUD-40095(02/2003) 4. 60-80 Percent of Area Median means a household 1. Section 8. Tenants receiving Section 8 assistance whose adjusted income exceeds 60 percent and does through the Section 8 Certificate Program under 24 CFR not exceed 80 percent of the median family income for part 882 or the Section 8 Housing Voucher Program the area, as determined by HUD with adjustments for under 24 CFR part 887. smaller and larger families. 2. HOME Tenant Based Rental Assistance. Tenants receiving HOME tenant-based assistance. Household Data. 3. Other Assistance. Tenants receiving rental assistance Hispanic Y/N: For each occupied residential unit, enter the through other Federal, State or local rental assistance ethnicity for the head of household as either "Y" for Hispanic or programs. Latino or"N"for Not Hispanic or Latino. Hispanic or Latino race is 4. No Assistance. Self-explanatory. defined as a person of Cuban, Mexican, Puerto Rican, South or Central American, other Spanish culture or origin, regardless of race. The term, "Spanish origin," can be used in addition to "Hispanic or Latino." Race—Head of Household: For each occupied residential unit, enter one code only based on the following definitions: 11. White. A person having origins in any of the original peoples of Europe, North Africa or the Middle East. 12. Black or African American. A person having origins in any of the black racial groups of Africa. Terms such as "Haitian"or"Negro"can be used in addition to"Black or African American." 13. Asian. A person having origins in any of the original peoples of the Far East, Southeast Asia, or the Indian subcontinent including, for example, Cambodia, China, India, Japan, Korea, Malaysia, Pakistan, the Philippine Islands,Thailand and Vietnam. 14. American Indian or Alaska Native. A person having origins in any of the original peoples of North and South America(including Central America),and who maintains affiliation or community attachment. 15. Native Hawaiian or Other Pacific Islander. A person having origins in any of the original people of Hawaii, Guam, Samoa or other Pacific Islands. 16. American Indian or Alaska Native&White. A person having these multiple race heritages as defined above. 17. Asian & White. A person having these multiple race heritages as defined above. 18. Black or African American&White. A person having these multiple race heritages as defined above. 19. American Indian or Alaska Native&Black or African American. A person having these multiple race heritages as defined above. 20. Other Multi Racial. For reporting individual responses that are not included in any of the other categories listed above. Size of Household. Enter the appropriate number of persons in the household: 1, 2, 3, 4, 5, 6, 7, or 8 or more persons (for households or more than 8,enter 8). Head of Household. For each residential unit, enter one code only based on the following definitions: 1. Single/Non-Elderly. One-person household in which the person is not elderly. 2. Elderly. One or two person household with a person at least 62 years of age. 3. Related/Single Parent. A single parent household with a dependent child or children(18 years old or younger). 4. Related/Two Parent. A two-parent household with a dependent child or children(18 years old or younger). 5. Other. Any household not included in the above 4 definitions, including two or more unrelated individuals. Rental Assistance: Enter one code only to indicate the type of assistance, if any, being provided to the tenant. Page 4 of 4 form HUD-40095(02/2003) WAIS Document Retrieval Page 1 of 4 [Code of Federal Regulations] • EX h• b 1+ , f- [Title 24, Volume 1, Parts 0 to 199] [Revised as of April 1, 1999] From the U.S. Government Printing Office via GPO Access [CITE: 24CFR5.609] [Page 68-71] TITLE 24--HOUSING AND URBAN DEVELOPMENT PART 5--GENERAL HUD PROGRAM REQUIREMENTS; WAIVERS--Table of Contents Subpart F--Income Limits, Annual Income, Adjusted Income, Rent, and Examinations for the Public Housing and Section 8 Programs Sec. 5.609 Annual income. (a) Annual income means all amounts, monetary or not, which: (1) Go to, or on behalf of, the family head or spouse (even if temporarily absent) or to any other family member; or (2) Are anticipated to be received from a source outside the family during the 12-month period following admission or annual reexamination effective date; and (3) Which are not specifically excluded in paragraph (c) of this section. (4) Annual income also means amounts derived (during the 12-month period) from assets to which any member of the family has access. (b) Annual income includes, but is not limited to: (1) The full amount, before any payroll deductions, of wages and salaries, overtime pay, commissions, fees, tips and bonuses, and other compensation for personal services; (2) The net income from the operation of a business or profession. Expenditures for business expansion or amortization of capital indebtedness shall not be used as deductions in determining net income. An allowance for depreciation of assets used in a [ [Page 69] ] business or profession may be deducted, based on straight line depreciation, as provided in Internal Revenue Service regulations. Any withdrawal of cash or assets from the operation of a business or profession will be included in income, except to the extent the withdrawal is reimbursement of cash or assets invested in the operation by the family; (3) Interest, dividends, and other net income of any kind from real or personal property. Expenditures for amortization of capital indebtedness shall not be used as deductions in determining net income. An allowance for depreciation is permitted only as authorized in paragraph (b) (2) of this section. Any withdrawal of cash or assets from an investment will be included in income, except to the extent the withdrawal is reimbursement of cash or assets invested by the family. Where the family has net family assets in excess of $5, 000, annual income shall include the greater of the actual income derived from all net family assets or a percentage of the value of such assets based on the current passbook savings rate, as determined by HUD; (4) The full amount of periodic amounts received from Social Security, annuities, insurance policies, retirement funds, pensions, disability or death benefits, and other similar types of periodic receipts, including a lump-sum amount or prospective monthly amounts for the delayed start of a periodic amount (except as provided in paragraph http://frwebgate 1.acces s.gpo.gov/cg i-bin/wai sgate.cgi?WAI S do cID=3 209 8 54819+4+0+0... 8/19/2003 WAIS Document Retrieval Page 2 of 4 (c) (14) of this section) ; (5) Payments in lieu of earnings, such as unemployment and disability compensation, worker's compensation and severance pay (except as provided in paragraph (c) (3) of this section) ; (6) Welfare assistance. If the welfare assistance payment includes an amount specifically designated for shelter and utilities that is subject to adjustment by the welfare assistance agency in accordance with the actual cost of shelter and utilities, the amount of welfare assistance income to be included as income shall consist of: (i) The amount of the allowance or grant exclusive of the amount specifically designated for shelter or utilities; plus (ii) The maximum amount that the welfare assistance agency could in fact allow the family for shelter and utilities. If the family's welfare assistance is ratably reduced from the standard of need by applying a percentage, the amount calculated under this paragraph (b) (6) (ii) shall be the amount resulting from one application of the percentage; (7) Periodic and determinable allowances, such as alimony and child support payments, and regular contributions or gifts received from organizations or from persons not residing in the dwelling; (8) All regular pay, special pay and allowances of a member of the Armed Forces (except as provided in paragraph (c) (7) of this section) . (c) Annual income does not include the following: (1) Income from employment of children (including foster children) under the age of 18 years; (2) Payments received for the care of foster children or foster adults (usually persons with disabilities, unrelated to the tenant family, who are unable to live alone) ; (3) Lump-sum additions to family assets, such as inheritances, insurance payments (including payments under health and accident insurance and worker's compensation) , capital gains and settlement for personal or property losses (except as provided in paragraph (b) (5) of this section) ; (4) Amounts received by the family that are specifically for, or in reimbursement of, the cost of medical expenses for any family member; (5) Income of a live-in aide, as defined in Sec. 5.403; (6) The full amount of student financial assistance paid directly to the student or to the educational institution; (7) The special pay to a family member serving in the Armed Forces who is exposed to hostile fire; (8) (i) Amounts received under training programs funded by HUD; (ii) Amounts received by a person with a disability that are disregarded for a limited time for purposes of Supplemental Security Income eligibility and benefits because they are set aside for use under a Plan to Attain Self-Sufficiency (PASS) ; [ [Page 70] ] (iii) Amounts received by a participant in other publicly assisted programs which are specifically for or in reimbursement of out-of-pocket expenses incurred (special equipment, clothing, transportation, child care, etc. ) and which are made solely to allow participation in a specific program; (iv) Amounts received under a resident service stipend. A resident service stipend is a modest amount (not to exceed $200 per month) received by a resident for performing a service for the PHA or owner, on a part-time basis, that enhances the quality of life in the development. Such services may include, but are not limited to, fire patrol, hall monitoring, lawn maintenance, and resident initiatives coordination. No resident may receive more than one such stipend during the same period of time; http://frwebgate 1.access.gpo.gov/cgi-bin/waisgate.cgi?WAISdocID=3209854819+4+0+0... 8/19/2003 WAIS Document Retrieval Page 3 of 4 (v) Incremental earnings and benefits resulting to any family member from participation in qualifying State or local employment training programs (including training programs not affiliated with a local government) and training of a family member as resident management staff. Amounts excluded by this provision must be received under employment training programs with clearly defined goals and objectives, and are excluded only for the period during which the family member participates in the employment training program; (9) Temporary, nonrecurring or sporadic income (including gifts) ; (10) Reparation payments paid by a foreign government pursuant to claims filed under the laws of that government by persons who were persecuted during the Nazi era; (11) Earnings in excess of $480 for each full-time student 18 years old or older (excluding the head of household and spouse) ; (12) Adoption assistance payments in excess of $480 per adopted child; (13) For public housing only: (i) The earnings and benefits to any family member resulting from the participation in a program providing employment training and supportive services in accordance with the Family Support Act of 1988, section 22 of the 1937 Act (42 U.S.C. 1437t) , or any comparable Federal, State, or local law during the exclusion period. (ii) For purposes of this paragraph, the following definitions apply: (A) Comparable Federal, State or local law means a program providing employment training and supportive services that-- (1) Is authorized by a Federal, State or local law; (2) Is funded by the Federal, State or local government; (3) Is operated or administered by a public agency; and (4) Has as its objective to assist participants in acquiring employment skills. (B) Exclusion period means the period during which the family member participates in a program described in this section, plus 18 months from the date the family member begins the first job acquired by the family member after completion of such program that is not funded by public housing assistance under the 1937 Act. If the family member is terminated from employment with good cause, the exclusion period shall end. (C) Earnings and benefits means the incremental earnings and benefits resulting from a qualifying employment training program or subsequent job; (14) Deferred periodic amounts from supplemental security income and social security benefits that are received in a lump sum amount or in prospective monthly amounts. (15) Amounts received by the family in the form of refunds or rebates under State or local law for property taxes paid on the dwelling unit; (16) Amounts paid by a State agency to a family with a member who has a developmental disability and is living at home to offset the cost of services and equipment needed to keep the developmentally disabled family member at home; or (17) Amounts specifically excluded by any other Federal statute from consideration as income for purposes of determining eligibility or benefits under a category of assistance programs that includes assistance under any program to which the exclusions set forth in 24 CFR 5.609(c) apply. A notice will be published in the Federal Register and distributed to PHAs and housing [ [Page 71] ] http://frwebgate 1.access.gpo.gov/cgi-bin/wai sgate.cgi?WAI SdocID=3209854819+4+0+0... 8/19/2003 WAIS Document Retrieval Page 4 of 4 owners identifying the benefits that qualify for this exclusion. Updates will be published and distributed when necessary. (d) For public housing only. In addition to the exclusions from annual income covered in paragraph (c) of this section, a PHA may adopt additional exclusions for earned income pursuant to an established written policy. (1) In establishing such a policy, a PHA must adopt one or more of the following types of earned income exclusions, including variations thereof: (i) Exclude all or part of the family's earned income; (ii) Apply the exclusion only to new sources of earned income or only to increases in earned income; (iii) Apply the exclusion to the earned income of the head, the spouse, or any other family member age 18 or older; (iv) Apply the exclusion only to the earned income of persons other than the primary earner; (v) Apply the exclusion to applicants, newly admitted families, existing tenants, or persons joining the family; (vi) Make the exclusion temporary or permanent, for the PHA, the family, or the affected family member; (vii) Make the exclusion graduated, so that more earned income is excluded at first and less earned income is excluded after a period of time; (viii) Exclude any or all of the costs that are incurred in order to go to work but are not compensated, such as the cost of special tools, equipment, or clothing; (ix) Exclude any or all of the costs that result from earning income, such as social security taxes or other items that are withheld in payroll deductions; (x) Exclude any portion of the earned income that is not available to meet the family's own needs, such as amounts that are paid to someone outside the family for alimony or child support; and (xi) Exclude any portion of the earned income that is necessary to replace benefits lost because a family member becomes employed, such as amounts that the family pays for medical costs or to obtain medical insurance. (2) Any amounts that are excluded from annual income under this paragraph (d) may not also be deducted in determining adjusted income, as defined in Sec. 5.611. (3) Housing agencies do not need HUD approval to adopt optional earned income exclusions. (4) In the calculation of Performance Funding System operating subsidy eligibility, housing agencies will have to absorb any loss in rental income that results from the adoption of any of the optional earned income exclusions discussed in paragraph (d) (1) of this section, including any variations of the listed options. (e) If it is not feasible to anticipate a level of income over a 12- month period, the income anticipated for a shorter period may be annualized, subject to a redetermination at the end of the shorter period. http://frwebgate 1.access.gpo.gov/cgi-bin/waisgate.cgi?WAI SdocID=3209854819+4+0+0... 8/19/2003 Now OMB Circular No. A-133 Page 1 of 33 EXHIBIT Circular No. A-133 Revised June 24, 1997 Audits of States, Local Governments, and Non-Profit Organizations (Accompanying Federal Register Materials-- Audits of States,.Local Governments,and Non- Profit Organizations June 30, i997) TO THE HEADS OF EXECUTIVE DEPARTMENTS AND ESTABLISHMENTS SUBJECT: Audits of States, Local Governments, and Non-Profit Organizations 1. Purpose.This Circular is issued pursuant to the Single Audit Act of 1984, P.L. 98-502, and the Single Audit Act Amendments of 1996,P.L, 104-156. It sets forth standards for obtaining consistency and uniformity among.Federal agencies for the audit of States, local governments, and non-profit organizations expending Federal awards. 2. Authority. Circular A-133 is issued under the authority of sections 503, 1111,and 7501 et seq. of title 31,United States Code, and Executive Orders 8248 and 11541. 3. Rescission and Supersession. This Circular rescinds Circular A-128, "Audits of State and Local Governments," issued April 12, 1985,and supersedes the prior Circular A-133, "Audits of Institutions of Higher Education and Other Non-Profit Institutions," issued April 22, 1996.For effective dates,see paragraph 10. 4. Policy. Except as provided herein,the standards set forth in this Circular shall be applied by all Federal agencies. If any statute specifically prescribes policies or specific requirements that differ from the standards provided herein,the provisions of the subsequent statute shall govern. • Federal agencies shall apply the provisions of the sections of this Circular to non-Federal entities, whether they are recipients expending Federal awards received directly from Federal awarding agencies,or are subrecipients expending Federal awards received from a pass-through entity(a recipient or another subrecipient). This Circular does not apply to non-U.S. based entities expending Federal awards received either directly as a recipient or indirectly as a subrecipient. 5. Definitions. The definitions of key terms used in this Circular are contained in §_.105 in the Attachment to this Circular. 6. Required Action. The specific requirements and responsibilities of Federal agencies and non- Federal entities are set forth in the Attachment to this Circular. Federal agencies making awards to non-Federal entities, either directly or indirectly, shall adopt the language in the Circular in codified regulations as provided in Section 10(below),unless different provisions are required by Federal statute or are approved by the Office of Management and Budget(OMB). 7. OMB Responsibilities. OMB will review Federal agency regulations and implementation of this Circular,and will provide interpretations of policy requirements and assistance to ensure uniform, http://www.whitehouse.gov/omb/circulars/a133/al33.html 6/21/00 a r OMB Circular No. A-133 Page 2 of 33 effective and efficient implementation. 8. Information Contact. Further information concerning Circular A-133 may be obtained by contacting the Financial Standards and Reporting Branch, Office of Federal Financial Management, Office of Management and Budget,Washington, DC 20503,telephone(202) 395-3993. 9. Review Date. This Circular will have a policy review three years from the date of issuance. 10. Effective Dates. The standards set forth in § .400 of the Attachment to this Circular,which apply directly to Federal agencies, shall be effective July 1, 1996, and shall apply to audits of fiscal years beginning after June 30, 1996, except as otherwise specified in §_.400(a). The standards set forth in this Circular that Federal agencies shall apply to non-Federal entities shall be adopted by Federal agencies in codified regulations not later than 60 days after publication of this final revision in the Federal Register, so that they will apply to audits of fiscal years beginning after June 30, 1996,with the exception that §_.305(b)of the Attachment applies to audits of fiscal years beginning after June 30, 1998. The requirements of Circular A-128, although the Circular is rescinded, and the 1990 version of Circular A-133 remain in effect for audits of fiscal years beginning on or before June 30, 1996. Franklin D. Raines Director Attachment PART_--AUDITS OF STATES, LOCAL GOVERNMENTS, AND NON-PROFIT ORGANIZATIONS Subpart A--General Sec. _.100 Purpose. __.105 Definitions. SubpartB- Audits _.200 Audit requirements. .205 Basis for determining Federal awards expended. _.210 Subrecipient and vendor determinations. .215 Relation to other audit requirements. _.220 Frequency of audits. _.225 Sanctions. _.230 Audit costs. _.235 Program-specific audits. SubpattC--Auditoes _.300 Auditee responsibilities. .305 Auditor selection. http://www.whitehouse.gov/omb/circulars/a133/a133.html 6/21/00 IN* OMB Circular No. A-133 Page 3 of 33 .310 Financial statements. .315 Audit findings follow-up. .320 Report submission. Subpart D--Federal Agencies_and Pass-Through E itities .400 Responsibilities. .405 Management decision. Subpart_E--Auditors .500 Scope of audit. .505 Audit reporting. .510 Audit findings. _.515 Audit working papers. _.520 Major program determination. .525 Criteria for Federal program risk. .530 Criteria for a low-risk auditee. Appendix A to Part—- Data Collection Form(Form SF-SAC). Appendix B to Part—-Circular A-133 Compliance Supplement. Subpart A--General § .100 Purpose. This part sets forth standards for obtaining consistency and uniformity among Federal agencies for the audit of non-Federal entities expending Federal awards. §_.105 Definitions. Auditee means any non-Federal entity that expends Federal awards which must be audited under this part. Auditor means an auditor,that is a public accountant or a Federal, State or local government audit organization,which meets the general standards specified in generally accepted government auditing standards(GAGAS). The term auditor does not include internal auditors of non-profit organizations. Audit finding means deficiencies which the auditor is required by§ 510(a)to report in the schedule of findings and questioned costs. CFDA number means the number assigned to a Federal program in the Catalog of Federal Domestic Assistance(CFDA). Cluster of programs means a grouping of closely related programs that share common compliance requirements. The types of clusters of programs are research and development(R&D), student financial aid(SFA), and other clusters. "Other clusters" are as defined by the Office of Management and Budget(OMB) in the compliance supplement or as designated by a State for Federal awards the http://www.whitehouse.gov/omb/circulars/a133/a133.html 6/21/00 . 4, OMB Circular No. A-133 Page 4 of 33 State provides to its subrecipients that meet the definition of a cluster of programs. When designating an "other cluster,"a State shall identify the Federal awards included in the cluster and advise the subrecipients of compliance requirements applicable to the cluster, consistent with §_.400(d)(1) and§ .400(dx2),respectively. A cluster of programs shall be considered as one program for determining major programs, as described in§_.520,and,with the exception of R&D as described in§ .200(c),whether a program-specific audit may be elected. Cognizant agency for audit means the Federal agency designated to carry out the responsibilities described in § .400(a). Compliance supplement refers to the Circular A-133 Compliance Supplement, included as Appendix B to Circular A-133,or such documents as OMB or its designee may issue to replace it. This document is available from the Government Printing Office, Superintendent of Documents, Washington,DC 20402-9325. Corrective action means action taken by the auditee that: (1)Corrects identified deficiencies; (2)Produces recommended improvements; or (3)Demonstrates that audit findings are either invalid or do not warrant auditee action. Federal agency has the same meaning as the term agency in Section 551(1)of title 5,United States Code. Federal award means Federal financial assistance and Federal cost-reimbursement contracts that non-Federal entities receive directly from Federal awarding agencies or indirectly from pass-through entities. It does not include procurement contracts,under grants or contracts, used to buy goods or services from vendors. Any audits of such vendors shall be covered by the terms and conditions of the contract. Contracts to operate Federal Government owned,contractor operated facilities(GOCOs) are excluded from the requirements of this part. Federal awarding agency means the Federal agency that provides an award directly to the recipient. Federal financial assistance means assistance that non-Federal entities receive or administer in the form of grants, loans, loan guarantees,property(including donated surplus property),cooperative agreements, interest subsidies,insurance, food commodities,direct appropriations, and other assistance,but does not include amounts received as reimbursement for services rendered to individuals as described in§ .205(h)and§ .205(i). Federal program means: (1)All Federal awards to a non-Federal entity assigned a single number in the CFDA. (2)When no CFDA number is assigned, all Federal awards from the same agency made for the same purpose should be combined and considered one program. (3)Notwithstanding paragraphs(1)and (2)of this definition,a cluster of programs. The types of http://www.whitehouse.gov/omb/circulars/aI33/a133.html 6/21/00 OMB Circular No. A-133 Page 5 of 33 clusters of programs are: (i)Research and development(R&D); (ii) Student financial aid(SFA); and (iii) "Other clusters," as described in the definition of cluster of programs in this section. GAGAS means generally accepted government auditing standards issued by the Comptroller General of the United States, which are applicable to financial audits. Generally accepted accounting principles has the meaning specified in generally accepted auditing standards issued by the American Institute of Certified Public Accountants(AICPA). Indian tribe means any Indian tribe,band,nation,or other organized group or community, including any Alaskan Native village or regional or village corporation(as defined in, or established under,the Alaskan Native Claims Settlement Act)that is recognized by the United States as eligible for the special programs and services provided by the United States to Indians because of their status as Indians. Internal control means a process,effected by an entity's management and other personnel, designed to provide reasonable assurance regarding the achievement of objectives in the following categories: (1)Effectiveness and efficiency of operations; (2)Reliability of financial reporting; and (3)Compliance with applicable laws and regulations. Internal control pertaining to the compliance requirements for Federal programs(Internal control over Federal programs)means a process--effected by an entity's management and other personnel--designed to provide reasonable assurance regarding the achievement of the following objectives for Federal programs: (1)Transactions are properly recorded and accounted for to: (i)Permit the preparation of reliable financial statements and Federal reports; (ii)Maintain accountability over assets; and (iii)Demonstrate compliance with laws, regulations, and other compliance requirements; (2)Transactions are executed in compliance with: (i)Laws,regulations, and the provisions of contracts or grant agreements that could have a direct and material effect on a Federal program; and (ii)Any other laws and regulations that are identified in the compliance supplement; and http://www.whitehouse.gov/omb/circulars/a133/a133.html 6/21/00 . 44411,' OMB Circular No. A-133 Page 6 of 33 (3)Funds,property, and other assets are safeguarded against loss from unauthorized use or disposition. Loan means a Federal loan or loan guarantee received or administered by a non-Federal entity. Local government means any unit of local government within a State, including a county,borough, municipality,city, town, township,parish, local public authority, special district, school district, intrastate district, council of governments, and any other instrumentality of local government. Major program means a Federal program determined by the auditor to be a major program in accordance with §__..520 or a program identified as a major program by a Federal agency or pass- through entity in accordance with §_.215(c). Management decision means the evaluation by the Federal awarding agency or pass-through entity of the audit findings and corrective action plan and the issuance of a written decision as to what corrective action is necessary. Non-Federal entity means a State, local government, or non-profit organization. Non-profit organization means: (1)any corporation,trust,association,cooperative, or other organization that: (i)Is operated primarily for scientific, educational, service,charitable,or similar purposes in the public interest; (ii)Is not organized primarily for profit; and (iii)Uses its net proceeds to maintain, improve,or expand its operations; and (2)The term non-profit organization includes non-profit institutions of higher education and, hospitals. OMB means the Executive Office of the President, Office of Management and Budget. Oversight agency for audit means the Federal awarding agency that provides the predominant amount of direct funding to a recipient not assigned a cognizant agency for audit. When there is no direct funding, the Federal agency with the predominant indirect funding shall assume the oversight responsibilities. The duties of the oversight agency for audit are described in§ .400(b). Pass-through entity means a non-Federal entity that provides a Federal award to a subrecipient to carry out a Federal program. Program-specific audit means an audit of one Federal program as provided for in § .200(c)and § .235. Questioned cost means a cost that is questioned by the auditor because of an audit finding: http://www.whitehouse.gov/omb/circulars/a133/a133.htm1 6/21 /00 OMB Circular No. A-133 Page 7 of 33 (1)Which resulted from a violation or possible violation of a provision of a law,regulation,contract, grant, cooperative agreement,or other agreement or document governing the use of Federal funds, including funds used to match Federal funds; (2)Where the costs, at the time of the audit, are not supported by adequate documentation; or (3)Where the costs incurred appear unreasonable and do not reflect the actions a prudent person would take in the circumstances. Recipient means a non-Federal entity that expends Federal awards received directly from a Federal awarding agency to carry out a Federal program. Research and development(R&D)means all research activities,both basic and applied, and all development activities that are performed by a non-Federal entity. Research is defined as a systematic study directed toward fuller scientific knowledge or understanding of the subject studied. The term research also includes activities involving the training of individuals in research techniques where such activities utilize the same facilities as other research and development activities and where such activities are not included in the instruction function. Development is the systematic use of knowledge and understanding gained from research directed toward the production of useful materials,devices, systems,or methods,including design and development of prototypes and processes. Single audit means an audit which includes both the entity's financial statements and the Federal awards as described in§ .500. State means any State of the United States,the District of Columbia, the Commonwealth of Puerto Rico,the Virgin Islands,Guam,American Samoa,the Commonwealth of the Northern Mariana Islands, and the Trust Territory of the Pacific Islands, any instrumentality thereof, any multi-State, regional, or interstate entity which has governmental functions, and any Indian tribe as defined in this section. Student Financial Aid(SFA)includes those programs of general student assistance, such as those authorized by Title IV of the Higher Education Act of 1965, as amended, (20 U.S.C. 1070 et seq.) which is administered by the U.S. Department of Education, and similar programs provided by other Federal agencies. It does not include programs which provide fellowships or similar Federal awards to students on a competitive basis, or for specified studies or research. Subrecipient means a non-Federal entity that expends Federal awards received from a pass-through entity to carry out a Federal program,but does not include an individual that is a beneficiary of such a program. A subrecipient may also be a recipient of other Federal awards directly from a Federal awarding agency. Guidance on distinguishing between a subrecipient and a vendor is provided in §_.210. Types of compliance requirements refers to the types of compliance requirements listed in the compliance supplement. Examples include: activities allowed or unallowed; allowable costs/cost principles; cash management; eligibility; matching, level of effort, earmarking; and,reporting. Vendor means a dealer,distributor,merchant, or other seller providing goods or services that are http://www.whitehouse.gov/omb/circulars/a133/a133.html 6/21/00 OMB Circular No.A-133 Page 8 of 33 required for the conduct of a Federal program. These goods or services may be for an organization's own use or for the use of beneficiaries of the Federal program. Additional guidance on distinguishing between a subrecipient and a vendor is provided in§ .210. Subpart B--Audits §_.200 Audit requirements. (a)Audit required. Non-Federal entities that expend$300,000 or more in a year in Federal awards shall have a single or program-specific audit conducted for that year in accordance with the e provisions of this part. Guidance on determining Federal awards expended is provided in §__.205. (b)Single audit. Non-Federal entities that expend$300,000 or more in a year in Federal awards shall have a single audit conducted in accordance with § .500 except when they elect to have a program- specific audit conducted in accordance with paragraph(c)of this section. (c) Program-specific audit election. When an auditee expends Federal awards under only one Federal program(excluding R&D) and the Federal program's laws,regulations, or grant agreements do not require a financial statement audit of the auditee,the auditee mayelect to have a program- specific P �' specific audit conducted in accordance with §_.235. A program-specific audit may not be elected for R&D unless all of the Federal awards expended were received from the same Federal agency,or the same Federal agency and the same pass-through entity,and that Federal agency,or pass-through entity in the case of a subrecipient, approves in advance a program-specific audit. (d)Exemption when Federal awards expended are less than $300,000.Non-Federal entities that expend less than$300,000 a year in Federal awards are exempt from Federal audit requirements for that year, except as noted in § .215(a),but records must be available for review or audit by appropriate officials of the Federal agency,pass-through entity, and General Accounting Office (GAO). (e) Federally Funded Research and Development Centers (FFRDC). Management of an auditee that owns or operates a FFRDC may elect to treat the FFRDC as a separate entity for purposes of this part. § .205 Basis for determining Federal awards expended. (a)Determining Federal awards expended. The determination of when an award is expended should be based on when the activity related to the award occurs. Generally,the activity pertains to events that require the non-Federal entity to comply with laws,regulations, and the provisions of contracts or grant agreements, such as: expenditure/expense transactions associated with grants, cost- reimbursement contracts, cooperative agreements, and direct appropriations;the disbursement of funds passed through to subrecipients; the use of loan proceeds under loan and loan guarantee programs; the receipt of property; the receipt of surplus property; the receipt or use of program income; the distribution or consumption of food commodities;the disbursement of amounts entitling the non-Federal entity to an interest subsidy; and, the period when insurance is in force. (b) Loan and loan guarantees(loans). Since the Federal Government is at risk for loans until the debt is repaid, the following guidelines shall be used to calculate the value of Federal awards expended under loan programs, except as noted in paragraphs(c)and (d) of this section: http://www.whitehouse.gov/omb/circulars/a133/a133.htmi 6/21/00 lot • OMB Circular No. A-133 Page 9 of 33 (1)Value of new loans made or received during the fiscal year;plus (2)Balance of loans from previous years for which the Federal Government imposes continuing compliance requirements; plus (3)Any interest subsidy, cash, or administrative cost allowance received. (c)Loan and loan guarantees(loans)at institutions of higher education. When loans are made to students of an institution of higher education but the institution does not make the loans,then only the value of loans made during the year shall be considered Federal awards expended in that year. The balance of loans for previous years is not included as Federal awards expended because the lender accounts for the prior balances. (d) Prior loan and loan guarantees(loans). Loans, the proceeds of which were received and expended in prior-years, are not considered Federal awards expended under this part when the laws, regulations, and the provisions of contracts or grant agreements pertaining to such loans impose no continuing compliance requirements other than to repay the loans. (e)Endowment funds. The cumulative balance of Federal awards for endowment funds which are federally restricted are considered awards expended in each year in which the funds are still restricted. (f)Free rent. Free rent received by itself is not considered a Federal award expended under this part. However, free rent received as part of an award to carry out a Federal program shall be included in determining Federal awards expended and subject to audit under this part. (g)Valuing non-cash assistance. Federal non-cash assistance,such as free rent, food stamps, food commodities,donated property, or donated surplus property, shall be valued at fair market value at the time of receipt or the assessed value provided by the Federal agency. (h)Medicare. Medicare payments to a non-Federal entity for providing patient care services to Medicare eligible individuals are not considered Federal awards expended under this part. (i)Medicaid.Medicaid payments to a subrecipient for providing patient care services to Medicaid eligible individuals are not considered Federal awards expended under this part unless a State requires the funds to be treated as Federal awards expended because reimbursement is on a cost- reimbursement basis. (j)Certain loans provided by the National Credit Union Administration. For purposes of this part, loans made from the National Credit Union Share Insurance Fund and the Central Liquidity Facility that are funded by contributions from insured institutions are not considered Federal awards expended. §_.210 Subrecipient and vendor determinations. (a)General. An auditee may be a recipient, a subrecipient, and a vendor. Federal awards expended as a recipient or a subrecipient would be subject to audit under this part. The payments received for goods or services provided as a vendor would not be considered Federal awards. The guidance in http://www.whitehouse.gov/omb/circulars/a133/a133.html 6/21/00 4. OMB Circular No. A-133 Page 10 of 33 paragraphs(b) and (c)of this section should be considered in determining whether payments constitute a Federal award or a payment for goods and services. (b) Federal award. Characteristics indicative of a Federal award received by a subrecipient are when the organization: (1)Determines who is eligible to receive what Federal financial assistance; (2)Has its performance measured against whether the objectives of the Federal program are met; (3)Has responsibility for programmatic decision making; (4)Has responsibility for adherence to applicable Federal program compliance requirements; and (5)Uses the Federal funds to carry out a program of the organization as compared to providing goods or services for a program of the pass-through entity. (c) Payment for goods and services. Characteristics indicative of a payment for goods and services received by a vendor are when the organization: (1)Provides the goods and services within normal business operations; (2)Provides similar goods or services to many different purchasers; (3)Operates in a competitive environment; (4)Provides goods or services that are ancillary to the operation of the Federal program; and (5)Is not subject to compliance requirements of the Federal program. (d) Use of judgment in making determination.There may be unusual circumstances or exceptions to the listed characteristics. In making the determination of whether a subrecipient or vendor relationship exists,the substance of the relationship is more important than the form of the agreement. It is not expected that all of the characteristics will be present and judgment should be used in determining whether an entity is a subrecipient or vendor. (e) For-profit subrecipient. Since this part does not apply to for-profit subrecipients, the pass- through entity is responsible for establishing requirements, as necessary,to ensure compliance by for- profit subrecipients. The contract with the for-profit subrecipient should describe applicable compliance requirements and the for-profit subrecipient's compliance responsibility. Methods to ensure compliance for Federal awards made to for-profit subrecipients may include pre-award audits, monitoring during the contract, and post-award audits. (f) Compliance responsibility for vendors. In most cases, the auditee's compliance responsibility for vendors is only to ensure that the procurement,receipt, and payment for goods and services comply with laws, regulations, and the provisions of contracts or grant agreements. Program compliance requirements normally do not pass through to vendors. However,the auditee is responsible for ensuring compliance for vendor transactions which are structured such that the vendor is responsible for program compliance or the vendor's records must be reviewed to determine http://www.whitehouse.gov/omb/circulars/a133/a133.html 6/21/00 OMB Circular No. A-133 Page 11 of 33 program compliance. Also, when these vendor transactions relate to a major program, the scope of the audit shall include determining whether these transactions are in compliance with laws, regulations, and the provisions of contracts or grant agreements. § .215 Relation to other audit requirements. (a)Audit under this part in lieu of other audits. An audit made in accordance with this part shall be in lieu of any financial audit required under individual Federal awards. To the extent this audit meets a Federal agency's needs, it shall rely upon and use such audits. The provisions of this part neither limit the authority of Federal agencies, including their Inspectors General,or GAO to conduct or arrange for additional audits(e.g., financial audits,performance audits, evaluations, inspections, or reviews)nor authorize any auditee to constrain Federal agencies from carrying out additional audits. Any additional audits shall be planned and performed in such a way as to build upon work performed by other auditors. (b)Federal agency to pay for additional audits. A Federal agency that conducts or contracts for additional audits shall, consistent with other applicable laws and regulations, arrange for funding the full cost of such additional audits. (c)Request for a program to be audited as a major program. A Federal agency may request an auditee to have a particular Federal program audited as a major program in lieu of the Federal agency conducting or arranging for the additional audits. To allow for planning,such requests should be made at least 180 days prior to the end of the fiscal year to be audited. The auditee, after consultation with its auditor, should promptly respond to such request by informing the Federal agency whether the program would otherwise be audited as a major program using the risk-based audit approach described in§ .520 and, if not,the estimated incremental cost. The Federal agency shall then promptly confirm to the auditee whether it wants the program audited as a major program. If the program is to be audited as a major program based upon this Federal agency request, and the Federal agency agrees to pay the full incremental costs,then the auditee shall have the program audited as a major program. A pass-through entity may use the provisions of this paragraph for a subrecipient. § .220 Frequency of audits. Except for the provisions for biennial audits provided in paragraphs(a) and(b)of this section, audits required by this part shall be performed annually. Any biennial audit shall cover both years within the biennial period. (a)A State or local government that is required by constitution or statute, in effect on January 1, 1987, to undergo its audits less frequently than annually, is permitted to undergo its audits pursuant to this part biennially. This requirement must still be in effect for the biennial period under audit. (b)Any non-profit organization that had biennial audits for all biennial periods ending between July 1, 1992, and January 1, 1995, is permitted to undergo its audits pursuant to this part biennially. §_.225 Sanctions. No audit costs may be charged to Federal awards when audits required by this part have not been made or have been made but not in accordance with this part. In cases of continued inability or unwillingness to have an audit conducted in accordance with this part,Federal.agencies and pass- http://www.whitehouse.gov/omb/circulars/a133/a133.html 6/21/00 OMB Circular No. A-133 Page 12 of 33 through entities shall take appropriate action using sanctions such as: (a)Withholding a percentage of Federal awards until the audit is completed satisfactorily; (b)Withholding or disallowing overhead costs; (c)Suspending Federal awards until the audit is conducted;or (d)Terminating the Federal award. § .230 Audit costs. (a) Allowable costs. Unless prohibited by law, the cost of audits made in accordance with the provisions of this part are allowable charges to Federal awards. The charges may be considered a direct cost or an allocated indirect cost, as determined in accordance with the provisions of applicable OMB cost principles circulars,the Federal Acquisition Regulation(FAR) (48 CFR parts 30 and 31), or other applicable cost principles or regulations. (b) Unallowable costs. A non-Federal entity shall not charge the following to a Federal award: (1)The cost of any audit under the Single Audit Act Amendments of 1996(31 U.S.C. 7501 et seq.) not conducted in accordance with this part. (2)The cost of auditinga non-Federal entity which has Federal awards expended of less than $300,000 per year and is thereby exempted under§ .200(d)from having an audit conducted under this part. However, this does not prohibit a pass-through entity from charging Federal awards for the cost of limited scope audits to monitor its subrecipients in accordance with§ .400(d)(3),provided the subrecipient does not have a single audit. For purposes of this part, limited scope audits only include agreed-upon procedures engagements conducted in accordance with either the AICPA's generally accepted auditing standards or attestation standards, that are paid for and arranged by a pass-through entity and address only one or more of the following types of compliance requirements: activities allowed or unallowed; allowable costs/cost principles; eligibility; matching, level of effort, earmarking; and, reporting. § .235 Program-specific audits. (a) Program-specific audit guide available. In many cases, a program-specific audit guide will be available to provide specific guidance to the auditor with respect to internal control, compliance requirements, suggested audit procedures, and audit reporting requirements. The auditor should contact the Office of Inspector General of the Federal agency to determine whether such a guide is available. When a current program-specific audit guide is available,the auditor shall follow GAGAS and the guide when performing a program-specific audit. (b) Program-specific audit guide not available. (1)When a program-specific audit guide is not available, the auditee and auditor shall have basically the same responsibilities for the Federal program as they would have for an audit of a major program in a single audit. (2) The auditee shall prepare the financial statement(s) for the Federal program that includes, at a minimum, a schedule of expenditures of Federal awards for the program and notes that describe the http://www.whitehouse.gov/omb/circulars/a133/a133.html 6/21/00 OMB Circular No. A-133 Page 13 of 33 significant accounting policies used in preparing the schedule, a summary schedule of prior audit findings consistent with the requirements of§ .315(b), and a corrective action plan consistent with the requirements of§ .315(c). (3)The auditor shall: ' (i)Perform an audit of the financial statement(s) for the Federal program in accordance with GAGAS; (ii)Obtain an understanding of internal control and perform tests of internal control over the Federal program consistent with the requirements of§ .500(c)for a major program; (iii)Perform procedures to determine whether the auditee has complied with laws,regulations,and the provisions of contracts or grant agreements that could have a direct and material effect on the Federal program consistent with the requirements of§_.500(d) for a major program;and (iv)Follow up on prior audit findings,perform procedures to assess the reasonableness of the summary schedule of prior audit findings prepared by the auditee, and report, as a current year audit finding,when the auditor concludes that the summary schedule of prior audit findings materially misrepresents the status of any prior audit finding in accordance with the requirements of§l.500 (e). (4)The auditor's report(s)may be in the form of either combined or separate reports and may be organized differently from the manner presented in this section. The auditor's report(s)shall state that the audit was conducted in accordance with this part and include the following: (i) An opinion(or disclaimer of opinion)as to whether the financial statement(s)of the Federal program is presented fairly in all material respects in conformity with the stated accounting policies; (ii)A report on internal control related to the Federal program,which shall describe the scope of testing of internal control and the results of the tests; (iii)A report on compliance which includes an opinion(or disclaimer of opinion) as to whether the auditee complied with laws, regulations, and the provisions of contracts or grant agreements which could have a direct and material effect on the Federal program; and (iv)A schedule of findings and questioned costs for the Federal program that includes a summary of the auditor's results relative to the Federal program in a format consistent with§ .505(d)(1)and findings and questioned costs consistent with the requirements of§_.505(d)(3). (c)Report submission for program-specific audits. (1)The audit shall be completed and the reporting required by paragraph(c)(2)or(c)(3)of this section submitted within the earlier of 30 days after receipt of the auditor's report(s),or nine months after the end of the audit period, unless a longer period is agreed to in advance by the Federal agency that provided the funding or a different period is specified in a program-specific audit guide. (However, for fiscal years beginning on or before June 30, 1998,the audit shall be completed and the required reporting shall be submitted within the earlier of 30 days after receipt of the auditor's report (s),or 13 months after the end of the audit period, unless a different period is specified in a progyam- http://www.whitehouse.gov/omb/circulars/a133/a133.html 6/21/00 OMB Circular No. A-133 Page 14 of 33 specific audit guide.)Unless restricted by law or regulation,the auditee shall make report copies available for public inspection. (2)When a program-specific audit guide is available, the auditee shall submit to the Federal clearinghouse designated by OMB the data collection form prepared in accordance with§ .320(b), as applicable to a program-specific audit,and the reporting required by the program-specific audit guide to be retained as an archival copy. Also,the auditee shall submit to the Federal awarding agency or pass-through entity the reporting required by the program-specific audit guide. (3) When a program-specific audit guide is not available, the reporting package for a program- specific audit shall consist of the financial statement(s)of the Federal program, a summary schedule of prior audit findings, and a corrective action plan as described in paragraph (b)(2)of this section, and the auditor's report(s)described in paragraph (b)(4) of this section. The data collection form prepared in accordance with §_.320(b), as applicable to a program-specific audit, and one copy of this reporting package shall be submitted to the Federal clearinghouse designated by OMB to be retained as an archival copy. Also,when the schedule of findings and questioned costs disclosed audit findings or the summary schedule of prior audit findings reported the status of any audit findings,the auditee shall submit one copy of the reporting package to the Federal clearinghouse on behalf of the Federal awarding agency, or directly to the pass-through entity in the case of a subrecipient. Instead of submitting the reporting package to the pass-through entity,when a subrecipient is not required to submit a reporting package to the pass-through entity, the subrecipient shall provide written notification to the pass-through entity,consistent with the requirements of§_.320(e)(2). A subrecipient may submit a copy of the reporting package to the pass-through entity to comply with this notification requirement. (d) Other sections of this part may apply. Program-specific audits are subject to § .100 through §_.215(b), § .220 through§_.230, §_.300 through § .305, § .315, §_.320(f) through § .320(0), § .400 through §_.405, §_.510 through § .515, and other referenced provisions of this part unless contrary to the provisions of this section,a program-specific audit guide, or program laws and regulations. Subpart C--Auditees §_.300 Auditee responsibilities. The auditee shall: (a)Identify, in its accounts, all Federal awards received and expended and the Federal programs under which they were received. Federal program and award identification shall include, as applicable,the CFDA title and number, award number and year, name of the Federal agency,and name of the pass-through entity. (b)Maintain internal control over Federal programs that provides reasonable assurance that the auditee is managing Federal awards in compliance with laws,regulations, and the provisions of contracts or grant agreements that could have a material effect on each of its Federal programs. (c) Comply with laws, regulations, and the provisions of contracts or grant agreements related to each of its Federal programs. http://www.whitehouse.gov/omb/circulars/a133/a133.html 6/21/00 . • • OMB Circular No. A-133 Page 15 of 33 (d)Prepare appropriate financial statements, including the schedule of expenditures of Federal awards in accordance with§ .310. (e)Ensure that the audits required by this part are properly performed and submitted when due. When extensions to the report submission due date required by§ .320(a) are granted by the cognizant or oversight agency for audit,promptly notify the Federal clearinghouse designated by OMB and each pass-through entity providing Federal awards of the extension. (f)Follow up and take corrective action on audit findings, including preparation of a summary schedule of prior audit findings and a corrective action plan in accordance with§ .315(b) and §_.315(c), respectively. §_.305 Auditor selection. (a)Auditor procurement. In procuring audit services, auditees shall follow the procurement standards prescribed by the Grants Management Common Rule(hereinafter referred to as the "A-102 Common Rule")published March 11, 1988 and amended April 19, 1995 [insert appropriate CFR citation],Circular A-110, "Uniform Administrative Requirements for Grants and Agreements with Institutions of Higher Education,Hospitals and Other Non-Profit Organizations," or the FAR(48 CFR part 42), as applicable(OMB Circulars are available from the Office of Administration, Publications Office, room 2200,New Executive Office Building,.Washington,DC 20503). Whenever possible,auditees shall make positive efforts to utilize small businesses, minority-owned firms,and women's business enterprises, in procuring audit services as stated in the A-102 Common Rule, OMB Circular A-110, or the FAR(48 CFR part 42), as applicable. In requesting proposals for audit services,the objectives and scope of the audit should be made clear. Factors to be considered in evaluating each proposal for audit services include the responsiveness to the request for proposal, relevant experience,availability of staff with professional qualifications and technical abilities,the results of external quality control reviews,and price. (b)Restriction on auditor preparing indirect cost proposals. An auditor who prepares the indirect cost proposal or cost allocation plan may not also be selected to perform the audit required by this part when the indirect costs recovered by the auditee during the prior year exceeded $1 million. This restriction applies to the base year used in the preparation of the indirect cost proposal or cost allocation plan and any subsequent years in which the resulting indirect cost agreement or cost allocation plan is used to recover costs. To minimize any disruption in existing contracts for audit services,this paragraph applies to audits of fiscal years beginning after June 30, 1998. (c) Use of Federal auditors. Federal auditors may perform all or part of the work required under this part if they comply fully with the requirements of this part. .310 Financial statements. (a) Financial statements. The auditee shall prepare financial statements that reflect its financial position,results of operations or changes in net assets, and, where appropriate, cash flows for the fiscal year audited. The financial statements shall be for the same organizational unit and fiscal year that is chosen to meet the requirements of this part. However, organization-wide financial statements may also include departments, agencies, and other organizational units that have separate audits in accordance with.§ .500(a)and prepare separate financial statements. http://www.whitehouse.gov/omb/circulars/a133/a133.html 6/21/00 OMB Circular No. A-133 Page 16 of 33 (b)Schedule of expenditures of Federal awards. The auditee shall also prepare a schedule of expenditures of Federal awards for the period covered by the auditee's financial statements. While not required,the auditee may choose to provide information requested by Federal awarding agencies and pass-through entities to make the schedule easier to use. For example,when a Federal program has multiple award years, the auditee may list the amount of Federal awards expended for each award year separately. At a minimum, the schedule shall: (1)List individual Federal programs by Federal agency. For Federal programs included in a cluster of programs, list individual Federal programs within a cluster of programs. For R&D, total Federal awards expended shall be shown either by individual award or by Federal agency and major subdivision within the Federal agency. For example, the National Institutes of Health is a major subdivision in the Department of Health and Human Services. (2)For Federal awards received as a subrecipient, the name of the pass-through entity and identifying number assigned by the pass-through entity shall be included. (3)Provide total Federal awards expended for each individual Federal program and the CFDA number or other identifying number when the CFDA information is not available. (4)Include notes that describe the significant accounting policies used in preparing the schedule. (5)To the extent practical,pass-through entities should identify in the schedule the total amount provided to.subrecipients from each Federal program. (6)Include, in either the schedule or a note to the schedule,the value of the Federal awards expended in the form of non-cash assistance, the amount of insurance in effect during the year, and loans or loan guarant ees es outstandingatyear end. While not required, it ispreferable to present this information in the schedule. § .315 Audit findings follow-up. (a)General. The auditee is responsible for follow-up and corrective action on all audit findings. As part of this responsibility, the auditee shall prepare a summary schedule of prior audit findings. The auditee shall also prepare a corrective action plan for current year audit findings. The summary schedule of prior audit findings and the corrective action plan shall include the reference numbers the auditor assigns to audit findings under§ .510(c). Since the summary schedule may include audit findings from multiple years, it shall include the fiscal year in which the finding initially occurred. (b)Summary schedule of prior audit findings. The summary schedule of prior audit findings shall report the status of all audit findings included in the prior audit's schedule of findings and questioned costs relative to Federal awards. The summary schedule shall also include audit findings reported in the prior audit's summary schedule of prior audit findings except audit findings listed as corrected in accordance with paragraph(b)(1)of this section,or no longer valid or not warranting further action in accordance with paragraph (b)(4)of this section. (1) When audit findings were fully corrected, the summary schedule need only list the audit findings and state that corrective action was taken. http://www.whitehouse.gov/omb/circulars/a133/a133.html 6/21/00 OMB Circular No. A-133 Page 17 of 33 ti (2)When audit findings were not corrected or were only partially corrected, the summary schedule shall describe the planned corrective action as well as any partial corrective action taken. (3)When corrective action taken is significantly different from corrective action previously reported in a corrective action plan or in the Federal agency's or pass-through entity's management decision, the summary schedule shall provide an explanation. (4)When the auditee believes the audit findings are no longer valid or do not warrant further action, the reasons for this position shall be described in the summary schedule. A valid reason for considering an audit finding as not warranting further action is that all of the following have occurred: (i)Two years have passed since the audit report in which the finding occurred was submitted to the Federal clearinghouse; (ii)The Federal agency or pass-through entity is not currently following up with the auditee on the audit finding; and (iii)A management decision was not issued. (c)Corrective action plan. At the completion of the audit,the auditee shall prepare a corrective action plan to address each audit finding included in the current year auditor's reports. The corrective action plan shall provide the name(s)of the contact person(s)responsible for corrective action,the corrective action planned, and the anticipated completion date. If the auditee does not agree with the audit findings or believes corrective action is not required,then the corrective action plan shall include an explanation and specific reasons. §_.320 Report submission. (a)General. The audit shall be completed and the data collection form described in paragraph(b) of this section and reporting package described in paragraph(c)of this section shall be submitted within the earlier of 30 days after receipt of the auditor's report(s),or nine months after the end of the audit period,unless a longer period is agreed to in advance by the cognizant or oversight agency for audit. (However, for fiscal years beginning on or before June 30, 1998,the audit shall be completed and the data collection form and reporting package shall be submitted within the earlier of 30 days after receipt of the auditor's report(s),or 13 months after the end of the audit period.)Unless restricted by law or regulation, the auditee shall make copies available for public inspection. (b) Data Collection. (1)The auditee shall submit a data collection form which states whether the audit was completed in accordance with this part and provides information about the auditee,its Federal programs, and the results of the audit. The form shall be approved by OMB, available from the Federal clearinghouse designated by OMB, and include data elements similar to those presented in this paragraph. A senior level representative of the auditee(e.g., State controller, director of finance, chief executive officer, or chief financial officer) shall sign a statement to be included as part of the form certifying that: the auditee complied.with the requirements of this part,the form was prepared in accordance with this part(and the instructions accompanying the form), and the information included in the form, in its entirety, are accurate and complete. http://www.whitehouse.gov/omb/circulars/a133/a133.html 6/21/00 • OMB Circular No. A-133 Page 18 of 33 (2)The data collection form shall include the following data elements: (i)The type of report the auditor issued on the financial statements of the auditee(i.e.,unqualified opinion,qualified opinion, adverse opinion,or disclaimer of opinion). (ii)Where applicable, a statement that reportable conditions in internal control were disclosed by the audit of the financial statements and whether any such conditions were material weaknesses. (iii)A statement as to whether the audit disclosed any noncompliance which is material to the financial statements of the auditee. (iv)Where applicable, a statement that reportable conditions in internal control over major programs were disclosed by the audit and whether any such conditions were material weaknesses. (v)The type of report the auditor issued on compliance for major programs(i.e., unqualified opinion, qualified opinion, adverse opinion,or disclaimer of opinion). (vi)A list of the Federal awarding agencies which will receive a copy of the reporting package pursuant to§ .320(d)(2)of OMB Circular A-133. (vii)A yes or no statement as to whether the auditee qualified as a low-risk auditee under§_.530 of OMB Circular A-133. (viii)The dollar threshold used to distinguish between Type A and Type B programs as defined in § .520(b) of OMB Circular A-133. (ix)The Catalog,of Federal Domestic Assistance(CFDA)number for each Federal program, as applicable. (x)The name of each Federal program and identification of each major program. Individual programs within a cluster of programs should be listed in the same level of detail as they are listed in the schedule of expenditures of Federal awards. (xi)The amount of expenditures in the schedule of expenditures of Federal awards associated with each Federal program. (xii)For each Federal program, a yes or no statement as to whether there are audit findings in each of the following types of compliance requirements and the total amount of any questioned costs: (A)Activities allowed or unallowed. (B)Allowable costs/cost principles. (C)Cash management. (D)Davis-Bacon Act. (E) Eligibility. http://wwvv.whitehouse.gov/omb/circulars/a133/a133.html 6/21/00 OMB Circular No. A-133 Page 19 of 33 (F)Equipment and real property management. (G)Matching, level of effort,earmarking. (H)Period of availability of Federal funds. (I)Procurement and suspension and debarment. (J)Program income. (K)Real property acquisition and relocation assistance. (L)Reporting. (M) Subrecipient monitoring. (N) Special tests and provisions. (xiii)Auditee Name, Employer Identification Number(s),Name and Title of Certifying Official, Telephone Number, Signature, and Date. (xiv)Auditor Name,Name and Title of Contact Person,Auditor Address, Auditor Telephone Number, Signature, and Date. (xv)Whether the auditee has either a cognizant or oversight agency for audit. (xvi)The name of the cognizant or oversight agency for audit determined in accordance with §_.400(a)and§ .400(b),respectively. (3)Using the information included in the reporting package described in paragraph(c)of this section, the auditor shall complete the applicable sections of the form. The auditor shall sign a statement to be included as part of the data collection form that indicates, at a minimum,the source of the information included in the form,the auditor's responsibility for the information,that the form is not a substitute for the reporting package described in paragraph(c)of this section,and that the content of the form is limited to the data elements prescribed by OMB. (c)Reporting package. The reporting package shall include the: (1)Financial statements and schedule of expenditures of Federal awards discussed,in § .310(a) and§ .310(b),respectively; (2) Summary schedule of prior audit findings discussed in §_.315(b); (3)Auditor's report(s)discussed in§_.505; and (4) Corrective action plan discussed in§ .315(c). http://vvww.whitehouse.gov/omb/circulars/a133/a133.html 6/21/00 OMB Circular No. A-133 Page 20 of 33 (d) Submission to clearinghouse. All auditees shall submit to the Federal clearinghouse designated by OMB the data collection form described in paragraph(b)of this section and one copy of the reporting package described in paragraph(c)of this section for: (1)The Federal clearinghouse to retain as an archival copy; and (2)Each Federal awarding agency when the schedule of findings and questioned costs disclosed audit findings relating to Federal awards that the Federal awarding agency provided directly or the summary schedule of prior audit findings reported the status of any audit findings relating to Federal awards that the Federal awarding agency provided directly. (e)Additional submission by subrecipients. (1) In addition to the requirements discussed in paragraph(d)of this section, auditees that are also subrecipients shall submit to each pass-through entity one copy of the reporting package described in paragraph(c) of this section for each pass- through entity when the schedule of findings and questioned costs disclosed audit findings relating to Federal awards that the pass-through entity provided or the summary schedule of prior audit findings reported the status of any audit findings relating to Federal awards that the pass-through entity provided. (2) Instead of submitting the reporting package to a pass-through entity, when a subrecipient is not required to submit a reporting package to a pass-through entity pursuant to paragraph(e)(1)of this section, the subrecipient shall provide written notification to the pass-through entity that: an audit of the subrecipient was conducted in accordance with this part(including the period covered by the audit and the name, amount, and CFDA number of the Federal award(s)provided by the pass-through entity); the schedule of findings and questioned costs disclosed no audit findings relating to the Federal award(s) that the pass-through entity provided; and,the summary schedule of prior audit findings did not report on the status of any audit findings relating to the Federal award(s) that the pass-through entity provided. A subrecipient may submit a copy of the reporting package described in paragraph(c)of this section to a pass-through entity to comply with this notification requirement. (f) Requests for report copies. In response to requests by a Federal agency or pass-through entity, auditees shall submit the appropriate copies of the reporting package described in paragraph(c)of this section and, if requested, a copy of any management letters issued by the auditor. (g) Report retention requirements. Auditees shall keep one copy of the data collection form described in paragraph(b)of this section and one copy of the reporting package described in paragraph(c)of this section on file for three years from the date of submission to the Federal clearinghouse designated by OMB. Pass-through entities shall keep subrecipients' submissions on file for three years from date of receipt. (h)Clearinghouse responsibilities. The Federal clearinghouse designated by OMB shall distribute the reporting packages received in accordance with paragraph(d)(2)of this section and § .235(c) (3)to applicable Federal awarding agencies,maintain a data base of completed audits,provide appropriate information to Federal agencies, and follow up with known auditees which have not submitted the required data collection forms and reporting packages. (i) Clearinghouse address. The address of the Federal clearinghouse currently designated by OMB is Federal Audit Clearinghouse,Bureau of the Census, 1201 E. 10th Street,Jeffersonville, IN 47132. http://www.whitehouse.gov/omb/circulars/a133/a133.html 6/21/00 . OMB Circular No. A-133 Page 21 of 33 (j) Electronic filing. Nothing in this part shall preclude electronic submissions to the Federal clearinghouse in such manner as may be approved by OMB. With OMB approval, the Federal clearinghouse may pilot test methods of electronic submissions. Subpart D—Federal Agencies and Pass-Through Entities §_.400 Responsibilities. (a)Cognizant agency for audit responsibilities. Recipients expending more than$25 million a year in Federal awards shall have a cognizant agency for audit. The designated cognizant agency for audit shall be the Federal awarding agency that provides the predominant amount of direct funding to a recipient unless OMB makes a specific cognizant agency for audit assignment. To provide for continuity of cognizance,the determination of the predominant amount of direct funding shall be based upon direct Federal awards expended in the recipient's fiscal years ending in 1995,2000, 2005, and every fifth year thereafter. For example,audit cognizance for periods ending in 1997 through 2000 will be determined based on Federal awards expended in 1995. (However, for States and local governments that expend more than$25 million a year in Federal awards and have previously assigned cognizant agencies for audit,the requirements of this paragraph are not effective until fiscal years beginning after June 30, 2000.)Notwithstanding the manner in which audit cognizance is determined, a Federal awarding agency with cognizance for an auditee may reassign cognizance to another Federal awarding agency which provides substantial direct funding and agrees to be the cognizant agency for audit. Within 30 days after any reassignment,both the old and the new cognizant agency for audit shall notify the auditee,and, if known,the auditor of the reassignment. The cognizant agency for audit shall: (1)Provide technical audit advice and liaison to auditees and auditors. (2)Consider auditee requests for extensions to the report submission due date required by§_.320 (a). The cognizant agency for audit may grant extensions for good cause. (3) Obtain or conduct quality control reviews of selected audits made by non-Federal auditors, and provide the results, when appropriate,to other interested organizations. (4)Promptly inform other affected Federal agencies and appropriate Federal law enforcement officials of any direct reporting by the auditee or its auditor of irregularities or illegal acts, as required by GAGAS or laws and regulations. (5)Advise the auditor where appropriate,the auditee of anydeficiencies found in the audits and, when the deficiencies require corrective action by the auditor. When advised of deficiencies,the auditee shall work with the auditor to take corrective action. If corrective action is not taken, the cognizant agency for audit shall notify the auditor, the auditee, and applicable Federal awarding agencies and pass-through entities of the facts and make recommendations for follow-up action. Major inadequacies or repetitive substandard performance by auditors shall be referred to appropriate State licensing agencies and professional bodies for disciplinary action. (6)Coordinate,to the extent practical, audits or reviews made by or for Federal agencies that are in addition to the audits made pursuant to this part, so that the additional audits or reviews build upon audits performed in accordance with this part. http://www.whitehouse.gov/omb/circulars/a133/a133.html 6/21/00 • OMB Circular No. A-133 Page 22 of 33 (7)Coordinate a management decision for audit findings that affect the Federal programs of more than one agency. (8)Coordinate the audit work and reporting responsibilities among auditors to achieve the most cost- effective audit. • (9)For biennial audits permitted under§ .220,consider auditee requests to qualify as a low-risk auditee under§ .530(a). (b)Oversight agency for audit responsibilities. An auditee which does not have a designated cognizant agency for audit will be under the general oversight of the Federal agency determined in accordance with§ .105. The oversight agency for audit:, (1) Shall provide technical advice to auditees and auditors as requested. (2)May assume all or some of the responsibilities normally performed by a cognizant agency for audit. (c)Federal awarding agency responsibilities. The Federal awarding agency shall perform the following for the Federal awards it makes: (1) Identify Federal awards made by informing each recipient of the CFDA title and number, award name and number, award year, and if the award is for R&D. When some of this information is not available,the Federal agency shall provide information necessary to clearly describe the Federal award. (2)Advise recipients of requirements imposed on them by Federal laws, regulations, and the provisions of contracts or grant agreements. (3) Ensure that audits are completed and reports are received in a timely manner and in accordance with the requirements of this part. (4)Provide technical advice and counsel to auditees and auditors as requested. (5)Issue a management decision on audit findings within six months after receipt of the audit report and ensure that the recipient takes appropriate and timely corrective action. (6)Assign a person responsible for providing annual updates of the compliance supplement to OMB. (d) Pass-through entity responsibilities. A pass-through entity shall perform the following for the Federal awards it makes: (1) Identify Federal awards made by informing each subrecipient of CFDA title and number, award name and number, award year, if the award is R&D, and name of Federal agency. When some of this information is not available, the pass-through entity shall provide the best information available to describe the Federal award. (2)Advise subrecipients of requirements imposed on them by Federal laws, regulations, and the http://www.whitehouse.gov/omb/circulars/a133/a 133.html 6/21/00 OMB Circular No. A-133 Page 23 of 33 provisions of contracts or grant agreements as well as any supplemental requirements imposed by the pass-through entity. (3)Monitor the activities of subrecipients as necessary to ensure that Federal awards are used for authorized purposes in compliance with laws,regulations, and the provisions of contracts or grant agreements and that performance goals are achieved. (4)Ensure that subrecipients expending$300,000 or more in Federal awards during the subrecipient's fiscal year have met the audit requirements of this part for that fiscal year. (5) Issue a management decision on audit findings within six months after receipt of the subrecipient's audit report and ensure that the subrecipient takes appropriate and timely corrective action. (6)Consider whether subrecipient audits necessitate adjustment of the pass-through entity's own records. (7)Require each subrecipient to permit the pass-through entity and auditors to have access to the records and financial statements as necessary for the pass-through entity to comply with this part. §_.405 Management decision. (a)General. The management decision shall clearly state whether or not the audit finding is sustained,the reasons for the decision,and the expected auditee action to repay disallowed costs, make financial adjustments,or take other action. If the auditee has not completed corrective action,a timetable for follow-up should be given. Prior to issuing the management decision,the Federal agency or pass-through entity may request additional information or documentation from the auditee, including a request for auditor assurance related to the documentation, as a way of mitigating disallowed costs. The management decision should describe any appeal process available to the auditee. (b)Federal agency. As provided in §_.400(a)(7),the cognizant agency for audit shall be responsible for coordinating a management decision for audit findings that affect the programs of more than one Federal agency. As provided in§_.400(c)(5), a Federal awarding agency is responsible for issuing a management decision for findings that relate to Federal awards it makes to recipients. Alternate arrangements may be made on a case-by-case basis by agreement among the Federal agencies concerned. (c) Pass-through entity. As provided in§ .400(d)(5),the pass-through entity shall be responsible for making the management decision for audit findings that relate to Federal awards it makes to subrecipients. (d)Time requirements. The entity responsible for making the management decision shall do so within six months of receipt of the audit report. Corrective action should be initiated within six months after receipt of the audit report and proceed as rapidly as.possible. (e) Reference numbers. Management decisions shall include the reference numbers the auditor assigned to each audit finding in accordance with§_.510(c). • http://www.whitehouse.gov/omb/circulars/a133/a133.html 6/21/00 • OMB Circular No. A-133 Page 24 of 33 Subpart E—Auditors §_.500 Scope of audit. (a)General. The audit shall be conducted in accordance with GAGAS. The audit shall cover the entire operations of the auditee; or, at the option of the auditee, such audit shall include a series of audits that cover departments, agencies, and other organizational units which expended or otherwise administered Federal awards during such fiscal year,provided that each such audit shall encompass the financial statements and schedule of expenditures of Federal awards for each such department, agency, and other organizational unit, which shall be considered to be a non-Federal entity. The financial statements and schedule of expenditures of Federal awards shall be for the same fiscal year. (b)Financial statements. The auditor shall determine whether the financial statements of the auditee are presented fairly in all material respects in conformity with generally accepted accounting principles. The auditor shall also determine whether the schedule of expenditures of Federal awards is presented fairly in all material respects in relation to the auditee's financial statements taken as a whole. (c)Internal control. (1)In addition to the requirements of GAGAS, the auditor shall perform procedures to obtain an understanding of internal control over Federal programs sufficient to plan the audit to support a low assessed level of control risk for major programs. (2)Except as provided in paragraph(c)(3)of this section,the auditor shall: (i)Plan the testing of internal control over major programs to support a Iow assessed level of control risk for the assertions relevant to the compliance requirements for each major program; and (ii)Perform testing of internal control as planned in paragraph(c)(2)(1) of this section. (3)When internal control over some or all of the compliance requirements for a major program are likely to be ineffective in preventing or detecting noncompliance,the planning and performing of testing described in paragraph(c)(2)of this section are not required for those compliance requirements. However, the auditor shall report a reportable condition(including whether any such condition is a material weakness) in accordance with§ .510, assess the related control risk at the maximum, and consider whether additional compliance tests are required because of ineffective internal control. (d) Compliance. (1)In addition to the requirements of GAGAS,the auditor shall determine whether the auditee has complied with laws,regulations, and the provisions of contracts or grant agreements that may have a direct and material effect on each of its major programs. (2)The principal compliance requirements applicable to most Federal programs and the compliance requirements of the largest Federal programs are included in the compliance supplement. (3)For the compliance requirements related to Federal programs contained in the compliance supplement, an audit of these compliance requirements will meet the requirements of this part. Where there have been changes to the compliance requirements and the changes are not reflected in the compliance supplement, the auditor shall determine the current compliance requirements and modify http://www.whitehouse.gov/omb/circulars/a133/a133.html 6/21/00 OMB Circular No.A-133 Page 25 of 33 the audit procedures accordingly. For those Federal programs not covered in the compliance supplement,the auditor should use the types of compliance requirements contained in the compliance supplement as guidance for identifying the types of compliance requirements to test, and determine the requirements governing the Federal program by reviewing the provisions of contracts and grant agreements and the laws and regulations referred to in such contracts and grant agreements. (4)The compliance testing shall include tests of transactions and such other auditing procedures necessary to provide the auditor sufficient evidence to support an opinion on compliance. (e)Audit follow-up. The auditor shall follow-up on prior audit findings,perform procedures to assess the reasonableness of the summary schedule of prior audit findings prepared by the auditee in accordance with § .315(b), and report, as a current year audit finding,when the auditor concludes that the summary schedule of prior audit findings materially misrepresents the status of any prior audit finding. The auditor shall perform audit follow-up procedures regardless of whether a prior audit finding relates to a major program in the current year. (f)Data Collection Form. As required in§ .320(b)(3),the auditor shall complete and sign specified sections of the data collection form. §_.505 Audit reporting. The auditor's report(s)may be in the form of either combined or separate reports and may be organized differently from the manner presented in this section. The auditor's report(s) shall state that the audit was conducted in accordance with this part and include the following: (a)An opinion (or disclaimer of opinion)as to whether the financial statements are presented fairly in all material respects in conformity with generally accepted accounting principles and an opinion(or disclaimer of opinion) as to whether the schedule of expenditures of Federal awards is presented fairly in all material respects in relation to the financial statements taken as a whole. (b)A report on internal control related to the financial statements and major programs. This report shall describe the scope of testing of internal control and the results of the tests, and, where applicable,refer to the separate schedule of findings and questioned costs described in paragraph(d) of this section. (c)A report on compliance with laws,regulations, and the provisions of contracts or grant agreements,noncompliance with which could have a material effect on the financial statements. This report shall also include an opinion(or disclaimer of opinion) as to whether the auditee complied with laws, regulations, and the provisions of contracts or grant agreements which could have a direct and material effect on each major program, and, where applicable,refer to the separate schedule of findings and questioned costs described in paragraph(d)of this section. (d) A schedule of findings and questioned costs which shall include the following three components: (1)A summary of the auditor's results which shall include: (i)The type of report the auditor issued on the financial statements of the auditee(i.e., unqualified opinion, qualified opinion, adverse opinion, or disclaimer of opinion); http://www.whitehouse.gov/omb/circulars/a133/a133.html 6/21/00 OMB Circular No. A-133 Page 26 of 33 (ii) Where applicable, a statement that reportable conditions in internal control were disclosed by the audit of the financial statements and whether any such conditions were material weaknesses; (iii)A statement as to whether the audit disclosed any noncompliance which is material to the financial statements of the auditee; (iv)Where applicable, a statement that reportable conditions in internal control over major programs were disclosed by the audit and whether any such conditions were material weaknesses; (v)The type of report the auditor issued on compliance for major programs (i.e., unqualified opinion, qualified opinion, adverse opinion, or disclaimer of opinion); (vi)A statement as to whether the audit disclosed any audit findings which the auditor is required to report under§ .510(a); (vii)An identification of major programs; (viii)The dollar threshold used to distinguish between Type A and Type B programs, as described in § .520(b); and (ix)A statement as to whether the auditee qualified as a low-risk auditee under§ .530. (2)Findings relating to the financial statements which are required to be reported in accordance with GAGAS. (3)Findings and questioned costs for Federal awards which shall include audit findings as defined in §_.510(a). (i) Audit findings(e.g., internal control findings, compliance findings,questioned costs,or fraud) which relate to the same issue should be presented as a single audit finding. Where practical, audit findings should be organized by Federal agency or pass-through entity. (ii)Audit findings which relate to both the financial statements and Federal awards, as reported under paragraphs (d)(2)and (d)(3)of this section, respectively, should be reported in both sections of the schedule. However,the reporting in one section of the schedule may be in summary form with a reference to a detailed reporting in the other section of the schedule. § .510 Audit findings. (a)Audit findings reported. The auditor shall report the following as audit findings in a schedule of findings and questioned costs: (1)Reportable conditions in internal control over major programs. The auditor's determination of whether a deficiency in internal control is a reportable condition for the purpose of reporting an.audit finding is in relation to a type of compliance requirement for a major program or an audit objective identified in the compliance supplement. The auditor shall identify reportable conditions which are individually or cumulatively material weaknesses. http://www.whitehouse.gov/omb/circulars/a133/a 133.html 6/21/00 OMB Circular No. A-133 Page 27 of 33 (2)Material noncompliance with the provisions of laws, regulations, contracts, or grant agreements related to a major program. The auditor's determination of whether a noncompliance with the provisions of laws, regulations, contracts, or grant agreements is material for the purpose of reporting an audit finding is in relation to a type of compliance requirement for a major program or an audit objective identified in the compliance supplement. (3)Known questioned costs which are greater than$10,000 for a type of compliance requirement for a major program. Known questioned costs are those specifically identified by the auditor. In evaluating the effect of questioned costs on the opinion on compliance, the auditor considers the best estimate of total costs questioned(likely questioned costs), not just the questioned costs specifically identified(known questioned costs). The auditor shall also report known questioned costs when likely questioned costs are greater than$10,000 for a type of compliance requirement for a major program. In reporting questioned costs,the auditor shall include information to provide proper perspective for judging the prevalence and consequences of the questioned costs. questioned costs which are greater than$10,000 for a Federal program which is not (4)Known audited as a major program. Except for audit follow-up,the auditor is not required under this part to perform audit procedures for such a Federal program; therefore, the auditor will normally not find questioned costs for a program which is not audited as a major program. However, if the auditor does become aware of questioned costs for a Federal program which is.not audited as a major program (e.g., as part of audit follow-up or other audit procedures) and the known questioned costs are greater than$10,000, then the auditor shall report this as an audit finding. (5)The circumstances concerning why the auditor's report on compliance for major programs is other than an unqualified opinion, unless such circumstances are otherwise reported as audit findings in the schedule of findings and questioned costs for Federal awards. (6)Known fraud affecting a Federal award,unless such fraud is otherwise reported as an audit finding in the schedule of findings and questioned costs for Federal awards. This paragraph does not require the auditor to make an additional reporting when the auditor confirms that the fraud was reported outside of the auditor's reports under the direct reporting requirements of GAGAS. 7 Instances where the results of audit follow-upprocedures disclosed that the summary schedule of prior audit findings prepared by the auditee in accordance with§_.315(b)materially misrepresents the status of any prior audit finding. (b)Audit finding detail. Audit findings shall be presented in sufficient detail for the auditee to prepare a corrective action plan and take corrective action and for Federal agencies and pass-through entities to arrive at a management decision. The following specific information shall be included,as applicable,in audit findings: (1)Federal program and specific Federal award identification including the CFDA title and number, Federal award number and year, name of Federal agency, and name of the applicable pass-through entity. When information, such as the CFDA title and number or Federal award number, is not available,the auditor shall provide the best information available to describe the Federal award. (2)The criteria or specific requirement upon which the audit finding is based, including statutory, regulatory,or other citation. http://www.whitehouse.gov/omb/circulars/a133/al33.html 6/21/00 OMB Circular No. A-133 Page 28 of 33 (3)The condition found, including facts that support the deficiency identified in the audit finding. (4)Identification of questioned costs and how they were computed. (5)Information to provide proper perspective for judging the prevalence and consequences of the audit findings,such as whether the audit findings represent an isolated instance or a systemic problem. Where appropriate, instances identified shall be related to the universe and the number of cases examined and be quantified in terms of dollar value. (6)The possible asserted effect to provide sufficient information to the auditee and Federal agency,or pass-through entity in the case of a subrecipient, to permit them to determine the cause and effect to facilitate prompt and proper corrective action. (7)Recommendations to prevent future occurrences of the deficiency identified in the audit finding. (8) Views of responsible officials of the auditee when there is disagreement with the audit findings,to the extent practical. (c)Reference numbers. Each audit finding in the schedule of findings and questioned costs shall include a reference number to allow for easy referencing of the audit findings during follow-up. § .515 Audit working papers. (a) Retention of working papers. The auditor shall retain working papers and reports for a minimum of three years after the date of issuance of the auditor's report(s)to the auditee, unless the auditor is notified in writing by the cognizant agency for audit,oversight agency for audit,or pass-through entity to extend the retention period. When the auditor is aware that the Federal awarding agency, pass-through entity, or auditee is contesting an audit finding, the auditor shall contact the parties contesting the audit finding for guidance prior to destruction of the working papers and reports. (b) Access to working papers. Audit working papers shall be made available upon request to the cognizant or oversight agency for audit or its designee, a Federal agency providing direct or indirect funding, or GAO at the completion of the audit, as part of a quality review,to resolve audit findings, or to carry out oversight responsibilities consistent with the purposes of this part. Access to working papers includes the right of Federal agencies to obtain copies of working papers,as is reasonable and necessary. § .520 Major program determination. (a) General. The auditor shall use a risk-based approach to determine which Federal programs are major programs. This risk-based approach shall include consideration of: Current and prior audit experience, oversight by Federal agencies and pass-through entities, and the inherent risk of the Federal program. The process in paragraphs (b) through(i)of this section shall be followed. (b)Step 1. (1)The auditor shall identify the larger Federal programs,which shall be labeled Type A programs. Type A programs are defined as Federal programs with Federal awards expended during the audit period exceeding the larger of: http://www.whitehouse.gov/omb/circulars/a133/a133.html 6/21/00 OMB Circular No. A-133 Page 29 of 33 (i)$300,000 or three percent(.03)of total Federal awards expended in the case of an auditee for which total Federal awards expended equal or exceed $300,000 but are less than or equal to $100 million. (ii)$3 million or three-tenths of one percent(.003)of total Federal awards expended in the case of an auditee for which total Federal awards expended exceed $100 million but are less than or equal to $10 billion. (iii) $30 million or 15 hundredths of one percent(.0015) of total Federal awards expended in the case of an auditee for which total Federal awards expended exceed$10 billion. (2)Federal programs not labeled.Type A under paragraph(b)(1)of this section shall be labeled Type B programs. (3)The inclusion of large loan and loan guarantees(loans) should not result in the exclusion of other programs as Type A programs. When a Federal program providing loans significantly affects the number or size of Type A programs, the auditor shall consider this Federal program as a Type A. program and exclude its values in determining other Type A programs. (4)For biennial audits permitted under§ .220,the determination of Type A and Type B programs shall be based upon the Federal awards expended during the two-year period. (c)Step 2. (1)The auditor shall identify Type A programs which are low-risk. For a Type A program to be considered low-risk, it shall have been audited as a major program in at least one of the two most recent audit periods(in the most recent audit period in the case of a biennial audit), and,in the most recent audit period, it shall have had no audit findings under§_.510(a). However, the auditor may use judgment and consider that audit findings from questioned costs under§ .510(a)(3)and §_.510(a)(4), fraud under§_.510(a)(6), and audit follow-up for the summary schedule of prior audit findings under§_.510(a)(7)do not preclude the Type A program from being low-risk. The auditor shall consider: the criteria in§ .525(c), § .525(d)(1), § .525(d)(2),and §_.525(d) (3); the results of audit follow-up;whether any changes in personnel or systems affecting a Type A program have significantly increased risk; and apply professional judgment in determining whether a Type A program is low-risk. (2)Notwithstanding paragraph(c)(1)of this section, OMB may approve a Federal awarding agency's request that a Type A program at certain recipients may not be considered low-risk. For example,it may be necessary for a large Type A program to be audited as major each year at particular recipients to allow the Federal agency to comply with the Government Management Reform Act of 1994(31 U.S.C. 3515). The Federal agency shall notify the recipient and, if known, the auditor at least 180 days prior to the end of the fiscal year to be audited of OMB's approval. (d)Step 3. (1) The auditor shall identify Type B programs which are high-risk using professional judgment and the criteria in §_.525. However, should the auditor select Option 2 under Step 4 (paragraph(e)(2)(i)(B)of this section), the auditor is not required to identify more high-risk Type B programs than the number of low-risk Type A programs. Except for known reportable conditions in internal control or compliance problems as discussed in§_.525(b)(1), § .525(b)(2), and §_.525(c)(1), a single criteria in§_.525 would seldom cause a Type B program to be considered high-risk. http://www.whitehouse.gov/omb/circulars/a133/a133.html 6/21/00 OMB Circular No. A-133 Page 30 of 33 (2)The auditor is not expected to perform risk assessments on relatively small Federal programs. Therefore, the auditor is only required to perform risk assessments on Type B programs that exceed the larger of: (i)$100,000 or three-tenths of one percent(.003)of total Federal awards expended when the auditee has less than or equal to $100 million in total Federal awards expended. (ii)$300,000 or three-hundredths of one percent(.0003) of total Federal awards expended when the auditee has more than$100 million in total Federal awards expended. (e)Step 4. At a minimum,the auditor shall audit all of the following as major programs: (1)All Type A programs,except the auditor may exclude any Type A programs identified as low-risk under Step 2 (paragraph(c)(1)of this section). (2)(i)High-risk Type B programs as identified under either of the following two options: (A)Option 1. At least one half of the Type B programs identified as high-risk under Step 3 (paragraph(d)of this section), except this paragraph(e)(2)(i)(A)does not require the auditor to audit more high-risk Type B programs than the number of low-risk Type A programs identified as low-risk under Step 2. (B)Option 2. One high-risk Type B program for each Type A program identified as low-risk under Step 2. (ii)When identifying which high-risk Type B programs to audit as major under either Option 1 or 2 in paragraph(e)(2)(i)(A)or(B), the auditor is encouraged to use an approach which provides an opportunity for different high-risk Type B programs to be audited as major over a period of time. (3) Such additional programs as may be necessary to comply with the percentage of coverage rule discussed in paragraph(f)of this section. This paragraph(e)(3)may require the auditor to audit more programs as major than the number of Type A programs. (f)Percentage of coverage rule. The auditor shall audit as major programs Federal programs with Federal awards expended that; in the aggregate, encompass at least 50 percent of total Federal awards expended. If the auditee meets the criteria in§ .530 for a low-risk auditee, the auditor need only audit as major programs Federal programs with Federal awards expended that,in the aggregate, encompass at least 25 percent of total Federal awards expended. (g)Documentation of risk. The auditor shall document in the working papers the risk analysis process used in determining major programs. (h)Auditor's judgment. When the major program determination was performed and documented in accordance with this part, the auditor's judgment in applying the risk-based approach to determine major programs shall be presumed correct. Challenges by Federal agencies and pass-through entities shall only be for clearly improper use of the guidance in this part. However, Federal agencies and pass-through entities may provide auditors guidance about the risk of a particular Federal program and the auditor shall consider this guidance in determining major programs in audits not yet http://www.whitehouse.gov/omb/circulars/a133/a133.html 6/21/00 OMB Circular No. A-133 Page 31 of 33 completed. • (i)Deviation from use of risk criteria. For first-year audits, the auditor may elect to determine major programs as all Type A programs plus any Type B programs as necessary to meet the percentage of coverage rule discussed in paragraph(1)of this section. Under this option, the auditor would not be required to perform the procedures discussed in paragraphs(c), (d), and(e) of this section. (1)A first-year audit is the first year the entity is audited under this part or the first year of a change of auditors. (2)To ensure that a frequent change of auditors would not preclude audit of high-risk Type B programs,this election for first-year audits may not be used by an auditee more than once in every three years. § .525 Criteria for Federal program risk. (a) General. The auditor's determination should be based on an overall evaluation of the risk of noncompliance occurring which could be material to the Federal program. The auditor shall use auditor judgment and consider criteria, such as described in paragraphs(b), (c),and(d)of this section, to identify risk in Federal programs. Also,as part of the risk analysis, the auditor may wish to discuss a particular Federal program with auditee management and the Federal agency or pass- through entity. (b)Current and prior audit experience. (1)Weaknesses in internal control over Federal programs would indicate higher risk. Consideration should be given to the control environment over Federal programs and such factors as the expectation of management's adherence to applicable laws and regulations and the provisions of contracts and grant agreements and the competence and experience of personnel who administer the Federal programs. (i)A Federal program administered under multiple internal control structures may have higher risk. When assessing risk in a large single audit, the auditor shall consider whether weaknesses are isolated in a single operating unit(e.g.,one college campus)or pervasive throughout the entity. (ii)When significant parts of a Federal program are passed through to subrecipients, a weak system for monitoring subrecipients would indicate higher risk. (iii)The extent to which computer processing is used to administer Federal programs, as well as the complexity of that processing, should be considered by the auditor in assessing risk.New and recently modified computer systems may also indicate risk. (2)Prior audit findings would indicate higher risk,particularly when the situations identified in the audit findings could have a significant impact on a Federal program or have not been corrected. . (3)Federal programs not recently audited as major programs may be of higher risk than Federal programs recently audited as major programs without audit findings. (c) Oversight exercised by Federal agencies and pass-through entities. (1)Oversight exercised by Federal agencies or pass-through entities could indicate risk. For example,recent monitoring or other http://wwvv.whitehouse.gov/omb/circulars/a13 3/a 133.html 6/21/00 OMB Circular No. A-133 Page 32 of 33 reviews performed by an oversight entity which disclosed no significant problems would indicate lower risk.However,monitoring which disclosed significant problems would indicate higher risk. (2)Federal agencies,with the concurrence of OMB, may identify Federal programs which are higher risk. OMB plans to provide,this identification in the compliance supplement. (d) inherent risk of the Federal program. (1)The nature of a Federal program may indicate risk. Consideration should be given to the complexity of the program and the extent to which the Federal program contracts for goods and services. For example,Federal programs that disburse funds through third party contracts or have eligibility criteria may be of higher risk. Federal programs primarily involving staff payroll costs may have a high-risk for time and effort reporting,but otherwise be at low-risk. (2)The phase of a Federal program in its life cycle at the Federal agency may indicate risk. For example, a new Federal program with new or interim regulations may have higher risk than an established program with time-tested regulations. Also, significant changes in Federal programs, laws, regulations, or the provisions of contracts or grant agreements may increase risk. (3) The phase of a Federal program in its life cycle at the auditee may indicate risk. For example, during the first and last years that an auditee participates in a Federal program,the risk may be higher due to start-up or closeout of program activities and staff. (4)Type 13 programs with larger Federal awards expended would be of higher risk than programs with substantially smaller Federal awards expended. §_.530 Criteria for a low-risk auditee. An auditee which meets all of the following conditions for each of the preceding two years (or, in the case of biennial audits,preceding two audit periods)shall qualify as a low-risk auditee and be eligible for reduced audit coverage in accordance with§_.520: (a) Single audits were performed on an annual basis in accordance with the provisions of this part. A non-Federal entity that has biennial audits does not qualify as a low-risk auditee,unless agreed to in advance by the cognizant or oversight agency for audit. (b)The auditor's opinions on the financial statements and the schedule of expenditures of Federal awards were unqualified. However,the cognizant or oversight agency for audit may judge that an opinion qualification does not affect the management of Federal awards and provide a waiver. (c) There were no deficiencies in internal control which were identified as material weaknesses under the requirements of GAGAS. However,the cognizant or oversight agency for audit may judge that any identified material weaknesses do not affect the management of Federal awards and provide a waiver. (d)None of the Federal programs had audit findings from any of the following in either of the preceding two years(or, in the case of biennial audits,preceding two audit periods)in which they were classified as Type A programs: (1) Internal control deficiencies which were identified as material weaknesses; http://www.whitehouse.gov/omb/circulars/a133/a133.html 6/21/00 OMB Circular No. A-133 Page 33 of 33 (2)Noncompliance with the provisions of laws,regulations, contracts, or grant agreements which have a material effect on the Type A program;or(3)Known or likely questioned costs that exceed five percent of the total Federal awards expended for a Type A program during the year. Appendix A to Part_-Data Collection Form(Form SF-SAC) d (56KB) Appendix B to Part_-Circular A-133 Compliance Supplement Note: Provisional OMB Circular A-133 Compliance Supplement is available from the Office of Administration,Publications Office, room 2200,New Executive Office Building, Washington,DC 20503. Billing Code 3110-01-P I OMB Home Page I.Budget Information j Legislative Information I Management Reform/GPRA f Grants Management I Financial Management I Procurement Policy I Information&Regulatory Policy I Special Topics Read our Privacy Policy http://www.whitehouse.gov/omb/circulars/a133/a133.html 6/21/00 cular No. A-67--Lost Principles for tate,Local,ana Inman r rioal uovernrnenls ILLpai www.w tc wuac.wv v u u a o avU ii N tva u i au. f Click to Print this document I. j`' Office of 11.'Ianagement and Budget Ex h i ' I/ August 29, 1997 MEMORANDUM FOR THE RECORD FROM: Norwood J. Jackson Deputy Controller • Office of Federal Financial Management SUBJECT: Recompilation of OMB Circular A-87 I certify that the attached document constitutes a recompilation of Office of Management and Budget Circular A-87, "Cost Principles for State, Local, and Indian Tribal Governments." The recompilation consists of the last complete revision of the Circular published at 60 FR 26484 (dated May 4, 1995,published May 17, 1995), as further amended at 62 FR 45934 (August 29, 1997). Top of Page OMB CIRCULAR A-87 (REVISED 5/4/95, As Further Amended 8/29/97) CIRCULAR NO. A-87 Revised TO THE HEADS OF EXECUTIVE DEPARTMENTS AND ESTABLISHMENTS SUBJECT: Cost Principles for State, Local, and Indian Tribal Governments 1. Purpose. This Circular establishes principles and standards for determining costs for Federal awards carried out through grants, cost reimbursement contracts, and other agreements with State and local governments and federally-recognized Indian tribal governments (governmental units). 2. Authority. This Circular is issued under the authority of the Budget and Accounting Act of 1921, as amended; the Budget and Accounting Procedures Act of 1950, as amended; the Chief Financial Officers Act of 1990; Reorganization Plan No. 2 of 1970; and Executive Order No. 11541 ("Prescribing the Duties of the Office of Management and Budget and the Domestic Policy Council in the Executive Office of the President"). 3. Background. An interagency task force was established in 1987 to review existing cost principles for Federal awards to State, local, and Indian tribal governments. The task force studied Inspector General reports and recommendation sulic.,ted suggestions for changes to the Circular from 1/Im)3 1:39 PM ... governmental units, and compared for consistency the provisions of other OMB cost principles circulars covering non-profit organizations and universities. A • proposed revised Circular reflecting the results of those efforts was issued on October 12; 1988, and August 19, 1993. Extensive comments on the proposed revisions, discussions with interest groups, and related developments were considered in developing this revision. 4. Rescissions. This Circular rescinds and supersedes Circular A-87, issued January 15, 1981. 5. Policy. This Circular establishes principles and standards to provide a uniform approach for determining costs and to promote effective program delivery, efficiency, and better relationships between governmental units and the Federal Government. The principles are for determining allowable costs only. They are not intended to identify the circumstances or to dictate the extent of Federal and governmental unit participation in the financing of a particular Federal award. Provision for profit or other increment above cost is outside the scope of this Circular. 6. Definitions. Definitions of key terms used in this Circular are contained in Attachment A, Section B. 7. Required Action. Agencies responsible for administering programs that involve cost reimbursement contracts, grants, and other agreements with governmental units shall issue codified regulations to implement the provisions of this Circular and its Attachments by September 1, 1995. 8. OMB Responsibilities. The Office of Management and Budget (OMB) will review agency regulations and implementation of this Circular, and will provide policy interpretations and assistance to insure effective and efficient implementation. Any exceptions will be subject to approval by OMB. Exceptions will only be made in particular cases where adequate justification is presented. 9. Information Contact. Further information concerning this Circular may be obtained by contacting the Office of Federal Financial Management, Financial Standards and Reporting Branch, Office of Management and Budget, Washington, DC 20503, telephone 202-395-3993. 10. Policy Review Date. OMB Circular A-87 will have a policy review three years from the date of issuance. 11. Effective Date. This Circular is effective as follows: - For costs charged indirectly or otherwise covered by the cost allocation plans described in Attachments C, D and E, this revision shall be applied to cost allocation plans and indirect cost proposals submitted or prepared for a governmental unit's fiscal year that begins on or after September 1. 1995. - For other costs, this revision shall be applied to all awards or amendments, including continuation or renewal awards, made on or after September 1, 1995. /I(vI)3 I: 9 I'M cular No.A-h/--Lost Principles tor state,Local,aria inoian i tidal vovernments p1 nrvavo r-au.ntmi r Attachments Top of Page OMB CIRCULAR NO. A-87 COST PRINCIPLES FOR STATE, LOCAL AND INDIAN TRIBAL GOVERNMENTS TABLE OF CONTENTS Attachment A - General Principles for Determining Allowable Costs Attachment B - Selected Items of Cost Attachment C - State/Local-Wide Central Service Cost Allocation Plans Attachment D - Public Assistance Cost Allocation Plans Attachment E - State and Local Indirect Cost Rate Proposals Top of Page ATTACHMENT A Circular No. A-87 GENERAL PRINCIPLES FOR DETERMINING ALLOWABLE COSTS TABLE OF CONTENTS A. Purpose and Scope l. Objectives 2. Policy guides 3. Application B. Definitions 1. Approval or authorization of he awarding or cognizant Federal agency 1/16103 is 9 PM 2. Award 3. Awarding agency 4. Central service cost allocation plan 5. Claim 6. Cognizant agency 7. Common rule 8. Contract 9. Cost 10. Cost allocation plan 11. Cost objective 12. Federally-recognized Indian tribal government 13. Governmental unit 14. Grantee department or agency 15. Indirect cost rate proposal 16. Local government 17. Public assistance cost allocation plan 18. State C. Basic Guidelines 1. Factors affecting allowability of costs 2. Reasonable costs 3. Allocable costs 4. Applicable credits D. Composition of Cost L. Total cost 2. Classification of costs -Lr1(0 )3 i:39 Pv cular No.A-87--Cost Principles for State,Local,and Indian Tribal ibal Governments http://www.whrtenouse.gowomoicucuiarsiaUts iiprinUa08/-all.html E. Direct Costs 1. General 2. Application 3. Minor items F. Indirect Costs 1. General 2. Cost allocation plans and indirect cost proposals 3. Limitation on indirect or administrative costs G. Interagency Services H. Required Certifications A. Purpose and Scope 1. Objectives. This Attachment establishes principles for determining the allowable costs incurred by State, local, and federally-recognized Indian tribal governments (governmental units) under grants, cost reimbursement contracts, and other agreements with the Federal Government (collectively referred to in this Circular as "Federal awards"). The principles are for the purpose of cost determination and are not intended to identify the circumstances or dictate the extent of Federal or governmental unit participation in the financing of a particular program or project. The principles are designed to provide that Federal awards bear their fair share of cost recognized under these principles except where restricted or prohibited by law. Provision for profit or other increment above cost is outside the scope of this Circular. 2. Policy guides. a. The application of these principles is based on the fundamental premises that: • (1) Governmental units are responsible for the efficient and effective administration of Federal awards through the application of sound management practices. (2) Governmental units assume responsibility for administering Federal funds in a manner consistent with underlying agreements, program objectives, and the terms and conditions of the Federal award. (3) Each governmental unit, in recognition of its own unique combination of staff, facilities, and experience. will have the primary responsibility for employing whatever form o l organization and management techniques may be ,� `; 4/i6'o3 i:3) PM UUILLI .YV.tl-U! -_VVJI 1 111tUl'JIUJ IVI JILLIUI LUULLII 411U IIIUI UII I I IULLI VVVUI IIIVUIILJ "vvr' """' "' J I I necessary to assure proper and efficient administration of Federal awards. b. Federal agencies should work with States or localities which wish to test alternative mechanisms for paying costs for administering Federal programs. The Office of Management and Budget (OMB) encourages Federal agencies to test fee-for-service alternatives as a replacement for current cost-reimbursement payment methods in response to the National Performance Review's (NPR) recommendation. The NPR recommended the fee-for-service approach to reduce the burden associated with maintaining systems for charging administrative costs to Federal programs and preparing and approving cost allocation plans. This approach should also increase incentives for administrative efficiencies and improve outcomes. 3. Application. a. These principles will be applied by all Federal agencies in determining costs incurred by governmental units under Federal awards (including subawards) except those with (1) publicly-financed educational institutions subject to OMB Circular A-21, "Cost Principles for Educational Institutions," and(2) programs administered by publicly-owned hospitals and other providers of medical care that are subject to requirements promulgated by the sponsoring Federal agencies. However, this Circular does apply to all central service and department/agency costs that are allocated or billed to those educational institutions, hospitals, and other providers of medical care or services by other State and local government departments and agencies. b. All subawards are subject to those Federal cost principles applicable to the particular organization concerned. Thus, if a subaward is to a governmental unit (other than a college, university or hospital), this Circular shall apply; if a subaward is to a commercial organization, the cost principles applicable to commercial organizations shall apply; if a subaward is to a college or university, Circular A-21 shall apply; if a subaward is to a hospital, the cost principles used by the Federal awarding agency for awards to hospitals shall apply, subject to the provisions of subsection A.3.a. of this Attachment; if a subaward is to some other non-profit organization, Circular A-122, "Cost Principles for Non-Profit Organizations," shall apply. c. These principles shall be used as a guide in the pricing of fixed price arrangements where costs are used in determining the appropriate price. d. Where a Federal contract awarded to a governmental unit incorporates a Cost Accounting Standards (CAS) clause, the requirements of that clause shall apply. In such cases, the governmental unit and the cognizant Federal agency shall establish an appropriate advance agreement on how the governmental unit will comply with applicable CAS requirements when estimating, accumulating and reporting costs under CAS-covered contracts. The agreement shall indicate that OMB Circular A-87 requirements will be applied to other Federal awards. In all cases, only one set of records needs to be maintained by the governmental unit. e. Conditional exemptions. (o)3 I:z9 PM rcular No.A-tS/ -Lost t nnciples tor State, Local,and Indian Tribal Governments http://www.whitehouse.gov/omb/circulars/a087/print/a087-all_html (1) OMB authorizes conditional exemption from OMB administrative requirements and cost principles circulars for certain Federal programs with statutorily-authorized consolidated planning and consolidated administrative funding, that are identified by a Federal agency and approved by the head of the Executive department or establishment. A Federal agency shall consult with OMB during its consideration of whether to grant such an exemption. (2) To promote efficiency in State and local program administration, when Federal non-entitlement programs with common purposes have specific statutorily-authorized consolidated planning and consolidated administrative funding and where most of the State agency's resources come from non-Federal sources, Federal agencies may exempt these covered State-administered, non-entitlement grant programs from certain OMB grants management requirements. The exemptions would be from all but the allocability of costs provisions of OMB Circulars A-87 (Attachment A, subsection C.3), "Cost Principles for State, Local, and Indian Tribal Governments," A-21 (Section C, subpart 4), "Cost Principles for Educational Institutions," and A-122 (Attachment A, subsection A.4), "Cost Principles for Non-Profit Organizations," and from all of the administrative requirements provisions of OMB Circular A-110, "Uniform Administrative Requirements for Grants and Agreements with Institutions of Higher Education, Hospitals, and Other Non-Profit Organizations," and the agencies' grants management common rule. (3) When a Federal agency provides this flexibility, as a prerequisite to a State's exercising this option, a State must adopt its own written fiscal and administrative requirements for expending and accounting for all funds,which are consistent with the provisions of OMB Circular A-87, and extend such policies to all subrecipients. These fiscal and administrative requirements must be sufficiently specific to ensure that: funds are used in compliance with all applicable Federal statutory and regulatory provisions, costs are reasonable and necessary for operating these programs, and funds are not be used for general expenses required to carry out other responsibilities of a State or its subrecipients. B. Definitions 1. "Approval or authorization of the awarding or cognizant Federal agency" means documentation evidencing consent prior to incurring a specific cost. If such costs are specifically identified in a Federal award document, approval of the document constitutes approval of the costs. If the costs are covered by a State/local-wide cost allocation plan or an indirect cost proposal, approval of the plan constitutes the approval. 2. "Award" means grants, cost reimbursement contracts and other agreements between a State, local and Indian tribal government and the Federal Government. 3. "Awarding agency" means (a) with respect to a ;rant. cooperative agreement, or cost reimbursement contract. the Federal agency, and (b) with respect to a /JM)3 1:39 PM I1 IVV.!1-U/ '-I.VJI l I )LULL,LVL.dl,dllu 111U1d1I l IlUdI VUV1.111I11U11J uur., vv rr r. ru,,,..vu�..w .v uv.0 .0 w.,uvV,.r a,uvu dll.111IIU subaward, the party that awarded the subaward. 4. "Central service cost allocation plan" means the documentation identifying, accumulating, and allocating or developing billing rates based on the allowable costs of services provided by a governmental unit on a centralized basis to its departments and agencies. The costs of these services may be allocated or billed to users. 5. "Claim" means a written demand or written assertion by the governmental unit or grantor seeking, as a matter of right, the payment of money in a sum certain, the adjustment or interpretation of award terms, or other relief arising under or relating to the award. A voucher, invoice or other routine request for payment that is not a dispute when submitted is not a claim. Appeals, such as those filed by a governmental unit in response to questioned audit costs, are not considered claims until a final management decision is made by the Federal awarding agency. 6. "Cognizant agency" means the Federal agency responsible for reviewing, negotiating, and approving cost allocation plans or indirect cost proposals developed under this Circular on behalf of all Federal agencies. OMB publishes a listing of cognizant agencies. 7. "Common Rule" means the "Uniform Administrative Requirements for Grants and Cooperative Agreements to State and Local Governments; Final Rule" originally issued at 53 FR 8034-8103 (March 11, 1988). Other common rules will be referred to by their specific titles. 8. "Contract" means a mutually binding legal relationship obligating the seller to furnish the supplies or services (including construction) and the buyer to pay for them. It includes all types of commitments that obligate the government to an expenditure of appropriated funds and that, except as otherwise authorized, are in writing. In addition to bilateral instruments, contracts include (but are not limited to): awards and notices of awards;job orders or task orders issued under basic ordering agreements; letter contracts; orders, such as purchase orders, under which the contract becomes effective by written acceptance or performance; and, bilateral contract modifications. Contracts do not include grants and cooperative agreements covered by 31 U.S.C. 6301 et seq. 9. "Cost" means an amount as determined on a cash, accrual, or other basis acceptable to the Federal awarding or cognizant agency. It does not include transfers to a general or similar fund. 10. "Cost allocation plan" means central service cost allocation plan, public assistance cost allocation plan, and indirect cost rate proposal. Each of these terms are further defined in this section. 11. "Cost objective" means a function, organizational subdivision. contract, grant, or other activity for which cost data are needed and for which costs are incurred. L/]6/O3 1.39 I'M ircular No.A-87--Cost Principles for State,Local,and Indian Tribal Governments http://www.whitehouse.gowombiclrcutars/a087/print/a087-all.html 12. "Federally-recognized Indian tribal government" means the governing body or a governmental agency of any Indian tribe, band, nation, or other organized group or community (including any native village as defined in Section 3 of the Alaska Native Claims Settlement Act, 85 Stat. 688) certified by the Secretary of the Interior as eligible for the special programs and services provided through the Bureau of Indian Affairs. 13. "Governmental unit" means the entire State, local, or federally-recognized Indian tribal government, including any component thereof. Components of governmental units may function independently of the governmental unit in accordance with the term of the award. 14. "Grantee department or agency" means the component of a State, local, or federally-recognized Indian tribal government which is responsible for the performance or administration of all or some part of a Federal award. 15. "Indirect cost rate proposal" means the documentation prepared by a governmental unit or component thereof to substantiate its request for the establishment of an indirect cost rate as described in Attachment E of this Circular. 16. "Local government" means a county, municipality, city, town, township, local public authority, school district, special district, intrastate district, council of governments (whether or not incorporated as a non-profit corporation under State law), any other regional or interstate government entity, or any agency or instrumentality of a local government. 17. "Public assistance cost allocation plan" means a narrative description of the procedures that will be used in identifying, measuring and allocating all administrative costs to all of the programs administered or supervised by State public assistance agencies as described in Attachment D of this Circular. 18. "State" means any of the several States of the United States, the District of Columbia, the Commonwealth of Puerto Rico, any territory or possession of the United States, or any agency or instrumentality of a State exclusive of local governments. C. Basic Guidelines 1. Factors affecting allowability of costs. To be allowable under Federal awards, costs must meet the following general criteria: a. Be necessary and reasonable for proper and efficient performance and administration of Federal awards. b. Be allocable to Federal awards under the provisions of this Circular. c. Be authorized or not prohibited under State or local laws or regulations. d. Conform to any limitation: or exclusions set forth in these principles. Federal !/I(o)3 I:9 PM rcular No. A-b/--Cost Principles tor state,Local,and Indian tribal C,ovemments http:nwww.wnnenuuse.guv uu,u Luau u s dUO Ni vaua -an.html laws, tennis and conditions of the Federal award, or other governing regulations as to types or amounts of cost items. e. Be consistent with policies, regulations, and procedures that apply uniformly to both Federal awards and other activities of the governmental unit. f. Be accorded consistent treatment. A cost may not be assigned to a Federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the Federal award as an indirect cost. g. Except as otherwise provided for in this Circular, be determined in accordance with generally accepted accounting principles. h. Not be included as a cost or used to meet cost sharing or matching requirements of any other Federal award in either the current or a prior period, except as specifically provided by Federal law or regulation. i. Be the net of all applicable credits. j. Be adequately documented. 2. Reasonable costs. A cost is reasonable if, in its nature and amount, it does not exceed that which would be incurred by a prudent person under the circumstances prevailing at the time the decision was made to incur the cost. The question of reasonableness is particularly important when governmental units or components are predominately federally- funded. In determining reasonableness of a given cost, consideration shall be given to: a. Whether the cost is of a type generally recognized as ordinary and necessary for the operation of the governmental unit or the performance of the Federal award. b. The restraints or requirements imposed by such factors as: sound business practices; arms length bargaining; Federal, State and other laws and regulations; and, terms and conditions of the Federal award. c. Market prices for comparable goods or services. d. Whether the individuals concerned acted with prudence in the circumstances considering their responsibilities to the governmental unit, its employees, the public at large, and the Federal Government. e. Significant deviations from the established practices of the governmental unit which may unjustifiably increase the Federal award's cost. 3. Allocable costs. a. A cost is allocable to a particular cost objective if the goods or services involved are chargeable or assignable to such cost objective in accordance with relative benefits received. Una i/I(iil)' ':39 P'A Ircu ar "o. - -- ost 'rincip es or tate, oca,an. n.ian ri.a Governments www.w ttehouse.gov/om./circu ars/a087/print/a087-all.html b. All activities which benefit from the governmental unit's indirect cost, including unallowable activities and services donated to the governmental unit by third parties, will receive an appropriate allocation of indirect costs. c. Any cost allocable to a particular Federal award or cost objective under the principles provided for in this Circular may not be charged to other Federal awards to overcome fund deficiencies, to avoid restrictions imposed by law or terms of the Federal awards, or for other reasons. However, this prohibition would not preclude governmental units from shifting costs that are allowable under two or more awards in accordance with existing program agreements. d. Where an accumulation of indirect costs will ultimately result in charges to a Federal award, a cost allocation plan will be required as described in Attachments C, D, and E. 4. Applicable credits. a. Applicable credits refer to those receipts or reduction of expenditure-type transactions that offset or reduce expense items allocable to Federal awards as direct or indirect costs. Examples of such transactions are:purchase discounts, rebates or allowances, recoveries or indemnities on losses, insurance refunds or rebates, and adjustments of overpayments or erroneous charges. To the extent that such credits accruing to or received by the governmental unit relate to allowable costs, they shall be credited to the Federal award either as a cost reduction or cash refund, as appropriate. b. In some instances, the amounts received from the Federal Government to finance activities or service operations of the governmental unit should be treated as applicable credits. Specifically, the concept of netting such credit items (including any amounts used to meet cost sharing or matching requirements) should be recognized in determining the rates or amounts to be charged to Federal awards. (See Attachment B, item 15, "Depreciation and use allowances," for areas of potential application in the matter of Federal financing of activities.) D. Composition of Cost 1. Total cost. The total cost of Federal awards is comprised of the allowable direct cost of the program, plus its allocable portion of allowable indirect costs, less applicable credits. 2. Classifical'on of costs. There is no universal rule for classifying certain costs as either dire:,t or indirect under every accounting system. A cost may be direct with respect to some specific service or function. but indirect with respect to the Federal award or other final cost objective. Therefore, it is essential that each item of cost be treated consistently in like circumstances either as a direct or an indirect cost. Guidelines for determining direct and indirect costs charged to _3 4/I6/u3 1:39 PM CUI2II IVu.A-0/ --l.US1 ri liWp1Us ILA JlalU,LUL.ah aUUU mown I I1Ua1 U OVGlJl1lI1.Its F'^',•,•••.,••••",•"""".b"••"••","• i""' " Federal awards are provided in the sections that follow. E. Direct Costs 1. General. Direct costs are those that can be identified specifically with a particular final cost objective. 2. Application. Typical direct costs chargeable to Federal awards are: a. Compensation of employees for the time devoted and identified specifically to the performance of those awards. b. Cost of materials acquired, consumed, or expended specifically for the purpose of those awards. c. Equipment and other approved capital expenditures. d. Travel expenses incurred specifically to carry out the award. 3. Minor items. Any direct cost of a minor amount may be treated as an indirect cost for reasons of practicality where such accounting treatment for that item of cost is consistently applied to all cost objectives. F. Indirect Costs 1. General. Indirect costs are those: (a) incurred for a common or joint purpose benefiting more than one cost objective, and (b) not readily assignable to the cost objectives specifically benefitted, without effort disproportionate to the results achieved. The term "indirect costs," as used herein, applies to costs of this type originating in the grantee department, as well as those incurred by other departments in supplying goods, services, and facilities. To facilitate equitable distribution of indirect expenses to the cost objectives served, it may be necessary to establish a number of pools of indirect costs within a governmental unit department or in other agencies providing services to a governmental unit department. Indirect cost pools should be distributed to benefitted cost objectives on bases that will produce an equitable result in consideration of relative benefits derived. 2. Cost allocation plans and indirect cost proposals. Requirements for development and submission of cost allocation plans and indirect cost rate proposals are contained in Attachments C, D, and E. 3. Limitation on indirect or administrative costs. a. In addition to restrictions contained in this Circular, there may be laws that further limit the amount of administrative or indirect cost allowed. b. Amounts not recoverable as indirect costs or administrative costs under one Federal award may not be shifted to another Federal award, unless specifically authorized by Federal legislation or regulation. 416/1)3 1:39 PM cular No.A-b --Lost l'rtnciptes tot Jtatc, Local,and Indian 1 What Uovernments nttp://www.wtmenouse.goviU111U/LAILuialw au° Ni illUaO0 -di 1.1illtil G. Interagency Services. The cost of services provided by one agency to another within the governmental unit may include allowable direct costs of the service plus a pro rate share of indirect costs. A standard indirect cost allowance equal to ten percent of the direct salary and wage cost of providing the service (excluding overtime, shift premiums, and fringe benefits) may be used in lieu of determining the actual indirect costs of the service. These services do not include centralized services included in central service cost allocation plans as described in Attachment C. H. Required Certifications. Each cost allocation plan or indirect cost rate proposal required by Attachments C and E must comply with the following: 1. No proposal to establish a cost allocation plan or an indirect cost rate, whether submitted to a Federal cognizant agency or maintained on file by the governmental unit, shall be acceptable unless such costs have been certified by the governmental unit using the Certificate of Cost Allocation Plan or Certificate of Indirect Costs as set forth in Attachments C and E. The certificate must be signed on behalf of the governmental unit by an individual at a level no lower than chief financial officer of the governmental unit that submits the proposal or component covered by the proposal. 2. No cost allocation plan or indirect cost rate shall be approved by the Federal Government unless the plan or rate proposal has been certified. Where it is necessary to establish a cost allocation plan or an indirect cost rate and the governmental unit has not submitted a certified proposal for establishing such a plan or rate in accordance with the requirements, the Federal Government may either disallow all indirect costs or unilaterally establish such a plan or rate. Such a plan or rate may be based upon audited historical data or such other data that have been furnished to the cognizant Federal agency and for which it can be demonstrated that all unallowable costs have been excluded. When a cost allocation plan or indirect cost rate is unilaterally established by the Federal Government because of failure of the governmental unit to submit a certified proposal, the plan or rate established will be set to ensure that potentially unallowable costs will not be reimbursed. Top of Page ATTACHMENT B Circular No. A-87 SELECTED ITEMS OF COST TABLE OF CONTENTS 1. Accounting 2. Advertising and public relations costs 3. Advisory councils 4. Alcoholic beverages t __ /16/03 1:39 PM 5. Audit services 6. Automatic electronic data processing 7. Bad debts 8. Bonding costs 9. Budgeting 10. Communications 11. Compensation for personnel services a. General b. Reasonableness c. Unallowable costs d. Fringe benefits e. Pension plan costs f. Post-retirement health benefits g. Severance Pay h. Support of salaries and wages i. Donated services 12. Contingencies 13. Contributions and donations 14. Defense and prosecution of criminal and civil proceedings, and claims 15. Depreciation and use allowances 16. Disbursing service 17. Employee morale, health, and welfare costs 18. Entertainment 19. Equipment and other capital expenditures 20. Fines and penalties 21. Fund raising and investment management costs 22. Gains and losses on disposition of depreciable property and other capital assets and substantial relocation of Federal programs. 23. General government expenses 24. Idle facilities and idle capacity 25. Insurance and indemnification 26. Interest 27. Lobbying 28. Maintenance, operations, and repairs 29. Materials and supplies 30. Memberships, subscriptions, and professional activities 31. Motor pools 32. Pre-award costs 33. Professional service costs 34. Proposal costs 35. Publication and printing costs 36. Rearrangements and alterations 37. Reconversion costs 38. Rental costs 39. Taxes 40. Training 41. Travel costs 42. Underrecovery of costs under Federal agreements Sections 1 through 42 provide principles to be applied in establishing the 4I6/1)3 I:39 PM t.uldl INU. H-O -l.Usl rl n ll.iplcs LUI Jlalc,LULU,dllu If olan I rnoal uovemmenis nap://www.wnuenouse.guwurituiLuculuiStalTh pl lnau0/-dIIJI[ml allowability or unallowability of certain items of cost. These principles apply whether a cost is treated as direct or indirect. A cost is allowable for Federal reimbursement only to the extent of benefits received by Federal awards and its conformance with the general policies and principles stated in Attachment A to this Circular. Failure to mention a particular item of cost in these sections is not intended to imply that it is either allowable or unallowable; rather, determination of allowability in each case should be based on the treatment or standards provided for similar or related items of cost. 1. Accounting. The cost of establishing and maintaining accounting and other information systems is allowable. 2. Advertising and public relations costs. a. The term "advertising costs" means the costs of advertising media and corollary administrative costs.. Advertising media include magazines, newspapers, radio and television programs, direct mail, exhibits, and the like. b. The term "public relations" includes community relations and means those activities dedicated to maintaining the image of the governmental unit or maintaining or promoting understanding and favorable relations with the community or public at large or any segment of the public. c. Advertising costs are allowable only when incurred for the recruitment of personnel, the procurement of goods and services, the disposal of surplus materials, and any other specific purposes necessary to meet the requirements of the Federal award. Advertising costs associated with the disposal of surplus materials are not allowable where all disposal costs are reimbursed based on a standard rate as specified in the grants management common rule. d. Public relations costs are allowable when: (1) Specifically required by the Federal award and then only as a direct cost; (2) Incurred to communicate with the public and press pertaining to specific activities or accomplishments that result from performance of the Federal award and then only as a direct cost; or (3) Necessary to conduct general liaison with news media and government public relations officers, to the extent that such activities are limited to communication and liaison necessary to keep the public informed on matters of public concern, such as notices of Federal contract/grant awards, financial matters, etc. e. Unallowable advertising and public relations costs include the following: (1) All advertising and public relations costs other than as specified in subsections c. and d.; (2) Except as otherwise permitted by these cost principles, costs of conventions, meetings. or other events related to other activities of the governmental unit f: -:/16/03 1:39 PM including: (a) Costs of displays, demonstrations, and exhibits; (b) Costs of meetingrooms, hospitality suites, and other special facilities used in P Y conjunction with shows and other special events; and (c) Salaries and wages of employees engaged in setting up and displaying exhibits, making demonstrations, and providing briefings; (3) Costs of promotional items and memorabilia, including models, gifts, and souvenirs; and (4) Costs of advertising and public relations designed solely to promote the governmental unit. 3. Advisory councils. Costs incurred by advisory councils or committees are allowable as a direct cost where authorized by the Federal awarding agency or as an indirect cost where allocable to Federal awards. 4. Alcoholic beverages. Costs of alcoholic beverages are unallowable. 5. Audit services. The costs of audits are allowable provided that the audits were performed in accordance with the Single Audit Act, as implemented by Circular A-128, "Audits of State and Local Governments." [Note: In June 1997, OMB rescinded Circular A-128 and co-located all audit requirements in a re-titled Circular A-133, "Audits of States, Local Governments, and Non-Profit Organizations."] Generally, the percentage of costs charged to Federal awards for a single audit shall not exceed the percentage derived by dividing Federal funds expended by total funds expended by the recipient or subrecipient (including program matching funds) during the fiscal year. The percentage may be exceeded only if appropriate documentation demonstrates higher actual costs. Other audit costs are allowable if specifically approved by the awarding or cognizant agency as a direct cost to an award or included as an indirect cost in a cost allocation plan or rate. 6. Automatic electronic data processing. The cost of data processing services is allowable (but see section 19, Equipment and other capital expenditures). 7. Bad debts. Any losses arising from uncollectible accounts and other claims, and related costs, are unallowable unless provided for in Federal program award regulations. 8. Bonding costs. Costs of bonding employees and officials are allowable to the extent that such bonding is in accordance with sound business practice. 9. Budgeting. Costs incurred for the development, preparation, presentation, and execution of budgets are allowable. (53 4/I6/03 1:39 PM rcular No.A-87--Cost Principles for State, Local,and Indian Tribal Governments http://www.whitehouse.gov/omb/circulars/a087/print/a087-all.html 10. Communications. Costs of telephone, mail, messenger, and similar communication services are allowable. 11. Compensation for personnel services. a. General. Compensation for personnel services includes all remuneration, paid currently or accrued, for services rendered during the period of performance under Federal awards, including but not necessarily limited to wages, salaries, and fringe benefits. The costs of such compensation are allowable to the extent that they satisfy the specific requirements of this Circular, and that the total compensation for individual employees: (1) Is reasonable for the services rendered and conforms to the established policy of the governmental unit consistently applied to both Federal and non-Federal activities; (2) Follows an appointment made in accordance with a governmental unit's laws and rules and meets merit system or other requirements required by Federal law, where applicable; and (3) Is determined and supported as provided in subsection h. b. Reasonableness. Compensation for employees engaged in work on Federal awards will be considered reasonable to the extent that it is consistent with that paid for similar work in other activities of the governmental unit. In cases where the kinds of employees required for Federal awards are not found in the other activities of the governmental unit, compensation will be considered reasonable to the extent that it is comparable to that paid for similar work in the labor market in which the employing government competes for the kind of employees involved. Compensation surveys providing data representative of the labor market involved will be an acceptable basis for evaluating reasonableness. c. Unallowable costs. Costs which are unallowable under other sections of these principles shall not be allowable under this section solely on the basis that they constitute personnel compensation. d. Fringe benefits. (1) Fringe benefits are allowances and services provided by employers to their employees as compensation in addition to regular salaries and wages. Fringe benefits include, but are not limited to, the costs of leave, employee insurance, pensions, and unemployment benefit plans. Except as provided elsewhere in these principles, the costs of fringe benefits are allowable to the extent that the benefits are reasonable and are required by law, governmental unit-employee agreement, or an established policy of the governmental unit. (2) The cost of fringe benefits in the form of regular compensation paid to employees during periods of authorized absences from the job, such as for annual leave, sick leave, holida'. ;, court leave, military leave, and other similar benefits, are allowable if: (a) they are provided under established written leave policies; ,,f /16/03 1: 9 I'M . .0 iu w. �.w.., .u..,.N,w..... , .....,,....., .......,..., ., .........w...,�„., .. r.,. • .-....uw (b) the costs are equitably allocated to all related activities, including Federal awards; and, (c) the accounting basis (cash or accrual) selected for costing each type of leave is consistently followed by the governmental unit. (3) When a governmental unit uses the cash basis of accounting, the cost of leave is recognized in the period that the leave is taken and paid for. Payments for unused leave when an employee retires or teiiuinates employment are allowable in the year of payment provided they are allocated as a general administrative expense to all activities of the governmental unit or component. (4) The accrual basis may be only used for those types of leave for which a liability as defined by Generally Accepted Accounting Principles (GAAP) exists when the leave is earned. When a governmental unit uses the accrual basis of accounting, in accordance with GAAP, allowable leave costs are the lesser of the amount accrued or funded. (5) The cost of fringe benefits in the form of employer contributions or expenses for social security; employee life, health, unemployment, and worker's compensation insurance (except as indicated in section 25, Insurance and indemnification); pension plan costs (see subsection e.); and other similar benefits are allowable, provided such benefits are granted under established written policies. Such benefits, whether treated as indirect costs or as direct costs, shall be allocated to Federal awards and all other activities in a manner consistent with the pattern of benefits attributable to the individuals or group(s) of employees whose salaries and wages are chargeable to such Federal awards and other activities. e. Pension plan costs. Pension plan costs may be computed using a pay-as-you-go method or an acceptable actuarial cost method in accordance with established written policies of the governmental unit. (1) For pension plans financed on a pay-as-you-go method, allowable costs will be limited to those representing actual payments to retirees or their beneficiaries. (2) Pension costs calculated using an actuarial cost- based method recognized by GAAP are allowable for a given fiscal year if they are funded for that year within six months after the end of that year. Costs funded after the six month period (or a later period agreed to by the cognizant agency) are allowable in the year funded. The cognizant agency may agree to an extension of the six month period if an appropriate adjustment is made to compensate for the timing of the charges to the Federal Government and related Federal reimbursement and the governmental unit's contribution to the pension fund. Adjustments may be made by cash refund or other equitable procedures to compensate the Federal Government for the time value of Federal reimbursements in excess of contributions to the pension fund. (3) Amounts funded by the governmental unit in excess of the actuarially determined amount for a fiscal year may be used as the governmental unit's contribution in future periods. ul -/16/U3 i:29 PNI cular No.A-87--Cost Principles for State,Local,and Indian Tribal Governments http://www.whitehouse.gov/omb/circulars/a087/print/a087-alI html • (4) When a governmental unit converts to an acceptable actuarial cost method, as defined by GAAP, and funds pension costs in accordance with this method, the unfunded liability at the time of conversion shall be allowable if amortized over a period of years in accordance with GAAP. (5) The Federal Government shall receive an equitable share of any previously allowed pension costs (including earnings thereon) which revert or inure to the governmental unit in the faint of a refund, withdrawal, or other credit. f. Post-retirement health benefits. Post-retirement health benefits (PRHB) refers to costs of health insurance or health services not included in a pension plan covered by subsection e. for retirees and their spouses, dependents, and survivors. PRHB costs may be computed using a pay-as-you-go method or an acceptable actuarial cost method in accordance with established written polices of the governmental unit. • (1) For PRHB financed on a pay as-you-go method, allowable costs will be limited to those representing actual payments to retirees or their beneficiaries. (2)PRHB costs calculated using an actuarial cost method recognized by GAAP are allowable if they are funded for that year within six months after the end of that year. Costs funded after the six month period (or a later period agreed to by the cognizant agency) are allowable in the year funded. The cognizant agency may agree to an extension of the six month period if an appropriate adjustment is made to compensate for the timing of the charges to the Federal Government and related Federal reimbursements and the governmental unit's contributions to the PRHB fund. Adjustments may be made by cash refund, reduction in current year's PRHB costs, or other equitable procedures to compensate the Federal Government for the time value of Federal reimbursements in excess of contributions to the PRHB fund. (3) Amounts funded in excess of the actuarially determined amount for a fiscal year may be used as the government's contribution in a future period. (4) When a governmental unit converts to an acceptable actuarial cost method and funds PRHB costs in accordance with this method, the initial unfunded liability attributable to prior years shall be allowable if amortized over a period of years in accordance with GAAP, or, if no such GAAP period exists, over a period negotiated with the cognizant agency. (5) To be allowable in the current year, the PRHB costs must be paid either to: (a) An insurer or other benefit provider as current year costs or premiums, or (b) An insurer or trustee to maintain a trust fund or reserve for the sole purpose of providing post-retirement benefits to retirees and other beneficiaries. (6) The Federal Government shall receive an equitable share of any amounts of previously allowed post-retirement benefit costs (including earnings thereon) which revert or inure to the governmental unit in the form of a refund, 4/16/03 1:39 PM ..ulal IVO.H-O/ --l-USt rl lllLJIJIC Jul lldLC, Lul.al,miu mown I I lual Uuvl.i uu, a , withdrawal, or other credit. g. Severance pay. (1) Payments in addition to regular salaries and wages made to workers whose employment is being terminated are allowable to the extent that, in each case, they are required by(a) law, (b) employer-employee agreement, or (c) established written policy. (2) Severance payments (but not accruals) associated with normal turnover are allowable. Such payments shall be allocated to all activities of the governmental unit as an indirect cost. (3) Abnormal or mass severance pay will be considered on a case-by-case basis and is allowable only if approved by the cognizant Federal agency. h. Support of salaries and wages. These standards regarding time distribution are in addition to the standards for payroll documentation. (1) Charges to Federal awards for salaries and wages, whether treated as direct or indirect costs, will be based on payrolls documented in accordance with generally accepted practice of the governmental unit and approved by a responsible official(s) of the governmental unit. (2)No further documentation is required for the salaries and wages of employees who work in a single indirect cost activity. (3) Where employees are expected to work solely on a single Federal award or cost objective, charges for their salaries and wages will be supported by periodic certifications that the employees worked solely on that program for the period covered by the certification. These certifications will be prepared at least semi-annually and will be signed by the employee or supervisory official having first hand knowledge of the work performed by the employee. (4) Where employees work on multiple activities or cost objectives, a distribution of their salaries or wages will be supported by personnel activity reports or equivalent documentation which meets the standards in subsection(5) unless a statistical sampling system (see subsection (6)) or other substitute system has been approved by the cognizant Federal agency. Such documentary support will be required where employees work on: (a) More than one Federal award, (b) A Federal award and a non-Federal award, (c) An indirect cost activity and a direct cost activity, (d) Two or more indirect activities which are allocated using different allocation bases, or ,)or 4/I6/U3 1:39 PM cu ar o.A-b --Cost 'nncip es tor tate, ocal,an. n.Ian nba ovemments ttp:/www.wnitenouse.gov omo circu ars/au.upnn aua -al .n mi (e) An unallowable activity and a direct or indirect cost activity. (5) Personnel activity reports or equivalent documentation must meet the following standards: (a) They must reflect an after-the-fact distribution of the actual activity of each employee, (b) They must account for the total activity for which each employee is compensated, (c) They must be prepared at least monthly and must coincide with one or more pay periods, and (d) They must be signed by the employee. (e) Budget estimates or other distribution percentages determined before the services are performed do not qualify as support for charges to Federal awards but may be used for interim accounting purposes, provided that: (i) The governmental unit's system for establishing the estimates produces reasonable approximations of the activity actually performed; (ii) At least quarterly, comparisons of actual costs to budgeted distributions based on the monthly activity reports are made. Costs charged to Federal awards to reflect adjustments made as a result of the activity actually performed may be recorded annually if the quarterly comparisons show the differences between budgeted and actual costs are less than ten percent; and (iii) The budget estimates or other distribution percentages are revised at least quarterly, if necessary, to reflect changed circumstances. (6) Substitute systems for allocating salaries and wages to Federal awards may be used in place of activity reports. These systems are subject to approval if required by the cognizant agency. Such systems may include, but are not limited to, random moment sampling, case counts, or other quantifiable measures of employee effort. (a) Substitute systems which use sampling methods (primarily for Aid to Families with Dependent Children (AFDC), Medicaid, and other public assistance programs) must meet acceptable statistical sampling standards including: (i) The sampling universe must include all of the employees whose salaries and wages are to be allocated based on sample results except as provided in subsection(c); (ii) The entire time period involved must be covered by the sample; and (iii) The results must be statistically valid and applied to the period being ,)r` /16/03 1:39 PM .1 l.Ul Ul [NO.!1-OI "\.VJL l I II.IfJIL.J LVI Jl(ltl.l LVI.UII u11u IIIVIUII 1IIOW • sampled. (b) Allocating charges for the sampled employees' supervisors, clerical and support staffs, based on the results of the sampled employees, will be acceptable. (c) Less than full compliance with the statistical sampling standards noted in subsection(a) may be accepted by the cognizant agency if it concludes that the amounts to be allocated to Federal awards will be minimal, or if it concludes that the system proposed by the governmental unit will result in lower costs to Federal awards than a system which complies with the standards. (7) Salaries and wages of employees used in meeting cost sharing or matching requirements of Federal awards must be supported in the same manner as those claimed as allowable costs under Federal awards. i. Donated services. (1)Donated or volunteer services may be furnished to a governmental unit by professional and technical personnel, consultants, and other skilled and unskilled labor. The value of these services is not reimbursable either as a direct or indirect cost. However, the value of donated services may be used to meet cost sharing or matching requirements in accordance with the provisions of the Common Rule. (2) The value of donated services utilized in the performance of a direct cost activity shall,when material in amount,be considered in the determination of the governmental unit's indirect costs or rate(s) and, accordingly, shall be allocated a proportionate share of applicable indirect costs. (3) To the extent feasible, donated services will be supported by the same methods used by the governmental unit to support the allocability of regular personnel services. 12. Contingencies. Contributions to a contingency reserve or any similar provision made for events the occurrence of which cannot be foretold with certainty as to time, or intensity, or with an assurance of their happening, are unallowable. The term "contingency reserve" excludes self-insurance reserves (see subsection 25.c.), pension plan reserves (see subsection l l.e.), and post-retirement health and other benefit reserves (see subsection 11.f.) computed using acceptable actuarial cost methods. 13. Contributions and donations. Contributions and donations, including cash, property, and services, by governmental units to others, regardless of the recipient, are unallowable. 14. Defense and prosecution of criminal and civil proceedings, and claims. a. The following costs are unallowable for contracts covered by 10 U.S.C. 2324(k), "Allowable costs under defense contracts." Ut a/16/03 1:39 PM -cular No.A-87--Cost Principles for State, Local,and In.ian I ri.a Govemments ttp:/www.w itehouse.gowom.icucu ars a!;I/pnnval./-a .html (1) Costs incurred in defense of any civil or criminal fraud proceeding or similar proceeding (including filing of false certification brought by the United States • where the contractor is found liable or has pleaded nolo contendere to a charge of fraud or similar proceeding (including filing of a false certification). (2) Costs incurred by a contractor in connection with any criminal, civil or administrative proceedings commenced by the United States or a State to the extent provided in 10 U.S.C. 2324(k). b. Legal expenses required in the administration of Federal programs are allowable. Legal expenses for prosecution of claims against the Federal Government are unallowable. 15. Depreciation and use allowances. a. Depreciation and use allowances are means of allocating the cost of fixed assets to periods benefitting from asset use. Compensation for the use of fixed assets on hand may be made through depreciation or use allowances. A combination of the two methods may not be used in connection with a single class of fixed assets (e.g.,buildings, office equipment, computer equipment, etc.) except as provided in subsection g. Except for enterprise funds and internal service funds that are included as part of a State/local cost allocation plan, classes of assets shall be determined on the same basis used for the government-wide financial statements. b. The computation of depreciation or use allowances shall be based on the acquisition cost of the assets involved. Where actual cost records have not been maintained, a reasonable estimate of the original acquisition cost may be used. The value of an asset donated to the governmental unit by an unrelated third party shall be its fair market value at the time of donation. Governmental or quasi-governmental organizations located within the same State shall not be considered unrelated third parties for this purpose. c. The computation of depreciation or use allowances will exclude: (1) The cost of land; (2) Any portion of the cost of buildings and equipment borne by or donated by the Federal Government irrespective of where title was originally vested or where it presently resides; and (3) Any portion of the cost of buildings and equipment contributed by or for the governmental unit, or a related donor organization, in satisfaction of a matching requirement. d. Where the use allowance method is followed, the use allowance for buildings and improvements (including land improvements, such as paved parking areas, fences, and sidewalks) will be computed at an annual rate not exceeding two percent of acquisition costs. The use allowance for equipment will be computed at an annual rate not exceeding 6 2/3 percent of acquisition cost. When the use 3 /16/03 i:39 PM allowance method is used for buildings, the entire building must be treated as a single asset; the building's components (e.g., plumbing system,heating and air condition, etc.) cannot be segregated from the building's shell. The two percent limitation, however, need not be applied to equipment which is merely attached or fastened to the building but not peuiiianently fixed to it and which is used as furnishings or decorations or for specialized purposes (e.g., dentist chairs and dental treatment units, counters, laboratory benches bolted to the floor, dishwashers, modular furniture, carpeting, etc.). Such equipment will be considered as not being permanently fixed to the building if it can be removed without the destruction of, or need for costly or extensive alterations or repairs, to the building or the equipment. Equipment that meets these criteria will be subject to the 6 2/3 percent equipment use allowance limitation. e. Where the depreciation method is followed, the period of useful service (useful life) established in each case for usable capital assets must take into consideration such factors as type of construction, nature of the equipment used, historical usage patterns, technological developments, and the renewal and replacement policies of the governmental unit followed for the individual items or classes of assets involved. In the absence of clear evidence indicating that the expected consumption of the asset will be significantly greater in the early portions than in the later portions of its useful life, the straight line method of depreciation shall be used. Depreciation methods once used shall not be changed unless approved by the Federal cognizant or awarding agency. When the depreciation method is introduced for application to an asset previously subject to a use allowance, the annual depreciation charge thereon may not exceed the amount that would have resulted had the depreciation method been in effect from the date of acquisition of the asset. The combination of use allowances and depreciation applicable to the asset shall not exceed the total acquisition cost of the asset or fair market value at time of donation. f. When the depreciation method is used for buildings, a building's shell may be segregated from the major component of the building(e.g., plumbing system, heating, and air conditioning system, etc.) and each major component depreciated over its estimated useful life, or the entire building(i.e., the shell and all components)may be treated as a single asset and depreciated over a single useful life. g. A reasonable use allowance may be negotiated for any assets that are considered to be fully depreciated, after taking into consideration the amount of depreciation previously charged to the government, the estimated useful life remaining at the time of negotiation, the effect of any increased maintenance charges, decreased efficiency due to age, and any other factors pertinent to the utilization of the asset for the purpose contemplated. h. Charges for use allowances or depreciation must be supported by adequate property records. Physical inventories must be taken at least once every two years (a statistical sampling approach is acceptable) to ensure that assets exist, and are in use. Governmental units will manage equipment in accordance with State laws Ui j 4/16/t13 I:39 PM CUII0I tNU.N-O/ --I.UJI JldIC, LOU !,U dllU I11U1d11 111Ui11 UUVCIll111c0I1 11 N.0 w w VV.wluiwvuau.6U V VI/I1J/U11,altlIJ CWO//IJI I111/ilUO/-dit.1111111 and procedures. When the depreciation method is followed, depreciation records indicating the amount of depreciation taken each period must also be maintained. 16. Disbursing service. The cost of disbursing funds by the Treasurer or other designated officer is allowable. 17. Employee morale, health, and welfare costs. The costs of health or first-aid clinics and/or infiuivaries, recreational facilities, employee counseling services, employee information publications, and any related expenses incurred in accordance with a governmental unit's policy are allowable. Income generated from any of these activities will be offset against expenses. 18. Entertainment. Costs of entertainment, including amusement, diversion, and social activities and any costs directly associated with such costs (such as tickets to shows or sports events, meals, lodging, rentals, transportation, and gratuities) are unallowable. 19. Equipment and other capital expenditures. a. As used in this section the following terms have the meanings as set forth below: (1) "Capital expenditure" means the cost of the asset including the cost to put it in place. Capital expenditure for equipment means the net invoice price of the equipment,including the cost of any modifications, attachments, accessories, or auxiliary apparatus necessary to make it usable for the purpose for which it is acquired. Ancillary charges, such as taxes, duty,protective in transit insurance, freight, and installation may be included in, or excluded from, capital expenditure cost in accordance with the governmental unit's regular accounting practices. (2) "Equipment" means an article of nonexpendable, tangible personal property having a useful life of more than one year and an acquisition cost which equals the lesser of(a) the capitalization level established bythe governmental unit for ss p financial statement purposes, or(b) $5000. (3) "Other capital assets" mean buildings, land, and improvements to buildings or land that materially increase their value or useful life. b. Capital expenditures which are not charged directly to a Federal award may be recovered through use allowances or depreciation on buildings, capital improvements, and equipment (see section 15). See also section 38 for allowability of rental costs for buildings and equipment. c. Capital expenditures for equipment, including replacement equipment, other capital assets, and improvements which materially increase the value or useful life of equipment or other capital assets are allowable as a direct cost when approved by the awarding agency. Federal awarding agencies are authorized at their option to waive o) delegate this approval requirement. 4/16/U3 i. 9 PM ILUlUl iN O.r-b i --I.UaL I tit 1Alt JtuLI.., l.v�..,al,u t kwm, I I IRA'v� �t n,n�., ,• Y... ... ... ". - a , d. Items of equipment with an acquisition cost of less than $5000 are considered to be supplies and are allowable as direct costs of Federal awards without specific awarding agency approval. e. The unamortized portion of any equipment written off as a result of a change in capitalization levels may be recovered by(1) continuing to claim the otherwise allowable use allowances or depreciation charges on the equipment or by(2) amortizing the amount to be written off over a period of years negotiated with the cognizant agency. f. When replacing equipment purchased in whole or in part with Federal funds, the governmental unit may use the equipment to be replaced as a trade-in or sell the property and use the proceeds to offset the cost of the replacement property. 20. Fines and penalties. Fines, penalties, damages, and other settlements resulting from violations (or alleged violations) of, or failure of the governmental unit to comply with, Federal, State, local, or Indian tribal laws and regulations are unallowable except when incurred as a result of compliance with specific provisions of the Federal award or written instructions by the awarding agency authorizing in advance such payments. 21. Fund raising and investment management costs. a. Costs of organized fund raising, including financial campaigns, solicitation of gifts and bequests, and similar expenses incurred to raise capital or obtain contributions are unallowable, regardless of the purpose for which the funds will be used. b. Costs of investment counsel and staff and similar expenses incurred to enhance income from investments are unallowable. However, such costs associated with investments covering pension, self-insurance, or other funds which include Federal participation allowed by this Circular are allowable. c. Fund raising and investment activities shall be allocated an appropriate share of indirect costs under the conditions described in subsection C.3.b. of Attachment A. 22. Gains and losses on disposition of depreciable property and other capital assets and substantial relocation of Federal programs. a. (1) Gains and losses on the sale, retirement, or other disposition of depreciable property shall be included in the year in which they occur as credits or charges to the asset cost grouping(s) in which the property was included. The amount of the gain or loss to be included as a credit or charge to the appropriate asset cost grouping(s) shall be the difference between the amount realized on the property and the undepreciated basis of the property. (2) Gains and losses on the disposition of depreciable property shall not be recognized as a separate credit or charge under the following conditions: . /16/03 i s 9 PM rcular No.A-b'/--Cost Principles for State,Local,and Indian I nbal Governments http:nwww.wmtenouse.gowombicircutarsiauu npnnvaua i-aii.ntmi • (a) The gain or loss is processed through a depreciation account and is reflected in the depreciation allowable under sections 15 and 19. (b) The property is given in exchange as part of the purchase price of a similar item and the gain or loss is taken into account in determining the depreciation cost basis of the new item. (c) A loss results from the failure to maintain permissible insurance, except as otherwise provided in subsection 25.d. (d) Compensation for the use of the property was provided through use allowances in lieu of depreciation. b. Substantial relocation of Federal awards from a facility where the Federal Government participated in the financing to another facility prior to the expiration of the useful life of the financed facility requires Federal agency approval. The extent of the relocation, the amount of the Federal participation in the financing, and the depreciation charged to date may require negotiation of space charges for Federal awards. c. Gains or losses of any nature arising from the sale or exchange of property other than the property covered in subsection a., e.g., land or included in the fair market value used in any adjustment resulting from a relocation of Federal awards covered in subsection b. shall be excluded in computing Federal award costs. 23. General government expenses. a. The general costs of government are unallowable (except as provided in section 41). These include: (1) Salaries and expenses of the Office of the Governor of a State or the chief executive of a political subdivision or the chief executives of federally-recognized Indian tribal governments; (2) Salaries and other expenses of State legislatures, tribal councils, or similar local governmental bodies, such as county supervisors, city councils, school boards, etc., whether incurred for purposes of legislation or executive direction; (3) Cost of the judiciary branch of a government; (4) Cost of prosecutorial activities unless treated as a direct cost to a specific program when authorized by program regulations (however, this does not preclude the allowability of other legal activities of the Attorney General); and (5) Other general types of government services normally provided to the general public, such as fire and police, unless provided for as a direct cost in program regulations. -I./l6/03 1:39 PM b. For federally-recognized Indian tribal governments and Councils Of Governments (COGs), the portion of salaries and expenses directly attributable to managing and operating Federal programs by the chief executive and his staff is allowable. 24. Idle facilities and idle capacity. a. As used in this section the following teinis have the meanings set forth below: (1) "Facilities" means land and buildings or any portion thereof, equipment individually or collectively, or any other tangible capital asset, wherever located, and whether owned or leased by the governmental unit. (2) "Idle facilities" means completely unused facilities that are excess to the governmental unit's current needs. (3) "Idle capacity" means the unused capacity of partially used facilities. It is the difference between (a) that which a facility could achieve under 100 percent operating time on a one-shift basis less operating interruptions resulting from time lost for repairs, setups, unsatisfactory materials, and other normal delays and(b) the extent to which the facility was actually used to meet demands during the accounting period. A multi-shift basis should be used if it can be shown that this amount of usage would normally be expected for the type of facility involved. (4) "Cost of idle facilities or idle capacity" means costs such as maintenance, repair, housing, rent, and other related costs, e.g., insurance, interest, and depreciation or use allowances. b. The costs of idle facilities are unallowable except to the extent that: (1)They are necessary to meet fluctuations in workload; or (2) Although not necessary to meet fluctuations in workload, they were necessary when acquired and are now idle because of changes in program requirements, efforts to achieve more economical operations, reorganization, termination, or other causes which could not have been reasonably foreseen. Under the exception stated in this subsection, costs of idle facilities are allowable for a reasonable period of time, ordinarily not to exceed one year, depending on the initiative taken to use, lease, or dispose of such facilities. c. The costs of idle capacity are normal costs of doing business and are a factor in the normal fluctuations of usage or indirect cost rates from period to period. Such costs are allowable, provided that the capacity is reasonably anticipated to be necessary or was originally reasonable and is not subject to reduction or elimination by use on other Federal awards, subletting, renting, or sale, in accordance with sound business, economic, or security practices. Widespread idle capacity throughout an entire facility or among a group of assets having substantially the same function may be considered idle facilities. ,Sr: =3 _It l6/03 i:39 PM rcular No.A-6/--Lost Nnnciples tor Jtate,Locai,aria Indian I nbal Uovernments nitp.i/www.willlellUUJe. UV/U111U/LIILLIIctIWuuo II plLI 25. Insurance and indemnification. a. Costs of insurance required or approved and maintained, pursuant to the Federal award, are allowable. • b. Costs of other insurance in connection with the general conduct of activities are allowable subject to the following limitations: (1) Types and extent and cost of coverage are in accordance with the governmental unit's policy and sound business practice. (2) Costs of insurance or of contributions to any reserve covering the risk of loss of, or damage to, Federal Government property are unallowable except to the extent that the awarding agency has specifically required or approved such costs. c. Actual losses which could have been covered by permissible insurance (through a self-insurance program or otherwise) are unallowable,unless expressly provided for in the Federal award or as described below. However, the Federal Government will participate in actual losses of a self insurance fund that are in excess of reserves. Costs incurred because of losses not covered under nominal deductible insurance coverage provided in keeping with sound management practice, and minor losses not covered by insurance, such as spoilage, breakage, and disappearance of small hand tools, which occur in the ordinary course of operations, are allowable. d. Contributions to a reserve for certain self-insurance programs including workers compensation, unemployment compensation, and severance pay are allowable subject to the following provisions: (1) The type of coverage and the extent of coverage and the rates and premiums would have been allowed had insurance (including reinsurance) been purchased to cover the risks. However,provision for known or reasonably estimated self-insured liabilities, which do not become payable for more than one year after the provision is made, shall not exceed the discounted present value of the liability. The rate used for discounting the liability must be determined by giving consideration to such factors as the governmental unit's settlement rate for those liabilities and its investment rate of return. (2) Earnings or investment income on reserves must be credited to those reserves. (3) Contributions to reserves must be based on sound actuarial principles using historical experience and reasonable assumptions. Reserve levels must be analyzed and updated at least biennially for each major risk being insured and take into account any reinsurance, coinsurance, etc. Reserve levels related to employee-related coverages will normally be limited to the value of claims (a) submitted and adjudicated but not paid, (b) submitted but not adjudicated, and (c) incurred but not submitted. Reserve levels in excess of the amounts based on the above must be identified and justified in the cost allocation plan or indirect cost rate proposal. i/16!l)3 1:39 PM � . �. , (4) Accounting records, actuarial studies, and cost allocations (or billings) must recognize any significant differences due to types of insured risk and losses generated by the various insured activities or agencies of the governmental unit. If individual departments or agencies of the governmental unit experience significantly different levels of claims for a particular risk, those differences are to be recognized by the use of separate allocations or other techniques resulting in an equitable allocation. (5) Whenever funds are transferred from a self-insurance reserve to other accounts (e.g., general fund),refunds shall be made to the Federal Government for its share of funds transferred, including earned or imputed interest from the date of transfer. e. Actual claims paid to or on behalf of employees or foituer employees for workers' compensation, unemployment compensation, severance pay, and similar employee benefits (e.g., subsection 111 for post retirement health benefits), are allowable in the year of payment provided(1) the governmental unit follows a consistent costing policy and (2) they are allocated as a general administrative expense to all activities of the governmental unit. f. Insurance refunds shall be credited against insurance costs in the year the refund is received. g. Indemnification includes securing the governmental unit against liabilities to third persons and other losses not compensated by insurance or otherwise. The Federal Government is obligated to indemnify the governmental unit only to the extent expressly provided for in the Federal award, except as provided in subsection d. h. Costs of commercial insurance that protects against the costs of the contractor for correction of the contractor's own defects in materials or workmanship are unallowable. 26. Interest. a. Costs incurred for interest on borrowed capital or the use of a governmental unit's own funds, however represented, are unallowable except as specifically provided in subsection b. or authorized by Federal legislation. b. Financing costs (including interest)paid or incurred on or after the effective date of this Circular associated with the otherwise allowable costs of building acquisition, construction, or fabrication, reconstruction or remodeling completed on or after October 1, 1980 is allowable, subject to the conditions in (1)-(4). Financing costs (including interest) paid or incurred on or after the effective date of this Circular associated with otherwise allowable costs of equipment is allowable, subject to the conditions in (1)-(4). 11. 5 1/I6,)3 is 9 PM rcular No.A-87--Cost Principles for State,Local,and Indian Tribal Governments http://www.whitehouse.gov/ombicircularsiaO //prinva08/-all.html (1) The financing is provided (from other than tax or user fee sources) by a bona fide third party external to the governmental unit; (2) The assets are used in support of Federal awards; (3) Earnings on debt service reserve funds or interest earned on borrowed funds pending payment of the construction or acquisition costs are used to offset the current period's cost or the capitalized interest, as appropriate. Earnings subject to being reported to the Federal Internal Revenue Service under arbitrage requirements are excludable. (4) Governmental units will negotiate the amount of allowable interest whenever cash payments (interest, depreciation, use allowances, and contributions) exceed the governmental unit's cash payments and other contributions attributable to that portion of real property used for Federal awards. 27. Lobbying. The cost of certain influencing activities associated with obtaining grants, contracts, cooperative agreements, or loans is an unallowable cost. Lobbying with respect to certain grants, contracts, cooperative agreements, and loans shall be governed by the common rule, "New Restrictions on Lobbying" published at 55 FR 6736 (February 26, 1990), including definitions, and the Office of Management and Budget "Government-wide Guidance for New Restrictions on Lobbying" and notices published at 54 FR 52306 (December 20, 1989), 55 FR 24540 (June 15, 1990), and 57 FR 1772 (January 15, 1992), respectively. 28. Maintenance, operations, and repairs. Unless prohibited by law, the cost of utilities, insurance, security,janitorial services, elevator service, upkeep of grounds,necessary maintenance, normal repairs and alterations, and the like are allowable to the extent that they: (1) keep property(including Federal property, unless otherwise provided for)in an efficient operating condition, (2) do not add to the permanent value of property or appreciably prolong its intended life, and (3) are not otherwise included in rental or other charges for space. Costs which add to the permanent value of property or appreciably prolong its intended life shall be treated as capital expenditures (see sections 15 and 19). 29. Materials and supplies. The cost of materials and supplies is allowable. Purchases should be charged at their actual prices after deducting all cash discounts, trade discounts, rebates, and allowances received. Withdrawals from general stores or stockrooms should be charged at cost under any recognized method of pricing, consistently applied. Incoming transportation charges are a proper part of materials and supply costs. 30. Memberships, subscriptions, and professional activities. a. Costs of the governmental unit's memberships in business, technical, and professional organizations are allowable. b. Costs of the governmental unit's subscriptions to business, professional, and technical periodicals are allowable. 3 1/I6/03 1:39 PM c. Costs of meetings and conferences where the primary purpose is the dissemination of technical information, including meals, transportation, rental of meeting facilities, and other incidental costs are allowable. d. Costs of membership in civic and community, social organizations are allowable as a direct cost with the approval of the Federal awarding agency. e. Costs of membership in organizations substantially engaged in lobbying are unallowable. 31. Motor pools. The costs of a service organization which provides automobiles to user governmental units at a mileage or fixed rate and/or provides vehicle maintenance, inspection, and repair services are allowable. 32. Pre-award costs. Pre-award costs are those incurred prior to the effective date of the award directly pursuant to the negotiation and in anticipation of the award where such costs are necessary to comply with the proposed delivery schedule or period of performance. Such costs are allowable only to the extent that they would have been allowable if incurred after the date of the award and only with the written approval of the awarding agency. 33. Professional service costs. a. Cost of professional and consultant services rendered by persons or organizations that are members of a particular profession or possess a special skill, whether or not officers or employees of the governmental unit, are allowable, subject to section 14 when reasonable in relation to the services rendered and when not contingent upon recovery of the costs from the Federal Government. b. Retainer fees supported by evidence of bona fide services available or rendered are allowable. 34. Proposal costs. Costs of preparing proposals for potential Federal awards are allowable. Proposal costs should normally be treated as indirect costs and should be allocated to all activities of the governmental unit utilizing the cost allocation plan and indirect cost rate proposal. However, proposal costs may be charged directly to Federal awards with the prior approval of the Federal awarding agency. 35. Publication and printing costs. Publication costs, including the costs of printing (including the processes of composition, plate-making, press work, and binding, and the end products produced by such processes), distribution, promotion, mailing, and general handling are allowable. 36. Rearrangements and alterations. Costs incurred for ordinary and normal rearrangement and alteration of facilities are allowable. Special arrangements and alterations costs incurred specifically for a Federal award are allowable with the prior approval of the Federal awarding agency. 1/I Ma I: 9 PM it cWal IVO.A-a i -cost rnncipies ror state,Local,ano inoian tribal Governments http://www.whitehouse.gov/omb/circulars/a087/pnnta087-all.html 37. Reconversion costs. Costs incurred in the restoration or rehabilitation of the governmental unit's facilities to approximately the same condition existing immediately prior to commencement of Federal awards, less costs related to noumal wear and tear, are allowable. 38. Rental costs. a. Subject to the limitations described in subsections b. through d. of this section, rental costs are allowable to the extent that the rates are reasonable in light of such factors as: rental costs of comparable property, if any; market conditions in the area; alternatives available; and, the type, life expectancy, condition, and value of the property leased. b. Rental costs under sale and leaseback arrangements are allowable only up to the amount that would be allowed had the governmental unit continued to own the property. c. Rental costs under less-than-arms-length leases are allowable only up to the amount that would be allowed had title to the property vested in the governmental unit. For this purpose, less-than-arms-length leases include, but are not limited to, those where: (1) One party to the lease is able to control or substantially influence the actions of the other; (2) Both parties are parts of the same governmental unit; or (3) The governmental unit creates an authority or similar entity to acquire and lease the facilities to the governmental unit and other parties. d. Rental costs under leases which are required to be treated as capital leases under GAAP are allowable only up to the amount that would be allowed had the governmental unit purchased the property on the date the lease agreement was executed. This amount would include expenses such as depreciation or use allowance,maintenance, and insurance. The provisions of Financial Accounting Standards Board Statement 13 shall be used to determine whether a lease is a capital lease. Interest costs related to capital leases are allowable to the extent they meet the criteria in section 26. 39. Taxes. a. Taxes that a governmental unit is legally required to pay are allowable, except for self-assessed taxes that disproportionately affect Federal programs or changes in tax policies that disproportionately affect Federal programs. This provision becomes effective for taxes paid during the governmental unit's first fiscal year that begins on or after January 1, 1998, and applies thereafter. b. Gasoline taxes, motor vehicle fees, and other taxes that are in effect user fees for benefits provided to the F.:deral :government are allowable. >(` 4/16/03 1:39 PM I Ill.uldl INO.f1-0/ -'LAJJI El II1l.1)11GJ IUI Jtatcl LUI.UI,Lulu Itlulall 1114d1 VUVL111111cuita •"`p•""""""" """"" '.� "`" "'•'1ti 111 c. This provision does not restrict the authority of Federal agencies to identify taxes where Federal participation is inappropriate. Where the identification of the amount of unallowable taxes would require an inordinate amount of effort, the cognizant agency may accept a reasonable approximation thereof. 40. Training. The cost of training provided for employee development is allowable. 41. Travel costs. a. General. Travel costs are allowable for expenses for transportation, lodging, subsistence, and related items incurred by employees traveling on official business. Such costs may be charged on an actual cost basis, on a per diem or mileage basis in lieu of actual costs incurred, or on a combination of the two, provided the method used is applied to an entire trip, and results in charges consistent with those normally allowed in like circumstances in non-federally-sponsored activities. Notwithstanding the provisions of section 23, travel costs of officials covered by that section, when specifically related to Federal awards, are allowable with the prior approval of a grantor agency. b. Lodging and subsistence. Costs incurred by employees and officers for travel, including costs of lodging, other subsistence, and incidental expenses, shall be considered reasonable and allowable only to the extent such costs do not exceed charges normally allowed by the governmental unit in its regular operations as a result of the governmental unit's policy. In the absence of a written governmental unit policy regarding travel costs, the rates and amounts established under subchapter I of Chapter 57 of Title 5, United States Code "Travel and Subsistence Expenses; Mileage Allowances," or by the Administrator of General Services, or the President (or his designee)pursuant to any provisions of such subchapter shall be used as guidance for travel under Federal awards (41 U.S.C. 420, "Travel Expenses of Government Contractors"). c. Commercial air travel. Airfare costs in excess of the customary standard (coach or equivalent) airfare, are unallowable except when such accommodations would: require circuitous routing, require travel during unreasonable hours, excessively prolong travel, greatly increase the duration of the flight, result in increased cost that would offset transportation savings, or offer accommodations not reasonably adequate for the medical needs of the traveler. Where a governmental unit can reasonably demonstrate to the awarding agency either the nonavailability of customary standard airfare or Federal Government contract airfare for individual trips or, on an overall basis, that it is the governmental unit's practice to make routine use of such airfare, specific determinations of nonavailability will generally not be questioned by the Federal Government, unless a pattern of avoidance is detected. However, in order for airfare costs in excess of the customary standard commercial airfare to be allowable, e.g., use of first-class airfare, the governmental unit must justify and document on a case-by-case basis the applicable condition(s) set forth above. d. Air travel by other than commercial carrier. Cost of travel by governmental -4or, A;I6R)31:3t9PM eutar No.H-a i --Lost rnncipies ror Mate,.Local,and Indian I nbal Uovernments http://www.whitehouse.goviombicirculars/aU?i"//pnnvaU81-all.html unit-owned, -leased, or-chartered aircraft, as used in this section, includes the cost of lease, charter, operation (including personnel costs), maintenance, depreciation, interest, insurance, and other related costs. Costs of travel via governmental unit-owned, -leased, or -chartered aircraft are unallowable to the extent they exceed the cost of allowable commercial air travel, as provided for in subsection c. 42. Underrecovery of costs under Federal agreements. Any excess costs over the Federal contribution under one award agreement are unallowable under other award agreements. Top of Page ATTACHMENT C Circular No. A-87 STATE/LOCAL-WIDE CENTRAL SERVICE COST ALLOCATION PLANS TABLE OF CONTENTS A. General B. Definitions 1. Billed central services 2. Allocated central services 3. Agency or operating agency C. Scope of the Central Service Cost Allocation Plans D. Submission Requirements E. Documentation Requirements for Submitted Plans 1. General 2. Allocated central services 3. Billed services a. General b. Internal service funds c. Self-insurance funds 4/16/03 1:39 PM ,c u,at INO.N-O I,IJL.,`JIL,3 lul JLUR,LV W,UI I,U 0.,I I lUal • d. Fringe benefits 4. Required certification F. Negotiation and Approval of Central Service Plans G. Other Policies 1. Billed central service activities 2. Working capital reserves 3. Carry-forward adjustments of allocated central service costs 4. Adjustments of billed central services 5. Records retention 6. Appeals 7. OMB assistance A. General. 1. Most governmental units provide certain services, such as motor pools, computer centers, purchasing, accounting, etc., to operating agencies on a centralized basis. Since federally-supported awards are performed within the individual operating agencies, there needs to be a process whereby these central service costs can be identified and assigned to benefitted activities on a reasonable and consistent basis. The central service cost allocation plan provides that process. All costs and other data used to distribute the costs included in the plan should be supported by formal accounting and other records that will support the propriety of the costs assigned to Federal awards. 2. Guidelines and illustrations of central service cost allocation plans are provided in a brochure published by the Department of Health and Human Services entitled "A Guide for State and Local Government Agencies: Cost Principles and Procedures for Establishing Cost Allocation Plans and Indirect Cost Rates for Grants and Contracts with the Federal Government." A copy of this brochure may be obtained from the Superintendent of Documents, U.S. Government Printing Office. B. Definitions. 1. "Billed central services" means central services that are billed to benefitted agencies and/or programs on an individual fee-for-service or similar basis. Typical examples of billed central services include computer services, • r„i13 416i031.39PM ircuiar NO. H-u/--Lost l-'rmcipies for Jtatc,Local,ano tnolan l ribal Uovernments http://www.whitehouse.gov/omb/circulars/aUts//print/aUa/-all.html transportation services, insurance, and fringe benefits. 2. "Allocated central services" means central services that benefit operating agencies but are not billed to the agencies on a fee-for-service or similar basis. These costs are allocated to benefitted agencies on some reasonable basis. Examples of such services might include general accounting, personnel administration, purchasing, etc. 3. "Agency or operating agency" means an organizational unit or sub-division within a governmental unit that is responsible for the perfoiniance or administration of awards or activities of the governmental unit. C. Scope of the Central Service Cost Allocation Plans. The central service cost allocation plan will include all central service costs that will be claimed (either as a billed or an allocated cost) under Federal awards and will be documented as described in section E. Costs of central services omitted from the plan will not be reimbursed. D. Submission Requirements. 1. Each State will submit a plan to the Depaitnient of Health and Human Services for each year in which it claims central service costs under Federal awards. The plan should include (a) a projection of the next year's allocated central service cost (based either on actual costs for the most recently completed year or the budget projection for the coming year), and (b) a reconciliation of actual allocated central service costs to the estimated costs used for either the most recently completed year or the year immediately preceding the most recently completed year. 2. Each local government that has been designated as a "major local government" by the Office of Management and Budget (OMB) is also required to submit a plan to its cognizant agency annually. OMB periodically lists major local governments in the Federal Register. 3. All other local governments claiming central service costs must develop a plan in accordance with the requirements described in this Circular and maintain the plan and related supporting documentation for audit. These local governments are not required to submit their plans for Federal approval unless they are specifically requested to do so by the cognizant agency. Where a local government only receives funds as a sub-recipient, the primary recipient will be responsible for negotiating indirect cost rates and/or monitoring the sub-recipient's plan. 4. All central service cost allocation plans will be prepared and, when required, submitted within six months prior to the beginning of each of the governmental unit's fiscal years in which it proposes to claim central service costs. Extensions may be granted by the cognizant agency on a case-by-case basis. E. Documentation Requirements for Submitted Plans. The documentation 1/V/03 i:39 PM ill,11 requirements described in this section may be modified, expanded, or reduced by the cognizant agency on a case-by-case basis. For example, the requirements may be reduced for those central services which have little or no impact on Federal awards. Conversely, if a review of a plan indicates that certain additional infoiivation is needed, and will likely be needed in future years, it may be routinely requested in future plan submissions. Items marked with an asterisk (*) should be submitted only once; subsequent plans should merely indicate any changes since the last plan. 1. General. All proposed plans must be accompanied by the following: an organization chart sufficiently detailed to show operations including the central service activities of the State/local government whether or not they are shown as benefiting from central service functions; a copy of the Comprehensive Annual Financial Report (or a copy of the Executive Budget if budgeted costs are being proposed) to support the allowable costs of each central service activity included in the plan; and, a certification (see subsection 4.) that the plan was prepared in accordance with this Circular, contains only allowable costs, and was prepared in a manner that treated similar costs consistently among the various Federal awards and between Federal and non-Federal awards/activities. 2. Allocated central services. For each allocated central service, the plan must also include the following: a brief description of the service*, an identification of the unit rendering the service and the operating agencies receiving the service, the items of expense included in the cost of the service, the method used to distribute the cost of the service to benefitted agencies, and a summary schedule showing the allocation of each service to the specific benefitted agencies. If any self-insurance funds or fringe benefits costs are treated as allocated(rather than billed) central services, documentation discussed in subsections 3.b. and c. shall also be included. 3. Billed services. a. General. The information described below shall be provided for all billed central services, including internal service funds, self-insurance funds, and fringe benefit funds. b. Internal service funds. (1) For each internal service fund or similar activity with an operating budget of $5 million or more, the plan shall include: a brief description of each service; a balance sheet for each fund based on individual accounts contained in the governmental unit's accounting system; a revenue/expenses statement, with revenues broken out by source, e.g., regular billings, interest earned, etc.; a listing of all non-operating transfers (as defined by Generally Accepted Accounting Principles (GAAP)) into and out of the fund; a description of the procedures (methodology) used to charge the costs of each service to users, including how billing rates are determined; a schedule of current rates; and, a schedule comparing total revenues (including imputed revenues) generated by the service to the allowable costs of the service, as determined under this 8vt_3 ui I6/O3 i:39 PM rcular No.A-87--Cost Principles for State, Local,and Indian Tribal Governments http://www.whitehouse.goviornoicircutarsiaU8//prinvaU6/-au.html Circular, with an explanation of how variances will be handled. (2) Revenues shall consist of all revenues generated by the service, including unbilled and uncollected revenues. If some users were not billed for the services (or were not billed at the full rate for that class of users), a schedule showing the full imputed revenues associated with these users shall be provided. Expenses shall be broken out by object cost categories (e.g., salaries, supplies, etc.). c. Self-insurance funds. For each self-insurance fund, the plan shall include: the fund balance sheet; a statement of revenue and expenses including a summary of billings and claims paid by agency; a listing of all non-operating transfers into and out of the fund; the type(s) of risk(s) covered by the fund(e.g., automobile liability, workers' compensation, etc.); an explanation of how the level of fund contributions are deteiiiiined, including a copy of the current actuarial report (with the actuarial assumptions used) if the contributions are determined on an actuarial basis; and, a description of the procedures used to charge or allocate fund contributions to benefitted activities. Reserve levels in excess of claims (1) submitted and adjudicated but not paid, (2) submitted but not adjudicated, and (3) incurred but not submitted must be identified and explained. d. Fringe benefits. For fringe benefit costs, the plan shall include: a listing of fringe benefits provided to covered employees, and the overall annual cost of each type of benefit; current fringe benefit policies*; and procedures used to charge or allocate the costs of the benefits to benefitted activities. In addition, for pension and post-retirement health insurance plans, the following information shall be provided: the governmental unit's funding policies, e.g., legislative bills, trust agreements, or State-mandated contribution rules, if different from actuarially determined rates; the pension plan's costs accrued for the year; the amount funded, and date(s) of funding; a copy of the current actuarial report (including the actuarial assumptions); the plan trustee's report; and, a schedule from the activity showing the value of the interest cost associated with late funding. 4. Required certification. Each central service cost allocation plan will be accompanied by a certification in the following form: CERTIFICATE OF COST ALLOCATION PLAN This is to certify that I have reviewed the cost allocation plan submitted herewith and to the best of my knowledge and belief: (1) All costs included in this proposal [identify date] to establish cost allocations or billings for [identify period covered by plan] are allowable in accordance with the requirements of OMB Circular A-87. "Cost Principles for State, Local, and Indian Tribal Governments," and the Federal award(s) to which they apply. Unallowable costs have been adjusted for in allocating costs as indicated in the cost allocation plan. (2) All costs includeu in this proposal ;:re properly allocable to Federal awards on the basis of a beneficial or causal ;elationship between the expenses incurred and 1/16/03 I:39 PM • - , .uuni the awards to which they are allocated in accordance with applicable requirements. Further, the same costs that have been treated as indirect costs have not been claimed as direct costs. Similar types of costs have been accounted for consistently. I declare that the foregoing is true and correct. Governmental Unit: Signature: Name of Official: Title: Date of Execution: F. Negotiation and Approval of Central Service Plans. 1. All proposed central service cost allocation plans that are required to be submitted will be reviewed, negotiated, and approved by the Federal cognizant agency on a timely basis. The cognizant agency will review the proposal within six months of receipt of the proposal and either negotiate/approve the proposal or advise the governmental unit of the additional documentation needed to support/evaluate the proposed plan or the changes required to make the proposal acceptable. Once an agreement with the governmental unit has been reached,the agreement will be accepted and used by all Federal agencies, unless prohibited or limited by statute. Where a Federal funding agency has reason to believe that special operating factors affecting its awards necessitate special consideration, the funding agency will,prior to the time the plans are negotiated,notify the cognizant agency. 2. The results of each negotiation shall be formalized in a written agreement between the cognizant agency and the governmental unit. This agreement will be subject to re-opening if the agreement is subsequently found to violate a statute or the information upon which the plan was negotiated is later found to be materially incomplete or inaccurate. The results of the negotiation shall be made available to all Federal agencies for their use. 3. Negotiated cost allocation plans based on a proposal later found to have included costs that: (a) are unallowable (i) as specified by law or regulation, (ii) as identified in Attachment B of this Circular, or (iii) by the terms and conditions of Federal awards, or (b) are unallowable because they are clearly not allocable to Federal awards, shall be adjusted, or a refund shall be made at the option of the Federal cognizant agency. These adjustments or refunds are designed to correct the plans and do not constitute a reopening of the negotiation. G. Other Policies. 1. Billed central service activities. Each billed central service activity must ���,; 4/I6/U3 I:39 PNI rcular No.A-87--Cost Principles for State,Local,and Indian Tribal Governments nttp://www.wnitenouse.gov/omo/circuiarsraua /prmvaua/-aii.ntmi • separately account for all revenues (including imputed revenues) generated by the service, expenses incurred to furnish the service, and profit/loss. 2. Working capital reserves. Internal service funds are dependent upon a • reasonable level of working capital reserve to operate from one billing cycle to the next. Charges by an internal service activity to provide for the establishment and maintenance of a reasonable level of working capital reserve, in addition to the full recovery of costs, are allowable. A working capital reserve as part of retained earnings of up to 60 days cash expenses for nouuiial operating purposes is considered reasonable. A working capital reserve exceeding 60 days may be approved by the cognizant Federal agency in exceptional cases. 3. Carry-forward adjustments of allocated central service costs. Allocated central service costs are usually negotiated and approved for a future fiscal year on a "fixed with carry-forward" basis. Under this procedure, the fixed amounts for the future year covered by agreement are not subject to adjustment for that year. However, when the actual costs of the year involved become known, the differences between the fixed amounts previously approved and the actual costs will be carried forward and used as an adjustment to the fixed amounts established for a later year. This "carry-forward" procedure applies to all central services whose costs were fixed in the approved plan. However, a carry-forward adjustment is not permitted, for a central service activity that was not included in the approved plan, or for unallowable costs that must be reimbursed immediately. 4. Adjustments of billed central services. Billing rates used to charge Federal awards shall be based on the estimated costs of providing the services, including an estimate of the allocable central service costs. A comparison of the revenue generated by each billed service (including total revenues whether or not billed or collected) to the actual allowable costs of the service will be made at least annually, and an adjustment will be made for the difference between the revenue and the allowable costs. These adjustments will be made through one of the following adjustment methods: (a) a cash refund to the Federal Government for the Federal share of the adjustment, (b) credits to the amounts charged to the individual programs, (c) adjustments to future billing rates, or(d) adjustments to allocated central service costs. Adjustments to allocated central services will not be permitted where the total amount of the adjustment for a particular service (Federal share and non-Federal) share exceeds $500,000. 5. Records retention. All central service cost allocation plans and related documentation used as a basis for claiming costs under Federal awards must be retained for audit in accordance with the records retention requirements contained in the Common Rule. 6. Appeals. If a dispute arises in the negotiation of a plan between the cognizant • agency and the governmental unit, the dispute shall be resolved in accordance with the appeals procedures of the cognizant agency. 7. OMB assistance. To the extent that problems are encountered among the Federal agencies and/or governmental units in connection with the negotiation t/16/O3 1:39 PM I l.0 ldl IVU.t1-U 1 --1.UJI I I 411U IIIUIu11 11 IUU1 1JVI1AI11111.111.1 ., •I.•,•• •• - J ", �• .11II111 • and approval process, OMB will lend assistance, as required, to resolve such problems in a timely manner. Top of Page ATTACHMENT D Circular No. A-87 PUBLIC ASSISTANCE COST ALLOCATION PLANS TABLE OF CONTENTS A. General B. Definitions 1. State public assistance agency 2. State public assistance agency costs C. Policy D. Submission, Documentation, and Approval of Public Assistance Cost Allocation Plans E. Review of Implementation of Approved Plans F. Unallowable Costs A. General. Federally-financed programs administered by State public assistance agencies are funded predominately by the Department of Health and Human Services (HHS). In support of its stewardship requirements, HHS has published requirements for the development, documentation, submission, negotiation, and approval of public assistance cost allocation plans in Subpart E of 45 CFR Part 95. All administrative costs (direct and indirect) are normally charged to Federal awards by implementing the public assistance cost allocation plan. This Attachment extends these requirements to all Federal agencies whose programs are administered by a State public assistance agency. Major federally-financed programs typically administered by State public assistance agencies include: Aid to Families with Dependent Children,Medicaid, Food Stamps, Child Support Enforcement, Adoption Assistance and Foster Care, and Social Services Block Grant. B. Definitions. 1. "State public assistance agency" means a State agency administering or supervising the administration of one or more public assistance programs operated by the State as identified in Subpart E of 45 CFR Part 95. For the purpose of this Attachment, these programs include all programs administered by ot` a/16/U3 :39 PM cular No.A-2 / -Lost rrinctples tor atate,Local,ana Indian t rroal vovernments nup://www.wiluenuuse.guv/U111U/lAILAIldIJ/ctli0//pi uuauo -a, .n w the State public assistance agency. 2. "State public assistance agency costs" means all costs incurred by, or allocable to, the State public assistance agency, except expenditures for financial assistance, medical vendor payments, food stamps, and payments for services and goods provided directly to program recipients. C. Policy. State public assistance agencies will develop, document and implement, and the Federal Government will review, negotiate, and approve, public assistance cost allocation plans in accordance with Subpart E of 45 CFR Part 95. The plan will include all programs administered by the State public assistance agency. Where a letter of approval or disapproval is transmitted to a State public assistance agency in accordance with Subpart E, the letter will apply to all Federal agencies and programs. The remaining sections of this Attachment (except for the requirement for certification) summarize the provisions of Subpart E of 45 CFR Part 95. • D. Submission, Documentation, and Approval of Public Assistance Cost Allocation Plans. 1. State public assistance agencies are required to promptly submit amendments to the cost allocation plan to HHS for review and approval. 2. Under the coordination process outlined in subsection E, affected Federal agencies will review all new plans and plan amendments and provide comments, as appropriate, to HHS. The effective date of the plan or plan amendment will be the first day of the quarter following the submission of the plan or amendment, unless another date is specifically approved by HHS. HHS, as the cognizant agency acting on behalf of all affected Federal agencies, will, as necessary, conduct negotiations with the State public assistance agency and will inform the State agency of the action taken on the plan or plan amendment. E. Review of Implementation of Approved Plans. 1. Since public assistance cost allocation plans are of a narrative nature, the review during the plan approval process consists of evaluating the appropriateness of the proposed groupings of costs (cost centers) and the related allocation bases. As such, the Federal Government needs some assurance that the cost allocation plan has been implemented as approved. This is accomplished by reviews by the funding agencies, single audits, or audits conducted by the cognizant audit agency. 2. Where inappropriate charges affecting more than one funding agency are identified, the cognizant HHS cost negotiation office will be advised and will take the lead in resolving the issue(s) as provided for in Subpart E of 45 CFR Part 95. 3. If a dispute arises in the negotiation of a plan or from a disallowance involving -l/16/03 1:39 PM two or more funding agencies, the dispute shall be resolved in accordance with the appeals procedures set out in 45 CFR Part 75. Disputes involving only one funding agency will be resolved in accordance with the funding agency's appeal process. 4. To the extent that problems are encountered among the Federal agencies and/or governmental units in connection with the negotiation and approval process, the Office of Management and Budget will lend assistance, as required, to resolve such problems in a timely manner. F. Unallowable Costs. Claims developed under approved cost allocation plans will be based on allowable costs as identified in this Circular. Where unallowable costs have been claimed and reimbursed, they will be refunded to the program that reimbursed the unallowable cost using one of the following methods: (a) a cash refund, (b) offset to a subsequent claim, or(c) credits to the amounts charged to individual awards. Top of Page ATTACHMENT E Circular No. A-87 STATE AND LOCAL INDIRECT COST RATE PROPOSALS TABLE OF CONTENTS A. General B. Definitions 1. Indirect cost rate proposal 2. Indirect cost rate 3. Indirect cost pool 4. Base 5. Predetermined rate 6. Fixed rate 7. Provisional rate 8. Final rate 9. Base period -/1 G/O3 1:3 9 PM L.•1111 I.VV.N—OI "\.UJI I II1ll.I III IVI .)IULL.v LVI.LLIv LLIIU 111U 11II I IIUaI IJU VCI III IIVIILJ vLLLN. +v cv v.+.a.vv....vu.....J.:........................•.......•r.......».,... » C. Allocation of Indirect Costs and Determination of Indirect Cost Rates 1. General 2. Simplified method 3. Multiple allocation base method 4. Special indirect cost rates D. Submission and Documentation of Proposals 1. Submission of indirect cost rate proposals 2. Documentation of proposals 3. Required certification E. Negotiation and Approval of Rates F. Other Policies 1. Fringe benefit rates 2. Billed services provided by the grantee agency 3. Indirect cost allocations not using rates 4. Appeals 5. Collections of unallowable costs and erroneous payments 6. OMB assistance A. General. 1. Indirect costs are those that have been incurred for common or joint purposes. These costs benefit more than one cost objective and cannot be readily identified with a particular final cost objective without effort disproportionate to the results achieved. After direct costs have been determined and assigned directly to Federal awards and other activities as appropriate, indirect costs are those remaining to be allocated to benefitted cost objectives. A cost may not be allocated to a Federal award as an indirect cost if any other cost incurred for the same purpose, in like circumstances, has been assigned to a Federal award as a direct cost. 2. Indirect costs include (a) the indirect costs originating in each department or agency of the governmental unit carrying out Federal awards and (b) the costs of i S3 s/16/U3 1:39 PM central governmental services distributed through the central service cost allocation plan (as described in Attachment C) and not otherwise treated as direct costs. 3. Indirect costs are normally charged to Federal awards by the use of an indirect cost rate. A separate indirect cost rate(s) is usually necessary for each department or agency of the governmental unit claiming indirect costs under Federal awards. Guidelines and illustrations of indirect cost proposals are provided in a brochure published by the Department of Health and Human Services entitled "A Guide for State and Local Government Agencies: Cost Principles and Procedures for Establishing Cost Allocation Plans and Indirect Cost Rates for Grants and Contracts with the Federal Government." A copy of this brochure may be obtained from the Superintendent of Documents, U.S. Government Printing Office. 4. Because of the diverse characteristics and accounting practices of governmental units, the types of costs which may be classified as indirect costs cannot be specified in all situations. However, typical examples of indirect costs may include certain State/local-wide central service costs, general administration of the grantee department or agency, accounting and personnel services performed within the grantee department or agency, depreciation or use allowances on buildings and equipment, the costs of operating and maintaining facilities, etc. 5. This Attachment does not apply to State public assistance agencies. These agencies should refer instead to Attachment D. B. Definitions. 1. "Indirect cost rate proposal" means the documentation prepared by a governmental unit or subdivision thereof to substantiate its request for the establishment of an indirect cost rate. 2. "Indirect cost rate" is a device for determining in a reasonable manner the proportion of indirect costs each program should bear. It is the ratio (expressed as a percentage) of the indirect costs to a direct cost base. 3. "Indirect cost pool" is the accumulated costs that jointly benefit two or more programs or other cost objectives. 4. "Base" means the accumulated direct costs (normally either total direct salaries and wages or total direct costs exclusive of any extraordinary or distorting expenditures) used to distribute indirect costs to individual Federal awards. The direct cost base selected should result in each award bearing a fair share of the indirect costs in reasonable relation to the benefits received from the costs. 5. "Predetermined rate" means an indirect cost rate, applicable to a specified current or future period, usually the governmental unit's fiscal year. This rate is based on an estimate of the costs to be incurred during the period. Except under very unusual circumstances, a predetermined rate is not subject to adjustment. �/16/113 1:39 PM rcular No.A-87--Cost Principles for State, Local,and Indian Tribal Governments http://www.wnitenouse.goviomoicircularsiaua upnnvaua/-aii.ntmi (Because of legal constraints, predetermined rates are not peiiiiitted for Federal contracts; they may, however, be used for grants or cooperative agreements.) Predeteiiuined rates may not be used by governmental units that have not submitted and negotiated the rate with the cognizant agency. In view of the potential advantages offered by this procedure, negotiation of predetermined rates for indirect costs for a period of two to four years should be the noun in those situations where the cost experience and other pertinent facts available are deemed sufficient to enable the parties involved to reach an infoirued judgment as to the probable level of indirect costs during the ensuing accounting periods. 6. "Fixed rate" means an indirect cost rate which has the same characteristics as a predetermined rate, except that the difference between the estimated costs and the actual, allowable costs of the period covered by the rate is carried forward as an adjustment to the rate computation of a subsequent period. 7. "Provisional rate" means a temporary indirect cost rate applicable to a specified period which is used for funding, interim reimbursement, and reporting indirect costs on Federal awards pending the establishment of a "final" rate for that period. 8. "Final rate" means an indirect cost rate applicable to a specified past period which is based on the actual allowable costs of the period. A final audited rate is not subject to adjustment. 9. "Base period" for the allocation of indirect costs is the period in which such costs are incurred and accumulated for allocation to activities performed in that period. The base period normally should coincide with the governmental unit's fiscal year,but in any event, shall be so selected as to avoid inequities in the allocation of costs. C. Allocation of Indirect Costs and Determination of Indirect Cost Rates. 1. General. a. Where a governmental unit's department or agency has only one major function, or where all its major functions benefit from the indirect costs to approximately the same degree, the allocation of indirect costs and the computation of an indirect cost rate may be accomplished through simplified allocation procedures as described in subsection 2. b. Where a governmental unit's department or agency has several major functions which benefit from its indirect costs in varying degrees, the allocation of indirect costs may require the accumulation of such costs into separate cost groupings which then are allocated individually to benefitted functions by means of a base which best measures the relative degree of benefit. The indirect costs allocated to each function are then distributed to individual awards and other activities included in that function by means of an indirect cost rate(s). c. Specific methods for allocating indirect costs and computing indirect cost rates along with the conditions under which each method should be used are described •)f5i 4/16/03 1:39 PM in subsections 2, 3 and 4. 2. Simplified method. a. Where a grantee agency's major functions benefit from its indirect costs to approximately the same degree, the allocation of indirect costs may be accomplished by(1) classifying the grantee agency's total costs for the base period as either direct or indirect, and (2) dividing the total allowable indirect costs (net of applicable credits) by an equitable distribution base. The result of this process is an indirect cost rate which is used to distribute indirect costs to individual Federal awards. The rate should be expressed as the percentage which the total amount of allowable indirect costs bears to the base selected. This method should also be used where a governmental unit's department or agency has only one major function encompassing a number of individual projects or activities, and may be used where the level of Federal awards to that department or agency is relatively small. b. Both the direct costs and the indirect costs shall exclude capital expenditures and unallowable costs. However, unallowable costs must be included in the direct costs if they represent activities to which indirect costs are properly allocable. c. The distribution base may be (1)total direct costs (excluding capital expenditures and other distorting items, such as pass-through funds, major subcontracts, etc.), (2) direct salaries and wages, or(3) another base which results in an equitable distribution. 3. Multiple allocation base method. a. Where a grantee agency's indirect costs benefit its major functions in varying degrees, such costs shall be accumulated into separate cost groupings. Each grouping shall then be allocated individually to benefitted functions by means of a base which best measures the relative benefits. b. The cost groupings should be established so as to permit the allocation of each grouping on the basis of benefits provided to the major functions. Each grouping should constitute a pool of expenses that are of like character in terms of the functions they benefit and in terms of the allocation base which best measures the relative benefits provided to each function. The number of separate groupings should be held within practical limits, taking into consideration the materiality of the amounts involved and the degree of precision needed. c. Actual conditions must be taken into account in selecting the base to be used in allocating the expenses in each grouping to benefitted functions. When an allocation can be made by assignment of a cost grouping directly to the function benefitted, the allocation shall be made in that manner. When the expenses in a grouping are more general in nature, the allocation should be made through the use of a selected base which produces results that are equitable to both the Federal Government and the governmental unit. In general, any cost element or related factor associated with the governmental unit's activities is potentially .8,,, -/I bi 03 l.39 PM Let I -O -- J IL 1i t. L,L• , I• adaptable for use as an allocation base provided that: (1) it can readily be expressed in terms of dollars or other quantitative measures (total direct costs, direct salaries and wages, staff hours applied, square feet used, hours of usage, number of documents processed, population served, and the like), and (2) it is common to the benefitted functions during the base period. d. Except where a special indirect cost rate(s) is required in accordance with subsection 4, the separate groupings of indirect costs allocated to each major function shall be aggregated and treated as a common pool for that function. The costs in the common pool shall then be distributed to individual Federal awards included in that function by use of a single indirect cost rate. e. The distribution base used in computing the indirect cost rate for each function may be (1) total direct costs (excluding capital expenditures and other distorting items such as pass-through funds, major subcontracts, etc.), (2) direct salaries and wages, or(3) another base which results in an equitable distribution. An indirect cost rate should be developed for each separate indirect cost pool developed. The rate in each case should be stated as the percentage relationship between the particular indirect cost pool and the distribution base identified with that pool. 4. Special indirect cost rates. a. In some instances, a single indirect cost rate for all activities of a grantee department or agency or for each major function of the agency may not be appropriate. It may not take into account those different factors which may substantially affect the indirect costs applicable to a particular program or group of programs. The factors may include the physical location of the work, the level of administrative support required, the nature of the facilities or other resources employed, the organizational arrangements used, or any combination thereof. When a particular award is carried out in an environment which appears to generate a significantly different level of indirect costs,provisions should be made for a separate indirect cost pool applicable to that award. The separate indirect cost pool should be developed during the course of the regular allocation process, and the separate indirect cost rate resulting therefrom should be used, provided that: (1) the rate differs significantly from the rate which would have been developed under subsections 2. and 3., and (2) the award to which the rate would apply is material in amount. b. Although this Circular adopts the concept of the full allocation of indirect costs, there are some Federal statutes which restrict the reimbursement of certain indirect costs. Where such restrictions exist, it may be necessary to develop a special rate for the affected award. Where a "restricted rate" is required, the procedure for developing a non-restricted rate will be used except for the additional step of the elimination from the indirect cost pool those costs for which the law prohibits reimbursement. D. Submission and Documentation of Proposals. 1. Submission of indirect cost rate proposals. • nf53 a/16/03 1:39 PM 11 .0 IUI IVU.[l"Ul L.UJl.1 Ilil.i NlU.l lUl JLUIUj 1JU\.•3 llu IIIUlc.0 .11UU! vU.j..II,illl.••LJ "`Y" "' "' J + ill ••cli•• a. All departments or agencies of the governmental unit desiring to claim indirect costs under Federal awards must prepare an indirect cost rate proposal and related documentation to support those costs. The proposal and related documentation must be retained for audit in accordance with the records retention requirements contained in the Common Rule. b. A governmental unit for which a cognizant agency assignment has been specifically designated must submit its indirect cost rate proposal to its cognizant agency. The Office of Management and Budget (OMB) will periodically publish lists of governmental units identifying the appropriate Federal cognizant agencies. The cognizant agency for all governmental units or agencies not identified by OMB will be deteiiiiined based on the Federal agency providing the largest amount of Federal funds. In these cases, a governmental unit must develop an indirect cost proposal in accordance with the requirements of this Circular and maintain the proposal and related supporting documentation for audit. These governmental units are not required to submit their proposals unless they are specifically requested to do so by the cognizant agency. Where a local government only receives funds as a sub-recipient, the primary recipient will be responsible for negotiating and/or monitoring the sub-recipient's plan. c. Each Indian tribal government desiring reimbursement of indirect costs must submit its indirect cost proposal to the Department of the Interior (its cognizant Federal agency). d. Indirect cost proposals must be developed (and, when required, submitted) within six months after the close of the governmental unit's fiscal year, unless an exception is approved by the cognizant Federal agency. If the proposed central service cost allocation plan for the same period has not been approved by that time, the indirect cost proposal may be prepared including an amount for central services that is based on the latest federally-approved central service cost allocation plan. The difference between these central service amounts and the amounts ultimately approved will be compensated for by an adjustment in a subsequent period. 2. Documentation of proposals. The following shall be included with each indirect cost proposal: a. The rates proposed, including subsidiary work sheets and other relevant data, cross referenced and reconciled to the financial data noted in subsection b. Allocated central service costs will be supported by the summary table included in the approved central service cost allocation plan. This summary table is not required to be submitted with the indirect cost proposal if the central service cost allocation plan for the same fiscal year has been approved by the cognizant agency and is available to the funding agency. b. A copy of the financial data(financial statements, comprehensive annual financial report, executive budgets, accounting reports, etc.) upon which the rate is based. Adjustments resulting from the use of unaudited data will be recognized, where appropriate, by the Federal cognizant agency in a subsequent 1/16/113 i:39 PM cular No. A-87--Cost Principles for State,Local,and Indian Tribal Governments http://www.whitehouse.gov/omb/circulars/a087/prmt/a087-all.html proposal. c. The approximate amount of direct base costs incurred under Federal awards. These costs should be broken out between salaries and wages and other direct costs. d. A chart showing the organizational structure of the agency during the period for which the proposal applies, along with a functional statement(s) noting the duties and/or responsibilities of all units that comprise the agency. (Once this is submitted, only revisions need be submitted with subsequent proposals.) 3. Required certification. Each indirect cost rate proposal shall be accompanied by a certification in the following form: CERTIFICATE OF INDIRECT COSTS This is to certify that I have reviewed the indirect cost rate proposal submitted herewith and to the best of my knowledge and belief: (1) All costs included in this proposal [identify date] to establish billing or final indirect costs rates for [identify period covered by rate] are allowable in accordance with the requirements of the Federal award(s) to which they apply and OMB Circular A-87, "Cost Principles for State, Local, and Indian Tribal Governments." Unallowable costs have been adjusted for in allocating costs as indicated in the cost allocation plan. (2)All costs included in this proposal are properly allocable to Federal awards on . the basis of a beneficial or causal relationship between the expenses incurred and the agreements to which they are allocated in accordance with applicable requirements. Further, the same costs that have been treated as indirect costs have not been claimed as direct costs. Similar types of costs have been accounted for consistently and the Federal Government will be notified of any accounting changes that would affect the predetermined rate. I declare that the foregoing is true and correct. Governmental Unit: Signature: Name of Official: Title: Date of Execution: 416/03 1:39 PM • E. Negotiation and Approval of Rates. 1. Indirect cost rates will be reviewed, negotiated, and approved by the cognizant Federal agency on a timely basis. Once a rate has been agreed upon, it will be accepted and used by all Federal agencies unless prohibited or limited by statute. Where a Federal funding agency has reason to believe that special operating factors affecting its awards necessitate special indirect cost rates, the funding agency will, prior to the time the rates are negotiated, notify the cognizant Federal agency. 2. The use of predetermined rates, if allowed, is encouraged where the cognizant agency has reasonable assurance based on past experience and reliable projection of the grantee agency's costs, that the rate is not likely to exceed a rate based on actual costs. Long-term agreements utilizing predetermined rates extending over two or more years are encouraged, where appropriate. 3. The results of each negotiation shall be formalized in a written agreement between the cognizant agency and the governmental unit. This agreement will be subject to re-opening if the agreement is subsequently found to violate a statute, or the information upon which the plan was negotiated is later found to be materially incomplete or inaccurate. The agreed upon rates shall be made available to all Federal agencies for their use. 4. Refunds shall be made if proposals are later found to have included costs that (a) are unallowable (i) as specified by law or regulation, (ii) as identified in Attachment B of this Circular, or(iii)by the terms and conditions of Federal awards, or(b) are unallowable because they are clearly not allocable to Federal awards. These adjustments or refunds will be made regardless of the type of rate negotiated (predetermined, final, fixed, or provisional). F. Other Policies. 1. Fringe benefit rates. If overall fringe benefit rates are not approved for the governmental unit as part of the central service cost allocation plan, these rates will be reviewed, negotiated and approved for individual grantee agencies during the indirect cost negotiation process. In these cases, a proposed fringe benefit rate computation should accompany the indirect cost proposal. If fringe benefit rates are not used at the grantee agency level (i.e., the agency specifically identifies fringe benefit costs to individual employees), the governmental unit should so advise the cognizant agency. 2. Billed services provided by the grantee agency. In some cases, governmental units provide and bill for services similar to those covered by ,ventral service cost allocation plans (e.g., computer centers). Where this occurs. the governmental unit should be guided by the requirements in Attachment C relating to the development of billing rates and documentation requirements. and should advise the cognizant agency of any billed services. Reviews of these -ypes of services (including reviews of costing/billing methodology, profits or osses, etc.) will be made on a case-by-case basis as warranted by the circumstances involved. ;2 u1 3 4/16/03 is 39 PM cular No. A-8/--Lost rrinclples ror Mate,Local,anu 1mUlarl I rloal Loverrlments 3. Indirect cost allocations not using rates. In certain situations, a governmental unit, because of the nature of its awards, may be required to develop a cost allocation plan that distributes indirect (and, in some cases, direct) costs to the specific funding sources. In these cases, a narrative cost allocation methodology should be developed, documented, maintained for audit, or submitted, as appropriate, to the cognizant agency for review, negotiation, and approval. 4. Appeals. If a dispute arises in a negotiation of an indirect cost rate (or other rate)between the cognizant agency and the governmental unit,the dispute shall be resolved in accordance with the appeals procedures of the cognizant agency. 5. Collection of unallowable costs and erroneous payments. Costs specifically identified as unallowable and charged to Federal awards either directly or indirectly will be refunded (including interest chargeable in accordance with applicable Federal agency regulations). 6. OMB assistance. To the extent that problems are encountered among the Federal agencies and/or governmental units in connection with the negotiation and approval process, OMB will lend assistance, as required, to resolve such problems in a timely manner. Return to this article at: http://www.whitehouse.gov/omb/circulars/a087/a087-all.html Click to Print this document 1 a/16iO3 1:39 PM EXHIBIT "I" EQUAL EMPLOYMENT OPPORTUNITY CLAUSE During the perfoiivance of this Contract, the Contractor agrees as follows: (1) The Contractor shall not discriminate against any employee or applicant for employment because of race, religion, color, sex or national origin. The Contractor shall take affirmative action to ensure that applicants are employed and that employees are treated during employment without regard to their race, religion, color, sex or national origin. As used herein, the work "treated" shall mean and include, without limitation, the following: Recruited, whether by advertising or by other means; compensated; selected for training, including apprenticeship; promoted; upgraded; demoted; downgraded; transferred; laid off; and terminated. The Contractor agrees to and shall post in conspicuous places, available to employees and applicants for employment, notices to be provided by the contracting officers setting forth the provisions of this nondiscrimination clause. (2) The Contractor shall, in all solicitations or advertisements for employees placed by or on behalf of the Contractor, state that all qualified applicants will receive consideration for employment without regard to race, religion, color, sex or national origin. (3) The Contractor shall send to each labor union or representative of workers with which he has a collective bargaining agreement or other contract or understanding a notice advising the labor union or worker's representative of the Contractor's commitments under the equal employment opportunity clause of the City and shall post copies of the notice in conspicuous places available to employees and applicants for employment. (4) The Contractor shall furnish to the contract compliance officer all Federal forms containing the information and reports required by the Federal government for Federal contracts under Federal rules and regulations, and including the information required by Omaha Municipal Code Sections 10-192 to 10-194, inclusive, and,shall permit reasonable access to his records. Records accessible to the contract compliance officer shall be those which are related to Paragraphs (1) through (7) of this subsection and only after reasonable notice is given to the Contractor. The purpose for this provision is to provide for investigation to ascertain compliance with the program provided for herein. (5) The Contractor shall take such actions with respect to any subcontractor as the City may direct as a means of enforcing the provisions of Paragraphs (1) through (7) herein, including penalties and sanctions for noncompliance; however, in the event the Contractor becomes involved in or is threatened with litigation as the result of such directions by the City, the City will enter into such litigation as is necessary to protect the interests of the City and to effectuate the provisions of this division; and in the case of contracts receiving Federal assistance, the Contractor or the City may request the United States to enter into such litigation to protect the interests of the United States. (6) The Contractor shall file and shall cause his subcontractors, if any, to file compliance reports with the Contractor in the same form and to the same extent as required by the Federal government for Federal contracts under Federal rules and regulations. Such compliance reports shall be filed with the contract compliance officer. Compliance filed at such times as directed shall contain information as to the employment practices, policies, programs and statistics of the Contractor and his subcontractor. (7) The Contractor shall include the provisions of Paragraphs (1) through (7) of this Section, "Equal Employment Opportunity Clause", and Omaha Municipal Code Section 10-193 in every subcontract or purchase order so that such provisions will be binding upon each subcontractor or vendor. OMB Circular A-122 http://www.whitehouse.gov/omb/circulars/a122/al22.html EXHIBIT 3 OFFICE OF MANAGEMENT AND BUDGET • Cost Principles for Non-Profit Organizations AGENCY: Office of Management and Budget ACTION: Final revision of OMB Circular A-122, "Cost Principles for Non-Profit Organizations" SUMMARY: The Office of Management and Budget(OMB)revises OMB Circular A-122 by amending the definition for equipment; requiring the breakout of indirect costs into two categories(facilities and administration)for certain non-profit organizations;modifying the multiple allocation basis; and,clarifying the treatment of certain cost items. DATES:The revision is effective on June 1, 1998. FOR FURTHER INFORMATION CONTACT: Federal agencies should contact Gilbert Tran,Office of Federal Financial Management,Office of Management and Budget,(202)395-3993.Non-Federal organizations should contact the organization's Federal cognizant agency. SUPPLEMENTARY INFORMATION: A.Background On October 6, 1995;the Office of Management and Budget(OMB)issued a final revision to OMB Circular A-122,"Cost Principles for Non-Profit Organizations," in the Federal Register(60 FR 52516) regarding interest allowability. The revision was made in a continuing effort to increase consistency across OMB's cost principles circulars A-122,A-21,"Cost Principles for Educational Institutions," and A-87, "Cost Principles for State,Local and Indian Tribal Governments." To further the goals of consistency, OMB proposed on the same date(60 FR 52522)to revise the definition of equipment,to clarify the treatment of certain types of costs,to modify the multiple allocation base method for computing indirect cost rate(s),and to place an upper-limit on payments of administrative expenses for certain non-profit organizations. With this final revision, Circular A-122 consists of the Circular as issued in 1980(45 FR 46022; July 8, 1980), as amended in 1984(49 FR 18260; April 27, 1984), in 1987(52 FR 19788;May 27, 1987), in 1995 (60 FR 52516;October 6, 1995),in 1997(62 FR 45934; August 29, 1997), and in this notice.A recompilation of the entire Circular A-122,with all its amendments, accompanies the notice and is available in electronic form on the OMB Home Page at http://www.whitehouse.gov/OMB. B. Current Revisions Circular A-122 is revised in this notice to: 1. Amend the definition of equipment by increasing the capitalization threshold to the lesser amount used for financial statement purposes or$5,000(see paragraph 15). 2.Require major non-profit organizations(those receiving more than$10 million in direct Federal funding) to report indirect cost rates by two major component categories: facilities and administration(see paragraph D,Attachment A). 1 of 63 6/21/00 2:34 PM OMB Circular A-122 http://1www.whitehouse.gov/omb/circulars/a122/a122.htm1 3. Modify the multiple allocation base method(MAB)to be consistent with OMB Circular A-21 (see paragraph D.3).However,major non-profit organizations are not required to use the multiple allocation base method.MAB remains one of the three available methodologies for computing indirect costs. 4. Clarify the treatment of the following cost items to provide consistency across OMB's cost principles circulars(A-21 and A-87)and the Federal Acquisition Regulations,where applicable: • Alcoholic beverages • Advertising and public relations costs • Organization-furnished automobiles • Defense and prosecution of criminal and civil proceedings,claims, appeals and patent infringements • Housing and living expenses • Insurance • Memberships • Selling or marketing of goods and services • Severance pay for foreign nationals OMB is not implementing the proposed restrictions on trustees'travel expenses at non-profit organizations. In line with this decision,and to further consistency between cost circulars,OMB will be amending Circular A-21 to allow trustees'travel expenses. OMB defers considering an upper-limit on payment of administrative expenses until better data on indirect costs at non-profit organizations are collected. C. Comments and Responses OMB received about 185 comments from non-profit organizations,Federal agencies,professional organizations and accounting firms. A summary of comments and OMB's responses are included in this notice. Several comments resulted in modifications to OMB's original proposal. The comments and OMB's responses are summarized by section as follow. Equipment Definition Comment:Clarification is needed on the treatment of depreciation of those assets which had costs between the old$500 threshold and the new$5,000. Response: In order to clarify the accounting for the undepreciated portion of any equipment costs as a result of a change in capitalization levels,paragraph 15 has been added to explain that the undepreciated amount may be recovered by continuing to claim otherwise allowable use allowances tar depreciation on the equipment,or by amortizing the amount to be written off over a period of years as negotiated with the Federal cognizant agency. Comment: Clarification is needed on whether equipment under the$5,000 threshold, as established by the non-profit organizations'policy,requires Federal approval prior to acquisition. Response: Equipment under the$5,000 threshold, as established by the non-profit organization's policy, can be directly charged to sponsored agreements(subparagraph 15.b)without prior Federal approval. Comment: Current subparagraph I3.b requires prior approval for special purpose equipment,as direct 2 of 63 6/21/00 2:34 PM OMB Circular A-122 http://www_whitehouse.gov/omb/circulars/a122/a122.�tmI costs,with a unit cost of$1,000 or more. This requirement is not consistent with the higher threshold of $5,000 allowed in the proposed revision.This requirement should be revised to be consistent with the proposed revision. Response: OMB agrees. The Circular is revised to require prior Federal approval only for special purpose equipment with a unit cost of$5,000 or more. Unallowable Cost Items These ten revised cost items are already unallowable under OMB Circulars A-21,"Cost Principles for Educational Institutions," and A-87, "Cost Principles for State,Local and Indian Tribal Governments," and/or the Federal Acquisition Regulations. OMB addressed the issue of trustees'travel in response to the comments received. For the other items,consistency across Federal cost regulations was a more significant issue than most of the commenters'concerns. Comments related to specific cost items are presented below, followed by OMB's responses. Advertising and Public Relations Costs Comment: Current paragraph 37,Public information service costs,should be combined with the "Advertising"paragraph to be consistent with other OMB cost principles in Circulars A-21 and A-87. Response: The commenter is correct. The treatment of public information service costs is now addressed in revised paragraph 1,Advertising and public relations costs. Current paragraph 37 is deleted. Comment: Clarify the types of activities that are allowable as public relations costs. Public relations costs to carry out certain functions,such as legitimate program outreach, that are required under sponsored programs and contracts should be allowable. Response: The Circular is revised to clarify that certain public relations costs for the purpose of communicating spe cific activities relatedto the sponsored programs to the public or the press are allowable po P 8Ta costs. When they are necessary for program outreach effort as required by sponsored programs,public relations costs are allowable.Costs of advertising and public relations incurred solely to promote the organization are unallowable. Comment: Clarify whether advertising media costs such as radio and television are allowable. Response: As long as the public relations costs are specifically required by the sponsored programs or are related to the promotion of sponsored programs, any reasonable advertising media,including magazines, newspapers,radio,television,direct mail,exhibits,and the like,can be used and its costs are allowable. See paragraph l.a. Comment: Community relation costs should be allowable as part of program outreach effort for Federal sponsored programs. Response: Community relations are defined in subparagraph 1.b as "those activities dedicated to maintain the image of the organization or promoting understanding and favorable relations with the community or public at large or any segment of the public." Costs related to community relations are allowable when the costs are required or necessary to the performance of the sponsored programs. Organization-furnished automobiles for personal use • 6/21/00 2:34 PM 3of63 OMB Circular A-122 http://www.whitehouse.gov/omb/circulars/a122/a122.1ttm1 Comment: For security and economic reasons,non-profit organizations often furnish automobiles and housing for its personnel working on Federal projects(e.g.,overseas projects sponsored by the U.S. Agency for International Development or the U.S. State Department). These costs should be allowable as direct costs. Response: The Circular is revised to allow these costs when they are necessary to perform the Federal projects,particularly the overseas sponsored projects with prior approval by the Federal awarding agency. These costs are allowable only as direct costs to the Federal projects,and not as fringe benefit or indirect costs. Comment: The Circular should specify which types of automobiles are allowable or unallowable(e.g.,cars, vans,trucks and buses). Response: The types of automobiles are irrelevant for the purpose of determining the allowability of automobile costs. Rather,the determinant factors should be whether the automobile costs are reasonable and necessary for the performance of the Federal projects and authorized by the Federal awarding agency. Defense and prosecution of criminal and civil proceedings,claims,appeals and patent infringements Comment: Current paragraph 35.d,Professional service costs, should be combined with new paragraph 10. Response: OMB agrees. Current paragraph 35.d is deleted. Professional service costs related to defense of antitrust suits,prosecution of claims against the Federal Government and patent infringement litigation are discussed in new paragraph 10. Professional service costs incurred for organization and reorganization are discussed in paragraph 31, Organization costs. Comment: Clarification is needed as to when legal costs related to claims,appeals or proceeding become unallowable. Commenters noted that Federal agencies are inconsistent in the determination of the allowability of legal costs as one agency would allow legal costs up to the point where the case goes out of the Federal agency appeal process and to the courts,whereas other agencies would only allow legal costs through the first phase of appeals within the Federal agency. Response: The policy makes unallowable legal and related costs for either defending against claims made by the Federal Government or prosecuting claims against the Government. As such,once a final management decision letter is issued by the agency(for example,a disallowance letter), all legal and related costs are unallowable from that point forward. Unallowable costs would include claims and defenses pursued through agencies'formal appeal procedures such as administrative law judges and agency appeal boards. Note that legal and related costs may be allowable if the non-profit organization's position is sustained by the administrative appeal process or an agreement is reached between the organization and the Federal Government(see subparagraghs 10.b, 10.c, 10.d and 10.e). This revision is consistent with the language contained in OMB Circular A-21, "Cost Principles for Educational Institutions." Comment: Some commenters objected to the proposed 80 percent limitation on reimbursement when the institution is found innocent. Response: The proposed revision was retained because it provides consistency with procurement contracts. This limitation is based on the statutory language of Public Law 100-700, Major Fraud Act of 1988, November 19, 1988 (41 U.S.C.,256(k)(5)),which only allows recovery of 80 percent of the legal costs. 4of63 6/21/00 2:34 PM OMB Circular A-122 http://www.wrowwuse.gov/omb/circulars/a 1221a 122.htm,: Comment: Legal expenses to defend against lawsuits brought by a foreign government for violation of that country's law should be allowable. Response: The Circular is revised in subparagraph 1O.d to authorize Federal agencies to allow legal expenses to defend against lawsuits brought by a foreign government for violation of its law when such costs were necessary or were direct results of the performance of Federal sponsored programs. The same authorizations apply for legal costs for defense against lawsuits brought by state or local governments. Comment: Legal fees to defend against lawsuits filed by former employees for termination or by subrecipients should be allowable. Response: Legal fees incurred in defense of lawsuits not brought by a Federal, State, local or foreign government,except when the suits are brought by former employees under Section 2 of the Major Fraud Act of 1988(Pub. L. 100-700),are allowable. Housing and living expenses Comment: For security and economic reasons,non-profit organizations often furnish automobiles and housing for its personnel working on overseas Federal projects(e.g.,overseas projects sponsored by the U.S.Agency for International Development). These costs should be allowable as direct costs. Response: As previously noted(in the discussion of automobiles), the Circular is revised to allow these costs when they are necessary to perform the Federal projects and when they are approved by the Federal awarding agency.These costs are allowable only as direct costs to the Federal projects,and not as fringe benefit or indirect costs. Insurance Comment: General and casualty liability insurance costs for organization's directors and administrators should be allowable. Response: General and casualty liability insurance costs for organization's directors and administrators are allowable,subject to limitations, as described in subparagraph 22.a.(2). New subparagraph 22.a.(2).f, Insurance against defects,prohibits the reimbursement of costs against Federally sponsored awards for product(or services)liability insurance costs. Comment: Medical liability insurance costs for participants in Federal training programs should be allowable. Response: Medical liability insurance costs associated with participants in Federal training programs are allowable to Federal programs as direct costs. Comment: Malpractice insurance costs for physicians should be direct charged to Federal programs while malpractice insurance costs for nurses or laboratory assistants,which are immaterial in most cases,should be charged as indirect costs. Response: Subparagraph B.2 of Attachment A provides that when a direct cost is of minor amounts,it may be treated as an indirect cost for reasons of practicality and efficiency,provided that the accounting treatment for such cost is consistently applied to all final cost objectives. Therefore,when malpractice insurance costs for nurses or lab technicians are immaterial in relation to its effect on the overall indirect 6/21/00 2:34 PM 5 of 63 • OMB Circular A-I22 http://www.whitehouse.gov/omb/circulars/aI22/al 22.html cost rates of the organization,they may be treated as indirect costs. Memberships Comment: Membership costs in civic and community organizations should be allowable. Response: Membership costs are allowable for business and professional organizations. The Circular is further revised to allow membership costs in civic and community organizations when associations with these organizations are essential to the performance of the Federal programs(as an outreach function). These membership costs must be approved by the Federal cognizant agency. Comment:Costs of membership in organizations that lobby should be unallowable. Response: Paragraph 25 of the Circular disallows lobbying costs. Membership dues to lobbying organizations are therefore unallowable. The unallowable portion of membership dues is determined by the percentage of lobbying activities versus other allowable activities of the lobbying organization. Selling or Marketing of Goods and Services Comment: Clarification is needed for what types of activities are considered to be the selling or marketing of goods and services, Response: Selling or marketing of goods and services generally include an organization's efforts to market the organization's products or services such as through advertising,organizational image enhancement, market planning and direct selling. Direct selling efforts are those acts or actions used to induce particular customers to purchase particular products or services of the organization. The allowability provisions for advertising costs are described in paragraph 1. Comment: The guidelines for selling or marketing of goods and services should be consistent with those in FAR 31.205.38(c)(1). Response: FAR 31.205.38(c)(1)allows direct selling costs at commercial contractors if they are reasonable in amount. By contrast to the commercial contract context,direct selling costs are generally not considered to be necessary costs for the performance of Federal sponsored programs by non-profit organizations. In those cases where they are essential for certain Federal sponsored programs,these costs can be charged as direct costs to the Federal sponsored programs if they are approved by the Federal awarding agency. Comment: Given that the Bayh-Dole Act encouraged technology transfer, selling or marketing costs of goods or services should be allowable costs. At the minimum,these costs should be allowable as direct costs to the Federal projects. Response: The Circular is revised to allow selling or marketing costs as direct costs to some Federal sponsored programs when approved by the Federal awarding agency. Severance Pay Comment: Early retirement benefits should be allowable costs. Response: Early retirement benefit costs are allowable costs,subject to limitations,and are discussed in subparagraph 6.f, Fringe Benefits, along with other forms of fringe benefits. Paragraph 49, Severance Pay, 6 of 63 6/21/00 2:34 PM OMB Circular A-122 http://www.whriehouse.gov/omh/circulars/a122/a122.html deals only with severance policy, i.e.,dismissal, and the reimbursement of its costs. Comment: Guidelines for costs of severance pay to foreign nationals in excess of customary or prevailing practices should be consistent with section 2151 of the Federal Acquisition Streamlining Act of 1994 (FASA). Response: OMB agrees. The Circular is revised to be consistent with FASA guidelines for severance pay to foreign nationals in excess of customary or prevailing practices. As a result, the Federal awarding agency may allow these costs when they are necessary for the performance of the Federal sponsored programs. Trustees' Travel Comment: Several commenters opposed the proposal to disallow trustees'travel costs citing the difficulty of retaining or obtaining members to serve voluntarily on the Board of Trustees(or Directors)of a non-profit organization,if Board Members have to pay for their own travel expenses to attend Board meetings.The commenters added that since serving on a non-profit organization's Board is often not as prestigious and desirable as serving on a University's Board(where trustees'travel costs are unallowable under Circular A-21),non-reimbursement of the travel costs would inhibit the recruitment of Board members. Response: OMB concurs that disallowing the reimbursement of trustees'travel costs could inhibit the recruitment of qualified Board members(particularly at smaller non-profit organizations), thereby hampering the operations of a non-profit organization. OMB also recognizes that trustees'travel costs are reasonable and necessary business costs. As a result,trustees'travel costs remain allowable. Comment: Trustees'travel costs should be allowable if they are reasonable. Some suggested tests for reasonableness of trustees'travel costs are: limit number of allowed trips per year,restriction of trips to organization's principal place of business or reasonable surroundings,distinction between scheduled Board meetings and emergency Board meetings, and disallowance of first-class airfare travels. Response: All costs charged to Federal projects must satisfy a reasonableness test. Although some of the suggested reasonableness tests appear to be good,OMB does not believe it is necessary at this time to impose specific restrictions on trustees'travel expenses.The reasonableness of a particular travel expense remains at the judgement of Federal negotiators. Comment: At Head Start organizations,some Trustee members are first sent for training in the operations of a Head Start program. These travel costs related to training should be allowable. Response: Travel costs related to training and education are allowable, subject to limitations,and are addressed in paragraph 53 of the Circular,Training and education costs. Comment: At Head Start organizations,there often are several advisory boards in addition to the Board of Trustees(or Directors). These advisory boards are involved in day-to-day operations of the organizations and often incur travel costs. Are these costs subject to the same restrictions as trustees'travel? Response: Travel costs for members of advisory groups are allowable, subject to the limitations in paragraph 55,Travel costs. Multiple Allocation Basis(MAB) 7 of 63 6/21/00 2:34 PM OMB Circular A-I22 http://www.whitehouse.gov/omb/circularsia122/a1.22.html Comment: The multiple allocation method for calculating indirect costs rates is much more complicated and burdensome than the simplified method and it will cost non-profit organizations much more to prepare the indirect cost proposal. Several commenters recommended the flexibility of using one of the three different allocation methods as they are currently described in the Circular. The multiple allocation basis (MAB)should remain an optional allocation methodology rather than a required methodology for certain organizations. Response: The use of MAB for major non-profit organizations promotes consistency in the calculation and the reporting of indirect costs. It would facilitate the accumulation of indirect cost data by cost components (i.e., facilities and administration)and provide comparable rates between major research non-profit organizations and universities. However,OMB recognizes that a conversion to MAB may require some substantial changes in the organization's accounting system and that MA13 is not practical for single-function organizations. Therefore,the Circular continues to allow non-profit organizations to use any of the current three allocation methodologies. Comment: Several commenters suggested raising the threshold for the requirement to$25 million in direct Federal funding. Several commenters also suggested an exemption from this requirement for single-function organizations regardless of Federal funding levels. Response: The Circular is revised to allow the use of the current three allocation methodologies for all non-profit organizations. For organizations that receive more than $10 million in direct Federal funding, a breakout of indirect costs into two components, facilities and administration, is required regardless of the ,selected allocation methodology. Comment: The allocation methodology for general administration under MAB on the basis of modified total direct costs conflicts with the required methodology under Cost Accounting Standard(CAS)410 applicable to contracts using the salaries and wages basis. One commenter suggested that a fully CAS-covered non-profit organization be exempted from the MAB requirement. Response: MAB is not a requirement for non-profit organizations and remains one of the three available methodologies in the Circular for computing indirect costs. In addition, CAS-covered non-profit organizations should continue to follow CAS with respect to the measurement,assignment and allocation of costs. Comment: The revision should clarify that the modified total direct cost base should only include the first $25,000 of a subcontract regardless of the period during which the project is started(consistent with OMB Circular A-21). Response: The modified total direct cost base, described in subparagraph D.3.f of the'Circular,includes the first $25,000 of each subgrant or subcontract regardless of the period covered by the subgrant or subcontract. Subgrant or subcontract costs above$25,000 shall be excluded from the Modified total direct cost base. For example, for a$300,000 subgrant that lasts three years,only the first$25,000 incurred on the award should be included in the modified total direct cost base. Administrative Cap of 26 percent Comment: Most commenters strongly opposed the 26 percent administrative cap stating that such limitation on cost reimbursement is arbitrary, capricious, and unnecessary. Some argued that a cap would be financially disastrous to non-profit organizations because they receive most of their funding from Federal sources(unlike universities). A detailed analysis is urged to determine the average administrative 8of63 6/21/00 2:34 PM OMB Circular A-122 http://www.whttehouse.gov/omb/circulars/a122/a122.hti costs applicable to non-profit organizations,if an administrative cap is to be implemented at non-profit organizations. Response: Based on the comments against the implementation of an administrative cap at non-profit organizations,OMB defers the consideration of establishing any administrative cap until better data on indirect costs at non-profit organizations can be collected. If OMB believes that an administrative cap should be implemented, it would be proposed in a subsequent notice. Other Comment: Attachment C of the Circular should be updated since a few listed organizations no longer exist. Response: OMB agrees.Attachment C is updated to delete those organizations that no longer exist or are no longer exempted from OMB Circular A-122. Franklin D. Raines Director Attachments A,B and C of Circular A-122 are revised as follows: A.Attachment A 1. Add subparagraph 3 to paragraph C("Indirect Costs"). 3. Indirect costs shall be classified within two broad categories: "Facilities" and"Administration." "Facilities" is defined as depreciation and use allowances on buildings, equipment and capital improvement,interest on debt associated with certain buildings,equipment and capital improvements, and operations and maintenance expenses. "Administration" is defined as general administration and general expenses such as the director's office,accounting,personnel, library expenses and all other types of expenditures not listed specifically under one of the subcategories of"Facilities" (including cross allocations from other pools,where applicable). See indirect cost rate reporting requirements in subparagraphs D.2.e and D.3.g. 2. Add subparagraph 2.e to paragraph D. e. For an organization that receives more than$10 million in Federal funding of direct costs in a fiscal year, a breakout of the indirect cost component into two broad categories,Facilities and Administration as defined in subparagraph C.3, is required.The rate in each case shall be stated as the percentage which the amount of the particular indirect cost category(i.e.,Facilities or Administration)is of the distribution base identified with that category. 3.Replace subparagraph D.3 with the following: 3. Multiple allocation base method. a. General. Where an organization's indirect costs benefit its major functions in varying degrees,indirect costs shall be accumulated into separate cost groupings,as described in subparagraph b. Each grouping shall then be allocated individually to benefitting functions by means of a base which best measures the relative benefits.The default allocation bases by cost pool are described in subparagraph c. 6/21/00 2:34 PM 9of63 OMB Circular A-122 http://www.whitehouse.gov/omb/circulars/a122/al22.html b. Identification of indirect costs. Cost groupings shall be established so as to permit the allocation of each grouping on the basis of benefits provided to the major functions. Each grouping shall constitute a pool of expenses that are of like character in terms of functions they benefit and in terms of the allocation base which best measures the relative benefits provided to each function. The groupings are classified within the two broad categories: "Facilities"and "Administration,"as described in subparagraph C.3. The indirect cost pools are defined as follows: (1)Depreciation and use allowances. The expenses under this heading are the portion of the costs of the organization's buildings,capital improvements to land and buildings, and equipment which are computed in accordance with paragraph 11 of Attachment B ("Depreciation and use allowances"). (2)Interest. Interest on debt associated with certain buildings, equipment and capital improvements are computed in accordance with paragraph 23 of Attachment B ("Interest, fund raising, and investment management costs"). (3)Operation and maintenance expenses. The expenses under this heading are those that have been incurred for the administration,operation, maintenance,preservation, and protection of the organization's physical plant. They include expenses normally incurred for such items as:janitorial and utility services; repairs and ordinary or normal alterations of buildings, furniture and equipment;care of grounds; maintenance and operation of buildings and other plant facilities; security; earthquake and disaster preparedness; environmental safety; hazardous waste disposal;property, liability and other insurance relating to property; space and capital leasing; facility planning and management; and,central receiving. The operation and maintenance expenses category shall also include its allocable share of fringe benefit costs, depreciation and use allowances, and interest costs. (4)General administration and general expenses. The expenses under this heading are those that have been incurred for the overall general executive and administrative offices of the organization and other expenses of a general nature which do not relate solely to any major function of the organization. This category shall also include its allocable share of fringe benefit costs, operation and maintenance expense, depreciation and use allowances, and interest costs. Examples of this category include central offices, such as the director's office, the office of finance,business services,budget and planning,personnel, safety and risk management,general counsel, management information systems, and library costs. In developing this cost pool,special care should be exercised to ensure that costs incurred for the same purpose in like circumstances are treated consistently as either direct or indirect costs. For example, salaries of technical staff,project supplies,project publication,telephone toll charges,computer costs, travel costs,and specialized services costs shall be treated as direct costs wherever identifiable to al particular program. The salaries and wages of administrative and pooled clerical staff should normally be treated as indirect costs. Direct charging of these costs may be appropriate where a major project or activity explicitly requires and budgets for administrative or clerical services and other individuals involved can be identified with the program or activity. Items such as office supplies,postage,local telephone costs, periodicals and memberships should normally be treated as indirect costs. c. Allocation bases. Actual conditions shall be taken into account in selecting the base to be used in. allocating the expenses in each grouping to benefitting functions. The essential consideration in selecting a method or a base is that it is the one best suited for assigning the pool of costs to cost objectives in accordance with benefits derived; a traceable cause and effect relationship;or logic and reason,where neither the cause nor the effect of the relationship is determinable. When an allocation can be made by assignment of a cost grouping directly to the function benefited, the allocation shall be made in that manner. When the expenses in a cost grouping are more general in nature, the allocation shall be made 10of63 6/21/00 2:34 PM OMB Circular A-122 http://www.wnUenuuse.g0v10mb/circulars/a I 22/a ILL MI, through the use of a selected base which produces results that are equitable to both the Federal Government and the organization.The distribution shall be made in accordance with the bases described herein unless it can be demonstrated that the use of a different base would result in a more equitable allocation of the costs, or that a more readily available base would not increase the costs charged to sponsored awards. The results of special cost studies(such as an engineering utility study)shall not be used to determine and allocate the indirect costs to sponsored awards. (1)Depreciation and use allowances.Depreciation and use allowances expenses shall be allocated in the following manner: (a)Depreciation or use allowances on buildings used exclusively in the conduct of a single function, and on capital improvements and equipment used in such buildings,shall be assigned to that function. (b)Depreciation or use allowances on buildings used for more than one function, and on capital improvements and equipment used in such buildings,shall be allocated to the individual functions performed in each building on the basis of usable square feet of space,excluding common areas,such as hallways,stairwells,and restrooms. (c)Depreciation or use allowances on buildings,capital improvements and equipment related space(e.g., individual rooms,and laboratories)used jointly by more than one function(as determined by the users of the space) shall be treated as follows.The cost of each jointly used unit of space shall be allocated to the benefitting functions on the basis of: (i)the employees and other users on a full-time equivalent(FTE)basis or salaries and wages of those individual functions benefitting from the use of that space;or (ii)organization-wide employee FTEs or salaries and wages applicable to the benefitting functions of the organization. (d)Depreciation or use allowances on certain capital improvements to land,such as paved parking areas, fences,sidewalks,and the like,not included in the cost of buildings, shall be allocated to user categories on a FTE basis and distributed to major functions in proportion to the salaries and wages of all employees applicable to the functions. (2)Interest. Interest costs shall be allocated in the same manner as the depreciation or use allowances on the buildings,equipment and capital equipments to which the interest relates. (3)Operation and maintenance expenses. Operation and maintenance expenses shall be allocated in the same manner as the depreciation and use allowances. (4)General administration and general expenses. General administration and general expenses shall be allocated to ben efitting functions based on modified total direct costs(MTDC), as described in subparagraph D.3.f. The expenses included in this category could be grouped first according to major functions of the organization to which they render services or provide benefits. The aggregate expenses of each group shall then be allocated to benefitting functions based on MTDC. d. Order of distribution. (1)Indirect cost categories consisting of depreciation and use allowances,interest,operation and maintenance,and general administration and general expenses shall be allocated in that order to the 6/21/00 2:34 PM 11 of 63 OMB Circular A-122 http://www.whitehouse.gov/omb/circulars/a122/a i 22.html remaining indirect cost categories as well as to the major functions of the organization. Other cost categories could be allocated in the order determined to be most appropriate by the organization. When cross allocation of costs is made as provided in subparagraph(2), this order of allocation does not apply. (2)Normally, an indirect cost category will be considered closed once it has been allocated to other cost objectives,and costs shall not be subsequently allocated to it. However, a cross allocation of costs between two or more indirect costs categories could be used if such allocation will result in a more equitable allocation of costs. If a cross allocation is used, an appropriate modification to the composition of the indirect cost categories is required. e. Application of indirect cost rate or rates. Except where a special indirect cost rate(s)is required in accordance with subparagraph D.5, the separate groupings of indirect costs allocated to each major function shall be aggregated and treated as a common pool for that function. The costs in the common pool shall then be distributed to individual awards included in that function by use of a single indirect cost rate. f. Distribution basis. Indirect costs shall be distributed to applicable sponsored awards and other benefitting activities within each major function on the basis of MTDC. MTDC consists of all salaries and wages, fringe benefits, materials and supplies, services, travel, and subgrants and subcontracts up to the first $25,000 of each subgrant or subcontract(regardless of the period covered by the subgrant or subcontract). Equipment,capital expenditures,charges for patient care, rental costs and the portion in excess of$25,000 shall be excluded from MTDC. Participant support costs shall generally be excluded from MTDC. Other items may only be excluded when the Federal cost cognizant agency determines that an exclusion is necessary to avoid a serious inequity in the distribution of indirect costs. g. Individual Rate Components. An indirect cost rate shall be determined for each separate indirect cost pool developed. The rate in each case shall be stated as the percentage which the amount of the particular indirect cost pool is of the distribution base identified with that pool. Each indirect cost rate negotiation or determination agreement shall include development of the rate for each indirect cost pool as well as the overall indirect cost rate. The indirect cost pools shall be classified within two broad categories: "Facilities" and "Administration," as described in subparagraph C.3. B. Attachment B Revise the following cost items in Attachment B to Circular A-122 ("Selected Items of Cost"). 1. Revise the Table of Contents for Attachment B to read: 1. Advertising and public relations costs 2. Alcoholic beverages 3. Bad debts 4. Bid and proposal costs(reserved) 5. Bonding costs 6. Communication costs 7. Compensation for personal services 8. Contingency provisions 9. Contributions 10. Defense and prosecution of criminal and civil proceedings,claims, appeals and patent infringement 11. Depreciation and use allowances 12. Donations 13. Employee morale,health, and welfare costs and credits 12of63 6/21/00 2:34 PM OMB Circular A-122 http://www.wlotehouse.gov/omb/circulars/a122/a122.htru1 14. Entertainment costs 15. Equipment and other capital expenditures 16.Fines and penalties 17.Fringe benefits 18.Goods or services for personal use 19.Housing and personal living expenses 20. Idle facilities and idle capacity 21. Independent research and development(reserved) 22. Insurance and indemnification 23. Interest, fund raising,and investment management costs 24. Labor relations costs 25. Lobbying costs 26. Losses on other awards 27. Maintenance and repair costs 28.Materials and supplies 29. Meetings and conferences 30. Memberships, subscriptions, and professional activity costs 31. Organization costs 32. Overtime,extra-pay shift,and multi-shift premiums 33.Page charges in professional journals 34. Participant support costs 35.Patent costs 36. Pension plans 37.Plant security costs 38.Pre-award costs 39.Professional service costs 40. Profits and losses on disposition of depreciable property or other capital assets 41. Publication and printing costs 42. Rearrangement and alteration costs 43. Reconversion costs 44. Recruiting costs 45.Relocation costs 46.Rental costs 47.Royalties and other costs for use of patents and copyrights 48. Selling and marketing 49. Severance pay 50. Specialized service facilities 51.Taxes 52. Termination costs 53. Training and education costs 54. Transportation costs 55.Travel costs 56. Trustees 2. Revise and retitle paragraph 1 to read: 1. Advertising and public relations costs. a. The term advertising costs means the costs of advertising media and corollary administrative costs. Advertising media include magazines,newspapers,radio and television programs,direct mail,exhibits, 6/21/00 2:34 PM 13of63 OMB Circular A-122 http://www.whitehouse.gov/omb/circulars/a122/a122.html and the like. b. The term public relations includes community relations and means those activities dedicated to maintaining the image of the organization or maintaining or promoting understanding and favorable relations with the community or public at large or any segment of the public. c. The only allowable advertising costs are those which are solely for: (1)The recruitment of personnel required for the performance by the organization of obligations arising under a sponsored award,when considered in conjunction with all other recruitment costs, as set forth in paragraph 44("Recruiting costs"); (2) The procurement of goods and services for the performance of a sponsored award; (3)The disposal of scrap or surplus materials acquired in the performance of a sponsored award except when organizations are reimbursed for disposal costs at a predetermined amount in accordance with OMB Circular A-110,Sec.-_.34, "Equipment";or (4)Other specific purposes necessary to meet the requirements of the sponsored award. d. The only allowable public relations costs are: (I) Costs specifically required by sponsored awards; (2)Costs of communicating with the public and press pertaining to specific activities or accomplishments which result from performance of sponsored awards(these costs are considered necessary as part of the outreach effort for the sponsored awards); or (3)Costs of conducting general liaison with news media and government public relations officers,to the extent that such activities are limited to communication and liaison necessary to keep the public informed on matters of public concern, such as notices of contract/grant awards, financial matters,etc. e. Costs identified in subparagraphs c and d if incurred for more than one sponsored award or for both sponsored work and other work of the organization,are allowable to the extent that the principles in paragraphs B("Direct Costs") and C("Indirect Costs")of Attachment A are observed. f. Unallowable advertising and public relations costs include the following: (1)All advertising and public relations costs other than as specified in subparagraphs c,d, and e; ' (2)Costs of meetings or other events related to fund raising or other organizational activities including: (i)Costs of displays, demonstrations, and exhibits; (ii)Costs of meeting rooms, hospitality suites, and other special facilities used in conjunction with shows and other special events; and (iii) Salaries and wages of employees or cost of services engaged in setting up and displaying exhibits, making demonstrations, and providing briefings; 14 of 63 6/21/00 2:34 PM UM14 l.ircular A-122 http://www.wuucuvuse.gov/omb/circulars/aI22-aI22.ht„Il (3)Costs of promotional items and memorabilia, including models, gifts, and souvenirs; (4)Costs of advertising and public relations designed solely to promote the organization. 3. Renumber current paragraphs 2 through 8 as paragraphs 3 through 9,respectively. 4. Add the following new paragraph 2: 2. Alcoholic beverages. Costs of alcoholic beverages are unallowable. 5. In paragraph 7("Compensation for personal services"), as renumbered above in item 3,rename the current subparagraph g("Pension costs"),as subparagraph h. Add a new subparagraph g: g. Organization-furnished automobiles. That portion of the cost of organization-furnished automobiles that relates to personal use by employees(including transportation to and from work)is unallowable as fringe benefit or indirect costs regardless of whether the cost is reported as taxable income to the employees. These costs are allowable as direct costs to sponsored award when necessary for the performance of the sponsored award and approved by awarding agencies. 6. Renumber current paragraphs 9 through 15 as paragraphs 11 through 17,respectively. 7. Add new paragraph 10: 10. Defense and prosecution of criminal and civil proceedings,claims,appeals and patent infringement. a. Definitions. (1)Conviction,as used herein,means a judgment or a conviction of a criminal offense by any court of competent jurisdiction,whether entered upon as a verdict or a plea,including a conviction due to a plea of nolo contendere. (2)Costs include,but are not limited to,administrative and clerical expenses;the cost of legal services, whether performed by in-house or private counsel;and the costs of the services of accountants,consultants, or others retained by the organization to assist it; costs of employees,officers and trustees, and any similar costs incurred before,during, and after commencement of a judicial or administrative proceeding that bears a direct relationship to the proceedings. (3)Fraud, as used herein,means(i) acts of fraud corruption or attempts to defraud the Federal Government or to corrupt its agents, (ii)acts that constitute a cause for debarment or suspension(as specified in agency regulations),and(iii)acts which violate the False Claims Act, 31 U.S.C., sections 3729-3731,or the Anti-Kickback Act,41 U.S.C., sections 51 and 54. (4)Penalty does not include restitution,reimbursement,or compensatory damages. (5)Proceeding includes an investigation. b. (1)Except as otherwise described herein,costs incurred in connection with any criminal,civil or administrative proceeding(including filing of a false certification)commenced by the Federal Government, or a State, local or foreign government,are not allowable if the proceeding: (1)relates to a violation of,or 15 of 63 6/21/00 2:34 PM OMB Circular A-122 http://www.whitehouse.gov/omb/circulars/al22/ai 22.html failure to comply with,a Federal, State, local or foreign statute or regulation by the organization(including its agents and employees),and(2)results in any of the following dispositions: (a)In a criminal proceeding,a conviction. (b)In a civil or administrative proceeding involving an allegation of fraud or similar misconduct, a determination of organizational liability. (c)In the case of any civil or administrative proceeding,the imposition of a monetary penalty. (d)A final decision by an appropriate Federal official to debar or suspend the organization,to rescind or void an award,or to terminate an award for default by reason of a violation or failure to comply with a law or regulation. (e)A disposition by consent or compromise, if the action could have resulted in any of the dispositions described in(a), (b), (c)or(d). (2)If more than one proceeding involves the same alleged misconduct, the costs of all such proceedings shall be unallowable if any one of them results in one of the dispositions shown in subparagraph b.(l). c. If a proceeding referred to in subparagraph b is commenced by the Federal Government and is resolved by consent or compromise pursuant to an agreement entered into by the organization and the Federal Government,then the costs incurred by the organization in connection with such proceedings that are otherwise not allowable under subparagraph b may be allowed to the extent specifically provided in such agreement. d. If a proceeding referred to in subparagraph b is commenced by a State, local or foreign government,the authorized Federal official may allow the costs incurred by the organization for such proceedings, if such authorized official determines that the costs were incurred as a result of(1)a specific term or condition of a federally-sponsored award,or(2) specific written direction of an authorized official of the sponsoring agency. e. Costs incurred in connection with proceedings described in subparagraph b,but which are not made unallowable by that subparagraph,may be allowed by the Federal Government,but only to the extent that: (1) The costs are reasonable in relation to the activities required to deal with the proceeding and the underlying cause of action; (2)Payment of the costs incurred,as allowable and allocable costs, is not prohibited by any other provision(s)of the sponsored award; (3)The costs are not otherwise recovered from the Federal Government or a third party,either directly as a result of the proceeding or otherwise; and, (4) The percentage of costs allowed does not exceed the percentage determined by an authorized Federal official to be appropriate,considering the complexity of the litigation,generally accepted principles governing the award of legal fees in civil actions involving the United States as a party, and such other factors as may be appropriate. Such percentage shall not exceed 80 percent. However, if an agreement reached under subparagraph c has explicitly considered this 80 percent limitation and permitted a higher percentage, then the full amount of costs resulting from that agreement shall be allowable. 16 of 63 6/21/00 2:34 PM OMB Circular A-I22 http://www.Whitehousc.gov/omb/circulars/a122/a122.htrul f. Costs incurred by the organization in connection with the defense of suits brought by its employees or ex-employees under section 2 of the Major Fraud Act of 1988 (Pub. L. 100-700), including the cost of all relief necessary to make such employee whole,where the organization was found liable or settled, are unallowable. g. Costs of legal,accounting,and consultant services, and related costs, incurred in connection with defense against Federal Government claims or appeals,antitrust suits,or the prosecution of claims or appeals against the Federal Government,are unallowable. h.Costs of legal, accounting, and consultant services,and related costs, incurred in connection with patent infringement litigation,are unallowable unless otherwise provided for in the sponsored awards. i. Costs which may be unallowable under this paragraph, including directly associated costs, shall be segregated and accounted for by the organization separately. During the pendency of any proceeding covered by subparagraphs b and f,the Federal Government shall generally withhold payment of such costs. However,if in the best interests of the Federal Government,the Federal Government may provide for conditional payment upon provision of adequate security,or other adequate assurance,and agreements by the organization to repay all unallowable costs,plus interest,if the costs are subsequently determined to be unallowable. 8. In paragraph 15 ("Equipment and other capital expenditures"), as renumbered in item 6 above,replace subparagraphs 15.a.(1)and 15.b.(2)to read: 15.a.(1)"Equipment"means an article of nonexpendable,tangible personal property having a useful life of more than one year and an acquisition cost which equals or exceeds the lesser of(a)the capitalization level established by the organization for the financial statement purposes,or(b)$5000. The unamortized portion of any equipment written off as a result of a change in capitalization levels may be recovered by continuing to claim the otherwise allowable use allowances or depreciation on the equipment,or by amortizing the amount to be written off over a period of years as negotiated with the Federal cognizant agency. 15.b.(2)Capital expenditures for special purpose equipment are allowable as direct costs,provided that items with a unit cost of$5000 or more have the prior approval of awarding agency. 9. Renumber current paragraphs 16 through 36 as paragraphs 20 through 40, respectively. 10. Add new paragraph 18: 18. Goods or services for personal use. Costs of goods or services for personal use of the organization's employees are unallowable regardless of whether the cost is reported as taxable income to the employees. 11. Add new paragraph 19: 19.Housing and personal living expenses. a.Costs of housing(e.g.,depreciation,maintenance,utilities, furnishings,rent,etc.),housing allowances and personal living expenses for/of the organization's officers are unallowable as fringe benefit or indirect costs regardless of whether the cost is reported as taxable income to the employees. These costs are allowable as direct costs to sponsored awards when necessary for the performance of the sponsored award and approved by awarding agencies. 6/21/00 2:34 PM 17 of 63 OMB Circular A-122 http://www.whitehouse.gov/omb/circulars/a122/a122.html b. The term"officers" includes current and past officers and employees. 12:Add to paragraph 22.a.(2)("Insurance and indemnification"),as renumbered in item 9,subparagraphs (f)and(g): (f)Insurance against defects. Costs of insurance with respect to any costs incurred to correct defects in the organization's materials or workmanship are unallowable. (g)Medical liability(malpractice)insurance. Medical liability insurance is an allowable cost of Federal research programs only to the extent that the Federal research programs involve human subjects or training of participants in research techniques. Medical liability insurance costs shall be treated as a direct cost and shall be assigned to individual projects based on the manner in which the insurer allocates the risk to the population covered by the insurance. 13. Revise paragraph 30, as renumbered in item 9,to read: 30. Memberships,subscriptions and professional activity costs. a. Costs of the organization's membership in business, technical, and professional organizations are allowable. b. Costs of the organization's subscriptions to business,professional,and technical periodicals are allowable. c. Costs of meetings and conferences,when the primary purpose is the dissemination of technical information, are allowable. This includes costs of meals,transportation, rental of facilities, and other items incidental to such meetings or conferences. d. Costs of membership in any civic or community organization are allowable with prior approval by Federal cognizant agency. e. Costs of membership in any country club or social or dining club or organization are unallowable. 14. Delete subparagraph 39.d, as renumbered in item 9. 15. Delete current paragraph 37 ("Public service costs"). 16. Renumber current paragraphs 38 through 44 as paragraphs 41 through 47,respectively. 17. Revise paragraph 44, as renumbered in item 16, to read: 44. Recruiting costs. a. Subject to subparagraphs b, c, and d, and provided that the size of the staff recruited and maintained is in keeping with workload requirements, costs of"help wanted" advertising,operating costs of an employment office necessary to secure and maintain an adequate staff, costs of operating an aptitude and educational testing program, travel costs of employees while engaged in recruiting personnel,travel costs of applicants for interviews for prospective employment, and relocation costs incurred incident to recruitment of new employees, are allowable to the extent that such costs are incurred pursuant to a well-managed recruitment 18 of 63 6/21/00 2:34 PM OMB CAr.ula'A-122 http:/N ww.wu„c❑ouse.govlomb/circulars/a122/a122.h rm program. Where the organization uses employment agencies,costs that are not in excess of standard commercial rates for such services are allowable. b.In publications,costs of help wanted advertising that includes color, includes advertising material for other than recruitment purposes,or is excessive in size(taking into consideration recruitment purposes for which intended and normal organizational practices in this respect), are unallowable. c. Costs of help wanted advertising,special emoluments, fringe benefits, and salary allowances incurred to attract professional personnel from other organizations that do not meet the test of reasonableness or do not conform with the established practices of the organization, are unallowable. d.Where relocation costs incurred incident to recruitment of a new employee have been allowed either as an allocable direct-or indirect cost, and the newly hired employee resigns for reasons within his control within twelve months after being hired,the organization will be required to refund or credit such relocation costs to the Federal Government. 18. Renumber current paragraphs 45 through 51 as paragraphs 49 through 55,respectively. 19. Add new paragraph 48: 48. Selling and marketing. Costs of selling and marketing any products or services of the organization (unless allowed under paragraph 1 as allowable public relations costs)are unallowable. These costs, however,are allowable as direct costs,with prior approval by awarding agencies, when they are necessary for the performance of Federal programs. 20. Add new subparagraphs c,d and e to paragraph 49("Severance pay"),as renumbered in item 18, as follow: c. Costs incurred in certain severance pay packages(commonly known as"a golden parachute"payment) which are in an amount in excess of the normal severance pay paid by the organization to an employee upon termination of employment and are paid to the employee contingent upon a change in management control over,or ownership of,the organization's assets are unallowable. d. Severance payments to foreign nationals employed by the organization outside the United States, to the extent that the amount exceeds the customary or prevailing practices for the organization in the United States are unallowable, unless they are necessary for the performance of Federal programs and approved by awarding agencies. e. Severance payments to foreign nationals employed by the organization outside the United States due to the termination of the foreign national as a result of the closing of,or curtailment of activities by,the organization in that country,are unallowable,unless they are necessary for the performance of Federal programs and approved by awarding agencies. 21. Add new paragraph 56: 56.Trustees. Travel and subsistence costs of trustees(or directors)are allowable. The costs are subject to restrictions regarding lodging,subsistence and air travel costs provided in paragraph 55. C. Attachment C 6/21/00 2:34 PM 19of63 OMB Circular A-122 http://www.whitehouse.gov/omb/circulars/a122/a122.html 1. Delete the following organizations from Attachment C. These organizations either no longer exist or are no longer exempted from complying with Circular A-122. • Associated Universities,Incorporated, Washington,D.C. • Associated Universities for Research and Astronomy, Tucson,Arizona ' • Center for Energy and Environmental Research(CEER), (University of Puerto Rico), Commonwealth of Puerto Rico • Comparative Animal Research Laboratory(CARL), (University of Tennessee),Oak Ridge, Tennessee • Institute of Gas Technology, Chicago, Illinois • Montana Energy Research and Development Institute, Inc.,(MERDI), Butte,Montana • Project Management Corporation, Oak Ridge, Tennessee • Sandia Corporation, Albuquerque, New Mexico • Universities Corporation for Atmospheric Research,Boulder, Colorado 2. Change Argonne Universities Association, Chicago, Illinois to Argonne National Laboratory,Chicago, Illinois. 3. Change the location of the Institute for Defense Analysis in Virginia from Arlington to Alexandria. 4. Replace Midwest Research Institute,Headquartered in Kansas City,Missouri to National Renewable Energy Laboratory, Golden, Colorado. D. A recompilation of the entire Circular A-122, with all its amendments, follows: CIRCULAR NO. A-122 Revised TO THE HEADS OF EXECUTIVE DEPARTMENTS AND ESTABLISHMENTS SUBJECT: Cost Principles for Non-Profit Organizations 1. Purpose. This Circular establishes principles for determining costs of grants,contracts and other agreements with non-profit organizations. It does not apply to colleges and universities which are covered by Office of Management and Budget(OMB)Circular A-21, "Cost Principles for Educational Institutions"; State, local, and federally-recognized Indian tribal governments which are covered by OMB Circular A-87, "Cost Principles for State, Local, and Indian Tribal Governments";or hospitals. The principles are designed to provide that the Federal Government bear its fair share of costs except where restricted or prohibited by law. The principles do not attempt to prescribe the extent of cost sharing or matching on grants,contracts, or other agreements. However, such cost sharing or matching shall not be accomplished through arbitrary limitations on individual cost elements by Federal agencies. Provision for profit or other increment above 20 of 63 6/21/00 2:34 PM OMB Circular A-122 http://wv.w.wnueuuuse.gov/omb/cIrculars/a122/aI22.htr.1 cost is outside the scope of this Circular. 2. Supersession. This Circular supersedes cost principles issued by individual agencies for non-profit organizations. 3. Applicability. a. These principles shall be used by all Federal agencies in determining the costs of work performed by non-profit organizations under grants,cooperative agreements,cost reimbursement contracts,and other contracts in which costs are used in pricing, administration,or settlement. All of these instruments are hereafter referred to as awards. The principles do not apply to awards under which an organization is not required to account to the Federal Government for actual costs incurred. b. All cost reimbursement subawards(subgrants, subcontracts,etc.) are subject to those Federal cost principles applicable to the particular organization concerned. Thus,if a subaward is to a non-profit organization,this Circular shall apply;if a subaward is to a commercial organization,the cost principles applicable to commercial concerns shall apply; if a subaward is to a college or university,Circular A-21 shall apply; if a subaward is to a State,local,or federally-recognized Indian tribal government,Circular A-87 shall apply. 4. Definitions. a. Non-profit organization means any corporation,trust,association,cooperative,or other organization which: (1)is operated primarily for scientific, educational,service,charitable,or similar purposes in the public interest; (2)is not organized primarily for profit; and (3)uses its net proceeds to maintain, improve, and/or expand its operations. For this purpose,the term "non-profit organization" excludes(i)colleges and universities;(ii)hospitals;(iii) State, local,and federally-recognized Indian tribal governments; and(iv)those non-profit organizations which are excluded from coverage of this Circular in accordance with paragraph 5. b. Prior approval means securing the awarding agency's permission in advance to incur cost for those items that are designated as requiring prior approval by the Circular. Generally this permission will be in writing. Where an item of cost requiring prior approval is specified in the budget of an award,approval of the budget constitutes approval of that cost. 5. Exclusion of some non-profit organizations. Some non-profit organizations,because of their size and nature of operations,can be considered to be similar to commercial concerns for purpose of applicability of cost principles. Such non-profit organizations shall operate under Federal cost principles applicable to commercial concerns. A listing of these organizations is contained in Attachment C. Other organizations may be added from time to time. 6. Responsibilities. Agencies responsible for administering programs that involve awards to non-profit organizations shall implement the provisions of this Circular. Upon request, implementing instruction shall be furnished to OMB. Agencies shall designate a liaison official to serve as the agency representative on matters relating to the implementation of this Circular. The name and title of such representative shall be 21 of 63 6/21/00 2:34 PM OMB Circular A-122 http://www.whitehouse.gov/omb/circulars/a122/aI22.html furnished to OMB within 30 days of the date of this Circular. 7. Attachments. The principles and related policy guides are set forth in the following Attachments: Attachment A-General Principles Attachment B -Selected Items of Cost Attachment C-Non-Profit Organizations Not Subject To This Circular 8. Requests for exceptions. OMB may grant exceptions to the requirements of this Circular when permissible under existing law. However, in the interest of achieving maximum uniformity, exceptions will be permitted only in highly unusual circumstances. 9. Effective Date. The provisions of this Circular are-effective immediately. Implementation shall be phased in by incorporating the provisions into new awards made after the start of the organization's next fiscal year. For existing awards,the new principles may be applied if an organization and the cognizant Federal agency agree. Earlier implementation,or a delay in implementation of individual provisions, is also permitted by mutual agreement between an organization and the cognizant Federal agency. 10. Inquiries. Further information concerning this Circular may be obtained by contacting the Office of Federal Financial Management, OMB, Washington,DC 20503,telephone(202) 395-3993. Attachments ATTACHMENT A Circular No. A-122 GENERAL PRINCIPLES Table of Contents A. Basic Considerations 1. Composition of total costs 2. Factors affecting allowability of costs 3. Reasonable costs 4. Allocable costs 5. Applicable credits 6. Advance understandings 7. Conditional exemptions B. Direct Costs C. Indirect Costs D. Allocation of Indirect Costs and Determination of Indirect Cost Rates 1. General 2. Simplified allocation method 22 of 63 6/21/00 2:34 PM OMB Circular A-122 http://www.wnuawuse.goviomblctrcuiarsiat22!a122.titl 3.Multiple allocation base method 4.Direct allocation method 5. Special indirect cost rates E.Negotiation and Approval of Indirect Cost Rates 1. Definitions 2.Negotiation and approval of rates _ ATTACHMENT A Circular No. A-122 GENERAL PRINCIPLES A. Basic Considerations • 1. Composition of total costs. The total cost of an award is the sum of the allowable direct and allocable indirect costs less any applicable credits. 2.Factors affecting allowability of costs. To be allowable under an award, costs must meet the following general criteria: a. Be reasonable for the performance of the award and be allocable thereto under these principles. b. Conform to any limitations or exclusions set forth in these principles or in the award as to types or amount of cost items. c. Be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the organization. d. Be accorded consistent treatment. (GAAP). e. Be determined in accordance with generally accepted accounting principles f.Not be included as a cost or used to meet cost sharing or matching requirements of any other federally-financed program in either the current or a prior period. g.Be adequately documented. • 3.Reasonable costs. A cost is reasonable if, in its nature or amount, it does not exceed that which would be incurred by a prudent person under the circumstances prevailing at the time the decision was made to incur the costs. The question of the reasonableness of specific costs must be scrutinized with particular care in connection with organizations or separate divisions thereof which receive the preponderance of their support from awards made by Federal agencies. In determining the reasonableness of a given cost, consideration shall be given to: • a. Whether the cost is of a type generally recognized as ordinary and necessary for the operation of the organization or the performance of the award. 6/21/00 2:34 PM 23 of 63 OMB Circular A-I22 http://www.whitehouse.gov/omb/circulars/a122/a i 22.html b. The restraints or requirements imposed by such factors as generally accepted sound business practices, arms length bargaining,Federal and State laws and regulations, and terms and conditions of the award. c. Whether the individuals concerned acted with prudence in the circumstances,considering their responsibilities to the organization, its members,employees, and clients,the public at large,and the Federal Government. d. Significant deviations from the established practices of the organization which may unjustifiably increase the award costs. 4.Allocable costs. a. A cost is allocable to a particular cost objective, such as a grant,contract,project,service, or other activity, in accordance with the relative benefits received. A cost is allocable to a Federal award if it is treated consistently with other costs incurred for the same purpose in like circumstances and if it: (1)Is incurred specifically for the award. (2)Benefits both the award and other work and can be distributed in reasonable proportion to the benefits received,or (3)Is necessary to the overall operation of the organization,although a direct relationship to any particular cost objective cannot be shown. b. Any cost allocable to a particular award or other cost objective under these principles may not be shifted to other Federal awards to overcome funding deficiencies,or to avoid restrictions imposed by law or by the terms of the award. 5.Applicable credits. a. The term applicable credits refers to those receipts,or reduction of expenditures which operate to offset or reduce expense items that are allocable to awards as direct Or indirect costs. Typical examples of such transactions are: purchase discounts,rebates or allowances,recoveries or indemnities on losses,insurance refunds,and adjustments of overpayments or erroneous charges. To the extent that such credits accruing or received by the organization relate to allowable cost,they shall be credited to the Federal Government either as a cost reduction or cash refund, as appropriate. b. In some instances,the amounts received from the Federal Government to finance organizational activities or service operations should be treated as applicable credits. Specifically,the concept of netting such credit items against related expenditures should be applied by the organization in determining the rates or amounts to be charged to Federal awards for services rendered whenever the facilities or other resources used in providing such services have been financed directly, in whole or in part,by Federal funds. c. For rules covering program income(i.e., gross income earned from federally-supported activities)see Sec. .24 of Office of Management and Budget(OMB)Circular A-110, "Uniform Administrative Requirements for Grants and Agreements with Institutions of Higher Education,Hospitals,and Other Non-Profit Organizations." 24 of 63 6/21/00 2:34 PM n l"cular H-rt2 http://v,ww.wnucuouse.gov/omb/circulars/aI22/a122.h,.ui • 6.Advance understandings. Under any given award,the reasonableness and allocability of certain items of costs may be difficult to determine. This is particularly true in connection with organizations that receive a preponderance of their support from Federal agencies. In order to avoid subsequent disallowance or dispute based on unreasonableness or nonallocability,it is often desirable to seek a written agreement with the cognizant or awarding agency in advance of the incurrence of special or unusual costs. The absence of an advance agreement on any element of cost will not,in itself, affect the reasonableness or allocability of that element. 7. Conditional exemptions. a. OMB authorizes conditional exemption from OMB administrative requirements and cost principles circulars for certain Federal programs with statutorily-authorized consolidated planning and consolidated administrative funding,that are identified by a Federal agency and approved by the head of the Executive department or establishment. A Federal agency shall consult with OMB during its consideration of whether to grant such an exemption. b. To promote efficiency in State and local program administration, when Federal non-entitlement programs with common purposes have specific statutorily-authorized consolidated planning and consolidated administrative funding and where most of the State agency's resources come from non-Federal sources,Federal agencies may exempt these covered State-administered,non-entitlement grant programs from certain OMB grants management requirements.The exemptions would be from all but the allocability of costs provisions of OMB Circulars A-87(Attachment A,subsection C.3), "Cost Principles for State, Local, and Indian Tribal Governments,"A-21 (Section C,subpart 4), "Cost Principles for Educational Institutions," and A-122(Attachment A,subsection A.4),"Cost Principles for Non-Profit Organizations," and from all of the administrative requirements provisions of OMB Circular A-110, "Uniform Administrative Requirements for Grants and Agreements with Institutions of Higher Education,Hospitals, and Other Non-Profit Organizations," and the agencies'grants management common rule. c. When a Federal agency provides this flexibility,as a prerequisite to a State's exercising this option, a State must adopt its own written fiscal and administrative requirements for expending and accounting for all funds,which are consistent with the provisions of OMB Circular A-87, and extend such policies to all subrecipients. These fiscal and administrative requirements must be sufficiently specific to ensure that: funds are used in compliance with all applicable Federal statutory and regulatory provisions,costs are reasonable and necessary for operating these programs, and funds are not be used for general expenses required to carry out other responsibilities of a State or its subrecipients. B. Direct Costs 1. Direct costs are those that can be identified specifically with a particular final cost objective, i.e.,a particular award,project, service,or other direct activity of an organization. However,a cost may not be assigned to an award as a direct cost if any other cost incurred for the same purpose, in like circumstance, has been allocated to an award as an indirect cost. Costs identified specifically with awards are direct costs of the awards and are to be assigned directly thereto. Costs identified specifically with other final cost objectives of the organization are direct costs of those cost objectives and are not to be assigned to other awards directly or indirectly. 2. Any direct cost of a minor amount may be treated as an indirect cost for reasons of practicality where the accounting treatment for such cost is consistently applied to all final cost objectives. 3.The cost of certain activities are not allowable as charges to Federal awards(see, for example, 25 of 63 6/21/00 2:27 PM OMB Circular A-122 http://www.whitehouse.gov/omb/circulars/a122/a122.html fundraising costs in paragraph 23 of Attachment B). However,even though these costs are unallowable for purposes of computing charges to Federal awards,they nonetheless must be treated as direct costs for purposes of determining indirect cost rates and be allocated their share of the organization's indirect costs if they represent activities which(1)include the salaries of personnel,(2)occupy space,and(3)benefit from the organization's indirect costs. 4. The costs of activities performed primarily as a service to members,clients,or the general public when significant and necessary to the organization's mission must be treated as direct costs whether or not allowable and be allocated an equitable share of indirect costs. Some examples of these types of activities include: a. Maintenance of membership rolls, subscriptions,publications, and related functions. b. Providing services and information to members, legislative or administrative bodies,or the public. c. Promotion, lobbying,and other forms of public relations. d. Meetings and conferences except those held to conduct the general administration of the organization. e. Maintenance,protection, and investment of special funds not used in operation of the organization. f. Administration of group benefits on behalf of members or clients, including life and hospital insurance, annuity or retirement plans, financial aid,etc. C. Indirect Costs 1. Indirect costs are those that have been incurred for common or joint objectives and cannot be readily identified with a.particular final cost objective. Direct cost of minor amounts may be treated as indirect costs under the conditions described in subparagraph 8.2. After direct costs have been determined and assigned directly to awards or other work as appropriate, indirect costs are those remaining to be allocated to benefiting cost objectives. A cost may not be allocated to an award as an indirect cost if any other cost incurred for the same purpose, in like circumstances,has been assigned to an award as a direct cost. 2. Because of the diverse characteristics and accounting practices of non-profit organizations,it is not possible to specify the types of cost which may be classified as indirect cost in all situations. However, typical examples of indirect cost for many non-profit organizations may include depreciation or use allowances on buildings and equipment, the costs of operating and maintaining facilities,and general administration and general expenses, such as the salaries and expenses of executive officers,personnel administration,and accounting. 3. Indirect costs shall be classified within two broad categories: "Facilities" and"Administration." "Facilities" is defined as depreciation and use allowances on buildings,equipment and capital improvement, interest on debt associated with certain buildings,equipment and capital improvements,and operations and maintenance expenses. "Administration" is defined as general administration and general expenses such as the director's office, accounting, personnel, library expenses and all other types of expenditures not listed specifically under one of the subcategories of"Facilities"(including cross allocations from other pools, where applicable). See indirect cost rate reporting requirements in subparagraphs D.2.e and D.3.g. D. Allocation of Indirect Costs and Determination of Indirect Cost Rates 26 of 63 6/21/00 2.27 PM UMt1 circular A-Ilt http://w.vw.wnucuouse.gov/omb/circulars/al22/aI22.ht:ni 1. General. a. Where a non-profit organization has only one major function,or where all its major functions benefit from its indirect costs to approximately the same degree, the allocation of indirect costs and the computation of an indirect cost rate may be accomplished through simplified allocation procedures, as described in subparagraph 2. b. Where an organization has several major functions which benefit from its indirect costs in varying degrees, allocation of indirect costs may require the accumulation of such costs into separate cost groupings which then are allocated individually to benefiting functions by means of a base which best measures the relative degree of benefit. The indirect costs allocated to each function are then distributed to individual awards and other activities included in that function by means of an indirect cost rate(s). c. The determination of what constitutes an organization's major functions will depend on its purpose in being;the types of services it renders to the public,its clients,and its members; and the amount of effort it devotes to such activities as fundraising,public information and membership activities. d. Specific methods for allocating indirect costs and computing indirect cost rates along with the conditions under which each method should be used are described in subparagraphs 2 through 5. e. The base period for the allocation of indirect costs is the period in which such costs are incurred and accumulated for allocation to work performed in that period. The base period normally should coincide with the organization's fiscal year but,in any event, shall be so selected as to avoid inequities in the allocation of the costs. 2. Simplified allocation method. a. Where an organization's major functions benefit from its indirect costs to approximately the same degree,the allocation of indirect costs may be accomplished by(i)separating the organization's total costs for the base period as either direct or indirect, and(ii)dividing the total allowable indirect costs(net of applicable credits)by an equitable distribution base. The result of this process is an indirect cost rate which is used to distribute indirect costs to individual awards. The rate should be expressed as the percentage which the total amount of allowable indirect costs bears to the base selected. This method should also be used where an organization has only one major function encompassing a number of individual projects or activities, and may be used where the level of Federal awards to an organization is relatively small. b. Both the direct costs and the indirect costs shall exclude capital expenditures and unallowable costs. However,unallowable costs which represent activities must be included in the direct costs under the conditions described in subparagraph B.3. c. The distribution base may be total direct costs(excluding capital expenditures and other distorting items, such as major subcontracts or subgrants),direct salaries and wages,or other base which results in an equitable distribution. The distribution base shall generally exclude participant support costs as defined in paragraph 34 of Attachment B. d. Except where a special rate(s) is required in accordance with subparagraph 5,the indirect cost rate developed under the above principles is applicable to all awards at the organization. If a special rate(s)is required, appropriate modifications shall be made in order to develop the special rate(s). 27 of 63 6/21/00 2:27 PM OMB Circular A-I22 http://www.whitehouse.gov/omb/circulars/a122/al22.htm1 e. For an organization that receives more than$10million in Federal funding of direct costs in a fiscal year, a breakout of the indirect cost component into two broad categories,Facilities and Administration as defined in subparagraph C.3, is required. The rate in each case shall be stated as the percentage which the amount of the particular indirect cost category(i.e.,Facilities or Administration)is of the distribution base identified with that category. 3. Multiple allocation base method a. General. Where an organization's indirect costs benefit its major functions in varying degrees, indirect costs shall be accumulated into separate cost groupings,as described in subparagraph b. Each grouping shall then be allocated individually to benefitting functions by means of a base which best measures the relative benefits. The default allocation bases by cost pool are described in subparagraph c. b. Identification of indirect costs. Cost groupings shall be established so as to permit the allocation of each grouping on the basis of benefits provided to the major functions. Each grouping shall constitute a pool of expenses that are of like character in terms of functions they benefit and in terms of the allocation base which best measures the relative benefits provided to each function. The groupings are classified within the two broad categories: "Facilities" and "Administration," as described in subparagraph C.3. The indirect cost pools are defined as follows: (1)Depreciation and use allowances. The expenses under this heading are the portion of the costs of the organization's buildings,capital improvements to land and buildings, and equipment which are computed in accordance with paragraph 11 of Attachment B("Depreciation and use allowances"). (2)Interest. Interest on debt associated with certain buildings,equipment and capital improvements are computed in accordance with paragraph 23 of Attachment B("Interest, fundraising, and investment management costs"). (3)Operation and maintenance expenses. The expenses under this heading are those that have been incurred for the administration,operation,maintenance,preservation,and protection of the organization's physical plant. They include expenses normally incurred for such items as:janitorial and utility services; repairs and ordinary or normal alterations of buildings, furniture and equipment;care of grounds; maintenance and operation of buildings and other plant facilities; security; earthquake and disaster preparedness;environmental safety;hazardous waste disposal;property, liability and other insurance relating to property; space and capital leasing; facility planning and management; and,central receiving. The operation and maintenance expenses category shall also include its allocable share of fringe benefit costs,depreciation and use allowances, and interest costs. (4)General administration and general expenses. The expenses under this heading are those that have been incurred for the overall general executive and administrative offices of the organization and other expenses of a general nature which do not relate solely to any major function of the organization. This category shall also include its allocable share of fringe benefit costs, operation and maintenance expense,depreciation and use allowances, and interest costs. Examples of this category include central offices, such as the director's office, the office of finance, business services,budget and planning,personnel, safety and risk management, general counsel,management information systems, and library costs. In developing this cost pool, special care should be exercised to ensure that costs incurred for the same purpose in like circumstances are treated consistently as either direct or indirect costs. For example, salaries of technical staff, project supplies,project publication, telephone toll charges,computer costs, travel costs, and specialized services costs shall be treated as direct costs wherever identifiable to a 28 of 63 6/21/00 2:27 PM Lircwar A-ILL http://www.wnhtenouse.gov/omb/circulars/a122/a122.hanl particular program.The salaries and wages of administrative and pooled clerical staff should normally be treated as indirect costs.Direct charging of these costs may be appropriate where a major project or activity explicitly requires and budgets for administrative or clerical services and other individuals involved can be identified with the program or activity. Items such as office supplies,postage, local telephone costs, periodicals and memberships should normally be treated as indirect costs. c. Allocation bases. Actual conditions shall be taken into account in selecting the base to be used in allocating the expenses in each grouping to benefitting functions. The essential consideration in selecting a method or a base is that it is the one best suited for assigning the pool of costs to cost objectives in accordance with benefits derived; a traceable cause and effect relationship;or logic and reason,where neither the cause nor the effect of the relationship is determinable. When an allocation can be made by assignment of a cost grouping directly to the function benefited,the allocation shalt be made in that manner. When the expenses in a cost grouping are more general in nature, the allocation shall be made through the use of a selected base which produces results that are equitable to both the Federal Government and the organization. The distribution shall be made in accordance with the bases described herein unless it can be demonstrated that the use of a different base would result in a more equitable allocation of the costs, or that a more readily available base would not increase the costs charged to sponsored awards. The results of special cost studies(such as an engineering utility study)shall not be used to determine and allocate the indirect costs to sponsored awards. (i)Depreciation and use allowances. Depreciation and use allowances expenses shall be allocated in the following manner: (a)Depreciation or use allowances on buildings used exclusively in the conduct of a single function, and on capital improvements and equipment used in such buildings,shall be assigned to that function. (b)Depreciation or use allowances on buildings used for more than one function,and on capital improvements and equipment used in such buildings,shall be allocated to the individual functions performed in each building on the basis of usable square feet of space, excluding common areas,such as hallways, stairwells, and restrooms. (c)Depreciation or use allowances on buildings,capital improvements and equipment related space(e.g., individual rooms, and laboratories)used jointly by more than one function(as determined by the users of the space)shall be treated as follows. The cost of each jointly used unit of space shall be allocated to the benefitting functions on the basis of: (i)the employees and other users on a full-time equivalent(FTE)basis or salaries and wages of those individual functions benefitting from the use of that space; or (ii)organization-wide employee FTEs or salaries and wages applicable to the benefitting functions of the organization. (d)Depreciation or use allowances on certain capital improvements to land, such as paved parking areas, fences, sidewalks, and the like,not included in the cost of buildings, shall be allocated to user categories on a FTE basis and distributed to major functions in proportion to the salaries and wages of all employees applicable to the functions. (2)Interest. Interest costs shall be allocated in the same manner as the depreciation or use allowances on the buildings, equipment and capital equipments to which the interest relates. 29of63 6/21/00 2:27 PM OMB Circular A-122 http://www.whitehouse.gov/omb/circulars/a122/a i 22.htm1 (3)Operation and maintenance expenses.Operation and maintenance expenses shall be allocated in the same manner as the depreciation and use allowances. (4)General administration and general expenses. General administration and general expenses shall be allocated to benefitting functions based on modified total direct costs(MTDC), as described in subparagraph D.3.f. The expenses included in this category could be grouped first according to major functions of the organization to which they render services or provide benefits. The aggregate expenses of each group shall then be allocated to benefitting functions based on MTDC. d. Order of distribution. (1)Indirect cost categories consisting of depreciation and use allowances, interest,operation and maintenance, and general administration and general expenses shall be allocated in that order to the remaining indirect cost categories as well as to the major functions of the organization. Other cost categories could be allocated in the order determined to be most appropriate by the organization. When cross allocation of costs is made as provided in subparagraph(2), this order of allocation does not apply. (2)Normally, an indirect cost category will be considered closed once it has been allocated to other cost objectives, and costs shall not be subsequently allocated to it. However, a cross allocation of costs between two or more indirect costs categories could be used if such allocation will result in a more equitable allocation of costs. If a cross allocation is used, an appropriate modification to the composition of the indirect cost categories is required. e. Application of indirect cost rate or rates. Except where a special indirect cost rate(s)is required in accordance with subparagraph D.5, the separate groupings of indirect costs allocated to each major function shall be aggregated and treated as a common pool for that function. The costs in the common pool shall then be distributed to individual awards included in that function by use of a single indirect cost rate. f. Distribution basis. Indirect costs shall be distributed to applicable sponsored awards and other benefitting activities within each major function on the basis of MTDC. MTDC consists of all salaries and wages, fringe benefits,materials and supplies, services,travel, and subgrants and subcontracts up to the first $25,000 of each subgrant or subcontract(regardless of the period covered by the subgrant or subcontract). Equipment,capital expenditures,charges for patient care,rental costs and the portion in excess of$25,000 shall be excluded from MTDC. Participant support costs shall generally be excluded from MTDC. Other items may only be excluded when the Federal cost cognizant agency determines that an exclusion is necessary to avoid a serious inequity in the distribution of indirect costs. g. Individual Rate Components. An indirect cost rate shall be determined for each separate indirect cost pool developed. The rate in each case shall be stated as the percentage which the amount of the particular indirect cost pool is of the distribution base identified with that pool. Each indirect cost rate negotiation or determination agreement shall include development of the rate for each indirect cost pool as well as the overall indirect cost rate. The indirect cost pools shall be classified within two broad categories: "Facilities" and "Administration," as described in subparagraph C.3. 4. Direct allocation method. a. Some non-profit organizations treat all costs as direct costs except general administration and general expenses. These organizations generally separate their costs into three basic categories: (i)General administration and general expenses, (ii) fundraising, and(iii)other direct functions(including projects performed under Federal awards). Joint costs, such as depreciation,rental costs,operation and maintenance 30 of 63 6/21/00 2:27 PM utviu ucwar H-ItZ ;pµ NW.w,,mnouse.gov/omb/circu1arsta 1 z2/al L2.ht.,11 of facilities,telephone expenses, and the like are prorated individually as direct costs to each category and to each award or other activity using a base most appropriate to the particular cost being prorated. b. This method is acceptable,provided each joint cost is prorated using a base which accurately measures the benefits provided to each award or other activity. The bases must be established in accordance with reasonable criteria, and be supported by current data. This method is compatible with the Standards of Accounting and Financial Reporting for Voluntary Health and Welfare Organizations issued jointly by the National Health Council, Inc.,the National Assembly of Voluntary Health and Social Welfare Organizations,and the United Way of America. c.Under this method, indirect costs consist exclusively of general administration and general expenses. In all other respects,the organization's indirect cost rates shall be computed in the same manner as that described in subparagraph 2. 5. Special indirect cost rates. In some instances,a single indirect cost rate for all activities of an organization or for each major function of the organization may not be appropriate, since it would not take into account those different factors which may substantially affect the indirect costs applicable to a particular segment of work. For this purpose,a particular segment of work may be that performed under a single award or it may consist of work under a group of awards performed in a common environment. These factors may include the physical location of the work, the level of administrative support required, the nature of the facilities or other resources employed,the scientific disciplines or technical skills involved,the organizational arrangements used,or any combination thereof. When a particular segment of work is performed in an environment which appears to generate a significantly different level of indirect costs,provisions should be made for a separate indirect cost pool applicable to such work. The separate indirect cost pool should be developed during the course of the regular allocation process, and the separate indirect cost rate resulting therefrom should be used,provided it is determined that(i)the rate differs significantly from that which would have been obtained under subparagraphs 2,3,and 4, and(ii)the volume of work to which the rate would apply is material. E. Negotiation and Approval of Indirect Cost Rates 1. Definitions. As used in this section,the following terms have the meanings set forth below: a. Cognizant agency means the Federal agency responsible for negotiating and approving indirect cost rates for a non-profit organization on behalf of all Federal agencies. b. Predetermined rate means an indirect cost rate,applicable to a specified current or future period, usually the organization's fiscal year. The rate is based on an estimate of the costs to be incurred during the period. A predetermined rate is not subject to adjustment. c. Fixed rate means an indirect cost rate which has the same characteristics as a predetermined rate,except that the difference between the estimated costs and the actual costs of the period covered by the rate is carried forward as an adjustment to the rate computation of a subsequent period. d. Final rate means an indirect cost rate applicable to a specified past period which is based on the actual costs of the period. A final rate is not subject to adjustment. e. Provisional rate or billing rate means a temporary indirect cost rate applicable to a specified period which is used for funding,interim reimbursement,and reporting indirect costs on awards pending the establishment of a final rate for the period. 6/21/00 2:27 PM 31 of63 OMB Circular A-122 http://www.whitehouse.gov/omb/circulars/a122/al22.html f. Indirect cost proposal means the documentation prepared by an organization to substantiate its claim for the reimbursement of indirect costs. This proposal provides the basis for the review and negotiation leading to the establishment of an organization's indirect cost rate. g. Cost objective means a function,organizational subdivision,contract,grant,or other work unit for which cost data are desired and for which provision is made to accumulate and measure the cost of processes,projects,jobs and capitalized projects. 2. Negotiation and approval of rates. a.Unless different arrangements are agreed to by the agencies concerned, the Federal agency with the largest dollar value of awards with an organization will be designated as the cognizant agency for the negotiation and approval of the indirect cost rates and,where necessary, other rates such as fringe benefit and computer charge-out rates. Once an agency is assigned cognizance for a particular non-profit organization, the assignment wilt not be changed unless there is a major long-term shift in the dollar volume of the Federal awards to the organization. All concerned Federal agencies shall be given the opportunity to participate in the negotiation process but,after a rate has been agreed upon, it will be accepted by all Federal agencies. When a Federal agency has reason to believe that special operating factors affecting its awards necessitate special indirect cost rates in accordance with subparagraph D.5,it will,prior to the time the rates are negotiated, notify the cognizant agency. b. A non-profit organization which has not previously established an indirect cost rate with a Federal agency shall submit its initial indirect cost proposal immediately after the organization is advised that an award will be made and, in no event, later than three months after the effective date of the award. c. Organizations that have previously established indirect cost rates must submit a new indirect cost proposal to the cognizant agency within six months after the close of each fiscal year. d. A predetermined rate may be negotiated for use on awards where there is reasonable assurance,based on past experience and reliable projection of the organization's costs, that the rate is not likely to exceed a rate based on the organization's actual costs. e. Fixed rates may be negotiated where predetermined rates are not considered appropriate. A fixed rate, however, shall not be negotiated if(i).all or a substantial portion of the organization's awards are expected , to expire before the carry-forward adjustment can be made; (ii)the mix of Federal and non-Federal work at the organization is too erratic to permit an equitable carry-forward adjustment;or(iii)the organization's operations fluctuate significantly from year to year. f. Provisional and final rates shall be negotiated where neither predetermined nor fixed rates are appropriate. g. The results of each negotiation shall be formalized in a written agreement between the cognizant agency and the non-profit organization. The cognizant agency shall distribute copies of the agreement to all concerned Federal agencies. h. If a dispute arises in a negotiation of an indirect cost rate between the cognizant agency and the non-profit organization, the dispute shall be resolved in accordance with the appeals procedures of the cognizant agency. 32 of 63 6/21/00 2:27 PM OMB l.'ucular A-I ll nttp://w‘,w.w uu..uvuse.gowomoiarcuiarsia l it/a i LL.nti..! i.To the extent that problems are encountered among the Federal agencies in connection with the negotiation and approval process, OMB will lend assistance as required to resolve such problems in a timely manner. ATTACHMENT B Circular No. A-122 SELECTED ITEMS OF COST Table of Contents 1. Advertising and public relations costs 2. Alcoholic beverages 3. Bad debts 4. Bid and proposal costs(reserved) 5.Bonding costs 6. Communication costs 7. Compensation for personal services 8. Contingency provisions 9. Contributions 10. Defense and prosecution of criminal and civil proceedings,claims, appeals and patent infringement 11. Depreciation and use allowances 12.Donations 13. Employee morale,health, and welfare costs and credits 14. Entertainment costs 15. Equipment and other capital expenditures 16. Fines and penalties 17.Fringe benefits 18. Goods or services for personal use 19.Housing and personal living expenses 20. Idle facilities and idle capacity 21. Independent research and development(reserved) 22. Insurance and indemnification 23. Interest, fund raising, and investment management costs 24. Labor relations costs 25. Lobbying 26. Losses on other awards 27. Maintenance and repair costs 28. Materials and supplies 29. Meetings and conferences 30. Memberships, subscriptions, and professional activity costs 31. Organization costs 32. Overtime,extra-pay shift,and multi-shift premiums 33. Page charges in professional journals 34. Participant support costs 35. Patent costs 36. Pension plans 37. Plant security costs 38. Pre-award costs 6/21/00 2:27 PM 33 of 63 OMB Circular A-122 http://www.whitehouse.gov/omb/circulars/a122/a122.html 39. Professional service costs 40. Profits and losses on disposition of depreciable property or other capital assets 41. Publication and printing costs 42. Rearrangement and alteration costs 43. Reconversion costs 44. Recruiting costs 45. Relocation costs 46. Rental costs 47. Royalties and other costs for use of patents and copyrights 48. Selling and marketing 49. Severance pay 50. Specialized service facilities 51. Taxes 52. Termination costs 53. Training and education costs 54. Transportation costs 55. Travel costs 56. Trustees ATTACHMENT B Circular No. A-122 SELECTED ITEMS OF COST Paragraphs 1 through 56 provide principles to be applied in establishing the allowability of certain items of cost. These principles apply whether a cost is treated as direct or indirect. Failure to mention a particular item of cost is not intended to imply that it is unallowable; rather, determination as to allowability in each case should be based on the treatment or principles provided for similar or related items of cost. 1. Advertising and public relations costs. a. The term advertising costs means the costs of advertising media and corollary administrative costs. Advertising media include magazines, newspapers,radio and television programs,direct mail,exhibits, and the like. b. The term public relations includes community relations and means those activities dedicated to maintaining the image of the organization or maintaining or promoting understanding and favorable relations with the community or public at large or any segment of the public: c. The only allowable advertising costs are those which are solely for: (1) The recruitment of personnel required for the performance by the organization of obligations arising under a sponsored award,when considered in conjunction with all other recruitment costs, as set forth in paragraph 44("Recruiting costs"); (2)The procurement of goods and services for the performance of a sponsored award; (3)The disposal of scrap or surplus materials acquired in the performance of a sponsored award except when organizations are reimbursed for disposal costs at a predetermined amount in accordance with OMB Circular A-110, Sec. .34, "Equipment"; or 34 of 63 6/21/00 2:27 PM OMB Circular A-122 http://www.wtmenouse.gov/omb/circulars/aI22/a122.ht,. (4)Other specific purposes necessary to meet the requirements of the sponsored award. d. The only allowable public relations costs are: (1)Costs specifically required by sponsored awards; (2)Costs of communicating with the public and press pertaining to specific activities or accomplishments which result from performance of sponsored awards(these costs are considered necessary as part of the outreach effort for the sponsored awards);or (3)Costs of conducting general liaison with news media and government public relations officers,to the extent that such activities are limited to communication and liaison necessary to keep the public informed on matters of public concern, such as notices of contract/grant awards, financial matters,etc. e. Costs identified in subparagraphs c and d if incurred for more than one sponsored award or for both sponsored work and other work of the organization,are allowable to the extent that the principles in paragraphs B("Direct Costs")and C("Indirect Costs")of Attachment A are observed. f.Unallowable advertising and public relations costs include the following: (1)All advertising and public relations costs other than as specified in subparagraphs c,d,and e; (2)Costs of meetings or other events related to fund raising or other organizational activities including: (i)Costs of displays,demonstrations,and exhibits; (ii)Costs of meeting rooms,hospitality suites,and other special facilities used in conjunction with shows and other special events; and (iii)Salaries and wages of employees or cost of services engaged in setting up and displaying exhibits, making demonstrations, and providing briefings; (3)Costs of promotional items and memorabilia, including models,gifts, and souvenirs; (4)Costs of advertising and public relations designed solely to promote the organization. 2. Alcoholic beverages. Costs of alcoholic beverages are unallowable. 3. Bad debts. Bad debts, including losses(whether actual or estimated)arising from uncollectible accounts and other claims,related collection costs,and related legal costs,are unallowable. 4. Bid and proposal costs. (reserved) 5. Bonding costs. a. Bonding costs arise when the Federal Government requires assurance against financial loss to itself or others by reason of the act or default of the organization. They arise also in instances where the organization requires similar assurance. Included are such bonds as bid,performance,payment,advance payment, infringement, and fidelity bonds. 35 of 63 6/21/00 2:27 PM OMB Circular A-122 http://www.whitehouse.gov/omb/circulars/a122/at22.htm1 b. Costs of bonding required pursuant to the terms of the award are allowable. c. Costs of bonding required by the organization in the general conduct of its operations are allowable to the extent that such bonding is in accordance with sound business practice and the rates and premiums are reasonable under the circumstances. 6. Communication costs. Costs incurred for telephone-.services, local and long distance telephone calls, telegrams,radiograms,postage and the like are allowable. 7. Compensation for personal services. a. Definition. Compensation for personal services includes all compensation paid currently or accrued by the organization for services of employees rendered during the period of the award(except as otherwise provided in subparagraph h). It includes,but is not limited to, salaries,wages,director's and executive committee member's fees, incentive awards, fringe benefits, pension plan costs, allowances for off-site pay, incentive pay, location allowances, hardship pay,and cost of living differentials. b. Allowability. Except as otherwise specifically provided in this paragraph, the costs of such compensation are allowable to the extent that: (1)Total compensation to individual employees is reasonable for the services rendered and conforms to the established policy of the organization consistently applied to both Federal and non-Federal activities;and (2)Charges to awards whether treated as direct or indirect costs are determined and supported as required in this paragraph. c. Reasonableness. (1) When the organization is predominantly engaged in activities other than those sponsored by the Federal Government,compensation for employees on federally-sponsored work will be considered reasonable to the extent that it is consistent with that paid for similar work in the organization's other activities. (2) When the organization is predominantly engaged in federally-sponsored activities and in cases where the kind of employees required for the Federal activities are not found in the organization's other activities, compensation for employees on federally-sponsored work will be considered reasonable to the extent that it is comparable to that paid for similar work in the labor markets in which the organization competes for the kind of employees involved. d. Special considerations in determining allowability. Certain conditions require special consideration and possible limitations in determining costs under Federal awards where amounts or types of compensation appear unreasonable. Among such conditions are the following: (1)Compensation to members of non-profit organizations,trustees,directors, associates,officers,or the immediate families thereof. Determination should be made that such compensation is reasonable for the actual personal services rendered rather than a distribution of earnings in excess of costs. (2)Any change in an organization's compensation policy resulting in a substantial increase in the organization's level of compensation, particularly when it was concurrent with an increase in the ratio of Federal awards to other activities of the organization or any change in the treatment of allowability of 36 of 63 6/21/00 2:27 PM UIVI is L Ircular A-I LL http://w,w.wuncuuuSe.goviomb/clrCularS/a 122/a 122.hti.d compensation dueFederal specific types of to changes in Fed a policy. e. Unallowable costs. Costs which are unallowable under other paragraphs of this Attachment shall not be allowable under this paragraph solely on the basis that they constitute personal compensation. f. Fringe benefits. (I)Fringe benefits in the form of regular compensation paid to employees during periods of authorized absences from the job,such as vacation leave,sick leave,military leave, and the like, are allowable, provided such costs are absorbed by all organization activities in proportion to the relative amount of time or effort actually devoted to each. (2)Fringe benefits in the form of employer contributions or expenses for social security,employee insurance,workmen's compensation insurance,pension plan costs(see subparagraph h), and the like, are allowable,provided such benefits are granted in accordance with established written organization policies. Such benefits whether treated as indirect costs or as direct costs, shall be distributed to particular awards and other activities in a manner consistent with the pattern of benefits accruing to the individuals or group of employees whose salaries and wages are chargeable to such awards and other activities. (3)(a)Provisions for a reserve under a self-insurance program for unemployment compensation or workers'compensation are allowable to the extent that the provisions represent reasonable estimates of the liabilities for such compensation,and the types of coverage,extent of coverage,and rates and premiums would have been allowable had insurance been purchased to cover the risks. However,provisions for self-insured liabilities which do not become payable for more than one year after the provision is made shall not exceed the present value of the liability. (b)Where an organization follows a consistent policy of expensing actual payments to,or on behalf of, employees or former employees for unemployment compensation or workers'compensation, such payments are allowable in the year of payment with the prior approval of the awarding agency,provided they are allocated to all activities of the organization. (4)Costs of insurance on the lives of trustees,officers,or other employees holding positions of similar responsibility are allowable only to the extent that the insurance represents additional compensation. The costs of such insurance when the organization is named as beneficiary are unallowable. g. Organization-furnished automobiles. That portion of the cost of organization-furnished automobiles that relates to personal use by employees(including transportation to and from work)is unallowable as fringe benefit or indirect costs regardless of whether the cost is reported as taxable income to the employees. These costs are allowable as direct costs to sponsored award when necessary for the performance of the sponsored award and approved by awarding agencies. h. Pension plan costs. (1)Costs of the organization's pension plan which are incurred in accordance with the established policies of the organization are allowable,provided: (a) Such policies meet the test of reasonableness; (b)The methods of cost allocation are not discriminatory; 37 of 63 6/21/00 2:27 PM • OMB Circular A-122 http://www.whitehouse.gov/omb/circulars/a122/a122.html (c)The cost assigned to each fiscal year is determined in accordance with generally accepted accounting principles(GAAP), as prescribed in Accounting Principles Board Opinion No. 8 issued by the American Institute of Certified Public Accountants; and (d)The costs assigned to a given fiscal year are funded for all plan participants within six months after the end of that year. However, increases to normal and past service pension costs caused by a delay in funding the actuarial liability beyond 30 days after each quarter of the year to which such costs are assignable are unallowable. (2)Pension plan termination insurance premiums paid pursuant to the Employee Retirement Income Security Act(ERISA)of 1974(Pub. L. 93-406)are allowable. Late payment charges on such premiums are unallowable. (3)Excise taxes on accumulated funding deficiencies and other penalties imposed under ERISA are unallowable. i. Incentive compensation. Incentive compensation to employees based on cost reduction, or efficient performance, suggestion awards,safety awards, etc., are allowable to the extent that the overall compensation is determined to be reasonable and such costs are paid or accrued pursuant to an agreement entered into in good faith between the organization and the employees before the services were rendered,or pursuant to an established plan followed by the organization so consistently as to imply, in effect, an agreement to make such payment. j. Overtime,extra-pay shift, and multi-shift premiums. See paragraph 32. k. Severance pay. See paragraph 49. 1. Training and education costs. See paragraph 53. m. Support of salaries and wages. (1)Charges to awards for salaries and wages,whether treated as direct costs or indirect costs,will be based on documented payrolls approved by a responsible official(s)of the organization. The distribution of salaries and wages to awards must be supported by personnel activity reports,as prescribed in subparagraph (2), except when a substitute system has been approved in writing by the cognizant agency. (See subparagraph E.2 of Attachment A.) (2) Reports reflecting the distribution of activity of each employee must be maintained for all staff members(professionals and nonprofessionals)whose compensation is charged, in whole or in part,directly to awards. In addition, in order to support the allocation of indirect costs, such report's must also be maintained for other employees whose work involves two or more functions or activities if a distribution of their compensation between such functions or activities is needed in the determination of the organization's indirect cost rate(s)(e.g., an employee engaged part-time in indirect cost activities and part-time in a direct function). Reports maintained by non-profit organizations to satisfy these requirements must meet the following standards: (a)The reports must reflect an after-the-fact determination of the actual activity of each employee.Budget estimates(i.e., estimates determined before the services are performed)do not qualify as support for charges to awards. 38 of 63 Fnt/nn 1./7 PM •.mouse.�oVion+D/c+rcula�Sai4Z/al[L.h1..I V IYIu\.1••.V IYI 11'•LL (b)Each report must account for the total activity for which employees are compensated and which is required in fulfillment of their obligations to the organization. (c)The reports must be signed by the individual employee,or by a responsible supervisory official having first hand knowledge of the activities performed by the employee,that the distribution of activity represents a reasonable estimate of the actual work performed by the employee during the periods covered by the reports. (d)The reports must be prepared at least monthly and must coincide with one or more pay periods. (3)Charges for the salaries and wages of nonprofessional employees, in addition to the supporting documentation described in subparagraphs(1)and(2),must also be supported by records indicating the total number of hours worked each day maintained in conformance with Department of Labor regulations implementing the Fair Labor Standards Act(FLSA)(29 CFR Part 516). For this purpose,the term "nonprofessional employee" shall have the same meaning as "nonexempt employee,"under FLSA. (4)Salaries and wages of employees used in meeting cost sharing or matching requirements on awards must be supported in the same manner as salaries and wages claimed for reimbursement from awarding agencies. 8. Contingency provisions. Contributions to a contingency reserve or any similar provision made for events the occurrence of which cannot be foretold with certainty as to time,intensity,or with an assurance of their happening,are unallowable. The term"contingency reserve" excludes self-insurance reserves(see subparagraphs 7.f(3)and 22.a(2)(d);pension funds(see subparagraph 7.h); and reserves for normal severance pay(see subparagraph 49.b(1)). 9. Contributions.Contributions and donations by the organization to others are unallowable. 10. Defense and prosecution of criminal and civil proceedings,claims,appeals and patent infringement. a. Definitions. (1)Conviction, as used herein,means a judgment or a conviction of a criminal offense by any court of competent jurisdiction,whether entered upon as a verdict or a plea, including a conviction due to a plea of nolo contendere. (2)Costs include,but are not limited to, administrative and clerical expenses; the cost of legal services, whether performed by in-house or private counsel; and the costs of the services of accountants,consultants, or others retained by the organization to assist it;costs of employees,officers and trustees,and any similar costs incurred before, during,and after commencement of a judicial or administrative proceeding that bears a direct relationship to the proceedings. (3)Fraud, as used herein,means(i)acts of fraud corruption or attempts to defraud the Federal Government or to corrupt its agents,(ii)acts that constitute a cause for debarment or suspension(as specified in agency regulations), and(iii)acts which violate the False Claims Act, 31 U.S.C.,sections 3729-3731,or the Anti-Kickback Act,41 U.S.C., sections 51 and 54. (4)Penalty does not include restitution, reimbursement,or compensatory damages. 6/21/00 2:27 PM 39 of 63 OMB Circular A-I22 http://www.whitehouse.gov/omb/circulars/a122/a122 html (5)Proceeding includes an investigation. b. (1)Except as otherwise described herein, costs incurred in connection with any criminal, civil or administrative proceeding(including filing of a false certification)commenced by the Federal Government, or a State, local or foreign government, are not allowable if the proceeding: (1)relates to a violation of,or failure to comply with, a Federal, State, local or foreign statute or regulation by the organization(including its agents and employees), and(2)results in any of the following dispositions: (a)In a criminal proceeding, a conviction. (b) In a civil or administrative proceeding involving an allegation of fraud or similar misconduct, a determination of organizational liability. • (c)In the case of any civil or administrative proceeding, the imposition of a monetary penalty. (d)A final decision by an appropriate Federal official to debar or suspend the organization,to rescind or void an award,or to terminate an award for default by reason of a violation or failure to comply with a law or regulation. (e)A disposition by consent or compromise, if the action could have resulted in any of the dispositions described in(a),(b),(c)or(d). (2)If more than one proceeding involves the same alleged misconduct,the costs of all such proceedings shall be unallowable if any one of them results in one of the dispositions shown in subparagraph b.(1). c. If a proceeding referred to in subparagraph b is commenced by the Federal Government and is resolved by consent or compromise pursuant to an agreement entered into by the organization and the Federal Government, then the costs incurred by the organization in connection with such proceedings that are otherwise not allowable under subparagraph b may be allowed to the extent specifically provided in such agreement. d. If a proceeding referred to in subparagraph b is commenced by a State, local or foreign government, the authorized Federal official may allow the costs incurred by the organization for such proceedings, if such authorized official determines that the costs were incurred as a result of(1)a specific term or condition of a federally-sponsored award, or(2)specific written direction of an authorized official of the sponsoring agency. e. Costs incurred in connection with proceedings described in subparagraph b,but which are not made unallowable by that subparagraph,may be allowed by the Federal Government,but only to the extent that: (1) The costs are reasonable in relation to the activities required to deal with the proceeding and the underlying cause of action; • (2)Payment of the costs incurred, as allowable and allocable costs, is not prohibited by any other provision(s)of the sponsored award; (3)The costs are not otherwise recovered from the Federal Government or a third party, either directly as a result of the proceeding or otherwise; and, (4)The percentage of costs allowed does not exceed the percentage determined by an authorized Federal 40 of 63 f/ tmn7•?7PM UAW ucwm to-ILL http://w.✓w.wuuuwuse.gov/omb/circulars/aI22/aI22.h�.n1 official to be appropriate,considering the complexity of the litigation,generally accepted principles governing the award of legal fees in civil actions involving the United States as a party, and such other factors as may be appropriate. Such percentage shall not exceed 80 percent. However, if an agreement reached under subparagraph c has explicitly considered this 80 percent limitation and permitted a higher percentage,then the full amount of costs resulting from that agreement shall be allowable. f. Costs incurred by the organization in connection with the defense of suits brought by its employees or ex-employees under section 2 of the Major Fraud Act of 1988 (Pub. L. 100-700), including the cost of all relief necessary to make such employee whole,where the organization was found liable or settled, are unallowable. g. Costs of legal, accounting,and consultant services, and related costs, incurred in connection with defense against Federal Government claims or appeals, antitrust suits, or the prosecution of claims or appeals against the Federal Government, are unallowable. h.Costs of legal,accounting,and consultant services,and related costs, incurred in connection with patent infringement litigation, are unallowable unless otherwise provided for in the sponsored awards. i. Costs which may be unallowable under this paragraph,including directly associated costs, shall be segregated and accounted for by the organization separately. During the pendency of any proceeding covered by subparagraphs b and f,the Federal Government shall generally withhold payment of such • costs. However,if in the best interests of the Federal Government,the Federal Government may provide for conditional payment upon provision of adequate security,or other adequate assurance, and agreements by the organization to repay all unallowable costs,plus interest, if the costs are subsequently determined to be unallowable. 11. Depreciation and use allowances. a. Compensation for the use of buildings,other capital improvements,and equipment on hand may be made through use allowances or depreciation. However,except as provided in subparagraph f,a combination of the two methods may not be used in connection with a single class of fixed assets(e.g., buildings,office equipment,computer equipment, etc.). b.The computation of use allowances or depreciation shall be based on the acquisition cost of the assets involved.The acquisition cost of an asset donated to the organization by a third party shall be its fair market value at the time of the donation. c.The computation of use allowances or depreciation will exclude: (1)The cost of land; (2)Any portion of the cost of buildings and equipment borne by or donated by the Federal Government irrespective of where title was originally vested or where it presently resides; and (3)Any portion of the cost of buildings and equipment contributed by or for the organization in satisfaction of a statutory matching requirement. d. Where the use allowance method is followed,the use allowance for buildings and improvement (including land improvements, such as paved parking areas,fences,and sidewalks)will be computed at an annual rate not exceeding two percent of acquisition cost. The use allowance for equipment will be 41 of 63 6/21/00 2:27 PM • OMB Circular A-122 http://www.whitehouse.gov/omb/circulars/a122/a122.html computed at an annual rate not exceeding six and two-thirds percent of acquisition cost. When the use allowance method is used for buildings,the entire building must be treated as a single asset;the building's components(e.g.,plumbing system,heating and air conditioning, etc.)cannot be segregated from the building's shell. The two percent limitation,however,need not be applied to equipment which is merely attached or fastened to the building but not permanently fixed to it and which is used as furnishings or decorations or for specialized purposes(e.g.,dentist chairs and dental treatment units, counters, laboratory benches bolted to the floor,dishwashers, carpeting,etc.). Such equipment will be considered as not being permanently fixed to the building if it can be removed without the need for costly or extensive alterations or repairs to the building or the equipment. Equipment that meets these criteria will be subject to the six and two-thirds percent equipment use allowance limitation. e. Where depreciation method is followed, the period of useful service(useful life)established in each case for usable capital assets must take into consideration such factors as type of construction,nature of the equipment used, technological developments in the particular program area, and the renewal and replacement policies followed for the individual items or classes of assets involved. The method of depreciation used to assign the cost of an asset(or group of assets)to accounting periods shall reflect the pattern of consumption of the asset during its useful life. In the absence of clear evidence indicating that the expected consumption of the asset will be significantly greater or lesser in the early portions of its useful life than in the later portions, the straight-line method shall be presumed to be the appropriate method. Depreciation methods once used shall not be changed unless approved in advance by the cognizant Federal agency. When the depreciation method is introduced for application to assets previously subject to a use allowance,the combination of use allowances and depreciation applicable to such assets must not exceed the total acquisition cost of the assets. When the depreciation method is used for buildings,a building's shell may be segregated from each building component(e.g.,plumbing system,heating,and air conditioning system, etc.)and each item depreciated over its estimated useful life;or the entire building (i.e., the shell and all components)may be treated as a single asset and depreciated over a single useful life.. f. When the depreciation method is used for a particular class of assets,no depreciation may be allowed on any such assets that, under subparagraph e, would be viewed as fully depreciated. However,a reasonable use allowance may be negotiated for such assets if warranted after taking into consideration the amount of depreciation previously charged to the Federal Government,the estimated useful life remaining at time of negotiation, the effect of any increased maintenance charges or decreased efficiency due to age, and any other factors pertinent to the utilization of the asset for the purpose contemplated. • g. Charges for use allowances or depreciation;.must be supported by adequate property records and physical inventories must be taken at least once every two years(a statistical sampling basis is acceptable)to ensure that assets exist and are usable and needed.When the depreciation method is followed, adequate depreciation records indicating the amount of depreciation taken each period must also be maintained. • 12. Donations. a. Services received. (1)Donated or volunteer services may be furnished to an organization by professional and technical personnel,consultants, and other skilled and unskilled labor. The value of these services is not reimbursable either as a direct or indirect cost. (2)The value of donated services utilized in the performance of a direct cost activity shall be considered in the determination of the organization's indirect cost rate(s)and, accordingly,shall be allocated a proportionate share of applicable indirect costs when the following circumstances exist: 42 of 63 6/21/00 2:27 PM :JAM t_.uwu,J.-14i nnp:/ n. (a)The aggregate value of the services is material; (b)The services are supported by a significant amount of the indirect costs incurred by the organization; (c)The direct cost activity is not pursued primarily for the benefit of the Federal Government, (3)In those instances where there is no basis for determining the fair market value of the services rendered, the recipient and the cognizant agency shall negotiate an appropriate allocation of indirect cost to the services. (4)Where donated services directly benefit a project supported by an award, the indirect costs allocated to the services will be considered as a part of the total costs of the project. Such indirect costs may be reimbursed under the award or used to meet cost sharing or matching requirements. (5)The value of the donated services may be used to meet cost sharing or matching requirements under conditions described in Sec._.23 of Circular A-110. Where donated services are treated as indirect costs, indirect cost rates will separate the value of the donations so that reimbursement will not be made. (6)Fair market value of donated services shall be computed as follows: (a) Rates for volunteer services. Rates for volunteers shall be consistent with those regular rates paid for —- similar work in other activities of the organization. In cases where the kinds of skills involved are not found in other activities of the organization,the rates used shall be consistent with those paid for similar work in the labor market in which the organization competes for such skills. (b)Services donated by other organizations. When an employer donates the services of an employee, these services shall be valued at the employee's regular rate of pay(exclusive of fringe benefits and indirect costs),provided the services are in the same skill for which the employee is normally paid. If the services are not in the same skill for which the employee is normally paid, fair market value shall be computed in accordance with subparagraph(a). b. Goods and space. (1)Donated goods; i.e., expendable personal property/supplies,and donated use of space may be furnished to an organization. The value of the goods and space is not reimbursable either as a direct or indirect cost. (2)The value of the donations may be used to meet cost sharing or matching share requirements under the conditions described in Sec._.23 of Circular A-110. The value of the donations shall be determined in accordance with Sec._.23 of Circular A-110. Where donations are treated as indirect costs, indirect cost rates will separate the value of the donations so that reimbursement will not be made. 13. Employee morale, health,and welfare costs and credits. The costs of house publications,health or first-aid clinics, and/or infirmaries,recreational activities, employees'counseling services,and other expenses incurred in accordance with the organization's established practice or custom for the improvement of working conditions,employer-employee relations,employee morale,and employee performance are allowable. Such costs will be equitably apportioned to all activities of the organization. Income generated from any of these activities will be credited to the cost thereof unless such income has been irrevocably set over to employee welfare organizations. 43 of 63 6/21/00 2:27 PM OMB Circular A-I22 http://www.whitehouse.gov/omb/circulars/a122/a122.html 14. Entertainment costs.Costs of amusement,diversion,social activities,ceremonials,and costs relating thereto, such as meals, lodging,rentals, transportation,and gratuities are unallowable(but see paragraphs 13 and 30). 15. Equipment and other capital expenditures. a. As used in this paragraph,the following terms have the meanings set forth below: (1) "Equipment"means an article of nonexpendable, tangible personal property having a useful life of more than one year and an acquisition cost which equals or exceeds the lesser of(a)the capitalization level established by the organization for the financial statement purposes,or(b) $5000. The unamortized portion of any equipment written off as a result of a change in capitalization levels may be recovered by continuing to claim the otherwise allowable use allowances or depreciation on the equipment, or by amortizing the amount to be written off over a period of years as negotiated with the Federal cognizant agency. (2)Acquisition cost means the net invoice unit price of an item of equipment, including the cost of any modifications, attachments, accessories, or auxiliary apparatus necessary to make it usable for the purpose for which it is acquired. Ancillary charges, such as taxes,duty,protective in-transit insurance, freight, and installation shall be included in or excluded from acquisition cost in accordance with the organization's regular written accounting practices. (3)Special purpose equipment means equipment which is usable only for research,medical, scientific,or technical activities. Examples of special purpose equipment include microscopes,x-ray machines, surgical instruments,and spectrometers. (4) General purpose equipment means equipment which is usable for other than research,medical, scientific,or technical activities,whether or not special modifications are needed to make them suitable for a particular purpose. Examples of general purpose equipment include office equipment and furnishings,air conditioning equipment,reproduction and printing equipment,motor vehicles, and automatic data processing equipment. b. (1)Capital expenditures for general purpose equipment are unallowable as a direct cost except with the prior approval of the awarding agency. (2) Capital expenditures for special purpose equipment are allowable as direct costs,provided that items with a unit cost of$5000 or more have the prior approval of awarding agency. c. Capital expenditures for land or buildings are unallowable as a direct cost except with the prior approval of the awarding agency. d. Capital expenditures for improvements to land,buildings,or equipment which materially increase their value or useful life are unallowable as a direct cost except with the prior approval of the awarding agency. e. Equipment and other capital expenditures are unallowable as indirect costs. However, see paragraph 11 for allowability of use allowances or depreciation on buildings, capital improvements, and equipment. Also,see paragraph 46 for allowability of rental costs for land,buildings, and equipment. 16. Fines and penalties. Costs of fines and penalties resulting from violations of,or failure of the organization to comply with Federal, State, and local laws and regulations are unallowable except when incurred as a result of compliance with specific provisions of an award or instructions in writing from the 44 of 63 6/21/00 2:27 PM UMkt Circular A-I22 http://www.wnuenuuse.gov/otnb/circulars/a122/a122.htc.J awarding agency. • 17. Fringe benefits. See subparagraph 7.f. 18. Goods or services for personal use. Costs of goods or services for personal use of the organization's employees are unallowable regardless of whether the cost is reported as taxable income to the employees. 19. Housing and personal living expenses. a. Costs of housing(e.g.,depreciation,maintenance,utilities, furnishings,rent,etc.),housing allowances and personal living expenses for/of the organization's officers are unallowable as fringe benefit or indirect costs regardless of whether the cost is reported as taxable income to the employees. These costs are allowable as direct costs to sponsored award when necessary for the performance of the sponsored award and approved by awarding agencies. b. The term "officers" includes current and past officers and employees. 20. idle facilities and idle capacity. a. As used in this paragraph,the following terms have the meanings set forth below: (1)Facilities means land and buildings or any portion thereof,equipment individually or collectively, or any other tangible capital asset,wherever located,and whether owned or leased by the organization. (2)Idle facilities means completely unused facilities that are excess to the organization's current needs. (3)Idle capacity means the unused capacity of partially used facilities. It is the difference between that which a facility could achieve under 100 percent operating time on a one-shift basis less operating interruptions resulting from time lost for repairs, setups,unsatisfactory materials, and other normal delays, and the extent to which the facility was actually used to meet demands during the accounting period. A multi-shift basis may be used if it can be shown that this amount of usage could normally be expected for the type of facility involved. (4)Costs of idle facilities or idle capacity means costs such as maintenance,repair,housing,rent, and other related costs,e.g.,property taxes, insurance, and depreciation or use allowances. b.The costs of idle facilities are unallowable except to the extent that: (1)They are necessary to meet fluctuations in workload; or (2)Although not necessary to meet fluctuations in workload,they were necessary when acquired and are now idle because of changes in program requirements, efforts to achieve more economical operations, reorganization,termination,or other causes which could not have been reasonably foreseen. Under the exception stated in this subparagraph,costs of idle facilities are allowable for a reasonable period of time, ordinarily not to exceed one year,depending upon the initiative taken to use, lease,or dispose of such facilities(but see subparagraphs 48.b and d). c. The costs of idle capacity are normal costs of doing business and are a factor in the normal fluctuations of usage or indirect cost rates from period to period. Such costs are allowable,provided the capacity is reasonably anticipated to be necessary or was originally reasonable and is not subject to reduction or 45 of 63 6/21/00 2:27 PM i 1I OMB Circular A-122 http://www.whitehouse.gov/omb/circulars/a122/a122.html elimination by subletting, renting,or sale, in accordance with sound business,economics,or security •• practices. Widespread idle capacity throughout an entire facility or among a group of assets having substantially the same function may be idle facilities. 21. Independent research and development. [Reserved] 22. Insurance and indemnification. a. Insurance includes insurance which the organization is required to carry,or which is approved,under the terms of the award and any other insurance which the organization maintains in connection with the general conduct of its operations. This paragraph does not apply to insurance which represents fringe benefits for employees(see subparagraphs 7.f and 7.h(2)). (I)Costs of insurance required or approved, and maintained,pursuant to the award are allowable. (2)Costs of other insurance maintained by the organization in connection with the general conduct of its operations are allowable subject to the following limitations: (a) Types and extent of coverage shall be in accordance with sound business practice and the rates and premiums shall be reasonable under the circumstances. (b)Costs allowed for business interruption or other similar insurance shall be limited to exclude coverage of management fees. (c) Costs of insurance or of any provisions for a reserve covering the risk of loss or damage to Federal property are allowable only to the extent that the organization is liable for such loss or damage. (d)Provisions for a reserve under a self-insurance program are allowable to the extent that types of coverage,extent of coverage, rates, and premiums would have been allowed had insurance been purchased to cover the risks. However,provision for known or reasonably estimated self-insured liabilities,which do not become payable for more than one year after the provision is made, shall not exceed the present value of the liability. (e) Costs of insurance on the lives of trustees,officers,or other employees holding positions of similar responsibilities are allowable only to the extent that the insurance represents additional compensation(see subparagraph 7.f(4)). The cost of such insurance when the organization is.identified as the beneficiary is unallowable. ' f• (f)Insurance against defects. Costs of insurance with respect to any costs incurred to correct defects in the organization's materials or workmanship are unallowable. (g)Medical liability(malpractice)insurance. Medical liability insurancf,is an allowable cost of Federal research programs only to the extent that the Federal research programs involve human subjects or training of participants in research techniques. Medical liability insurance costs shall be treated as a direct cost and shall be assigned to individual projects based on the manner in which the insurer allocates the risk to the population covered by the insurance. (3)Actual losses which could have been covered by permissible insurance(through the purchase of insurance or a self-insurance program) are unallowable unless expressly provided for in the award,except: 46of63 6/21/00 2:27 PM OMB Circular A-122 http://w ww.whttehouse.gov/omb/circulars/al 22/a 122.htruil (a)Costs incurred because of losses not covered under nominal deductible insurance coverage provided in keeping with sound business practice are allowable. (b)Minor losses not covered by insurance, such as spoilage,breakage, and disappearance of supplies, which occur in the ordinary course of operations, are allowable. b. Indemnification includes securing the organization against liabilities to third persons and any other loss or damage,not compensated by insurance or otherwise. The Federal Government is obligated to indemnify the organization only to the extent expressly provided in the award. 23. Interest,fundraising,and investment management costs. a. Interest. (1)Costs incurred for interest on borrowed capital or temporary use of endowment funds,however represented,are unallowable. However, interest on debt incurred after the effective date of this revision to acquire or replace capital assets(including renovations, alterations, equipment, land, and capital assets acquired through capital leases), acquired after the effective date of this revision and used in support of sponsored agreements is allowable,provided that: (a)For facilities acquisitions(excluding renovations and alterations)costing over$10 million where the Federal Government's reimbursement is expected to equal or exceed 40 percent of an asset's cost, the non-profit organization prepares,prior to the acquisition or replacement of the capital asset(s), a justification that demonstrates the need for the facility in the conduct of federally-sponsored activities. Upon request,the needs justification must be provided to the Federal agency with cost cognizance authority as a prerequisite to the continued allowability of interest on debt and depreciation related to the facility.The needs justification for the acquisition of a facility should include,at a minimum,the following: A statement of purpose and justification for facility acquisition or replacement A statement as to why current facilities are not adequate A statement of planned future use of the facility A description of the financing agreement to be arranged for the facility A summary of the building contract with estimated cost information and statement of source and use of funds A schedule of planned occupancy dates (b)For facilities costing over$500,000,the non-profit organization prepares,prior to the acquisition or replacement of the facility, a lease/purchase analysis in accordance with the provisions of Sec._.30 through_.37 of Circular A-110,which shows that a financed purchase or capital lease is less costly to the organization than other leasing alternatives,on a net present value basis. Discount rates used should be equal to the non-profit organization's anticipated interest rates and should be no higher than the fair market rate available to the non-profit organization from an unrelated("arm's length")third-party. The lease/purchase analysis shall include a comparison of the net present value of the projected total cost comparisons of both alternatives over the period the asset is expected to be used by the non-profit 47 of 63 6/21/00 2:27 PM OMB Circular A-122 http://www.whitehouse.gov/omb/circulars/a122/a122 html organization. The cost comparisons associated with purchasing the facility shall include the estimated purchase price, anticipated operating and maintenance costs(including property taxes, if applicable)not included in the debt financing, less any estimated asset salvage value at the end of the period defined above. The cost comparison for a capital lease shall include the estimated total lease payments, any estimated bargain purchase option,operating and maintenance costs, and taxes not included in the capital leasing arrangement, less any estimated credits due under the lease at the end of the period defined above. Projected operating lease costs shall be based on the anticipated cost of leasing comparable facilities at fair market rates under rental agreements that would be renewed or reestablished over the period defined above, and any expected maintenance costs and allowable property taxes to be borne by the non-profit organization directly or as part of the lease arrangement. (c)The actual interest cost claimed is predicated upon interest rates that ate no higher than the fair market rate available to the non-profit organization from an unrelated("arm's length") third party. (d)Investment earnings, including interest income, on bond or loan principal,pending payment of the construction or acquisition costs, are used to offset allowable interest cost. Arbitrage earnings reportable to the Internal Revenue Service are not required to be offset against allowable interest costs. (e)Reimbursements are limited to the least costly alternative based on the total cost analysis required under subparagraph (b). For example, if an operating lease is determined to be less costly than purchasing through debt financing, then reimbursement is limited to the amount determined if leasing had been used. In all cases where a lease/purchase analysis is performed, Federal reimbursement shall be based upon the least expensive alternative. (f)Non-profit organizations are also subject to the following conditions: (i)Interest on debt incurred to finance or refinance assets acquired before or reacquired after the effective date of this Circular is not allowable. (ii)For debt arrangements over Si million, unless the non-profit organization makes an initial equity contribution to the asset purchase of 25 percent or more,non-profit organizations shall reduce claims for interest expense by an amount equal to imputed interest earnings on excess cash flow,which is to be calculated as follows. Annually,non-profit organizations shall prepare a cumulative(from the inception of the project)report of monthly cash flaws that includes inflows and outflows,regardless of the funding source. Inflows consist of depreciation expense,amortization of capitalized'construction interest,and annual interest'expense. For cash flow calculations, the annual inflow figures shall be divided by the number of months in the year(usually 12)that the building is in service for monthly amounts. Outflows consist of initial equity contributions, debt principal payments(less the pro rata share attributable to the unallowable costs of land)and interest payments. Where cumulative inflows exceed cumulative outflows, interest shall be calculated on the excess inflows for that period and be treated as a reduction to allowable interest expense. The rate of interest to be used to compute earnings on excess cash flows shall be the three month Treasury Bill closing rate as of the last business day of that month. (iii) Substantial relocation of federally-sponsored activities from a facility financed by indebtedness, the cost of which was funded in whole or part through Federal reimbursements, to another facility prior to the expiration of a period of 20 years requires notice to the Federal cognizant agency. The extent of the relocation, the amount of the Federal participation in the financing, and the depreciation and interest charged to date may require negotiation and/or downward adjustments of replacement space charged to Federal programs in the future. 48 of 63 6/21/00 2:27 PM VIVlU�.111,u1U1 A-ILL. lIup://K LL/UI LL.III 11 (iv)The allowable costs to acquire facilities and equipment are limited to a fair market value available to the non-profit organization from an unrelated("arm's length")third party. (2)For non-profit organizations subject to"full coverage"'under the Cost Accounting Standards(CAS)as defined at 48 CFR 9903.201,the interest allowability provisions of subparagraph a do not apply. Instead, these organizations'sponsored agreements are subject to CAS 414(48 CFR 9903.414),cost of money as an element of the cost of facilities capital,and CAS 417(48 CFR 9903.417), cost of money as an element of the cost of capital assets under construction. (3)The following definitions are to be used for purposes of paragraph 23: (a)Re-acquired assets means assets held by the non-profit organization prior to the effective date of this revision that have again come to be held by the organization,whether through repurchase or refinancing. It does not include assets acquired to replace older assets. (b)Initial equity contribution means the amount or value of contributions made by non-Federal entities for the acquisition of the asset or prior to occupancy of facilities. (c)Asset costs means the capitalizable costs of an asset,including construction costs, acquisition costs,and other such costs capitalized in accordance with GAAP. b. Costs of organized fundraising, including financial campaigns,endowment drives, solicitation of gifts and bequests,and similar expenses incurred solely to raise capital or obtain contributions are unallowable. c. Costs of investment counsel and staff and similar expenses incurred solely to enhance income from investments are unallowable. d.Fundraising and investment activities shall be allocated an appropriate share of indirect costs under the conditions described in subparagraph B.3 of Attachment A. 24. Labor relations costs. Costs incurred in maintaining satisfactory relations between the organization and its employees,including costs of labor management committees,employee publications, and other related activities are allowable. 25. Lobbying. a.Notwithstanding other provisions of this Circular, costs associated with the following activities are unallowable: (1)Attempts to influence the outcomes of any Federal, State,or local election,referendum, initiative,or similar procedure,through in kind or cash contributions, endorsements,publicity,or similar activity; (2)Establishing, administering,contributing to,or paying the expenses of a political party,campaign, political action committee,or other organization established for the purpose of influencing the outcomes of elections; (3)Any attempt to influence: (i)The introduction of Federal or State legislation;or(ii)the enactment or modification of any pending Federal or State legislation through communication with any member or employee of the Congress or State legislature(including efforts to influence State or local officials to engage in similar lobbying activity),or with any Government official or employee in connection with a 49 of 63 6/21/00 2:27 PM OMB Circular A-122 http://www.whitehouse.gov/omb/circulars/a122/a l 22.html decision to sign or veto enrolled legislation; (4)Any attempt to influence: (i)The introduction of Federal or State legislation;or(ii)the enactment or modification of any pending Federal or State legislation by preparing,distributing or using publicity or propaganda,or by urging members of the general public or any segment thereof to contribute to or participate in any mass demonstration,march,rally, fundraising drive, lobbying campaign or letter writing or telephone campaign;or (5)Legislative liaison activities, including attendance at legislative sessions or committee hearings, gathering information regarding legislation,and analyzing the effect of legislation,when such activities are carried on in support of or in knowing preparation for an effort to engage in unallowable lobbying. b. The following activities are excepted from the coverage of subparagraph a: (1)Providing a technical and factual presentation of information on a topic directly related to the performance of a grant, contract or other agreement through hearing testimony, statements or letters to the Congress or a State legislature,or subdivision, member,or cognizant staff member thereof,in response to a documented request(including a Congressional Record notice requesting testimony or statements for the record at a regularly scheduled hearing)made by the recipient member, legislative body or subdivision,or a cognizant staff member thereof; provided such information is readily obtainable and can be readily put in deliverable form;and further provided that costs under this section for travel, lodging or meals are unallowable unless incurred to offer testimony at a regularly scheduled Congressional hearing pursuant to a written request for such presentation made by the Chairman or Ranking Minority Member of the Committee or Subcommittee conducting such hearing. (2) Any lobbying made unallowable by subparagraph a(3)to influence State legislation in order to directly reduce the cost, or to avoid material impairment of the organization's authority to perform the grant, contract,or other agreement. (3) Any activity specifically authorized by statute to be undertaken with funds from the grant,contract,or other agreement. c. (1) When an organization seeks reimbursement for indirect costs, total lobbying costs shall be separately identified in the indirect cost rate proposal, and thereafter treated as other unallowable activity costs in accordance with the procedures of subparagraph B.3 of Attachment A. (2)Organizations shall submit, as part of the annual indirect cost rate proposal, a certification that the requirements and standards of this paragraph have been complied with. 1 • (3)Organizations shall maintain adequate records to demonstrate that the determination of costs as being allowable or unallowable pursuant to paragraph 25 complies with the requirements of this Circular. (4)Time logs, calendars,or similar records shall not be required to be created for purposes of complying with this paragraph during any particular calendar month when: (1)the employee engages in lobbying(as defined in subparagraphs(a) and(b)) 25 percent or less of the employee's compensated hours of employment during that calendar month, and(2)within the preceding five-year period, the organization has not materially misstated allowable or unallowable costs of any nature, including legislative lobbying costs. When conditions (1) and (2) are met, organizations are not required to establish records to support the allowabliliy of claimed costs in addition to records already required or maintained. Also,when conditions (1) and(2)are met,the absence of time logs, calendars, or similar records will not serve as a basis for 50 of 63 4/,1inn 17PM l/Mti circular A-122 http://www.wnttenouse.gov/omb/circulars/a122/a122.htial disallowing costs by contesting estimates of lobbying time spent by employees during a calendar month. (5)Agencies shall establish procedures for resolving in advance, in consultation with OMB,any significant questions or disagreements concerning the interpretation or application of paragraph 25. Any such advance resolution shall be binding in any subsequent settlements, audits or investigations with respect to that grant or contract for purposes of interpretation of this Circular;provided, however,that this shall not be construed to prevent a contractor or grantee from contesting the lawfulness of such a determination. 26. Losses on other awards. Any excess of costs over income on any award is unallowable as a cost of any other award. This includes,but is not limited to,the organization's contributed portion by reason of cost sharing agreements or any under-recoveries through negotiation of lump sums for, or ceilings on, indirect costs. 27. Maintenance and repair costs. Costs incurred for necessary maintenance,repair, or upkeep of buildings and equipment(including Federal property unless otherwise provided for)which neither add to the permanent value of the property nor appreciably prolong its intended life,but keep it in an efficient operating condition, are allowable. Costs incurred for improvements which add to the permanent value of the buildings and equipment or appreciably prolong their intended life shall be treated as capital expenditures(see paragraph 15). 28. Materials and supplies. The costs of materials and supplies necessary to carry out an award are allowable. Such costs should be charged at their actual prices after deducting all cash discounts,trade discounts,rebates,and allowances received by the organization. Withdrawals from general stores or stockrooms should be charged at cost under any recognized method of pricing consistently applied. Incoming transportation charges may be a proper part of material cost. Materials and supplies charged as a direct cost should include only the materials and supplies actually used for the performance of the contract or grant, and due credit should be given for any excess materials or supplies retained,or returned to vendors. 29. Meetings and conferences. a. Costs associated with the conduct of meetings and conferences include the cost of renting facilities, meals, speakers' fees, and the like. But see paragraph 14, Entertainment costs, and paragraph 34, Participant support costs. b. To the extent that these costs are identifiable with a particular cost objective,they should be charged to that objective(see paragraph B of Attachment A). These costs are allowable,provided that they meet the general tests of allowability, shown in paragraph A of Attachment A to this Circular. c. Costs of meetings and conferences held to conduct the general administration of the organization are allowable. 30. Memberships,subscriptions,and professional activity costs. a. Costs of the organization's membership in business,technical,and professional organizations are allowable. b. Costs of the organization's subscriptions to business,professional,and technical periodicals are allowable. 51 of 63 6/21/00 2:27 PM OMB Circular A-122 http://www.whitehouse.gov/omb/circulars/a122/a122.html C. Costs of meetings and conferences,when the primary purpose is the dissemination of technical information,are allowable. This includes costs of meals, transportation,rental of facilities, and other items incidental to such meetings or conferences. d. Costs of membership in any civic or community organization are allowable with prior approval by Federal cognizant agency. e. Costs of membership in any country club or social or dining club or organization are unallowable. 31. Organization costs. Expenditures, such as incorporation fees, brokers' fees, fees to promoters, organizers or management consultants, attorneys, accountants,or investment counselors,whether or not employees of the organization, in connection with establishment or reorganization of an organization, are unallowable except with prior approval of the awarding agency. 32. Overtime,extra-pay shift, and multi-shift premiums. Premiums for overtime, extra-pay shifts,and multi-shift work are allowable only with the prior approval of the awarding agency except: a. When necessary to cope with emergencies, such as those resulting from accidents,natural disasters, breakdowns of equipment, or occasional operational bottlenecks of a sporadic nature. b. When employees are performing indirect functions, such as administration, maintenance,or accounting. c. In the performance of tests, laboratory procedures, or other similar operations which are continuous in nature and cannot reasonably be interrupted or otherwise completed. d. When lower overall cost to the Federal Government will result. 33. Page charges in professional journals. Page charges for professional journal publications are allowable as a necessary part of research costs,where: a. The research papers report work supported by the Federal Government; and b. The charges are levied impartially on all research papers published by the journal, whether or not by federally-sponsored authors. 34. Participant support costs. Participant support costs are direct costs for items such as stipends or subsistence allowances, travel allowances, and registration fees paid to or on behalf of participants or trainees(but not employees) in connection with meetings,conferences, symposia, or training projects. These costs are allowable with the prior approval of the awarding agency. 35. Patent costs. a. Costs of(i)preparing disclosures, reports, and other documents required by the award and of searching the art to the extent necessary to make such disclosures,(ii)preparing documents and any other patent costs in connection with the filing and prosecution of a United States patent application where title or royalty-free license is required by the Federal Government to be conveyed to the Federal Government, and (iii)general counseling services relating to patent and copyright matters, such as advice on patent and copyright laws, regulations, clauses, and employee agreements are allowable(but see paragraph 39). b. Cost of preparing disclosures, reports, and other documents and of searching the art to the extent 52 of 63 6/7 I/00 2:77 PM VMts Lircuiar A-122 http://www.wunan.,use.gov/ombictrculars/a122/aI22.ht..'I necessary to make disclosures, if not required by the award,are unallowable. Costs in connection with(i) filing and prosecuting any foreign patent application,or(ii)any United States patent application,where the award does not require conveying title or a royalty-free license to the Federal Government, are unallowable (also see paragraph 47). 36. Pension plans. See subparagraph 7.h. 37. Plant security costs.Necessary expenses incurred to comply with Federal security requirements or for facilities protection,including wages,uniforms,and equipment of personnel are allowable. 38. Pre-award costs. Pre-award costs are those incurred prior to the effective date of the award directly pursuant to the negotiation and in anticipation of the award where such costs are necessary to comply with the proposed delivery schedule or period of performance. Such costs are allowable only to the extent that they would have been allowable if incurred after the date of the award and only with the written approval of the awarding agency. 39. Professional service costs. a. Costs of professional and consultant services rendered by persons who are members of a particular profession or possess a special skill, and who are not officers or employees of the organization, are allowable,subject to subparagraphs b and c when reasonable in relation to the services rendered and when not contingent upon recovery of the costs from the Federal Government. b. In determining the allowability of costs in a particular case,no single factor or any special combination of factors is necessarily determinative. However,the following factors are relevant: (1)The nature and scope of the service rendered in relation to the service required. (2)The necessity of contracting for the service,considering the organization's capability in the particular area. (3)The past pattern of such costs,particularly in the years prior to Federal awards. (4)The impact of Federal awards on the organization's business(i.e.,what new problems have arisen). (5)Whether the proportion of Federal work to the organization's total business is such as to influence the organization in favor of incurring the cost,particularly where the services rendered are not of a continuing nature and have little relationship to work under Federal grants and contracts. (6)Whether the service can be performed more economically by direct employment rather than contracting. (7)The qualifications of the individual or concern rendering the service and the customary fees charged, especially on non-Federal awards. (8)Adequacy of the contractual agreement for the service(e.g.,description of the service,estimate of time required,rate of compensation,and termination provisions). c. In addition to the factors in subparagraph b,retainer fees to be allowable must be supported by evidence of bona fide services available or rendered. 53 of 63 6/21/00 2:27 PM OMB CircularA-122 http://www.whitehouse.gov/omb/circulars/a122/a122.html 40. Profits and losses on disposition of depreciable property or other capital assets. a. (1)Gains and losses on sale,retirement,or other disposition of depreciable property shall be included in the year in which they occur as credits or charges to cost grouping(s)in which the depreciation applicable to such property was included.The amount of the gain or loss to be included as a credit or charge to the appropriate cost grouping(s)shall be the difference between the amount realized on the property and the undepreciated basis of the property. (2)Gains and losses on the disposition of depreciable property shall not be recognized as a separate credit or charge under the following conditions: (a)The gain or loss is processed through a depreciation reserve account and is reflected in the depreciation allowable under paragraph 11. (b) The property is given in exchange as part of the purchase price of a similar item and the gain or loss is taken into account in determining the depreciation cost basis of the new item. (c) A loss results from the failure to maintain permissible insurance, except as otherwise provided in subparagraph 22.a(3). (d) Compensation for the use of the property was provided through use allowances in lieu of depreciation in accordance with paragraph 11. (e)Gains and losses arising from mass or extraordinary sales,retirements,or other dispositions shall be considered on a case-by-case basis. b. Gains or losses of any nature arising from the sale or exchange of property other than the property covered in subparagraph a shall be excluded in computing award costs. 41. Publication and printing costs. a. Publication costs include the costs of printing(including the processes of composition,plate-making, press work,binding, and the end products produced by such processes),distribution,promotion,mailing, and general handling. b. If these costs are not identifiable with a particular cost objective,they should be allocated as indirect costs to all benefiting activities of the organization. c. Publication and printing costs are unallowable as direct costs except with the prior approval of the awarding agency. d. The cost of page charges in journals is addressed paragraph 33. 42. Rearrangement and alteration costs. Costs incurred for ordinary or normal rearrangement and alteration of facilities are allowable. Special arrangement and alteration costs incurred specifically for the project are allowable with the prior approval of the awarding agency. 43. Reconversion costs. Costs incurred in the restoration or rehabilitation of the organization's facilities to approximately the same condition existing immediately prior to commencement of Federal awards, fair wear and tear excepted, are allowable. 54 of 63 6/21/00 2:27 PM vM its 1.trCular A-ILL IlllP://W':.W.mu.....AING.$uV/UIIIWLIICWaIS/a 1 LLi a I LL.11U -� 44. Recruiting costs. a. Subject to subparagraphs b,c,and d,and provided that the size of the staff recruited and maintained is in keeping with workload requirements,costs of"help wanted" advertising,operating costs of an employment office necessary to secure and maintain an adequate staff,costs of operating an aptitude and educational testing program,travel costs of employees while engaged in recruiting personnel, travel costs of applicants for interviews for prospective employment, and relocation costs incurred incident to recruitment of new employees,are allowable to the extent that such costs are incurred pursuant to a well-managed recruitment program. Where the organization uses employment agencies,costs that are not in excess of standard commercial rates for such services are allowable. b. In publications,costs of help wanted advertising that includes color, includes advertising material for other than recruitment purposes,or is excessive in size(taking into consideration recruitment purposes for which intended and normal organizational practices in this respect), are unallowable. c. Costs of help wanted advertising, special emoluments, fringe benefits, and salary allowances incurred to attract professional personnel from other organizations that do not meet the test of reasonableness or do not conform with the established practices of the organization,are unallowable. d. Where relocation costs incurred incident to recruitment of a new employee have been allowed either as an allocable direct or indirect cost,and the newly hired employee resigns for reasons within his control • within twelve months after being hired,the organization will be required to refund or credit such relocation costs to the Federal Government. 45. Relocation costs. a. Relocation costs are costs incident to the permanent change of duty assignment(for an indefinite period or for a stated period of not less than 12 months)of an existing employee or upon recruitment of a new employee. Relocation costs are allowable,subject to the limitation described in subparagraphs b,c, and d,provided that: (1)The move is for the benefit of the employer. (2)Reimbursement to the employee is in accordance with an established written policy consistently followed by the employer. (3)The reimbursement does not exceed the employee's actual(or reasonably estimated)expenses. b. Allowable relocation costs for current employees are limited to the following: (1)The costs of transportation of the employee,members of his immediate family and his household,and personal effects to the new location. (2)The costs of finding a new home, such as advance trips by employees and spouses to locate living quarters and temporary lodging during the transition period,up to maximum period of 30 days, including advance trip time. (3)Closing costs, such as brokerage, legal,and appraisal fees, incident to the disposition of the employee's former home.These costs,together with those described in(4), are limited to 8 per cent of the sales price 6/21/00 2:27 PM 55 of 63 OMB Circular A-122 http://www.whitehousc.gov/omb/circulars/a122/aI22.html of the employee's former home. (4)The continuing costs of ownership of the vacant former home after the settlement or lease date of the employee's new permanent home,such as maintenance of buildings and grounds(exclusive of fixing up expenses), utilities, taxes,and property insurance. (5)Other necessary and reasonable expenses normally incident to relocation,such as the costs of canceling an unexpired lease,disconnecting and reinstalling household appliances, and purchasing insurance against loss of or damages to personal property. The cost of canceling an unexpired lease is limited to three times the monthly rental. c. Allowable relocation costs for new employees are limited to those described in(1) and(2)of subparagraph b. When relocation costs incurred incident to the recruitment of new employees have been allowed either as a direct or indirect cost and the employee resigns for reasons within his control within 12 months after hire, the organization shall refund or credit the Federal Government for its share of the cost. However, the costs of travel to an overseas location shall be considered travel costs in accordance with paragraph 55 and not relocation costs for the purpose of this paragraph if dependents are not permitted at the location for any reason and the costs do not include costs of transporting household goods. d. The following costs related to relocation are unallowable: (1)Fees and other costs associated with acquiring a new home. (2)A loss on the sale of a former home. (3) Continuing mortgage principal and interest payments on a home being sold. • (4)Income taxes paid by an employee related to reimbursed relocation costs. 46. Rental costs. a. Subject to the limitations described in subparagraphs b through d, rental costs are allowable to the extent that the rates are reasonable in light of such factors as:rental costs of comparable property, if any; market conditions in the area; alternatives available; and the type, life expectancy,condition, and value of the property leased. b. Rental costs under sale and leaseback arrangements are allowable only up to the amount that would be allowed had the organization continued to own the property. c. Rental costs under less-than-arms-length leases are allowable only)up to the amount that would be allowed had title to the property vested in the organization. For this purpose,a less-than-anus-length lease is one under which one party to the lease agreement is able to control or substantially influence the actions of the other. Such leases include,but are not limited to those between(i)divisions of an organization;(ii) organizations under common control through common officers,directors,or members; and(iii)an organization and a director, trustee, officer,or key employee of the organization or his immediate family either directly or through corporations, trusts,or similar arrangements in which they hold a controlling interest. d. Rental costs under leases which are required to be treated as capital leases under GAAP, are allowable only up to the amount that would be allowed had the organization purchased the property on the date the 56 of 63 6/21/00 2:27 PM r • U rvlo..iroWar H-ILL http://W.vw.wuuc,wuse.gov/omb/circulars/a I22/a I22.ht.nl lease agreement was executed,i.e., to the amount that minimally would pay for depreciation or use allowances,maintenance,taxes, and insurance. Interest costs related to capitalized leases are allowable to the extent they meet criteria in subparagraph 23.a. Unallowable costs include amounts paid for profit, management fees, and taxes that would not have been incurred had the organization purchased the facility. 47. Royalties and other costs for use of patents and copyrights. a. Royalties on a patent or copyright or amortization of the cost of acquiring by purchase a copyright, patent,or rights thereto,necessary for the proper performance of the award are allowable unless: (1)The Federal Government has a license or the right to free use of the patent or copyright. (2)The patent or copyright has been adjudicated to be invalid,or has been administratively determined to be invalid. (3)The patent or copyright is considered to be unenforceable. (4)The patent or copyright is expired. b. Special care should be exercised in determining reasonableness where the royalties may have arrived at as a result of less-than-arm's-length bargaining,e.g.: (1)Royalties paid to persons, including corporations,affiliated with the organization. (2)Royalties paid to unaffiliated parties,including corporations,under an agreement entered into in contemplation that a Federal award would be made. (3)Royalties paid under an agreement entered into after an award is made to an organization. c. In any case involving a patent or copyright formerly owned by the organization,the amount of royalty allowed should not exceed the cost which would have been allowed had the organization retained title thereto. 48. Selling and marketing. Costs of selling and marketing any products or services of the organization (unless allowed under paragraph 1 as allowable public relations costs)are unallowable. These costs, however,are allowable as direct costs,with prior approval by awarding agencies,when they are necessary for the performance of Federal programs. 49. Severance pay. a. Severance pay, also commonly referred to as dismissal wages, is a payment in addition to regular salaries and wages,by organizations to workers whose employment is being terminated. Costs of severance pay are allowable only to the extent that in each case, it is required by(i) law, (ii)employer-employee agreement, (iii)established policy that constitutes, in effect, an implied agreement on the organization's part,or(iv) circumstances of the particular employment. b. Costs of severance payments are divided into two categories as follows: (1) Actual normal turnover severance payments shall be allocated to all activities;or,where the organization provides for a reserve for normal severances,such method will be acceptable if the charge to 57 of 63 1 6/21/00 2:27 PM ( r OMB Circular A-122 http://www.whitehouse.gov/omb/circulars/a122/a122.html current operations is reasonable in light of payments actually made for normal severances over a representative past period, and if amounts charged are allocated to all activities of the organization. (2)Abnormal or mass severance pay is of such a conjectural nature that measurement of costs by means of an accrual will not achieve equity to both parties. Thus, accruals for this purpose are not allowable. However,the Federal Government recognizes its obligation to participate, to the extent of its fair share,in any specific payment. Thus,allowability will be considered on a case-by-case basis in the event or -occurrence. c. Costs incurred in certain severance pay packages(commonly known as "a golden parachute"payment) which are in an amount in excess of the normal severance pay paid by the organization to an employee upon termination of employment and are paid to the employee contingent upon a change in management control over,or ownership of, the organization's assets are unallowable. d. Severance payments to foreign nationals employed by the organization outside the United States,to the extent that the amount exceeds the customary or prevailing practices for the organization in the United States are unallowable, unless they are necessary for the performance of Federal programs and approved by awarding agencies. e. Severance payments to foreign nationals employed by the organization outside the United States due to the termination of the foreign national as a result of the closing of,or curtailment of activities by,the organization in that country, are unallowable, unless they are necessary for the performance of Federal programs and approved by awarding agencies. 50. Specialized service facilities. a. The costs of services provided by highly complex or specialized facilities operated by the organization, such as electronic computers and wind tunnels, are allowable,provided the charges for the services meet the conditions of either subparagraph b or c and, in addition,take into account any items of income or Federal financing that qualify as applicable credits under subparagraph A.5 of Attachment A. b. The costs of such services, when material,must be charged directly to applicable awards based on actual usage of the services on the basis of a schedule of rates or established methodology that(i)does not discriminate against federally-supported activities of the organization, including usage by the organization for internal purposes, and(ii)is designed to recover only the aggregate costs of the services. The costs of each service shall consist normally of both its direct costs and its allocable share of all indirect costs. Advance agreements pursuant to subparagraph A.6 of Attachment A are particularly important in this situation. c. Where the costs incurred for a service are not material, they may be allocated as indirect costs. 51. Taxes. a: In general, taxes which the organization is required to pay and which are paid or accrued in accordance with GAAP, and payments made to local governments in lieu of taxes which are commensurate with the local government services received are allowable, except for(i)taxes from which exemptions are available to the organization directly or which are available to the organization based on an exemption afforded the Federal Government and in the latter case when the awarding agency makes available the necessary exemption certificates,(ii)special assessments on land which represent capital improvements, and(iii) Federal income taxes. 58 of63 6/21/00 2:27 PM WWt./.0 W,..,,.......---- vu.J,m a.Lc,d la.L.UI. b.Any refund of taxes, and any payment to the organization of interest thereon,which were allowed as award costs,will be credited either as a cost reduction or cash refund, as appropriate,to the Federal Government. • 52.Termination costs. Termination of awards generally give rise to the incurrence of costs, or the need for special treatment of costs,which would not have arisen had the award not been terminated. Cost principles covering these items are set forth below. They are to be used in conjunction with the other provisions of this Circular in termination situations. a. Common items. The cost of items reasonably usable on the organization's other work shall not be allowable unless the organization submits evidence that it would not retain such items at cost without sustaining a loss. In deciding whether such items are reasonably usable on other work of the organization, the awarding agency should consider the organization's plans and orders for current and scheduled activity. Contemporaneous purchases of common items by the organization shall be regarded as evidence that such items are reasonably usable on the organization's other work. Any acceptance of common items as allocable to the terminated portion of the award shall be limited to the extent that the quantities of such items on hand,in transit,and on order are in excess of the reasonable quantitative requirements of other work. b. Costs continuing after termination. If in a particular case,despite all reasonable efforts by the organization,certain costs cannot be discontinued immediately after the effective date of termination, such - costs are generally allowable within the limitations set forth in this Circular,except that any such costs continuing after termination due to the negligent or willful failure of the organization to discontinue such costs shall be unallowable. c. Loss of useful value. Loss of useful value of special tooling,machinery and equipment which was not charged to the award as a capital expenditure is generally allowable if: (1) Such special tooling,machinery,or equipment is not reasonably capable of use in the other work of the organization. (2)The interest of the Federal Government is protected by transfer of title or by other means deemed appropriate by the awarding agency; d. Rental costs. Rental costs under unexpired leases are generally allowable where clearly shown to have been reasonably necessary for the performance of the terminated award less the residual value of such leases, if(i)the amount of such rental claimed does not exceed the reasonable use value of the property leased for the period of the award and such further period as may be reasonable, and(ii)the organization makes all reasonable efforts to terminate,assign, settle,or otherwise reduce the cost of such lease. There also may be included the cost of alterations of such leased property,provided such alterations were necessary for the performance of the award,and of reasonable restoration required by the provisions of the lease. e. Settlement expenses. Settlement expenses including the following are generally allowable: (1)Accounting, legal,clerical, and similar costs reasonably necessary for: (a)The preparation and presentation to awarding agency of settlement claims and supporting data with respect to the terminated portion of the award,unless the termination is for default(see Sec._.61 of 59 of 63 6/21/00 2:27 PM OMB Circular A-122 http://www.whitehouse.gov/omb/circulars/a122/a122.html Circular A-110); and (b)The termination and settlement of subawards. (2)Reasonable costs for the storage,transportation,protection, and disposition of property provided by the Federal Government or acquired or produced for the award, except when grantees or contractors are reimbursed for disposals at a predetermined amount in accordance with Sec. .30 through .37 of Circular A-110. (3) Indirect costs related to salaries and wages incurred as settlement expenses 'g p es in subparagraphs(1)and 2 . Normally,such indirect costs shall be limited to fringe benefits,g occupancy cost, and immediate supervision. f. Claims under subawards. Claims under subawards, including the allocable portion of claims which are common to the award, and to other work of the organization are generally allowable. An appropriate share of the organization's indirect expense may be allocated to the amount of settlements with subcontractors and/or subgrantees,provided that the amount allocated is otherwise consistent with the basic guidelines contained in Attachment A. The indirect expense so allocated shall exclude the same and similar costs claimed directly or indirectly as settlement expenses. 53. Training and education costs. a. Costs of preparation and maintenance of a program of instruction including but not limited to on-the-job, classroom,and apprenticeship training, designed to increase the vocational effectiveness of employees, including training materials,textbooks, salaries or wages of trainees(excluding overtime compensation which might arise therefrom),and(i)salaries of the director of training and staff when the training program is conducted by the organization; or(ii)tuition and fees when the training is in an institution not operated by the organization, are allowable. b. Costs of part-time education, at an undergraduate or post-graduate college level, including that provided at the organization's own facilities, are allowable only when the course or degree pursued is relative to the field in which the employee is now working or may reasonably be expected to work,and are limited to: (1)Training materials. (2)Textbooks. (3) Fees charges by the educational institution. • (4)Tuition charged by the educational institution or, in lieu of tuition, instructors'salaries and the related share of indirect costs of the educational institution to the extent that the sum thereof'is not in excess of the tuition which would have been paid to the participating educational institution. (5) Salaries and related costs of instructors who are employees of the organization. (6)Straight-time compensation of each employee for time spent attending classes during working hours not in excess of 156 hours per year and only to the extent that circumstances do not permit the operation of classes or attendance at classes after regular working hours;otherwise,such compensation is unallowable. c. Costs of tuition, fees, training materials, and textbooks(but not subsistence, salary, or any other 60 of 63 6/21/00 2:27 PM 1 ' 1 Lucuiar Aa-14z http://w ww.wuucuouse.gov/omb/circularsia122/aI22.11:n1 emoluments)in connection with full-time education,including that provided at the organization's own facilities,at a post-graduate(but not undergraduate)college level, are allowable only when the course or degree pursued is related to the field in which the employee is now working or may reasonably be expected to work,and only where the costs receive the prior approval of the awarding agency. Such costs are limited to the costs attributable to a total period not to exceed one school year for each employee so trained. In unusual cases the period may be extended. d. Costs of attendance of up to 16 weeks per employee per year at specialized programs specifically designed to enhance the effectiveness of executives or managers or to prepare employees for such positions are allowable. Such costs include enrollment fees, training materials, textbooks and related charges, employees'salaries,subsistence, and travel. Costs allowable under this paragraph do not include those for courses that are part of a degree-oriented curriculum,which are allowable only to the extent set forth in subparagraphs b and c. e. Maintenance expense,and normal depreciation or fair rental,on facilities owned or leased by the organization for training purposes are allowable to the extent set forth in paragraphs 11,27,and 46. f. Contributions or donations to educational or training institutions, including the donation of facilities or other properties, and scholarships or fellowships, are unallowable. g. Training and education costs in excess of those otherwise allowable under subparagraphs b and c may be allowed with prior approval of the awarding agency. To be considered for approval,the organization must demonstrate that such costs are consistently incurred pursuant to an established training and education program, and that the course or degree pursued is relative to the field in which the employee is now working or may reasonably be expected to work. 54. Transportation costs. Transportation costs include freight,express,cartage,and postage charges relating either to goods purchased, in process,or delivered. These costs are allowable. When such costs can readily be identified with the items involved,they may be directly charged as transportation costs or added to the cost of such items(see paragraph 28). Where identification with the materials received cannot readily be made,transportation costs may be charged to the appropriate indirect cost accounts if the organization follows a consistent,equitable procedure in this respect. 55. Travel costs. a. Travel costs are the expenses for transportation, lodging,subsistence, and related items incurred by employees who are in travel status on official business of the organization. Travel costs are allowable subject to subparagraphs b through e,when they are directly attributable to specific work under an award or are incurred in the normal course of administration of the organization. b. Such costs may be charged on an actual basis,on a per diem or mileage basis in lieu of actual costs incurred,or on a combination of the two,provided the method used results in charges consistent with those normally allowed by the organization in its regular operations. c.The difference in cost between first-class air accommodations and less than first-class air accommodations is unallowable except when less than first-class air accommodations are not reasonably available to meet necessary mission requirements, such as where less than first-class accommodations would(i)require circuitous routing, (ii)require travel during unreasonable hours,(iii)greatly increase the duration of the flight,(iv)result in additional costs which would offset the transportation savings,or(v) offer accommodations which are not reasonably adequate for the medical needs of the traveler: 61 of 63 6/21/00 2:27 PM 1 OMB Circular A-122 http://www.whitehouse.gov/omb/circulars/a122/al22.html • d. Necessary and reasonable costs of family movements and personnel movements of a special or mass nature are allowable,pursuant to paragraphs 44 and 45, subject to allocation on the basis of work or time period benefited when appropriate. Advance agreements are particularly important. e. Direct charges for foreign travel costs are allowable only when the travel has received prior approval of the awarding agency. Each separate foreign trip must be approved. For purposes of this provision, foreign travel is defined as any travel outside of Canada and the United States and its territories and possessions. However, for an organization located in foreign countries,the term "foreign travel"means travel outside that country. 56. Trustees. Travel and subsistence costs of trustees(or directors)are allowable. The costs are subject to restrictions regarding lodging,subsistence and air travel costs provided in paragraph 55. ATTACHMENT C Circular No. A-122 NON-PROFIT ORGANIZATIONS NOT SUBJECT TO THIS CIRCULAR Aerospace Corporation, El Segundo,California Argonne National Laboratory,Chicago, Illinois Atomic Casualty Commission, Washington, D.C. Battelle Memorial Institute, Headquartered in Columbus,Ohio Brookhaven National Laboratory, Upton,New York Charles Stark Draper Laboratory, Incorporated, Cambridge,Massachusetts Environmental Institute of Michigan, Ann Arbor,Michigan Hanford Environmental Health Foundation, Richland, Washington IIT Research Institute, Chicago, Illinois Institute for Defense Analysis,Alexandria, Virginia Mitre Corporation, Bedford,Massachusetts National Radiological Astronomy Observatory,Green Bank, West Virginia National Renewable Energy Laboratory, Golden,Colorado Oak Ridge Associated Universities,Oak Ridge,Tennessee Rand Corporation, Santa Monica,California Research Triangle Institute,Research Triangle Park,North Carolina Riverside Research Institute,New York,New York Southern Research Institute, Birmingham, Alabama . Southwest Research Institute, San Antonio,Texas SRI International, Menlo Park,California Syracuse Research Corporation, Syracuse,New York Universities Research Association, Incorporated(National Acceleration Lab),Argonne,Illinois Non-profit insurance companies, such as Blue Cross and Blue Shield Organizations Other non-profit organizations as negotiated with awarding agencies BILLING CODE 3110-01 OMB Home Page I Budget Information I Legislative Information I Management Reform/GPRA Grants Management I Financial Management j Procurement Policy ..f 61 601/An 217 PM OMB Circular A-ILL nup:II W,v W............,uSe.guvro111u.cu wmi a/41 64 a i LL.ill Information&Regulatory Policy I Special Topics Read our Privacy Policy 6/21/00 2:27 PM 63 of 63 4 24 CFR 85.43 ENFORCEMENT Exhibit K (a) Remedies for non-compliance. If a grantee or sub-grantee materially fails to comply with any term of an award, whether stated in a Federal statute or regulation, an assurance, in a State plan or application, a notice of award, or elsewhere, the awarding agency may take one or more of the following actions, as appropriate in the circumstances: (1) Temporarily withhold cash payments pending correction of the deficiency by the grantee or sub-grantee or more severe enforcement action by the awarding agency, (2) Disallow (that is, deny both use of funds and matching credit for) all or part of the cost of the activity or action not in compliance, (3) Wholly or partly suspend or terminate the current award for the grantee's or sub- grantee's program, (4) Withhold further awards for the program, or (5) Take other remedies that may be legally available. (b) Hearings, appeals. In taking an enforcement action, the awarding agency will provide the grantee or sub-grantee an opportunity for such hearing, appeal or other administrative proceeding to which the grantee or sub-grantee is entitled under any statute or regulation applicable to the action involved. (c) Effects of suspension and termination. Costs of grantee or sub-grantee resulting from obligations incurred by the grantee or sub-grantee during a suspension or after termination of an award are not allowable unless the awarding agency expressly authorizes them in the notice of suspension or termination or subsequently. Other grantee or sub-grantee costs during suspension or after termination which are necessary and not reasonably avoidable are allowable if: (1) The costs result from obligations which were properly incurred by the grantee or sub- grantee before the effective date of suspension or termination, are not in anticipation of it, and, in the case of a termination, are non-cancellable, and, (2) The costs would be allowable if the award were not suspended or expired normally at the end of the funding period in which the termination takes effect. (d) Relationship to Debarment and Suspension. The enforcement remedies identified in this section, including suspension and termination, do not preclude grantee or sub-grantee from being subject to "Debarment and Suspension"under EO 12549 (see § 85.35). 24 CFR 85.44 TERMINATION FOR CONVENIENCE Except as provided in § 85.43 awards may be terminated in whole or in part only as follows: (a) By the awarding agency with the consent of the grantee or sub-grantee in which case the two parties shall agree upon the termination conditions, including the effective date and in the case of partial termination, the portion to be terminated, or (b) By the grantee or sub-grantee upon written notification to the awarding agency, setting forth the reasons for such termination, the effective date, and in the case of partial termination, the portion to be terminated. However, if, in the case of a partial termination, the awarding agency determines that the remaining portion of the award will not accomplish the purposes for which the award was made, the awarding agency may terminate the award in its entirety under either § 85.43 or Paragraph (a) of this section. C-25A CITY OF OMAHA LEGISLATIVE CHAMBER Omaha,Nebraska RESOLVED BY THE CITY COUNCIL OF THE CITY OF OMAHA: WHEREAS, the City of Omaha is a Municipal Corporation located in Douglas County, Nebraska, and is organized and existing under the laws of the State of Nebraska, and is authorized and empowered to exercise all powers conferred by the State Constitution, laws, Home Rule Charter of the City of Omaha, 1956, as amended, and local ordinances, including, but not limited to,the power to contract; and, WHEREAS, on February 12, 1992, the City was designated as a Participating Jurisdiction for the Home Investment Partnerships Program (HOME) by the U.S. Department of Housing and Urban Development; and, WHEREAS, on September 9, 2003, by Resolution No. 1179, the City Council approved an Agreement between the City of Omaha and the Housing Authority of the City of Omaha (OHA), which provided $937,163.50 in HOME funding comprised of$140,261.50 in FY 2001 HOME Funds and $500,000.00 in FY 2002 HOME Funds and $250,000.00 in FY 2003 HOME Funds and $46,902.00 administrative funds to provide rental assistance to low-income households; and, WHEREAS, the term of that Agreement expired July 31, 2004 and was extended until October 31, 2004 by the Planning Director of the City of Omaha as allowed under Section 2.04 of that Agreement in order to utilize funds most effectively; and, WHEREAS, $185,000.00 in FY 2003 HOME Funds for rental assistance is remaining from that Agreement; and, WHEREAS, on November 4, 2003, by Resolution No. 1328, the City Council approved the 2004 Consolidated Submission for Community Planning and Development Programs which allocated $300,000.00 in FY 2004 HOME Funds for the Omaha Housing Authority to provide rental assistance to low-income households; and, WHEREAS, the OHA requested administrative funds in the amount of $46,902.00 to effectively operate a rental assistance program; and, WHEREAS, the Omaha Housing Authority possesses the administrative capability and agrees to administer the City's Rental Assistance Program; and, By Councilmember Adopted City Clerk Approved Mayor 1 C-25A CITY OF OMAHA LEGISLATIVE CHAMBER Omaha,Nebraska PAGE-2- WHEREAS, it is in the best interest of the City to enter into an Agreement with the Omaha Housing Authority for administration of the City's Rental Assistance Program for the total amount of$532,424.00. NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF OMAHA: THAT, the attached Agreement as recommended by the Mayor, between the City of Omaha and the Housing Authority of the City of Omaha, 540 South 27th Street, Omaha, Nebraska, 68105, in the amount of$532,424.00; comprised of $185,522.00 in FY 2003 HOME funds and $300,000.00 in FY 2004 HOME Funds and $46,902.00 administrative funds for the Rental Assistance Program, which will assist a minimum of 60 low-income households including households from transitional programs for homeless persons and programs for persons with disabilities, for the period from October 1, 2004 through July 31, 2005 is hereby approved. Rental assistance payments totaling $485,522.00 shall be paid from Fund No. 12179, Organization No.128034; and administrative funds of $46,902.00 shall be paid from General Fund No. 11111, Organization No. 109023. / APPROVED AS TO FORM: c.tt 9/2//ok CITY ATTORNEY DATE P:\PLN2\11282pjm.doc By ; . . 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