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Subpart J—Grant Administration
SOURCE: 53 FR 8058, Mar. 11, 1988, unless otherwise noted.
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§570.500 Definitions.
For the purposes of this subpart, the following terms shall apply:
(a) Program income means gross income received by the recipient or a subrecipient directly generated from the
use of CDBG funds, except as provided in paragraph (a)(4) of this section.
(1) Program income includes, but is not limited to, the following:
(i) Proceeds from the disposition by sale or Tong -term lease of real property purchased or improved with CDBG
funds;
(ii) Proceeds from the disposition of equipment purchased with CDBG funds;
(iii) Gross income from the use or rental of real or personal property acquired by the recipient or by a
subrecipient with CDBG funds, less costs incidental to generation of the income;
(iv) Gross income from the use or rental of real property, owned by the recipient or by a subrecipient, that was
constructed or improved with CDBG funds, Tess costs incidental to generation of the income;
(v) Payments of principal and interest on loans made using CDBG funds, except as provided in paragraph (a)(3)
of this section;
(vi) Proceeds from the sale of loans made with CDBG funds;
(vii) Proceeds from sale of obligations secured by loans made with CDBG funds;
(viii) [Reserved]
(ix) Interest earned on program income pending its disposition; and
(x) Funds collected through special assessments made against properties owned and occupied by
households not of low and moderate income, where the assessments are used to recover all or part of the CDBG
portion of a public improvement.
(2) Program income does not include income earned (except for interest described in §570.513) on grant
advances from the U.S. Treasury. The following items of income earned on grant advances must be remitted to HUD
for transmittal to the U.S. Treasury, and will not be reallocated under section 106(c) or (d) of the Act:
(i) Interest earned from the investment of the initial proceeds of a grant advance by the U.S. Treasury;
(ii) Interest earned on loans or other forms of assistance provided with CDBG funds that are used for activities
determined by HUD either to be ineligible or to fail to meet a national objective in accordance with the requirements
of subpart C of this part, or that fail substantially to meet any other requirement of this part; and
(iii) Interest earned on the investment of amounts reimbursed to the CDBG program account prior to the use of
the reimbursed funds for eligible purposes.
(3) The calculation of the amount of program income for the recipient's CDBG program as a whole (i.e.,
comprising activities carried out by a grantee and its subrecipients) shall exclude payments made by subrecipients
of principal and/or interest on CDBG-funded loans received from grantees if such payments are made using program
income received by the subrecipient. (By making such payments, the subrecipient shall be deemed to have
transferred program income to the grantee.) The amount of program income derived from this calculation shall be
used for reporting purposes, for purposes of applying the requirement under §570.504(b)(2)(iii), and in determining
limitations on planning and administration and public services activities to be paid for with CDBG funds.
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(4) Program income does not include:
(i) Any income received in a single program year by the recipient and all its subrecipients if the total amount of
such income does not exceed $25,000; and
(ii) Amounts generated by activities that are financed by a loan guaranteed under section 108 of the Act and
meet one or more of the public benefit criteria specified at §570.209(b)(2)(v) or are carried out in conjunction with a
grant under section 108(q) in an area determined by HUD to meet the eligibility requirements for designation as an
Urban Empowerment Zone pursuant to 24 CFR part 597, subpart B. Such exclusion shall not apply if CDBG funds
are used to repay the guaranteed loan. When such a guaranteed loan is partially repaid with CDBG funds, the
amount generated shall be prorated to reflect the percentage of CDBG funds used. Amounts generated by activities
financed with loans guaranteed under section 108 which are not defined as program income shall be treated as
miscellaneous revenue and shall not be subject to any of the requirements of this part, except that the use of such
funds shall be limited to activities that are located in a revitalization strategy area and implement a HUD approved
area revitalization strategy pursuant to §91,215(e) of this title. However, such treatment shall not affect the right of
the Secretary to require the section 108 borrower to pledge such amounts as security for the guaranteed loan. The
determination whether such amounts shall constitute program income shall be governed by the provisions of the
contract required at §570.705(b)(1).
(5) Examples of other receipts that are not considered program income are proceeds from fund raising activities
carried out by subrecipients receiving CDBG assistance (the costs of fundraising are generally unallowable under the
applicable OMB circulars referenced in 24 CFR 84.27), funds collected through special assessments used to recover
the non-CDBG portion of a public improvement, and proceeds from the disposition of real property acquired or
improved with CDBG funds when the disposition occurs after the applicable time period specified in §570.503(b)(8)
for subrecipient-controlled property, or in §570.505 for recipient -controlled property.
(b) Revolving fund means a separate fund (with a set of accounts that are independent of other program
accounts) established for the purpose of carrying out specific activities which, in turn, generate payments to the fund
for use in carrying out the same activities. Each revolving loan fund's cash balance must be held in an interest -
bearing account, and any interest paid on CDBG funds held in this account shall be considered interest earned on
grant advances and must be remitted to HUD for transmittal to the U.S. Treasury no less frequently than annually.
(Interest paid by borrowers on eligible loans made from the revolving loan fund shall be program income and treated
accordingly.)
(c) Subrecipient means a public or private nonprofit agency, authority, or organization, or a for -profit entity_
authorized under §570.201A, receiving CDBG funds from the recipient or another subrecipient toundertake
activities _hgible_fassistance under subpart C of this part. The term excludes an entity receiving CDBG
funds from the recipient under the authority of §570.264; un ess`the grantee explicitly designates it as a subrecipient.
The term includes a public agency designated by a unit of general local government to receive a loan guarantee
under subpart M of this part, but does not include contractors providing supplies, equipment, construction, or
services subject to the procurement requirements in 24 CFR 85.36 or 84.40, as applicable.
[53 FR 8058, Mar. 11, 1988, as amended at 57 FR 27120, June 17, 1992; 60 FR 1952, Jan. 5, 1995; 60 FR 17445, Apr. 6,
1995; 60 FR 56914, Nov. 9, 1995]
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Subpart C—Eligible Activities
SOURCE: 53 FR 34439, Sept. 6, 1988, unless otherwise noted.
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§570.200 General policies.
(a) Determination of eligibility. An activity may be assisted in whole or in part with CDBG funds only if all of the
following requirements are met:
(1) Compliance with section 105 of the Act. Each activity must meet the eligibility requirements of section 105
of the Act as further defined in this subpart.
(2) Compliance with national objectives. Grant recipients under the Entitlement and HUD -administered Small
Cities programs and recipients of insular area funds under section 106 of the Act must certify that their projected use
of funds has been developed so as to give maximum feasible priority to activities which will carry out one of the
national objectives of benefit to low- and moderate -income families or aid in the prevention or elimination of slums or
blight. The projected use of funds may also include activities that the recipient certifies are designed to meet other
community development needs having a particular urgency because existing conditions pose a serious and
immediate threat to the health or welfare of the community where other financial resources are not available to meet
such needs. Consistent with the foregoing, each recipient under the Entitlement or HUD -administered Small Cities
programs, and each recipient of insular area funds under section 106 of the Act must ensure and maintain evidence
that each of its activities assisted with CDBG funds meets one of the three national objectives as contained in its
certification. Criteria for determining whether an activity addresses one or more of these objectives are found in
§570.208.
(3) Compliance with the primary objective. The primary objective of the Act is described in section 101(c) of the
Act. Consistent with this objective, entitlement recipients, non -entitlement CDBG grantees in Hawaii, and recipients
of insular area funds under section 106 of the Act must ensure that, over a period of time specified in their
certification not to exceed three years, not less than 70 percent of the aggregate of CDBG fund expenditures shall be
for activities meeting the criteria under §570.208(a) or under §570.208(d)(5) or (6) for benefiting low- and moderate -
income persons. For grants under section 107 of the Act, insular area recipients must meet this requirement for each
separate grant. See §570.420(d)(3) for additional discussion of the primary objective requirement for insular areas
funded under section 106 of the Act. The requirements for the HUD -administered Small Cities program in New York
are at §570.420(d)(2). In determining the percentage of funds expended for such activities:
(i) Cost of ministration and planning eligible under §570.205 and §570.206 will be assumed to benefit low and
modera e income persons in the same propn as the remainder of the CDBG funds and, accordingly shall be
excluded from the calculation;
(ii) Funds deducted by HUD for repayment of urban renewal temporary loans pursuant to §570.802(b) shall be
excluded;
(iii) Funds expended for the repayment of loans guaranteed under the provisions of subpart M shall also be
excluded;
(iv) Funds expended for the acquisition, new construction or rehabilitation of property for housing that qualifies
under §570.208(a)(3) shall be counted for this purpose but shall be limited to an amount determined by multiplying
the total cost (including CDBG and non-CDBG costs) of the acquisition, construction or rehabilitation by the percent
of units in such housing to be occupied by low and moderate income persons.
(v) Funds expended for any other activities qualifying under §570.208(a) shall be counted for this purpose in their
entirety.
(4) Compliance with environmental review procedures. The environmental review procedures set forth at 24 CFR
part 58 must be completed for each activity (or project as defined in 24 CFR part 58), as applicable.
(5) Cost principles. Costs incurred, whether charged on a direct or an indirect basis, must be in conformance
with OMB Circulars A-87, "Cost Principles for State, Local and Indian Tribal Governments"; A-122, "Cost Principles
for Non-profit Organizations"; or A-21, "Cost Principles for Educational Institutions," as applicable.1 All items of cost
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listed in Attachment B of these Circulars that require prior Federal agency approval are allowable without prior
approval of HUD to the extent they comply with the general policies and principles stated in Attachment A of such
circulars and are otherwise eligible under this subpart C, except for the following:
1These circulars are available from the American Communities Center by calling the following toll -free numbers: (800)
998-9999 or (800) 483-2209 (TDD).
O Depreciation methods for fixed assets shall not be changed without HUD's specific approval or, if charged
through a cost allocation plan, the Federal cognizant agency.
(ii) Fines and penalties (including punitive damages) are unallowable costs to the CDBG program.
(iii) Pre -award costs are limited to those authorized under paragraph (h) of this section.
(b) Special policies governing facilities. The following special policies apply to:
(1) Facilities containing both eligible and ineligible uses. A public facility otherwise eligible for assistance under
the CDBG program may be provided with CDBG funds even if it is part of a multiple use building containing ineligible
uses, if:
(i) The facility which is otherwise eligible and proposed for assistance will occupy a designated and discrete area
within the larger facility; and
(ii) The recipient can determine the costs attributable to the facility proposed for assistance as separate and
distinct from the overall costs of the multiple -use building and/or facility.
Allowable costs are limited to those attributable to the eligible portion of the building or facility.
(2) Fees for use of facilities. Reasonable fees may be charged for the use of the facilities assisted with CDBG
funds, but charges such as excessive membership fees, which will have the effect of precluding low and moderate
income persons from using the facilities, are not permitted.
(c) Special assessments under the CDBG program. The following policies relate to special assessments under
the CDBG program:
(1) Definition of special assessment. The term "special assessment" means the recovery of the capital costs of
a public improvement, such as streets, water or sewer lines, curbs, and gutters, through a fee or charge levied or
filed as a lien against a parcel of real estate as a direct result of benefit derived from the installation of a public
improvement, or a one-time charge made as a condition of access to a public improvement. This term does not
relate to taxes, or the establishment of the value of real estate for the purpose of levying real estate, property, or ad
valorem taxes, and does not include periodic charges based on the use of a public improvement, such as water or
sewer user charges, even if such charges include the recovery of all or some portion of the capital costs of the
public improvement.
(2) Special assessments to recover capital costs, Where CDBG funds are used to pay all or part of the cost of a
public improvement, special assessments may be imposed as follows:
(i) Special assessments to recover the CDBG funds may be made only against properties owned and occupied
by persons not of low and moderate income. Such assessments constitute program income.
(ii) Special assessments to recover the non-CDBG portion may be made provided that CDBG funds are used to
pay the special assessment in behalf of all properties owned and occupied by low and moderate income persons;
except that CDBG funds need not be used to pay the special assessments in behalf of properties owned and
occupied by moderate income persons if the grant recipient certifies that it does not have sufficient CDBG funds to
pay the assessments in behalf of all of the low and moderate income owner -occupant persons. Funds collected
through such special assessments are not program income.
(3) Public improvements not initially assisted with CDBG funds. The payment of special assessments with
CDBG funds constitutes CDBG assistance to the public improvement. Therefore, CDBG funds may be used to pay
special assessments provided:
(i) The installation of the public improvements was carried out in compliance with requirements applicable to
activities assisted under this part including environmental, citizen participation and Davis -Bacon requirements;
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(ii) The installation of the public improvement meets a criterion for national objectives in §570.208(a)(1), (b), or
(c); and
(iii) The requirements of §570.200(c)(2)(ii) are met.
(d) Consultant activities. Consulting services are eligible for assistance under this part for professional
assistance in program planning, development of community development objectives, and other general professional
guidance relating to program execution. The use of consultants is governed by the following:
(1) Employer -employee type of relationship. No person providing consultant services in an employer -employee
type of relationship shall receive more than a reasonable rate of compensation for personal services paid with CDBG
funds. In no event, however, shall such compensation exceed the equivalent of the daily rate paid for Level IV of the
Executive Schedule. Such services shall be evidenced by written agreements between the parties which detail the
responsibilities, standards, and compensation.
(2) Independent contractor relationship. Consultant services provided under an independent contractor
relationship are governed by the procurement requirements in 24 CFR 85.36, and are not subject to the
compensation limitation of Level IV of the Executive Schedule.
(e) Recipient determinations required as a condition of eligibility. In several instances under this subpart, the
eligibility of an activity depends on a special local determination. Recipients shall maintain documentation of all such
determinations. A written determination is required for any activity carried out under the authority of §§570.201(f),
570.201(i)(2), 570.201(p), 570.201(q), 570.202(b)(3), 570.206(f), 570.209, 570.210, and 570.309.
(f) Means of carrying out eligible activities. (1) Activities eligible under this subpart, other than those authorized
under §570.204(a), may be undertaken, subject to local law:
(i) By the recipient through:
(A) Its employees, or
(B) Procurement contracts governed by the requirements of 24 CFR 85.36; or
(ii) Through loans or grants under agreements with subrecipients, as defined at §570.500(c); or
(iii) By one or more public agencies, including existing local public agencies, that are designated by the chief
executive officer of the recipient.
(2) Activities made eligible under §570.204(a) may only be undertaken by entities specified in that section.
(g) Limitation on planning and administrative costs. No more than 20 percent of the sum of any grant, plus
program income, shall be expended for planning and program administrative costs, as defined in §§570.205 and
507.206, respectively. Recipients of entitlement grants under subpart D of this part shall conform with this
requirement by limiting the amount of CDBG funds obligated for planning plus administration during each program
year to an amount no greater than 20 percent of the sum of its entitlement grant made for that program year (if any)
plus the program income received by the recipient and its subrecipients (if any) during that program year.
(h) Reimbursement for pre -award costs. The effective date of the grant agreement is the program year start date
or the date that the consolidated plan is received by HUD, whichever is later. For a Section 108 loan guarantee, the
effective date of the grant agreement is the date of HUD execution of the grant agreement amendment for the
particular loan guarantee commitment.
(1) Prior to the effective date of the grant agreement, a recipient may incur costs or may authorize a
subrecipient to incur costs, and then after the effective date of the grant agreement pay for those costs using its
CDBG funds, provided that:
(i) The activity for which the costs are being incurred is included, prior to the costs being incurred, in a
consolidated plan action plan, an amended consolidated plan action plan, or an application under subpart M of this
part, except that a new entitlement grantee preparing to receive its first allocation of CDBG funds may incur costs
necessary to develop its consolidated plan and undertake other administrative actions necessary to receive its first
grant, prior to the costs being included in its consolidated plan;
(ii) Citizens are advised of the extent to which these pre -award costs will affect future grants;
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(iii) The costs and activities funded are in compliance with the requirements of this part and with the
Environmental Review Procedures stated in 24 CFR part 58;
(iv) The activity for which payment is being made complies with the statutory and regulatory provisions in effect
at the time the costs are paid for with CDBG funds;
(v) CDBG payment will be made during a time no longer than the next two program years following the effective
date of the grant agreement or amendment in which the activity is first included; and
(vi) The total amount of pre -award costs to be paid during any program year pursuant to this provision is no more
than the greater of 25 percent of the amount of the grant made for that year or $300,000.
(2) Upon the written request of the recipient, HUD may authorize payment of pre -award costs for activities that
do not meet the criteria at paragraph (h)(1)(v) or (h)(1)(vi) of this section, if HUD determines, in writing, that there is
good cause for granting an exception upon consideration of the following factors, as applicable:
(i) Whether granting the authority would result in a significant contribution to the goals and purposes of the
CDBG program;
(ii) Whether failure to grant the authority would result in undue hardship to the recipient or beneficiaries of the
activity;
(iii) Whether granting the authority would not result in a violation of a statutory provision or any other regulatory
provision;
(iv) Whether circumstances are clearly beyond the recipient's control; or
(v) Any other relevant considerations.
(i) Urban Development Action Grant. Grant assistance may be provided with Urban Development Action Grant
funds, subject to the provisions of subpart G, for:
(1) Activities eligible for assistance under this subpart; and
(2) Notwithstanding the provisions of §570.207, such other activities as the Secretary may determine to be
consistent with the purposes of the Urban Development Action Grant program.
(j) Faith -based activities. (1) Organizations that are religious or faith -based are eligible, on the same basis as
any other organization, to participate in the CDBG program. Neither the Federal government nor a State or local
government receiving funds under CDBG programs shall discriminate against an organization on the basis of the
organization's religious character or affiliation.
(2) Organizations that are directly funded under the CDBG program may not engage in inherently religious
activities, such as worship, religious instruction, or proselytization, as part of the programs or services funded under
this part. If an organization conducts such activities, the activities must be offered separately, in time or location,
from the programs or services funded under this part, and participation must be voluntary for the beneficiaries of the
HUD -funded programs or services.
(3) A religious organization that participates in the CDBG program will retain its independence from Federal,
State, and local governments, and may continue to carry out its mission, including the definition, practice, and
expression of its religious beliefs, provided that it does not use direct CDBG funds to support any inherently religious
activities, such as worship, religious instruction, or proselytization. Among other things, faith -based organizations
may use space in their facilities to provide CDBG-funded services, without removing religious art, icons, scriptures,
or other religious symbols. In addition, a CDBG-funded religious organization retains its authority over its internal
governance, and it may retain religious terms in its organization's name, select its board members on a religious
basis, and include religious references in its organization's mission statements and other governing documents.
(4) An organization that participates in the CDBG program shall not, in providing program assistance,
discriminate against a program beneficiary or prospective program beneficiary on the basis of religion or religious
belief.
(5) CDBG funds may not be used for the acquisition, construction, or rehabilitation of structures to the extent
that those structures are used for inherently religious activities. CDBG funds may be used for the acquisition,
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construction, or rehabilitation of structures only to the extent that those structures are used for conducting eligible
activities under this part. Where a structure is used for both eligible and inherently religious activities, CDBG funds
may not exceed the cost of those portions of the acquisition, construction, or rehabilitation that are attributable to
eligible activities in accordance with the cost accounting requirements applicable to CDBG funds in this part.
Sanctuaries, chapels, or other rooms that a CDBG-funded religious congregation uses as its principal place of
worship, however, are ineligible for CDBG-funded improvements. Disposition of real property after the term of the
grant, or any change in use of the property during the term of the grant, is subject to government -wide regulations
governing real property disposition (see 24 CFR parts 84 and 85).
(6) If a State or local government voluntarily contributes its own funds to supplement federally funded activities,
the State or local government has the option to segregate the Federal funds or commingle them. However, if the
funds are commingled, this section applies to all of the commingled funds.
[53 FR 34439, Sept. 6, 1988, as amended at 54 FR 47031, Nov. 8, 1989; 57 FR 27119, June 17, 1992; 60 FR 1943, Jan. 5,
1995; 60 FR 17445, Apr. 6, 1995; 60 FR 56910, Nov. 9, 1995; 61 FR 11476, Mar. 20, 1996; 61 FR 18674, Apr. 29, 1996; 65
FR 70215, Nov. 21, 2000; 68 FR 56404, Sept. 30, 2003; 69 FR 32778, June 10, 2004; 70 FR 76369, Dec. 23, 2005; 72 FR
46370, Aug. 17, 2007]
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§570.201 Basic eligible activities.
CDBG funds may be used for the following activities:
(a) Acquisition. Acquisition in whole or in part by the recipient, or other public or private nonprofit entity, by
purchase, long-term lease, donation, or otherwise, of real property (including air rights, water rights, rights -of -way,
easements, and other interests therein) for any public purpose, subject to the limitations of §570.207.
(b) Disposition. Disposition, through sale, lease, donation, or otherwise, of any real property acquired with CDBG
funds or its retention for public purposes, including reasonable costs of temporarily managing such property or
property acquired under urban renewal, provided that the proceeds from any such disposition shall be program
income subject to the requirements set forth in §570.504.
(c) Public facilities and improvements. Acquisition, construction, reconstruction, rehabilitation or installation of
public facilities and improvements, except as provided in §570.207(a), carried out by the recipient or other public or
private nonprofit entities. (However, activities under this paragraph may be directed to the removal of material and
architectural barriers that restrict the mobility and accessibility of elderly or severely disabled persons to public
facilities and improvements, including those provided for in §570.207(a)(1).) In undertaking such activities, design
features and improvements which promote energy efficiency may be included. Such activities may also include the
execution of architectural design features, and similar treatments intended to enhance the aesthetic quality of
facilities and improvements receiving CDBG assistance, such as decorative pavements, railings, sculptures, pools
of water and fountains, and other works of art. Facilities designed for use in providing shelter for persons having
special needs are considered public facilities and not subject to the prohibition of new housing construction
described in §570.207(b)(3). Such facilities include shelters for the homeless; convalescent homes; hospitals,
nursing homes; battered spouse shelters; halfway houses for run -away children, drug offenders or parolees; group
homes for mentally retarded persons and temporary housing for disaster victims. In certain cases, nonprofit entities
and subrecipients including those specified in §570.204 may acquire title to public facilities. When such facilities are
owned by nonprofit entities or subrecipients, they shall be operated so as to be open for use by the general public
during all normal hours of operation. Public facilities and improvements eligible for assistance under this paragraph
are subject to the policies in §570.200(b).
(d) Clearance and remediation activities. Clearance, demolition, and removal of buildings and improvements,
including movement of structures to other sites and remediation of known or suspected environmental
contamination. Demolition of HUD -assisted or HUD -owned housing units may be undertaken only with the prior
approval of HUD. Remediation may include project -specific environmental assessment costs not otherwise eligible
under §570.205.
(e) Public services. Provision of public services (including labor, supplies, and materials) including but not
limited to those concerned with employment, crime prevention, child care, health, drug abuse, education, fair housing
counseling, energy conservation, welfare (but excluding the provision of income payments identified under
§570.207(b)(4)), homebuyer downpayment assistance, or recreational needs. To be eligible for CDBG assistance, a
public service must be either a new service or a quantifiable increase in the level of an existing service above that
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which has been provided by or on behalf of the unit of general local government (through funds raised by the unit or
received by the unit from the State in which it is located) in the 12 calendar months before the submission of the
action plan. (An exception to this requirement may be made if HUD determines that any decrease in the level of a
service was the result of events not within the control of the unit of general local government.) The amount of CDBG
funds used for public services shall not exceed paragraphs (e) (1) or (2) of this section, as applicable:
(1) The amount of CDBG funds used for public services shall not exceed 15 percent of each grant, except that
for entitlement grants made under subpart D of this part, the amount shall not exceed 15 percent of the grant plus 15
percent of program income, as defined in §570.500(a). For entitlement grants under subpart D of this part,
compliance is based on limiting the amount of CDBG funds obligated for public service activities in each program
year to an amount no greater than 15 percent of the entitlement grant made for that program year plus 15 percent of
the program income received during the grantee's immediately preceding program year.
(2) A recipient which obligated more CDBG funds for public services than 15 percent of its grant funded from
Federal fiscal year 1982 or 1983 appropriations (excluding program income and any assistance received under Public
Law 98-8), may obligate more CDBG funds than allowable under paragraph (e)(1) of this section, so long as the total
amount obligated in any program year does not exceed:
(i) For an entitlement grantee, 15% of the program income it received during the preceding program year; plus
(ii) A portion of the grant received for the program year which is the highest of the following amounts:
(A) The amount determined by applying the percentage of the grant it obligated for public services in the 1982
program year against the grant for its current program year;
(B) The amount determined by applying the percentage of the grant it obligated for public services in the 1983
program year against the grant for its current program year;
(C) The amount of funds it obligated for public services in the 1982 program year; or,
(D) The amount of funds it obligated for public services in the 1983 program year.
(f) Interim assistance. (1) The following activities may be undertaken on an interim basis in areas exhibiting
objectively determinable signs of physical deterioration where the recipient has determined that immediate action is
necessary to arrest the deterioration and that permanent improvements will be carried out as soon as practicable:
(i) The repairing of streets, sidewalks, parks, playgrounds, publicly owned utilities, and public buildings; and
(ii) The execution of special garbage, trash, and debris removal, including neighborhood cleanup campaigns, but
not the regular curbside collection of garbage or trash in an area.
(2) In order to alleviate emergency conditions threatening the public health and safety in areas where the chief
executive officer of the recipient determines that such an emergency condition exists and requires immediate
resolution, CDBG funds may be used for:
(i) The activities specified in paragraph (f)(1) of this section, except for the repair of parks and playgrounds;
(ii) The clearance of streets, including snow removal and similar activities, and
(iii) The improvement of private properties.
(3) All activities authorized under paragraph (f)(2) of this section are limited to the extent necessary to alleviate
emergency conditions.
(g) Payment of non -Federal share. Payment of the non -Federal share required in connection with a Federal
grant-in-aid program undertaken as part of CDBG activities, provided, that such payment shall be limited to activities
otherwise eligible and in compliance with applicable requirements under this subpart.
(h) Urban renewal completion. Payment of the cost of completing an urban renewal project funded under title 1 of
the Housing Act of 1949 as amended. Further information regarding the eligibility of such costs is set forth in
§570.801.
(i) Relocation. Relocation payments and other assistance for permanently and temporarily relocated individuals
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families, businesses, nonprofit organizations, and farm operations where the assistance is (1) required under the
provisions of §570.606 (b) or (c); or (2) determined by the grantee to be appropriate under the provisions of
§570.606(d).
(j) Loss of rental income. Payments to housing owners for losses of rental income incurred in holding, for
temporary periods, housing units to be used for the relocation of individuals and families displaced by program
activities assisted under this part.
(k) Housing services. Housing services, as provided in section 105(a)(21) of the Act (42 U.S.C. 5305(a)(21)).
(I) Privately owned utilities. CDBG funds may be used to acquire, construct, reconstruct, rehabilitate, or install
the distribution lines and facilities of privately owned utilities, including the placing underground of new or existing
distribution facilities and lines.
(m) Construction of housing. CDBG funds may be used for the construction of housing assisted under section
17 of the United States Housing Act of 1937.
(n) Homeownership assistance. CDBG funds may be used to provide direct homeownership assistance to low-
or moderate -income households in accordance with section 105(a) of the Act.
(o)(1) The provision of assistance either through the recipient directly or through public and private organizations,
agencies, and other subrecipients (including nonprofit and for -profit subrecipients) to facilitate economic development
by:
(i) Providing credit, including, but not limited to, grants, loans, loan guarantees, and other forms of financial
support, for the establishment, stabilization, and expansion of microenterprises;
(ii) Providing technical assistance, advice, and business support services to owners of microenterprises and
persons developing microenterprises; and
(iii) Providing general support, including, but not limited to, peer support programs, counseling, child care,
transportation, and other similar services, to owners of microenterprises and persons developing microenterprises.
(2) Services provided this paragraph (o) shall not be subject to the restrictions on public services contained in
paragraph (e) of this section.
(3) For purposes of this paragraph (o), "persons developing microenterprises" means such persons who have
expressed interest and who are, or after an initial screening process are expected to be, actively working toward
developing businesses, each of which is expected to be a microenterprise at the time it is formed.
(4) Assistance under this paragraph (o) may also include training, technical assistance, or other support
services to increase the capacity of the recipient or subrecipient to carry out the activities under this paragraph (o).
(p) Technical assistance. Provision of technical assistance to public or nonprofit entities to increase the
capacity of such entities to carry out eligible neighborhood revitalization or economic development activities. (The
recipient must determine, prior to the provision of the assistance, that the activity for which it is attempting to build
capacity would be eligible for assistance under this subpart C, and that the national objective claimed by the grantee
for this assistance can reasonably be expected to be met once the entity has received the technical assistance and
undertakes the activity.) Capacity building for private or public entities (including grantees) for other purposes may be
eligible under §570.205.
(q) Assistance to institutions of higher education. Provision of assistance by the recipient to institutions of
higher education when the grantee determines that such an institution has demonstrated a capacity to carry out
eligible activities under this subpart C.
[53 FR 34439, Sept. 6, 1988, as amended at 53 FR 31239, Aug. 17, 1988; 55 FR 29308, July 18, 1990; 57 FR 27119, June
17,1992; 60 FR 1943, Jan. 5, 1995; 60 FR 56911, Nov. 9, 1995; 61 FR 18674, Apr. 29, 1996; 65 FR 70215, Nov. 21, 2000;
67 FR 47213, July 17, 2002; 71 FR 30034, May 24, 2006]
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§570.202 Eligible rehabilitation and preservation activities.
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(a) Types of buildings and improvements eligible for rehabilitation assistance. CDBG funds may be used to
finance the rehabilitation of:
(1) Privately owned buildings and improvements for residential purposes; improvements to a single-family
residential property which is also used as a place of business, which are required in order to operate the business,
need not be considered to be rehabilitation of a commercial or industrial building, if the improvements also provide
general benefit to the residential occupants of the building;
(2) Low-income public housing and other publicly owned residential buildings and improvements;
(3) Publicly or privately owned commercial or industrial buildings, except that the rehabilitation of such buildings
owned by a private for -profit business is limited to improvement to the exterior of the building, abatement of asbestos
hazards, lead -based paint hazard evaluation and reduction, and the correction of code violations;
(4) Nonprofit -owned nonresidential buildings and improvements not eligible under §570.201(c); and
(5) Manufactured housing when such housing constitutes part of the community's permanent housing stock.
(b) Types of assistance. CDBG funds may be used to finance the following types of rehabilitation activities, and
related costs, either singly, or in combination, through the use of grants, loans, loan guarantees, interest
supplements, or other means for buildings and improvements described in paragraph (a) of this section, except that
rehabilitation of commercial or industrial buildings is limited as described in paragraph (a)(3) of this section.
(1) Assistance to private individuals and entities, including profit making and nonprofit organizations, to acquire
for the purpose of rehabilitation, and to rehabilitate properties, for use or resale for residential purposes;
(2) Labor, materials, and other costs of rehabilitation of properties, including repair directed toward an
accumulation of deferred maintenance, replacement of principal fixtures and components of existing structures,
installation of security devices, including smoke detectors and dead bolt locks, and renovation through alterations,
additions to, or enhancement of existing structures and improvements, abatement of asbestos hazards (and other
contaminants) in buildings and improvements that may be undertaken singly, or in combination;.
(3) Loans for refinancing existing indebtedness secured by a property being rehabilitated with CDBG funds if
such financing is determined by the recipient to be necessary or appropriate to achieve the locality's community
development objectives;
(4) Improvements to increase the efficient use of energy in structures through such means as installation of
storm windows and doors, siding, wall and attic insulation, and conversion, modification, or replacement of heating
and cooling equipment, including the use of solar energy equipment;
(5) Improvements to increase the efficient use of water through such means as water savings faucets and
shower heads and repair of water leaks;
(6) Connection of residential structures to water distribution lines or local sewer collection lines;
(7) For rehabilitation carried out with CDBG funds, costs of:
(i) Initial homeowner warranty premiums;
(ii) Hazard insurance premiums, except where assistance is provided in the form of a grant; and
(iii) Flood insurance premiums for properties covered by the Flood Disaster Protection Act of 1973, pursuant to
§570.605.
(8) Costs of acquiring tools to be lent to owners, tenants, and others who will use such tools to carry out
rehabilitation;
(9) Rehabilitation services, such as rehabilitation counseling, energy auditing, preparation of work specifications,
loan processing, inspections, and other services related to assisting owners, tenants, contractors, and other entities,
participating or seeking to participate in rehabilitation activities authorized under this section, under section 312 of
the Housing Act of 1964, as amended, under section 810 of the Act, or under section 17 of the United States
Housing Act of 1937;
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(10) Assistance for the rehabilitation of housing under section 17 of the United States Housing Act of 1937; and
(11) Improvements designed to remove material and architectural barriers that restrict the mobility and
accessibility of elderly or severely disabled persons to buildings and improvements eligible for assistance under
paragraph (a) of this section.
(c) Code enforcement. Costs incurred for inspection for code violations and enforcement of codes (e.g., salaries
and related expenses of code enforcement inspectors and legal proceedings, but not including the cost of correcting
the violations) in deteriorating or deteriorated areas when such enforcement together with public or private
improvements, rehabilitation, or services to be provided may be expected to arrest the decline of the area.
(d) Historic preservation. CDBG funds may be used for the rehabilitation, preservation or restoration of historic
properties, whether publicly or privately owned. Historic properties are those sites or structures that are either listed
in or eligible to be listed in the National Register of Historic Places, listed in a State or local inventory of historic
places, or designated as a State or local landmark or historic district by appropriate law or ordinance. Historic
preservation, however, is not authorized for buildings for the general conduct of government.
(e) Renovation of closed buildings. CDBG funds may be used to renovate closed buildings, such as closed
school buildings, for use as an eligible public facility or to rehabilitate such buildings for housing.
(f) Lead -based paint activities. Lead -based paint activities pursuant to §570.608.
[53 FR 34439, Sept. 6, 1988; 53 FR 41330, Oct. 21, 1988, as amended at 60 FR 1944, Jan, 5, 1995; 60 FR 56911, Nov. 9,
1995; 64 FR 50225, Sept. 15, 1999; 71 FR 30035, May 24, 2006]
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§570.203 Special economic development activities.
A recipient may use CDBG funds for special economic development activities in addition to other activities
authorized in this subpart that may be carried out as part of an economic development project. Guidelines for
selecting activities to assist under this paragraph are provided at §570.209. The recipient must ensure that the
appropriate level of public benefit will be derived pursuant to those guidelines before obligating funds under this
authority. Special activities authorized under this section do not include assistance for the construction of new
housing. Activities eligible under this section may include costs associated with project -specific assessment or
remediation of known or suspected environmental contamination. Special economic development activities include:
(a) The acquisition, construction, reconstruction, rehabilitation or installation of commercial or industrial
buildings, structures, and other real property equipment and improvements, including railroad spurs or similar
extensions. Such activities may be carried out by the recipient or public or private nonprofit subrecipients.
(b) The provision of assistance to a private for -profit business, including, but not limited to, grants, loans, loan
guarantees, interest supplements, technical assistance, and other forms of support, for any activity where the
assistance is appropriate to carry out an economic development project, excluding those described as ineligible in
§570.207(a). In selecting businesses to assist under this authority, the recipient shall minimize, to the extent
practicable, displacement of existing businesses and jobs in neighborhoods.
(c) Economic development services in connection with activities eligible under this section, including, but not
limited to, outreach efforts to market available forms of assistance; screening of applicants; reviewing and
underwriting applications for assistance; preparation of all necessary agreements; management of assisted
activities; and the screening, referral, and placement of applicants for employment opportunities generated by
CDBG-eligible economic development activities, including the costs of providing necessary training for persons filling
those positions.
[53 FR 34439, Sept. 6, 1988, as amended at 60 FR 1944, Jan. 5, 1995; 71 FR 30035, May 24, 2006}
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§570.204 Special activities by Community -Based Development Organizations (CBDOs).
(a) Eligible activities. The recipient may provide CDBG funds as grants or loans to any CBDO qualified under
this section to carry out a neighborhood revitalization, community economic development, or energy conservation
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project. The funded project activities may include those listed as eligible under this subpart, and, except as
described in paragraph (b) of this section, activities not otherwise listed as eligible under this subpart. For purposes
of qualifying as a project under paragraphs (a)(1), (a)(2), and (a)(3) of this section, the funded activity or activities
may be considered either alone or in concert with other project activities either being carried out or for which funding
has been committed. For purposes of this section:
(1) Neighborhood revitalization project includes activities of sufficient size and scope to have an impact on the
decline of a geographic location within the jurisdiction of a unit of general local government (but not the entire
jurisdiction) designated in comprehensive plans, ordinances, or other local documents as a neighborhood, village, or
similar geographical designation; or the entire jurisdiction of a unit of general local government which is under 25,000
population;
(2) Community economic development project includes activities that increase economic opportunity, principally
for persons of low- and moderate -income, or that stimulate or retain businesses or permanent jobs, including projects
that include one or more such activities that are clearly needed to address a lack of affordable housing accessible to
existing or planned jobs and those activities specified at 24 CFR 91.1(a)(1)(iii); activities under this paragraph may
include costs associated with project -specific assessment or remediation of known or suspected environmental
contamination;
(3) Energy conservation project includes activities that address energy conservation, principally for the benefit of
the residents of the recipient's jurisdiction; and
(4) To carry out a project means that the CBDO undertakes the funded activities directly or through contract with
an entity other than the grantee, or through the provision of financial assistance for activities in which it retains a
direct and controlling involvement and responsibilities.
(b) Ineligible activities. Notwithstanding that CBDOs may carry out activities that are not otherwise eligible under
this subpart, this section does not authorize:
(1) Carrying out an activity described as ineligible in §570.207(a);
(2) Carrying out public services that do not meet the requirements of §570.201(e), except that:
(i) Services carried out under this section that are specifically designed to increase economic opportunities
through job training and placement and other employment support services, including, but not limited to, peer support
programs, counseling, child care, transportation, and other similar services; and
(ii) Services of any type carried out under this section pursuant to a strategy approved by HUD under the
provisions of 24 CFR 91.215(e) shall not be subject to the limitations in §570.201(e)(1) or (2), as applicable;
(3) Providing assistance to activities that would otherwise be eligible under §570.203 that do not meet the
requirements of §570.209; or
(4) Carrying out an activity that would otherwise be eligible under §570.205 or §570.206, but that would result in
the recipient's exceeding the spending limitation in §570.200(g).
(c) Eligible CBDOs. (1) A CBDO qualifying under this section is an organization which has the following
characteristics:
(i) Is an association or corporation organized under State or local law to engage in community development
activities (which may include housing and economic development activities) primarily within an identified geographic
area of operation within the jurisdiction of the recipient, or in the case of an urban county, the jurisdiction of the
county; and
(ii) Has as its primary purpose the improvement of the physical, economic or social environment of its
geographic area of operation by addressing one or more critical problems of the area, with particular attention to the
needs of persons of low and moderate income; and
(iii) May be either non-profit or for -profit, provided any monetary profits to its shareholders or members must be
only incidental to its operations; and
(iv) Maintains at least 51 percent of its governing body's membership for low- and moderate -income residents of
its geographic area of operation, owners or senior officers of private establishments and other institutions located in
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and serving its geographic area of operation, or representatives of low- and moderate -income neighborhood
organizations located in its geographic area of operation; and
(v) Is not an agency or instrumentality of the recipient and does not permit more than one-third of the
membership of its governing body to be appointed by, or to consist of, elected or other public officials or employees
or officials of an ineligible entity (even though such persons may be otherwise qualified under paragraph (c)(1)(iv) of
this section); and
(vi) Except as otherwise authorized in paragraph (c)(1)(v) of this section, requires the members of its governing
body to be nominated and approved by the general membership of the organization, or by its permanent governing
body; and
(vii) Is not subject to requirements under which its assets revert to the recipient upon dissolution; and
(viii) Is free to contract for goods and services from vendors of its own choosing.
(2) A CBDO that does not meet the criteria in paragraph (c)(1) of this section may also qualify as an eligible
entity under this section if it meets one of the following requirements:
(i) Is an entity organized pursuant to section 301(d) of the Small Business Investment Act of 1958 (15 U.S.C.
681(d)), including those which are profit making; or
(ii) Is an SBA approved Section 501 State Development Company or Section 502 Local Development Company,
or an SBA Certified Section 503 Company under the Small Business Investment Act of 1958, as amended; or
(iii) Is a Community Housing Development Organization (CHDO) under 24 CFR 92.2, designated as a CHDO by
the HOME Investment Partnerships program participating jurisdiction, with a geographic area of operation of no more
than one neighborhood, and has received HOME funds under 24 CFR 92.300 or is expected to receive HOME funds
as described in and documented in accordance with 24 CFR 92.300(e).
(3) A CBDO that does not qualify under paragraph (c)(1) or (2) of this section may also be determined to qualify
as an eligible entity under this section if the recipient demonstrates to the satisfaction of HUD, through the provision
of information regarding the organization's charter and by-laws, that the organization is sufficiently similar in purpose,
function, and scope to those entities qualifying under paragraph (c)(1) or (2) of this section.
[60 FR 1944, Jan. 5, 1995; as amended at 71 FR 30035, May 24, 2006]
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§570.205 Eligible planning, urban environmental design and policy -planning -management -capacity
building activities.
(a) Planning activities which consist of all costs of data gathering, studies, analysis, and preparation of plans
and the identification of actions that will implement such plans, including, but not limited to:
(1) Comprehensive plans;
(2) Community development plans;
(3) Functional plans, in areas such as:
(i) Housing, including the development of a consolidated plan;
(ii) Land use and urban environmental design;
(iii) Economic development;
(iv) Open space and recreation;
(v) Energy use and conservation;
(vi) Floodplain and wetlands management in accordance with the requirements of Executive Orders 11988 and
11990;
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(vii) Transportation;
(viii) Utilities; and
(ix) Historic preservation.
(4) Other plans and studies such as:
(i) Small area and neighborhood plans;
(ii) Capital improvements programs;
(iii) Individual project plans (but excluding engineering and design costs related to a specific activity which are
eligible as part of the cost of such activity under §§570.201-570.204);
(iv) The reasonable costs of general environmental, urban environmental design and historic preservation
studies; and general environmental assessment- and remediation-oriented planning related to properties with known
or suspected environmental contamination. However, costs necessary to comply with 24 CFR part 58, including
project specific environmental assessments and clearances for activities eligible for assistance under this part, are
eligible as part of the cost of such activities under §§570.201-570.204. Costs for such specific assessments and
clearances may also be incurred under this paragraph but would then be considered planning costs for the purposes
of §570.200(g);
(v) Strategies and action programs to implement plans, including the development of codes, ordinances and
regulations;
(vi) Support of clearinghouse functions, such as those specified in Executive Order 12372; and
(vii) Analysis of impediments to fair housing choice.
(viii) Developing an inventory of properties with known or suspected environmental contamination.
(5) [Reserved]
(6) Policy—planning--management—capacity building activities which will enable the recipient to:
(1) Determine its needs;
(2) Set long-term goals and short-term objectives, including those related to urban environmental design;
(3) Devise programs and activities to meet these goals and objectives;
(4) Evaluate the progress of such programs and activities in accomplishing these goals and objectives; and
Carry out management, coordination and monitoring of activities necessary for effective planning
implementation, but excluding the costs necessary to implement such plans.
[53 FR 34439, Sept. 6, 1988, as amended at 56 FR 56127, Oct. 31, 1991; 60 FR 1915, Jan. 5, 1995; 71 FR 30035, May 24,
2006]
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§570.206 Program administrative costs.
Payment of reasonable administrative costs and carrying charges related to the planning and execution of
community development activities assisted in whole or in part with funds provided under this part and, where
applicable, housing activities (described in paragraph (g) of this section) covered in the recipient's housing
assistance plan. This does not include staff and overhead costs directly related to carrying out activities eligible
under §570.201 through §570.204, since those costs are eligible as part of such activities.
(a) General management, oversight and coordination. Reasonable costs of overall program management,
coordination, monitoring, and evaluation. Such costs include, but are not necessarily limited to, necessary
expenditures for the following:
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(1) Salaries, wages, and related costs of the recipient's staff, the staff of local public agencies, or other staff
engaged in program administration. In charging costs to this category the recipient may either include the entire
salary, wages, and related costs allocable to the program of each person whose primary responsibilities with regard
to the program involve program administration assignments, or the pro rata share of the salary, wages, and related
costs of each person whose job includes any program administration assignments. The recipient may use only one
of these methods during the program year (or the grant period for grants under subpart F). Program administration
includes the following types of assignments:
(i) Providing local officials and citizens with information about the program;
(ii) Preparing program budgets and schedules, and amendments thereto;
(iii) Developing systems for assuring compliance with program requirements;
(iv) Developing interagency agreements and agreements with subrecipients and contractors to carry out program
activities;
(v) Monitoring program activities for progress and compliance with program requirements;
(vi) Preparing reports and other documents related to the program for submission to HUD;
(vii) Coordinating the resolution of audit and monitoring findings;
(viii) Evaluating program results against stated objectives; and
(ix) Managing or supervising persons whose primary responsibilities with regard to the program include such
assignments as those described in paragraph (a)(1)(i) through (viii) of this section.
(2) Travel costs incurred for official business in carrying out the program;
(3) Administrative services performed under third party contracts or agreements, including such services as
general legal services, accounting services, and audit services; and
(4) Other costs for goods and services required for administration of the program, including such goods and
services as rental or purchase of equipment, insurance, utilities, office supplies, and rental and maintenance (but not
purchase) of office space.
(b) Public information. The provisions of information and other resources to residents and citizen organizations
participating in the planning, implementation, or assessment of activities being assisted with CDBG funds.
(c) Fair housing activities. Provision of fair housing services designed to further the fair housing objectives of
the Fair Housing Act (42 U.S.C. 3601-20) by making all persons, without regard to race, color, religion, sex, national
origin, familial status or handicap, aware of the range of housing opportunities available to them; other fair housing
enforcement, education, and outreach activities; and other activities designed to further the housing objective of
avoiding undue concentrations of assisted persons in areas containing a high proportion of low and moderate income
persons.
(d) [Reserved]
(e) Indirect costs. Indirect costs may be charged to the CDBG program under a cost allocation plan prepared in
accordance with OMB Circular A-21, A-87, or A-122 as applicable.
(f) Submission of applications for federal programs. Preparation of documents required for submission to HUD to
receive funds under the CDBG and UDAG programs. In addition, CDBG funds may be used to prepare applications
for other Federal programs where the recipient determines that such activities are necessary or appropriate to
achieve its community development objectives.
(g) Administrative expenses to facilitate housing. CDBG funds may be used for necessary administrative
expenses in planning or obtaining financing for housing as follows: for entitlement recipients, assistance authorized
by this paragraph is limited to units which are identified in the recipient's HUD approved housing assistance plan; for
HUD -administered small cities recipients, assistance authorized by the paragraph is limited to facilitating the
purchase or occupancy of existing units which are to be occupied by low and moderate income households, or the
construction of rental or owner units where at least 20 percent of the units in each project will be occupied at
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affordable rents/costs by low and moderate income persons. Examples of eligible actions are as follows:
(1) The cost of conducting preliminary surveys and analysis of market needs;
(2) Site and utility plans, narrative descriptions of the proposed construction, preliminary cost estimates, urban
design documentation, and "sketch drawings," but excluding architectural, engineering, and other details ordinarily
required for construction purposes, such as structural, electrical, plumbing, and mechanical details;
(3) Reasonable costs associated with development of applications for mortgage and insured loan commitments,
including commitment fees, and of applications and proposals under the Section 8 Housing Assistance Payments
Program pursuant to 24 CFR parts 880-883;
(4) Fees associated with processing of applications for mortgage or insured loan commitments under programs
including those administered by HUD, Farmers Home Administration (FmHA), Federal National Mortgage Association
(FNMA), and the Government National Mortgage Association (GNMA);
(5) The cost of issuance and administration of mortgage revenue bonds used to finance the acquisition,
rehabilitation or construction of housing, but excluding costs associated with the payment or guarantee of the
principal or interest on such bonds; and
(6) Special outreach activities which result in greater landlord participation in Section 8 Housing Assistance
Payments Program -Existing Housing or similar programs for low and moderate income persons.
(h) Section 17 of the United States Housing Act of 1937. Reasonable costs equivalent to those described in
paragraphs (a), (b), (e) and (f) of this section for overall program management of the Rental Rehabilitation and
Housing Development programs authorized under section 17 of the United States Housing Act of 1937, whether or
not such activities are otherwise assisted with funds provided under this part.
(i) Whether or not such activities are otherwise assisted by funds provided under this part, reasonable costs
equivalent to those described in paragraphs (a), (b), (e), and (f) of this section for overall program management of:
(1) A Federally designated Empowerment Zone or Enterprise Community; and
(2) The HOME program under title II of the Cranston -Gonzalez National Affordable Housing Act (42 U.S.C.
12701 note).
[53 FR 34439, Sept. 6, 1988; 53 FR 41330, Oct. 21, 1988, as amended at 54 FR 37411, Sept. 8, 1989; 60 FR 56912, Nov. 9,
1995; 69 FR 32778, June 10, 2004]
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