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Federal Register / Vol. 86, No. 117 / Tuesday, June 22, 2021 / Notices iii Gross income from the use or rental of real or personal property acquired by a State, local government, or subrecipient thereof with CDBGDR
funds, less costs incidental to generation of the income i.e., net income.
iv Net income from the use or rental of real property owned by a State, local government, or subrecipient thereof, that was constructed or improved with CDBGDR funds.
v Payments of principal and interest on loans made using CDBGDR funds.
vi Proceeds from the sale of loans made with CDBGDR funds.
vii Proceeds from the sale of obligations secured by loans made with CDBGDR funds.
viii Interest earned on program income pending disposition of the income, including interest earned on funds held in a revolving fund account.
ix Funds collected through special assessments made against nonresidential properties and properties owned and occupied by households not lowand moderate-income, where the special assessments are used to recover all or part of the CDBGDR portion of a public improvement.
x Gross income paid to a state, local government, or a subrecipient thereof, from the ownership interest in a forprofit entity in which the income is in return for the provision of CDBGDR
assistance.
V.A.18.b. Program incomedoes not include:
i The total amount of funds that is less than $35,000 received in a single year and retained by a state, local government, or a subrecipient thereof.
V.A.18.c. Retention of program income. Grantees may permit a local government that receives or will receive program income to retain the program income but are not required to do so.
V.A.18.d. Program incomeuse, close out, and transfer.
i Program income received and retained, if applicable before or after close out of the grant that generated the program income, and used to continue disaster recovery activities, is treated as additional CDBGDR funds subject to the requirements of this notice and must be used in accordance with the grantees action plan for disaster recovery. To the maximum extent feasible, program income shall be used or distributed before additional withdrawals from the U.S. Treasury are made, except as provided V.A.18.e. below.
ii In addition to the regulations dealing with program income found at 24 CFR 570.489e and 570.504c for subrecipients, as modified by the waivers and alternative requirements in
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this paragraph V.A.18., the following rule applies:
1 All program income received from CDBGDR-funded electrical power system improvements under this notice, including proceeds from the disposition by sale or long-term lease of any component of the electrical power system, remain subject to the requirements of this notice and shall be used only for electrical power system improvements. Program income, however, received after grant closeout pursuant to this notice, may be held in trust by the grantee for the exclusive benefit of low-income residents for the purpose of reducing electricity costs to those residents through a subsidized electricity rate that is below that provided to other residents, or through electricity rates that are lower than was previously charged prior to completion of the electrical power system improvements.
V.A.18.e. Revolving funds. A grantee may establish revolving funds to carry out specific, identified activities.
Grantees may also establish a revolving fund to distribute funds to local governments or tribes to carry out specific, identified activities. A
revolving fund, for this purpose, is a separate fund with a set of accounts that are independent of other program accounts established to carry out specific activities. These activities must generate payments used to support similar activities going forward. These payments to the revolving fund are program income and must be substantially disbursed from the revolving fund before additional grant funds are drawn from the U.S. Treasury for payments that could be funded from the revolving fund. Such program income is not required to be disbursed for nonrevolving fund activities. A
revolving fund established by a CDBG
DR grantee shall not be directly funded or capitalized with CDBGDR grant funds, pursuant to 24 CFR 570.489f3.
V.A.19. Review of continuing capacity to carry out CDBG-funded activities in a timely manner. If HUD determines that the grantee has not carried out its CDBGDR activities and certifications in accordance with the requirements for CDBGDR funds, HUD will undertake a further review to determine whether or not the grantee has the continuing capacity to carry out its activities in a timely manner. In making the determination, the Department will consider the nature and extent of the recipients performance deficiencies, types of corrective actions the recipient has undertaken, and the success or likely success of such actions, and apply
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the corrective and remedial actions specified in section V.A.20. below.
V.A.20. Corrective and remedial actions. To ensure compliance with the requirements of the Appropriations Act and to effectively administer CDBGDR
grants in a manner that facilitates resilience, particularly the alternative requirements permitting the grantee to act directly to carry out eligible activities, HUD is waiving 42 U.S.C.
5304e to the extent necessary to establish the following alternative requirement: HUD may undertake corrective and remedial actions for the grantee in accordance with the authorities applicable to entitlement grantees in subpart O including corrective and remedial actions in 24
CFR 570.910, 570.911, and 570.913 or under subpart I of the CDBG regulations at 24 CFR part 570. In response to a deficiency, HUD may issue a warning letter followed by a corrective action plan that may include a management plan which assigns responsibility for further administration of the grant to specific entities or persons. Failure to comply with a corrective action may result in the termination, reduction, or limitation of payments to a grantee receiving CDBGDR funds.
V.A.21. Noncompliance and grant conditions. Failure to implement a CDBGDR grant in accordance with a grantees approved financial certification, the capacity and implementation plan, the action plan, as well as grant conditions established by the Department or other applicable requirements, shall constitute a performance deficiency. To correct that deficiency, the Department may exercise any of the corrective and remedial actions authorized in subpart O of the CDBG regulations including corrective and remedial actions in 24 CFR 570.910, 570.911, and 570.913 or under subpart I of the CDBG regulations at 24 CFR part 570. Grantees are advised that such remedies may include suspension of administrative funds as well as a reduction of the grantees CDBGDR
grant or its annual CDBG grant.
The Department may also establish special grant conditions for individual CDBGDR grants to mitigate the risks posed by the grantee, including risks related to the grantees capacity to carry out the specific programs and projects proposed in its action plan. These conditions will be designed to provide additional assurances that electrical power system improvements are implemented in a manner to prevent waste, fraud, and abuse and that the funded electrical power system improvements are effectively operated and maintained.

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