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Daily Rules, Proposed Rules, and Notices of the Federal Government

DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Part 1000

[Docket No. FR-5275-F-13]

RIN 2577-AC80

Native American Housing Assistance and Self-Determination Reauthorization Act of 2008: Amendments to Program Regulations

AGENCY: Office of the Assistant Secretary for Public and Indian Housing, HUD.
ACTION: Final rule.
SUMMARY: This final rule revises the regulations governing the Indian Housing Block Grant (IHBG) program and the Title VI Loan Guarantee program. HUD negotiated this rule with active tribal participation under the procedures of the Negotiated Rulemaking Act of 1990, pursuant to the Native American Housing Assistance and Self-Determination Reauthorization Act of 2008. These regulatory changes implement statutory amendments and reflect the consensus decisions reached by HUD and the tribal representatives.
DATES: Effective Date:January 2, 2013.
FOR FURTHER INFORMATION CONTACT: Rodger J. Boyd, Deputy Assistant Secretary for Native American Programs, Office of Public and Indian Housing, Department of Housing and Urban Development, 451 7th Street SW., Room 4126, Washington, DC 20410; telephone number 202-401-7914 (this is not a toll-free number). Hearing- or speech-impaired individuals may access this number via TTY by calling the toll-free Federal Relay Service at 1-800-877-8339.
SUPPLEMENTARY INFORMATION: I. Executive Summary A. Purpose of the Regulatory Action

This final rule implements a number of amendments to the statutory requirements governing HUD's IHBG and Title VI Loan Guarantee programs under the Native American Housing Assistance Act of 1996 (25 U.S.C. 4101et seq.). Specifically, it focuses on implementing provisions of the Native American Housing Assistance and Self-Determination Reauthorization Act of 2008 (Pub. L. 110-411, approved October 14, 2008) (NAHASDA Reauthorization Act or 2008 Reauthorization Act). The NAHASDA Reauthorization Act reauthorizes the Native American Housing Assistance and Self-Determination Act of 1996 (25 U.S.C. 4101et seq.) (NAHASDA) through September 30, 2013, and makes a number of amendments to the statutory requirements governing HUD's IHBG and Title VI Loan Guarantee programs. Among other changes, the NAHASDA Reauthorization Act amends section 106 of NAHASDA to provide that HUD shall initiate a negotiated rulemaking in order to implement provisions of the 2008 Reauthorization Act that require rulemaking. The rule also implements statutory changes to NAHASDA made by several laws enacted between 1998 and 2005.1 After establishing the NAHASDA Negotiated Rulemaking Committee (Committee), and with the full and active participation of the Tribal representation on the Committee, HUD and the Committee published a proposed rule on November 18, 2011 (76 FR 71474), which reflected the consensus decision of the Committee. This final rule takes into consideration the public comments on the proposed rule and, as discussed in this preamble, makes some changes to the November 18, 2011, proposed rule. This final rule reflects the consensus decisions reached by HUD and the Committee.

1Departments of Veterans Affairs and Housing and Urban Development, and Independent Agencies Appropriations Act, 1999) (Pub. L. 105-276, approved October 21, 1998); Omnibus Indian Advancement Act (Pub. L.106-568, approved December 27, 2000); Native American Housing Assistance and Self Determination Reauthorization Act of 2002 (Pub. L. 107-292, approved November 13, 2002); Homeownership Opportunities for Native Americans Act of 2004, (Pub. L. 108-393, approved October 30, 2004); Native American Housing Enhancement Act of 2005(Pub. L. 109-136, approved December 22, 2005); and Energy Policy Act of 2005 (Pub. L. 109-58, approved August 8, 2005).

B. Summary of Major Provisions of the Regulatory Action

This final rule would amend HUD's regulations by implementing statutory amendments to NAHASDA. The rule amends the regulations under subpart A of 24 CFR part 1000 regarding the guiding principles of NAHASDA, definitions, labor standards, environmental review procedures, procurement, tribal and Indian preference, and program income. The rule also amends subpart B of 24 CFR part 1000, which addresses eligible families, useful life of properties, and criminal conviction records, and subpart C of 24 CFR part 1000, which addresses the tribal program year, Indian Housing Plan (IHP) requirements, administrative and planning expenses, reserve accounts, local cooperation agreements, and exemption from taxation. Changes to subpart D of part 1000 address certain formula information that must be included in the IHP and Annual Performance Report (APR), as well as the date by which HUD must provide data used for the formula and projected allocation to a tribe or Tribally Designated Housing Entity (TDHE). The final rule amends subpart E of 24 CFR part 1000, which addresses financing guarantees, and subpart F of 24 CFR part 1000, which addresses HUD monitoring, APRs, APR review, HUD performance measures, recipient comments on HUD reports, remedial actions in the event of substantial noncompliance, audits, submission of audit reports, and records retention.

C. Costs and Benefits

This rule implements the NAHASDA Reauthorization Act, but does not directly address those provisions that affect the NAHASDA allocation formula, subpart D of 24 CFR part 1000. In implementing these provisions of the NAHASDA Reauthorization Act, this rule does not impose any significant additional costs on Indian tribes, tribal and regional housing authorities, or TDHEs. It provides tribes greater flexibility in administering of their IHBG and Title VI Loan programs and reduces administrative costs by, for example, exempting procurements of goods and services with a value of less than $5000 from competitive requirements and permitting recipients to use Federal supply sources made available by the General Services Administration. Accordingly, HUD has determined that this rule is not an economically significant regulatory action.

II. Background

NAHASDA reorganized and simplified HUD's system of housing assistance to Native Americans by eliminating several separate HUD programs and replacing them with a single block grant program, made directly to tribes, known as the IHBG. Title VI of NAHASDA also authorizes federal guarantees for the financing of certain tribal activities (under the Title VI Loan Guarantee Program). HUD's regulations governing the IHBG and Title VI Loan Guarantee programs are located in 24 CFR part 1000. In accordance with section 106 of NAHASDA, HUD developed the regulations with active tribal participation under the procedures of the Negotiated Rulemaking Act of 1990 (5 U.S.C. 561-570).

Under the IHBG program, HUD makes assistance available to eligible Indian tribes for affordable housing activities. The amount of assistance made available to each Indian tribe is determined using a formula that was developed as part of the NAHASDA negotiated rulemaking process (IHBG Formula). Based on the amount of funding appropriated annually for the IHBG program, HUD calculates the annual grant for each Indian tribe and provides this information to the Indian tribes. An IHP for the Indian tribe is then submitted to HUD. If the IHP is found to be in compliance with statutory and regulatory requirements, the grant is made.

Under the Title VI Loan Guarantee program, HUD guarantees obligations issued by tribes or TDHEs, with tribal approval, to finance eligible affordable housing activities under Section 202 of NAHASDA and housing-related community development activities consistent with the purposes of NAHASDA. No guarantee can be approved if the total outstanding obligations exceed five times the amount of the grant for the issuer, taking into consideration the amount needed to maintain and protect the viability of housing developed or operated pursuant to the U.S. Housing Act of 1937. The program requires issuers to pledge current and future IHBG appropriations to the repayment of the guaranteed obligations. The full faith and credit of the United States is pledged to the payment of all guarantees.

The NAHASDA Reauthorization Act reauthorizes NAHASDA through September 30, 2013, and makes a number of amendments to the statutory requirements governing the IHBG and Title VI Loan Guarantee programs. Among other changes, the NAHASDA Reauthorization Act amends section 106 of NAHASDA to require that HUD establish a negotiated rulemaking committee, in accordance with the procedures of the Negotiated Rulemaking Act of 1990 (5 U.S.C. 561-570) to implement aspects of the 2008 Reauthorization Act that require rulemaking. On January 12, 2009 (74 FR 1227), as required by section 106 of NAHASDA, HUD announced its intention to establish a Negotiated Rulemaking Committee to develop the regulatory changes to the IHBG and Title VI Loan Guarantee programs. On September 23, 2009 (74 FR 48584), after taking nominations for membership on the committee, HUD publishedmembership on the Committee reflecting a balanced representation of Indian tribes.

The NAHASDA Rulemaking Committee convened for one 2-day meeting and five 3-day meetings in Scottsdale, Arizona; Westminster, Colorado; Seattle, Washington; and St. Paul, Minnesota, from March to August 2010. Under the terms of the charter approved by the Committee, the negotiations were to focus on implementation of NAHASDA, as amended, except that subpart D of 24 CFR part 1000, which governs the NAHASDA allocation formula, was generally to be excluded from the negotiations. (The committee nonetheless agreed by consensus to make minor revisions to regulations in subpart D in order to address issues that primarily involved provisions under subpart C.) With the full and active participation of the Tribes, HUD and the Committee published a proposed rule on November 18, 2011 (76 FR 71474). The November 18, 2011, proposed rule reflected the consensus decisions of HUD and the Tribal representatives. The NAHASDA Rulemaking Committee convened for a 2-day meeting in Washington, DC, on May 1-2, 2012, to review and consider public comments received on the proposed rule. This final rule takes into consideration the public comments on the proposed rule, and makes some changes, based on the public comments, to the November 18, 2011, proposed rule. It also reflects the consensus decisions reached by HUD and the Committee.

III. Changes and Clarifications Made in This Final Rule

This final rule follows publication of the November 18, 2011, proposed rule and takes into consideration the public comments received on the proposed rule. In response to public comment, a discussion of which is presented in the following section of this preamble, and in further consideration of issues addressed at the proposed rule stage, HUD and the Committee are making the following changes at this final rule stage and clarifying or correcting portions of the preamble to the November 18, 2011, proposed rule:

• HUD and the Committee are revising § 1000.16, which addresses labor standards, to accurately reflect the intent of the Committee during the negotiated rulemaking sessions held in Westminster, Colorado; specifically, that construction and development contracts are not subject to the prevailing wage provisions referenced in NAHASDA section 104(b)(1) if the contracts are subject to Tribal laws that require payment of not less than prevailing wages, as determined by the Indian tribe. HUD is also clarifying that operations and maintenance contracts and work performed by the TDHE and Tribal employees directly are excluded from Davis-Bacon and HUD wage rates where a Tribal wage provision that requires not less than prevailing wage rates is in existence. In making these changes, HUD also agrees that the preamble of the November 18, 2011, proposed rule incorrectly describes this change as one that did not reach consensus and, accordingly corrects that preamble to reflect otherwise.

• HUD and the Committee are revising § 1000.503(a) to more accurately describe the assessment factors that determine the frequency and level of monitoring recipients. Specifically, HUD and the Committee are revising paragraphs (a)(4), (a)(5) and (a)(6) of § 1000.503 to specifically reference Office of Management and Budget (OMB) Circular A-133. This revision is based on the parties' understanding during the negotiated rulemaking sessions leading to the development of the proposed rule that the delinquent audits included in HUD's risk assessment were delinquent OMB Circular A-133 audits. In addition, to reflect existing practice that considers open Inspector General audit findings as a risk assessment factor, HUD and the Committee are revising § 1000.503(a)(4) to reference open Inspector General audit findings.

• HUD and the Committee are revising § 1000.503(b) to address a perceived grammatical problem and bring greater clarity to the paragraph.

• While not changing HUD regulatory text of § 1000.532(a), HUD and the Committee are clarifying the description of this section in this final rule. Specifically, rather than covering “significant noncompliance with a major activity of a recipient's IHP,” as described in the proposed rule, § 1000.532 is clarified to provide that it applies to several categories of “substantial noncompliance” as that term is defined in § 1000.534.

IV. The Public Comments

The public comment period for the November 18, 2011, proposed rule closed on January 17, 2012, and HUD received 20 public comments, including one duplicate, on the proposed rule. Comments were submitted by federally recognized Indian tribes, tribal and regional housing authorities, TDHEs, associations comprised of tribes, a law office, a nonprofit devoted to issues of race and ethnicity, and a member of the public. On May 1 and 2, 2012, the Committee met in Washington, DC, to review and consider responses to the public comments. This section of the preamble addresses the significant issues raised in the public comments and organizes the comments by subject category, with a brief description of the issue, followed by the Committee's response. For the convenience of readers, the discussion of the public comments is organized into three sections. The first section discusses the general comments that were received on the proposed rule. The second section discusses the public comments received on specific proposed regulatory changes contained in the proposed rule. The third section discusses the public comments received on nonconsensus issues (i.e., those issues on which the Committee could not reach agreement on proposed regulatory language).

A. General Comments

Issue: Tribal and Indian preferences, generally.One commenter stated that unless there is an explicit statutory mandate to do so, there should be no preferences given on the basis of “Indian” (racial) as opposed to “tribal” (political) status. The commenter citedMortonv.Mancarito support this comment. The commenter stated that the former is a racial classification and, therefore, triggers strict scrutiny and is presumptively unconstitutional.Adarand Constructors, Inc.v.PenaandPersonnel Administratorv.Feeney.

Response:The commenter stated that “unless there is an explicit statutory mandate to do so, there should be no preferences given on the basis of `Indian' (racial) as opposed to `tribal' (political) status,” asserting that “the former is a racial classification and, therefore, triggers strict scrutiny and is presumptively unconstitutional.” The commenter references the United States Supreme Court's decision inMortonvMancari,417 U.S. 535 (1974), in support of this comment. The Committee notes that there is a mandate to use Indian preference under NAHASDA, both in providing affordable housing and in hiring and contracting. 25 U.S.C. 4101, 4111, 4131. Further, the Committee notes thatMorton,contrary to the commenter's assertion, expressly found that, “Indian” preference is not a racial categorization, but is rather a political one and that, therefore, the use of Indian preference does not trigger strict scrutiny review under the Constitution's equal protection clause. 417 U.S. 535, 554-555. As a result, the Committee decided not to revise any provisions providing Indian or tribal preference in this final rule.

Issue: Lack of timeliness in issuing regulations.Several commenters expressed their concern that HUD is only now promulgating regulations to implement provisions that were enacted through the NAHASDA. The commenters stated that it is imperative that HUD be timelier in proposing future regulations.

Response:HUD recognizes the concern raised by the commenters and is committed to working more timely in proposing future regulations.

B. Comments on Specific Proposed Regulatory Changes

Issue: Initiation of rulemaking; providing for periodic review (§ 1000.9(b)).Several commenters, citing section 106(b)(2)(D) of NAHASDA, as amended, stated that the proposed rule provides a mechanism for initiating rulemaking when NAHASDA is amended, but does not provide a mechanism for initiating the periodic review of the regulations as required by this section of NAHASDA.

Response:The Committee considered the comments and determined that no change is required to § 1000.9(b) as published in the proposed rule.

Issue: Initiation of rulemaking; clarifying actions that “significantly” amend NAHASDA (§ 1000.9(b)).Several commenters recommended that HUD clarify the standard used when determining whether an enactment has “significantly” amended NAHASDA. The commenters stated that without such clarification, HUD would retain too much discretion to determine when negotiated rulemaking is called for. The commenters recommended that HUD define “significantly” as “any enactment that has the effect of altering the rights, privileges, duties, or responsibilities of the Secretary, Tribes, or TDHEs, that changes any aspect of the funding allocation mechanism under the statute, or that changes any procedure.” Several other commenters agreed and opined that had HUD initiated negotiated rulemaking in 2002, many of the accounting issues facing tribes and TDHEs would not have been necessary.

Response:The Committee considered these comments and did not reach consensus on revising § 1000.9(b) as published in the propose rule. Tribal representatives stated that defining “significantly” would provide more clarity and certainty regarding when negotiated rulemaking was required rather than leaving the decision entirely within HUD's discretion. HUD's position was that § 1000.9(b) was intended to provide HUD the flexibility to quickly respond to minor changes or technical changes to NAHASDA without first having to establish a negotiated rulemaking committee, a process that may take considerable time and resources. HUD asserted that defining “significantly” as recommended by the commenters or removing the word “significantly” from § 1000.9(b) would be difficult and likely result in the delayed implementation of amendments to NAHASDA to the detriment of both HUD and the Tribes. As a result, the Committee did not reach consensus to revise § 1000.9(b) in response to these comments.

Issue: Labor Standards; consensus reached to exclude contracts from section 104(b)(1) of NAHASDA (§ 1000.16(e)).Several commenters stated that the Committee reached consensus on including language that would exclude construction and development contracts from being required to contain the prevailing wage provision referenced in section 104(b)(1) of NAHASDA. These commenters cited to transcripts of the negotiated rulemaking sessions held in Westminster, Colorado (Neg. Reg. Committee Transcript Vol. II, Page 168 and Issue Number 32 on the NAIHC Legislative Committee Analysis Chart) to support their position. These commenters also stated that the Committee reached agreement specifying that “agreements for assistance, sale or lease” included construction and development contracts. These commenters stated that the final rule should reflect the Committee's action to include regulatory language specifically excluding construction and development contracts from this provision.

These commenters also stated that HUD should clarify that contracts for operations and maintenance of NAHASDA-assisted affordable housing are not subject to the provisions of section 104(b)(1) provided that applicable tribal law requires the payment of prevailing wage rates, and that work performed directly by tribal or TDHE employees on NAHASDA-assisted housing is also excluded from that provision. Another commenter also recommended that proposed § 1000.16(e) be revised to provide a more complete description of those activities not subject to the prevailing wage requirement. The commenter recommended that proposed § 1000.16(e) be revised to add, “including such construction and development contracts and such contracts for the maintenance and operation of NAHASDA-assisted affordable housing. Work performed directly by tribal or TDHE employees on NAHASDA-assisted housing is also not subject to the prevailing wages provisions in section 104(b)(1) if covered by one or more such laws or regulations adopted by an Indian tribe.”

Response:After reviewing this issue, the Committee agreed that consensus was reached and that construction and development contracts, if entered into pursuant to a HUD contract or agreement for assistance, sale, or lease under NAHASDA, are not required to contain the prevailing wage provision referenced in NAHASDA section 104(b)(1) if the contracts are subject to tribal laws that require payment of not less than prevailing wages. Accordingly, the Committee is revising § 1000.16 to accurately reflect this consensus position. In addition, as requested by the commenter, the Committee is also clarifying that operations and maintenance contracts and work performed by the TDHE and Tribal employees directly are excluded from Davis-Bacon and HUD wage rates under section 104(b)(1) where a Tribal wage provision that requires not less than prevailing wage rates is in existence. In making these changes, the Committee also agrees that the preamble of the November 18, 2011, proposed rule incorrectly describes this change as one that did not reach consensus and, accordingly, corrects that preamble to reflect otherwise.

Issue: Waiver of environmental review procedures; secretarial discretion to approve the waiver (§ 1000.21).Several commenters stated that the proposed regulation permits the Secretary discretion to grant a waiver from the environmental review requirements in certain circumstances, and sets out the criteria to be used by the Secretary in making his determination. The commenters recommended that the waiver be mandatory if the Secretary determines that the recipient's waiver request meets each condition provided by § 1000.21.

Response:The Committee considered these comments and did not reach consensus to change § 1000.21, regarding waiver of environmental compliance. Tribal representatives stated that adopting the comment would provide a level of certainty regarding HUD's treatment of waiver requests and would be more workable for the tribes. HUD stated that section 105 of NAHASDA provides that the Secretary “may” waive environmental requirements upon a showing of the stated criteria delineated by the statute and reiterated that the intent of this section was to simply codify statutory text. While tribal representativesthought otherwise, HUD also asserted that removing Secretarial discretion to review these waiver requests would diminish HUD's ability to ensure that each criterion was met. HUD also stated that it has routinely granted such waiver requests in the past whenever a recipient has demonstrated that each criterion has been met.

Issue:Another commenter stated that HUD changed the preamble discussion of § 1000.21 following Committee consensus by referencing Notice CPD-04-08, regarding the procedures for requesting a waiver of the statutory environmental review requirements, and by adding a footnote that summarizes these procedures. According to the commenter, the inclusion of this language misleadingly implies that there has been sufficient tribal consultation to justify HUD's policies on these issues. The commenter also states that this language attempts to raise the CPD notice almost to the level of a negotiated rule by referencing it in the preamble. The commenter recommended that the wording be removed and full tribal consultation be sought before application of the referenced program notice, or some revised version of that notice.

Response:The Committee considered this comment and concluded that no action on this comment is required. Notice CPD-04-08, which has since been replaced by Notice CPD-11-010, restates the authority of the Secretary to waive environmental requirements and describes the existing procedures that HUD follows when reviewing and approving waiver requests. The Notice was referenced only to describe the process, timing, procedures, and forms used by HUD to process a request to waive environmental requirements. As a result, the Committee decided that no action on this comment is required.

Issue: Utilizing federal supply sources in procurement (§ 1000.26(11)(iv)).Several commenters stated that they welcomed this provision, which permits recipients to use federal supply sources made available by the General Service Administration (GSA). The commenters reported, however, reluctance on the part of GSA to apply the provision and recommended that the failure be remedied.

Response:The Committee notes that the comment offers an observation rather than a recommendation to change the regulatory text. As a result, the Committee agreed that no action on this comment is required. Nevertheless, the Committee agrees with the commenters that use of federal supply sources provided by GSA can be extremely cost effective for tribes, saving thousands of dollars in procurement costs during a period of scarce federal resources. HUD commits to continuing to work with GSA to reduce the difficulties associated with using these sources.

Issue: Applicability of section 3 of the Housing and Urban Development Act of 1968 (§ 1000.42).Several commenters stated that section 101(k) of NAHASDA, as amended, designated as Tribal Preference in Employment and Contracting provides that tribal employment and contract preference laws and regulations apply notwithstanding any other provision of law. The commenters stated that while section 3 of the HUD Act of 1968 requires that low-income residents receive preference in employment and contracts, low-income household members are not always Native American or members of a tribe. The commenters recommended, therefore, that the preamble or the final rule confirm that HUD will not treat the application of tribal preference laws as a violation of section 3, even if they do not contemplate preference for non-Tribal household members.

Another commenter stated that section 3 is an infringement on tribal self-determination and that § 1000.42 of the proposed rule should be eliminated. The commenter stated that application of the section 3 requirement would require that 30 percent of the aggregate number of new hires be section 3 residents and that 10 percent of all contracts be awarded to section 3 businesses. The commenter also stated that tribal education and training programs are federally funded programs for the benefit of Native Americans, and that HUD cannot dictate that this funding be directed to assist non-Indians.

Response:The Committee considered the comment and agreed that § 1000.42 does not require change. As more fully discussed in the preamble to the November 18, 2011, proposed rule, § 1000.42 addresses section 3 of the Housing and Urban Development Act of 1968 (12 U.S.C. 1701u), which requires certain HUD recipients (e.g., recipients of more than $200,000 in HUD housing and community development assistance for a covered project) to provide economic opportunities to low- and very low-income residents. Section 1000.42(c) clarifies that recipients meet the section 3 requirements when they comply with employment and contract preference laws adopted by their tribe in accordance with section 101(k) of NAHASDA.

Issue: Tribal and Indian preferences; potential infringement on Tribal Sovereignty (§§ 1000.48, 1000.50, and 1000.52).One commenter stated that these sections, which provide that a recipient is required to apply Tribal preference in employment and contracting, if the Tribe has enacted Tribal preference laws, and that it must apply Indian preference to the extent that Tribal preference laws have not been enacted, may infringe on tribal sovereignty. According to the commenter, each tribe should be able to determine whether or not to implement Indian or tribal preferences and the extent to which it implements such preferences.

Response:The final rule has not been revised in response to this comment. As stated in the preamble to the proposed rule, these sections implement section 101(k) of NAHASDA, which provides that the employment and contract preference laws of a tribe that receives the benefit of a grant (or portion of a grant) apply to the administration of the grant (or portion of the grant), notwithstanding any other provision of law. More specifically, these sections clarify that a recipient is required to apply tribal preference in employment and contracting if a tribe has enacted tribal preference laws, and that only to the extent that such tribal preference laws have not been enacted, a recipient must instead apply Indian preference, as required under section 7(b) of the Indian Self-Determination and Education Assistance Act (25 U.S.C. 450e(b)). In addition, §§ 1000.48(c) and 1000.52(d) clarify that the exemption in NAHASDA section 203(g) for procurements of less than $5,000 from competitive rules and procedures serves to exempt such procurements from Indian preference requirements under section 7(b) of the Indian Self-Determination and Education Assistance Act.

Issue: Program Income; Use for Housing or housing related activities (§§ 1000.10(b), 1000.26, and 1000.64).Several commenters stated that §§ 1000.10(b), 1000.26, and 1000.64 implement changes enacted by the NAHASDA Reauthorization Act of 2002 that provide that income derived from NAHASDA funded activities are not restricted so long as they are used for housing or housing related activities. According to the commenters, this change should have been self-implementing and, as a result, HUD should authorize tribes and TDHEs to recoup any program income that they were forced to expend since 2002 on affordable housing activities, the statutory standard prior to the 2002 change.

Response:The Committee considered these comments and agreed that they raise a valid concern. Notwithstanding,the comments raise issues outside the scope of this rulemaking and can more properly be addressed in a separate rulemaking. As a result, the Committee considered the comments and decided not to revise §§ 1000.10(b), 1000.26, or 1000.64.

Issue: The rule fails to assist recipients to determine “useful life” (§ 1000.142).Several commenters stated that § 1000.142 fails to inform recipients regarding how to determine the useful life of a housing unit. As a result, the useful life of a housing unit will be determined on a case-by-case determination by HUD's approval of the recipient's Indian Housing Plan. The commenters stated that HUD should provide a clear and realistic way to determine a unit's useful life rather than relying on a case-by-case determination. Another commenter agreed that § 1000.142 is not clear. The commenter opined that HUD will likely be required to publish guidance regarding the provision and cautioned that unless the guidance is subject to HUD's tribal consultation policy, such guidance could appear to infringe on tribal self-determination.

Response:The Committee considered these comments and concluded not to change § 1000.142. This provision was a consensus provision agreed to by HUD and the Committee. Moreover, § 1000.142 reflects current practice and remains useful in clarifying that recipients implement the useful life requirement by placing binding commitments on the assisted property that are satisfactory to HUD.

Issue: The requirement that binding commitments are applicable to third parties that are not family members does not make sense (§ 1000.146).Several commenters stated that § 1000.146 does not make practical sense. The commenters stated that the binding commitment is between the recipient and the homebuyer and does not pass to family or household members. As a result, the commenters stated that the family or household member cannot pass the restriction to third party buyers. The commenters recommend that HUD revise this provision by deleting the last sentence of the proposed section.

Response:As discussed in the preamble to the proposed rule, § 1000.146 incorporates section 205(c) of NAHASDA. More specifically, the sentence that the commenters recommend be deleted reflects the intent of the Committee that any subsequent transfer by the family member or household member to a third party that is not a family member or household member be subject to any remaining useful life under a binding commitment. Accordingly, HUD and the Committee determined that a change to the rule was not necessary.

Issue: Difficulty receiving criminal conviction information (§ 1000.150).Several commenters stated that most tribal housing programs and TDHEs remain unable to obtain criminal conviction information on applicants or tenants from law enforcement agencies, including the Bureau of Indian Affairs Police and local non-Indian agencies. The commenters recommended that the authorization to obtain this information be strengthened by regulation or by statutory amendment.

Response:The November 18, 2011, rule proposed to amend only the heading of § 1000.150, to conform it to section 208(a) of NAHASDA, which permits the use of criminal conviction records to screen applicants for employment. Consequently, the Committee agrees that no change to § 1000.150 is required. Nevertheless, the Committee agrees that section 208(a) of NAHASDA provides that the National Crime Information Center, police departments, and other law enforcement agencies are required to provide this information upon request. The Committee also agrees that the preamble to this final rule state that, while § 1000.150 does not explicitly list the “other law enforcement agencies” from which tribes and TDHEs should be able to obtain the criminal conviction records of applicants for employment and adult applicants for housing, the intent of the Committee is that such information be made available from the Bureau of Indian Affairs Police and local non-Indian agencies.

Issue: Response time not sanctioned (§§ 1000.227 and 1000.246).Several commenters stated that, unlike § 1000.114, these provisions covering the granting of waivers relating to local cooperation agreement and taxation exemption requirements, as well as waivers relating to a recipient's IHP submission deadline, do not provide consequences for HUD's failure to act within the prescribed timeframes. The commenters recommended that these sections be revised to provide that HUD's failure to issue a decision within the prescribed timeframe shall result in the waiver request being approved.

Response:The Committee considered these comments and did not reach consensus to change either § 1000.227 or § 1000.246. The deadlines for HUD action reflected in §§ 1000.227 and 1000.246 were the subject of much discussion during the negotiated rulemaking sessions leading to the proposed rule. Tribal representatives opined that establishing consequences for HUD's failure to meet its deadline would expedite the review process and provide certainty for the tribes. HUD asserted that a deadline would eliminate the flexibility it needs to fully review these requests. HUD also asserted the fact that it has delegated decisionmaking authority to the field should expedite HUD decisionmaking, and supports the conclusion that these sections not be revised to result in automatic waivers of program requirements being granted should HUD fail to issue a decision within the prescribed timeframes.

The Committee also reviewed whether to revise § 1000.246(c) to delete the second and third sentences that read, “If the request is denied, IHBG funds may not be spent on the housing units. If IHBG funds have been spent on the housing units prior to the denial, the recipient must reimburse the grant for all IHBG funds expended.” HUD notes that section 101(d) of NAHASDA states that grant amounts may not be used unless the dwelling units are exempt from all real and personal property taxes levied or imposed by the state, tribe, city, county or other political subdivision. Recipients would not, therefore, comply with NAHASDA if they used non-federal assistance to pay any tax imposed on the units. As a result, the Committee did not revise § 1000.246.

Issue: What is the appropriate extent of HUD monitoring (§ 1000.503(a)).One commenter stated that HUD changed one of the risk assessment factors related to a determination of the frequency of HUD monitoring in § 1000.532(a)(4) from “delinquent IPA audits” to “delinquent audits.” The commenter stated that the reference to “delinquent audits” should be changed back to the October 2010 version of the provision which provided, “delinquent Independent Public Accountant (IPA) audits.”

Response:HUD agrees that the reference to “delinquent IPA audits” was changed to “delinquent audits,” after the language was negotiated and consensus reached. HUD stated that the change was intended to clarify the provision since the term “IPA” is not defined in the rule and may lend itself to confusion. To more accurately describe the assessment factors which determine the frequency and level of monitoring recipients, the Committee agrees to revise paragraphs (a)(4), (a)(5) and (a)(6) of § 1000.503 to reference OMB Circular A-133. The parties understood during the negotiated rulemaking sessions leading to the development of the proposed rule thatthe delinquent audits included in HUD's risk assessment were delinquent OMB Circular A-133 audits. In addition, to reflect existing practice that considers open Inspector General audit findings as a risk assessment factor, the Committee agrees to revise § 1000.503(a)(5) to read, “open OMB Circular A-133 or Inspector General audit findings.”

Issue: Potential ambiguity in § 1000.503(b).One commenter stated that there appears to be a grammatical problem with the wording in the introductory language of § 1000.503(b) that could cause ambiguity. The commenter recommended that the provision be clarified by rewriting the section to read as follows: “(b) If monitoring indicates noncompliance, HUD may undertake additional sampling and review to determine the extent of such noncompliance. The level of HUD monitoring of a recipient once that recipient has been selected for HUD monitoring is as follows * * *”

Response:The Committee agrees that the recommendation offered by the commenter would clarify § 1000.503(b) and accordingly, revises this section. In addition, the Committee agrees to further clarify the wording in §§ 1000.503(b)(2) and (b)(3) to make the provisions easier to comprehend and apply.

Issue: HUD altered the meaning of § 1000.503(d) as negotiated by the Committee.One commenter stated that HUD has changed § 1000.503(d) in a way that alters its meaning as negotiated by the Committee. According to the commenter, the original intent agreed to by the Committee was that HUD would not monitor a recipient that has a self-monitoring agreement, absent the circumstances listed in the regulations. The language incorporated in the proposed rule, however, implies that self-monitoring agreements will include provisions for some form of HUD monitoring, even when the circumstances listed in the proposed rule are not present. The commenter recommended that the final regulation include the wording as originally shown in the October 2010 version of the rule, specifically, that “ONAP will not monitor the recipient within the effective period of such agreement or arrangements, unless ONAP finds reasonable evidence of fraud, a pattern of noncompliance, or the significant unlawful expenditure of IHBG funds.”

Response:Section 1000.503(d) provides that a recipient may request to enter into a self-monitoring agreement with HUD, under which HUD would monitor only the recipient in accordance with the agreement, absent reasonable evidence of fraud, a pattern of noncompliance, or significant unlawful expenditure of IHBG funds. The Committee agrees that as written, § 1000.503(d) represents the intent of the parties, and as a result, does not require change at this final rule stage.

Issue: Failure of HUD to issue timely report not sanctioned (§ 1000.528).Several commenters stated that the proposed regulations require tribes to submit comments to the HUD draft report within specific timeframes, and that failure to meet the prescribed time results in consequences for the tribe. The commenters state that there are no consequences for HUD's failure to issue a report within the regulatory timelines. The commenters recommended that the regulation contain some kind of consequence for HUD, or some kind of enforcement or appeal mechanism if HUD fails to meet its obligations under the timelines.

Response:The Committee considered this comment and recognizes that § 1000.528 establishes a timeline for HUD to take action, but does not establish consequences for HUD not taking action within that time period. Tribal representatives stated that establishing consequences for HUD if it fails to meet the timeline would expedite HUD's review of a tribe's draft report and provide additional certainty for the tribes. This section was discussed during the committee meeting leading to the development of this section and there was no consensus to adopt the Tribal position. As a result, the Committee did not change the rule to address this comment.

Issue: Preamble does not accurately describe scope of § 1000.532(a).One commenter stated that HUD's preamble describing the scope of § 1000.532(a) inaccurately describes the scope of this section. The commenter stated that the preamble describes this section as covering “significant noncompliance with major activity of a recipient's IHP” when the proposed section covers any act of substantial noncompliance as defined in § 1000.534, which includes events that are financially significant, whether or not a major activity is involved. The commenter recommended that HUD clarify this language in the final rule.

Response:The Committee considered this comment and agrees that it does not recommend changes to the regulatory text of the final rule. As a result, the Committee agrees that § 1000.532(a) does not require change at this final rule stage. The commenter raises a concern regarding the accuracy of the section of the preamble to the proposed rule that describes § 1000.532(a) (76 FR 71479-71480). HUD and the Committee reviewed this section of the preamble and agree it does not clearly describe § 1000.532(a). Specifically, the preamble to the proposed rule states that § 1000.532(a) applies to “significant noncompliance with a major activity of a recipients IHP.” To clarify, the final rule at § 1000.532 applies to several categories of “substantial noncompliance” as that term is defined in § 1000.534.

Issue: Provision regarding how long the recipient must maintain program records should be clarified (§ 1000.552(b)).Several commenters stated that only smaller tribes will be controlled by this provision and that most tribes and TDHEs are subject to the Single Audit Act and existing § 1000.552(c). The commenters recommended that HUD combine proposed § 1000.552(b) and existing § 1000.552(c) to make one clearly stated and understandable statement.

Response:The Committee considered these comments and agrees not to change § 1000.552(b) to address this comment.

C. Comments Regarding Nonconsensus Items

Issue: Procedures to respond to HUD remedial actions are insufficient and do not conform to statute (§§ 1000.528 to 1000.536).Several commenters stated that sections 401 and 405 of NAHASDA require full due process for recipients before any NAHASDA funds can be reduced or recaptured for any reason. Full due process includes adequate and detailed notice, the right of the recipient to respond, a hearing, and a final determination made by a fair and impartial decisionmaker. Furthermore, the commenters stated that NAHASDA does not provide for the recapture of funds spent on eligible affordable housing activities under any circumstances. The commenters stated that the proposed regulations do not sufficiently or clearly address these requirements. They recommended that the Committee propose new regulations that make these due process requirements clear and state that recapture of NAHASDA funds that have already been spent on eligible affordable housing activities is prohibited under all circumstances.

Response:No change has been made to this final rule in response to these comments. As discussed in detail in the preamble to the proposed rule, the Committee could not reach consensus on the recapture of expenditures on affordable housing activities. Because decisionmaking during the negotiated rulemaking process was based onconsensus, the absence of consensus on recapture of funds, even after the full consideration of public comments, precluded the Committee from adopting the changes proposed by the commenters.

Issue: Remedial actions in the event of substantial noncompliance; HUD should reconsider opposition to three nonconsensus items (§ 1000.532).

Several commenters urged HUD to reconsider its opposition to the tribal position on three nonconsensus items. Initially, the commenters urged HUD to include in the final rule the Tribes' proposal to impose a 3-year “statute of limitations” on HUD enforcement actions. The commenters stated that such a limitation would provide certainty and stability to tribes and TDHEs in their operations. Second, the commenters urged HUD to incorporate the Tribes' proposal to retain the existing language that would prohibit HUD from recapturing funds that have already been distributed to recipients and expended on affordable housing activities, stating that the recapture of funds is unduly punitive to recipients and would have a potentially adverse impact on low-income tenants and homebuyers who depend on the recipients for ongoing services. Finally, the commenters urged HUD to incorporate the Tribes' proposed language to clarify that the Line of Control Credit System (LOCCS) edit is in fact a “limitation on the availability of payments to programs, projects, or activities not affected by a failure to comply as described under section 401(a)(1) of NAHASDA.” The commenters stated that the justification that HUD put forward to support its position is not borne out by the facts or the law.

Another commenter stated that procedures to be used for noncompliance are extremely important to recipients, and while it did not object to § 1000.532 as proposed, it is important for HUD and tribes to reach consensus concerning procedures to be used when noncompliance that is not “substantial” is involved.

Response:No change has been made to this final rule in response to these comments. HUD and the Committee considered these comments and for the reasons discussed in the preamble to the proposed rule, could not reach consensus on any of these three items. Because decisionmaking during the negotiated rulemaking process was based on consensus, the absence of consensus on these three items, even after the full consideration of public comments, precluded the Committee from adopting the changes proposed by the commenters.

Issue: LOCCS edit is subject to section 401(a)(1) of NAHASDA and should be reconsidered.Several commenters recommended that the rule incorporate the Tribes' proposed language that clarifies that the LOCCS edit is a “limitation on the availability of payments to programs, projects, or activities not affected by a failure to comply,” under section 401(a)(1) of NAHASDA, subject to notice and the opportunity for hearing before terminating, reducing, or limiting the availability of payments. The commenters stated that the justification that HUD put forward during the negotiations to support its position is not borne out by the facts or the law cited by HUD, and that HUD's efforts in other programs to avoid due process requirements when restricting or limiting access to funds have been struck down by the courts. Another commenter disagreed with HUD's position regarding the LOCCS edit and stated that HUD will likely be required to publish guidance regarding the provision. The commenter cautioned that unless the guidance is subject to HUD's tribal consultation policy, such guidance would infringe on tribal self-determination.

Response:As discussed in detail in the preamble to the November 18, 2011, proposed rule, HUD and the Tribes disagree as to whether a “LOCCS edit” is a “limitation on the availability of payments to programs, projects, or activities not affected by a failure to comply,” as described under section 401(a)(1) of NAHASDA. Interested parties are directed to review the preamble to the proposed rule for a full discussion of the position of the parties. Because decisionmaking during the negotiated rulemaking process was based on consensus, the absence of consensus, even after the full consideration of public comments, precluded the Committee from adopting the changes proposed by the commenters.

Issue: Hearing Requirements for Formula Current Assisted Stock (FCAS) overcounts should be reconsidered (§ 1000.532(b)).Several commenters stated that the tribally proposed language that would make some level of inaccuracy in FCAS reporting by the recipient a substantial noncompliance requiring a hearing should be reconsidered. The commenters strongly recommend that the Committee propose new regulations that make the statutory due process requirements clear in the case of overcounts where a recipient would lose a substantial amount of their annual funding.

Response:As discussed in detail in the preamble to the November 18, 2011, proposed rule, HUD and the Tribes disagree on the meaning of section 401(a)(2) of NAHASDA, which addresses the counting of FCAS units. Interested parties are directed to review the preamble to the proposed rule for a full discussion of the position of the parties. The Tribes also recommended the addition of a new subsection to § 1000.534 that would provide that a FCAS overcount, in itself, does not constitute substantial noncompliance. Because decisionmaking during the negotiated rulemaking process was based on consensus, the absence of consensus on FCAS overcounting, even after the full consideration of public comments, precluded the Committee from adopting the changes proposed by the commenters.

Issue: Preamble does not accurately describe hearing requirement for FCAS overcounts.One commenter stated that HUD failed to include a full explanation of the Committee's failure to reach consensus of the FCAS overcount issue in the preamble of the rule. The commenter stated that the October 2010 version of the preamble had the full explanation, including a discussion of whether section 401(a)(2) of NAHASDA, as amended, required a hearing before any grant amount adjustment by HUD. The October 2010 version also addressed the Committee's broader discussions regarding the procedural protections to be applied to both noncompliance and “substantial” noncompliance, and would have ensured that even in cases not involving substantial noncompliance, recipients would have minimum due process protections of notice and an opportunity for some form of hearing. The commenter stated that the failure to include the full discussion of these issues as provided in the October 2010 version downplays the significance of the importance of the issue to recipients. The commenter concluded by recommending that even if HUD persists in omitting the provisions concerning noncompliance that is not substantial, the October 2010 preamble discussion of this issue should be included in the published version of the rules.

Response:As discussed in the response immediately preceding this comment, HUD and the Tribes were unable to reach consensus on this issue. Accordingly, the lack of consensus precluded the Committee from adopting the changes proposed by the commenter.

V. Findings and Certifications Regulatory Review—Executive Orders 12866 and 13563

Under Executive Order 12866 (Regulatory Planning and Review), a determination must be made whether a regulatory action is significant and, therefore, subject to review by the Office of Management and Budget (OMB) in accordance with the requirements of the order. Executive Order 13563 (Improving Regulations and Regulatory Review) directs executive agencies to analyze regulations that are “outmoded, ineffective, insufficient, or excessively burdensome, and to modify, streamline, expand, or repeal them in accordance with what has been learned. Executive Order 13563 also directs that, where relevant, feasible, and consistent with regulatory objectives, and to the extent permitted by law, agencies are to identify and consider regulatory approaches that reduce burdens and maintain flexibility and freedom of choice for the public. This final rule was determined not to be a “significant regulatory action” as defined in section 3(f) of Executive Order 12866. The docket file is available for public inspection in the Regulations Division, Office of General Counsel, 451 7th Street SW., Room 10276, Washington, DC 20410-0500. Due to security measures at the HUD Headquarters building, an advance appointment to review the public comments must be scheduled by calling the Regulations Division at 202 402-3055 (this is not a toll-free number). Individuals with speech or hearing impairments may access this number via TTY by calling the Federal Relay Service, toll free, at 1-800-877-8339.

Paperwork Reduction Act

The information collection requirements contained in this rule have been approved by OMB in accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520) and assigned OMB Control Number 2577-0218. In accordance with the Paperwork Reduction Act, an agency may not conduct or sponsor, and a person is not required to respond to, a collection of information, unless the collection displays a currently valid OMB control number.

Regulatory Flexibility Act

The Regulatory Flexibility Act (RFA) (5 U.S.C. 601et seq.) generally requires an agency to conduct a regulatory flexibility analysis for any rule that is subject to notice and comment rulemaking requirements, unless the agency certifies that the rule will not have a significant economic impact on a substantial number of small entities. The requirements of this rule apply to Indian tribal governments and their tribal housing authorities. Tribal governments and their tribal housing authorities are not covered by the definition of “small entities” under the RFA. Accordingly, the undersigned certifies that this rule will not have a significant impact on a substantial number of small entities.

Executive Order 13132, Federalism

Executive Order 13132 (entitled “Federalism”) prohibits, to the extent practicable and permitted by law, an agency from promulgating a regulation that has federalism implications and either imposes substantial direct compliance costs on state and local governments and is not required by statute, or preempts state law, unless the relevant requirements of section 6 of the Executive Order are met. This rule does not have federalism implications and does not impose substantial direct compliance costs on state and local governments or preempt state law within the meaning of the Executive Order.

Unfunded Mandates Reform Act

Title II of the Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538) (UMRA) establishes requirements for federal agencies to assess the effects of their regulatory actions on state, local, and tribal governments, and on the private sector. This rule will not impose any federal mandate on any state, local, or tribal government, or on the private sector, within the meaning of UMRA.

Environmental Review

A Finding of No Significant Impact (FONSI) with respect to the environment was made at the proposed rule stage in accordance with HUD regulations at 24 CFR part 50, which implement section 102(2)(C) of the National Environmental Policy Act of 1969 (42 U.S.C. 4332(2)(C)). The Finding of No Significant Impact is available for public inspection between the hours of 8 a.m. and 5 p.m. weekdays in the Regulations Division, Office of General Counsel, Department of Housing and Urban Development, 451 7th Street SW., Room 10276, Washington, DC 20410. Due to security measures at the HUD Headquarters building, please schedule an appointment to review the FONSI by calling the Regulations Division at 202-708-3055 (this is not a toll-free number). Individuals with speech or hearing impairments may access this number via TTY by calling the Federal Relay Service, toll free, at 1-800-877-8339.

Catalog of Federal Domestic Assistance

The Catalog of Federal Domestic Assistance Number (CFDA) for Indian Housing Block Grants is 14.867, and the CFDA for Title VI Federal Guarantees for Financing Tribal Housing Activities is 14.869.

List of Subjects in 24 CFR Part 1000

Aged, Community development block grants, Grant programs—housing and community development, Grant programs—Indians, Indians, Individuals with disabilities, Public housing, Reporting and recordkeeping requirements.

Accordingly, for the reasons described in the preamble, HUD amends 24 CFR part 1000 as follows:

PART 1000—NATIVE AMERICAN HOUSING ACTIVITIES 1. The authority citation for 24 CFR part 1000 continues to read as follows: Authority:

25 U.S.C. 4101et seq.;42 U.S.C. 3535(d).

2. Revise § 1000.2(a)(6) and (a)(7) to read as follows:
§ 1000.2 What are the guiding principles in the implementation of NAHASDA?

(a) * * *

(6) The need for affordable homes in safe and healthy environments on Indian reservations, in Indian communities, and in Native Alaskan villages is acute and the federal government shall work not only to provide housing assistance, but also, to the extent practicable, to assist in the development of private housing finance mechanisms on Indian lands to achieve the goals of economic self-sufficiency and self-determination for Indian tribes and their members.

(7) Federal assistance to meet these responsibilities shall be provided in a manner that recognizes the right of Indian self-determination and tribal self-governance by making such assistance available directly to the Indian tribes or tribally designated entities under authorities similar to those accorded Indian tribes in Public Law 93-638 (25 U.S.C. 450et seq.).

3. Add § 1000.9 to read as follows:
§ 1000.9 How is negotiated rulemaking conducted when promulgating NAHASDA regulations?

The negotiated rulemaking procedures and requirements set out in section 106(b) of NAHASDA shall be conducted as follows:

(a)Committee membership.In forming a negotiated rulemaking committee, HUD shall appoint as committee members representatives of the Federal Government and representatives of diverse tribes and program recipients.

(b)Initiation of rulemaking.HUD shall initiate a negotiated rulemaking not later than 90 days after the enactment of any act to reauthorize or significantly amend NAHASDA.

(c)Work groups.Negotiated rulemaking committees may form workgroups made up of committee members and other interested parties to meet during committee sessions and between sessions to develop specific rulemaking proposals for committee consideration.

(d)Further review.Negotiated rulemaking committees shall provide recommended rules to HUD. Once rules are proposed by HUD, they shall be published for comment in theFederal Register. Any comments will be further reviewed by the committee and HUD before HUD determines if the rule or rules will be adopted.

4. In § 1000.10(b), revise the definition of “Indian area”and add, in alphabetical order, the definitions for the terms “Housing related activities,”Housing related community development,”Outcomes,”and “Tribal program year,”to read as follows:
§ 1000.10 What definitions apply in these regulations?

(b) * * *

Housing related activities,for purposes of program income, means any facility, community building, infrastructure, business, program, or activity, including any community development or economic development activity, that:

(1) Is determined by the recipient to be beneficial to the provision of housing in an Indian area; and

(2) Would meet at least one of the following conditions:

(i) Would help an Indian tribe or its tribally designated housing entity to reduce the cost of construction of Indian housing;

(ii) Would make housing more affordable, energy efficient, accessible, or practicable in an Indian area;

(iii) Would otherwise advance the purposes of NAHASDA.

Housing related community development:

(1) Means any facility, community building, business, a