RES 1997-3069 - Agmt with Holy Name Housing Corporation for construction of single family homes Za,0- ‘,.3D6'
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City of Omaha NCt . , "'riw199i�a 1
Hal Daub,Mayor
Honorable President
and Members of the City Council,
The attached proposed Resolution authorizes a Community Development Revolving Loan Fund
Agreement for the Holy Name Housing Corporation (HNHC), located at 3014 North 45th Street,
Omaha, Nebraska 68104. The Revolving Loan Fund will be used by HNHC to construct and sell
four new housing units to home buyers in the 51st and Nebraska Avenue Redevelopment Area. The
Redevelopment Area is generally bounded by Curtis Avenue on the north, Kansas Avenue on the
south, 50th Street on the east, and 51 st Street on the west.
The proposed Agreement allocates $100,000 in FY97 CDBG program funds pursuant to the
amended 1997 Consolidated Submission for Community Planning and Development Programs
(Consolidated Plan), approved by the City Council on August 26, 1997, by Resolution No. 2420.
The contractor has on file a current Annual Contract Compliance Report Form(CC-1). As is City
policy, the Human Relations Director will review the contractor to ensure compliance with the
Contract Compliance Ordinance.
Your favorable consideration of this Resolution will be appreciated.
Sincerely, Referred to City C uncil for Consi ation:
- , i# 97
Zi-tvi 7176. - ie. /1077
Robert C. Peters Date ayor's Office 'tie Date
Acting Planning Director
Approved as to Funding: Approved:
1 r6 .j2i7, /°/Zl47Louis A. D' rcole, hector Dat eorge L. vi/544;S.
, irector Date
Finance Department Gi' 6 Human R tions Department 1
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C-ZSA CITY OF OMAHA
LEGISLATIVE CHAMBER
Omaha,Nebr November 4 19 97
RESOLVED BY THE CITY COUNCIL OF THE CITY OF OMAHA:
WHEREAS,the City annually receives Community Development Block Grant Funds,
under Title I of the Housing and Community Development Act of 1974, as amended,for the purpose
of benefiting low and moderate income residents,eliminating slums and blight,and for other urgent
community development needs; and,
WHEREAS,the Omaha City Council, on August 26, 1997,by Resolution No. 2420,
approved the amended 1997 Consolidated Submission for Community Planning and Development
Programs which included the Holy Name Housing Corporation (HNHC)51st and Nebraska Avenue
Infill Revolving Loan Fund Program; and,
WHEREAS, the Holy Name Housing Corporation proposes to construct, and sell
approximately four houses during the term of the Agreement; and,
WHEREAS, the Holy Name Housing Corporation plans to provide mortgage
financing to potential homeowners in the Target Area at an affordable rate; and,
WHEREAS, the 51st and Nebraska Avenue Infill Target Area, an area defined by
Curtis on the north,Kansas Avenue on the south,50th Street on the east,and 51st Street on the west,
is an area of predominately low and moderate income residents; and,
WHEREAS,a determination has been made that this Infill Program provides housing
which benefits low and moderate income persons or addresses slums and blighted conditions on a
spot basis; and,
WHEREAS, it is in the best interests of the citizens of the City of Omaha to initiate
the construction of single family dwelling units in the Holy Name Housing Corporation 51st and
Nebraska Avenue Infill Target Area.
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE
CITY OF OMAHA:
By
Councilmember
Adopted
City Clerk
Approved
Mayor r
L
e
c-25A CITY OF OMAHA
LEGISLATIVE CHAMBER
Omaha,Nebr November 4 1997
PAGE 2
THAT,the attached Agreement,as recommended by the Mayor,between the City of
Omaha and the Holy Name Housing Corporation, a Nebraska Non-Profit Corporation, 3014 North
45th Street,Omaha,Nebraska 68104,for a Revolving Loan Fund in the total amount of$100,000.00
FY97 CDBG Funds for the construction and sale of approximately four new single family homes to
low and moderate income persons in the Holy Name Housing Corporation 51st and Nebraska Avenue
Infill Target Area,bounded by Curtis Avenue on the north,Kansas Avenue on the south, 50th Street
on the east, and 51st Street on the west, is hereby approved. Funds in the amount of$100,000.00
shall be paid from the Community Development Block Grant Fund No. 193, Organization No. 8324.
P:\PLN2\6852.SKZ APPROVED AS TO FORM:
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ASSISTANT CITY ATTORNEY DATE
hereby certify that the foregoing is a true
and correct copy of the original document
now on file in the City Jerk's office.
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CITY CLERK
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Councilmember
Adopted......NOV. -..4...1497•
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City C rk
Approved. Y Y
Mayor
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AGREEMENT
THIS AGREEMENT is entered into by and between the City of Omaha, a Municipal
Corporation in Douglas County, Nebraska (sometimes hereinafter referred to as "City"); and the
Holy Name Housing Corporation, a Nebraska Non-profit Corporation, 3014 North 45th Street,
Omaha,Nebraska 68104(sometimes hereinafter referred to as"HNHC");for the construction of four
(4)new single family houses in the 51st and Nebraska Avenue Infill Housing Redevelopment Area.
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,a primary objective of the City of Omaha's Community Development Program
is the development of viable urban communities with decent housing opportunities, job
opportunities,and a suitable living environment principally for persons of low and moderate income;
and,
WHEREAS, the 51st and Nebraska Avenue Redevelopment Area, a vacant site in North
Omaha, is a blighted and substandard area; and,
WHEREAS,51st and Nebraska Avenue Redevelopment Proposal,designated the Holy Name
Housing Corporation, a non-profit neighborhood based organization, as the developer responsible
for the construction and sale of four(4) single-family houses in the Redevelopment Area; and,
i
WHEREAS, the Holy Name Housing Corporation proposes to construct and sell four new
houses during the term of this Agreement; and,
WHEREAS, the Holy Name Housing Corporation plans to provide mortgage financing to
potential homeowners in the Redevelopment Area at an affordable rate; and,
WHEREAS, a determination has been made that this Infill Housing Program provides
housing which is determined to benefit low and moderate income persons; and,
WHEREAS, it is in the best interests of the citizens of the City of Omaha to initiate the
construction of four single family dwelling units in the 51st and Nebraska Avenue Redevelopment
Area.
NOW, THEREFORE,in consideration of these mutual covenants,the Holy Name Housing
Corporation and the City of Omaha do hereby agree as follows:
Section 1. Definitions -Abbreviations
The following terms shall have the following meaning for all purposes in this Agreement:
1.1 "City" shall mean-the City of Omaha, a Nebraska Municipal Corporation.
1.2 "Developer" shall mean - the Holy Name Housing Corporation, 3014 North 45th
Street, Omaha,Nebraska 68104.
1.3 "Director" shall mean-the Planning Director.
1.4 "HNHC" shall mean - the Holy Name Housing Corporation, a Nebraska nonprofit
corporation(see Exhibit A).
1.5 "51st and Nebraska Avenue Infill Housing Target Area" shall mean-vacant, platted
lots located in an area bounded by Curtis Avenue on the north,Kansas Avenue on the
south, 50th Street on the east, and 51st Street on the west, and legally described as
Lots 8, 10-17, Block 1, and Lots 1-8, Block 2, of the Fred Gordon Addition, an
Addition to the City of Omaha,as surveyed,platted and recorded in Douglas County,
Nebraska.
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1.6 "Deferred Payment Loan(DPL)" shall mean- a loan of CDBG funds, in an amount
not to exceed $25,000.00 for each newly constructed property, made subject to the
terms, conditions and provisions of the loan agreement under which said loan is
made, secured by no less than a second mortgage/deed of trust on an individual
property, which shall provide, inter-alia, that same shall become due and payable
without interest upon the sale or transfer of ownership of the property, or portion
thereof, or interest therein by the Owner.
The Homebuyer Deferred Payment Loan amount will depreciate 50%after 10 years
from the date of loan closing,with the remaining depreciated balance due upon sale
or transfer of the property. Following the initial depreciation,the Owner may choose
to repay the 50% DPL balance over a period of time. Upon written request by the
Owner to repay the DPL balance the Planning Department will determine the terms
and conditions of repayment.
1.7 "Community Development Block Grant (CDBG)" shall mean - the program
conducted under the provisions of the Housing and Community Development Act of
1974,as amended(42 U.S.C. 5301 et. seq.),and the Code of Federal Regulations(24
CFR Part 570).
1.8 "Subrecipient" shall mean - a public or private nonprofit agency, authority or
organization receiving CDBG funds to undertake eligible activities. In this
Agreement,the subrecipient is HNHC.
1.9 "Recipient" shall mean-the City of Omaha.
1.10 "Program Income" shall mean - gross income received by the Recipient or
Subrecipient directly generated by an activity that is only partially assisted with
CDBG funds,the income shall be prorated to reflect the percentage of CDBG funds
used (see Exhibit B).
1.11 "Construction Contract" shall mean - the ensuing contract for all work to be
performed upon the subject property,more specifically, scattered vacant lots within
the 51 st and Nebraska Avenue Redevelopment Site.
1.12 "Construction Work" shall mean-the work to be performed on scattered vacant lots
within 51st and Nebraska Avenue Infill Housing Target Area and all work or services
provided for in professional services or construction contracts and as may be required
hereunder.
1.13 "CDBG Funds" shall mean - that portion of the Community Development Block
Grant awarded to the City as may be available to loan during program year 1997 for
professional services,Construction Work and Deferred Payment Loans involving the
property as described in Section 1.5 of this Agreement in an amount not to exceed
$100,000.00, subject to the terms, conditions and requirements of said Grant.
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1.14 "Progress Payment" shall mean-that portion of the total construction contract paid
in one or more disbursements, based upon the value of the construction,
administrative or professional services work completed at the time the payment
request is made.
Section 2. Duties and Conditions of City Financing
2.1 Subject to and conditioned upon actual receipt of same, the City agrees to make
available to HNHC $100,000.00 in CDBG Funds received for use in the 1997
program year, as hereinabove described and defined. Funding shall be subject to the
terms and conditions specified and contained in this Agreement. Further, funding
shall be used only for the following purposes:
2.1.1 Architectural,engineering,legal,financial and administrative services for the
preparation of all design and construction documents and construction
supervision necessary for construction and sale of single family residential
units within the 51st and Nebraska Avenue Redevelopment Site. All
contracts for services and construction documents pursuant to this Section
must be approved by the Planning Director, prior to funding of such
contracts.
2.1.2 Partial construction financing for each single family house at no interest as
follows:
A. In case of speculation or model houses (houses for which no buyer is
identified and obligated to purchase), such construction financing shall
be made to HNHC without interest in an amount not to exceed
$25,000.00 per unit. Such loans shall be secured by no less than a
second mortgage or deed of trust to the City of Omaha and shall
become due and payable to the City at the loan closing from the sale
proceeds as each individual house is sold. Each dollar of construction
financing for speculation houses provided by the City shall be matched
by at least 1.75 dollars of private construction financing.
B. In the case of pre-sold houses (houses in which a buyer has been
identified, and approved for partial mortgage or deed of trust financing
under 2.1.3 below and has become obligated to purchase regardless of
whether the sale has been closed), such construction financing shall be
secured by no less than a second mortgage or deed of trust to the City
of Omaha and shall be made without interest in an amount not to
exceed the amount approved for said buyer under paragraph 2.1.3.
Such loans shall become due and payable to the City at the loan closing
from the sale proceeds as each individual house is sold.
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C. At the closing of a loan for each sale of a house,the City shall release
its mortgage or provide a deed of reconveyance for its deed of trust for
such property.
2.1.3 Partial mortgage or deed of trust financing to qualified low and moderate
income buyers through the use of Deferred Payment Loans shall be secured
by a second mortgage or deed of trust on individual properties and shall not
exceed $25,000.00 (Exhibit C).
2.1.4 City funding pursuant to this Section shall be contingent upon receipt of and
subject to availability of Community Development Block Grant funds in
1997 in amounts adequate to meet any contractual obligations in force upon
the date of execution of this Agreement as well as this proposed obligation.
Should adequate funding not be available, the City shall notify HNHC as
soon as reasonably possible. At this time, the responsibilities of the HNHC
under Section 3 of this Agreement shall be released,the provisions of Section
5.6 will be exercised and the Agreement will be terminated.
2.1.5 Funds paying for contractual work shall be payable in consideration with the
construction progress payment schedule, in accordance with the Director's
prior approval.
2.2 The City shall review and approve all plans for house construction and perform
interim and final inspections on each construction phase or completed residential
unit.
2.3 The City shall review and monitor the quarterly reports that identify the
progress/accomplishments of the HNHC,on the activities included in this Agreement
and on contracts entered into with third parties pursuant thereto.
2.4 After completion of construction,the property must comply with all appropriate City
codes and ordinances, and with Federal Section 8 Housing Quality Standards.
2.5 In no event shall the City assume any obligation to make any or all of the above-
referred funding available,nor shall the City incur any liability hereunder,unless and
until the HNHC has submitted for and received the approval of the Director of all of
the following:
a. evidence that owner funding is available; and,
b. duly executed contracts for construction work; and,
c. Lien waivers from the General Contractor, its subcontractors and suppliers.
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•
2.6 In no event shall the City assume any obligation to make or continue to make any or
all of the above-referenced funding available, nor shall the City incur any liability
hereunder,unless and until HNHC has timely and fully completed with its duties and
obligations arising hereunder.
2.7 In the event that all of the terms and conditions for funding as set forth hereinabove
have been fully complied with, the City does hereby agree to make only those
progress payments as may be authorized to be paid by the Director or his designate
upon receipt, verification and approval of an American Institute of Architects
Document G702 "Application and Certificate for Payment", provided that no
payments shall be made for any acquisition, work, labor, material or expense
incurred which the Director, in his sole discretion, deems to be:
a. unacceptable or substandard; or,
b. not in accordance with this Agreement or the construction contract as
approved; or,
c. not in conformance with the applicable state,federal and local laws, including,
but not limited to,the building, plumbing and/or electrical codes; or,
d. not in conformance with the working drawings and/or specifications as
approved.
Further, any such administrative, acquisition and construction progress payments or
sources of construction and permanent financing shall be made from, and be
attributable to,each funding source in proportion to the approximate percentage that
same bears to the total amount of funding hereunder, which, for the purpose of this
section,are hereby established in Exhibit D of this Agreement. Progress payments
for development fees shall be pro-rated based upon the percentage of site preparation
and public improvements completed and the number of completed single family
residential units.
2.8 The City agrees to provide HNHC funds,as described in Sections 2.1 and 2.2 herein,
to carry out the services described herein for a period of thirty-six (36)months from
the time of favorable consideration by the City Council.
Section 3. Duties and Responsibilities of Holy Name Housing Corporation
3.1 HNHC shall be responsible for the security and maintenance of Redevelopment Sites.
3.2 HNHC shall contract for architectural and engineering services for the preparation
of all design and construction documents, cost estimates, and construction
supervision necessary for the construction of new single family houses in the 51st
and Nebraska Avenue Redevelopment Site. As specified in Section 2.1,HNHC shall
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obtain the approval of the Director for all contracts,plans, and plats pursuant to this
Section.
3.3 HNHC shall contract for and complete construction as specified in Section 2.1.
HNHC shall obtain the approval of the Director for all construction contracts,prior
to the start of such contracts.
3.4 Upon a date agreeable to HNHC and the Planning Director, HNHC shall begin
construction of no fewer than two single family detached houses to be used as model
houses or houses available for sale. Construction plans and locations for such houses
shall be approved by the Planning Director. The construction of such houses shall
be eligible for the partial construction financing as outlined in Section 2.1.1.
3.5 HNHC shall construct at least one additional housing unit for each housing unit sold,
subject to the limitations on outstanding City construction funding set forth in
Section 2.1.2. HNHC shall make best efforts to construct and sell approximately
four single family housing units over a three-year period in conformance with the
Development Schedule described in Exhibit D.
3.6 The HNHC shall secure private funds as described in Exhibit D. The HNHC shall
certify the availability of these funds to the Director in a manner designed by him.
3.7 The HNHC does hereby certify contract and agree that any and all funding obtained
by it or made available to it hereunder, shall be used solely and exclusively for the
express purpose of developing the 51 st and Nebraska Avenue Redevelopment Site
in strict compliance with this Agreement and the construction contracts as approved,
as well as the drawings and other specifications as approved.
3.8 The HNHC shall submit to the Director, for his review and approval, all working
drawings,plans and specifications necessary or incidental to this project. In addition,
the HNHC shall submit duly authorized construction contracts for the Director's
review and approval. The Director reserves the right to reject,modify or amend any
or all of the foregoing. Upon approval,no changes or amendments may be made to
any of the foregoing without the written approval of the Director. In no event shall
the City become obligated to make any payments or release loan proceeds for any
work performed,materials furnished, expenses incurred, or any other expenditure of
whatsoever kind or nature unless same was expressly included in one or more of the
above-mentioned documents as approved.
3.9 The HNHC shall not commence any work hereunder until such time as it has
received a written notice to proceed as issued by the Director. Any work performed
prior to the issuance of such notice shall be the sole responsibility of the HNHC.
3.10 The HNHC agrees to use no lead-based paint in the performance of this Agreement,
including the performance of any subcontractor. "Lead-based Paint"means any paint
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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 HNHC
further agrees to abide by all Federal requirements regarding lead-based paint poison
prevention.
3.11 The HNHC agrees that the CDBG Revolving Loan funds shall only be used to
finance the construction of housing units to be initially owned and occupied by
households whose annual income does not exceed 80%of the "Median Income by
Family (MFI)"
The "Median Income by Family Size (MFI) refers to specific income data as
published by HUD and as further updated and revised by HUD to reflect the current
or most recent income level statistics, a copy of the relevant portion of which is
included in Exhibit E and incorporated herein by this reference.
• 3.12 Until the loan closing for each sold house,the HNHC shall maintain the property at
all times in a safe and sanitary condition. Upon sale of a house, HNHC shall have
no further responsibility for such housing unit and real estate lot. The HNHC will
also maintain the property in a safe and sanitary condition to the extent reasonably
possible during the construction phase of the project.
3.13 The HNHC shall ensure that all work performed and the construction as completed
is in conformance with all state, federal,and local laws, ordinances, regulations and
codes, including, but not limited to, Section 8 Housing Quality Standards for
Existing Homes(HQS)as established by HUD. The Director shall assist HNHC, in
the same manner the Director provides technical assistance to other developers,
during the construction phase to ensure compliance with such requirements.
3.14 The HNHC shall obtain a certificate from each contractor or subcontractor to be used
on this project to the effect that such contractor or subcontractor has not been
disbarred or disqualified by the U.S. Department of Housing and Urban
Development. The Director shall approve all contractors and subcontractors prior to
being hired by HNHC.
3.15 The HNHC and the first mortgage or deed of trust lending institution, shall ensure
that property insurance, all taxes,regular and special, are to be paid up-to-date as of
the scheduled time for loan closing(s).
3.16 HNHC shall submit to the Director, for his review and approval, a minority and
women business participation plan which discusses economic development and
employment opportunities. The HNHC shall make best efforts to ensure that
construction services, contracts and employment opportunities are affirmatively
marketed to women and members of minority groups.
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3.17 The HNHC shall employ affirmative marketing procedures in the advertising and
marketing of completed residential units. In marketing, the HNHC shall also
conform to the nondiscrimination provisions as hereinafter set forth. Any such
advertisements shall receive the approval of the Director prior to their release.
3.18 The HNHC shall maintain such records and accounts, including 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 of Omaha,as approved by the Planning Director,shall have access to any books,
documents,papers,records and accounts of the HNHC, Contractor or Subcontractor
. 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 years from the contract period completion. Any contract entered
into by the HNHC with any Contractor or Subcontractor shall include this Section
to ensure said access.
3.19 HNHC shall submit a monthly progress report to the City of Omaha, Director of
Planning. The progress report will delineate HNHC, staff accomplishments for the
previous 30 day period.
3.20 HNHC shall submit a monthly financial report (income statement) delineating the
revenue and line item expenditures for the development of the 51 st and Nebraska
Avenue Infill Housing Redevelopment Site. In addition, a monthly check register
is to be submitted reflecting payee, date, amount and check number.
3.21 HNHC shall ensure that the residential development conforms to City housing and
zoning ordinances. HNHC shall carry out all construction in an efficient manner.
3.22 HNHC shall make best efforts to secure favorable mortgage or deed of trust financing
for eligible home buyers.
3.23 HNHC 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 purpose stated, and HNHC further agrees to indemnify and hold
harmless the City of Omaha for any liability arising out of the improper use of the
information provided.
3.24 HNHC shall assist first mortgage or deed of trust lenders to ensure that all loans are
made in compliance with first mortgage or deed of trust lending institutions policies
and underwriting standards similar in content to the HNHC Loan Policies and
Underwriting Standards attached hereto as Exhibit G and made a part hereof by
reference.
3.25 HNHC shall maintain fiscal integrity of the programs,which include all financial and
narrative reports required by the City of Omaha,and the U.S. Department of Housing
and Urban Development.
3.26 HNHC shall assume responsibility for assisting the first mortgage lending institution
in the collection of all reports and other information required to make a decision
relative to financing a client.
3.27 HNHC shall acquire bonding for the benefit of the City of Omaha in the amount of
$50,000 for the HNHC, Board of Directors and employees entrusted with the
handling of funds pursuant to this Agreement.
3.28 HNHC shall ensure that any Program Income received will be returned to the City
of Omaha within thirty(30)days of receipt. In the event the City shall cease to fund
the redevelopment of the 51st and Nebraska Avenue Redevelopment Site, HNHC
shall have no further responsibility under the terms of the Agreement except to return
unsold lots and any unobligated CDBG funds, if any,provided to HNHC under this
Agreement, all as provided in Section 5.6 herein.
3.29 HNHC shall comply with all provisions and regulations of the Community
Development Block Grant Program and have an annual audit completed in
compliance with OMB Circular A-133. A copy of this audit shall be provided to the
Director. OMB Circular A-133 is attached as Exhibit F.
Section 4. Terms of the Agreement
This Agreement shall be effective for a period of thirty-six (36) months from the time of
favorable consideration by the City Council.
Section 5. Mutual Agreements
HNHC agrees and the City states, that the City:
5.1 Is not acting as the HNHC's architect or engineer.
5.2 Makes no warranties, express or implied, as to the construction work.
5.3 Owes no duty to the HNHC or any other person that shall arise because of any
inspection of the redevelopment site by the City's agents or employees.
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5.4 May inspect the redevelopment site at any reasonable time, including a final
inspection to certify completion prior to disbursement of any funding.
5.5 Shall be held harmless by the HNHC for all injury and damages arising by virtue of
this Agreement.
5.6 Will be deeded any unused lots and/or parcels of land which have not been utilized,
through the performance of this Agreement,upon the date the parties reach a mutual
decision to terminate this Agreement before full development of the project or upon
the expiration date of this Agreement as described in Section 4, whichever date or
event first occurs.
5.7 HNHC shall execute at closing covenants securing compliance with Federal
regulations governing CDBG programs.
Section 6. Provisions of the Agreement
6.1 Equal Employment Opportunity/Affirmative Action Plan. Attached hereto as Exhibit
H and Exhibit I and made a part hereof by reference are the equal employment
provisions of this Agreement.
6.2 Non-discrimination. The HNHC shall not, in the performance of this contract,
discriminate or permit discrimination in violation of federal or state laws or local
ordinances because of race, color, sex, age, political or religious opinions,
affiliations,national origin, familial status or handicap.
6.3 Captions. Captions used in this contract are for convenience and are not used in the
construction of this contract.
6.4 Applicable Law. Parties to this contract 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 contract.
6.5 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 contract. A violation of this Section with the knowledge of
the person or corporation contracting with the City shall render the contract voidable
by the Mayor or the City Council.
6.6 Merger. This Agreement shall not be merged into any other oral or written
Agreement, lease or deed of any type.
6.7 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
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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.
6.8 Assignment. HNHC may not assign its rights under this Agreement without the
express prior written consent of the City; except, that the Mayor may, without City
Council approval,approve,in writing,the assignment to a limited partnership so long
as the HNHC is and remains a general partner.
6.9 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.
6.10 Termination. This Agreement may be terminated by either party upon thirty (30)
days written notice to the other party. Said notice shall be given when received by
certified mail at the other parry's usual place of business. Upon termination of this
Agreement, all funds and interest in any account hereunder become the property of
the City and shall be returned to the City of Omaha. This Agreement may also be
suspended or terminated in accordance with 24 CFR 85.43, Enforcement or
24 CFR 85.44, Termination for Convenience (Exhibit J).
6.11 Subrecipients. HNHC shall comply with the requirements and standards of OMB
Circular No. A-122, "Cost Principles for the Non-Profit Organizations" (Exhibit K)
and Attachments A,B, C, F,H,N and 0 to OMB Circular No. A-110 as identified
in Exhibit F.
6.12 Other Program Requirements. The HNHC shall be required to carry out each activity
of this Agreement in compliance with all Federal laws and regulations described in
Subpart K of the CDBG Program Entitlement Grant Regulations Handbook 6500
(Exhibit L).
6.13 Reversion of Assets. Upon the expiration of this Agreement, the HNHC shall
transfer to the City of Omaha any CDBG funds on hand at the time of expiration and
not required for the purpose of this Agreement.
6.14 HNHC shall indemnify and hold the City harmless from and against: (1) any and all
claims arising from contracts between HNHC 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.
6.15 If through any cause, HNHC shall fail to fulfill in a timely and proper manner any
obligations under this Agreement, or violate any of the covenants,representations or
- 12 - � �
agreements hereof, the City may, upon written notice,terminate this Agreement or
such parts thereof as to this Agreement, and may hold HNHC liable for any damages
caused to the City by reason of such default and termination.
6.16 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 provisions hereof or
affecting the validity or enforceability of such provision in any other jurisdiction.
6.17 This Agreement shall be a contract made under and governed by the laws of the State
of Nebraska.
6.18 Disclosure of Lobbying. HNHC 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 HNHC, 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 HNHC 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.
Section 7. Authorized Representative
In further consideration of the mutual covenants herein contained,the parties hereto expressly
agree that for the purpose of notice, including legal service of process, during the term of this
Agreement and for the period of any applicable statute of limitations thereafter,the following named
individuals shall be authorized representatives of the parties:
- 13 - _
(1) City of Omaha: (2) Developer:
Director,Planning Department Holy Name Housing Corporation
Omaha/Douglas Civic Center Sr. Marilyn Ross, Executive Director
1819 Farnam Street 3014 North 45th Street
Omaha,Nebraska 68183 Omaha,Nebraska 68104
IN WITNESS WHEREOF,the parties have executed this Agreement as of the date indicated
below:
ATTEST: CITY OF 0 , a Mui ' ipal Corporation
lerk of-the City of Omaha Date Mayor the City of maha D to
WITNESS: HOLY NAME HOUSING CORPORATION
.• ' IIA. 7L /� 9 07 By: II,.
a. �, 0
ate
Name: Lica. A. R,rks
Title: SeCie..f Lry
Date: !0-(1_27
APPROVED AS TO FORM:
4/1/-eiLe' (19.- a41 //60k
P:\PLN2\6853.SKZ Assistant City Attorney Date
1,
E
- 14 -
SCHEDULE OF EXHIBITS
Agreement
Exhibit Location Description
A 1.4 HNHC Articles of Incorporation
B 1.10 Definition-Program Income
C 2.2.3 Deferred Payment Loan Determination Process
D 2.8, 3.7 Project Pro-Forma and Development Schedule
E 3.12 Median Income by Family Size
F 3.22 OMB Circular No. A-133
G 3.26 HNHC Underwriting Guidelines
H 6.1 Equal Employment Opportunity Clause
I 6.1 Affirmative Action Plan
J 6.10 Termination- CFR 85.43 and CFR 85.44
K 6.11 OMB Circular No. A-122
L 6.12 Other Program Requirements -Handbook 6500,
Subpart K
Exhibits identified herein are made a part hereof by reference and are a part of the provisions of the
Agreement. Exhibits B, F, and H through K are on file in the Planning Department, and are
available upon rquest.
P:\PLN2\6853.SKZ
•
•
•
•
ARTICLES OF INCORPORATION •
OF •
HOLY NAME HOUSING CORPORATION
•
•
•
Pursuant to the provisions of the Nebraska Nonprofit
Corporation Act, the undersigned natural persons of the age of
• eighteen years or more, acting as incorporators, do. hereby set
forth:
ARTICLE I •
Name •
•
•
The name of the corporation is Holy Name Housing
Corporation.
•
MAR WI
ARTICLE II —.-..--
ST'ATE OF NEERASICA i SS
• Duration Ci ET R`,'S OIf�ICE
• Fjligt and recorded c9 film roll
• The corporation shall haveexistence-7—PR' (C%
P perpetual
ARTICLE I II O e4 'Gr�.0
• • (.6 L'. Socrutary of State
• Purposes •
By
The corporation is organized and shall be operated
exclusively as a nonprofit corporation for the- -following pur-
poses:
•
( 1 ) To promote and encourage the rehabilitation and
• maintenance of substandard housing in economically
depressed areas of the City of Omaha;
(2 ) To actively engage in the rehabilitation and
maintenance • of .substandard housing in economically
depressed areas of the City of Omaha; '
•
(3 ) To participate . in activities and other programs
of public interest which relate to the establishment
and maintenance of desirable housing and neighborhood
rehabilitation and preservation; and
(4) Such other charitable, benevolent, eleemosynary,
educational , civic, religious and social activities as
may be deemed appropriate by the Board of Directors . •
The corporation shall have the power to hold property of any
. nature in trust for itself or for the carrying out of any of its
authorized purposes . In furtherance of its foregoing purposes,
the corporation shall have all the powers given to and possessed
by a corporation under the Nebraska Nonprofit Corporation Act
that are not inconsistent with such purposes, subject always ,
however, to the_.limitation that, notwithstanding any other
•
•
provision of •these Articles, only such powers shall be exercised
as may be exercised by an organization exempt under Section •
501 (c) (3 ) of the Internal Revenue Code and its 'regulations as . • •
. they now exist or as they may hereafter be amended.
•
ARTICLE IV
•
Registered Office and Registered Agent
The address of the corporation' s registered office is
3014 North 45th Street, Omaha, Nebraska 68104, and the name of
,its registered agent at such office is Rev. Gerald Mullin, C. S . s .R.
•
• ARTICLE V . •
•
Management of Affairs
•
The affairs of the corporation shall be managed in
accordance with the By-laws by a Board of Directors . The method
of selection, , the number of directors and the duration of their .
terms shall be as provided in the By-laws , provided that the
number of directors shall not be less than three (3 ) . The
directors constituting the, first Board of Directors are as
follows :
1 . Rev. Gerald Mullin, C. S . s .R.
• 3014 North. 45th Sta;eet
Omaha, Nebraska 68104
2 . Rev. Donald Neureuther, C. S . s .R.
30.14 North 45th Street'
Omaha, Nebraska 68104
3 . Edward Vaughan
2711 North 48th Avenue
• Omaha, Nebraska 68104
•
ARTICLE VI •
By-laws.
The By-laws of the corporation shall be adopted by the
Directors at any regular meeting or at any special meeting
called for that purpose so long as they are not inconsistent
with the provisions of these Articles . The By-laws may be
aniended .by . the Board of Directors in the manner provided in the
By-laws . •
•
•
ARTICLE VII
Membership; Capital Stock •
The corporation shall have no members and the corpora-
tion shall not have nor shall it issue any shares of stock in
any form or denomination.
•
•
.. .. ., ...,. ... .. S ...'. .> . :.. .�.............-.,._... .. i• .._.:v.'U:... ....,�i.,`r....._ ...... ,.::ds.�i�::ecS:.G'wlfts_v..,.
•
•
•
ARTICLE VIII •
Amendments
•
The corporation reserves the right to amend, alter or
• repeal any provision contained in these Articles of Incorporation
in the manner now or hereinafter prescribed or permitted by law.
•ARTICLE IX
•
Liability of Members, Board of Directors, Officers , etc.
The private property of the incorporators and Directors
of the corporation shall not be subject to the debts or obliga-
tions of the corporation to any extent whatsoever.
• • ARTICLE X • •
•
• Prohibitions; Dissolution
This corporation is organized exclusively for chari-
table, religious, educational, and scientific purposes, includ-
ing, for such purposes, the making of distributions to organiza-
tions that qualify as exempt organizations under Section 501 (c) (3 )
of the Internal Revenue Code of 1954 (or the corresponding
provision of any future United States Internal Revenue Law ) . No
part of the net earnings of the . corporation shall inure to the
benefit of, or be distributable to its Directors, officers, or
•
other private persons, except that the corporation shall be
authorized and .empowered to pay reasonable compensation for
services rendered and to make payments and distributions in
furtherance Of the purposes set forth in the preceding sentence
hereof. No substantial part of the activities of the corpora-
tion shall be the carrying on of propaganda, or otherwise
attempting to influence . legislation, and the corporation shall
not participate in, or intervene in ( including the publishing or
distribution of . statements ) any political campaign on behalf of
any candidate for public office. Notwithstanding any other
provision of these Articles, :the corporation shall not carry on
activities not permitted to -be carried on (a) by a corporation
exempt from Federal. . Income Tax under Section 501 (c) (3 ) of the
Internal Revenue Code of 1954 (or the corresponding provision of
any future United States Internal Revenue Law) or (b ) by a .
corporation, contributions to which .are deductible under Section
170(c) (2 ) of the Internal Revenue Code of 1954 (or the correspond-
ing provisions of ,any future United States Internal Revenue •
Law) . `
• Notwithstanding anything herein to the contrary upon
the dissolution of the corporation, the Board of Directors
shall , after paying or making provision. for the payment of all •
of the liabilities of the corporation, dispose of all of the •
assets of the corporation in such manner, or to such organiza-
r
• •,: ,; ,
•
•
tion or organizations organized and operated exclusively for
charitable , educational , religious. or scientific purposes as
shall at the time qualify as an exempt organization or organiza
• ti ons under section 501 (c ) ( 3 ) of the Internal Reve::ue Code of
1954 ( or the corresponding provision of any future ' United States •
internal Revenue Law) , as the Board of Directors shall deter-
mine . Any such assets not so disposed of shall be disposed of
by the District Court of the county in - which the principal
office of the corporation is then located, exclusively for such
purposes or to such organizations , as said Court shall deter-
mine , which are organized and operated exclusively for such
purposes .
ARTICLE XI
The name and• street address of each incorporator is as
follows :
Rev. Gerald Mullin, C . S . s . R.
3014 North 45th Street
Omaha , Nebraska 66104 •
Rev. Donald - Neureuther, C. S . s . R.
3014 NorthStreet
a 45th
Omaha, Nebraska 68104
DATED this 3rd day of March, 1982 . •
•
•
PC• 1-4( •1l
. Incorporator
•
k, 09.1 ,„
Incorporator
07/10/1997 13:56 4024517187 HOLYNAMEHOUSING PAGE 09
RESTATED
BY-LAWS
HOLY NAME HOUSING CORPORATION
ARTICLE I CORPORATE AFFAIRS
1 . 1 . The affairs of the corporation shall be conducted
strictly in accordance with and furtherance of the
Corporation's charitable and educational purposes as
set forth in the Articles of Incorporation, and all
provisions of these By-laws shall be construed in a
manner consistent with the furtherance of such
purposes.
ARTICLE II BOARD OF DIRECTORS
2. 1 . Purpose and Duties. The purpose offthe Board of
Directors is to assure that the philosophy and
mission of Holy Name Housing Corporation is in
agreement with the philosophy and mission of the
Redemptorist Fathers, St. Louis Province, Inc.
The duties of the Board of Directors shall be:
a. to appoint or remove the Executive Director and
Director of Rehabilitation;
b. to approve any amendment of the Articles or
By-laws of the Corporation;
c. to review and approve the annual operating budget
of Holy Name Housing Corporation;
d. to approve any dissolution, consolidation, or
merger of the Corporation and to approve the
incorporation of affiliated corporations of this
Corporation.
2. 2. Membership. The members of the Board of Directors
shall, at all times, be the three (3 ) persons who
hold the offices of Rector and Consultors of the
Redemptorist Fathers of Nebraska. When any
Redemptorist shall cease to be the Rector or
Consultor of the Redemptorist Fathers of Nebraska, he
shall cease to be a director of this Corporation,
automatically and without any affirmative action on
the part of the Corporation, and his replacement as
Rector or Consultor of the Redemptorist Fathers of
Nebraska shall automatically become a director of
this corporation.
2. 3. Compensation. Directors shall serve without
compensation.
2. 4. Meetings. Regular meetings of the Board of Directors
shall be held annually on April 15 of each year.
Special meetings shall be called from time to time
•
07/10/1997 13:56 4024517187 HOLYNAMEHOUSING PAGE 10
when requested by two ( 2) directors.
2.5. Notice. Reasonable notice of all Directors' meetings
shall be given. A majority of Directors present shall
constitute a quorum for the transaction of business.
ARTICLE III BOARD OF CONSULTORS
3.1 . Purpose and Duties. The purpose of the Board of
Consultors is to assure that the philosophy, goals
and purpose of Holy Name Housing Corporation are
preserved.
The duties of the Board of Consultors shall be:
a. to participate in an advisory capacity in the
ongoing long range planning process of the Holy Name
Housing Corporation;
b. to make recommendations to the Executive Director
regarding organizational development, fund-raising,
financial management, and relationships with other
agencies, institutions and individuals;
c. to make recommendations, in an advisory capacity,
regarding provision, maintenance and expansion of
housing services.
3.2. Membership. Membership of the Board of Consultors
shall be comprised of the Executive Director of Holy
Name Housing Corporation and such persons as he
appoints, including, by way of example only,
representatives of the Holy Name neighborhood,
representatives of organizations which fund Holy Name
Housing Corporation, representatives of the business
and professional sector of this community, and
representatives of community organizations.
3.3. Compensation. Consultors shall serve without
compensation.
3.4. Terms. Members of the Board of Consultors shall
serve at the will of the Executive Director for such
time as he may specify.
3. 5. Officers and Duties. Such officers as the Executive
Director determines are necessary shall be elected by
the Holy Name Housing Board of Consultors from time
to time and shall perform such duties and have such
responsibilities as the Executive Director shall
determine.
ARTICLE IV EXECUTIVE DIRECTOR
4.1 . Appointment. The Executive Director. shall be
appointed by, accountable to, and shall serve at the
will of the Board of Directors.
07/10/1997 13:56 4024517187 HOLYNAMEHOUSING PAGE 11
4.2. Duties. The duties of the Executive Director of Holy
Name Housing Corporation are:
•
a. to direct the activities of Holy Name Housing
Corporation in accordance with the Corporation's
Articles of Incorporation and By-laws;
b. to provide leadership in the governance and
management of Holy Name Housing Corporation;
c. to achieve the objectives and discharge the
responsibilities established by the Board of
Directors;
d. to plan, direct, control and evaluate all
day-to-day corporate activities.
4.3. Compensation. The compensation of, the Executive
Director shall be established by the Board of
Directors from time to time.
ARTICLE V DIRECTOR OF REHABILITATION
5. 1 . Appointment. The Director of Rehabilitation shall be
appointed and serve at the will of the Board of
Directors and shall be accountable to the Executive
Director.
5.2. Duties. The duties of the Director of Rehabilitation
of Holy Name Housing Corporation are:
a. to assist the Executive Director and to oversee
all phases of rehabilitation;
b. to evaluate the effectiveness and performance of
members of the work crews;
c. to undertake and perform such other duties as the
Executive Director may determine.
5.3. Compensation. The compensation of the Director of
Rehabilitation shall be established by the Board of
Directors from time to time.
ARTICLE VI CORPORATE SEAL
6. 1 . The Corporation shall not have a corporate seal.
ARTICLE VII FISCAL YEAR
7.1 . The fiscal year of the Corporation shall commence on
the first day of April and end on the thirty-first
day of March.
ARTICLE VIII AMENDMENTS
•
8.1 . These By-laws may be repealed, altered or amended by
majority vote of the Board of Directors at any
regular meeting or any special meeting held for that
07/10/1997 13:56 4024517187 HOLYNAMEHOUSING PAGE 12
•
•
purpose.
The undersigned hereby certify that the foregoing
By-laws were duly adopted by the Board of Directors
effective May 1 , 1986.
•
. Ani , Cat?.
Don R. Neureuther, C.SS.R
14/70Z!---
Edward R. Vaughan
Marily07F. Ross, RSM
BOARD RESOLUTION
The Board of Directors of Holy Name Housing Corporation authorizes
Lisa A. Burks to sign all documents necessary to obtain financing
for the purchase, sale and construction financing for homes for the
Corporation. These documents include, but are not limited to:
Deeds of Trust
Promissory Notes
Loan Agreements
Warranty Deeds
Transfer Statements
Lien Waivers
Closing Statements
(4/4/ 4
Fr. Brian Johnresident Date
Board of Direc or
v
MOLY NAME HOUSING CORPORATION
51ST & NEBRASKA AVENUE
Proforma Budget for the construction and sale of four homes
at 51st and Nebraska Avenue:
CONSTRUCTION:
Expenses:
Per House Total
Construction Costs: 83,703.05 334,812.20
(see Attachment)
Sources of Financing:
Private bank financing 55,000. 00 220, 000.00
City of Omaha 25, 000.00 100, 000.00
Holy Name Housing Corp. 3,703 .05 14,812 .20
83,703 .05 334 ,812 .20
SALE OF HOMES
Sale Price of Homes 90, 000. 00 360, 000. 00
Sources of Buyer Financing:
First Mortgage-Omaha 100 62, 300. 00 249, 200. 00
Second Mortgage-City of Omaha 25, 000. 00 100, 000. 00
Buyer downpayment 2,700. 00 10, 800. 00
90, 000. 00 360, 000. 00
HOLY NAME HOUSING CORPORATION 51ST& NEBRASKA AVENUE
Construction Costs
Lot 0.00
Tree Removal 0.00
Plans and permits 170.00
Survey 230.00
Excavation 700.00
Foundation 5,800.00
I Beam 675.00
Water Proof 600.00
Drain Tile 350.00
Pre-Treat 225.00
Plumbing 6,800.00
Electrical 2,975.00
HVAC 4,450.00
OPPD 380.00
Building Supplies 19,000.00
Frame 6,400.00
Roof 1,300.00
Concrete 4,900.00
Garage Door 410.00
Insulate 1,250.00
Rock and Tape 4,500.00
Ext. Paint 1,300.00
Cabinet and Top 2,450.00
Finish and Trim 2,300.00
Interior Paint 1,850.00
Gutters 475.00
Grade 400.00
Sod and Seed 1,000.00
Vinyl Floors 535.00
Hardware and Mirror 150.00
Carpet 1,550.00
Appliance 650.00
Decks 675.00
Clean-up 500.00
Warranty 500.00
Storm Door 185.00
Fireplace 500.00
Sewer Front 100.00
Soft Costs 700.00
Construction Super. 2,000.00
Total Construction 78,935.00
Contingency 2,368.05
Overhead 2,400.00
Total Costs 83,703.05
L
Exhibit C
Holy Name Housing Corporation
Deferred Payment Loan Determination Process
The prospective home purchaser in the Holy Name Housing Corporation's home ownership program
will proceed through the following loan approval process:
• Initial assessment by HNHC representative to insure that the client's intent is home
ownership. If so, the home ownership program is briefly described and an application is
completed.
• The completed application is reviewed for eligibility by the HNHC Housing Developer.
Employment history, income and level of debt are reviewed for initial eligibility. Apparent
application difficulties and strengths are reviewed. If no obvious disqualifying issues are
identified,the applicants are asked to obtain a credit report.
• The credit report is examined with the applicants. Any blemishes on the credit report are
discussed and a plan of action is implemented to clear credit problems. If no difficulties are
found, or when the problems are cleared up, the applicants are provided a list of HNHC
houses which the applicants would be qualified to purchase, based on the total family
income.
• When the applicants have selected a home they would like to purchase,they are referred to
Omaha 100, Inc. to complete the loan application process and secure permanent mortgage
financing:
• During the loan approval process, all income sources are identified and verified. The
Housing to Income Ratio cannot exceed 33% and the Debt to Income Ratio cannot exceed
42% of the applicant's monthly income.
• When all conditions are met and first mortgage financing is tentatively approved, the
application is routed to the City Planning Department for a request for second mortgage
deferred payment loan(DPL)financing approval.
DPL Formula:
The DPL request is for an amount which will reduce the purchase price of the house to an
amount where the monthly housing payment of the first mortgage is less than or equal to
33%of the applicant's income.
Under no circumstances does the DPL amount exceed $25,000.00 for a home that was
constructed by HNHC or$15,000.00 for a home that was rehabilitated by HNHC.
P:\PLN2\6864.SKZ
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19150 Federal Register / Vol. 61, No. 84 / Tuesday, April 30, 1996 / Notices
judgment in applying the risk-based (i)A Federal program administered indicate risk.For example.a new
approach to determine major programs under multiple internal control Federal program with new or interim
shall be presumed correct.Challenges structures may have higher risk.When regulations may have higher risk than
by Federal agencies and pass-through assessing risk in a large single audit,the an established program with time-tested
entities shall only be for clearly auditor shall consider whether regulations. Also,significant changes in
improper use of the guidance in this weaknesses are isolated in a single Federal programs,laws,regulations,or
part. However.Federal agencies and operating unit (e.g.,one college campus) the provisions of contracts or grant
pass-through entities may provide or pervasive throughout the entity. agreements may increase risk.
auditors guidance about the risk of a (ii)When significant parts of a Federal (3)The phase of a Federal program in
particular Federal program and the program are passed through to • its life cycle at the auditee may indicate
auditor shall consider this guidance in subrecipients, a weak system for risk. For example,during the first and
determining major programs in audits monitoring subrecipients would last years that an auditee participates in
not yet completed. indicate higher risk. a Federal program,the risk may be
(i)Deviation from use of risk criteria. (iii)The extent to which computer higher due to start-up or closeout of
For first-year audits,the auditor may processing is used to administer Federal program activities and staff.
elect to determine major programs as all programs,as well as the complexity of (4)Type B programs with larger
Type A programs plus any Type B that processing,should be considered expenditures would be of higher risk
programs as necessary to meet the 50 by the auditor in assessing risk.New than programs with substantially
percent rule discussed in paragraph(f) and recently modified computer smaller expenditures.
of this section. Under this option,the systems may also indicate risk.
auditor would not be required to (2)Prior audit findings would § .530 Criteria for a low-risk auditee.
perform the procedures discussed in indicate higher risk, particularly when An auditee which meets.all of the
paragraphs (c), (d), and (e)of this the situations identified in the audit following conditions for each of the
section. findings could have a significant impact preceding two years shall qualify as a -
(1)A first-year audit is the first year on a Federal program or have not been low-risk auditee and be eligible for
the entity is audited under this part or corrected. reduced audit coverage in accordance
the first year of a change of auditors. (3)Federal programs not recently with § .520(f):
(2)To ensure that a frequent change audited as major programs may be of (a)The audits were performed in
of auditors would not preclude audit of higher risk than Federal programs accordance with the provisions of this l
high risk Type B programs,this election recently audited as major programs part. -
for first-year audits may not be used by without audit findings. (b)The auditor's opinions on the
an auditee more than once in every (c)Oversight exercised by Federal financial statements and the schedule of -
three years. agencies and pass-through entities. (1) expenditures of Federal awards were
Oversight exercised by Federal agencies unqualified.However,the cognizant or
§ .525 Criteria for Federal program or pass-through entities could indicate oversight agency for audit may judge
risk. risk.For example,recent monitoring or that an opinion qualification does not• -
(a) General.The auditor's - other reviews performed by an oversight affect the management of Federal -
determination should be based on an entity which disclosed no significant • awards and provide a waiver. .
overall evaluation of the risk of problems would indicate lower risk. (c)There were no deficiencies in
noncompliance occurring which could However,monitoring which disclosed internal control which were identified
be material to the Federal program.The significant problems would indicate as material weaknesses under the
auditor shall use auditor judgment and higher risk. requirements of GAGAS.However,the •
consider criteria,such as described in (2)Federal agencies,with the cognizant or oversight agency for audit
paragraphs (b), (c),and(d)of this concurrence of OMB,may identify may judge that the material weaknesses
section,to identify risk in Federal Federal programs which are higher risk. do not affect the management of Federal
- programs.Also,as part of the risk OMB plans to provide this identification awards and provide a waiver.
analysis,the auditor may wish to in the compliance supplements. (d)None of the Type A programs,as
discuss a particular Federal program •(d)Inherent risk of the Federal defined in§ .520(b),had audit
with auditee management and the program. (1)The nature of a Federal findings from any.of the following:
Federal agency or passthrough entity. program may indicate risk. . (1)Internal control deficiencies which ,
(b) Current and prior audit Consideration should be given to the were identified as material weaknesses; •
experience. (1)Weaknesses in internal complexity of the program and the (2)Noncompliance with the
control over Federal programs would. extent to which the Federal program provisions of laws,regulations, •
indicate higher risk. Consideration - contracts for goods and services:For contracts,or grant agreements which
• should be given to the control example,Federal programs that disburse have a material effect on the Type A
environment over Federal programs and funds through third party contracts or.-
such factors as the expectation of . have eligibility criteria may be of higher Progr Kn am;or •
management's adherence to applicable risk.Federal programs primarily (3) xceed or likely questioned costs •
laws and regulations and the provisions. involving staff payroll costs may have a th•at exceed five percent of the total
of contracts and grant agreements and high-risk for time and effort reporting,- expenditures for a Type A program ,
the competence and experience of but otherwise be at low risk. during the year.
personnel who administer the Federal (2)The phase of a Federal program in.. (FR Doc 96-10330 Filed 4-29-96;8:45 am]
programs. . its life cycle at the Federal agency may. BILLING CODE 311O-01-P
Y Federal Register / Vol. 61,. No. 84 / Tuesday, April 30, 1996 / Notices 19149
(7) Recommendations to prevent expenditures in the case of an auditee and the criteria in§ .525.Except
future occurrences of the deficiency for which total Federal expenditures • for known reportable conditions in identified in the audit finding. exceed S100 million but are less than or internal control or compliance problems
(8)Views of responsible offi°ials of equal to$10 billion. as discussed in§ ,525(b)(1), -
the auditee when there is disagreement (iii)S30 million or 15 hundredths of § .525(b)(2),and
with the audit findings, to the extent one percent(.0015)of total Federal § .525(c)(1),a single criteria in
practical. expenditures in the case of an auditee § .525 would seldom cause a
(c) Reference numbers.Each audit for which total Federal expenditures Type B program to be considered high
finding in the schedule of findings and exceed S10 billion. ,
• questioned costs shall include a _ (2)Federal programs not labeled Type
risk.
reference number to allow for easy A underparagraphP }P (2)An audit under this part is not
(b)(1)-of this section expected to test relatively small Federal
• referencing of the audit findings during shall be labeled Type B programs. programs.Therefore,except to meet the
follow-up. (3)The inclusion of large insurance
programs or loan and loan guarantees (f)50 f this section,t ule discussed in pa only
§ .515 Audit working papers. (loans) should not result in the required t s toefothe auassessmentsditor is only
(a) Retention of working papers.The exclusion of other programs as Type A programs that risk dthel on
auditor shall retain working papers and programs.When a Federal program Type B exceed the larger
reports for a minimumyears of threeprovidingof:
insurance or loans (i)S100,000 or three-tenths of one
after the date of issuance of the auditor's significantly affects the number or size percent(.003)of total Federal
report(s)to the auditee,unless the of Type A programs,the auditor shall
auditor is notified in writing by the consider this Federal program as a Type than or equal when the auditee has less
cognizant agency for audit,oversight Aprogram and exclude its values in than a equal d 5100 million in total
Federal expenditures.
agency for audit,or pass-through entity determining other Type A programs.
to extend the retention period.When (c) Step 2.(1)The auditor shall (ii)S300,000 0r ) of total Federal
of
the auditor is aware that the Federal identify Type A programs which are one expenditures
di uret(.when the total Federal
awarding agency,pass-through entity,or low-risk. For a Type A program to be , than S100 millionan whentotal Federale has more
auditee is contesting an audit finding,, considered low-risk,it shall have been than dit in
the auditor shall contact the parties • audited as a major program in at least (eexpenditures.
Stepres.
contesting the audit finding for one of the two most recent audits all 4.At a he following the auditor
guidance prior to destruction of the periods,and,in the most recent audit programs:hol audit all of the as major
t working papers and reports. period,it shall have had no audit
(b)Access to working papers.Audit findings under§ 530(a): (1)All Type A programs, except the
working papers shall be made available However,the auditor may use judgment auditor may exclude any Type A
i upon request to the cognizant or and consider that audit findings from programs identified as low-risk under
oversight agency for audit or its questioned costs under Step 2 (paragraph(c)(1) of this section);
designee,a Federal agency.providing § 510(a)(3), fraud under (2)At least one half of the Type B
direct or indirect funding, or GAO at the § 510(a)(5), and audit follow u programs identified as high-risk under
P Step (paragraph(d)of this section),3
completion of the audit.Access to for the summary schedule of prior audit except this paragraph (e)(2)does not
working papers includes the right of findings under§ .510(a)(6)do not
require the auditor to audit more high-
Federal agencies to obtain copies of preclude the Type A program from risk Type B programs than the number
working papers 7,s is reasonable and being lowrisk.The auditor shall of low-risk Type A programs identified
necessary• consider:the criteria in § .525 c
( ) as low-risk under Step 2;and
§ .525(d)(1), § .525(d)(2),§ .520 Major program determination. and§ 525(d)(3);the results of (3)Such additionalprograms as may
be comply
necessary to com 1 •with the 50
(a) General. The auditor shall use a audit follow-up;whether any changes in •percent rule discussed in paragraph (f)
iI risk-based approach to determine which personnel or systems affecting a Type A of this section.This paragraph (e)(3)
Federal programs are major programs. . program have significantly increased may require the auditor to audit more
This risk-based approach shall include risk; and apply professional judgment in programs as major than the number of
1 consideration of:Current and prior determining whether a Type A program
i audit experience,oversight by Federal is low-risk. yP P g Ty e A programs.
agencies and passthrough entities,and (2)Notwithstandinga a a h c '1 50 percent rule.The ederalr shall 1
i P p Ot ) audit as major programs Federal
the inherent risk of the Federal program. of this section,OMB may approve a programs with expenditures
that,
The process in paragraphs (b) through Federal awarding agency's request that aggregate,encompass at least50
opercent
(i)of this section shall be followed. a Type A program at certain recipients of total Federal expenditures:If the
(b) Step 1. (1)The auditor shall may not be considered low-risk. For auditee meets the criteria in
identify the larger Federal programs, example,it may be necessary for a large § .530 for a low-risk auditee,the
which shall be labeled Type A Type A
i yp program to be audited as major auditor need only audit as major
programs.Type A programs are defined each year at particular recipients top 0
with
• as Federal programs with Federal allow the Federal agenc •to comply expenditures
re that,at programs e aggregate,
expenditures during the audit period with the Government Management encompass aleast in the c o
exceeding the larger of: Federal
pass at 25 percent of total
Reform Act of 1994 (31 U.S.C. 3515). Feder expenditures.
(i)5300,000 cr three percent(.03)of The Federal agency shall notify the (o
total Federal expenditures in the case ofif ) doc,�meatin Documentation of risk. g The auditor
recipient and, known.the auditor at shall document in the...orking papers
an auditee for which total Federal least 120 days prior to the end oftheprocessexpenditures equal or exceed S300,000 the risk analysis rogman. in
are lessfiscal year to be audited of ON2's deter,-''-1' major programs.than or equal to Si00
million. approval. O Auditor's jud?.^.:er;t. When tine.
td)Step 3.(1)The auditor shall major program determination was
(ii'53 million or three-tenths of one ' tType
percent( ) `fetal Federal teen. i . B p:ogra.,;.s which are performed and documented in.003 0�
high-risk usingprofessional u gmen accordancethis part.
� ^'�' ) 'dam t ::.t.1 t..?ZCdlt°r S. �
19148 Federal Register / Vol. 51, No. 84 / Tuesday. April 30, 1995 / Notices , -
•
' schedule of findings and questioned (a)Where applicable,a statement that (5)Known fraud affecting a Federal
costs described in paragraph (a)(4)of the audit follow-up procedures award,unless such fraud is otherwise
this section. disclosed that the summary schedule of reported as an audit finding in the
(3)A report on compliance with laws, prior audit findings materially schedule of findings and questioned
regulations,and the provisions of misrepresents the status of any prior costs.Fraud is a type of illegal act ;
i
contracts or grant agreements, audit finding,as described in involving the obtaining of something of
noncompliance with which could have § .510(a)(6). value through willful misrepresentation.
a material effect on the financial § .510 Audit findings. This paragraph does not require the
statements.This report shall also auditor to make an additional reporting
include an opinion (or disclaimer of (a)Audit findings reported.The when the auditor confirms that the
opinion)as to whether the auditee auditor shall report the following as fraud was reported outside of the
complied with laws,regulations,and audit findings in a schedule of findings auditor's reports under the direct
the provisions of contracts orgrant and questioned costs:
(1)Reportable conditions in internal reporting requirements of GAGAS.
agreements which could have a direct (6)Instances where the results of
and material effect on each major control over major programs.The audit follow-up procedures disclosed i
and,where applicable,refer to auditor's determination of whether to
program, PP report a deficiency in internal control as that the summary schedule of prior i
the separate schedule of findings and audit findings prepared by the auditee
costs described in paragraph a reportable condition is in relation to
questionedP g P in accordance with § .315(b)
(a)(4) of this section. a type of compliance requirement for a
(4)A schedule of findings program or an audit
objective materially misrepresents the status of
major
g I
identified in the compliance any prior audit finding.
questioned costs which includes a supplements.The auditor shall identify (b)Audit finding detail.Audit
summary of the auditor's results as reportable conditions which are findings shall be presented in sufficient ;
described in paragraph (b) of this individually or cumulatively material detail for the auditee to prepare a
section and all audit findings as defined weaknesses. - corrective action plan and take
in§ .510(a). Any findings(e.g., . (2)Material noncompliance with the corrective action and for Federal
internal control findings,compliance • provisions of laws,regulations, agencies and pass-through entities to .t
' findings,questioned costs,or fraud) contracts,or grant agreements which the arrive at a management decision.The
which elate to the same issue should be auditor concludes,based on evidence 'following specific information shall be
preserved as a single finding.Where obtained,has occurred or is likelyto included, as applicable,in audit
practical,audit findings should be have occurred.The auditor's findings:
organized by Federal agency or pass- determination of whether a (1)Federal program and specific - i
through entity. noncompliance with the provisions of Federal award identification including t
(b)Summary of the auditor's results. lav+s,regulations,contracts,or grant the CFDA title and number,Federal 1
The summary of the auditor's results agreements is material for the purpose award number and year,name of !
-shall include: • of reporting an audit finding is in Federal agency,and name of the
(1)The type of report the auditor relation to a type of compliance applicable pass-through entity.When }
issued on the financial statements of the requirement for a major program or an information,such as the CFDA title and I
auditee(i.e.,unqualified opinion, audit objective identified in the number or Federal award number,is not t
qualified opinion, adverse opinion,or compliance supplements. available,the auditor shall provide the
disclaimer of opinion); (3)Known questioned costs which are best information available to describe
(2)Where applicable,a statement that greater than S10,000 for a type of the Federal award.
the auditor's report on the financial compliance requirement for a major (2)The criteria or specific
statements indicated that the auditor program.Known questioned costs are requirement upon which the audit
has substantial doubt about the those specifically identified by the finding is based,including statutory,
auditee's ability to continue as a going auditor.In evaluating the effect of regulatory,or other citation.
concern; questioned costs on the opinion on - (3)The condition found,including
(3)The type of report the auditor compliance for each major program,the facts that support the deficiency
issued on compliance for major auditor considers the best estimate of identified in the audit finding.
programs(i.e.,unqualified opinion, total costs questioned (likely questioned . (4)Identification of questioned costs
qualified opinion,adverse opinion,or costs),not just the questioned costs and how they were computed.
disclaimer of opinion); specifically identified(known (5)Information to provide proper
.- (4)Where applicable,a statement that questioned costs).The auditor shall also perspective for judging the prevalence
reportable conditions in internal control report known questioned costs when . and consequences of the audit findings,
over major programs were disclosed by likely questioned costs are greater than such as whether the audit findings
the audit and whether any such S10,000 for a type of compliance represent an isolated instance or a
conditions were material weaknesses,as requirement for a major program.In systemic problem.Where appropriate,
described in§ .510(a)(1); . reporting questioned costs,the auditor• instances identified shall be related to
(5)A statement as to whether the shall include information to provide the universe and the number of cases
audit disclosed any material proper perspective for judging the examined and be quantified in terms of
noncompliance in major programs,as . prevalence and consequences of the dollar value. . -
described in§ .510(a)(2); questioned costs. - (6)The possible asserted effect to .• -
(6)A statement as to whether the (4)The circumstances concerning provide sufficient information to the
. audit disclosed any questioned costs,as why the auditor's report on compliance auditee and Federal agency,or pass- •
described in§ .510(a)(3); for major programs is other than an through entity in the case of a -
' . • (7)Where applicable, a statement that unqualified opinion,unless such subrecipient,to.permit them to
the schedule of findings and questioned circumstances are otherwise reported as determine the cause and effect to
• costs contains instances of known fraud; audit findings in the schedule of. . . . facilitate prompt and proper corrective
• as described in§ .510(a)(5);and .. findings and questioned costs. action.-
•
. t. -
._ _______ - 1}-
Federal Register / Vol. 61, No. 84 / Tuesday, April 30, 1996 / Notices •
19147
§ .405 Management decision. (c)Internal control.(1)In addition to • costs/cost rinci les,t
(a) General.The management decision the requirements of GAGAS,the auditor allowed or unallowed,eligibility,and
shall clearly state whether or not the shall perform procedures to obtain an matching)contained in the compliance"
audit finding is sustained,the reasons understanding of internal control over supplements as guidance for identifying
for the decision,and the expected Federal programs sufficient to plan the • the types of compliance requirements to
auditee action to repay disallowed costs, audit to achieve a low assessed level of test,and determine the requirements
make financial adjustments,or take control risk for major programs. ' • governing the Federal program by •
other action.If the auditee has not (2)Except as provided in paragraph reviewing the provisions of contracts
completed corrective action,a timetable (c)(3)of this section,the auditor shall: and grant agreements and the.laws and -
for follow-up should be given.Prior to (i)Plan the testing of internal control regulations referred to in such contracts
issuing the management decision,the over major programs to achieve a low and grant agreements.The auditor
assessed level of control risk for the should consult with the applicable
Federal agency or pass-through entity
may request additional information or assertions relevant to the compliance Federal agency to determine the
documentation from the auditee, requirements for each program;majorro am;
gr availabilityof agency-prepared
including a request that the and
documentation be audited,as a way of (ii)Perform testing of internal control supplements or audit guides.
mitigating disallowed costs.The over major programs as planned in (el Audit follow-up.The auditor shall
management decision should describe paragraph(c)(2)(i)of this section, follow-up on prior audit findings,
any appeal process available to the (3)When internal control over some perform procedures to assess the
auditee. or all of the compliance requirements reasonableness of the summary
(b)Federal agency.As provided in for a major program are likely to be schedule of prior audit findings
§ .400(a)(7),the cognizant agency ineffective in preventing or detecting prepared by the auditee in accordance
noncompliance,the planning and
for audit shall be responsible forwis § 315(b),and report,as a
performing of testing described in
coordinating a management decision for current year audit finding,when the .
.audit findings that affect the programs paragraph(c)(2) of this section are not auditor concludes that the summary schedule of prior audit
of more than one Federal agency.As required for those compliance findings
provided in§ 400(c)(4),a Federal requirements.However,the auditor materially misrepresents the status of
awarding agency is responsible for shall report a reportable condition or a any prior audit finding.The auditor shall perform audit follow-up
issuing a management decision for material weakness in accordance with
findings that relate to Federal awards it § 510,assess the related control procedures regardless of whether a prior
makes to recipients.Alternate riskaudit at the maximum,and considerfinding relates to a major prop am
arrangements may be made on a case- whether additional compliance tests are in the current year.
l by-case basis by agreement among the required because of ineffective internal (fl Communication.The auditor shall
Federal agencies concerned. control over the major program, communicate,audi preferably in writing,to
(d) Compliance. (i)Ina the auditee which Federal awarding
(c)Pass-through entity.As provided Pedition to the agencies and pass-through entities re
in § .400(d)(5),the pass-through requirements of GAGAS,the auditor required to receive a copy of the
entity shall be responsible for making shall determine whether the auditee has
the management decision for audit complied with laws,regulations,and §eporten r3P0(d)(2) dsuant to
findings that relate to Federal awards it the provisions of contracts or grant •
makes to subrecipients. agreements that may have a direct and auditor shall(
(retain a record of this
(d) Time requirements.The entity magrial effect on each of its major communication in the auditor's working-.
responsible for making the management Programs.
decision shall do so within six months (2)The compliance testing shall Papers.
of receipt of the audit report.Corrective include tests of transactions and such § 505 Audit reporting. '
action should be initiated within six other auditing procedures necessary to (a)Auditor's reports.The auditor's
months and preceed as rapidly as provide the auditor sufficient evidence report(s)may be in tl}e form of either
possible. to support an opinion on compliance for combined or separate reports and may
•
each major program. be organized different
(e)Reference numbers.Management )decisions shall include the reference (3)The principal compliance manner presented in thisfrom the
section.The
numbers the auditor assigned to each requirements of the largest Federal auditor's report(s)shall state that the
audit finding in accordance with P a programs are included in the audit was conducted in accordance with
§ 510(c): cum compliance supplements. • this part and include the following:
Il (4)For Federal programs contained in (1)An opinion(or disclaimer of
Subpart E—Auditors the compliance supplements, an audit opinion)as to whether the financial of the compliance requirements§ .500 cope of audit requ statements are presented fairly in all
(a) General.The audit shall be contained in the compliance material respects in conformity with
supplements will meet the requirements generally accepted accounting
conducted in accordance with GAGAS._ of this part. Where there have been(b)Financial statements.The auditor changes to the compliance requirements principles opinion)s andato opinion the dh dine r
shall determine whether the financial and the changes are not reflected in the of r whether schedule
statements of the auditee are presented compliance supplements, of exnenditures iofn Federal awards e
fairly in all material respects in P PP nts,the auditor presented fairly in all material respects
shall determine the current compliance in relation to the financial statements
i conformity with generally accepted requirements and modify the audit accounting principles.The auditor shall procedures accordingly. or those ta(2) reportara n.
iternal
also determine whether the schedule of Federal programs not covered in the to the financial tate.en stand major related
expenditures of Federal awards is compliance supplements, the auditor programs.
presented fairly in all material respects should use the types of compliance scope
of t This report shall control
and the
in relation to the auditee's financial ult of the tests,internal control
requirements (e.g.,cash management, the result;of and;where
statements taken as a whole. ,
Federal financial reporting,allowable applicable,refer to the separate „
.19146 Federal Register / Vol. 61, No. 84 / Tuesday, April 30, 1996 / Notices
paragraph (d)(2) of this section and Federal auditors,and provide the (2)Ensure that audits are completed
§ .235(c)(3)to applicable Federal results,when appropriate,to other and reports are received in a timely
awarding agencies,maintain a data base interested organizations. manner and in accordance with the
of completed audits,provide (4)Promptly inform other affected requirements of this part.
appropriate information to Federal Federal agencies and appropriate (3)Provide technical advice and
agencies,.and follow up with known Federal law enforcement officials of any counsel to auditees and auditors as
auditees which have not submitted the direct reporting by the auditee or its requested.
required certifications and reporting auditor of irregularities or illegal acts,as (4) Issue a management decision on
packages. required by GAGAS or laws and audit findings within six months after
(i) Clearinghouse address.The regulations, when such reporting is not receipt of the audit report and ensure
address of the central clearinghouse included in the reporting package that the recipient takes appropriate and
currently designated by OMB is Federal described in§ .320(c). •
Audit Clearinghouse,Bureau of the (5)Advise the auditor and,where timely corrective action.
Census, 1201 E. 10th Street, appropriate,the auditee of any (5)Assign a person responsible to
Jeffersonville,IN 47132. deficiencies found in the audits when inform OMB annually of any updates
(j) Electronic filing. Nothing in this the deficiencies require corrective needed to the compliance supplements.
part shall preclude electronic action by the auditor.When advised of (d) Pass-through entity •
submissions to the central clearinghouse deficiencies,the auditee shall work with responsibilities.A non-profit pass-
in such manner is may be approved by the auditor to take corrective action.If through entity shall perform the
OMB. With OMB approval,the central corrective action is not taken,the following for the Federal awards it
clearinghouse may pilot test methods of cognizant agency for audit shall notify makes:
electronic submissions. the auditor,the auditee,and applicable (1)Identify Federal awards made by
Federal awarding agencies and pass- informing each subrecipient of CFDA
Subpart D—Federal Agencies and through entities of the facts and make title and number,award name and '
Pass-Through Entities recommendations for follow-up action. number,'award year,if the award is
• § a00 Responsibilities. Major inadequacies or repetitive R&D,and name of Federal agency.
(a) Cognizant agency for audit substandard performance by auditors When some of this information is not
shall be referred to appropriate State available,the pass-through entity shall
•responsibilities.Recipients expending licensing agencies and professional provide the best information available to
more than S25 million a year in Federal bodies for disciplinary action.
awards shall have a cognizant agencydescribe the Federal award.
(6)Coordinate,to the extent practical,
for audit.The designated cognizant audits or reviews made by or fr Federal (2)Advise subrecipients of •
agency for audit shall be the Federal agencies that are in addition to the requirements imposed on them by
• awarding agency that provides the audits made pursuant to this part,so Federal laws,regulations,and the
predominant amount of direct funding that the additional audits or reviews provisions of contracts or grant
to a recipient unless OMB makes a build upon audits performed in agreements as well as any supplemental
specific cognizant agency for audit accordance with this part. requirements imposed by the pass-
assignment and provides notice in the (7)Coordinate a management decision through entity.
Federal Register.To provide for for audit findings that affect the Federal (3)Monitor the activities of
continuity of cognizance,the programs of more than one agency. subrecipients as necessary to ensure that
determination of the predominant (8)Coordinate the audit work and Federal awards are used for authorized
amount of direct funding shall be based reporting responsibilities among purposes in compliance with laws,
upon direct Federal awards expended in auditors to achieve the most regulations,and the provisions of
the recipient's fiscal years ending in costeffective audit. contracts or grant agreements and that
1995, 2000,2005,and every fifth year (b) Oversight agency for audit performance goals are achieved. •
thereafter.For example,audit responsibilities.An auditee which does (4)Ensure that non-profit
cognizance for periods ending in 1996 not have a designated cognizant agency subrecipients expending S300,000 or
through 2000 will be determined based for audit will be under the general more in Federal awards during the " •
on Federal awards expended in 1995.A oversight of the Federal agency subrecipient's fiscal year have met the
Federal awarding agency with determined in accordance with . audit requirements of this part for that •
cognizance for an auditee may reassign § .105 (Oversight agency for fiscal year,and that subrecipients
cognizance to another Federal awarding audit).The oversight agency for audit: subject to Circular A-128 have met the •
agency N+'hich provides substantial (1)Shall provide technical advice to requirements of Circular A-128. •
direct funding and agrees to be the auditees and auditors as requested. • (5)Issue a management decision on
cognizant agency for audit.Within 30 (2)May assume all or some of the audit findings within six months after.
days after any reassignment,both the responsibilities normally performed.by , recei •
pt of the subrecipient's audit report. .
old and the new cognizant agency for a cognizant agency for audit. and ensure that the subrecipient takes
' audit shall notifythe auditee,and,if (c)Federal awarding agency •
-
known,the auditor of the reassignment. responsibilities.The Federal awarding apprctioopriate and timely corrective •
The cognizant agency for audit shall: agency shall perform the following for •. -
• (1)Provide technical audit advice and . the Federal awards it makes: • (6)Consider whether subrecipient-
•
liaison to auditees and auditors. (1)Identify Federal awards made by audits necessitate adjustment of the
• (2) Consider auditee requests for informing each recipient of the CFDA pass-through entity's own records. • •
•
extensions to the report submission due title and number,award name and (7).Require each subrecipient to •
date required by § .320(a).The number,award year,and if the award is permit the pass-through entity and
cognizant agency for audit may grant for R&D.When some of this information auditors to have access to the records
. extensions for good cause. is not available,the Federal agency shall and financial statements as necessary
(3)Obtain or conduct quality control provide information necessary to clearly for the pass-through entity to comply • .
reviews of selected audits made by non- describe tke Federal award. with this part. <-
r..
.a
• Federal Register / Vol. 61, No. 84 / Tuesday, April 30, 1996 / Notices - 19145
(iii)A management decision was not unqualified opinion,qualified opinion, (1)Certification discussed in
issued. adverse opinion,or disclaimer of opinion).. paragraph(b)of this section;
(c) Corrective action plan.At the . 2.A yes or no statement as to whether the . (2)Financial statements and schedule
completion of the audit,the'auditee auditor's report on the financial statements of expenditures of Federal awards
shall prepare a corrective action plan to indicated that the auditor has substantial
doubt about the auditee's ability to continue discussed in§ .310(a)and
address each audit finding included in as a going concern. § .310(b),respectively; •
the current year auditor's reports.The 3.The type of report the auditor issued on (3)Summary schedule of prior audit
corrective action plan shall provide the compliance for major programs(i.e., . findings discussed in§ .315(b);
name(s) of the contact person(s) unqualified opinion,qualified opinion, (4)Auditor's report(s) discussed in ..
responsible for corrective action,the adverse opinion,or disclaimer of opinion). § .505;and
.corrective action planned, and the 4.A list of the Federal awarding agencies (5)Corrective action plan discussed in
anticipated completion-date.If the and pass-through entities which will receive § .315(c).
• auditee does not agree with the audit a copy of the reporting package pursuant to (d) Submission to clearinghouse.All
findings or believes corrective action is § .320(d)(2)and§ 320(e)(2)of auditees shall submit to the central
not required,then the corrective action ONIB Circular A-133.An explanation should clearinghouse designated by OMB one
be provided if this list is different from the copy of the reporting package described
plan shall include art explanation and
specific reasons. communication the auditor provides to the
auditee under§ .500(f)of OMB in paragraph(c)of this section for:
§ .320 Report submission. Circular A-133. (1)The central clearinghouse to retain
5.A yes or no statement as to whether the _ as art archival copy;and
(a) General.The audit shall be auditee qualified as a low-risk auditee under (2)Each Federal awarding agency
completed and the reporting package § .530 of OMB Circular A-133. when the schedule of findings and - _
described in paragraph (c) of this 6.The dollar threshold used to distinguish questioned costs disclosed audit .
section submitted within nine months between Type A and Type B prograrris as findings relating to Federal awards that
after the end of the audit period,unless defined in§ .520(b)of OMB Circular the Federal awarding agency provided
a longer period is agreed to in advance A-133• • directly or the summary schedule of
by the cognizant or oversight agency for 7.The Catalog of Federal Domestic prior audit findings reported the status
audit.Also,the reporting package shall Assistance(CFDA)number for each Federal
program,as applicable. of any audit findings relating to Federal
be submitted within 30 days after 8.The name of each Federal program-and awards that the Federal awarding
issuance of the auditor's report(s)to the identification of each major program. agency provided directly.
auditee. Unless restricted by law or Individual awards within a category of (e)Additional submission by
regulation,the auditee shall make awards should be listed in the same level of subrecipients.In addition to the
copies available for public inspection. detail as they are listed in the schedule of requirements discussed in paragraph(d)
(b) Certification.The auditee shall expenditures of Federal awards. of this section,subrecipients shall
complete a certification form which 9.The amount of expenditures in the . submit to each pass-through entity one
states whether the audit was completed schedule of expenditures of Federal awards copy of the:
in accordance with this part and associated with each Federal prog am.. (1)Certification discussed in
provides information about the audite , 10.A yes or no statement as to whether
e
its Federal programs,and the results there are audit findings and the amount of Paragraph(b)of this section;and
any questioned costs related to the following (2)Reporting package described in
the audit.The form shall be approved for each Federal program: paragraph(c)of this section for each
by OMB,available from the central a.Types of services allowed or unallowed. pass-through entity when the schedule
clearinghouse designated by OMB, b.Eligibility. of findings and questioned costs
include data elements similar to those c.Matching,maintenance of level of effort, disclosed audit findings relating to
presented in this paragraph,and use a or earmarking. t Federal awards that the pass-through
machine-readable format.The auditee's d.Federal financial reporting. entity provided or the summary -
• chief executive officer or chief financial e.Program income. schedule ofprior audit findings
officer shall sign a statement that the f.Procurement. g
reported the status of any audit findings
g.Subrecipient monitoring.
information on the form is accurate and h.Allowable costs/cost principles. relating to Federal awards that the
complete as follows: i.Other. passthrough entity provided.
Certificate of Audit .11.Auditee Name: (f)Requests for report copies.In
p . response to requests by a Federal agency
This is to certify that,to the best of my
knowledge and belief•the(specify name of Employer Identification Number: or pass through entity,auditees shall
the auditee]has:ell engaged an auditor to submit the appropriate copies of the
perform an audit in accordance with the Name and Title of Responsible Official: reportin package described in
provisions of OMB Circular A-133 for the Telephone Number: paragraph(c)of this section and,if
(specify number]months ended (specify requested,a copy of any management
date];(2)the auditor has completed such Signature: letters issued by the auditor.
audit and presented a signed audit report (g) Report retention requirements.
• which states that the audit was conducted in Auditees shall keep one copy of the
accordance with the provisions of the Date:
Circular;and.(3)the information on the reporting package described in
attached form accurately and completely 12.Auditor Name: paragraph(c)of this section on file for
reflects the results of this audit.as presented three years from the date of submission
Namein the auditor's report.I declare that the and Title of Contact Person: to the central clearinghouse designated
foregoing is cue and correct. by OMB.Pass-through entities shall
Auditor Address: keep subrecipients'submissions on file
Attachment to Certificate
Auditor Telephone Number:
Information Accompanying Certificate of for three years from date of receipt.
Audit (h) Clearinghouse responsibilities.
The central clearinghouse designated by
1.The type cf report the auditor issued on (c) Reporting Package.The reporting OMB shall distribute the repertir-g
the financial s:a;emerits of the auditee(i.e., package shall include the: • packages received in accordance with
i
i • 19144 Federal Register / Vol. 61, No. 64 / Tuesday, April 30, 1996 / Notices t •
. (e)Ensure that the audits required by (c) Use of Fec'eral auditors. Federal cash assistance expended•insurance in
•
this part are properly performed and auditors may perform ail or part of the
submitted:•:lien due. When extensions work required under this part if they guavaffect guarantees
the and year
loans or loan I
to the repo:t submission due date comply fully with the requirements of S �'antees outstanding at year end.
required by § .320(a)are granted this g
by the goer izant or oversight agency for part 3t5 Audit findings follow-up.
audit, promptly notify the central § 310 Financial suitemeruts. (a) General.The auditee is responsible
clearinghouse designated by OMB and (a)Financial state en The auditee for follow-up and corrective action on
each pass-through entity providing shall prepare financial statements that responsibility,
audit fndin;s•-.s part of this
Federal awards of the extension. reflect its financial position,results of a summaryt c the le ofpr shallr prepare
(f)FcIlo.v up and take corrective operations,and,where appropriate, summary schedule shall
ll alsoupr
action on audit findings,including cash flows for the fiscal year audited. a findings.corrective
rctThe action
plan for current
year
preparation of a summary schedule of The financial statements shall be for the a audit
f ni in action for scheduler
prior audit findings and a corrective same organizational unit-and fiscal year of pri.ridings. ndi s s and v
action plan in accordance with that is chosen to meet the requirements of prior audit firdirgs and the
§ •315(b)and § .315(c), of this part, q corrective action plan shall include the
respectively. (b) Schedule of expenditures ofreference numbers the auditor assigns to
Federal awards.The auditee shall also audit findings under§ 510(c).
§ .305 Auditor selection. prepareal a schedule of shall Since the summary
(a)Auditor procurement.In z-ranair. schedule may •
S Federal awards for the period covered include auditshall incfindlude
frome fiscal multiple
for audit services,auditees shall follow by the auditee's financial statements. years,it include the year in
tby he proct Ae t standards
prescribed While not required,it is appropriate for which the findings initiallydl priorrau.
Requirements for Grants and the auditee to provide information (b)Summary schedule of prior audit
Agreements with Institutions of Higher requested to make the schedule easier to findings.The summary shall r e o to of
Agree entHospitals Other igh use b Federal awarding agencies and spaor offal faudini dng report d
Profit n,Hospitals
and the FederalNon- pass-through entities. For example, the
of all
audit's
schedulefindings included fn in
• Acquisition on Organizations," r CFR Drat 42), when a Federal program has multiple ande prior questioneds of findings
as (CircularRegulation available from award years,the auditee may list the leallalsocosts.includeThe audit h�
as applicable.pe of Administration,tr r a Publicationsblem amount of each award year separately. schedule reported heprior audit'
At a minimum,the schedule shall: } findings in the audit's
Office,room 2200,New Executive (1)List individual Federal programs summary schedule of prior audit
Office Building,Washington,DC 20503; by Federal agency and major
telephone (202) 395-7332.)2.)Whenever 203r findings except audit findings listed as
telephone
auditees shall make positive subdivision within a Federal agency. corrected in accordance with paragraph
possible, For Federal awards received as a ro)(1), or no longer valid or not
efforts to utilize small businesses, subrecipient,the name of the pass- warranting further action in accordance
efforts
to utilize firms,and businesses,
throughentityand identifying eewitparagraph m nnesy enterprises, wome audit S number (b )findingsof this section.
services in OMB procuring
Circular A_ assigned by the ass-Lhrou h entity (1)When audit were fully
shall be included. • S corrected,the summary schedule need
110 or the Federal Acquisition (2)Provide total expenditures for each only findingsand state that
Regulation(48 CFR part 42),as list the audit
Regulation
ne.(In4 CFR part as. for individual Federal program and the corrective action was taken.
auditl the objectives andproposalsfscope CFDA number or other identifying (2)When audit findings were not
ofatheaudit services,the made s number when the CFDA information is corrected or were only partially
o theFactors to could bee in evaluating not available. corrected,the summary schedule shall
proposal oar servicesev include (3)Identify major programs. • describe the planned corrective action
eachthe responsiveness for audit to the a request for (4) Include notes that describe the as well as any partial corrective action
significant accounting policies used in taken.
proposal,relevant experience, preparing the schedule and identify in (3)When corrective action taken is
availability of staff with professional the notes the dollar threshold used to significantly different from corrective
qualifications and technical abilities, distinguish between Type A and Type B previously reporied in a
the results of external quality control yp action r y p -
eviee•s,and price. programs,as described in corrective action plan or in the Federal
(b) on prepa�ng § •520(b)' agency's or pass-through entity's
indirectRestriction cost proposals.auditor.An auditor g (5)To the extent practical,pass- management decision,the summary
prepares the pr post cost proposal who through entities should identify in the schedule shall provide an explanation.
P p schedule the total amount provided to (4)When the auditee believes the
_cost allocation plan may not also be . subrecipients from each Type A .• 'audit findings are no longer valid or do
selected to perform the audit required program and from each Type B program not warrant further action,the reasons
by this part when the indirect costs which is audited as a major program, for this position shall be described in
recovered by the auditee during the (6)List individual Federal awards ' the summary schedule.A valid reason
prior year exceeded S1 million.This within a category of Federal awards, for considering'an audit finding as not
- restriction applies to the base year used . However,when it is not practical to list warranting further action is that all of
in the preparation of the indirect cost each individual Federal award for R&D, the following have occurred:
proposal or cost allocation plan and any total expenditures shall be shown by : (i)Two years have passed since the
subsequent years in which the resulting Federal agency and major subdivision • audit report in which the finding
indirect cost agreement or cost within the Federal agency..For example, occurred was submitted to the central
allocation plan is used to recover costs, the National Institutes of Health is a clearinghouse;
To minimize any disruption in existing major subdivision in the Department of (ii)The Federal agency or pass- _
contracts for audit services,this ' Health and Human Services. . through entity is not currently following
paragraph applies to audits of fiscal • (7)Include,in either the-schedule or up with the auditee on the audit
.
years ending on or after June 30,1999. . 'a note to the schedule,the value of non- finding;and 4
-
•
r.
Federal Register / Vol. 61, No. 84 / Tuesday, April 30, 1996 / Notices 19143 '
applicable OMB cost principles , with the requirements of package for a program-specific audit
circulars, Federal Acquisition . § .500(e). shall consist of the certification -
Regulation(48 CFR part 31),or other (4)The auditor's report(s)may be in prepared in accordance with
applicable cost principles or the form of either combined or separate § .320(b),as applicable to a
•
regulations. • reports and may be organized differently program-specific audit,the financial •
§ .235 Program specific audits. from the manner presented in this statement(s)of the Federal program,a
(a) Program-specificra - audit guide section.The auditor's report(s)shall summary schedule of prior audit .•
• available. n m cases,a program- state that the audit was conducted in _ findings,and a corrective action plan as
specific In guide will be rogram- to accordance with this part and include described in paragraph(b)(2)of this
Pthe following: - section,and the auditor's report(s)provide specific guidance to the auditor (i)An opinion(or disclaimer of P th
with respect to internal control, described in paragraph(b)(4) of this
P opinion)as to whether the financial section.One copy of this reporting compliance requirements,suggested statement(s)of the Federal program is package shall be submitted to the
audit procedures,and audit reporting presented fairly in all material respects central clearinghouse designated by --
requirements.The auditor should . in accordance with the stated .
contact the Office of Inspector General accounting policies; OMB to be retained as an archival copy.
of the Federal agency to determine (ii)A report on internal control Also,when the schedule of findings and
whether such a guide is available.When related to the Federal program,which fnd ngs orned thecos summary disclos scheduled aud
a current program-specific audit guide is shall describe the scope of testing of findings or of
available, the auditor shall follow internal control and the results of the prior audit findings reported the status
GAGAS and the guide when performing tests; of any audit findings,the auditee shall
a program-specific audit. (iii)A report on compliance which submit one copy of the reporting
. (b)Program-specific audit guide not includes an opinion (or disclaimer of Package to the central clearinghouse on
available. (1)When a program-specific opinion)as to whether the auditee behalf of the Federal awarding agency,
audit guide is not available,the auditee complied with laws,regulations,and orcase directly to the pass through entity in
and auditor shall have basically the the provisions of contracts or grant the case of a subrecipient.
same responsibilities for the Federal agreements which could have a direct (d) Other sections of this pars may
program as they would have for an audit and material effect on the Federal apply Program-specific audits are
of a major program in a single audit. program;and subject to§ 100 through
(2)The auditee shall prepare the (iv)A schedule of findings and § .215(b), § .220 through
financial statement(s)for the Federal questioned costs for the Federal § .230.§ . .300 through
program that includes,at a minimum,a program that is consistent with the § .305, § .315,
schedule of the Federal progra 's requirements of§ .505(a)(4)and § 320(f)through§ 320(j),
m
expenditures and notes that describe the includes a summary of the auditor's § 400 through § 405,
significant accounting policies used in results applicable to the audit of the § 510 through § 515,and
preparing the schedule, a summary Federal program and in a format other referenced provisions of this part
schedule of prior audit findings consistent with§ .505(b). unless contrary to the provisions of this
consistent with the requirements of (c)Report submission for program- section,a program-specific audit guide,
§ .315(b),and a corrective action specific audits. (1)The audit shall be or program laws and regulations.
plan consistent with the requirements of completed and the reporting required by Subpart t,—Auditees§ .315(c). paragraph(c)(2) or(c)(3)of this section
(3)The auditor shall: submitted within nine months after the § .300 Auditee respc sibitities.
•
(i)Perform an audit of the financial end of the audit period,unless a longer
statement(s) for the Federal program in period is agreed to in advance by the The auditee shall: _
accordance with GAGAS; Federal agency that provided the (a)Identify,in its accounts,all
(ii)Obtain an understanding of • funding or a different period is specified Federal awards received and expended
internal control aria perform tests of in-a program-specific audit guide.Also, and the Federal programs under which
internal control over the Federal this required reporting shall be they were received.Federal program .
•
program consistent with the submitted within 30 days after the and award identification shall include,
requirements of§ .500(c)for a issuance of the auditor's report(s)to the as applicable,the CFDA title and
i major program; auditee.Unless restricted by law or number,award number and year,name
(iii)Perform procedures to determine regulation,the auditee shall make report of the Federal agency,and name of the
• whether the auditee has complied with copies available for public inspection. pass-through entity.
•
• laws,regulations,and the provisions of (2)When a program-specific audit (b)Maintain internal control over
contracts or grant agreements that could guide is available, the auditee shall Federal programs that provides
have a direct and material effect on the submit to the central clearinghouse reasonable assurance that the auditee is
Federal program consistent with the designated by OMB one copy of the managing Federal awards in compliance
requirements of§ .500(d)for a certification prepared in accordance with laws,regulations,and the
major program;and with§ • .320(b),as applicable to a provisions of contracts or grant
(iv)Follow up on prior audit findings, program-specific audit,and the agreements that could have a material
perform procedures to assess the reporting required by the program- effect on each of its Federal programs.
reasonableness of the summary specific audit guide to be retained as an (c)Comply with laws,regulations,
schedule of prior audit findings archival copy.Also,the auditee shall and the provisions of contracts or grant
prepared by the auditee,and report,as submit to the Federal awarding agency agreements related to each of its Federal
a current year audit finding,when the or pass-through entity the reporting programs.
auditor concludes that the summary required by the program-specific audit (d)Prepare appropriate financial
schedule of prior audit findings guide. statements,including the schedule of
materially misrepresents the status of (3) When a program-specific audit expenditures of Federal awards in
any prior audit finding in accordance guide is not available, the reporting accordance with§ .310. 0
.
19142 Federal Register / Vol. 61, No. 84 / Tuesday, April 30, 1996 / Notices
' (i)Medicaid. Medicaid payments to a judgment should be used in determining for funding the cost of such additional
non-profit organization for providing whether an entity is a subrecipient or audits. 1
patient care services to Medicaid vendor. (c)Request far a program to be
eligible individuals are not considered (e)For-profit subrecipient. Since this audited os a major program.A Federal
Federal awards expended under this part does not apply to for-profit agency may request an auditee to have
part unless a State requires the funds to subrecipients,the pass-through entity is a particular Federal program audited as
be treated as Federal awards expended responsible for establishing a major program in lieu of the Federal
because reimbursement is on a cost- requirements,as necessary,to ensure agency conducting or arranging for the
reimbursement basis. compliance by for-profit subrecipients. additional audits.To allow for planning,
The contract with the for-profit such requests should be made at least
determinations..210
Subreclpient and vendor subrecipient should describe applicable 180 days prior to the end of the fiscal
compliance requirements and the for- year to be audited.The auditee,after
(a) General.An auditee may be a profit subrecipient's compliance consultation with its auditor,should
recipient, a subrecipient,and-a vendor. responsibility.Methods to ensure promptly respond to such request by
Federal awards expended as a recipient compliance for Federal awards made to informing the Federal agency whether
or a subrecipient would be subject to for-profit subrecipients may include the program would otherwise be audited
audit under this part.The payments pre-award audits,monitoring during the as a major program using the risk-based
received for goods or services provided contract,and post-award audits. audit approach described in
as a vendor would not be considered (f)Compliance responsibility for § .520 and,if not,the estimated
Federal awards.The guidance in vendors.In most cases,the auditee's incremental cost.The Federal agency
paragraphs (b) and(c) of this section compliance responsibility for vendors is shall then promptly confirm to the
should be considered in determining only to ensure that the procurement, auditee whether it wants the program
whether payments constitute a Federal receipt,and payment for goods and audited as a major program.If the
award or a payment for goods and services comply with laws,regulations, program is to be audited as a major
services. and the provisions of contracts or grant program based upon this Federal agency
(b)Federal award.Characteristics agreements.Program compliance request,and the Federal agency agrees
• indicative of a Federal award received requirements normally do not pass to pay the full incremental costs,then
by a subrecipient are when the through to vendors.However,the thv auditee shall have the program
organization: auditee is responsible for ensuring aL.-.ited as a major program.A pass-
(1)Determines who is eligible to compliance for vendor transactions through entity may use the provisions of
receive what Federal financial which are structured such that the this paragraph for a subrecipient.
assistance; • vendor is responsible for program
(2)Has its performance measured compliance or the vendor's records . - § .220 Frequency of audits.
against whether the objectives of.the must be reviewed to determine program Audits required by this part shall be
Federal program are met; compliance.Also,when these vendor performed annually.However,a Federal
(3)Has responsibility for transactions relate to a major program, agency or pass-through entity may allow
programmatic decision making; the scope of the audit shall include an auditee that elects a program-specific
(4)Has responsibility for adherence to determining whether these transactions audit under§ .200(c)to perform
applicable Federal program compliance are in compliance with laws, the audit every two years. Two-year
requirements; and regulations,and the provisions of audits must cover both years.
(5)Uses the Federal funds to carry out contracts or grant agreements. •
a program of the organization as . ' § .225 Sanctions.
compared to providing goods or services § .215 Relation to other audit • . No audit costs may be charged to
for a program of the pass-through entity. requirements. . Federal awards when audits required by
(c)Payment for goods and services. (a)Audit under this part in lieu of this part have not been made or have •
• Characteristics indicative of a payment other audits.An audit made in been made but not in accordance with
• for goods and services received by a accordance with this part shall be in this part.In cases of continued inability
vendor are when the organization: lieu of any financial audit required or unwillingness to have an audit
(1)Provides the goods and services under individual Federal awards.To the conducted in accordance with this part,
within normal business operations; . extent this audit meets a Federal Federal agencies and pass-through
(2)Provides similar goods or services agency's needs,it shall rely upon and .entities shall take appropriate action
to many different purchasers; use such audits.The provisions of this using sanctions such as:
(3)Operates in a competitive part neither limit the authority of (a)Withholding a percentage of
environment; • Federal agencies,including their . Federal awards until the audit is .
(4)Provides goods or services that are Inspectors General,or GAO to conduct completed satisfactorilyr
ancillary to the operation of the Federal or arrange for additional audits (e.g.,- . (b)Withholding or disallowing . •
program;and financial audits,performance audits, overhead costs; - -
(5)Is not subject to compliance evaluations,inspections,or reviews)nor (c)Suspending Federal awards until •
requirements of the Federal program. authorize any auditee to constrain • the audit is conducted;or
(d) Use of judgment in making Federal agencies from carrying out (d)Terminating the Federal award.
determination.There may be unusual additional audits.Any additional audits - •
circumstances or exceptions to the shall be planned and performed in such § .230 Audit costs.
listed characteristics.In making the a way as to build upon work performed Unless prohibited by law,the cost of
. determination of whether a subrecipient by other auditors. - audits made in accordance with the .
or vendor relationship exists,the (b)Federal agency to pay for provisions of this part are-allowable
substance of the relationship is more additional audits.A Federal agency that charges to Federal awards,The charges -
: important than the form of the conducts or contracts for additional may be considered a direct cost or an
agreement.It is not expected that all of audits shall,consistent with other• . . allocated indirect cost,as determined in
• the characteristics will be present and . applicable laws and regulations,arrange accordance with the provisions of -
• Federal Register / Vol. 61, No. 84 / Tuesday, April 30, 1996 / Notices 19141
where such activities utilize the same awards expended is provided in amounts entitling the non-profit
• • facilities as other research and -§ .205. • organization to an interest subsidy;and,.
development activities and where such (b) Single audit.Non-profit the period when insurance is in force.
activities are not included in the organizations that expend 5300,000 or (b)Loan and loan guarantees(loans).
instruction function. Development is the more in a year in Federal awards shall Since the Federal Government is at risk
systematic use of knowledge and • have a single audit conducted in • for loans until the debt is repaid,the
understanding gained from research •accordance with§ .500 except following guidelines shall be used to
directed toward the production of useful when they elect to have a program- calculate the value of Federal awards-
specific audit conducted in accordance 'expended under loan programs.except
materials,devices,systems,or methods,
including design and development of with paragraph(c) of this section. as noted in paragraphs(c)and(d)of this -
prototypes and.processes. (c)Program-specific audit election. section: .
Single audit means an audit which When an auditee expends Federal (1)Value of new loans made or
includes both the entity's financial awards under only one Federal program received during the fiscal year;plus
statements and the Federal awards as (excluding R&D) and the Federal (2)Balance of loans from previous
described in § .500. program's laws,regulations,or grant years for which the Federal Government
Student Financial Aid(SFA)includes agreements do not require a financial •imposes continuing compliance
those programs of general student •statement audit of the auditee,the requirements;plus
•
assistance,such as those authorized by ' auditee may elect to have a program- (3)Any interest subsidy,cash,or• . •
Title IV of the Higher Education Act of specific audit conducted in accordance -administrative cost allowance received.
1965,as amended,(20 U.S.C. 1070 et with§ .235.A program-specific (c)Loan and loan guarantees(loans)
se which is administered b the U.S. audit may not be elected for R&D unless at institutions of higher education.
q') y all expenditures areFederalawards
for When loans are made to students of an
Department of Education,and similarinstitution of higher education but the
• programs provided by other Federal received from the same Federal agency, institution does not make the loans,
agencies.It does not includeprograms or the same Federal agency and the
g same pass-through entity,and that then only the value of loans made
which provide fellowships or similar Federal agency, or pass-through entity during the year shall be considered •.
Federal awards to students on a in the case of a subrecipient,approves Federal awards expended in that year.
competitive basis,or for specified in advance a program-specific audit. The balance of loans for previous years
studies or research.
Subrecipient means the entitythat (d).Exemption when expenditures are is not included as Federal awards
p less than S300,000.Non-profit expended because the lender accounts
expends Federal awards received from a organizations that expend less than for the prior balances.
pass-through entity to carry out a ,5300,000 a year in Federal awards are (d)Prior loan and loan guarantees
Federal program,but does not include exempt from Federal audit requirements (loans).Loans,the proceeds of which
an individual that is a beneficiary of for that year,except as noted in • were received and expended in prior-
-such a program.A subrecipient may •§ .215(a),but records must be • years,are not considered Federal
also be a recipient of other Federal -available for review or audit by - awards expended under this part when
awards directly from a Federal awarding appropriate officials of the Federal the laws,regulations,and the provisions
agency.Guidance on distinguishing agency,pass-through entity,and of contracts or grant agreements
between a subrecipient and a vendor is General Accounting Office(GAO). pertaining to such loans impose no
provided in § .210. (e)Federally Funded Research and continuing.compliance requirements
. .Types of compliance requirements Development Centers(FFRDC). other than to repay the loans.
refers to the types of compliance Management of an auditee that owns or (e)Endowment funds.The cumulative
requirements listed in the compliance operates a FFRDC may elect to treat the balance of Federal awards for
supplements.Examples include cash FFRDC as a separate entity for purposes endowment funds which are federally
i • management,Federal financial • of this part. restricted are considered awards -
reporting,allowable costs/cost expended in each year in which the
principles,types of services allowed or § .205 Basis for determining Federal funds are still restricted.
unallowed,eligibility,and matching. awards expended. (f)Free rent.Free rent received by
Vendor means a dealer,distributor, (a) Determining Federal awards itself is not considered an award
merchant,or other seller providing expended.The determination of when expended under this'part.However,free
. goods or services that are required for an award is expended should be based rent received as part of an award to
the conduct of a Federal program.These on when the activity related to the carry out a Federal program shall be
goods or services may be for an award occurs. Generally,the activity included in determining Federal awards
organization's own use or for the use of pertains to events that require the non- expended and subject to audit under
beneficiaries of the Federal program. profit organization to comply with laws, this part.
Additional guidance on distinguishing regulations,and the provisions of (g) Valuing non-cash assistance.
between a subrecipient and a vendor is contracts or grant agreements,such as: Federal non-cash assistance,such as
provided in§ .210. expenditure/expense transactions free rent,food stamps,food
associated with grants,cost- commodities,donated property.or
Subpart B—Audits reimbursement contracts,cooperative donated surplus property,shall be
agreements,and direct appropriations; valued at fair market value at the time -
§ .200 Audit requirements. the disbursement of funds passed of receipt or the assessed value provided
(a)Audit required.Non-profit through to subrecipients;the use of loan by the Federal agency.
organizations that expend 5300,000 or proceeds under loan and loan guarantee (h)Medicare.Medicare payments to a
more in a year in Federal awards shall programs;the receipt of property;the non-profit organization for providing
have a single or program-specific audit receipt of surplus property;the receipt patient care services to Medicare
conducted for that Year in accordance or use of program income;the - eligible individuals are not considered
with the provisions of this part. distribution or consumption of food Federal awards expended under this
Guidance on determining Federal commodities;the disbursement of part. `f
•
19140 Federal Register / Vol. 61. No. 64 / Tuesday, April 30, 1996 / Notices
- Audits of State and Local Governments (iii)Cluster of programs. (iii)Uses its net proceeds to maintain,
or such documents as the Office of GA GAS means generally accepted im rove,or expand its operations;and
Management and Budget (OMB)or its government auditing standards issued (2)' The term non-profit organization
designee may issue to replace them. by the Comptroller General of the includes both non-profit institutions of
These documents are available from the United States.which are applicable to higher education and hospitals.and
Government Printing Office, financial audits. public institutions of higher education
Superintendent of Documents,P.O. Box Generclly accepted accounting and hospitals that are not audited in
371954,Pittsburgh, PA 15250-7954, principles has the meaning specified in accordance with Circular A-123.
telephone (202) 512-1800. generally accepted auditing standards "Audits of State and Local
Corrective action moans action taken issued by the American Institute of Governments"(Available from Office of
by the auditee that: Certified Public Accountants(AICPA)• Administration,Publications Office,
(1)Corrects identified deficiencies; Internal control ha's the meaning room 2200,New Executive Office
(2)Produces recommended specified in generally accepted auditing Building,Washington,DC 20503;
. improvements;or standards issued by the AICPA. telephone(202)395-7332).
(3)Demonstrates that audit findings internal control over Federal OMB means the Executive Office of
are either invalid or do not warrant programs means a process—effected by the President,Office of Management
auditee action. an entity's management and other and Budget.
•
Federal agency has the same meaning personnel—designed to provide Oversight agency for audit means the
as the term agency in Section 551(1) of reasonable assurance regarding the Federal awarding agency that provides
title 5,United States Code. achievement of the following objectives the predominant amount of dirct
Federal award means Federal for Federal programs: funding to a recipient not assigned a
financial assistance and Federal cost- (1)Transactions are properly recorded cognizant agency for audit.When there
reimbursement contracts.It includes and accounted for to: is no direct funding,the Federal agency
Federal awards made directly by (i)Permit the preparation of reliable with the predominant Tndirect funding
Federal awarding agencies or indirectly financial statements and Federal shall assume the oversight
•
_ by recipients of Federarawards or reports; g
(ii)Maintain accountabilityresponsibilities.The duties of the
subrecipients. It does not includeover oversight agency for audit are described
procurement contracts, under grants or assets;and
contracts,used to buy goods or services ).
(iii)Demor trate compliance with in pass-through entity means a non-
from vendors.Any audits of such laws,regular ns,and other compliance
vendors shall be covered by the terms requirements; profit organization or other entity that
and conditions of the contract.Contract's `2)Transactions are executed in provides a Federal award to a
compliance with: subrecipient.
to operate Federal Government owned, (i)Las,s,regulations,and the Program-specific audit means art
contractor operated facilities(GOCOs) provisions of contracts or grant audit of one Federal program as
are excluded from the requirements of agreements that could have a direct and provided for in § .200(c)and
this part. material effect on a Federal program; § .235.
Federal awarding agency means the and Questioned cost means a cost that is
Federal agency that provides an award (ii)Any other laws and regulations questioned by the auditor because of an
directly to the recipient. - . that are identified in the compliance audit finding:
Federal financial assistance means su laments;and Which resulted from a possible
assistance received or administered to 3)Funds,property,and other assets violation of a provision of a law,
carry our a program. Such assistance are safeguarded against loss from regulation,contract,grant,cooperative
may be in the form of grants, unauthorized use or disposition.• agreement, or other agreement or
cooperative agreements,donated Loan means a Federal loan or loan document governing the use of Federal
surplus property,food commodities, guarantee received or administered by a funds,including funds used to-match
. loans,loan guarantees,property,interest non-profit organization. Federal funds; .
subsidies,insurance,direct Major program means a Federal (2)Where the costs,at the time of the
•appropriations,and other assistance. program determined by the auditor to be audit,are not supported by adequate _
Federal program means: a major program in accordance with documentation;or
. (1)All Federal awards under the same § .520 or a program identified as (3)Where the costs incurred appear -
CFDA number.When no CFDA number a major program by a Federal agency or unreasonable and do not reflect the
is assigned,all Federal awards from the pass-through entity in accordance with actions a prudent person would take in
same agency made for the same purpose § .215(c). the circumstances.
should be combined and considered one Management decision means the Recipient means a non-profit -
program.State governments may evaluation by the Federal awarding organization that expends Federal •
combine funding from different Federal agency or pass-through entity of the awards received directly from a Federal
awards in providing assistance to their audit findings and corrective action . awarding agency to carry out a Federal •
subrecipients when the awards are plan and the issuance of a written program. '
closely related programs and share . decision as to'what corrective action is Research and development(R&D)
-common compliance requirements.In necessary. means all research activities,both basic•
. this case,the State government may Non-profit organization means:(1) and applied,and all development -
• require the subrecipient-to treat the any corporation,trust,association, activities that are performed by a non-
- combined Federal awards as a single cooperative,or other organization - profit organization..,l?esearch is defined
program. • which: as a systematic study directed toward- .
(2)A category of Federal awards (i)Is operated primarily for scientific, - fuller scientific knowledge or
• which is a group of awards in the educational;service,charitable,or understanding of the subject studied.
categories of: similar purposes in the public interest; The term research also includes i
(i)Research and development; (ii)Is not organized primarily for activities involving the training of
(ii)Student financial aid;or profit;and - individuals in research techniques
.
.
i Federal Register / Vol. 61, No. 84 /•Tuesday, April 30, 1996 / Notices 19139 ' "
SUBJECT-:Audits of Institutions of 7. OMB Responsibilities.OMB will —315 Audit findings follow-up.
Higher Education and Other Non- review Federal agency regulations and _320 Report submission.
Profit Institutions implementation of this Circular,and Subpart D—Federal Agencies and Pass- -
1.Purpose.This Circular sets forth will provide interpretations of policy Through Entities .
standards for obtaining consistency and requirements and assistance to ensure. _.400 Responsibilities.
uniformity among Federal agencies for effective and efficient implementation.the audit of non-profit organizations 8. Information Contact.Further _rags Management decision.Subpart E—Auditors
expending Federal awards. information concerning Circular A-133 • 500. Scope of audit.
• •2.Authority.Circular A-133 is issued may be obtained by contacting the —.50s ScopeAudit ofre audit.
under the authority of sections 503 and Financial Standards and Reporting 510 Audit findings. -
1111 of title 31,United States Code,and Branch,Office of Federal Financial _ orting. •
.515 Audit working papers.Executive Orders 8248 and 11541. Management,Office of Management and —.52o Major program determination.c'
3.Supersession.This Circular Budget,Washington,DC 20503, ;523 Criteria for Federal proam risk.
supersedes the prior Circular A-133, •telephone(202)395-3993. _.530 Criteria for a low-risk auditee.
issued March 8, 1990.For effective • .. 9. Termination Review Date.This • "•Authority:(Each Federal agency should
dates,see paragraph 10. Circular will have a policy review three insert its own rule making authority using
4.Policy.Except as provided herein, years from the date of issuance. • appropriate United States Code citations.]
the standards set forth in this Circular 10.Effective Dates.The standards set Subpart A--General
shall be applied by all Federal agencies. forth in § .400 of the Attachment
If any statute specifically prescribes to this Circular,which apply directly to § 100 Purpose. •
policies or specific requirements that Federal agencies,shall be effective July This part sets forth standards for
differ from the standards provided 1,1996,and shall apply to audits of obtaining consistency and uniformity
herein,the provisions of the statute fiscal years ending on or after June 30, among Federal agencies for the audit of •
shall govern. 1997. non-profit organizations expending
Federal agencies shall apply the The standards set forth in this Federal awards.
provisions of the sections of this Circular that Federal agencies are to -
Circular to non-profit organizations, apply to non-profit organizations shall § .105. Definitions.
whether they are recipients expending be adopted by Federal agencies in Auditee means any organization that
Federal awards received directly from codified regulations not later than expends Federal awards which must be
Federal awarding agencies,or are November 30, 1996,so that they will audited under this part.
subrecipients expending Federal awards apply to audits of fiscal years ending on Auditor means an auditor.that is a
received from a pass through entity (a• or after June 30,1997,with the public accountant or a Federal.State or
recipient or another subrecipient). exception that§ .3C5(b) of the local government audit organization,
Therefore, whereas this Circular does Attachment applies to audits of fiscal which meets the general standards
not apply to grants,contracts,or other years ending on or after June 30,1999. specified in generally accepted
agreements between the Federal In the interim period,until the government auditing standards
Government and State or local standards in this Circular are adopted (GAGAS).The term auditor does not
governments(which are covered by and become applicable,the audit include internal auditors of non-profit
Circular A-128."Audits of State and provisions of Circular A-133,issued oroenizatiors. •
L• ocal Goverrr*re..^.ts"),this Circular does March 8,1990,shall continue in effect. Audit finding means deficiencies
apply to awards that State and local Alice Ni.Rivlin, which the auditor is required by
• governments make to non-profit Director. • § .510(a)to report in the schedule
organizations covered by this Circular. •
of findings and questioned costs.
This Circular does not apply to public Attachment CFDA number means the number .
• institutions of higher education and PART —AUDITS OF INSTITUTIONS assigned to a Federal program in the
hospitals which are audited under OF.HIGHER EDUCATION AND OTHER Catalog of Federal Domestic Assistance
Office of Management and Budget NON-PROFIT INSTITUTIONS (CFDA). - •
i (OMB) Circular A-128. Cluster of programs means Federal
This Circular does not apply to non- Subpart A—General programs with different CFDA numbers
U.S.based entities expending Federal Sec. that are defined as a cluster of programs
awards received either directly as a .100 Purpose. in the compliance supplements because
i recipient or indirectly as a subrecipient. —105 Definitions. they are closely related programs and
j 5.Definitions.The definitions of key Subpart B—Audits share common compliance
• terms used in this Circular are requirements.A cluster of programs
contained in§ .105 in the —200 Audit requirements. shall be considered as one program for
.205 Basis for determining Federal
Attachment to this Circular. — determining major programs,as
• .6.Required Action.The specific aards expended.
4 _.210 Subrecipient and vendor described in§ 520.and whether
•• requirements and responsibilities ofdeterminations. a program-specific audit may be elected
Federal agencies and non-profit _.215 Relation to other audit under§ .200(c).
organizations are set forth in the requirements. Cognizant agency for audit means the
Attachment to this Circular.Federal .220 Frequency of audits. Federal agency designated to carry out
agencies making a-.t:''ards to non-profit 225 Sanctions. the r spens bilities described in
organizations, either directly or —223o Audit tests. �§ .400(a).
indirectly,shall adopt the language in —235 Program-specifr ic audits. Compliance supplements refers to the
•
the Circular in codified regulations not Subpart C—Auditaes Compliance Supplement for Audits of
late:than November 3C, 1996,unless sco Auditee responsibilities. Inst:rttti ns of Higher Learning and
different provisions are required by _305 Auditor selection. Other Nan-Profit Institutions and the
Federal statute or are approved by OMB. _.310 Financial stat_rn,-n.a. Compliance Supplement for Sin ie
i
19138 Federal Register / Vol. 61, No. 84 / Tuesday, April 30, 1996 / Notices `
Report Due Date
including management letters as part of Questions and Answers on OMB
Comment:Most State auditor and •a public filing of the auditor's reports CircularA-133
college and university commenters could reduce the effectiveness of
expressed opposition to shortening the management letters. Comment:In May President's the Standards
due date for reports from 13 to 9 Subcommittee of the
p Response:OMB agrees that it is not Council on Integrity and Efficiency
months. However,most State manager necessary to routinely include auditor's (PCIE)issued PCIE Position Statement
and non-profit organization commenters management letters as part of the report No. 6,titled "Questions and Answers on
supported the change.The view submission.Therefore,this provision OMB Circular A-133"(A-133
appeared to be that those receiving and has not been adopted. However,because commenter inquired whether thiisA) A
relying on the reports and those management letters may contain document could be used as guidance in
currently completing the audit in 9 information relevant to the needs of performing audits under the revised
months liked the change. By contrast,it Federal agencies and pass-through
appears that those who were not Circular. -133.
entities to monitor Federal awards,a Response: Since this revision makes _
currently completing the audit in 9 provision has been added that Federal significant changes in OMB Circular A-
months opposed the change. agencies and pass-through entities can 133,the May 1992 A-133 &A should
Response:This proposal has been request a copy of management letters. not be used as a primary source of
adopted,with a change.The provision
retains the requirement in the Circular Coordinated Audit Approach guidance for audits performed under
that,when the audit is completed earlier this revision.However,many items in
than the due date,the reporting Comment:A few commenters
lethe A-133 Q&A were incorporated in
must be submitted within 30 days
of expressed concern that the term this revision and the A-133 Q&A may
audit report issuance. coordinated audit approach was not be a useful historical reference of the
single audit process.If there are
used in the proposed revision and
Certification - whether the removal of this term significant questions cencerring the
Comment Comments were mixed on precluded Federal auditors from revised Circular A-133,OMB will
the certification form.Most State participating in audits required by this consider issuing a revised A-133 Q&A.
auditor and CPA commenters opposed Circular. Compliance Supplements
•
the certification form,citing it as an Response:The proposed revision does Comment:Some CPA and State
increased burden on the. to prepare not prohibit the participation of Federal auditor commenters expressed concern
and duplicative of information in the auditors in audits required by the
audit reports. Most college and Circular,a concept referred to as the that compliancel supplementsp should keep the
universitycommenters supportedp zusrent.
the coordinated audit approach.This term Response:OMB recognizes the need
use of the certification form as a method was not included in the proposed for updated compliance supplements
of reducing the volume of paper in revision because the definition of
single audits. auditor clearly includes Federal audit and isthePerking with Federal agencies •
On a related issue,some State auditor organizations and further reference to and currentPCIE plcans are+to s issuetask.
and CPA commenters cited a possible the term coordinated audit approach OMB's plans up a
logistical problem that the auditor was not considered necessary.A revised compliance supplement by the
would not be able to complete the audit provision(§ .305(c))has been end of 1996.
report until the certification form was added to clarify that Federal auditors Public Information Collection
prepared (because the auditor must read may perform all or part of the work The revision includes art information
the certification form and report as an required under the Circular if they fully collectio •
n requirement for reports from
audit finding material inconsistencies comply with the requirements of the auditors concerning their audit findings
with the audit)and the certification Circular.
form could not be prepared until the to auditees(§ 235(b)(4),
audit is completed. GOCOs and FFRDCs § .505,and§ .510)and
Response:The requirements for the reports from auditees to the Federal
auditor to read the certification form Comment:A few Federal agency and Government concerning these report
•• and report as an audit finding any non-profit organization commenters (§ .235(c)and§ 320).OMB
material inconsistencies has not been expressed concern that the proposed requested comments on the proposed
adopted.As a preventive control to revision did not specifically address information collection described in the
ensure proper distribution of audit Federal Government o�cned,contractor Circular in a April 1; 1996 Federal •
reports,a requirement(§ ,800(f)) operated facilities(GOCOs)or Federally Register notice (61 FR 14338)in
has been added for the auditor to
Funded Research and Development accordance with the Paperwork
. identify to the auditee those Federal Centers(FFRDCs). Reduction Act of 1995 (44 U.S.C.
• awarding agencies and pass-through Response:A provision has been Chapter 35 et seq).The proposed •
entities which are required to receive a added to the definition of the term information collection requirement will .
• copy of the reporting package.Also,a Federal award that contracts to operate not be effective until another noticeiS
- •- requirement(§ .505(b))was added GOCOs are excluded from the published in the Federal Register.The
for the schedule of findings and - requirements of this Circular.Also, subsequent notice will provide the
questioned costs prepared by the • paragraph§ .200(e)has been effective date and the OMB control
auditor to include a summary of the added to allow management of an • number.•
•
• - -auditor's results-This summary will auditee that owns or operates a FFRDC Alice M.Rivlin,
facilitate preparation of the certification to elect to treat the FFRDC as a separate Director.• •
form by the auditee. entity for purposes of this Circular.If April 22,1996.
Management Letter - the FFRDC is treated as a separate . Circular No.A-133,Revised - •
entity,the determination of cognizant TO THE HEADS OF EXECUTIVE Comment:Most commenters agency for audit would be based upon r, DEPARTMENTS AND expressed concern that routinely this separate entity. ESTABLISHMENTS .
. r
•
_t.
,
,
k Federal Rester / Vol. 61, No. 84 /'Tuesday, April 30, 1996 / Notices 19137
no �' . Corrective Action Plan negotiation are different and,therefore, perform the audit and prepare the
Comment:Some college and the same Federal agency does not need indirect cost proposal.
- .� universitycommenters expressed _ to be cognizant for both.The name for
*a� _ the cognizant agency has been changed Response:A provision
.1: concern that the requirement to list the g g �' g (§ .305(b))has been added o
-. name of the contact person responsible to the cognizant agency for audit to preclude the same auditor from
for corrective action precluded a non- clearly distinguish it from the cognizant preparing the indirect cost proposal or
:•. •g. profit organization from naming one agency for indirect cost rate negotiation. cost allocation plan when indirect costs
- tt.^ person res onsible•for all audit findings.r p g • Provision for Small and Minority Audit exceeded S1 million in the prior year.
•
Response:The proposal has been -Firms .This threshold was chosen to limit this
.�� adopted,with no changes.Some restriction to a relatively small number•
commenters appeared to misunderstand Comment One commenter expressed
d.:. ppconcern that theprovision for small and of entities,while still protecting the
L. this provision. It is important that a Federal interest.The prior year was
e. non-profit rofit organization name a contact minority,audit firms was proposed for
deletion. chosen because non-profit organizations
5�: person or persons to be responsible for • often engage the auditor before the end
'.. corrective action.However,contrary to Response:As explained in the of the yearand at this time it may be .
4' the commenters'understanding,the . preamble to the proposed revision,this unknown whether the current year's
non-profit organization has discretion to provision was proposed to be deleted indirect costs will exceed the SI million
'' determine whether one person should because the requirements related to threshold.Based on available data,OMB
be responsible for all or a group of audit small and minority audit firms are more estimates that entities with indirect
findings or whether a separate person fully covered in§ .44(b)(4)of costs exceeding million cumulatively
' should be responsible.for each audit OMB Circular A-110, "Uniform
finding. Requirements for Grants and receive approximately 90 percent of the
Agreements With Institutions of Higher
Pass-Through Entity's Responsibility for Education,Hospitals and Other Non- total indirect costs charged by non-
profit organizations.
Subrecipient Audit Profit Organizations" (58 FR 62992; This restriction applies to the base
Comment:A few commenters November 29, 1993).There was no year from which financial data is used
I expressed concern that,unless the pass- intention to change or diminish the to compute the rates even though the
through entity gave the subrecipient requirements for using small and audit of the base year financial
S300,000,it would be difficult to minority audit firms.To ensure that statements is often completed before the
u determine whether the subrecipient was these requirements continue to receive indirect cost proposal or cost allocation
j' required to have an audit under the consideration,a provision has been plan is prepared.The base year was
u Circular. Specifically,the commenters added to the auditor selection paragraph included to enhance the appearance of
asked for guidance on how the pass- that,whenever possible in procuring independence to the Federal agencies
through entity could determine if the - audit services,non-profit organizations which rely upon the auditor's testing of
subrecipient received other Federal shall make positive efforts to utilize information used in both the calculation
1 awards which cumulatively added up to small businesses,minority-owned firms, and application of indirect cost rates.
1 the S300,000 threshold for atidit. and women's business enterprises,as The disclosure statements required by
Response:This provision has been stated in OMB Circular A—no. OMB Circular A-21 have been excluded
adopted,with no changes.There was no Restriction on Auditor Also Preparing from this restriction because the
intention that this provisic,require the •• Indirect Cost Proposal disclosure statement is new,many of
passthrough entity to perform extensive the statements will be submitted before
verification procedures to determine the Comment:The preamble to the the effective date of this Circular A-133
total Federal expenditures of a proposed revision requested comments revision,and the disclosure statements
subrecipient.OMB expects that,in on whether the auditor should also be
1 many cases,the pass-through entity will permitted to prepare the indirect cost are expected to have a long life.Under ,
have knowled• ge of-the subrecipient _ proposal(including similar documents, these circumstances,it does not seem
sufficient to estimate the subreci• pient's such as the cost allocation plan,or the appropriate public policy to restrict
• total Federal expenditures.Another disclosure statement required by OMB auditors who prepared the original
techni• que would be for the pass-through Circular A-21).All Federal agency disclosureheaudit
statements from performing
entity to clearly explain the audit • commenters and most State auditor the audit for a long period of time.
requirements to the subrecipient and commenters cited at least an appearance Therefore,the disclosure statements
• then ask the subrecipient the amount of of lack of independence when the same required by OMB Circular A-21 have
its total Federal expenditures. auditor both performed the audit and been excluded from this restriction on
prepared the indirect cost proposal. One auditor selection.OMB will monitor
Audit Cognizance Federal agency commenter stated,"In these disclosure statements and may
Comment Some college and preparing the indirect cost proposal,the revisit this issue again at a later date.
university commenters expressed auditor is an advocate for the client The implementation date for this
concern that the cognizant agency before the Federal Government. We provision is delayed two years until
determination was not consistent with believe it stretches the bounds of audits of fiscal years ending on or after .
the proposed revision to OMB Circular standards for the auditor to be - •June 30, 1999,to minimize any effect
A-21."Cost Principles for Educational considered independent to audit this this provision could have on existing
Institutions" (60 FR 7105;February 6, same indirect cost proposal for the contracts for audit services.For
1995),and could result in an entity purpose of providing assurances to the example,an auditor that prepared an
having one cognizant agency for audit Federal Government."In contrast.C?As indirect cost proposal or cost allocation
purposes and another for indirect cost and non-profit organizations did not see which is used as the basis for charging
rate negotiation. an independence problem and stated indirect costs in the fiscal veer ending
Response:The responsibilities for . there were significant efficiency June 30,1999,is not permitted to
audit cognizance an.d indirect cost advantages for the same firm to both perform the 1999 audit. 0
•
191'36 Federal Register / Vol. 61, No. 84 / Tuesday. April 30, 1995 / Notices t
- ' meeting the 50 percent rule.This control the recirie nt of Federal funds is audit objective in the cornzliance
process does not significantly change required to maintain.Also,the Circular
supplements will sail be reported as
the authority Federal agencies and pass- permits the auditor to not test internal reportable
ti-.rou h entities now have toperform controls
o tr conditionsa) r material
under g' cJ. ols:+h'.c'� e inadequate and § 510(aj(1) or mai_
additional audits as long as they pay for instead disclose a reportable condition noncompliance under i
them.The addition is that these audits or material weakness and f perorm r
may be ir:corperatad:+-iL�:'.n the r � .S10,a)(..). i
additional tests of compliance as
fra ne++:,rk of the single audit and Generally accepted a project
g standards
€ necessary in the auditor's judgment.
thereby eliminate duplicative audit g require the auditor to project the
planning and reporting. Since the Schedule of Expenditures of Federal
amount of known questioned costs
Federal agency or pass-through entity gl+'c'rls identified in the sample to the items in
must still nay the full incremental audit Comment:;.pest commenters bthe major program and to consider the
cost• OMB does not expect a significant supported the level of detail included in (bothEst estimate of total questioned dete costs
,increase in major programs from this the proposal for the schedule of opiniono o and in The Circular
determining
provision. expenditures ni Federal awards.One •
andoes
nrequire compliance.e auditor The ort an
•It should be pointed out that any Type commenter suggested that it would be exact not unto she projection to rpo of
A program selected to be audited under beneficial for pass-through entities to aruouro e costs.bratetoof
this provision must be low-risk.If it identify in the schedule the amount likely e an audit n but enheeto
were not low-risk,it would have been passed-through to subrecipients.This include an audit latio not thesehen the
audited as a major program under the disclosure would tell program managers auditor's extrapolation of likely
risk-based approach.Therefore,this the amount of program expenditures questioned costs regreaterr the aud.to0.
provision will not reduce the number of that was subject to audit at the pass- Since the requirement for the auditor
high-risk Type B programs audited as through entity level. to consider likely questioned colts is
major. Response:A provision has been not new, and since likely questioned
Required Level of Internal Control added to encourage,but not require, costs which are greater than S1C,000
- Testing pass through entities to disclose in the may be significant to a Flo be included program,
- schedule the total amount provided to
' in auB believes they should be
Comment:All CPA commenters and subrecipients from each Type A in audit findings. In reporting likely
over half of the State auditor program and from each Type B program questioned costs.it is important that the
commenters opposed the proposed which is audited as a major program.Ln auditor follows the requirements of
requirement for the auditor to plan the most cases this information should he § .510(b)and provides
testing of internal control over Federal readily available and would improve the appropriate information for judging the
programs to achieve a low assessed level usefulness of the schedule. prevalence and consequences of the
of control risk.Concerns included that audit finding. - •
it increases the amount of audit work, Attestation on Internal Control and '
limits auditor's judgment,and is Compliance Requirement To Follow Up on Prior
•
arbitrary. By contrast, one commenter Comment:The preamble to the Audit Findings
commenter
stated support for the proposed proposed revision requested comments Comment:One commenter expressed
• requirement because it would force the as to whether a requirement should be concern that the requirement for the
auditor to look at internal control over added for the audits to include a summary schedule of prior audit
Federal programs and to note reportable management assertion and auditor findings to include audit findings from
conditions•when internal control is not attestation for internal control or before the prior year may result in many
adequate. compliance. old audit findingsbeing reported
Response:The proposal has been P werehr majorityppe to after year. g re of.ed year
adopted,with no changes. Some c°rnmenters opposed this
change because it would impose Response:As a practical matter,
commenters appeared to understand additional requirements on entity, unless an audit finding is repeated in a
this provision to mean that,when , management and increase audit cost. subsequent year,there is limited value
control exceptions are found,the Response:In light of the concerns in continuing to follow up on an audit
auditor is required to continue testing raised,this proposed revision has not finding when the Federal agency or
until a low level of risk is achieved, been added to the Circular. . pass-through entity chobses to take no
This is not the case.The auditor is not action. Therefore,a provision has been
. required to expand testing to try to Criteria for Reporting Questioned Costs added stating that a valid reason for
achieve a low level of risk.The auditor Comment:Commenters'views on the considering an audit finding as not •
is only required to plan the audit for a proposed S10,000 threshold for-- warranting further action is that: (a)two
low level of assessed risk and report the reporting known or likely questioned . years have passed since the audit report
results of this testing. costs varied from describing it as too was filed with the central clearinghouse
It has been a longstanding Federal high,too low,or just right.Commenters designated by OMB;(b)the Federal
policy that the recipient of Federal - expressed concern that the concept of agency or pass-through entity is not •
funds is required to establish internal likely questioned costs needed further currently following up on the audit
• control systems to provide reasonable. clarification. . finding,and(c)a management decision
assurance that it is managing Federal . Response:O.'v1B believes that the - was not issued.
•
funds in compliance with applicable : S10,000 threshold for reporting Also,for the first year the entity is laws and regulations.Also,the Single questioned costs provides the audited under this Circular,the prior
Audit Act (31 U.S.C.Chapter 75) appropriate balance between reporting year report may not have included the
•
requires the auditor to test internal all questioned costs and only reporting equivalent of a summary schedule of control over Federal funds subject to large questioned costs.Also,audit prior audit findings.In these cases,the
• that Act.Therefore,it is reasonable to findings which do not result in • auditee may exercise judgment and only
require the auditor to plan the audit questioned costs but are material to the include, to the extent practical,audit
• consistent with the level of internal. types of compliance requirements or an findings before the prior year. t
i
1.
P.
. = ='i
.
/ Federal Re ��-"i�'-• -gister / Vol. 61, No. 84 / Tuesday, April 30, 1996 / Notices
19135
• The pass-through entity's auditor is through entity's review of subrecipient these Type B programs audited as major
responsible for performing sufficient reports which have no audit Endings. need not exceed the number of low-risk•=•
tests to support an opinion on
••
compliance for each major program. Risk-Based Approach To Determine Type A programs.
When subrecipients which are not Major Programs However,should the auditor choose
• audited expend a material amount of Comment:Except for comments from not to exclude a low-risk Type A
funds from a major program,the auditor CPAs,the commenters supported the The limit
the would not affectofthe lisle
•
will need to consider obtaining risk based approach as presented.CPA The limit is on the number of low-risk
compliance assurances by reviewing the commenters opposed th risk-based Typee A programs,se not the number
pass-through entity's records and approach and cited as reasons that it excluded.Also,even though larger
monitoring procedures,performing was inappropriate for the auditor to dollar Type A programs may be
additional procedures to determine determine major programs,there could needexeluded as low-risk,they maye Dill
compliance,such as testing the be problems in submitting a proposal to to be audited to meet the 50
subrecipient's records,or a combination P P percent rule. •
conduct a Circular A-133 audit when it To mitigate any implementation
of procedures. In addition,the pass- is not known in advance which problems with the risk-based approach, -
•
programs will be audited,and there the provision for deviation from use-of
through entity's auditor is responsible
would possibly be cost increases
for determining whether the pass- or the
through entity's system for monitoring auditor to perform risk assessments. •
risk criteria provided in§ 520(i)
subrecipients is adequate and whether While State auditor commenters applies
to the first year this Circular is
subrecipient noncompliance supported the risk based approach, applicableand permits auditors to defer
necessitates adjustment of the pass- PP implementation of the risk-based
those from the larger States cited
through entity's records. implementation problems in performing approach for one year.
t risk assessments on a large number of Implementation of the Risk-Based
Consideration of Triennial Audit
Type B programs. Approach To Determining Major
Comment:Ln the preamble of the Response:The auditor is best suited Programs
proposed revision, OMB stated it was to determine major programs for Comment:A commenter inquired
considering a triennial audit approach reasons,such as independence and the whether a Type A program may be
3 and requested comments on its understanding of risk to Federal
programs obtained as considered low-risk when it was
feasibility.Commenters from non-profit p o part of the audit. audited as a major program in
i organizations supported a triennial Therefore, the proposal has been
audit approach. Reasons cited were adopted,with no changes made to the 133,accordance
s ued March 8,the i 990 and Circular A—
relief of audit burden and a reduction in requirement for the auditor to determine otherwise met the criteria in Appendix
the number of audits required to be major programs.However,in
reviewed as part of subrecipient recognition of the concerns expressed 1,Restes 2 to be cssified as
ponse:The reference inw-risk.App Appendix
monitoring.
r (§ 520),Maor relative to larger audits,Appendix 1 1,step2
Program
(§ .520(c)(1))to the two
However,Federal agency commenters 1 m most recent audit periods means audit
Determination,was modified as follows: periods in which the audit was
were opposed to a triennial audit
approach and cited problems,such as•it Step I (§ .520(b)(1))was performed either under the prior
would alert the non-profit organization modified to provide a sliding scale in Circular A-133 or this revision.
•
determining Type A p rograms.This Therefore,a Type A program which
in advance of which years should be
audited,significantly complicate the change only affects auditees with
1 risk-based approach for selecting major Federal expenditures over S100 million. meets the Appendix 1,step is
' Step 2 (§ .520(c)(2))was (§ the e)(i))criteria f rtow-risk
! programs(e.g.,under the risk based based on the results of an audit
approach a large program is only modified to permit a Federal agency, performed in accordance with the prior
with OMB approval, to designate that a Circular A-133 may be considered low-
rears and with triennial audits this lees'risk Type A program could not be risk.Similarly,the reference in the
could b be once in every and considered low-risk. This deli,ration criteria for glow-risk auditee in
j resultonly limited cost nine years),s(e.g., could be for reasons, such as to help the Appendix 3 (§ _530)to the
under inths triennial audit approach a Federal agency comply with Section 405 preceding two years applies to audits
financial statement audit and testing of of the Government Management Reform performed either under the prior
Act(P.L. 103-356).
internal control would still be required). Step 3 (§ .520(d)(2)) was Circular A-133 or this revision.
Response:The triennial audit modified to add a sliding scale which Request fora Program To Be Audited as
approach was not added to the Circular, defines relativelysmall Federal
However,the Circular does provide programs a Major Program ..
gficant audit reliefur toesnon-profit P grams in terms of a percentage of Comment:Several commenters
total Federal expenditures.This benefits expressed concern that the provision for
organizationsit raising the audit
j organizations
t from by2ai000 t S300,000,auditvery large audits by reducing the a Federal agency or pass-through entity
allowing a 25,0 0 to o numberQ of Type B programs for which to request a program to be audited as a
selecting major risk-basedprograms,p and the auditor mustperform risk
major progr the would s for single
streamlining report distribution assessments.The decrease in the total increase the work required for single
process by use the a certification ibn ion amount of Federal expenditures subject audits and requested that it be removed.
The process
use of a certi willi permitoto audit will be relatively small because A few commenters also expressed
T e risk non-profit t organizatins to of the wide difference in size between concern that these programs would not
loreduce the percentage of Federal the largest and smallest Federal count towards meeting the programs. 50 percent
expenditures required to be covered as Step4 .520(e)) rule.
major programs. The certification form, to ony require one-half f the high was -risk adofied pted:however,o:This provision has been
as discussed later in this supplementaryTypeprogramstoasadopted: a change was made /F ��
information,will simplify the pass- and provide a imi that auditedthe number majorf undler th s process to count towards /
- *--
SUBRECIPIENT UNDERWRITING GUIDELINES
CITY OF OMAHA DEFERRED PAYMENT LOANS
Effective Date: February 12, 1997
These Underwriting Guidelines provide a general overview of the City of Omaha requirements
applicable to Deferred Payment Loans for homes purchased through Subrecipients, including but
not limited to, Holy Name Housing Corporation, Holy Name Affordable Housing Corporation,
United Ministries of Northeast Omaha,Inc.,and Omaha 100,Inc. While it is not possible to mention
all requirements, these guidelines answer most questions concerning the City's Deferred Payment
Loans.
A. PURPOSE
The purpose of the Planning Department's Community Development Division is to promote
the growth,development and revitalization of the City of Omaha through the elimination of
slums and blight;to assist low and moderate income persons and families in attaining decent,
affordable housing; and to create job opportunities for lower income persons through
economic development activities.
This is accomplished by 1)formulating and implementing plans and programs designed to
revitalize neighborhoods, commercial areas,and industrial areas; upgrade the housing stock
in the inner-city; and create homeownership opportunities; 2) administering home
renovation, home construction, economic development, real estate development, and
revitalization programs and activities; and 3) providing services and improved service
facilities for housing counseling,home maintenance,homelessness,job training, education,
elderly persons, handicapped and other socio-economic assistance activities.
B. DEFINITIONS
In order to provide guidance and consistency in providing Deferred Payment Loans to
homebuyers,the following definitions shall apply:
1. Borrower - shall mean one or more persons purchasing a property and any other
persons co-signing on the promissory note.
2. Debt-to-Income Ratio (DIR) - shall mean the monthly total of all mortgage
payments, real estate taxes, special assessments, property insurance premiums and
liabilities (excluding utilities, federal income taxes, state income taxes and social
security payments)divided by the gross monthly income. The maximum DIR shall
be 42% or the percentage established by the lender providing the first mortgage
financing.
1
In computing the DIR, installment debts extending ten months or more and all
revolving accounts shall be considered.
3. Deferred Payment Loan(DPL)- shall mean a loan of City funds made subject to the
terms, conditions and provisions of the loan agreement under which said loan is
made, which shall provide, inter-alia, that the DPL shall become due and payable
upon the sale or transfer of ownership of the property or portion thereof, or interest
therein by the Owner.
4. Employment History-shall mean a verifiable and continuous two-year work history,
or a verifiable source of other income, including but limited to, social security,
pension, annuities, child support, alimony, etc.
5. Household - shall mean all persons who will occupy the property. The occupants
may be a single family,one person living alone,two or more families living together,
or any other group of related or unrelated persons who share living arrangements and
includes:
a. any dependent child under the age of 19. If a child is claimed for income tax
(IRS)purposes,the City will consider the child a dependent.
b. any dependent member over the age of 62 who has lived in the household full
time for a minimum of 6 months immediately prior to application date and
will continue to live in the household full time, does not own other property,
and is dependent upon the borrower.
6. Housing-Income-Ratio(HIR)shall mean the monthly total of all mortgage payments,
real estate taxes, special assessments, and property insurance premiums divided by
the gross monthly income. The maximum HIR shall be 33% or the percentage
established by the lender providing the first mortgage financing.
7. Income - shall mean all actual or projected income derived from full, part-time
and/or seasonal employment, self-employment social security, pension, annuities,
interest or dividends from investments, child support, alimony, etc.
NOTE: Income Averaging is not acceptable.
8. Median Income - shall mean the Median Income by Family Size income data as
published by the United States Department of Housing and Urban Development and
as further updated and revised to reflect the current or most recent income level
statistics. A copy of the median incomes is available upon request at the City of
Omaha Planning Department.
9. Subrecipient - shall mean a public or private non-profit agency, authority or
organization receiving CDBG or HOME Funds to undertake eligible activities.
- 2 - (ice'
C. 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 with the knowledge of the person or corporation contracting
with the City shall render the Agreement voidable by the Mayor or the City Council.
D. BANKRUPTCY
Borrowers who have filed a bankruptcy must have established a verifiable form of credit
over a six month period commencing after the Bankruptcy Court entered its Order of
Discharge. A copy of the bankruptcy document, Court Order of Discharge, and a letter
explaining the reason for filing bankruptcy and the circumstances surrounding it must be
submitted with the initial application for preliminary loan approval by the City.
E. INSURANCE
The Borrower must have at least a hazard insurance policy in force for one year at the time
of loan closing. The policy must have a proper endorsement naming the City of Omaha as
an additional mortgagee. Proper mortgage endorsement is available at the City of Omaha
Planning Department.
F. SALE OF PROPERTY
In the event of sale of the property,the deferred payment loan must be repaid to the City of
Omaha as specified in the promissory note.
G. LOAN ASSUMPTION
Some Homeowners who have received financial assistance from the City of Omaha for a
Deferred Payment Loan to purchase their homes may, at some point, desire to transfer their
homes and have the loan assumed by a new buyer. The following criteria will apply when
a homeowner desires to sell his/her property and requests that the loan be assumed by a new
buyer:
1. The family who assumes a City of Omaha Deferred Payment Loan:
a. must be creditworthy, and;
b. must meet all underwriting criteria contained in these guidelines, and;
c. must agree to live in the house for the remaining term of the Deferred
Payment Loan.
- 3 -
`.
1
2. The purchase price,including the downpayment,must be negotiated and agreed upon
between the buyer and seller.
3. The incomes of families assuming a DPL may not exceed the limits of the median
family income contained in the agreement under which the Seller's DPL was
approved.
4. The new buyer assuming a DPL must assume liability for the balance of the loan at
the time of loan closing.
5. When an Owner of a property with a DPL wishes to transfer his/her property through
an assumption,the Owner must:
a. Secure a potential borrower who is willing to assume the DPL.
b. Negotiate a selling(purchase)price with the potential buyer. The amount of
the downpayment would be paid to the Owner by the new buyer at the time
of loan closing. The City of Omaha will not negotiate with either party over
the amount of this repayment.
c. Write a letter to the Subrecipient requesting that an assessment be made of
the prospective borrower's qualifications to assume the DPL.
d. After this assessment is completed,the present Owner will be notified of the
prospective buyer's eligibility to assume the loan.
6. In the event of the death of an Owner, the heirs will have the same assumption
options as the Owner.
H. CITIZENSHIP
Borrower must be a Citizen of the United States.
CREDIT HISTORY
1. Judgments
Judgments must be paid or satisfied prior to loan closing.
2. Collection Accounts
Collection accounts should be paid or a repayment agreement must be in effect. If
a repayment agreement is in effect,the Borrower must have established a minimum
of six months payment history.
•
3. Divorce
In the case of a divorce, any debts remaining in both names originated prior to the
Court granting of a decree shall be considered a financial obligation against the
borrower. •
4. Legal Separation
Borrower that is legally separated will be subjected to same underwriting criteria as
a married person.
J. NON-DISCRIMINATION BASED ON HANDICAP
1. The Subrecipient shall not discriminate or permit discrimination in violation of
federal or state laws or local ordinances because of race, color, sex, age,political or
religious opinions, affiliations,national origin, familial status or handicap.
2. The Subrecipient shall not discriminate in admission or access to, or treatment or
employment in, its federally assisted programs and activities. To this end, no
otherwise qualified individual with a handicap shall, solely by reason of his or her
handicap, be excluded from participation in, or be denied the benefits of, or be
subjected to discrimination under this or any other City-sponsored program or
activity. The person responsible for coordinating the Planning Department's efforts
to comply with its non-discrimination policies is Marian Todd, Section 504
Coordinator, Planning Department, Suite 1111, 1819 Farnam Street, Omaha,
Nebraska, 68183, (402) 444-5217 (V/TDD) 444-5150)
Persons desiring to file a complaint with the City of Omaha concerning an allegation of
discrimination shall contact the Human Relations Department at(402) 444-5025 (B/TDD
444-5055).
P:\PLN1\4621.SAP
- 5 -
SECTION 3 CLAUSE
All Section 3 covered contracts shall include the following clause (referred to as the Section 3
clause):
A. The work to be performed under this contract is subject to the requirements of Section 3 of
the Housing and Urban Development Act of 1968, as amended, 12 U.S.C. 1701u (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.
B. The parties to this contract agree to comply with HUD's regulations in 24 CFR part 135,
which implement Section 3. As evidenced by their execution of this contract, the parties to
this contract certify that they are under no contractual or other impediment that would
prevent them from complying with the part 135 regulations.
C. The contractor agrees to send to each labor organization or representative of workers with
which the contractor has a collective bargaining agreement or other understanding, if any, a
notice advising the labor organization or workers' representative of the contractor's
commitments under this Section 3 clause, and will post copies of the notice in conspicuous
places at the work site where both employees and applicants for training and employment
positions can see the notice. The notice shall describe the Section 3 preference,shall set forth
minimum number and job titles subject to hire, availability of apprenticeship and training .
positions, the qualifications for each; and the name and location of the person(s) taking
applications for each of the positions; and the anticipated date the work shall begin.
D. The contractor agrees to include this Section 3 clause in every subcontract subject to
compliance with regulations in 24 CFR part 135, and agrees to take appropriate action, as
provided in an applicable provision of the subcontract or in this Section 3 clause, upon a
finding that the subcontractor is in violation of the regulations in 24 CFR part 135. The
contractor will not subcontract with any subcontractor where the contractor has notice or
knowledge that the subcontractor has been found in violation of the regulations in 24 CFR
part 135.
E. The contractor will certify that any vacant employment positions, including training
positions, that are filled(1) after the contractor is selected but before the contract is executed,
and (2) with persons other than those to whom the regulations of 24 CFR part 135 require
employment opportunities to be directed, were not filled to circumvent the contractor's
obligations under 24 CFR part 135.
F. Noncompliance with HUD's regulations in 24 CFR part 135 may result in sanctions,
termination of this contract for default, and debarment or suspension from future HUD-
assisted contracts.
Effective August 1, 1994
„
f
•
G. With respect to work performed in connection with Section 3 covered Indian housing
assistance, Section 7(b) of the Indian Self-Determination and Education Assistance Act (25
U.S.C. 450e) also applies to the work to be performed under this contract. Section 7(b)
requires that to the greatest extent feasible (i) preference and opportunities for training and
employment shall be given to Indians, and (ii) preference in the award of contracts and
subcontracts shall be given to Indian organizations and Indian-owned Economic Enterprises.
Parties to this contract that are subject to the provisions of Section 3 and Section 7(b) agree
to comply with Section 3 to the maximum extent feasible, but not in derogation of
compliance with Section 7(b).
Providing Other Economic Opportunities.
(a) General. In accordance with the findings of the Congress, as stated in Section 3, that other
economic opportunities offer an effective means of empowering low-income persons, a
recipient is encouraged to undertake efforts to provide to low-income persons economic
. . opportunities other than training, employment, and contract awards, in connection with
Section 3 covered assistance.
(b) Other training and employment-related opportunities. Other economic opportunities to
train and employ Section 3 residents include, but need not be limited to, use of "upward
mobility", "bridge" and trainee positions to till vacancies; hiring Section 3 residents in
management and maintenance positions within other housing developments; and hiring
Section 3 residents in part-time positions.
(c) Other business-related economic opportunities. (1) A recipient or contractor may provide
economic opportunities to establish, stabilize or expand Section 3 business concerns,
including micro-enterprises. Such opportunities include„ but are not limited to the formation
of Section 3 joint ventures, financial support for affiliating with franchise development, use
of labor only-contracts for building trades, purchase of supplies and materials from housing
authority resident-owned businesses, purchase of materials and supplies from PHA resident-
owned businesses and use of procedures under 24 CFR part 963 regarding HA contracts to
HA resident-owned businesses. A recipient or contractor may employ these methods directly
or may provide incentives to non-Section 3 businesses to utilize such methods to provide
•• other economic opportunities to low-income persons. (2) A Section 3 joint venture means an
association of business concerns, one of which qualifies as a Section 3 business concern, •
formed by written joint venture agreement to engage in and carry out a specific business
venture for which purpose the business concerns combine their efforts, resources, and skills
for joint profit, but not necessarily on a continuing or permanent basis for conducting
business generally,and for which the Section 3 business concern:
(i) - Is responsible for a clearly defined portion of the work to be performed and holds
management responsibilities in the joint venture;and
(ii) Performs at least 25 percent of the work and is contractually entitled to compensation
,,,,,,:.:proportionate to its work.
•
• Effective August 1, 1994 •
•
CITY OF OMAHA
AFFIRMATIVE MARKETING POLICY
AND MONITORING PROCEDURES
•
Affirmative Marketing Policy
In furtherance of the City of Omaha's commitment to non-discrimination and equal .
opportunity in housing, the City of Omaha establishes' procedures to
affirmatively market units constructed or rehabilitated under any City-assisted
program or project. These procedures are intended to further the objectives of
Title VIII of the Civil Rights Act of 1968 and Executive Order 11063.
It is the affirmative marketing goal of the _City of Omaha to assure that
individuals who normally might not apply for vacant rehabilitated units because . ,
of their race or ethnicity:
. know about the vacancies
feel welcome to apply
. . • have the lajaportunity to rent the units
•
• This policy will be carried out through the following procedures:
•
•
1. Informing the public, potential tenants, and owners about Federal fair
• housing laws and affirmative marketing policies •
•
. The City of Omaha will inform the public, potential tenants, and
• owners about its affirmative marketing policy and Title VIII and
Executive Order 11063.
The City will place public notices in the Omaha World Herald and
the North Omaha Star to inform owners of the program.
. City representatives will meet with property owners and assist them
in preparing program applications as requested and necessary.
Owners selected for a program shall notify in-place tenants in
writing of their involvement in the program and provide them with
the following options:
•
1. Remain in the present unit during rehabilitation.
•
2. Move temporarily to another unit within the project while
his/her unit is being rehabilitated.
3. Permanently relocate or voluntarily abandon the unit during the
•
rehabilitation.
•
. Owners shall post the HUD Equal Housing Opportunity Logo in the
•
project building and display the Fair Housing Poster in their
rental office.
•
•
•
� i
4 { Z
iy
•
• Owners shall use media accessible to minorities when advertising
the availability of rental units •
. Owners shall use the Equal Housing Opportunity logo, slogan or
statement in all advertising.
• Owners shall maintain a non-discriminatory hiring policy.
. Owners shall adopt a fair housing policy.
2. Informing_ low and moderate-income persons ,about available units
Property Owners having vacant rental rehabilitation units may call the Omaha
Housing Authority (OHA) (444-6900) and place units on OHA's "Available Unit"
list. This list is distributed to families who have received Certificates
of Family Participation and are looking for units to rent. The listing will
remain on the "Available" list for 35 calendar days then be removed. If
still vacant, the property may be relisted.
When rehabilitated units are available for initial occupancy, the owner
shall inform the following outreach agencies of this fact in writing and
submit a copy of the letters to the City of Omaha, Planning Department,
Housing and Community Development Division, Rental Rehabilitation Program,
1819 Farnam Street, Room 1111, Omaha, Nebraska 68183:
. Chicano Awareness, Inc.
4821 South 24th Street
Omaha, NE 68107
• Native American Community Development Corp.
2226 Leavenworth Street
Omaha, Nebraska 68102
• Family Housing Advisory Services
2416 Lake Street •
Omaha, NE 68111
. Urban League of Nebraska
3022 North 24th Street
Omaha, NE 68111
3. Recordkeeping
•
The City of Omaha will keep records of the following:
• local media advertisements of the Rental Rehabilitation Program
. contact dates with outreach •agencies and Omaha Housing Authority
• correspondence informing outreach agencies of vacancies
• Race and gender data of initial occupants and persons inquiring
about availability of units
. Tenant Survey forms
•
-2-
' y
4. Assessment of Actions •
• The Owners'. .affirmative marketing .efforts will .be assessed by the City to:
determine good faith efforts of Owners to affirmatively market
vacant units; and,
. • determine whether a sufficient number of racial and ethnic families
• have applied for vacant units.
The City will •take corrective action if it is found that property owners are not
carrying 'out established procedures of the City's Affirmative Marketing Policy
• and Monitoring Procedures.
•
Affirmative Marketing Policy Monitoring Procedures .
1. Duties and Responsibilities of the Owner
a) The Owner shall post the H.U.D. Equal Housing Opportunity Logo in the
building project, and in the rental office.
b) The Owner shall submit to the City a copy of all letters notifying the
outreach agencies listed below of vacancies:
• . Omaha Housing Authority
540 South 27th Street
Omaha, NE 68105
• . Chicano Awareness, Inc.
. 4821 South 24th Street •
Omaha, NE 68107
•
. . Native American Community Development Corp.
• 2226 Leavenworth Street
Omaha, NE 68102
. Family Housing Advisory Services
2416 Lake Street
Omaha, NE 68111
. Urban League of Nebraska •
. 3022 North 24th Street
Omaha, NE 68111
c) The Owner shall submit to the City a copy of all advertisements placed
• in the local newspapers. All advertisements must include the Equal
• Housing Opportunity Logo, Slogan, or Statement.
d) The Owner shall submit to the City a Racial/Gender Form, attached as
Exhibit 1, which includes the name, racial/ethnic characteristics,
income, family size, and gender for each person responding to the '
advertisement.
• e) The Owner shall meet with each in-place tenant and all tenants of
initially occupied vacant units and complete a Tenant Survey Form, a
copy of which is attached and marked Exhibit 2. /` •
-3- �1 _ ��
f) The Owner shall submit to the City the original Tenant Survey Form and
retain a copy for proper recordkeeping.
• g) The Owner shall provide each in-place tenant in the project with a copy
of the City of Omaha's written Tenant Assistance Policy (TAP) and shall
advise said tenant(s) of the impact of the project on him or her. The
Owner shall provide the TAP to the tenant immediately after submission
of the owners application for participation in .the Rental
Rehabilitation Program. •
2 Duties and Responsibilities of the City
a) The City shall assess the affirmative-marketing procedures tip determine
good faith efforts of the Owner to affirmatively market the vacant units
by monitoring the Owners' performance in carrying out the Duties and
Responsibilities of the Owner as outlined in Section 1.
b) The City shall assess the affirmative marketing efforts of the Owner to
determine whether a sufficient number of racial and ethnic families have
applied for vacant units. This determination will be made by reviewing
the information provided on the Racial/Gender Form and Tenant Survey
Form to determine the proportion of racial/gender participation versus
overall participation.
c) The City shall take the following corrective action if it is found that
the Owner is not carrying out established procedures of affirmatively
marketing units:
▪ Notify the Owner in writing of any violations of the Owners Duties
and Responsibilities.
•
. The Owner will be given thirty (30) days upon receipt of written
notification to provide evidence of compliance. Upon the Owner's
request, the City will provide technical assistance. •
• If the Owner fails to comply with the Affirmative Marketing Policy
and Monitoring Procedures the City may declare the loan in default.
•
-4-
EXHIBIT 1
RACE/GENDER FORN
Number of
Loan Mo. Date Vacant Units
Owner Project Address
Person Completing Person's
This Report Phone No. Home:
Project Completion Date Work:
Female
Race/Ethnicity Head of
Family Monthly of Head of Household
Applicant Size Income Household Yes/No .
►
EXHIBIT 2
CITY OF OMAHA
RENTAL. REHABILITATION PROGRAM
TENANT SURVEY FORM
A. GENERAL INFORMATION RACE
Name Telephone
Address APT. #
DATE FIRST OCCUPIED UNIT:
Head of Household is: Male Female Elderly Handicapped
Number_ of Occupants: Total No. Adults No. Children Under. 18
GROSS MONTHLY INCOME OF HOUSEHOLD:
Name Monthly Gross Income
TOTAL GROSS MONTHLY INCOME $
B. HOUSING CHARACTERISTICS:
Monthly Housing Cost:
Monthly Contract Rent $
Average Monthly Utility Cost $
Monthly Housing Cost $
Unit Size: Efficiency ._r 1 BR 2 BR 3 BR Other
C. TENANT ASSISTANCE RECOMMENDATIONS (If Applicable):
Remain in Present Dwelling. ____ Move to Another Dwelling in Building
Rent Elsewhere Purchase Subsidized Housing None
Location/Neighborhood Contributions:
Special Needs (Disabilities, Pets, Etc.)
Size of Dwelling Required:
Remarks:
Owner Date
24 CFR 85.43 ENFORCEMENT
(a) Remedies for noncompliance. If a grantee or subgrantee 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 subgrantee 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 subgrantee'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 subgrantee an opportunity for such hearing,
appeal, or other administrative proceeding to which the grantee or
subgrantee is entitled under any statute or regulation applicable to the
action involved.
(c) Effects of suspension and termination. Costs of grantee or subgrantee
resulting from obligations incurred by the grantee or subgrantee 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 subgrantee 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 subgrantee before the effective date of suspension
or termination, are not in anticipation of it, and, in the case of
a termination, are noncancellable, 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 subgrantee from being subject to "Debarment and
Suspension" under E.O. 12549 (see § 85.35).
11 1
•
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 subgrantee 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 subgrantee 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.
9124u
o
.:tiz _
Thursday
•
ber 3,
•
Novem 1983
=
410 7.•
•
•
re���
,
Part Ill
rZe
Office of
Management and
Budget
a Department of.
.......______ =........
Defense
...1.-_,.___:= = . . General Services
Administration ..
.
Lr—• -� Circular A-122: Cost Principles for
_ Nonprofit•Organizations; Lobbying and •
f Related Activities
P—
r: j •
ap L,r= ; r •
i ,
Fedaca
50880
t Risgis / Vol, 48; No. 214 / Thursday, November 3, 1983 / Notices
OFFICE OF MANAGEMENT AND. •to Use-a more limited definition of
BUDGET • unallowable costs:and compliance and a myriad f statutory
•to clarify and limit reporting and provisions mandating that no federal
Circular A-17Z:Cost f+rin p g funds be used for lobbying purposes.
Nonprofit 12.2.:Cost
.fof recordkeeping requirements in the spirit and to comply,in balanced fashion,with
Related Activities Lobbying d of the Paperwork Reduction Act. fundamental First Amendment
•
III.Background of Circular A-12Z
imperatives.
AGENCY:Office of Management end For contractor or grantees to use
GENC. • Circular A-122."Cost Principles for federal monies to engage in lobbying is
ACTION:Notice.Budget
Nonprofit Organizations."establishes an inappropriate use of federal funds for
uniform rules for determining the costs
: I.Summary of grants, contracts, arid other a purpose that was not intended.Such
• agreements.Like other OMB cost misuse of funds diverts precious
This notice offers interested parties an principle circulars for state and local resources from the true mission of the
opportunity to comment on the Office of governments and for educational grant or contract.Moreover,government
Management and Budget's(tom$}•, institutions,A-122 is a management subsidy of the lobbying efforts of its
proposed revision to Circular A-I22. directive addressed to the Heads of contractors and grantees distorts the
"Cast Principles for Nonprofit Federal Departments and Agencies and political process.It favors the political Organizations." The proposed revision is the legal basis for defining allowable expression of some—or
the c a:inns with
makes unallowable the costs associated costs and setting forth procedures for contracts or grants—at the -:pr iisepal of
with lobbying and related activities. recovering them. others, who must ca
Parallel revisions are being proposed for Circular A-122 was first issued in m'on pence otitfca!
expression at their own ex
defense and civilian contractors by the June. 1980. It was developed by an Despite the frequently worthwhile
Department of Defense(DOD or • interagency team made up of the major content of the lobbying conducted by
Defense), the General Service* grant-making agencies and led by OMB, such organizations,it runs against the
•
Administration (GSA), and NASA. Before issuance. public comments were grain of First Amendment government
These proposed revisions follow the A- sought and received end consultations neutrality in political debate for federal
122 revision text. were held with the General Accounting funds to be used in this manner.
The comments printed in the text of Office.The cost principles built upon - tGovern:nent neutrality in the democratic
•the proposed revision are For accounting rules previously in use by process is especially endangered by the
explanatory purposes.They will not be federal agencies in their dealings with practice of using grant or contract funds
printed in the Circular after the nonprofit organizations.The Circular lobbying and related activity
revisions arc final. for
standardized and simplified those rules, because,as a general rule,only one side
II. Supplementary Information Generally, the circular provides that.to the debate is funded.Those favoring
OMB le published a proposal onJanuarybe recovered from the federal grant programs and contracting activity
24. 19A3, to revise A-12Zs government,costs must be necessary. have the grants and contracts: those
treatment of the costa Circular Areasonable,and related to the federally- opposed do not.Not to control this
related treatment
activities.costa
of In lobbying and sponsored activity.In addition,costs practice,then,is not only to subsidize
OMB received approximately g publication, must be legal.proper, and consistent national debate over the extent and
comments he 48i� with the policies that govern the desirability of government spending,
omm and public generaloee ponis.and organization's other expenditures. domestic and military,but to subsidize
private agencies.dp The disallowance of lobbying and systematically but one side of those
Approximately 1t3,500 related costs in the proposed revision is debates.
comments opposed the proposed comparable to the disallowance by Moreover,use of federal funds for
revisions,and approximately 31.800 Circular A-122 of other costs which are private lobbying and related political
supported 'hem.Many of the opposing disallowed on grounds of public policy: activity can give the appearance of
comments expressed support for the for example,advertising,fundraising federal support of one political position
geneuld ral principle that federal tax dollars costs,and entertainment.In each of over another.It can create
se ho
red not
be purposes, but for
lobbying
andat t
these examples,a determination has misunderstanding and interfere with the
means proposed in the January 24 notice abpprn opriate ate or coade that ts efficient practice to of federally-funded not be an neutral, gprogr ms�nAll Arian
would disrupt the legitimate activities of Pp P
oudl grantees and permit federal tax dollars to be used for citizens have the right to receive the
fecontractors.or .nonprofit the grantees
hand,many of these purposes.In this notice,costs of benefits of federally-funded programs
the supporting comments haved implied lobbying and related activities are without being made the captive
or stated a need for regulations proposed to be similarly disallowed, audience for a grassroots lobbying
significantly more restrictive than those IV.Purpose of the Revisions campaign,and without fear that delvery
of services is accompanied by federall all
•
proposed in January.In order to accord The purpose of these revisions is toy-
the issues raised by these comments establish a comprehensive government- funded partisanship in political or public further study, and to permit a new round wide set of cost principles to ensure that This proposal is designed to balance
of public comments on a revised policy controversies.
proposal.OMB withdrew the January 24 used by federally-appropriated
orator grantees
fors are t the First Amendment rights is of federat
proposal at the end of a 45-day public lobbying or related activities.The intent correspondingo and Amendment the
comment period.The current proposal is is not to discourage or in anywayobligation First
significantly changed from the January penalize organizations for lobbying eres and ringithat the government
24
•
proposal. the most important changes efforts conducted with their own
Wr8 " Interest of ensuring that government
have been: but to ensure that the federal' does not subsidize the political
• to adopt an allocation method governmentto does not subsidize such advocacy activities of private groups or
arepunting for the costs of lobbying and activities.In•addition,as later noted.the First Amendment•No person toro receive
has a
related activities: revision is for the purpose of assuringgovernmental
right to receive
governmental funding for political
i
. 4
Federal Register / Vol. 48. No. 214 / Thursday. November 3. 1983 / Notices 50861
expression: requiring grantees and fostered,or"prescribe(d) (as] orthodox" - 'publii.ity'and'propaganda:Thus.there
contractors to bear the costs of their a particular view on such issues. West appears to be no firm distinction between the
own lobbying efforts does not infringe Virginia State Board of Education v. conduct which is premiesible and that which
upon their constitutional rights.Free Barnette. 219 U.S.624.645 (1943). is prohibited.
speech does not mean subsidized OMB has received thousands of Moreover.in the absence of dear and
speech.The Supreme Count emphasized letters from members of the public who fair guidelines enforceable acrnss the
this point in a recent unanimous opinion are understandably concerned when board.agency officials have been
when it stated that the federal they see their tax money involved in reluctant to make politically-sensitive
• government "is not required by the First projects that involve political organizing determinations in particular cases.This
Amendment to subsidize lobbying.. . . for causes they may not support. problem is especially serious where
We again reject the notion that First Furthermore.numerous cases have been there is a natural conjunction of interest
Amendment rights are somehow not cited and documented—by federal between agency officials and their
fully realized unless they are subsidized agencies,the Comptroller General, contractors and grantees. as where
by the State.-Regan v. Taxation with Congress. and the general public—of grantees or contractors lobby for
Representation of Washington. 103 S. federal grant and contract funds that additional appropriations to the agency
Ct.1997. 2001 (198,9). were used for lobbying or related involved.The thousands of grantees and
On the other hand, there are serious n:ti iti ant regulatory
due to prior contractors who receive federal money
constitutional problems with a system gulatory restrictions and are a strong lobbying force in
that permits tax money to be used for limited enforcement efforts. the true Washington.and can use grant and
the political expression of private magnitude of these abuses has never contract funds to help perpetuate their
individuals or groups.Americans have been quantified.Many organizations programs.irrespective of the programs'
the First Amendment right both to receiving federal grants engage in merit or effectiveness.
engage freely in speech and political extensive lobbying and related political The improper use of federal funds for
expression. and to refrain from activity, but in many instances the
P lcbbying and related activities has been
speaking, without interference or control financial and performance reports filed
on the part of the government or its by the organizations are insufficiently In 1919.Congreperceived as a ss problem
legislationany ars
agents. Wooley v.Maynard. 430 U.S. detailed to permit the federal agency to making certain uses of federal funds for
705, 714(1977).The proposed revision is determine whether federal funds have lobbying purposes a criminal offense for
intended to ensure that the use of been used for those purposes and, federal employees: as early as 1948,the
Federalgrants,contracts and other therefore,misused.The problem has
General Accounting Office began to
agreements by private organizations been exacerbated by the lack of any unearth instances of federal grantees
engagingin lobbying does not erode or clear definitions of lobbying, and,in
Y ng using federal Overunds for lobbying
infringe these rights,or particular.of exactly what activities are purposes. the past ten years,
distort thepoliticalconstitutional byunallowable.
process • Congress has attached over fifty riders
Both criminal statutes-18 U.S.C.encoura in or discouraging certain
Section 1913—and appropriations
to appropriations bills addressing parts
forms of political activity. of the problem.In the past few years.
The activities ofgovernment in a restrictions—including Section 807(a)of
the Treasury,Postal Service, and pressure has increased for further steps.
democracy necessarily involve a degree As a result:
General Government Appropriations
of political advocacy,since government Act—currently prohibit the use of • On December 19,1921, the
officials are expected to communicate federal funds for certain types of Department of Defense issued revisions
with the people,explain their programs. lobbying, but there is no clear, uniform to its Defense Acquisition Regulations
and provide leadership and direction.to definition of prohibited activities to (DAR).addressing for the first time the
the nation.Thus.Members of Congress which grantees. , auditors, issue of lobbying costs, and making suts. :
contractors
and their staffs, the President and hiscosts unallowable under DOD contracts.
political appointees.necessarily agency officials,or the public can refer. • On April 27,1982 and October 22,
alitic ate in forms ofpoliticalssari The clear signal from Congress through •
participate 1962.DOD further toughened its rules
the appropriations laws and other g
advocacy. However.it is a distortion of actions has not been translated into, disallowing lobbying costs, eliminating
the rna:.ketplace of ideas for the effective management controls. • certain exceptions from coverage.
government to use its financial power to • On May 28,1982.NASA issued a
The vagueness of existing anti-
"tip the electoral process."El:od v. lobbying restrictions has hampered the new cost principle in the NASA
0;:rn.s. :27 U S.353. 356(1976).by Procurement Regulations (NASAPR)
ability of contractors and grantees to
suhsiciizing the political advocacy making lobbying costs unallowable for
activities of private organizations and comply voluntarily with the restrictions,and has made the Job of auditors NASA contractors.This was revised
corporations.This proposal will ensure. difficult. if not impossible. For example, August 1 .
to the extent consistent with the • On November 2,1982, the General
communications function of the in recent General Accounting Office(GAO) investigations of improper Services Administration issued a new
government, that taxpayers are not lcbbying expenditures, the contractors cost principle in the Federal
required. directly or indirectly."to and grantees were able to urge that Procurement Regulations (FPR)making
contribute to the support of art current rules did not ban the lobbying costs unallowable for civilian
ideological cause(they) may oppose." contracts with commercial
expenditures.As the Investigations
.4hond v. Detroit Bocrd of Education. Subcommittee of the House Armed organizations.
4 it U.S. 209. 235-236(1977).The Services Committee recently concluded: These developments,however.affect
proposal also seeks to avoid the only defense and civilian contracts with
(Tlhere is a deficiency in the
appearance that,by awarding Federal commercial organizations.No generally-
appncpriations acts'prohibition of lobbying
grants. contracts.or other agreements to vv;th appropriated funds.A review of the applicable cost principle has been
organizations engaged in political legislative history of the publicity- issued to control the federal funding of
advocacy on particular sides of public propaganda appropriations ects restrictions lcbbying under contracts and grants to
issues. the government has endorsed. pro%ides no definition of the critical terms nonprofit organizations. (�
•
• '4
,
•
50862 Federal Register / Vol. 48, No. 214 / Thursday, November 3, 1983 / Notices •
thus addresses the final preamble,the proposals are in fact
proposal nonetheless be required to maintain
This
major eirea in which federal cost identical save far the inclusion in the fully documented time records in order.
principles have nut yet adopted DAR proposal of more restrictive to rebut auditor assertions of disbelief of
'restrictions on the use of federal funds definitions of lobbying and related their claims.The A-122 proposal
for lobbying and related activities by activities than are proposed for all other includes specific previsions to safeguard
private organizations.It has been covered parties.) against this potential problem and
prepared in active consultation with the 2.Existing rules have failed to stop or exempts indirect cost employees from
General Accounting Office,which identify abuses:Cases have been cited documentation requirements. including
supports this initiative.The proposal is and documented of federal grant and the creation of time logs. calendars,or
similar in critical respects to the current contract funds that were used for similar records,if they self-certify that
Defense.NASA, and GSA procurement 'lobbying and related activities. they spent less than 25%of their time on
regulations. Parallel tevisions now being Moreover,insufficient regulatory lobbying or related activities.The
proposed by GSA and NASA will' guidance under the current A-122 has proposed revision also mandates that
eliminate all differences: revisions now limited enforcement efforts so that the agency documentation guidance be
being prorosed by Defense will true magnitude of actual abuses has not restricted further by review pursuant to
eliminate these differences save for been quantified.Such audits as now the Paperwork Reductiun Act, to ensure
certain provisions later described in this take place regarding the use of federal it is the least burdensome necessary to
notice which retain more restrictive . funds for lobbying purposes can easily satisfy the documentationrequirement
re uirement
definitions of lobbying contained in the bog down into disputes between objectives.The self-certification rights
present DAR. attorneys and accountants regarding and protections of the proposal are only
V.Necessity for the A-122 Revision definitions,rules and standards.Thus, possible because of the clear definitions
is little regarding many agencies choose not to commit of lobbying and related activities that
the There is little inappropriateness disagreemente using federal limited auditing resources to an effort are elsewhere set forth.It is impossible.
grant and contract funds fur lobbying which,whatever its importance,can risky for grantees and ultimately
and related activities.Still, some have often be limited or even thwarted meaningless to self-certify to •
and re that no regulations should be fn because existing standards arc vague compliance with a vague and ultimately
effect for contractors: alternatively, and unclear. meaningless standard.
others have agreed that none should be 3. The vagueness of existing. 5. The A-122 proposal explicitly
in effect for nonprofit grantees.(Often, standards impose administrative and protects many activities presently
inte and without even appreciating the irony rpretative problems on nonprofit subject to claims of unallowability:A-
ni their positicrs, those arguing for self- grantees:The corollary to the above 122's comprehensive treatment of
exemption strenuously assert the need problem for auditing agencies is that lobbying makes many activities
f„r strung regulation to restrict the use many nonprofit grantees—often the allowable that auditors might currently
.if federal funds for lobbying purposes least financially endowed—are deem unallowable.Examples of the •
„y everyone other than themselves.)The particularly disadvantaged if and as above include:
procurement agencies have properly actually audited.Many grantees may! —Lobbying at the state level to enhance •
ejected the notion of no regulation for lack the resources or access to outside the organization's ability or cost to
civilian. siace and defense contractors. professional assistance to effectively perform the grant or contract:also.in
'i his revision of the OMB Circular is in resist forced.questionable or subjective recognition of principles of federalism.
furtherance of the view that fair, construction by auditors of the presently state subgrantors may, through
coneis.. nt r::.;ulnt:in makes sense for undefined"lobbying"term.Moreover, • appropriate processes. •
anrt is i:: the int,`rojt of the government the absence of clearly defined standards disallowancetate provision for sta ens the
a:, ..':I •;s eunerefit grantees.The ensures that all grantees are now
fult.•v.:.:g points help explain that necessarily uncertain of the allowability lobbying by state ive Branchantees.
pnsit:aa: of many intended expenditures— —All federal Executive contacts
t !t •, stet, •''tiasiL/e to cover whatever their good faith desire not to • except attempts to influence the
'su r it:c :.7r. crrnler tough guAielines spend grant funds for lobbying purposes, signing or veto of legislation.
w.true ry•`ectively exemp:r:rg nonprofit The A-122 proposal clearly defines what —Employee activity related to service
,grcrr:"•,:c from any regulation:During the types of lobbying and related activities • as an elected or appointed official,or
pas; ::years, lohbyir,;provisions far are unallowable and,further and member of a governmental advisory
:nun• r,•'ttirti'e than the proposed A- critically,provides for binding advance panel.
122 reviricor, h.;'.e been added to the cost guidance from agencies in situations —Providing technical advice to
principles,;nvv.;rni tX all defense and where grantees are in doubt as to the legislative bodies in response to
cictli.rc:..;,:,rtc:;:tire:. (These provisions meaning of the Circular. specific written requests.
•
.,re u::•r r:!•,•r+ 1.i.e`vhcrc in the 4. The A-122 proposal also safeguards 8. The Internal Revenue Code and
prear.:t•I.• t Use or federal funds fur against paperwork requirements to
lohbci,ig and related purposes is no less which grantees are presently subject: by ri.g onrctions preventing the use of grantee
an abn:e when engaged in by grantees- Aside from the current absence of funds.for lobbying purposes:'The notion
than by contractors, and OMB knows of definitions of lobbying and related that Code lobbying provisions for tax
• no basis for differential.much less activities,audited grantees are,further, exempt organizations preempt or
highly diffce'ential treatment of the two. effectively subject to the requirement otherwise make unnecessary the
Since par•illel revisions are being issued that they document certain allowable promulgation of cost standards in this
for A-122, the FPR,and the NASAPR expenses charged to the government. area is belied by the fact that those
sets of cost principles, the present This requirement is particularly onerous provisions are for the purpose of
initiative guarantees uniformity of with indirect cost("overhead")
er and status of
lobbying cost rules for both nonprofit employees who frequently spend limited such organizations.Under the Code.as
and profit-makirtg recipients of federal amounts of time engaged in lobbying or long as an organization's lobbying
funds. (As is elsewhere described in the related activities—but who may expenditures do not exceed a certain
)
. , 1 Federal Register / Vol. 48. No. 214 / Thursday, November 3. 1983 / Notices
50863
portion of its revenues. it is eligible for 7. The Comptroller General supports • Efforts to employ state or local
tax exempt status.The Code lobbying the need forA-122 revision:As officials to lobby Congress or state
provisions are only determinative, indicated elsewhere in the preamble,the legislatures;
however. of wherther an organization.Is A-1..2.proposal was prepared in active •
sufficiently devoted to a public purpose consultation with the General Legislative extent liaison they
arcs,but
to justify preferential tax treatment.The only to the that they are directly
Accounting Office,which supports the related to unallowable lobbying
•
provisions do not address the issue of initiative and believes that the proposal activities as otherwise defined by the
whether federal grant monies should be satisfies the concerns which it had
used to subsidize lobbying—the sole expressed earlier. activities
(Alle coveredlegieve liaison
• purpose of cost standards. Indeed,the activities are by DAR.)
fact that the code lobbying And. as noted elsewhere.after a GAO The proposal will make unallowable
y g provisions investigation of lobbying activities by only the portion of costs attributable to
do not address the use of grant monies grantees under Title X of the Public lobbying and related activities—not.as
for lobbyingby has been implicitly Health Services Act, the Comptroller in the January 24 proposal, entire cost
recognizedth ou h gr er 1982: items used in part for political advocacy.
ess on numerous General stated in Septemb
g ppropriation bill
riders prohibiting such expenditures. Clear federal guidance is needed both to Further,and critically, the proposal
See. es.. Pub.L.97-377,section 509:Pub. ensure that Title X program funds are not will provide relief from paperwork and
L.96-74. section 607. used for lobbying and to preclude audit problems such as those
unnecessary controversy over whether experienced under the current DAR.
It is clear that because expenditures grantees are violating federal restrictions. -
by nonprofits are permissible under the The move to revise and make more specific FPR.and NASAPR: for the purposes of
Code does not mean that federal grant the cost principles applicable to all federal accountedng with thi indirect employees
monies should be spent for those grantees is the appropriate mechanism to accounted for on an indirect basis will
purposes. For example. the Code does achieve!hose ends. [Emphasis added.) not he required ds to maintain time logs or
notprohibit tax exempt organizations similar records if they lobby less than
P 8 VI.Summary Description of Proposal 25% of the time.The fedora'government
from spending their revenues on
•
advertising or entertainment.Circular This proposal uses the term"lobbying Will rely upon their good faith
A-122. however.allows only certain and related activities" to describe • certification of lobbying time below 25%.
advertising costs.and disallows allunallowable activities instead of the fo tndt for organizations that have been
entertainment costs.Another example is expansive term"political advocacy" found to have materially misstated
section 503 of the Code, which denies used in the January 24 proposal.This allowable or unallowable costs within
tax exempt status in certain instances to reflects a significant tightening of the the preceding five-year period.Under
organizations using their revenues for definition of unallowable activity in the the proposal,the absence of time logs or
• the private gain of controlling new proposal. Unlike the January 24 similar records not kept pursuant to
individuals.The regulatory scheme proposal, this proposal will not cover. grantee or contractor discretion will no
embodied in section 503 does not imply. • Lobbying at the lacaI level(covered longer serve as a basis for contesting or
however. that the federal government under the current DAR and FPR); employees. claims for indirect cost
•
should not have more stringent • Appearances before Congress or employees.
restrictions on the use of federal grant state legislatures at their written request In order to provide even-handed.
monies for private gain.This point is (covered under the current DAR); •9 government-wide Defense.
rules for NASA
best understood by the fact that nothing • Contracts with Executive Branch are rodosi Defense, GSA.and NASA
in the Code would prevent many officials, other than in connection with procurementgregulationsvisions in their
grantees from spending all of their grant the veto or signing of enrolled bills,or
funds for lobbying purposes. attempts to use state or local officials as VII.Variances With the Lobbying
Correlatively, the fact that the Code conduits for unallowable lobbying • Provision of Defense Acquisition
• and other provisions of law regulate the (covered under the January 24 proposal); Regulations(DAR)
business community in its lobbying . • Litigation on behalf of others not A standardized lobbying activtt;rs. e.g.,Section 162(e),IRC; e g provision
directly authorized by grant or contract that will govern grantees and
Federal Election Campaign Act,2 U.S.C. (covered under the January 24 proposal); contractors alike resulted from
Sections 431-456, does not mean that • Lobbying at the state level that extensive negotiations among the four
there should be no provisions in the would affect the organization's ability or agencies which are responsible for the
OAR. F'PR or NASAPR regarding such cost of perforr,!inr a grant or contract • major sets of cost principles affecting
activities. Some in the business (covered under the current DAR. FPR, grants and contracts: the Federal
• corn mi:nity have suggested that current and NASAPR); Procurement Regulations (FPR), which
provisions regarding the unallcwability • The entire cost of menbershi dues covers civilian contractors and which is
of lobbying expenditures should be a P administered by GSA: the NASA
superseded by definitions of lobbying to rode associations or other
organizations which have lobbying as a Procurement Regulations e contractors
R):the
• set forth in the Federal Regulation of "substantial organizational purpose" DAR,which covers defense contractors
Lobbying Act. 2 U.S.C. sections 261-270. t and is administered by the Department
(covered under fire January
That p.•;i►ion has been properly 24 proposal). of Defense;end Circular A-122,which
rejected. and no Congressional intent or Unallowable activities will consist of: covers nonprofit organizations and is
operative theory can seriously support • Federal,state or local electioneering implemented under the guidance of
the n:bon that the.Code.lobbyists and support of campaign organizations. OMS.
reistr.:lion laws or any other like PACS. and the like; Although exact conformity was
st.,tu::es permit the government to avoid • Direct lobbying of Congress and,to reached between the lobbying
its responsibility to assure that federal the degree noted above, state • provisions in the FPR. NASAPR,and the
grant ,nd contract funds are spent for legislatures: A-122 proposal. four exempted activities
authorized purposes and intended and • Crass roots lobbying concerning under these regulations are restricted
best uses. state or federal legislation: under the DAR proposal.The ac!ivit•les
• I
. Lam_ \.
IC —
50864 Federal Register / Vol. 48. No. 214 / Thursday. November 3, 1983 / Notices r
allowable under the proposed A-122. Institutions of Higher Education. spent in lobbying by such employees.or
FPR.and NASAPR.but unallowable Hospitals. and Other Nonprofit upon other evidence not precluded
under the proposed DAR are as follows: Organizations: Uniform Administrative above.As earlier noted,the absence of
(a)Local lobbying activities to Requirements." (See.e.g.Circular A-110. time logs or comparable records for
influence officials on local concerns. Attachments C and F.)The Circular. indirect cost employees not kept
a-(bi).Provtance dito gtchnicladvice
or inter alio,generally requires grantees to pursuant.to the discretion of the grantee
Congressorstate keep for a period of three years. or contractor will not serve as a basis
legislatures,or members or committees "(f)inancial records,supporting for contesting or disallowing claims.
thereof,in response to a specific written documents, statistical records.and all Only if a material misstatement is found
request:and other records pertinent to(grants(."and on the basis of other eviderce can an
the(c) L a level: and
related
d activities
at to access for audit purposes "pertinent agency require the keeping of time logs
(1)s the purpose ofhooks,documents.papers and records fur such employees.This avoids the
influencing legislation directly affecting of' • • recipient organizations."
the ability of the organization or cost to As later described in the preamble. necessity lobbying havingf s who engage t
the organization of performing the grant the proposal also modifies. in certain incidental of their lobbying federalto account
or contract: or(2) in the case of states' situations, the ability of auditors to for all of time to agencies.
subgrantees. if the restrictions are require the creation of certain Subparagraph a(5)requires agencies
waived by the state (the subgrantor) documents and records.See paragraph resolutionto procedures for issues arising
through appropriate state processes. 1.a.(4)of the proposal. re definitional iae
(d) Legislative liaison activities that As with the DAR.FPR,and NASAPR, under this revision.This will alleviate
are unrelated to unallowable lobbying and as is already the case under A-122's the inevitable problems of interpretation
activities. as otherwise defined in the general rules for unallowable costs.the at the margin and will avoid creating a
proposal. costs identified as unallowable by these disincentive for organizations to engage
VIM analysis revisions include not only costs of the in borderline activity merely because of
The proposed revision comprises direct activity but also the costs of other the uncertainty of applicability of the
p' P activities directly supporting such direct provisions.
three paragraphs.The first creates a activity.Under the proposal.for Subparagraph b defines five
new paragraph in Attachment B to example, if a lobbyist spends four hours categories of lobbying and related
Circular A-122. to be called "821 lobbying the Congress and an additional activities that are unallowable.It should
Lobbying and Related Activities." eight hours in study,consultation. and. be read in conjunction with
Paragraph B21 consists of three preparation for the lobbying,the full subparagraph c,which establishes
subparagraphs' twelve hours are disallowed,along with exceptions to these prohibitions.
Subparagraph• a establishes an the cost of anysupport
t�lbiat ra establishes
for the overall services and any Subparagraph b(1)makes unallowable
revision. Subparagraph a(1)represents other costs attributable to the lobbying certain electioneering activities at the
no departure from the current principles activity, federal, state,or local levels.It applies
of cost allocation familiar to grantees As emphasized in the comment to referenda as well as to elections of
and contractors. While the precise detail published along with the proposal's text candidates to office.The restrictions •
of ende reporting only the portion of cost items allocable shouldp g procedures will necessarily to the lobbying activity is unallowable. organs bet familiarsn to nonprofitae
he set according to individual agency This departs:from the approach taken in bygan0.5.C.Section othey are prohibited
p;tract ice. this paragraph establishes a the January 24.1983,proposal which by 28 U.S.C. 50f(cJ(3).
general format similar to,and no more made the entire cost of any cost item Subparagraph b(2)makes unallowable
onerous than. that now applicable to used for lobbying activities unallowable. the financial or administrative support •
comparable unallowable activities.See. Subparagraph a(2)makes clear that g political
for example the HHS"Guide for of political entities—including
Nonprofit the Organizations"(May 1S83j, at the certification required as a part of the parties.campaigns,political action
(Sample Indirect Cost 198l financial status report required under committees, or other 73organizations—
p.Format—Direct Allocationv Method).. Attachment C of Circular A-110 is with the purpose of influencing
deemed a certification of compliance elections.Thus,it bars indirect support
Indirect cost rate negotiations are (paragraph of electioneering activities through
conducted between an organization and with this revision B21,
a stride cognizant et a "Lobbying and Related Activities").It is intermediaries.
organization-by-organizationingozantagencyon anrather than important that a responsible official of . • Subparagraph b(3)makes unallowable
on a grant basis.This approachthe contractor or grantee investigate and the costs of attempts to influence state
will save agencies ensure compliance with these or federal legislation.Unlike the January
and recipient provisions: however,no new paperwork 24.1983.proposal.this proposal confines
urganiza:.:ns considerable time and is required.
effort in cases where the organization leg reach of ut not
xecu ivebying to
receives more than one rant or Subparagraph a(3)restates the general legislative,but not executive.
g rule for cost documentation,but is de,;isionmaking.This is the traditional
contract.Further, the subparagraph modified by subparagraph a(4). which understanding of lobbying and was
•
follows existing accounting practice and provides that for the purposes of strongly urged by many commenters.
emphasizes that lobbying and related complying with this revision.• costs must he identified and dealt with organizations are not required to Many
r stressed the nececommentinssity organizationsand
apporpriately: in accordance with the prepare or maintain time logs, appropriateness of contacts with
Circular's provisions. cu!endars, or like records to document officials charged not with passing laws
No detailed record•kceping the time spent by indirect cost
requirements have been included in this employees who state in good faith that Executive in Branch g bbyin g the . hmadee only
proposal• as such requirements are they spend less than 25%of their time on unallowable are attempts to influence a
generally set forth for all nonprofit lobbying and related activities.This organizations in ONIB Circular A-flu: ldecision ilti ton, and attempts
to ed
means that the agency and auditor must IPgislatioh,and attempts to use state
"(;rants and Agreements with rely nn the good-faith estimates of time and local officials as conduits for
R
Y Federal Register / Vol. 48, No. 214 / Thursday, November 3. 1983 / Notices 50865
grantee and contractor lobbying of unallowable.Under the DAR.all lobbying exempted from unalluwability
Congress or state legislatures. • legislative liaison activities are deemed under this section must be "directly
The coverage of subparagraph b(3) unallowable. related"to lower costs or better
has been limited to state and federal Subparagraph r:sets forth five performance of grants or contracts.
legislation in these proposals.unlike the exceptions to subparagraph b.The costs Lobbying in the case of secondary.
prohibitions in the internal Revenue of activities described in subparagraph c tangential or speculative links between
Code. the DAR,the FPR.and the are not unallowable under this proposal. proposed state laws and grant or
NASAPR. because it is difficult to Note that this does not necessarily make contract costs or performance will
distinguish between legislative and such costs ulluwnh/r:alluwahility or remain unallowable.
executive lobbying at the local level. unallowability of such costs will be • In recognition of the principles of
. Many of the comments received from determined by the terms of the grant, federalism.states which are subgrantnrs
• organizations critical of the January 24. contract, or other agreement involved. for federal grants may, through
1983. proposal gave examples of Circular A-122 does not authorize costs appropriate state processes, waive the
contacts with local officials that are or expenditures:it exclusively limits the disallowance provision for state
vital to carrying out grants or allowability of costs or expenditures. lobbying by state subgrantees.
contracts—for example, obtaining Subparagraph c(1)exempts the The final exception. in subparagraph
zoning charges. police protection.or provision of technical advice or c(5), is for any activity specifically
permits. At the local level, there is no assistance to a legislature upon a authorized by statute to be undertaken
rigorous separation between legislative specific written request.This includes pursuant to the federal grant,contract.
and Executive Branches, and it would not merely testimony, but also or other agreement.The provisions of
be difficult to construct or enforce a rule conferences with legislators and staff this Circular do not override statutory
regarding legislative lobbying at the when requested.The exemption is law
local level. meant to be permitted on a limited hs
u enm
Paragraph 2 rbers paragraphs
As indicated.however, in keeping basis, to fulfill the specific informational B21 through B of ircular agrap
—122's
with the intent of the revision.b(3) needs of legislatures.and members and Attachment B.Since the cost items
includes a phrase clarifying that efforts staffs thereof: covered under Attachment B are
expended to influence state and local Subparagraph c(2),patterned after 26 numbered in alphabetical order,
officials to accomplish the lobbying U.S.C.4911(d)(2)(E),makes clear that "Lobbying and Related Activities"is
activities defined in b(3) are likewise communications with Executive Branch appropriately designated as paragraph
unallowable.Under the proposal,the officials are not unallowable. with two 1321,necessitating the renumbering of
government would not reimburse the exceptions:(1)to influence a decision to paragraphs B21 through B50 as B22
• cost of meeting with mayors or city sign or veto legislation or(2) to influence t•
hrough B51.
council representatives if the purpose is state or local officials to serve as •
to convince them to lobby the Congress conduits for unallowable lobbying Paragraph 3,like paragraph 2.is a
for legislation that the grantee or activities.as defined by this revision. technical language change.It changes
contractor favors. Subparagraph c(3)ensures that the the former term"lobbying"to the new
Subparagraph b(4)deals with grass salary of an employee does not become term"lobbying and related activities,"
roots lobbying,and is applicable only to unallowable because of participation in as used in this revision. .
grass roots campaigns concerning civic affairs as an elected or appointed 1X.Legal Authority
legislation.This provision is not meant official or member of a governmental The responsibility for implementing
to disallow associations from informing advisory panel. P Y
their membership about legislative Subparagraph c(4)exempts lobbying grant programs, including the power of
developments or soliciting their or related activity at the state level administration,has been delegated by
members' views as a basis For where it directly affects the ability of or Congress to the grant-and contract-
developing the associations'own cost to the organization of performing making agencies.Those agencies have
legislative positions. the grant or contract.Such lobbying can• the direct legal authority to establish
The proposal's definition of grass directly benefit the federal government. cost principles and,prior to the late
roots lobbying is less inclusive than the The proposed exception does not permit 1970's,did so in a piecemeal fashion
Internal Revenue Code definition.in that the use of federal funds to lobby state , without coordinated government-wide
the IRC includes local lobbying:and legislatures to promote the ideological standards.OMB's legal authority in this
restricts "any attempt to influence any objectives of the organization. merely process derives from the President's
legislation through an attempt to affect because those objectives are consonant constitutional authority to"Take Care
the npi.7ions of the general public or any with the purposes of the grant or that the Laws be Faithfully Executed."
segment thereof."This subparagraph contract. A recipient of a grant for U.S.Constitution,Article II.Section 1 as
restricts only efforts to obtain specified services to the elderly cannot thereby well as from general supervisory
lobby ing actions an the part of the engage in lobbying on behalf of the responsibilities vested by Congress in
public. (See 26 U.S.C.4911(d)(1)(A)). concerns of the eldery.Rather, the the President and in OMB.
Subparagraph b(5)makes unallowable lobbying must relate to the Grants management responsibility
the cost of legislative liaison activities organization's direct performance of the was placed in OMB by Executive Order
• when they relate to unallowable grant or contract.Fur example.a grantee No.11541 (July 1.1970),pursuant to
lobbying and related activities as in a drug rehabilitation program might Reorganization Plan No.2 of 1970.5
defined in paragraph b.This distinction be able to lobby a state legislature for U.S.C.App.Subsequently,grants
recognizes that while the primary laws permitting the prescription of management authority was transferred
purpose of an organization's "legislative methadone to heroin addicts.or a to GSA by Executive Order No.11717
liaison" unit is ordinarily to direct and grantee distributing dairy products to (May 9.1973)and retransferred back to
prepare for what has been defined in the needy might lobby against an OMB by Executive Order No.11893
this revision as unallowable lobbying. increased excise tax on milk that would (December 31,1975).Relevant statutory
there are many other functions served increase its distribution costs.It should authorities include the Budget and
that this revision does not make be ur.derstood.however. that state Accounting Act of 1921.ch.18,Section
a
50866 Federal Register / Vol. 48. No. 214 / Thursday, November 3. 1983 / Notices •
209,31 U.S.C. Section 18: the Budget and years.Although it has never enacted would be classified as unallowable
Accounting Procedures Act of 1950.ch. comprehensive legislation to address the under these revisions.Subparagraph c(5)
94r,,Section 104, 31 U.S.C.Section 18a: use of federal funds for lobbying of the proposal makes any such
Pub. L.No.97-258. Section 1.31 U.S.C. purposes an a government wide hasis. specifically authorized activity
Section 3507: Pub. I...No.93-400.Section Congress has used the vehicle ofallowable:
3.41 U.S.C.Section 402.Under these and tw thus.thisenacted revision does not
other general management authorities, appropriations acts to curb some of the conflict with any statutes but is
more flagrant abuses and to prod the consistent with the broad thrust of
OMII may develop plans for
better management with Executive Branch into action.Over the congressional policy in the area.
implementing view efficient ette andm economical l past ten years, some 40 to 50 riders have As noted, this proposal has been
been attached to appropriations bills to prepared in active consultation with the
service"and may issue supplementary address some aspects of the problem. General Accounting Office, which
interpretative guidelines"to promote These consistent and efficient use o different formulat ons, but have asriations riders use say thsupports isproposal initiativeai sthe
ed concerns
nernbelieves that
procurement contracts,grant ccmnion element the prohibition of the which e GAO adeexpressed earlier.
agreements, and cooperative use of appropriated funds for publicity
agreements."In its capacity of or propaganda purposes designed to
exercising the President's general X.Enforcement
exercising
functions over the support or defeat legislation.One such Circular A-122 is a management
management fur.:, OMB has the power appropriations rider,Section 607(a) of directive to federal agencies
toExecutive u v B and direct the e the Treasury. Postal Service,and establishing cost principles for use in
super ofe federal ect the management General Government Appropriations connection with grants and contracts
Agencies,s, in turn, incorporate the Act, applies across the board to all with nonprofit organizations. It does not
provisions and requirements of federal agencies: contain its own enforcement
applicable OMB circulars into grant and Na part of any appropriation contained in mechanism, though its terms are
contract agreements through regulations, this or any other Act,or of the funds incorporated in grants and contracts
tt contract terms,s u otherg meann, available for expenditure by corporation or through agency regulations or grant
i ats or contract
the,Circular or vme provisions agency,shall be used for"publicity or instruments.The degree and nature of
become legallyane binding upon contractors propaganda"purposes designed to support or
defeat legislation before Congress.(Emphasis enforcementro o thesepeanti-lobbying, re re,
and grantees. Moreover, it has been held added). provisions will depend, therefore,on
that the provisions of OMB Circular A— operational experience and competing
demands on enforcement
102 are legally applicable to grants even The Department of Interior
Appropriations Acts use the following This analysis of enforcement is
when the grant-making agency has notrces.
formulation,which is more restrictive descriptive rather than prescriptive:it is
explicitly implemented the Circular.
Qonnar Corporation v.Metropolitan than the Treasury formulation: presented to provide a context for public
.4tlonta Rapid Transit Authority,441 F. No part of any appropriation contained in understanding of the proposal.
Supp. 1168,1172 (N.D.Ga.1977). this Act shall be available for any activity or 1. Voluntary Compliance.The
the publication or distribution of literature bedrock for enforcing these provisions is
Circular A-122 is on the same legal
footing. that in any way tends to promote"public voluntary compliance by grantees and
In summary, the legal authority for support or opposition"to any legislative
OMB cost principles derives from proposal on which congressional action is not contractors.In the past,restrictions on
related activities have been
OMB's delegated authority from complete,in accordance with 18 U.S U.S.C.1913. the use of federal funds for lobbying and
Congress and the President-to manage The Labor, Health and Human inadequately communicated and
the Executive Branch with a view Services, Education, and Related defined.Neither agencies nor recipient
•
toward economy and efficiency,as it Agencies Appropriations Act states: organizations devoted much attention to
affects the agencies' exercise of their No part of anyappropriation contained in proposal is expected to
•grew'administration functions. them.This
this Act shall be ue t pay the salary or . improve compliance significantly by:
rats proposed revision,like cost expenses of any grant or contract recipient or • Defining unallowable activities ao
r•.tnciples disallowing advertising costs, agency acting for such recipient to engage In that organizations can comply in good
fundraising costs, and entertainment any activity designed to Influence legislation faith,and
costs, is directly related to the efficient or appropriations pending before the and economical administration of Congress. • Providing formats(indirect cost rate
grants,contracts, and other agreements. Other agencies and entities affected • snegotiations,tatus report)certificationfinancial
inwhich responsible
By prohibiting the use of grant and byappropriations
contract monies for lobbying or related te enrlly applicable p provision in the confront the isdition to officials of the sue of the organizato s�11
activities (unless specifically authorized Treasury appropriation)include
to be conducted with grant or contract Defense,State.Justice, Commerce, Tcoo assistanse.
f cads by statute•). Funds can be directed District of Columbia, Legal Services agencies shall be organizations in cres I
toward their proper uses, thereby be prepared to resolve g�town vi their
Corporation,ACTION,Community o greater public benefit.As the Services Administration,and Health th definitional potential
expendituresitun concerning
Comptroller General has noted,"The Systems Agencies.Taken as a whole, prrocedure should reduce the inevitable
trust principles applicable to all federal these provisions indicate a far-ran gin
gntees is the appropriate mechanism Congressional concern to control the use marrgin�y of interpretations at the
i 1
to achieve these ends [of ensuring that of federal funds for lobbying purposes, 2.Sanctions. Penalties for violations
program funds are not used for Neither legislation nor legislative history
I•1Irhyir,Xl•�'�%t10/1•iRD--62_]u6 pry of this revision are the same as for(September 24. 198 I at 27. suggests any deliberate departure by the violations of existing A-122 provisions.
The larger 24 1 8for2) the proposed Congress from this principle. The principal sanction in the event of
revision is further su in serveral specific instances, minor or unintentional violations of
pported by a series Congress has directly authorized the use these restrictions is cost recovery,i.e..
of congressional actions over the last 20 of appropriated funds for activities that the federal agency will obtain
'`ti
Federal Roister / Vol. 48. No. 214 / Thursday, November 3. 1983 / Notices 50867
' reimbursement from the contractor or activities and 40%on federal grant On the other hand.considerable
grantee of misspent funds.In more activities.40%of the salary may be • problems of definition and interpretation
serious cases.contracts and grants can allocated to the grant.This approach is arise when terms such as"substantial"
be suspended or terminated,or consistent with the DAR. FPR. and are used to define the point at which the
contractors and grantees can be NASAPR lobbying cost treatment entire cost of a meeting or conference is
debarred from further awards.The provisions, as well as the traditional to become wholly unallowable.
availability of these sanctions for accounting method of prorating costs Given the inherent difficulties in using
onviolating the
iaanaslo by ng restrictions
between allowable and unallowable cost principles to attempt to deal with
PP P g activities. this problem,it appears that the better
confirmed by the Office of Legal An alternative method of allocating approach would be for agencies to adopt
• Counsel of the Department of Justice. costs of items used for both lobbying
3.Advance screening. One of the most actitvities and grant/contractP g more stringent meetings policies regardingthe
effective means of enforcing these that was consideredandre e purposes fundingthey and conferences
restrictions is to ensure that grants and rejected was when are likely to finance or
contracts officers are aware of the past the concept that no federal money can otherwise support clear lobbying
performance of organizations seeking be used to pay for any portion of a cost activities.(See Office of Management
new or continued funding. If an item that is used for lobbying activities and Budget Memorandum. M-82-4:
organization has not devoted past (1) in any way,or(2) over 5% of the "Improper Uses of Federal Funds."April
time.
appropriations to the grant or contract 26. 1982.)
purposes. and has materially diverted The OMB proposal published on 2. Definition of Lobbying Activities.
them to lobbying(or other extraneous January 24. 1983 followed this approach. One of the weaknesses of current
activities).questions can legitimately be Commenters argued that it would restrictions on tax-funded lobbying is
raised as to whether additional grants or increase the cost of performing federal the lack of a clear and detailed
contracts would be appropriate.Once grants and contracts because it would definition of exactly what is and what is
uniform and understood cost principles effectively require them to separate their not covered.In constructing the
art:in place. it is expected that agencies lobbying activities from their grant or definition in this proposal, OMB has
will take steps to ensure more thorough contracts activities.This could lead to drawn upon experience and language
advance screening of grant and contract inefficient duplication of equipment and from Internal Revenue Code definitions.
applications. facilities—with attendent increased statutory provisions. Defense. GSA.and
• 4.Audits. Contractors and grantees costs to the taxpayer.They also argued NASA procurement regulations, and
are currently subject to audit that it would burden the First similar sources.Care has been taken not
requirements.and to the possibility of Amendment rights of contractors and to prohibit activities that are
audit by agency Inspectors General or grantees because engaging in lobbying legitimately necessary to the fulfillment
the Comptroller General; However,most activities could result in disallowance of . of the grant or contract.
audits have not focused on compliance otherwise legitimate costs.The purpose The proposal addresses the various
with anti-lobbying provisions. Audit of this proposal,however. is to enforce categories of lobbying (e.g.,grass roots
strategy and priority will continue to be governmental neutrality by preventing lobbying),and defines the unallowable
established by the independent the use of federally appropriated funds activities.A separate section is devoted
judgment of these enforcement bodies. for lobbying and related activities.To to activities which are exceptions to the
After uniform cost principles are the extent that an approach would general restrictions.
promulgated.it will become possible for significantly increase costs or burden The. more vigorous and effective audit First Amendment expression. it is unallowable following activitiesalirneive have beenions
enforcement to takeplace. Stratified P ofconsideredandrcd:
inappropriate. re audits and other strategies can be used Some commenters have urged that rejected:
to create an incentive for greater ' nonprofit organizations should be a. The definitions used in could be
compliance among all grantees and Jonuary24, t983,proposal eau/dbe
contractors. Alternatively.promulgation ineligible to receive any federal funding used:.This would result in disallowing.
of a defined set of rules can and will if they engage in any lobbying activities. among others,the following categories
Such an approach would be more
serve as a protective barrier against of activity not covered in this proposed
audit harassment. and will and should restrictive then OMB's January 24.1983, revision:
, makeaudit for fairer and simpler audits for •proposal and would be strongly opposed
P • Lobbying on local concerns at the
grantees and contractors.This should be l:y many affected groups. Furthermore.a local level.
wholesale preclusion of participation in
of particular benefit to smaller grantees • Lobbying at the state level, even
an.1 contractors who lack the means and grants and contracts as a result of even when the lobbying isi
• a modest amount of lobbying would y ng directly related to
support staff to contend with audits raise difficult questions of legality and the cost to or ability of the organization
under the vague.ambiguous. and efficiency in a case where the applicant to perform the grant or contract.
differential rules now in effect.With was otherwise the most qualified
• Attempts to influence "licensing.
expanded Inspector General and agency a licant, grants,ratemakin formal or informal
audit staffs now in place. the protections PP adjudications,guidelines.and olio
afforded by the proposal are manifest. One variation from the allocation 1 8 policy
principle considered by OMB related to statements."
1 XI. Alternative Approaches to Major the costs of conducting meetings and • • Contacts with Executive Branch
Issues in The Revision conferences that are held in "substantial officials concerning any governmental
1. General Cost Treatment.This part" to promote lobbying. decisions.
proposal makes unallowable only the The practice of partisan meeting • Litigation on behalf of others not
portion of a cost item that is actually sponsors scheduling large blocks of directly authorized by grant or contract.
used in lobbying activities. as opposed "open time" to facilitate lobbying during • Encouragement of grass roots
to the entire item.Thus,if an employee Washington meetings could make the lobbying to influence notice and
spends GO% of his time on lobbying allocation approach impractical. comment rulemaking.
r -
50868 Federal Register / Vol. 48, No. 214 / Thursday, November 3, 1g83 / Notices
•
• • Membership dues or contributions included"making available the results activity—rather than to identify specific
to organizations which have lobbying as of nonpartisan analysis. study,or activities that should not be subsidized
a "substantial organizational purpose." research, the distribution of which is not by the federal government.The result of
Many commenters on the January 24 primarily designed to influence the' adopting any of those previously proposal felt that the scope of outcome of any federal, state.or local established definitions in whole would
unallowable lobbying activities in that election,referendum,initiative,or be to disallow certain activities that are
proposal was too broad and would similar procedure, or any governmental properly allowable,and to allow certain
result in disallowing certain legitimate decision."The current proposal's activities that are not proper purposes
activities appropriately funded under a revised lobbying definition and fur the expenditure of federal funds.
• grant er contract.For example,many accounting treatment do not make such Therefore, the approach of this
contracts with )executive Branch activity unallowable in the first place,so proposal has been to use concepts and
officials at the local,state,and federal the inclusion of such exception-is not definitions from the DAR.FPR.
•
levels are considered necessary to only unnecessary but confusing. NASAPR, and Internal Revenue Code
performance of the grant or contract. b. Lobbying could be defined us (lRC) where appropriate.and,often, compliance with the law, broadly as possible, with a detailed list from them wherre approp ate.to The deviate
Moreover, the concept of lobbying has of the unallowable activities:Some "Analysis" section of this preamble
traditionally been understood to be art criticism was made of OMB's January 24 identifies the areas of deviation and the
attempt to influence legislative rather proposal for not being comprehensive rationale for them.Several areas of
than executive actions. Departure from enough in its restrictions on lobbying particular interest.however. should be
this understanding appears to create activities.Commenters felt that because noted. Unlike the DAR.FPR.NASAPR,
uncertainty and uneasiness among of the ambiguous nature of lobbying and and IRC, this proposal does not include
affected parties.Thus.OMB has rejected quasi-lobbying activities,it was more local lobbying,because of the difficulty
as too broad a definition of lobbying efficient to restrict the broadest scope of in distinguishing legislative from
•
that would deem Executive Branch these activities.As noted above, this executive lobbying at the local level and
contacts (other than in connection with argument was rejected in rewriting the the necessity of frequent contact by
the signing or veto of legislation)as proposal: in fact. the definitions have contractors and grantees with local
unallowable. been made less expansive.
Unlike the January 24 proposal,the officials or matters of administrative
C. The lobbying restriction could concern to the contract and grant.
current draft does not disallow the consist of a broad/but undefined.promotion of grass roots lobbying to r.• f On the issue of legislative liaison
Y 8 prohii,rtti n on lobbying activities:This activity, this proposal basically adopts
influence notice and comment is essentially the approach being used the FPR and NASAPR position in
rulemaking.The reason for the original currently in the grants area through
inclusion of this provision was that such assorted appropriation bill riders.and it when related tot ivit otherwise unallowabunallowable le
rideni;ukings are quasi-legislative in
has not been effective.By not specifying lobbying. When legislative liaison
character and that it is inappropriate for which activities are restricted,agencies activity is performed in preparation for
the government to be financing march are required to do much more contradict
captains.rally orgainizers and other interpretative and negotiation work to revs on s intent l d tomake suchthe activity
such persons for the performance of implement the restriction.Grantees and completely allowable.On the other
such activities in connection with grass contractors are uncertain as to what is hand,legislative liaison can serve other
•
., roots campaigns regarding such restricted,and whether the govenment is functions not made unallowable by this
regulations. On the other hand,the serious in enforcing those restrictions.In revision.
consultation process relative to the
rulrrent ,liaft disclosed serious concerns complicate ate audits conducted to wouldch an approach 3.Documentation methodof cost Requirements:atmen
about .he possible applicability of any determine whethereenWhen the dcost treatment enf was
provi:ion regarding regulations to joint for'lobb yin purposes, and would beu3Cd items changed bfrall totalinv involved
lobbying of cost
or collaborative efforts by grantees or y g anua y partially iosal to h (the
contractors to share information and particularly burdensome to smaller January 24 proposal)to the typical
thereby to ha the comments made grantees and contractors. "proportional"cost treatment used for
bytolby they ,,i improvet enci t madeMB's d. The lobbying restriction could be cost items related to both unallowable.
e , in light federal then above,that this made identical in coverage to that of and allowable activities, documentation
matter intention. in be above.
the current Defense. CSA, or NASA of amounts of allowable and
course should
the comingestudiedduringprocurement regulations,or to the year to determine definition of"influencing legislation"in unallowable costs became a necessity.
whether:I can be known,and if so to the Internal Revenue Code:There would wash to adopt the documentation
what extent, the federal government be substantial advantages to this
now finances grass roots lobbying a philosophy of the GSA.Defense.and
ar.tivitiesina of march captains, rally approach,since current DAR,FPR. NASA procurement regulations'
NASAPR,and IRS restrictions are well- restrictions on lobbying,i.e., to place the
organizers and the like in connection established and, in the case of the
with notice and comment rulemaking. Internal Revenue Code,reasenablywell- prove in all the contractorces or grantee to
Agency auditors and others will defined.However, the DAR,FPR,ad appropriatenessprove instances the
examine this or matter so to determined of a cost.This
examine additional lso as a is neededNASAPR provisions are unfamiliar to approach.while 8 the nonprofit community,while the IRS principles in general,would entail anost-
in the Circular to deal with this matter. restrictions on lobbying by SO1(c)(3) implied burden on indirect cost
The exception in the January proposal organizations are unfamiliar to defense employees to maintain records(time
for distribution of nonpartisan analysis and civilian contractors.Moreover,the logs,calendars,or the like) to establish
for nun-lobbying purposes is made IRS definition of"influencing
superfluous by changes in the current legislation"is intended to idntify the the
bying or rrela related activities.es.This on
drift,and thus has been deleted.As • character of the organization—whether would be particularly onerous for high
previously stated, the exception it is engaged ed in "substantial"lobbyinglevel officials who,in the ordinar
g�8• r
Y
l
Federal Register / Vol. 48, No. 214 / Thursday, November 3. 1983 / Notices 50868
course of business.frequently engage in the federal funds corporate ' giant funds are used for the purposes
only a small amount of lobbying.OMB organizational documents: audit reports: that were intended,and not to facilitate
(along with Defense.CSA. and NASA) publications,newsletters. periodicals.- lobbying campaigns.As noted above.
therefore proposes to allow grantees etc.issued by the recipient organization: current financial control procedures do
and contractors to certify in good faith and/or other information relating to a not permit an accurate estimate of the
the amout of lobbying and related recipient organization's activities? amount of tax dollars now diverted to
activities performed by indirect cost (3)Is the broad exclusion of local ' lobbying efforts by grantees and
• employees (i.e., those who do not level lobbying from coverage of these contractors:whether large or small.
• already have to account for their time provisions necessary or desirable? correction of this problem will produce a
. spent directly on a grant or contract). (4)Are any additional exceptions net gain to the intended beneficiaries of
Only if the employee is engaged necessary or desirable?Are any of the federal programs.The costs to be
(according to the organization's own exceptions provided in this proposal considered are primarily accounting and
estimate or outside evidence) in unnecessary or undesirable? recordkeeping costs for grantees and
lobbying or related activities more than (5)Restrictions on the encouragement contractors,as well as federal agencies.
25%of his time could further of grass roots lobbying inherently These new costs,however.are minimal
• documentation be required. If a require an understanding of the in both absolute and relative amounts.
contractor or grantee is determined to distin;:lion between providing and in many instances the revisions
have materially misstated allowable or information and encouraging lobbying. should reduce audit and compliance
unallowable costs within the preceding The intent of the section on grass roots costs.Furthermore,much of the
five-year period, more extensive lobbying(subparagraph b(4)) is that accounting work that the revision
documentation could be required. internal communications between an requires is already mandated by other
OMB also considered and rejected organization and its bona fide members sections of Circular A-122, or Circular
more extensive"sunshine" provisions to provide legislative information is A-110.This proposal has nonetheless
which would have called for full allowable,but the promotion of been prepared in accordance with the
disclosure by recipient organizations of' membership lobbying is not. In light of analytical requirements of Executive
detailed information concerning their the above. is it desirable to add Order 12291.
personnel. public policy positions, language to the Circular regarding such
affiliations of officers and directors. internal communications: if so.what XIV.Paperwork Reduction Act
publications, and other such form should this language take? Requirements
information. OMB believes such (6) Is the allocation method the proper in accordance with the requirements
• reporting requirements would exceed accounting method for disallowing costs of the Paperwork Reduction Act of 1980.
those necessary to achieve the purpose related to sponsoring meetings and 44 U.S.C.3501 et seq., and 5 CFR Part
of these proposals.i.e.. to ensure that conferences when these are used to 1320.the collection of information
federally appropriated funds are not promote lobbying?Would it be possible requirements contained in this proposed
used for lobbying or related activities by to disallow the entire cost of a meeting revision have been submitted for review
grantees and contractors.However, or conference if a"substantial parr is to OMB's Office of Information and
•OMB has explicitly sought comments on devoted to promoting lobbying?If so. Regulatory Affairs.
this issue. (See Issues for Comment, how should the term"substantial"be Comments about the appropriateness
2.) • defined? ppropriateness
4.Pena/ties:OMB considered and (7)Are there are any cases where the of collection of information
rejected as too stringent a penalty explanatory comments in the proposal requirements in this proposal should be
provision which would require the and the preamble are not sufficiently addressed to Edward C.Springer,Office
return to the federal government of all clear or detailed to enable of Information and Regulatory Affairs.
grant or contract funds received by a understanding of the proposal's Office of Management and Budget.
nonprofit organization found to be meaning? Washington,D.C.20503.(202)395-4814.
engaged in lobbying or related activities.
Instead. OMB has opted to follow the XIII. Designation as"Non-major"Rule Comment Submittal and Further
Information
standard A-122 penalties of cost OMB has determined that the
recovery and. in certain cases, proposed revision to A-122 does not Comments should be submitted in
stispensicn. termination, and debarment. qualify as a "major rule"under the duplicate to the Financial Management
XII.Issues fur Comment criteria as listed in Executive Order Division.Office of Management and
12291: Budget.Washington.D.C. 29593.All
In addition to any other comments. (h) "Major rule"means any regulation comments should be received within 45
the public is specifically invited to that is likely to result in: days of this notice.
co^cment nn the following issues: (I) An annual effect on the economy FOR FURTHER INFORMATION CONTACT.
(I) no the provisions of Subparagraph of 51110 million or more: John J.Lordan.Financial Management
a(;► (concerning the maintenance of time (2) A major increase in costs or prices Branch.Office of Management and
• logs and similar records) adequately for consumers,individual industries, Budget..Washington.D.C.20503(202)
protect against unreasonable federal. state.or local government 395-6823.
recnrdkeepiirg burdens without agencies.or geographic regions:or
rendering these provisions (3)Significant adverse effects on Issued in Washington D.C..November 1.
unenforceable?What changes. if any, competition, employment,investment. 1983.
dre recommended? productivity,innovation.or un the Darrell Johnson, ,
(2)Should broader disclosure ability of United States-based Budge!and 1onagement Officer.
requirements for recipient organizations enterprises to compete with foreign- (Circular A-122J
he included to facilitate the monitoring based enterprises in domestic or export Cost Principles for Nonprofit
of their activities?For example.should markets. Organizations
recipient organizations be required to The principal effect of the proposed g -
provide the agency granting or awarding revisions will be to ensure that federal Circular A-122 is revised as follows: ' '�
f
t .2
v ,
•
•
50870 Federal Register / Vol. 48. No. 214 / Thursday, November 3. 1983 / Notices
a.
1.insert a new paragraph in (5)Agencies shall establish or propaganda purposes designed to support
Attachment B. as follows:"1321 procedures for resolving in advance,in ur defeat legislation pending before
Lobbying and Related Actit;ities." consultation with OMB.any significant (,ingress."E.g.. Pub.L 96 74,Section e07,93
a.(1)Organizations shall include.as questions or disagreements concerning St:'t.5:5.'1he internal Revenue Code defines
part of their annual indirect cost the interpretation or application of "influencing legislation"as inc eral.stg"any
proposal, a statement identifying by subparagraphs a or b.Any.surh advance attempt to influence any(fedral state,ur
category costs attributable in whole or resolution, if in writing,shell be bindingi"ty member
r oron through communication with
in part to activities made unallowable bod .orrbr r employee e a legislative
•
by subparagraph b,and Stalin how in any subsequent settlements. audits.or body.or with any government official or 8 investigations with respect to that grant employee who may participate in the
• • they are accounted for. or contract For purposes of
formulation albs legislation.":3 U.S.C.Comment The fact that a cost included in interpretation of this Circular. Section 4911(d)(1)(B).This provision is
the proposal discussed in subparagraph all) b.Notwithstanding other provisions of narrower than the internal Revenue Code
(such as an employee's salary.an item of this Circular, costs associated with the provisions because it does not apply to
equipment,or the cost of a facility)may be following activities are unallowable: influencing legislation at the local level.
used in part for lobbying or related activities,
asi defined by euboerang or B21 does not (1)Attempts to influence the outcomes Moreover. subparagraph c(5)excludes from
make the terms:rider unallowable. of any Federal. State,or local election, the coverage of this provision any lobbying or
related(2)The certification required as apart referendum, initiative, or similar related to :he tability aty at the tar cost level the
q procedure, through in kind or cash
organization
of the Financial Status Report required contributions, endorsements,publicity. of performing the grant or
tinder Attachment C of Circular.A-110 .or similar activity; contract.
shall be deemed to be a certfication that
the requirements and standards of this Comment:The Internal Revenue Code (4) Preparation,distribution,or use of
and of other of prohibits tax-exempt chariti,ble organizations publicity or propaganda designed to
paragraph,
ar ant of other paragraphsg and from"interven[ing(in(including the influence legislation pending before
Circular
activities,"A2es have been"lobbying compiled publishing or distributing of statements).any Congress or a State legislature by urging
with. P political campaign on behelf of any candidate members of the general public or any
for public office."2e U.S.C.Section 501(c)(3). segment thereof to contribute to or
(•.1) Organizations shall maintain In addition.for purposes of defining
adequate records to demonstrate that "influencinglegislation."the Internal participateh. l inor any massa demonstration.
the determination of costs as being g• gi lobbyi rally, igndorlette drive.w
Revenue Code defines"legislation"to include
allowable or unallowablepursuant to "action with respect to Acts.bills, lobbying campaign, letter-writing or
p gn,or letter-writi
subparagraph a(1)above complies with resolutions,or similar items, : .by the public telephone campaign,for the purpose of
the requirements of this circular. in a referendum;initiative,coestitutione) influencing such legislation:or
amendment,or similar procedure."26 U.S.C. Comment The Treasury.Postal Service,
Comment:As with other costs under this Section 4911(e)(2),
Circular.to the extent that such In one respect,this subparagraph is and General Government Appropriations Act
documentation is not provided by the narrower than the Internal Revenue t part o anyy contains a n ot containedinproviding: is
organization,the amount that cannot provisions,because it is confined to any other Actshallppropa b used islhit or reasonably be demonstrated to be allowable. "contributions.endorsements,publicity,or opag d ... s s used for publicity
up to the entire cost in question.shall be similar activity."in contrast M the broader or propaganda purposes pending
o e support
disallowed. proscription of"participat(ion)or or defeat legislation pending before
(4)For the purposes of complying with louse en[tionl,directly or indirectly • • •• Slat.5 Congress."E.g..P.L.98Rev Section 807,93
subparagraph a, there will be noa Stat.575.The Internal Revenue Code defines
requirement for time logs,calendars,or contributing to,or payingdttherexpenses "influencingtem o influencer any(federaon"to l state,or•
ahem •
similar records documenting the of a political party,campaign,political local)legislation through an attempt to affect
activities of an employee whose salary action committee,or other organization
is treated as art indirect cost,and the established for the purpose of the opinions of the general public or any
absence of time logs or comparable segment thereof."28 U.S.0 Section 4911
P influencing the outcomes of elections: (A).Thissubparagraph ase is more
records for indirect cost employees not narrowly tailored than theseptrovbiain kept pursuant to the discretion of the Comment:The Internal Revenue Service because it is limited to efforts to obtain
•
grantee pu n contractor not serve has included within the list of disqualifying concerted actions-Ott the part of the publir,
as a activities under 26 U.S.C.Section 501(c)(3)the and does not, therefore,include mere
•
basis for contesting or disallowing following: rot'"pa icipa(tlonl or intervenitfon), attempts"to affect the opinions of the general
claims, unless: (a) the employee engages directly or indirectly in any political ublic in lobbying or related activities more campaign on behalf of or in nopoaitio:, to any a trn etros do not lead to concerted action.This
than 25 0 of the time or(b) the candidate for blic afire."26 CFR Section is consistent with the GAO's interpretation of
er +ni;::,ticn has materially misstated p-
R� 1.501(c)(3)-(t:)(:l)(iii), the"publicity or propaganda"appropriations
al!u•.vable or unallowable costs within (3)Attempts to influence legislation
the preceding five year period.Agency rider.See 6-202975(Nov.3,1981).
g pending before Congress or a State
guidance regarding the extent and legislature by communicating with any . includingg attendance at legislative
n-ture of documentation required member or employee of the Congress or sessions or committee hearings.
pursuant to subparagraph a(3)shall be legislature,(including efforts to
gathering information regarding pending
ic'rie:vcd under the criteria of the influence state or local officials to
Paperwork P.eduction Act, to ensure that engage. in similar lobbying activit legpendingislation.a legislation,e, and analyzing t to theec
requirements are the least burden3cme with anyy)•or or thatuch activities
do
not el the extent
necessary to satisfy the objectives of employee connection f official
h a decision lobbying or crelated activities ase to
defined
tins subparagraph. to sign or veto enacted legislation;
C:orune^t:This provision is for the impose Comment The Treasury,Postal Service, by paragraph Comment.-
1.b.hereof.all
of assuring that agencies and auditors must and General Government Appropriations Comment The costs madeell legislative
rely on the good faith estimates of time spent traditionally contains a riderpropiding "Act •liaison tors under are unallowablet Defense for
on lobbying by such eritployees,or upon. art S "No contractors the current outlob evidence.
by p' of any appropriation contained In this or Acquisition Regulations(DAR),Section 15-
any other Act. . .shall be used for publicity 205.51,but are allowable for civilian
•
Federal Register / Vol. 48. No. 214 / Thursday. November 3. 1983 / Notices 50871
contractors under the current Federal enrolled bills.or attempts to use state and affects the ability of or cost to the grantee or
Procurement Regulations(FPR).Section 1- local officials es conduits for grantee and contractor of performing the grant or
• 15.205-52 contractor lobbying of Congress or stile contract:or(b)when states choose to adopt
This subparagraph is narrower then the legislatures. miles waiving such restrictions for their
DAR provisions,because it only makes
legislative liaison costs unallowable if they (3)Any activity in connection with an federal grunt subgrantees.
relate to otherwise unallowable lobbying employee's service as an elected or (5)Any activity specifically
activities. appointed official or member of a
C.Notwithstanding subparagraph b. governmental advisory panel: authorizedrua by statute to ae undertaken,
costs associated with the followin (4)Anylobbying or related activityat or others g the agrefedement.
grant.contract.
g the state evel orgthe purpose of or agreement.
activities are not unallowable under this
paragraph: influencing legislation directly affecting Comment:This circular does not.nor could
(1)Providing technical advice or the ability of the organization or cost to it.limit the ability of Congress subject to
assistance to the Congress or a State the organization of performing:he grant. Constitutional constraints,to appropriate
contract.or other a funds for the use by contractors or granters
reement:however,legislature or to a member,committee, g
or other subdivision thereof. in response state governments acting as subgrantors fur lobbying or related activities.
•
to a specific written request by such may. through appropriate state 2.Renumber subsequent paragraphs
member. legislative body.or processes, waive the current practice of Attachment B.
subdivision: under OMB Circular A-102 making 3. Insert language in subparagraph
Comment.-This tracks the exception at 26 Circular A-122 applicable to nonprofit B.4.b of Attachment A. so that it reads
U.S.C.Section 4911(d)(2)(B). subgrantees with regard to such as follows:
Anycommunication with an lobbying activities at the state level as b.Promotion.lobbying or related
(2) are deemed appropriate. activities(as
ragra
su
executive branch official or employee. Comment:The Internal Revenue Code B21(b) of Attachment By and publicph other than a communication made rovisiucs defintn )' p
expressly unallowable by paragraph P 8"influencing legislation" relations.
cover lobbying at the state and local level,us
l.h.(3) hereof. do the current Defense Acquistiun Comments This is a technical language
Comment:This is identical in substance to Regulations(DAR).Section 15-205.51 and the change,which amends the former term
the exception at 28 U.S.C.Section 4911 current Federal Procurement Regulations "lobbying"to"lobbying and related
(d)(2)(FI.Reud in conjunction with • (FPR).Section 1-15.205-52.This activities."The added language is"or rehired
subparagraph b(3).the effect is to make clear subparagraph is narrower than those activities(as defined by subparagraph 821th)
that the only contacts with executive branch provisions because(1)lobbying at the local of Attachment B)."
officials made unallowable are those in level is not covered.and(2)lobbying at the J1'a nor.sa-soma Ft.d 11-2-aa rn MI
connection with the signing or veto^r state level is not covered if it(a)directly suwao coot?3110-o1-6/
•
•
•
•
•
•
•
•
•
•
•
•
•
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Hand 6500
�.. 111 ma`s
o Ms.s.Department of Housing and Urban Development
`
4.'Ncoe's' Office of Community Planning and Development
e
4rarnParticipans
9
and Departmental
Staff
September 1988 Community
Development R lock
Grant Program
Entitlement Grant
Regulations
)
CCBE: Distribution:W=1,W-3.1, R=1, R-6, Special (CPD
Field Directors)
b
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
Office of th.e Assistant Secretary
for
Community Planning and Development
24 CFR Part 570
COMMUNITY DEVELOPMENT BLOCK GRANT PROGRAM
IL
FINAL RULE
as published in the
FEDERAL REGISTER
(53 FR 34437; September 6, 1988]
MOVE ME. t 1..J G ;
( i) The subrecipient does not assume the recipient 's
environmental responsibilities described at § 570.604;
and
Ni` (ii) The subrecipient does not assume the recipient 's
responsibility for initiating the review
Executive Order 22372. process under
1
•
•
7. Subpart K of Part 570 is revised to read as follows:
Subpart K -- Other Program Requirements.
Sec.
570. 600 General.
570.601 Public Law 88-352 and Public Law 90-284 ; affirmatively
furthering fair housing ; and Executive Order 11063 .
570. 602 Section 109 of the Act.
570. 603 Labor standards.
570.604 Environmental standards.
570. 605 National Flood Insurance Program.
570.606 Relocation, displacement and acquisition.
570. 607 Employment and contracting opportunities.
570. 608 Lead-based paint.
570.609 Use of debarred, suspended, or ineligible contractors or
subrecipients.
570. 610 Uniform administrative requirements and cost principles.
570. 611 Conflict of interest:
570.612 Executive Order 12372.
Subpart K Other Program Requirements.
S 570.600 General.
(a) Section 104 (b) of the Act provides that any grant under
section 106 of the Act shall be made only if the grantee
certifies to the satisfaction of the Secretary, among other
things, that the grant "will be conducted and administered in
conformity with Public Law 88-352 and Public Law 90-284," and,
further, that the grantee "will comply with the other
provisions of this title and with other applicable laws."
Section 104 (e) (1) of the Act requires that the Secretary
determine with respect to grants made pursuant to section
106 (b) (Entitlement Grants) and 106 (d) (2) (13) (HUD-administered
Small Cities Grants) , at least on an annual basis, among other
things, "whether the grantee has carried out (its)
certifications in compliance with the requirements and the
primary objectives of this title and with other applicable
Certain other statutes are expressly made
applicable to activities assisted under the Act by the Act
itself, while other laws not referred to in the Act may be
applicable to such activities by their own terms. Certain
statutes or Executive Orders which may be applicable to
activities assisted under the Act by their own terms are
administered or enforced by governmental departments . or
agencies other than the Secretary or the Department. This
Subpart K enumerates laws which the Secretary will treat as
applicable to grants made under section 106 of the Act, other
than grants to States made pursuant to section 206 (d) of the
K-1
9/88
Act, for purposes of the determinations described above to be
made by the Secretary under section 104 (e) (1) of the Act,
7)
including statutes expressly made applicable by the Act and
certain other statutes and Executive Orders for which the
Secretary has enforcement responsibility. The absence of
mention herein of any other statute for which the Secretary
does not have direct enforcement responsibility is not
intended to be taken as an indication that, in the Secretary 's
opinion, such statute or Executive Order is not applicable to
activities assisted under the Act. Fop laws which the
Secretary will treat as applicable to grants made to States
under section 106 (d) of the Act for purposes of the
determination required to be made by the Secretary pursuant to
section 104 (e) (2) of the Act, see § 570.496.
(b) This subpart also sets forth certain additional program
requirements which the Secretary has determined to be
applicable to grants provided under the Act as a matter of
administrative discretion.
(c) In addition to grants made pursuant to section 106 (b) and
106 (d) (2) (8) of the Act (Subparts D and F, respectively) , the
requirements of this Subpart K are applicable to grants made
pursuant to sections 107 and 119 of the Act (Subparts E and G,
respectively) , and to loans guaranteed pursuant to Subpart M.
S 570.601 Public Law 88-352 and Public Law 90-284; affirmatively
furthering fair housing; Executive Order 11063.
Section 104 (b) of the Act provides that any grant under
section 106 of the Act shall be made only if the grantee certifies
to the satisfaction of the Secretary that the grant "will be
conducted and administered in conformity with Public Law 88-352 and
Public Law 90-284 and the grantee will affirmatively further fair
housing . " Similarly, section 107 provides that no grant may be
made under that section (Secretary's Discretionary Fund) or
section 119 (UDAG) without 'satisfactory assurances that the
grantee 's program will be conducted and administered in conformity
with Public Law 88-352 and Public Law 90-284.
(a) "Public Law 88-352" refers to title VI of the Civil Rights Act
of 1964 (42 U.S.C. 2000d et seq.) , which provides that no
person in the United States shall on the ground of race,
color, or national origin, be excluded from participation in,
be denied the benefits of, or be subjected to discrimination
under any program or activity receiving Federal financial
assistance. Section 602 of the Civil Rights Act of 1964
directs each Federal department and agency empowered to extend
Federal financial assistance to any program or activity by way
of grant to effectuate the foregoing prohibition by issuing
rules, regulations, or orders of general applicability which
K-2 .9/88
shall he consistent with achievement of the statute
authorizing the financial assistance . HUD regulations
implementing the requirements of Title VI with respect to HUD
programs are contained n 24 CFR Part 1.
(b) "Public Law 90-284" refers to title VIII of the Civil Rights
Act of 1968 (42 U.S.C. 3601 et If a. ) , popularly known as the
Fair Housing Act , which . provides that it is the policy of the
United States to provide , within constitutional limitations, •
for fair housing throughout the United States and prohibits
any person from discriminating in the sale or rental of
housing , the financing of housing , or the provision of
brokerage services, including otherwise ;fnaking unavailable or
denying a dwelling to any person, because of race , color ,
religion , sex , or national origin. 'Title VIII further
requires the Secretary to administer the programs and
activities relating to housing and urban development in a
manner affirmatively • to further the policies of Title VIII.
Pursuant to this statutory direction, the Secretary requires
that 9-rantees administer all programs and activities related
to housing and community development in a manner to
affirmatively further the policies of Title VIII; furthermore,
section 104 (b) (2) of the Act requires that each grantee
receiving funds under section 106 of the Act (entitlement or
small cities grantees) certify to the satisfaction of the
Secretary that it will affirmatively further fair housing.
(c) Executive Order 11063, as amended by Executive Order 12259,
directs the Department to take all action necessary and
appropriate to prevent discrimination because of race, color ,
religion (creed) , sex , or national origin, in the sale,
leasing , rental, or other disposition of residential property
and related facilities (including land to be developed for
residential use) , or in the use or occupancy thereof, if such
property and related facilities are, among other things,
provided in whole or in part with the aid of loans, advances,
grants , or .contributions agreed to be made by the Federal
Government. HUD regulations implementing Executive Order
11063 are contained in 24 CFR Part 107.
S 570.602 Section 109 of the Act.
(a) Section 109 of the Act requires that no person in the United
States shall on the ground of race, color , national origin or
sex, be excluded from participation in, be denied the benefits
of , or be subjected to discrimination under, any program or
activity funded in whole or in part with community development
funds made available pursuant to the Act. For purposes of
this section "program or activity" is defined as any function
conducted by an identifiable administrative unit of the
recipient, or by any unit of government, subrecipient, or
K--3
9/88
•
private contractor receiving community development funds or
loans from the recipient. "Funded in whole or in part with
community development funds" means that community development
funds in any amount in the form of grants or proceeds from HUD
guaranteed loans have been transferred by the recipient or a
subrecipient to an identifiable administrative unit and
disbursed in a program or activity. In subsection (b) of this
section, "recipient" means recipient as defined in 24 CFR
1,.2 (f) .
(b) Specific discriminatory actions prohibited and corrective
actions.
•
(1) A recipient may not, under any program or activity to
which the regulations of this part may apply, directly or
through contractual or other arrangements, on the ground
of race, color , national origin, or sex:
(i) Deny any individual any facilities, services,
financial aid or other benefits provided under the
program or activity.
(ii) Provide any facilities, services, financial aid or
other benefits which are different, or are provided in
a different form, from that provided to others under
the program or activity.
(iii) Subject an individual to segregated or separate
treatment in any facility in, or in any matter of
process related to receipt of any service or benefit
under the program or activity.
(iv) Restrict an individual in any way in access to, or in
the enjoyment of, any advantage or privilege enjoyed
by others in connection with facilities, services,
financial aid or other benefits under the program or
activity.
•
(v) Treat an individual differently from others in
determining whether the individual satisfies any
admission, enrollment, eligibility, membership, or
other requirement or condition which the individual
must meet in order to be provided any facilities,
services or other benefit provided under the program
or activity.
(vi) Deny an individual an opportunity to participate in a
program or activity as an employee.
(2) A recipient may not use criteria or methods of
administration which have the effect of subjecting persons
to discrimination on the basis of race, color, national
�t K-4 9/88
1
origin , or sex , or have the effect of defeating or •
substantially impairing accomplishment of the objectives -
of the program or activity with respect to persons of a
particular race, color , national origin, or sex .
(3) A recipient, in determining the site or location of
housing or facilities provided in. whole or in part with
funds under this part, may not make selections of such
site or location which have the effect of excluding
persons from, denying them the benefits of , or subjecting
them to discrimination on the ground of race , color ,
• national origin, or sex; or which have the purpose or
effect of defeating or substantially impairing the
accomplishment of • the objectives of the Act and of this
section.
(4)
(i) In administering a program or activity funded in whole
or in part with CDBG funds regarding which the
recipient has previously discriminated against persons
on the ground of race , color , national origin or sex,
or if there is sufficient evidence to conclude that
such discrimination existed, the recipient . must take
remed-ial affirmative action to overcome the effects of
prior discrimination. The word "previously" does not
exclude current discriminatory practices.
(ii) In the absence of discrimination, a recipient, in
administering a program or activity funded in whole or
in part with funds made available under this part, may
take any, nondiscriminatory affirmative action
necessary to ensure that the program or activity is
open to all without .regard to race , color, national
origin or sex,
(iii) After a t;nding of noncompliance or after a recipient
has a firm basis to conclude that discrimination has
occurred , a recipient shall not be prohibited by this
section from taking any action eligible under Subpart
C to ameliorate an imbalance in services or facilities
provided to any geographic area or specific group of
persons within its jurisdiction, where the purpose of
such action is to remedy prior discriminatory practice
or usage.
(5) Notwithstanding anything to the contrary in this section,
nothing contained herein shall be construed to prohibit
any recipient from maintaining or constructing separate
living facilities or rest room facilities for the
selectivity'• the basis of
different sexes. Furthermore , .,elec_i�ity on
sex is not prohibited when institutional or custodial
ti_ 5 9/88
services can properly be performed oral bymember a of the
same sex as the recipients of the services.
(c) Section 109 of the Act further provides that any prohibition
against discrimination on the basis of age under the Age
Discrimination Act of 1975 (42 U.S.C. 6101 et a. ) or with
respect to an otherwise qualified handicapped person as
provided in section 504 of the Rehabilitation Act of 1973 (29
U.S.C. 794) shall also apply to any program or activity funded
in whole or in part with funds made available pursuant to the
Act. HUD regulations implementing the Age Discrimination Act
are Contained in 24 CFR Part 146 and the regulations
implementing section 504 are contained in 24 CFR Part 8.
5 570.603 Labor standards.
Section 110 of the Act requires that all laborers and
mechanics employed by contractors or subcontractors on construction
work financed in whole or in part with assistance received under
the Act shall be paid wages at rates not less than those prevailing
on similar construction in the locality as determined by the
Secretary of Labor in accordance with the Davis-Bacon Act, as
amended (40 U.S.C. 276a - 276a-5) . By reason of the foregoing
requirement, the Contract Work Hours and Safety Standards Act (40
U.S.C. 327 et seq. ) also applies. However, these requirements
apply to the rehabilitation of residential property only if such
property contains not less than 8 units. With respect to the labor
standards specified in this section, the Secretary of Labor has the
authority and functions set forth in Reorganization Plan Number 14
of 1950 (5 U. S.C. 1332-15) and section 2 of the Act of June 13 ,
1934 , as amended (40 U.S.C. 276c) .
S 570.604 Environmental standards.
Section 104 (g) expresses the intent that "the policies of the
National Environmental Policy Act of 1969 and other provisions of
law which further the purposes of such Act (as specified in
regulations issued by the Secretary) . . . [be) most effectively
implemented in connection with the expenditure of funds under" the
Act. Such other provisions of law which further the purposes of
the National Environmental Policy Act of 1969 are specified in
regulations issued pursuant to section 104 (g) of the Act and
contained in 24 CFR Part 58 . Section 104 (g) also provides that, in
lieu of the environmental protection procedures otherwise
applicable, the Secretary may under regulations provide for the
release of funds for particular projects to grantees who assume all
of the responsibilities for environmental review, decisionmaking,
and action pursuant to the National Environmental Policy Act of
1969 , and the other provisions of law specified by the Secretary as
described above, that would apply to the Secretary were he/she to
h-G 9/88
undertake such projects as Federal projects. Grantees assume such
environmental review, decisionmaking, and action responsibilities •
by execution of grant agreements with the Secretary. The
procedures for carrying out such environmental responsibilities are
contained in 24 CFR Part 58,
S 570.605 National Flood Insurance Program.
Section 202 (a) of the Flood Diaster Protection Act .of 1973
(42 U.S.C. 4106) provides that no Federal officer or agency shall
- approve any financial assistance for acquisition or construction
• purposes (as defined under section 3 (a) of said Act (42 U.S.C .
400 (a) ) , one year after a community has been formally notified of
its identification as a community containing an area of special
flood hazard , for use in any area that has beer. identified by the
Director of the Federal Emergency Management Agency- as an area
having special flood hazards unless the community in which such
area is situated is then participating in the National Flood
Insurance Program. Notwithstanding the date of HUD approval of the
recipient ' s application (or , in the case of grants made ender
Subpart D, the date of submission of the grantee ' s final statement
pursuant to § 570. 302) , funds provided under this part shall not he
expended for acquisition or construction purposes in an area that
has been identified by the Federal Emergency Management Agency
! (FEMA) as having special flood hazards unless the community in
which the area is situated is participating in the National Flood
Insurance Program in accordance with 44 CFR Parts 59-79, or less
i than a year has passed since FEMA notification to the community
regarding such hazards; and flood insurance is obtained in •
i accordance with section 102 (a) of the Flood Disaster Protection Act
1 of 1973 (42 U.S.C'. 4001) .
S 570.606 Relocation, displacement and acquisition.
(a) Uniform Relocation Act. •
(1) The Uniform Relocation Assistance and Real Property
Acquisition Policies Act of. 1970 (ORA) (42 U.S.0 4601) and
- HUD implementing regulations at 24 CFR Part 42 apply to
i the acquisition of real property by a State agency for an
activity assisted under this part and to the displacement
of any family, individual, business, nonprofit
! 'organization or farm .that results from such acquisition.
The grantee ' s certification of compliance with the URA is
required in the grant agreement.
(2) An acquisition and resulting displacement by a State
agency is "for an assisted activity" if . it occurs on or
after the date of the initial— submission of a final
statement under 24 CFR 570. 302 (a) (2) (Entitlement Grants) ;
't 9/88 •
fl
1
/ N. \
e "
the initial submission of an application to HUD by a unit
of general local government under SS 570. 426 , 570.430, or
570.435 (d) . that is granted for the requested activity (HUD
administered Small Cities Program) ; or the submission of .
an application to HUD by a city or urban county under
S 570.458 that is granted for the requested activity
(UDAG) . However , an acquisition or displacement that
occurs on or after the described date is not subject to
the URA if the grantee determines that the acquisition or
displacement was not carried out for an assisted activity,
and the HUD Field Office concurs in that determination.
An acquisition or displacement that occurs before the
described date is subject to the URA, if the grantee or
the HUD Field Office determines that the acquisition or
displacement was carried out for the assisted activity.
The grantee may, at any time, request a HUD determination
whether an acquisition or displacement will be considered
to be for an assisted activity and thus subject to these
regulations. To be eligible for relocation assistance,
however , a person must also meet the eligibility criteria
in 24 CFR Part 42.
(b) Residential antidisplacement and relocation assistance plan.
Under section 104 (d) of the Act, each grantee must adopt, make
public and certify that it is following a residential
antidisplacement and relocation assistance plan providing one-
for-one replacement units (paragraph (b) (1) of this section) ,
and relocation assistance (paragraph (b) (2) of this
section) . The plan must also indicate the steps that will be
taken consistent with other goals and objectives of this part
to minimize the displacement of persons from their homes as a
result of any activities assisted under this part.
(1) One-for-one replacement units.
(i) All occupied and vacant occupiable low/moderate-income
dwelling units that are demolished or converted to a
use other than as low/moderate-income dwelling units
as a direct result of an activity assisted under this
part must be replaced by governmental agencies or
private developers with low/moderate-income dwelling
units. Replacement low/moderate-income dwelling units
may include public housing , or existing housing
receiving Section 8 project-based assistance under the
United States Housing Act of 1937. The replacement
low/moderate-income dwelling units must be provided
within three years of the commencement of the
demolition or rehabilitation related to the
conversion, and must meet the following requirements :
(A) The units must be located within the grantee 's
jurisdiction.
,, , K-8 9/88
(B) The units must he sufficient in number and size to
house at least the number of occupants that could
have been housed in the units that are demolished or
converted. The )= number of occupants that may be
housed in units shall be determined in accordance
with local housing occupancy codes.
(C) The units must be provided in standard condition.
Replacement low/moderate-income dwelling units may
include units that have been raised to standard from
substandard condition.
(0) The units must be designed to remain low/moderate-
• '" income dwelling units for at least 10 years from the
date of initial occupancy.
(ii) Before obligating or expending funds provided under
;I this part for any activity that will directly result
in the demolition of low/moderate-income dwelling
units or the conversion of low/moderate-income
dwelling units to another use, the grantee must make
j public, and submit the following information in
writing to HUD:
i
j (A) A description of the proposed assisted activity;
1 (B) The general location on a map and approximate number
t�. � . of dwelling units by size (number of bedrooms) that
I will be demolished or converted to a use other than
for low/moderate-income dwelling units as a direct
result of the assisted activity;
1 (C) A time schedule for the commencement and completion
of the demolition or conversion;
(D) The general location on a map and approximate number
of dwelling units by size (number of bedrooms) that
will be provided as replacement dwelling units;
(E) The source of funding and a time schedule for the
(I provision of replacement dwelling units;
(F) The basis .for concluding that each replacement
. :
dwelling unit will remain a low/moderate-income
dwelling unit for at least 10 years from the date of
initial occupancy.
.)
(iii)
(A) The requirements of paragraph (b) (1) of this section
do not apply if the HUD Field Office determines,
based upon objective data, that there is an adequate
l� supply of vacant low/moderate-income dwelling units
K-9 9/88
t
in standard condition available on a
nondiscriminatory basis within the grantee 's
jurisdiction. zn making' this determination, the HUD
Field Office will consider the housing vacancy rate
for the jurisdiction, the number of vacant
low/moderate-income dwelling units in the
jurisdiction (excluding units that will be demolished
or converted) and the number of eligible families on
waiting lists for housing assisted under the United
States Housing Act of 1937 in the jurisdiction.
(B) The HUD Field Office may consider the supply of
vacant low/moderate-income dwelling units in standard
condition available on a nondiscriminatory basis in
an area that is larger than the grantee's
jurisdiction. Such additional dwelling units shall
be considered if the HUD Field Office determines that
the units would be suitable to serve the needs of the
low- and moderate income households that could be
served by the low/moderate-income dwelling units that
are to be demolished or converted to another use.
The HUD Field Office must base this determination on
geographic and demographic factors, such as location
and access to places of employment and to other
facilities.
(C) The grantee must submit a request for a determination
under paragraph (b) (1) (iii) of this section, directly
to the HUD Field Office. J1
(2) Relocation assistance.
(i) Each low- or moderate-income household that is
displaced by demolition or by the conversion of a
low/moderate income dwelling unit to another use as a
direct result of an activity assisted under this part
shall be provided with relocation assistance. The
low- or moderate-income household may elect to receive
relocation assistance described at 24 CFR Part 42
(HUD's regulations implementing the URA) , or may elect
to receive the following relocation assistance:
(A) The relocation assistance described at 24 CFR Part
' 42, Subpart C (General Relocation Requirements) and
Subpart D (Payment ' for Moving and Related
Expenses) . Relocation notices must be issued
consistent with, and in the manner prescribed under,
24 CFR 42.203. The definition of "comparable
replacement dwelling" used in 24 CFR Part 42 is
modified as described in paragraph (b) (3) (i) of this
section. Displaced households provided with
replacement housing assistance under paragraph
K-10 9/88
(b) (2) ( i) (C) oC this eection, in the form of a
certificate or housing voucher under Section 8 of the •
United States Housing Act of 1937 , must be provided
referrals to comparable replacement dwelling units
whose owners are willing to participate in the housing
voucher or certificate program. Tine grantee. shall
advise tenants of their .rights under the Federal Fair
Housing Law (Title VIII) and of replacement housing
opportunities in such a manner that, whenever
feasible , they will have a choice between relocating
. within their neighborhoods and other neighborhoods
consistent with the grantee 's responsibility to
affirmatively further fair housing
(8) The reasonable and necessary cost of any security
deposit required to rent the replacement dwelling
unit, and credit checks required to rent or purchase
the replacement dwelling unit ; and
•
(C) Replacement housing. assistance. Households are
eligible to receive one of the following forms of
replacement housing assistance :
(1) Each household must be offered compensation
designed to ensure that, for a five-year period,
the displaced household will not bear, after
! • relocation , a ratio of shelter costs to income
i that exceeds 30 percent. Such compensation
{ shall be either :
(i) A certificate or housing voucher for
rental assistance provided through the local
Public Housing Agency under Section 8 of the
United State Housing Act of 1937; or
(ii) Cash rental assistance equal to 60 times
• the amount that is obtained by subtracting 30
percent of the displaced househoid 's monthly
gross income (with such adjustments as the
grantee may deem appropriate) from the lesser
of : the monthly cost of rent and utilities at a
• comparable replacement dwelling unit or the
monthly cost oil' rent and utilities at the
decent, safe and sanitary replacement dwelling
to which the household relocates. The grantee
1 may provide the cash payment in either a lump
( sum or in installments. The grantee may at its
discretion offer the household a choice between
the • certificate/housing voucher or cash rental
assistance.
•
•
K_, l 9/88
(2) If the household purchases an interest in a
Ilh
housing cooperative or mutual housing
association and occupies a decent, safe and
sanitary unit inrthe cooperative or association,
the household may elect to receive a lump sum
payment. This lump sum payment shall be equal
to the capitalized value 'of 60 monthly
installments of the amount that is obtained by
subtracting 30 percent of the displaced
household's monthly gross income (with such
adjustments as the grantee may deem appropriate)
from the monthly cost of rent and utilities at a
comparable replacement dwelling unit. To
compute the capitalized value, the installments
shall be discounted at the rate of interest paid
on passbook savings deposits by a federally-
insured bank or savings and loan institution
conducting business within the grantee 's
jurisdiction. To the extent necessary to
minimize hardship to the household, the grantee
shall, subject to appropriate safeguards, issue
a payment in advance of the purchase of the
interest in the housing cooPerative or mutual
housing association.
(ii) Eligibility for relocation assistance.
(A) °A low- or moderate-income household that is required
to move as a direct result of demolition or
conversion of a low/moderate income dwelling unit to
another use, is • eligible for relocation assistance
under paragraph (b) (2) of this section if:
(1) The household is required to move from the
dwelling unit on or after the date that the
owner submits a request to the grantee for
financial assistance that is later approved for
the , requested activity. (This applies to
dwelling units owned by a person other than a •
Federal or State agency, as defined under the
URA) .
•
(2) The household is required to move from the
dwelling unit on : or after the date of the
initial submission of a final statement under 24
CFR 570.302 (a) (2) (Entitlement Grants) ; the
initial submission of an application to HUD by a
unit of general local government under
SS 570.426, ' 570.430, or 570.435(d) that is
granted for the requested activity (HUD
administered Small Cities Program) ; or the
submission of an application to HUD by a city or
urban county under § 570.458 that is granted for
411
K-12 9/88
•
- 1
the requested activity (UDAG) . (This applies to
dwelling units owned by a Federal or State
agency as defined under the URA. )
(B) If the displacement occurs on or after the
appropriate date described in paragraph (b) (2) ( ii) (A)
of this section, the low- or moderate-income
household is not eligible for relocation assistance
if:
(1) The household is evicted for cause ;
(2) The household moved into the property on or
after the date described in paragraph
(b) (2) (ii) (A) of this section, after receiving
written notice of the expected displacement; or
(3) The grantee determines that the
displacement was not a direct result of the
assisted activity, and the HUD office concurs in
that determination.
(C) If the displacement occurs before the appropriate
date described in paragraph (b) (2) (ii) (A) of this
section, the low- or moderate-income household is
eligible for relocation assistance if the grantee or
HUD determines that the displacement was a direct
result of an activity assisted under this part.
(3) Definitions. For the purposes of paragraph (b) of this
section :
(i) 'Comparable replacement dwelling unit" means a
dwelling unit that:
(A) Meets the criteria of 24 CFR 42.2 (c) (1) through (4)
and
(B) Is available at a monthly cost for rent plus
estimated average monthly utility costs that does not
exceed 30 percent of the household's average gross
( monthly income (with such adjustments to income as
the grantee may deem appropriate) after taking into
account any rental assistance the household would
receive. Where a certificate or housing voucher is
provided to a household under paragraph
(b) (2) (i) (C) (1) (i) of this section, the dwelling unit
must .be available to the household at a monthly cost
for rent and estimated average monthly utility cost
that does not exceed the Fair Market Rent or the
payment standard, respectively.
f ,
K-13 9/88
(ii) "Decent, safe and sanitary dwelling" means a decent,
safe and sanitary dwelling as defined in 24 CFR
42. 2 (e) .
(iii) "Low/moderate income dwelling unit" means a dwelling
unit with a market rental ( including utility costs)
that does not exceed the applicable Fair Market Rent
(FMR) for existing housing and moderate rehabilitation
established under 24 CFR Part 888.
(iv) "Occupiable dwelling unit" means a dwelling unit that
is in a standard condition , or is in a substandard •
condition, but is suitable for rehabilitation.
(v) "Standard condition" and "substandard condition
suitable for rehabilitation. " If the grantee has a
HUD-approved Housing Assistance Plan, the definitions
of "standard condition' and "substandard condition
suitable for rehabilitation" established in the plan
will apply. If the grantee does not have a HUD-
approved Housing Assistance Plan, the grantee must
establish and make public its definition of these
terms consistent with the requirements of
S 570.306 (e) (1) .
(4) Effective date. For all grants except those made under
Subpart D of this part (Entitlement Grants) , the ,)
provisions of this paragraph (b) are applicable to grants
made on or after October 1, 1988. For grants made under
Subpart D, these provisions will govern all activities for
which funds are first obligated by the grantee on or after
the date the first grant is made after September 30, 1988,
without regard to the source year of the funds used for the activity.
(c) Section 104 (k) relocation requirements. Section 104 (k) of the
Act requires that reasonable relocation assistance be provided
to persons (families, individuals, businesses, nonprofit
organizations, or farms) displaced (i .e. , moved permanently
and involuntarily) as a result of the use of assistance
received under this part to acquire or substantially
rehabilitate property. If such displacement is subject to
paragraph (a) or (b) of this sectio
n, above, this paragraph
does not apply. The grantee must develop, adopt and provide
to persons to be displaced a written notice of the relocation
assistance for which they are eligible. The minimum 1
requirements for such assistance under the UDAG Program are
described at S 570.457 (b) . Under CDBG programs, persons
entitled to assistance under this paragraph must be provided
relocation assistance, including at a minimum:
(1) Reasonable moving expenses;
K-14 9/88
(2) Advisory services needed to help in relocating. The
grantee shall advise tenants of their rights under the
Federal Fair Housing Law (Title VIII) and of replacement
housing opportunities in such a manner that, whenever
feasible, they will have a choice between relocating
within their neighborhoods and other neighborhoods
consistent with the grantee 's responsibility to
affirmatively further fair housing ; and
(3) Financial assistance sufficient to enable any person
displaced from his or her dwelling to lease and occupy a
suitable, decent, safe and sanitary replacement dwelling
where the cost of rent and utilities does not exceed 30
percent of the household 's gross income.
(d) Optional relocation assistance. Under section 105 (a) (11) of
the Act, the grantee may provide relocation payments and other
relocation assistance for individuals, families, businesses,
nonprofit organizations and farms displaced by an activity not
subject to paragraphs (a) , (b) or (c) of this section., The
grantee may also provide relocation assistance to persons
covered under paragraphs (a) , (b) or (c) of this section
beyond that required. Unless such assistance is provided
pursuant to State or local law, the grantee must provide the
assistance only upon the basis of a written determination that
the assistance is appropriate and must adopt a written policy
available to the public that describes the relocation
assistance that the grantee has elected to provide and that
provides for equal relocation assistance within each class of
displacees.
(e) Appeals. If a person disagrees with the grantee's
determination concerning the person's eligibility for, or the
amount of a relocation payment under this section, the person
may file a written appeal of that determination with the
grantee. The appeal procedures to be followed are described
in 24 CFR 42. 10. A low- or moderate-income household that has
been displaced from a dwelling may file a written request for
review of the grantee decision, to the HUD Field Office.
(f) Responsibility of grantee.
(1) The grantee is responsible for ensuring compliance with
the requirements of this section, notwithstanding any
( third party's contractual obligation to the grantee to
comply with the provisions of this part.
(2) The cost of assistance required under this section may be
paid from local public funds, funds provided under this
part, or funds available from other sources.
K-15 9/88
7
1
(3) The grantee must maintain records in sufficient detail to
demonstrate compliance with the provisions of this
section.
(g) Displacement. For the purposes of this section, a "displaced
person" is a person that is required to move permanently and
involuntarily and includes a residential tenant who moves from
the real property if :
(1) The tenant has not been provided with a reasonable
opportunity to lease and occupy a suitable, decent, safe
and sanitary dwelling in the same building or in a nearby •
building on the real property following the completion of
the assisted activity at a monthly rent and estimated
average cost for utilities that does not exceed the
greater of
(i) 30 percent of the tenant household 's average monthly
gross income; or
(ii) The tenant 's monthly rent and average cost for
utilities before
(A) The date that the owner submits a request to the
grantee for financial assistance that is later
approved for the requested activity. (This applies
• to dwelling units owned by a person other than a
Federal or . State agency, as defined under the URA) ;
or
(B) The date of the initial submission of a final
statement under S 570.302(a) (2) (Entitlement Grants) ;
the initial submission of an application to HUD by a
unit of general local government under S 570.426,
570.430, or 570.435 (d) that is granted for the
requested activity (HUD administered Small Cities
Program) ; or the submission of an application to HUD
by a city or urban county under S 570.458 that is
granted for the requested activity (UDAG) . (This
applies to dwelling units owned by a Federal or State
agency as defined under the URA) ; or
(2) The tenant is required to move to another dwelling in the
real property but is not reimbursed for all actual
reasonable out-of-pocket costs incurred in connection with
the move; or
(3) The tenant is required to relocate temporarily and :
( i) Is not reimbursed for all reasonable out-of-pocket
expenses incurred in connection with the temporary
relocation, including moving costs and any increased
rent and utility costs; or •
K-16 9/88
( ii) Other conditions of the temporary relocation are not
reasonable .
S 570.607 Employment and contracting opportunities.
(a) Grantees shall comply with Executive Order 11246 , as amended
by Executive Order 12086 , and the regulations issued pursuant
thereto (41 CFR Chapter 60) which provide that no person shall
be discriminated against on the basis of race , color ,
religion , sex, or national origin in all phases of employment
during the performance of Federal or , federally assisted
construction contracts. As specified in Executive Order 11246
and the implementing regulations, contractors and
subcontractors on Federal or federally assisted construction
contracts shall take affirmative action to ensure fair
treatment in employment, upgrading , demotion or transfer ,
recruitment or recruitment advertising , layoff or termination,
rates of pay, or other forms of compensation and selection for
• training and apprenticeship.
• (b) Section 3 of the Housing and Urban Development Act of 1968 (12
U.S.C. 1701u) requires , in connection with the planning and
carrying out of any project assisted under the Act, that to
the greatest extent feasible opportunities for training and
employment be given to low and moderate income persons
residing within the unit of local government or the
( metropolitan area (or nonmetropolitan county) as determined by
the Secretary, in which the project is located , and that
contracts for work in connection with the project be awarded
{ to eligible business concerns which are located in , or owned
residing in substantial part by persons in the same
metropolitan area (or nonmetropolitan county) as the
project. Grantees shall adopt appropriate procedures and
requirements to assure good faith efforts toward compliance
J with the statutory directive. HUD regulations at 24 CFR Part
135 are not applicable to activities assisted under this part
1 but may be referred to as guidance indicative of the
Secretary's view of the statutory objectives in other
y contexts.
1 •
( S 570.608 Lead-based paint.
(a) Prohibition against the use of lead-based paint. Section
401(b) of the Lead-Based Paint Poisoning Prevention Act (42
U.S.C. 4831 (b) ) directs the Secretary to prohibit the use of
lead- paint residential structures constructed or
re habilbased
itated with Federal assistance. Such prohibitions are
( contained in 24 CFR Part 35, Subpart B, and are applicable to
' residential structures constructed or rehabilitated with
t assistance provided under this part.
K-17 9/88
L-,
1
(b) Notification of hazards of lead-based paint poisoning.
(1) The Secretaryhas
promulgated requirements regarding
notification to purchasers and tenants of HUD-associated
housing constructed prior to 1978 of the hazards of lead-
based paint poisoning at 24 CFR Part 35, Subpart A. This
paragraph is promulgated pursuant to the authorization
granted in 24 CFR 35.5 (c) and supersedes , with respect to
all housing to which it applies, the notification
requirements prescribed by Subpart A of 24 CFR Part 35.
(2) For properties constructed prior to 1978 , applicants for •
rehabilitaion ' assistance provided under this part and
tenants or purchasers of properties owned by the grantee
or its subrecipient and acquired or rehabilitated with
assistance provided under this part shall be notified :
(i) That the property may contain lead-based paint;
(ii) of the hazards of lead-based paint;
(iii) of the symptoms and treatment of lead-based poisoning ;
(iv) of the precautions to be taken to avoid lead-based
paint poisoning (including maintenance amd removal
techniques for eliminating such hazards) ;
(v) of the advisability and availability of blood lead
level screening for children under seven years of age;
and
(vi) that in the event lead-based paint is found on the
property, appropriate abatement procedures may be
undertaken.
(c) Elimination of lead-based paint hazards. The purpose of this
paragraph is to implement the provisions of section 302 of the
Lead-Based Paint Poisoning Prevention Act, 42 U.S.C. 4822, by
establishing procedures to eliminate as far as practicable the
hazards due to the presence of paint which may contain lead
and to which children under seven years of age may be exposed
in existing housing which is rehabilitated with assistance
provided under this part. The Secretary has promulgated
requirements regarding the elimination of lead-based paint
hazards in HUD-associated housing at 24 CFR Part 35, Subpart
C. This paragraph is promulgated pursuant to the
authorization granted in 24 CFR 35.24 (b) (4) and supersedes,
with respect to all housing to which it applies, the
requirements prescribed by Subpart C of 24 CFR Part 35.
K-18 9/88
1
(1) Applicability. This paragraph applies to the
rehabilitation of applicable surfaces in existing housing
which is assisted under this part. The following
activities assisted under the Community Development Block
Grant program are not covered by this paragraph :
(i) Emergency repairs (not including lead-based paint-
related emergency repairs) ;
• (ii) weatherization;
(iii) water or sewer hook-ups;
(iv) installation of security devices; '
(v) facilitation of tax exempt bond issuances which
provide funds for rehabilitation;
(vi) other similar types of single-purpose programs that do
not include physical repairs or remodeling of
applicable surfaces (as defined in 24 CFR 35.22) of
residential structures; and
(vii) any non-single purpose rehabilitation that does not
involve applicable surfaces (as defined in 24 CFR
35.22) that does not exceed $3,000 per unit.
(2) . Definitions. - Applicable surface. All intact and
nonintact interior and exterior painted surfaces of a
residential structure.
Chewable surface. All chewable protruding painted
surfaces up to five feet from the floor or ground, which
are readily accessible to children under seven years of
age, e.g. , protruding corners, windowsills and frames,
doors and frames, and other protruding woodwork.
Defective paint surface. Paint on applicable surfaces
that is cracking, scaling, chipping, peeling or loose.
Elevated blood lead level or EBL. Excessive absorption of
• lead , that is, a confirmed concentration of lead in whole
blood of 25 ug/dl (micrograms of lead per deciliter of
whole blood) or greater.
Lead-based paint surface. A paint surface, whether or not
defective, identified a4 having a lead content greater
than or equal to 1 mg/cm •
(3) Inspection and Testing
1
K-19 9/88
P
•
(i) Defective paint surfaces. The grantee shall inspect
for defective paint surfaces in all units constructed
prior to 1978 which are occupied by families with
children under seven years of age and which are
proposed for rehabilitation assistance.
inspection shall .occur ;at the same time the properThe
ty
is being inspected for rehabilitation. Defective
paint conditions will be included in the work write-up
for the remainder of the rehabilitation work.
(ii) Chewable surfaces. The grantee shall be required to
test the lead content of chewable surfaces if the
family residing in a unit, constructed prior to 1978
and receiving rehabilitation assistance, includes a
child under seven years of age with an identified ESL
condition. Lead content shall be tested by using an
X-ray fluorescence analyzer (XRF) or other method
approved by HUD. Test readings of 1 mg/cm2 or higher
using an XRF shall be considered positive for presence
of lead-based paint.
(iii) Abatement without testing.
set forth in paragraph In lieu of the procedures
this sectin, in
the case of ap residential) structure fconstructedoprior
to 1978, the grantee may forgo testing and abate all
applicable surfaces in accordance with the methods set
out in 24 CFR 35.24 (b) (2) (ii) ,
(4) Abatement Actions.
(i) For inspections performed under § 570. 608 (c) (3) (i) and
where defective paint surfaces are found, treatment
shall be provided to defective areas. Treatment shall
be performed before final inspection and approval of
the work.
(ii) For testing performed under 5 570.608 (c) (3) (ii) and
where interior chewable surfaces are found to contain
lead-based paint, all interior chewable surfaces in
any affected room shall be treated. Wh
e exterior
chewable surfaces are found to contain
rlead-based
paint, the entire exterior chewable surface shall be
treated. Treatment shall be performed before final
inspection and approval of the work.
(iii) When weather prohibits repainting exterior surfaces
before final inspection, the grantee may permit the
owner to abate the defective paint or chewable lead-
based paint as required by this section and agree to
repaint by a specified date. A separate inspection is
required.
K-20 9/88 �.
(5) Abatement methods. At a minimum, treatment of the
defective areas and chewable lead-based paint surfaces
shall consist of covering or removal of the painted
surface as described in 24 CFR 35. 24 (b) (2) (ii) .
(6) Funding for inspection; testing and abatement. Program
requirements and local program design will determine
whether the cost of inspection, testing or abatement is to
be borne by the owner/developer, the grantee or a
combination of the owner/developer and the grantee.
(7) Tenant protection. The owner/developer shall take
appropriate action to protect tenants from hazards
associated with abatement procedures. Where necessary,
these actions may include the temporary relocation of
tenants during the abatement process. The owner/developer
shall notify the grantee of all such actions taken.
(8) Records. The grantee shall keep a copy of each inspection
and/or test report for at least three years.
(9) Monitoring and enforcement. HUD field office monitoring
of rehabilitation programs includes reviews for compliance
with applicable program requirements for lead-based
paint. The CPD Field Monitoring Handbook which currently
includes instructions for monitoring lead-based paint
:31
requirements will be amended as appropriate. In cases of
noncompliance, HUD may impose conditions or sanctions on
grantees to encourage prompt compliance.
(10) Compliance with other program requirements, Federal, State
and local laws.
(i) Other program requirements. To the extent that
assistance from any of the programs covered by this
section is used in conjunction with other HUD program
assistance which have lead-based paint requirements
which may have more or less stringent requirements,
the more stringent requirements will prevail.
(ii) HUD responsibility. If HUD determines that a State or
local law, ordinance, code or regulation provides for
lead-based paint testing or hazard abatement in a •
manner which provides a level of protection from the
hazards of lead-based paint poisoning at least
comparable to that provided by the requirements of
this section and that adherence to the requirements of
this subpart would be duplicative or otherwise cause
inefficiencies, HUD may modify or waive the
requirements of this section in such manner as may be
appropriate to promote efficiency while ensuring such
comparable level of protection.
K-21 9/88
N
1
(iii) Grantee responsibility. Nothing in this section is
intended to relieve any grantee in the programs
covered by thi's sect+ion • of any responsibility for
compliance with ;State or local laws, ordinances, codes
or regulations governing lead-based paint testing or
hazard abatement:. . - es .
(iv) Disposal of, lead-based paint debris. Lead-basd paint
and defective paint debris shall be disposed of in
accordance with applicable Federal, State or local
requirements. (See , ,e.g . , 40 CFR Parts 260 through
271. ) •
S 570.609 Use of debarred, suspended, or ineligible contractors or
subrecipients. ry
. I
Assistance under this part shall not be used directly or
indirectly to employ, award contracts to, or otherwise engage the
services of, or fund any contractor or subrecipient during any
period of debarment, suspension, or placement in ineligibility
status under the provisions. of 24 CPR Part 24.
S 570.610 Uniform administrative requirements and cost principles.
The recipient, its agencies or instrumentalities, and
subrecipients shall comply with the policies, guidelines, and
requirements of 24 CFR Part 85 and OMB Circulars A-87, A-110, A-
122, and A-128 (implemented at 24 CFR Part 44) , as applicable, as
they relate to the acceptance and use of Federal funds under this
part. The applicable sections of 24 CFR Part 85 and OMB Circular
A-110 are set forth at S 570.502.
S 570.611 Conflict of interest.
(a) Applicability.
(1) In the procurement of supplies, equipment, construction,
and services by recipients, and by subrecipients
(including those specified at S 570.204 (c) ) , the conflict
of interest provisions in 24 CFR 85.36 and OMB Circular A-
110, respectively, shall apply.
(2) In all cases not governed by 24 CFR 85.36 and OMB Circular
A-110, the provisions of this section shall apply. Such
cases include the acquisition and disposition of real
property and the provision of assistance by the recipient,
by its subrecipients, or to individuals, businesses and
other private entities under eligible activities which
authorize such assistance (e.g . , rehabilitation,
K-22 9/88
preservation, and other improvements of private properties
or facilities pursuant to § 570.202, or grants, loans and
other assistance to businesses, individuals and other
private entities pursuant to 5 570.203, S 570.204 or
S 570.455) .
1 6
(b) Conflicts prohibited. Except forrthe use of CDBG funds to pay
salaries and other related administrative or personnel costs,
the general rule is that no persons described in paragraph (c)
• of this section who exercise or have exercised any functions
or responsibilities with respect to CDBG activities assisted
under this part or who are in a position to participate in a
decisionmaking process or gain inside information with regard
to such activities, may obtain a personal or financial
interest or benefit from a CDBG assisted activity, or have an
interest in any contract, subcontract or agreement with
respect thereto, or the proceeds thereunder, either for
themselves or those with whom they have family or business
ties, during their tenure or for one year thereafter. For the •
UDAG program, the above restrictions shall apply to all
activities that are a part of the UDAG project, and shall
cover any such interest or benefit during, or at any time
after, such person's tenure.
(c) Persons covered. The conflict of interest provisions of
paragraph (b) of this section apply to any person who is an
employee, agent, consultant, officer, or elected official or
appointed official of the recipient, or of any designated
public agencies, or subrecipients which are receiving funds
under this part.
(d) Exceptions: threshold requirements. Upon the written request
of the recipient, HUD may grant an exception to the provisions
of paragraph (b) of this section on a case-by-case basis when
it determines that such an exception will serve to further the
purposes of the Act and the effective and efficient
administration of the recipient 's program or project. An
exception may be considered only after the recipient has
provided the following :
(1) A disclosure of the nature of the conflict, accompanied by
•
an assurance that there has been public disclosure of the
conflict and a description of how the public disclosure •
was made ; and
(2) An opinion of the recipient's attorney that the interest
for which the exception is sought would not violate State
or local law.
(e) Factors to be considered for exceptions. In determining
whether to grant a requested exception after the recipient has
satisfactorily met the requirements of paragraph (d) of this
K-23 9/83
. ` 7
1% 'N
.
section, HUD shall consider the cumulative effect of the
following factors , where applicable :
u
(1) Whether the exception would provide a significant cost
benefit or an essential degree of expertise to the program
or project which would otherwise not be available ;
(2) Whether an opportunity was provided for open competitive
bidding or negotiation;
(3) Whether the person affected is a member of a group or
class of low or moderate income persons intended to be the
beneficiaries of the assisted activity, and the exception
will permit such person to receive generally the same
interests or benefits as are being made available or
provided to the group or class;
(4) Whether the affected person has withdrawn from his or her
functions or responsibilities, or the 'decisionmaking
process with respect to the specific assisted activity in
question;
(5) Whether the interest or benefit was present before the
affected person was in a position as described in
paragraph (b) of this section;
(6) Whether undue hardship will result either to the recipient
or the person affected when weighed against the public
interest served by avoiding the prohibited conflict; and
(7) Any other relevant considerations.
S 570.612 Executive Order 12372.
(a) General. Executive Order 12372, Intergovernmental Review of
Federal Programs, and the Department 's implementing
regulations at 24 CFR Part 52, allow each State to establish
its own process for review and comment on proposed Federal ,
financial assistance programs.
(b) Applicability. Executive Order 12372 applies to the CDBG
Entitlement program and the UDAG program. The Executive Order
applies to all activities proposed to be assisted under UDAG,
but it applies to the Entitlement program only where a grantee
proposes to use funds for the planning or construction
(reconstruction or installation) of water or sewer
facilities. Such facilities include storm sewers as well as
all sanitary sewers , but do not include water and sewer lines
connecting a structure to the lines in the public right-of-way
or easement. It is the responsibility of the grantee to
initiate the Executive Order review process if it proposes to
use its CDBG or UDAG funds for activities subject to review.
K-24 9/88
C-25A CITY OF OMAHA
LEGISLATIVE CHAMBER
Omaha,Nebr November 4, 19 97
RESOLVED BY THE CITY COUNCIL OF THE CITY OF OMAHA:
WHEREAS,the City annually receives Community Development Block Grant Funds,
under Title I of the Housing and Community Development Act of 1974, as amended,for the purpose
of benefiting low and moderate income residents,eliminating slums and blight,and for other urgent
community development needs; and,
WHEREAS,the Omaha City Council, on August 26, 1997,by Resolution No. 2420,
approved the amended 1997 Consolidated Submission for Community Planning and Development
Programs which included the Holy Name Housing Corporation (HNHC)51st and Nebraska Avenue
Infill Revolving Loan Fund Program; and,
WHEREAS, the Holy Name Housing Corporation proposes to construct, and sell
approximately four houses during the term of the Agreement; and,
WHEREAS, the Holy Name Housing Corporation plans to provide mortgage
financing to potential homeowners in the Target Area at an affordable rate; and,
WHEREAS, the 51st and Nebraska Avenue Infill Target Area, an area defined by
Curtis on the north,Kansas Avenue on the south,50th Street on the east, and 51st Street on the west,
is an area of predominately low and moderate income residents; and,
WHEREAS,a determination has been made that this Infill Program provides housing
which benefits low and moderate income persons or addresses slums and blighted conditions on a
spot basis; and,
WHEREAS,it is in the best interests of the citizens of the City of Omaha to initiate
the construction of single family dwelling units in the Holy Name Housing Corporation 51st and
Nebraska Avenue Infill Target Area.
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE
CITY OF OMAHA:
By Councilmember
Adopted
0
City Clerk
Approved Cf '
Mayor
c-25a CITY OF OMAHA
•
LEGISLATIVE CHAMBER
Omaha,Nebr November 4 19@7
PAGE 2
THAT,the attached Agreement,as recommended by the Mayor,between the City of
Omaha and the Holy Name Housing Corporation, a Nebraska Non-Profit Corporation, 3014 North
45th Street,Omaha,Nebraska 68104,for a Revolving Loan Fund in the total amount of$100,000.00
FY97 CDBG Funds for the construction and sale of approximately four new single family homes to
low and moderate income persons in the Holy Name Housing Corporation 51st and Nebraska Avenue
Infill Target Area,bounded by Curtis Avenue on the north,Kansas Avenue on the south, 50th Street
on the east, and 51st Street on the west, is hereby approved. Funds in the amount of$100,000.00
shall be paid from the Community Development Block Grant Fund No. 193, Organization No. 8324.
P:\PLN2\6852.sKZ APPROVED AS TO FORM:
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ASSISTANT CITY ATTORNEY DATE
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Councilmember
Adopted...... v 4..1997 1�
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Mayor
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