ACT-7

FOR FURTHER INFORMATION CONTACT: Thuy Dinh, Esq., Office of General Counsel, at (202) 418-5128 or tdinh@cftc.gov; or Richard Foelber, Esq., Division of Enforcement, at (202) 418-5347 or rfoelber@cftc.gov, Commodity Futures Trading Commission, 1155 21st Street, NW., Washington, DC 20581. This document also is available at http://www.regulations.gov.

SUPPLEMENTARY INFORMATION: The Federal Civil Penalties Inflation Adjustment Act of 1990 (FCPIAA), as amended by the Debt Collection Improvement Act of 1996 (DCIA), *1 requires the head of each Federal agency to adjust by regulation, at least once every four years, the maximum amount of CMPs provided by law within the jurisdiction of that agency by the cost of living adjustment defined in the FCPIAA, as amended. *2 Because the purposes of the inflation adjustments include maintaining the deterrent effect of CMPs and promoting compliance with the law, the Commission monitors the impact of inflation on its CMP maximums and adjusts them as needed to implement the requirements and purposes of the FCPIAA. *3

*1 The FCPIAA, Pub. L. 101-410 (1990), and the relevant amendments to the FCPIAA contained in the DCIA, Public Law 104-134 (1996), are codified at 28 U.S.C. 2461 note.

*2 The DCIA also requires that the range of minimum and maximum CMPs be adjusted, if applicable. This is not applicable to the Commission because, for the relevant CMPs within the Commission's jurisdiction, the Act provides only for maximum amounts that can be assessed for each violation of the Act or the rules and orders thereunder; the Act does not set forth any minimum penalties. Therefore, the remainder of this release will refer only to CMP maximums.

*3 Specifically, the FCPIAA states:

The purpose of [the FCPIAA] is to establish a mechanism that shall--

(1) Allow for regular adjustment for inflation of civil monetary penalties;

(2) Maintain the deterrent effect of civil monetary penalties and promote compliance with the law; and

(3) Improve the collection by the Federal Government of civil monetary penalties.

Congress this year enacted the CFTC Reauthorization Act of 2008 at Title XIII of the Food, Conservation, and Energy Act of 2008, P.L. 110-246, 122 Stat. 1651 (eff. May 22, 2008)(Farm Bill). Section 13103(a)-(c) amends sections 6(c), 6b and 6c of the Act, in each case increasing the maximum civil monetary penalty that may be imposed "in any case of manipulation or attempted manipulation" in violation of section 6(c), 6(d), or 9(a)(2) to "the greater of $1,000,000 or triple the monetary gain" to the violator. *4

*4 Section 13103(a) of the Farm Bill states:

(a) ENFORCEMENT POWERS OF THE COMMISSION.--Section 6(c) of the Commodity Exchange Act (7 U.S.C. 9, 15) is amended in clause (3) of the 10th sentence--

(1) by inserting "(A)" after "assess such person"; and

(2) by inserting after "each such violation" the following:

", or (B) in any case of manipulation or attempted manipulation in violation of this subsection, subsection (d) of this section, or section 9(a)(2), a civil penalty of not more than the greater of $1,000,000 or triple the monetary gain to the person for each such violation,".

Section 13103(b) of the Farm Bill states:

(b) NONENFORCEMENT OF RULES OF GOVERNMENT OR OTHER VIOLATIONS.--

Section 6b of such Act (7 U.S.C. 13a) is amended--

(1) In the first sentence, by inserting before the period at the end the following: ", or, in any case of manipulation or attempted manipulation in violation of section 6(c), 6(d), or 9(a)(2), a civil penalty of not more than $1,000,000 for each such violation"; and

(2) In the second sentence, by inserting before the period at the end the following: ", except that if the failure or refusal to obey or comply with the order involved any offense under section 9(a)(2), the registered entity, director, officer, agent, or employee shall be guilty of a felony and, on conviction, shall be subject to penalties under section 9(a)(2)".

Section 13103(c) of the Farm Bill states:

(c) ACTION TO ENJOIN OR RESTRAIN VIOLATIONS.--Section 6c(d) of such Act (7 U.S.C. 13a-1(d)) is amended by striking all that precedes paragraph (2) and inserting the following:

"(d) CIVIL PENALTIES.--

"(1) IN GENERAL.--In any action brought under this section, the Commission may seek and the court shall have jurisdiction to impose, on a proper showing, on any person found in the action to have committed any violation--

"(A) a civil penalty in the amount of not more than the greater of $100,000 or triple the monetary gain to the person for each violation; or

"(B) in any case of manipulation or attempted manipulation in violation of section 6(c), 6(d), or 9(a)(2), a civil penalty in the amount of not more than the greater of $1,000,000 or triple the monetary gain to the person for each violation."

II. Relevant Commission CMPs

The inflation adjustment requirement applies to:

[A]ny penalty, fine or other sanction that--

(A) Is for a specific monetary amount as provided by Federal law; or

(ii) Has a maximum amount provided for by Federal law; and

(B) Is assessed or enforced by an agency pursuant to Federal law; and

(C) Is assessed or enforced pursuant to an administrative proceeding or a civil action in the Federal courts[.] 28 U.S.C. 2661 note. The Act provides for CMPs that meet the above definition, and are therefore subject to the inflation adjustment, in three instances: Sections 6(c), 6b, and 6c of the Act. *5

*5 7 U.S.C. 9, 13a and 13a-1.

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Penalties may be assessed in a Commission administrative proceeding pursuant to Section 6(c) of the Act, 7 U.S.C. 9, against "any person" found by the Commission to have:

(1) Engaged in the manipulation of the price of any commodity, in interstate commerce, or for future delivery;

(2) Willfully made a false or misleading statement or omitted a material fact in an application or report filed with the Commission; or

(3) Violated any provision of the Act or the Commission's rules, regulations or orders thereunder.

Penalties may be assessed in a Commission administrative proceeding pursuant to Section 6b of the Act, 7 U.S.C. 13a, against: (1) Any registered entity that the Commission finds is not enforcing or has not enforced its rules, or (2) any registered entity, or any director, officer, agent, or employee of any registered entity, that is violating or has violated any of the provisions of the Act or the Commission's rules, regulations or orders thereunder.

Penalties may be assessed pursuant to Section 6c of the Act, 7 U.S.C. 13a- l, against "any person" found by "the proper district court of the United States" to have committed any violation of any provision of the Act or any rule, regulation or order thereunder.

III. Relevant Cost-of-Living Adjustment

The formula for determining the cost-of-living adjustment, first defined by the FCPIAA, and amended by the DCIA, consists of a four-step process.

The first step entails determining the inflation adjustment factor. This is done by calculating the percentage increase by which the Consumer Price Index for the month of June of the calendar year preceding the adjustment exceeds the Consumer Price Index for the month of June of the calendar year in which the amount of such civil monetary penalty was last set or adjusted pursuant to law. *6 Accordingly, the inflation adjustment factor for the present adjustment equals the Consumer Price Index for all-urban consumers published by the Department of Labor for June 2007 (i.e., June of the year preceding this year), divided by that index for June 2004. *7

*6 The Consumer Price Index means the Consumer Price Index for all urban consumers (CPI-U) published by the Department of Labor. Interested parties may find the relevant Consumer Price Index over the Internet. To access this information, go to the Consumer Price Index Home Page at: http:// www.bls.gov/data/. Under the Prices and Living Conditions Section, select Most Requested Statistics for CPI--All Urban Consumers (Current Series). Then check the box for CPI for U.S. All Items, 1967=100-CUUR0000AA0, and click the Retrieve Data button.

*7 The Consumer Price Index for all-urban consumers published by the Department of Labor for June 2007 was 624.129, and for June 2004 was 568.2. Therefore, the relevant inflation adjustment factor equals 624.129 divided by 568.2. The result is a 9.8 percent increase in the CPI between June 2003 and June 2007. Accordingly, our inflation adjustment factor is 9.8 percent, or 0.0984 for computational purposes.

Once the inflation adjustment factor is determined, it is then multiplied by the current maximum CMP set forth in Rule 143.8 to calculate the raw inflation increase. *8 This raw inflation increase is then rounded according to the guidelines set forth by the FCPIAA. *9 Finally, once the inflation increase has been rounded pursuant to the FCPIAA, it is added to the current CMP maximum to obtain the new CMP maximum penalty. *10 As a result, the maximum, inflation-adjusted CMP for each violation of the Act or Commission rules or orders thereunder assessed against any person pursuant to Sections 6(c) and 6c of the Act will be $140,000 or triple the monetary gain to such person for each violation, and $675,000 for each such violation when assessed pursuant to Section 6b of the Act.

*8 The current CMP maximum listed in Rule 143.8, as amended in 2004, for purposes of Sections 6(c) and 6c of the Act is $130,000. The current CMP maximum for purposes of Section 6b of the Act is $625,000.

Accordingly, the calculations for the raw inflation increase are the following:

Sections 6(c) and 6c: (0.0984 x $130,000) = $12,792

Section 6b: (0.0984 x $625,000) = $61,500

*9 The FCPIAA, as amended by the DCIA, provides in relevant part that any increase "shall be rounded to the nearest--

(5) multiple of $10,000 in the case of penalties greater than $100,000 but less than or equal to $200,000; and

(6) multiple of $25,000 in the case of penalties greater than $200,000."

Accordingly, the raw inflation increase for purposes of Sections 6(c) and 6c of the Act ( $12,792) is rounded to $10,000, while the raw inflation increase for purposes of Section 6b ( $61,500) is rounded to $50,000.

*10 For purposes of Sections 6(c) and 6c of the Act, the rounded inflation increase ( $10,000) is added to the current CMP maximum ( $130,000), totaling $140,000. For purposes of Section 6b of the Act, the rounded inflation increase ( $50,000) is added to the current CMP maximum ( $575,000), totaling $625,000.

The FCPIAA provides that "any increase under [FCPIAA] in a civil monetary penalty shall apply only to violations which occur after the date the increase takes effect." *11 Thus, the new CMP maximum may be applied only to violations of the Act that occur after the effective date of this amendment, October 23, 2004. The new statutory maximum for manipulation and attempted manipulation shall apply to violations that occur after the effective date of the Farm Bill, i.e., May 22, 2008.

*11 See also Landgraf v. USI Film Products, 511 U.S. 244 (1994) (holding that there is a presumption against retroactivity in changes to damage remedies or civil penalties in the absence of clear statutory language to the contrary).

IV. Related Matters

A. Notice Requirement

This amendment to Rule 143.8 will implement a statutory change regarding agency procedure or practice within the meaning of 5 U.S.C. 553(b)(3)(A) and therefore does not require notice. *12 The Commission also believes that opportunity for public comment is unnecessary under 5 U.S.C. 553(b)(3)(B). This amendment does not effect any substantive change in Commission rules, nor alter any obligation that a party has under Commission rules, regulations or orders. No party must change its manner of doing business, either with the public or the Commission, to comply with the rule amendment. This change is undertaken pursuant to a statutory requirement that all agencies make such adjustments and is intended to prevent inflation from eroding the deterrent effect of CMPs. The change also recognizes amendments to the Act contained in the Farm Bill.

*12 U.S.C. 553(b) generally requires notice of proposed rulemaking to be published in the Federal Register . That provision states, however, that "[e]xcept when notice or hearing is required by statute, [notice is not required]--

(A) [for] interpretive rules, general statements of policy, or rules of agency organization, procedure, or practice; or

(B) when the agency for good cause finds (and incorporates the finding and a brief statement of reasons therefor in the rules issued) that notice and public procedure thereon are impracticable, unnecessary, or contrary to the public interest."

While higher maximum CMPs may expose persons to potentially higher financial liability, in nominal terms, for violations of the Act or Commission rules or orders thereunder, the rule amendment does not require that the maximum penalty be imposed on any party, nor does it alter any substantive due process rights that a party has in an administrative proceeding or a court of law that protect against imposition of excessive penalties. Further, as previously noted, the rule amendment applies only to violations of the Act or Commission rules or orders that occur after the effective date of this amendment.

B. Regulatory Flexibility Act

The Regulatory Flexibility Act, 5 U.S.C. 601 et seq., requires that agencies consider the impact of their rules on small businesses. The amended rule potentially will affect those persons who are found by the Commission or the Federal courts to have violated the

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Act or Commission rules or orders. Some of these affected parties could be small businesses. Nevertheless, the Acting Chairman, on behalf of the Commission, certifies that this rule will not have a significant economic impact on a substantial number of small entities. While the Commission recognizes that certain persons assessed a CMP for violating Act or Commission rules or orders may be small businesses, the rule does not mandate the imposition of the maximum CMP set forth in the rule on any party. As is currently the case, the imposition of the maximum CMP will occur only where the administrative law judge, the Commission or a Federal court finds that the gravity of the offense warrants a CMP in that amount. *13

*13 Section 6(e) of the Act, 7 U.S.C. 9a(1), directs the Commission to "consider the appropriateness of [a] penalty to the gravity violation" when assessing a CMP pursuant to Section 6(c) of the Act. In addition, the Commission's penalty guidelines state that the Commission, when assessing any CMP, will consider the gravity of the offense in question. In assessing the gravity of an offense, the Community may consider such factors as whether the violations resulted in harm to the victims, whether the violations involved core provisions of the Act, and whether the violator acted intentionally or willfully, as well as other factors. See CFTC Policy Statement Relating to the Commission's Authority to Impose Civil Money Penalties and Futures Self- Regulatory Organizations' Authority to Impose Sanction; Penalty Guidelines, [1994-1996 Transfer Binder] Comm. Fut. L. Rep. (CCH) [paragraph] 26,265 (CFTC November 1994).

The rule should not increase in real terms the economic burden of the maximum CMPs set forth in the Act. Instead, the rule implements a statutory requirement that agencies adjust for inflation existing CMPs so that the real economic value of such penalties, and therefore the Congressionally-intended deterrent effect of such CMPs, is not reduced over time by inflation. Nor does the rule impose any new, affirmative duty on any party or change any existing requirements, and thus no party who is currently complying with the Act and Commission regulations will incur any expense in order to comply with the amended rule. Therefore, the Commission believes that this final rule will not have a significant economic impact on a substantial number of small entities. *14

*14 Any agency that regulates the activities of small entities must establish a policy or program to reduce and, when appropriate, to waive civil penalties for violations of statutory or regulatory requirements by small entities. An agency is not required to reduce or waive civil penalties, however, if: (1) An entity has been the subject of multiple enforcement actions; (2) an entity's violations involve willful or criminal conduct; or (3) the violations involve serious health, safety or environmental threats. See Small Business Regulatory Enforcement Fairness Act of 1996 ("SBREFA"), Public Law 104-121, [Section] 223, 110 Stat. 862 (March 29, 1996). The Commission takes these provisions of SBREFA into account when it considers whether to seek or impose a civil monetary penalty in a particular case involving a small entity.

C. Paperwork Reduction Act

The Paperwork Reduction Act of 1995 (PRA), 44 U.S.C. 3507(d), which imposes certain requirements on Federal agencies, including the Commission, connection with their conducting or sponsoring any collection of information as defined by the PRA, does not apply to this rule. The Commission believes this rule amendment does not contain information collection requirements that require the approval of the Office of Management and Budget.

List of Subjects in 17 CFR Part 143

Civil monetary penalty, Claims.

In consideration of the foregoing and pursuant to authority contained in Sections 6(c), 6b and 6c of the Act, 7 U.S.C. 9, 13a, and 13a-1(d), and 28 U.S.C. 2461 note as amended by Pub. L. 104-134, the Commission hereby amends part 143 of chapter I of title 17 of the Code of Federal Regulations as follows:

PART 143--COLLECTION OF CLAIMS OWED THE UNITED STATES ARISING FROM ACTIVITIES UNDER THE COMMISSION'S JURISDICTION

1. The authority citation for part 143 reads as follows:

Authority: 7 U.S.C. 9 and 15, 9a, 12a(5), 13a, 13a-1(d) and 13(a); 31 U.S.C. 3701-3719; 28 U.S.C. 2461 note.

2. Section 143.8 is amended by revising paragraph (a) to read as follows:

[Section] 143.8 Inflation-adjusted civil monetary penalties.

(a) Unless otherwise amended by an act of Congress, the inflation-adjusted maximum civil monetary penalty for each violation of the Commodity Exchange Act or the rules or orders promulgated thereunder that may be assessed or enforced by the Commission under the Commodity Exchange Act pursuant to an administrative proceeding or a civil action in Federal court will be:

(1) Except as provided in paragraph (v) hereof, for each violation for which a civil monetary penalty is assessed against any person (other than a registered entity) pursuant to Section 6(c) of the Commodity Exchange Act, 7 U.S.C. 9:

(i) For violations committed between November 27, 1996 and October 22, 2000, not more than the greater of $110,000 or triple the monetary gain to such person for each such violation;

(ii) For violations committed between October 23, 2000 and October 22, 2004, not more than the greater of $120,000 or triple the monetary gain to such person for each such violation;

(iii) For violations committed between October 23, 2004 and October 22, 2008, not more than the greater of $130,000 or triple the monetary gain to such person for each such violation; and

(iv) For violations committed on or after October 23, 2008, not more than the greater of $140,000 or triple the monetary gain to such person for each such violation; provided that--

(v) In any case of manipulation or attempted manipulation in violation of Section 6(c), 6(d), or 9(a)(2) of the Act committed on or after May 22, 2008, not more than the greater of $1,000,000 or triple the monetary gain to such person for each such violation; and

(2) Except as provided in paragraph (v) hereof, for each violation for which a civil monetary penalty is assessed against any registered entity or other person pursuant to Section 6c of the Commodity Exchange Act, 7 U.S.C. 13a-l:

(i) For violations committed between November 27, 1996 and October 22, 2000, not more than the greater of $110,000 or triple the monetary gain to such person for each such violation;

(ii) For violations committed between October 23, 2000 and October 22, 2004, not more than the greater of $120,000 or triple the monetary gain to such person for each such violation;

(iii) For violations committed between October 23, 2004 and October 22, 2008, not more than the greater of $130,000 or triple the monetary gain to such person for each such violation; and

(iv) For violations committed on or after October 23, 2008, not more than the greater of $140,000 or triple the monetary gain to such person for each such violation; provided that--

(v) In any case of manipulation or attempted manipulation in violation of Section 6(c), 6(d), or 9(a)(2) of the Act committed on or after May 22, 2008, not more than the greater of $1,000,000 or triple the monetary gain to such person for each such violation;

(3) For each violation for which a civil monetary penalty is assessed against any registered entity or any director, officer, agent, or employee of any registered entity pursuant to Section 6b of the Commodity Exchange Act, 7 U.S.C. 13a:

(i) For violations committed between November 27, 1996 and October 22, 2000, not more than $550,000 for each such violation;

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(ii) For violations committed between October 23, 2000 and October 22, 2004, not more than $575,000 for each such violation;

(iii) For violations committed between October 23, 2004 and October 22, 2008, not more than $625,000 for each such violation; and

(iv) For violations committed on or after October 23, 2008, not more than the greater of $675,000 or triple the monetary gain to such person for each such violation, provided that--

(v) In any case of manipulation or attempted manipulation in violation of Section 6(c), 6(d), or 9(a)(2) of the Act committed on or after May 22, 2008, not more than the greater of $1,000,000 or triple the monetary gain each such violation.

* * * * *

Issued in Washington, DC, on September 30, 2008 by the Commission.

David A. Stawick,

Secretary of the Commission.

[FR Doc. E8-23417 Filed 10-2-08; 8:45 am]

BILLING CODE 6351-01-P

Vol. 73, No. 193

17 CFR Part 143; RIN 3038-AC13

Rules and Regulations

ADDRESSES: You may submit comments to this rule by any of the following methods:

. Federal eRulemaking Portal: http://www.regulations.gov. Follow the instructions for submitting comments.

. Mail: Submit written comments via the U.S. Postal Service to the Branch Chief, Regulations and Paperwork Management Branch, U.S. Department of Agriculture, STOP 0742, 1400 Independence Avenue, SW., Washington, DC 20250- 0742.

. Hand Delivery/Courier: Submit written comments via Federal Express Mail or other courier service requiring a street address to the Branch Chief, Regulations and Paperwork Management Branch, U.S. Department of Agriculture, 300 7th Street, SW., 7th Floor, Washington, DC 20024.

All written comments will be available for public inspection during regular work hours at the 300 7th Street, SW., 7th Floor address listed above.

FOR FURTHER INFORMATION CONTACT: Mr. Michael Foore, Rural Development, Business and Cooperative Programs, U.S. Department of Agriculture, 1400 Independence Avenue, SW., Stop 3201, Washington, DC 20250-3201; e-mail: Michael.Foore@wdc.usda.gov; telephone (202) 690-4730.

SUPPLEMENTARY INFORMATION: This proposed rule has been reviewed under Executive Order (EO) 12866 and has been determined to be significant by the Office of Management and Budget. The EO defines a "significant regulatory action" as one that is likely to result in a rule that may: (1) Have an annual effect on the economy of $100 million or more or adversely affect, in a material way, the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, or tribal governments or communities; (2) Create a serious inconsistency or otherwise interfere with an action taken or planned by another agency; (3) Materially alter the budgetary impact of entitlements, grants, user fees, or loan programs or the rights and obligations of recipients thereof; or (4) Raise novel legal or policy issues arising out of legal mandates, the President's priorities, or the principles set forth in this EO.

The Agency conducted a qualitative benefit-cost analysis to fulfill the requirements of Executive Order 12866. The Agency has identified potential benefits to the prospective grantee and to the Agency. These benefits are associated with the increase in program transparency, Administrative flexibility, and increased efficiency in delivering the programs. While unable to quantify any costs or benefits associated with this rulemaking, the agency believes that the overall effect of the rule may be beneficial.

Unfunded Mandates Reform Act

Title II of the Unfunded Mandates Reform Act 1995 (UMRA) of Public Law 104- 4 establishes requirements for Federal agencies to assess the effects of their regulatory actions on State, local, and tribal governments and the private sector. Under section 202 of the UMRA, Rural Development generally must prepare a written statement, including a cost-benefit analysis, for proposed and final rules with "Federal mandates" that may result in expenditures to State, local, or tribal governments, in the aggregate, or to the private sector of $100 million or more in any one year. When such a statement is needed for a rule, section 205 of UMRA generally requires Rural Development to identify and consider a reasonable number of regulatory alternatives and adopt the least costly, more cost-effective, or least burdensome alternative that achieves the objectives of the rule.

This proposed rule contains no Federal mandates (under the regulatory provisions of Title II of the UMRA) for State, local, and tribal governments or the private sector. Thus, this rule is not subject to the requirements of sections 202 and 205 of the UMRA.

Environmental Impact Statement

This document has been reviewed in accordance with 7 CFR part 1940, subpart G, "Environmental Program." Rural Development has determined that this action does not constitute a major Federal action significantly affecting the quality of the human environment, and in accordance with the National Environmental Policy Act (NEPA) of 1969, 42 U.S.C. 4321 et seq., an Environmental Impact Statement is not required. Grant applications will be reviewed individually to determine compliance with NEPA.

Executive Order 12988, Civil Justice Reform

This proposed rule has been reviewed under Executive Order 12988, Civil Justice Reform. In accordance with this rule: (1) All State and local laws and regulations that are in conflict with this rule will be preempted; (2) no retroactive effect will be given this rule; and (3) administrative proceedings in accordance with the regulations of the Department of Agriculture's National Appeals Division (7 CFR part 11) must be exhausted before bringing suit in court challenging action taken under this rule unless those regulations specifically allow bringing suit at an earlier time.

Executive Order 13132, Federalism

It has been determined, under Executive Order 13132, Federalism, that this proposed rule does not have sufficient federalism implications to warrant the preparation of a Federalism Assessment. The provisions contained in the proposed rule will not have a substantial direct effect on States or their political subdivisions or on the distribution of power and responsibilities among the various government levels.

Regulatory Flexibility Act

The Regulatory Flexibility Act (5 U.S.C. 601-602) (RFA) generally requires an agency to prepare a regulatory flexibility analysis of any rule subject to notice and comment rulemaking requirements under the Administrative Procedure Act or any other statute unless the agency certifies

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that the rule will not have a significant economic impact on a substantial number of small entities. Small entities include small businesses, small organizations, and small governmental jurisdictions.

In compliance with the RFA, Rural Development has determined that this action will not have a significant economic impact on a substantial number of small entities. Rural Development made this determination based on the fact that this regulation only impacts those who choose to participate in the program. Small entity applicants will not be affected to a greater extent than large entity applicants.

Executive Order 12372, Intergovernmental Review of Federal Programs

Rural Development grants are subject to the Provisions of Executive Order 12372, which require intergovernmental consultation with State and local officials. Rural Development will conduct intergovernmental consultation in the manner delineated in RD Instruction 1940-J, "Intergovernmental Review of Rural Development Programs and Activities," available in any Rural Development office, on the Internet at http://www.rurdev.usda.gov/regs, and in 7 CFR part 3015, subpart V.

Executive Order 13175, Consultation and Coordination With Indian Tribal Governments

This executive order imposes requirements on Rural Development in the development of regulatory policies that have tribal implications or preempt tribal laws. Rural Development has determined that the proposed rule does not have a substantial direct effect on one or more Indian tribe(s) or on either the relationship or the distribution of powers and responsibilities between the Federal Government and the Indian tribes. Thus, the proposed rule is not subject to the requirements of Executive Order 13175.

Programs Affected

The Catalog of Federal Domestic Assistance Program numbers assigned to this program are 10.766, Community Facilities Loans and Grants; 10.855, Distance Learning and Telemedicine Loans and Grants; 10.766, Economic Impact Initiatives Grants; 10.775, Renewable Energy Systems and Energy Efficiency Improvements Program; 10.771, Rural Cooperative Development Grants; 10.352, Value-Added Producer Grants; and 10.760, Water and Waste Disposal Loans and Grants (Section 306a); and 10.221, Tribal College Educational Equity Grants.

Paperwork Reduction Act

In accordance with the Paperwork Reduction Act of 1995, Rural Development will seek OMB approval of the reporting and recordkeeping requirements contained in this proposed rule and hereby opens a 60-day public comment period.

Title: Rural Development Grants.

Type of Request: New collection.

Abstract: Rural Development is implementing a new consolidated grant platform. The new grant platform would combine the following existing grant regulations into a consolidate rule: (1) The Community Facility Program, (2) the Distance Learning and Telemedicine Program; (3) the Economic Impact Initiatives Program; (4) the Rural Cooperative Development Program, (5) the Tribal College Grant Program, (6) the Value-Added Producer Program, (7) the Water and Waste Disposal Facilities Program, and (8) the Renewable Energy Systems and Energy Efficiency Improvement Program (now known as the Rural Energy for America program). These programs provide grants for a variety of projects intended to assist and improve rural America.

The information required under the proposed rule is similar to much of the information currently being required under the separate regulations. Under these separate regulations, the current information being collected is approved under OMB control numbers as follows:

0570-0006 (Rural Cooperative Development Grants).

0570-0039 (Value-Added Producer Grants).

0570-0050 (Renewable Energy Systems and Energy . Efficiency Improvement Grants).

0572-0096 (Distance Learning and Telemedicine).

0572-0121 (Water and Waste Loan and Grant Program).

0575-0173 (Community Facilities Grants).

The proposed rule creates a single set of common forms that applicants can use across all eight programs, thereby creating efficiencies in reporting.

The collection of information is vital to Rural Development to make wise decisions regarding the eligibility of projects and applicants in order to ensure compliance with the regulations and to ensure that the funds obtained from the Government are used appropriately (i.e., being used for the purposes for which the grant funds were awarded). In sum, this collection of information is necessary in order to implement the consolidated grant regulation being proposed.

The following estimates are based on the average over the first three years the program is in place.

Estimate of Burden: Public reporting burden for this collection of information is estimated to average 4.8 hours per response.

Respondents: Rural developers, farmers and ranchers, rural businesses, public bodies, local governments, institutions of higher learning, hospitals and medical facilities, Indian tribes, agricultural producers groups, farmer and rancher cooperatives, independent producers, majority controlled producer- based businesses, private corporations, non-profit organizations, rural electric cooperatives, public power entities, faith-based organizations, and incorporated organizations and partnerships.

Estimated Number of Respondents: 2.045.

Estimated Number of Responses per Respondent: 4.8.

Estimated Number of Responses: 24,650.

Estimated Total Annual Burden (hours) on Respondents: 118,802.

Copies of this information collection may be obtained from Cheryl Thompson, Regulations and Paperwork Management Branch, Support Services Division, U.S. Department of Agriculture, Rural Development, STOP 0742, 1400 Independence Ave., SW., Washington, DC 20250-0742 or by calling (202) 692-0043.

Comments

Comments are invited on: (a) Whether the proposed collection of information is necessary for the proper performance of the functions of Rural Development, including whether the information will have practical utility; (b) the accuracy of the new Rural Development estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used; (c) ways to enhance the quality, utility, and clarity of the information to be collected; and (d) ways to minimize the burden of the collection of information on those who are to respond, including through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology. Comments may be sent to Cheryl Thompson, Regulations and Paperwork Management Branch, U.S. Department of Agriculture, Rural Development, STOP 0742, 1400 Independence Ave., SW., Washington, DC 20250. All responses to this proposed rule will be summarized and

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included in the request for OMB approval. All comments will also become a matter of public record.

E-Government Act Compliance

Rural Development is committed to complying with the E-Government Act, to promote the use of the Internet and other information technologies to provide increased opportunities for citizen access to Government information and services, and for other purposes.

I. Background

Rural Development proposes a unified platform for delivery of eight existing Rural Development grant programs--Community Facility; Distance Learning and Telemedicine; Economic Impact Initiatives; Renewable Energy Systems and Energy Efficiency Improvement Projects (now known as the Rural Energy for America program); Rural Cooperative Development; Value-Added Producer; Water and Waste Disposal Facilities; and Tribal College. These programs are administered by the Rural Housing Service (Community Facilities, Economic Impact Initiatives, Tribal Grants), Rural Utilities Service (Distance Learning and Telemedicine, Water and Waste Disposal Facilities), and Rural Business-Cooperative Service (Rural Cooperative Development, Value-Added Producer, Rural Energy for America). Collectively, Rural Development's programs work together to assist in building and maintaining entire, sustainable rural communities.

For the reasons cited below, the Agency is proposing to incorporate eight of its 39 existing grant programs into this proposed new platform.

First. In selecting grant programs for inclusion in the proposed consolidated grant program, the Agency's two principal priorities are to include (1) grant programs associated with programs being included in the consolidated guaranteed loan rule and (2) grant programs that are representative of both State-allocated grant programs and nationally-competed grant programs, which are the two main types of grant programs administered by Rural Development.

As such, three of the seven grant programs are being proposed for inclusion because their guaranteed loan programs are being included in the Agency's new guaranteed loan program consolidating four of the Agency's guaranteed loan programs. These three programs are: Community Facilities, Water and Waste Disposal, and Rural Energy for America.

The Community Facilities and Water and Waste Disposal grant programs are both State-allocated grant programs, while the Rural Energy for America grant program is a nationally-competed grant program. To "round these out," the Agency is proposing to add three additional nationally-competed grant programs--Rural Cooperative Development grants, Value-Added Producer grants, and Distance Learning and Telemedicine grants.

The Agency is proposing to include the Economic Impact Initiative grant program because it is administered under the same regulation as Community Facilities.

Second. The Agency is proposing to include Tribal College grants. As mentioned elsewhere in this preamble, the Tribal College grants program is neither a State-allocated or nationally-competed grant program. However, it does rely on portions of the Community Facilities grant program for its administration requirements. Because the proposed rule would eliminate the Community Facilities grant rule once the proposed rule is finalized, the Tribal College grant program would no longer have a grant regulation for its administration. Thus, the Agency was faced with two options--incorporate the Tribal College grant program into the proposed rule or develop a new regulation specific to Tribal College grants. The Agency believes that it makes more sense to include Tribal College grants in the new rule, then to develop a completely separate regulation for that one specific grant program.

As noted later in this preamble, the Agency is seeking specific comment on the grant programs being proposed for inclusion in the consolidated grant rule. Please see section II.C of this preamble.

The purpose of this proposed rule is to initiate the process of developing a single regulation covering all grant programs of the Rural Development Mission Area. Given the logistical and administrative challenges for the Agency and the stakeholders associated with such a consolidation, the Agency has decided to conduct this effort in stages. The proposed rule represents the first stage of this process. In this proposed rule stage the Agency selected grant programs to be included that: (1) Represented a cross section of the Agency's grant programs to ensure that the single regulatory platform being developed would be flexible enough the accommodate all of the Agency's grant programs; (2) corresponded to the loan guarantee programs that are covered by the regulatory consolidation taking place with respect to the Agency's loan guarantee programs (see 7 FR 52618, September 14, 2007); and (3) allowed whole regulatory parts of the current program regulations to be deleted.

After the Agency has the opportunity to determine the success of this initial phase of this regulatory consolidation effort, the Agency will decide whether it would be appropriate to continue to the next phase of incorporating additional grant programs into this regulatory platform and the schedule for the next phase. A key assumption the Agency has made in deciding to initiate the process of consolidating these regulations is that the platform is flexible enough to accommodate all of the various grant programs of the Rural Development Mission Area. Therefore, the Agency's decision to move forward to the next phase of this effort and to add the regulations of new grant programs to this platform will hinge on the degree the rulemaking process of this proposed rule either supports or challenges this assumption.

Under the unified grant platform, Rural Development will simplify, improve, and enhance the delivery of these grant programs across their service areas. The remainder of this section describes Rural Development's mission, the eight grant programs being aligned under the new platform, why the new platform is being proposed, and how the new platform will work.

A. Rural Development's Mission

By statutory authority, Rural Development is the leading Federal advocate for rural America, administering a multitude of programs, ranging from housing and community facilities to infrastructure and business development. Its mission is to increase economic opportunity and improve the quality of life in rural communities by providing the leadership, infrastructure, venture capital, and technical support that enables rural communities to prosper and supports them in the dynamic global environment defined by the Internet revolution, and the rise of new technologies, products, and markets.

To achieve its mission, Rural Development provides financial support (including direct loans, grants, and loan guarantees) and technical assistance to help enhance the quality of life and provide the foundation for economic development in rural areas. To improve the delivery of this financial support for all of its programs and thereby enhance its mission, Rural Development in February 2006 initiated the Delivery Enhancement Task Force (DET). The DET is working to develop consolidated program delivery platforms.

This proposed rulemaking presents the Agency's proposed consolidated

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grant platform. The Agency has already published a proposed rule in support of its unified guaranteed loan platform, which was published in the Federal Register on September 14, 2007 (72 FR 52618).

B. Current Grant Programs

The following paragraphs describe briefly the scope of each of the current programs with regard to eligible projects and applicants.

Community Facilities Grant Program. The Community Facilities grant program provides grants to develop essential community facilities in rural areas. However, eligible utility-type service facilities, such as telecommunications and hydroelectric, that serve both rural and non-rural areas can be located in either rural or non-rural areas. Grant funds may be used to construct, enlarge, or improve community facilities for health care, public safety, and public services. This can include costs to acquire land needed for a facility, pay necessary professional fees, and purchase equipment required for its operation.

Eligible applicants for community facilities grants are public bodies, such as municipalities, counties, districts authorities, or other political subdivisions of a State; non-profit corporations and associations, and Federally-recognized tribes. Further, applicants must have the legal authority to own, construct, operate, and maintain the proposed facility.

The amount of grant assistance provided under this program must be the minimum amount sufficient for feasibility which will provide for facility operation and maintenance, reasonable reserves, and debt repayment. As statutorily required, grants may be made up to 75 percent of the cost of developing essentially community facilities. Recently, these grants have averaged $29,916, which is approximately 7 percent of the average costs of the projects that the grants are funding.

Economic Impact Initiatives Grant Program. This program is administered under the same regulations as the Community Facilities grant program, but provides grants to rural communities with extreme unemployment and severe economic depression. In addition, the essential community facility must be located in a rural community where the "not employed rate" is greater than the percentage specified in section 306(a)(20) of the Consolidated Farm and Rural Development Act (7 U.S.C. 1926(a)(20)(B)). (The "not employed rate" is the percentage of individuals over the age of 18 who reside within the community and who are ready, willing, and able to be employed but are unable to find employment, as determined by the department of labor of the State in which is the community is located.)

Notwithstanding the above, eligible applicants are otherwise the same as under the Community Facilities grant program. Eligible projects are also the same as under the Community Facilities grant program.

Under this program, the minimum grant amount awarded is that amount needed to achieve financial feasibility for the project. Recently, these grants have averaged $42,890, which is approximately 19 percent of the average costs of the projects that the grants are funding.

Tribal College Grant Program. The Tribal College grant program is designed to enhance educational opportunities at the Tribal colleges and universities designated as the 1994 Land-Grant Institutions (1994 Institutions) by strengthening their educational programs. The program provides funding for essential community facilities and equipment for the Tribal colleges and universities.

To be eligible to receive a grant under this program, the applicant must be one of the Tribal colleges or universities designated as the 1994 Institutions. Grant funds are disbursed in an attempt to provide an equal distribution of funds to each of the 1994 Institutions when possible. Recently, these grants have averaged $572,837, which is approximately 32 percent of the average costs of the projects that the grants are funding.

Distance Learning and Telemedicine Grant Program. The purpose of the Distance Learning and Telemedicine (DLT) Loan and Grant program is to encourage and improve telemedicine services and distance learning services in rural areas through the use of telecommunications, computer networks, and related advanced technologies by students, teachers, medical professionals, and rural residents.

To be eligible to receive a grant under this program, the applicant must be legally organized as an incorporated organization or partnership, an Indian tribe or tribal organization, as defined in 25 U.S.C. 450b (b) and (c), a state or local unit of government, a consortium, as defined in [Section] 1703.102, or other legal entity, including a private corporation organized on a for profit or not-for profit basis. In addition, each applicant must provide written evidence of its legal capacity to contract with the Agency to obtain the grant, loan and grant combination, or the loan, and comply with all applicable requirements. If a consortium lacks the legal capacity to contract, each individual entity must contract with the Agency in its own behalf.

As implemented by the program office, an applicant is responsible for providing at least 15 percent of the grant amount requested and the minimum amount of a grant under this program is $50,000. Recently, these grants have averaged $294,950, which is approximately 60 percent of the average costs of the projects that the grants are funding.

Renewable Energy Systems and Energy Efficiency Improvement Grant Program. The current Renewable Energy Systems and Energy Efficiency Improvement grant program provides grants for the purchase and installation of renewable energy systems and energy efficiency improvements. Eligible applicants are farmers, ranchers, and rural small businesses who can demonstrate financial need, as determined by the Agency.

The amount of the grant made available to an eligible project cannot exceed 25 percent of total eligible project costs, as required by the authorizing statute. Currently, the program office sets the minimum amount of a grant at $2,500 and the maximum amount at $500,000 for renewable energy systems and $2,500 and $250,000, respectively, for energy efficiency improvement projects. Unlike the 25 percent limitation, these minimum and maximum grant amounts are not statutorily specified, but are set by the Agency in implementing the program. Recently, these grants have averaged $35,703, which is approximately 17 percent of the average costs of the projects that the grants are funding.

Rural Cooperative Development Grant Program. The Rural Cooperative Development grant program provides grants for the development or continuation of the cooperative development center concept. Grant funds and matching funds may be used for, but are not limited to, providing the following to individuals, cooperatives, small businesses and other similar entities in rural areas served by the Center:

. Applied research, feasibility, environmental and other studies that may be useful for the purpose of cooperative development.

. Collection, interpretation and dissemination of principles, facts, technical knowledge, or other information for the purpose of cooperative development.

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. Providing training and instruction for the purpose of cooperative development.

. Providing loans and grants for the purpose of cooperative development in accordance with the annual Notice of Solicitation of Applications and applicable regulations.

. Providing technical assistance, research services and advisory services for the purpose of cooperative development.

Applicants eligible for rural cooperative development grants are non-profit organizations and institutions, including institutions of higher education. Public bodies are not eligible to receive grants.

Under the current Rural Cooperative Development grant regulation, grant funds may be used to pay up to 75 percent (95 percent where the grantee is a 1994 Institution) of the cost of establishing and operating centers for rural cooperative development. Applicants must verify in their application that all matching funds are available for the time period of the grant. Recently, these grants have averaged $189,000, which is approximately 58 percent of the average costs of the projects that the grants are funding.

Value-added Producer Grant Program. The purpose of this program is to provide grants to enable producers to develop businesses that produce and market value-added agricultural products, including the development of strategies, creation of marketing opportunities, and development of business plans. The program distinguishes between planning grants and working capital grants. Grant funds for planning grants may be used for such purposes as, but not necessarily limited to: Obtaining legal advice and assistance; conducting a feasibility study; developing a business plan; and developing a marketing plan. Grant funds for working capital grant may be used for such purposes as, but not necessarily limited to: Designing or purchasing an accounting system, paying for salaries, utilities, and rental office space; and purchasing inventory, office equipment, and office supplies.

Applicants eligible for grants under this program are independent producers, agricultural producer groups, farmer or rancher cooperatives, and majority-controlled producer-based business ventures. Except for independent producers, all other applicants must be entering an emerging market in order to be eligible.

As required by its authorizing statute, grant funds may be used to pay up to 50 percent of the costs for carrying out eligible projects. Recently, these grants have averaged $150,000, which is approximately 50 percent of the average costs of the projects that the grants are funding.

Water and Waste Disposal Facilities Grant Program. The Water and Waste Disposal Facilities grant program provides grants to develop water and wastewater systems, including solid waste disposal and storm drainage, in rural areas and to cities and towns with a population of 10,000 or less. Example projects include construction of water lines, pumping stations, wells, storage tanks, and sewage treatment facilities.

Eligible applicants for water and waste disposal facilities grants are public bodies, such as municipalities, counties, districts authorities, or other political subdivisions of a State, territory, or commonwealth; non- profit organizations, such as corporations and associations; Indian tribes on Federal and State reservations or other federally-recognized Indian tribes. Further, applicants must have the legal authority to own, construct, operate, and maintain the proposed facility.

As required by its authorizing statute, grant funds are limited to no more than 75 percent of the Agency eligible project development costs. As implemented by the program office, grant funds are limited to: (1) No more than 75 percent of the Agency eligible project development costs when the median household income of the service area is below the higher of the poverty line or 80 percent of the state non-metropolitan median income and the project is necessary to alleviate a health or sanitary problem and (2) no more than 45 percent of the Agency eligible project development costs when the median household income of the service area exceeds 80 percent of the state non- metropolitan median income but is not more than 100 percent of the statewide non-metropolitan median household income. Recently, these grants have averaged $663,190, which is approximately 20 percent of the average costs of the projects that the grants are funding.

How the Current Programs Work

The grant programs being included in today's proposed rulemaking have many similarities, with a few major differences. A major difference between seven of the eight grant programs is whether the grant program is administered as a Nationally-competed grant program or a State-allocated grant program. The eighth grant program, Tribal College grants, is a program with a small statutorily defined set of beneficiaries.

The following paragraphs provide an overview of how the Nationally-competed and State-allocated grant programs are currently implemented.

Nationally-competed grant programs. The following paragraphs describe how the Agency currently administers its nationally-competed grant programs, four of which are being consolidated under this proposed rule--Distance Learning and Telemedicine, Renewable Energy Systems and Energy Efficiency Improvement (now known as the Rural Energy for America Program), Rural Cooperative Development, and Value-added Producer.

As it currently administers its nationally-competed grant programs, the Agency typically publishes a Federal Register notice announcing that it is accepting applications for the program, either as a Notice of Solicitation of Application (NOSA) or a Notice of Funding Availability (NOFA). The primary purpose of this notice is to alert the public to the opening of a period during which the Agency will accept applications for the program. This creates a "window" for submitting applications.

The amount and type of information contained in these NOSAs and NOFAs varies from program to program and may vary greatly year to year. Most notices include information on applicant and project eligibility, application submittal and content requirements, minimum and/or maximum grant amounts, and project priority categories and scoring.

Under the current administration of the nationally-competed grant programs, applications are either submitted to a Rural Development State Office or to the Rural Development National Office, depending on the program, for review, evaluation, and scoring. For most of the nationally-competed grant programs, the applicant will receive a letter from the Agency acknowledging receipt and confirmation that a full application was received. If an incomplete application is received, the Agency notifies, for some nationally-competed grant programs, the applicant as to what information is missing and the applicant has a set period of time in which to provide the missing information. For other nationally-competed grant programs, however, if an incomplete application is received, the Agency does not go back to the applicant for the missing information. This is done because some nationally- competed grant programs receive a sufficient number of complete applications to use all of the funds in a fiscal year and, accordingly, the Agency does not pursue incomplete applications. If this is the situation, the

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NOSA or NOFA indicates this to the public.

As noted above, the nationally-competed grant programs provide a window for which applications are accepted. This results generally in a one time review and then scoring and ranking of applications. As currently implemented, the Agency reviews an application upon its receipt to determine whether the applicant and project are eligible for that program. If the Agency determines that the applicant and/or project are ineligible, the Agency notifies the applicant of such determination. Applications that are determined to be eligible are scored and ranked by National Office program staff. Depending on the nationally-competed grant program, independent reviewers may be used to evaluate and score applications. In addition, the nationally-competed grant programs currently limit the Administrator's discretionary points that can be included in the scoring of applications to 10 percent or less of the total potential points that an application can score.

Based on this pool of applications, a nationally-competed grant program's National Office selects applications for funding. Applicants that are not selected due to a low priority rating are notified. The Agency then proceeds to work with the applicants selected for funding in order to make awards by the end of the Federal fiscal year.

In currently administering its nationally-competed grant programs, the Agency begins the process of obligating funds and making awards (disburse the grant) by sending the applicant a letter of conditions that must be agreed to before the Agency and the grantee enter into a binding agreement, such as a grant agreement.

Once the Agency has initiated funds disbursement, it monitors the grantee to ensure conformance with the terms and conditions of the grant agreement. Depending on the nationally-competed grant program, the grantee is currently required to submit reports to the Agency during the grant period. Once the project has been completed, the Agency closes out the grant. If a grantee violates the terms and conditions of the grant agreement, the Agency takes appropriate steps, including, depending on the severity of the violation, the suspension or termination of the agreement.

State-allocated grant programs. These paragraphs describe how the Agency currently administers its State-allocated grant programs, three which are being consolidated under this proposed rule--Community Facilities, Economic Impact Initiatives, and Water and Waste Disposal Facilities. In contrast to the Nationally-competed grant programs, the Agency typically does not publish Federal Register (FR) notices for its State-allocated programs, but instead relies on other methods for alerting the public to the programs and the submittal of applications. In addition, the Agency tends to accept applications for State-allocated grant programs at any point during the course of the year.

Using Community Facilities (and the Economic Impact Initiatives) as an example of how the Agency currently implements a State-allocated grant program, applicants file a preapplication with requisite documentation and supporting information to the Rural Development field office. The Rural Development field office then reviews the package for completeness of the documentation and for applicant and project eligibility. If needed, the Rural Development field office will request the opinion of the Office of General Counsel on the applicant's legal existence and authority to perform the proposed project.

As currently being administered, the Rural Development field office submits a copy of the application package to the Rural Development State Office with a letter of recommendation. The Rural Development State Office reviews the package and notifies the Rural Development field office of its findings. If an application is determined to be ineligible, the Rural Development field office notifies the applicant, who has the right of appeal.

If an application is determined to be eligible, the Rural Development field office provides the applicant with the necessary forms and instructions for filing a complete application. For example, the Community Facilities program requires Form SF 424, a preliminary architecture report, a financial feasibility report, and environmental information. If the project is small, the architectural and financial feasibility reports may not be required.

If there is a concern (e.g., incomplete, not properly assembled) with the application, the Rural Development field office will notify the applicant as to what information is needed. If the applicant fails to submit a complete application by the date specified by the Rural Development State Office or in an otherwise timely manner, the Agency may discontinue processing the application. If the application is complete, the Agency will notify the applicant as to eligibility and anticipated availability of funds.

Completed applications returned to the Rural Development field office are evaluated. The Rural Development field office reviews the application package for the amount of grant funds allowed and scores the application for selection priority. As currently implemented, applications may also receive discretionary points from the State Director.

Generally, the Rural Development State Office authorizes grant assistance to those eligible applicants with the highest priority score. Other factors, however, may enter into selecting applications for funding including the amount of funding being requested relative to available funds and whether the application is for the continuation of a project. Applicants who are eligible for funding, but cannot be funded due to lack of Agency funds are advised by the State Office that grant assistance is not available. If, based upon the application, it appears that funds will be available for the project within a feasible period of time, the Agency notifies the applicant that the application will be retained until funding becomes available. If, based upon the application, it is not likely that the project will be funded in the near future, the Agency returns the application to the applicant at the end of the fiscal year.

As for nationally-competed grant programs, the process the Agency currently uses to obligate funds and make awards (disburse the grant) for State- allocated grant programs begins with the Agency sending the applicant a letter of conditions that must be agreed to before the Agency and the grantee enter into a binding agreement, such as a grant agreement.

Once funds have been disbursed, the Agency monitors the grantee to ensure conformance with the terms and conditions of the grant agreement. Depending on the State-allocated grant program, the grantee is currently required to submit reports to the Agency during the grant period. Once the project has been completed, the Agency closes out the grant. If a grantee violates the terms and conditions of the grant agreement, the Agency takes appropriate steps, including, depending on the severity of the violation, the suspension or termination of the agreement.

C. Goals of the New Platform

The grant programs that are being combined under the proposed new platform were developed separately, and are administered independently of each other. The platform being proposed seeks to achieve the following objectives:

. Reduce the burden to applicants;

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. Increase the efficiency in delivering grant programs; and

. Improve the Agency's program monitoring and reporting capabilities.

Reduce the burden to applicants. The new platform can potentially reduce the burden to applicants in several ways.

First. When applicants seek grants under more than one of the programs, they are required to learn how to fill out multiple forms. This is inefficient and costly to the applicants and makes the programs less attractive to the applicants. By combining common elements into a single subpart, the new platform can reduce the burden to applicants applying to multiple grant programs covered in this regulation.

Second. Many grant programs receive applications from applicants or projects that are ineligible. In some cases, the applicant spends a significant amount of resources in putting together such applications. To help reduce the number of such applications, the new platform incorporates a voluntary preapplication process that applicants can use to help assess whether they and their projects are eligible. By getting an early assessment of eligibility, the Agency believes that fewer "non-eligible" applications will be submitted, thereby saving the applicant expenses in assembling and submitting a complete application.

Third. Under the new platform, applicants would be allowed to submit applications, including preapplications, to any Rural Development office or on-line through grants.gov. Allowing applicants to submit applications to any Rural Development office, including Rural Development field offices, provides applicants with additional submittal options than under the current programs, which specify locations where applications are to be submitted. For some applicants, the ability to submit applications to their local Rural Development field office will be more convenient. In addition, to the extent that this platform can leverage and further promote the utilization of field offices, it will serve to improve communication between the Agency and the applicants.

Increase efficiency in delivering grant programs. There are several ways in which the new platform will help the Agency improve the efficiency in delivering the grant programs.

First. The new platform would improve the work flow for the National and State Rural Development office personnel. The current delivery platform creates significant processing peaks and valleys in the delivery of the grant programs. The new platform seeks to "smooth out" these peaks and valleys through an open application period. This will also allow the Agency to better manage staffing requirements and provide administrative consistency among the various grant programs.

Second. The new platform improves program delivery efficiency by "separating" the application process from the funding process. Currently, consideration of grants waits until funds are made available through the appropriations process. This creates uncertainty in work flow and, at times, compresses the effort and resources required to review applications and make decisions into a very short timeframe.

The new platform incorporates two different application submittal schemes. Under the first scheme, applications are accepted at any time. Under the second scheme, applications are submitted once each year. These processes will occur regardless of when funds are available and under what mechanism they are made available. By separating the application submittal and review process from funding availability, the Agency is creating a process that will allow both applicants and Agency staff to better manage their resources.

Third. The new platform would streamline the Agency's efforts in administering the grant programs. Maintaining separate sets of basic requirements creates complexity in administrative activities. For example, with each program administered under separate regulations, any change to basic requirements calls for multiple concurrences. Similarly, adding a new program requires the addition of a new set of basic requirements as these are not currently shared. The proposed combined platform will streamline basic grant requirements, allowing all the grant programs included in this regulation to reach a uniform functionality of process.

Further, when new programs are implemented under the current delivery platform, a new regulation is developed that, in many respects, addresses or adopts many of the same requirements. Time and effort are wasted in readdressing issues during the development of new program regulations leading to inefficient rulemaking and a delay in program implementation. The structure of the new platform provides for the addition of other Agency, or newly authorized, grant programs as needed without the addition of new sets of basic requirements. The common elements (proposed subpart A) of the proposed rule are intended to remain unchanged, while additional programs would be added to proposed subpart B.

Fourth. Having a common rule for multiple programs will be easier to administer, improve communication of basic program characteristics, and reduce confusion among both staff and the public. A common regulation will reduce the staff time, effort, and training necessary for issuing grants. Efficiencies will be realized as common program elements facilitate consolidation of information technology platforms and systems' maintenance cost. Internal management controls will improve with standardized servicing and oversight. Uniform processes will facilitate electronic commerce between Rural Development and its customers.

Improve the Agency's program monitoring and reporting capabilities. Building on the efficiency improvements under a common grants platform, monitoring and reporting program performance of grant recipients will be conducted in conformance with uniform standards. With standardized servicing and oversight, Agency staff will be better able to monitor grant recipients to the extent necessary to ensure that facilities are functioning in accordance with project performance goals.

Through the grantee's uniform standard semiannual performance reporting and a final performance report, the Agency will be able to compare actual accomplishments against the objectives and benchmarks stated in the project's performance plan. To account for the diversity in grant programs, additional grantee performance data may be needed for a thorough evaluation. Any special reporting requirements not specified in the rule or subsequent notices will be established in the Agency's letter of conditions provided to the grantee.

Project monitoring and report data will be captured and retained through the Agency's management information systems and data warehouse. Drawing on standardized collected data, the Agency will be able to generate more comprehensive program performance reports both within a program and comparisons across several programs. This will be especially useful where programs with common or complementary performance measures may have a compounded impact on a community's social and economic development.

D. The New Platform

By way of this rule, the Agency is initiating the process of developing a single regulation covering all 39 grant programs of the Rural Development Mission Area. For the grant programs listed in this regulation, the proposed

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new platform simplifies, improves, and enhances the delivery of the grant programs. By applying the requirements shared among the eight grant programs included in this rule while maintaining required programmatic differences, this new structure will streamline the promulgation of regulations for new grant programs.

As noted earlier, the Agency is proposing to include eight grant programs within this proposed rule. Under the new platform, the common features of the programs are incorporated into a single subpart (subpart A), with program- specific features provided in a separate subpart (subpart B). While key features (e.g., applicant and project eligibility, funding) of the existing programs remain under the new platform, key differences can be found in applying for a grant, in the process in which applications are submitted, evaluated, and selected for funding, and in the manner in which notifications will be used to provide information to the public on the grant programs.

The following paragraphs address the new platform by examining the proposed delivery mechanisms, beginning with a discussion on the use of notifications under the new platform and concluding with grant close-out. Figure 1 illustrates the overall application process for grant programs with an application deadline. Figure 2 illustrates the overall application process for grant programs with an open application period.

See Illustrations on Pages 61206-61207 in Original Document.

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1. Notifications. Under the new platform, the Agency will use notifications to provide information on program funding and on programmatic changes relevant to applications and to program administration. The primary notification method used to disseminate this information depends on whether the program is a Nationally-competed grant program or a State-allocated grant program. In addition, the timing of when the Agency issues a notification depends on the type of information the notification contains.

Funding. The Agency will issue notifications identifying the level of funds are available for each program and their minimum and maximum grant amounts.

The Agency may elect to provide additional funding information in these notifications. Such information may include, but would not be limited to:

. Type of award;

. Fiscal year funds;

. Approximate total funding;

. Approximate number of awards;

. Approximate average award;

. Floor of award range;

. Ceiling of award range;

. Budget period length; and

. Project period length.

For Nationally-competed grant programs, the primary notification method that the Agency will use will be a Federal Register notice. One or more notices may be necessary to do this. For State-allocated grant programs, the primary notification method will be through a link found on Rural Development's Web site http://www.rurdev.usda.gov. Funding information for both types of grant programs would also be available at any Rural Development office. The Agency will provide funding information on each program every fiscal year.

Programmatic changes. The Agency will also issue notifications that identify changes to a program that would affect the applicant or the applicant's application. These circumstances are discussed below.

. Administrator and State Director priority categories. Subpart A provides lists of Administrator and State Director priority categories. Administrator priority categories apply to both State-allocated grant programs and nationally-competed grant programs, while State Director priority categories apply only to State-allocated grant programs. Individual programs may elect to use any or all of the priority categories identified in subpart A in scoring applications, but would not be able to add to these lists (unless done through a change to the rule). Subpart B specifies the specific sets of Administrator and State Director priority categories that each program can use each year to score applications.

If a program office determines that a different set of priority categories (but still within the priority categories identified in subpart A) will be applicable for a given fiscal year, the Agency will issue a notification to announce the priority categories that will be used in scoring applications for that fiscal year.

. Administrator and State Director points. Subpart B identifies how points will be allocated for both Administrator and State Director priority categories for each of the grant programs. If a program office determines that a different allocation of these points is appropriate, whether or not in conjunction with a change in priority categories, then that program office would issue a notification, as applicable, to indicate the point allocation to be used in that fiscal year.

. Additional reports. A program office may determine that additional reports on project performance that are generally applicable across projects within the program are necessary in addition to those required under the proposed rule. In such instances, the Agency would issue a notification to the public.

. Ranking dates. A program office may elect to change one (or more) of the ranking dates specified in subpart B of the proposed rule. For example, a program office that has a specified ranking date (July 15) may determine that it is necessary to move the ranking date to earlier in the year because the program office has determined that additional time may be needed to rank the applications in order to ensure sufficient time to obligate funds. In such instances, the Agency would issue a notification to the public.

. Application deadline. For those programs with a specified application deadline, a program office may elect to change the application deadline date specified in subpart B of the proposed rule. For example, a program office that has a specified application deadline (March 1) may determine that it is necessary to move the application deadline to earlier in the year in order to better manage Agency resources and program funds. In such instances, the Agency would issue a notification to the public.

For changes in Administrator and State Director priority categories and/or points, the program office would issue the notification(s) at least 30 days prior to the first ranking date in the upcoming fiscal year or the application deadline, as applicable, to allow sufficient time for applicants to finish their applications. If multiple program offices seek to make these types of changes, the Agency may issue, where feasible, a single notification covering all of the affected programs rather than individual notifications for each of the affected programs. For other programmatic changes, the Agency would issue notifications on an as needed basis.

Finally, a program's eligibility requirements may change or the Agency may determine that certain types of projects are no longer eligible for grants or certain ineligible projects may become eligible. Such instances would require the Agency to change to the regulation. In order to help ensure the public is aware of such changes, the Agency may include such information in the programmatic change notifications discussed above.

Administrator approval. Under the new platform, State Directors would propose to the Administrator each year the minimum and maximum grant amounts for each State-allocated grant program included in this part. Upon approval from the Administrator, the Agency would then notify the public of the minimum and maximum grant amounts approved by the Administrator. Similarly, each State Director may propose to the Administrator changes in State Director priority categories and associated points for State-allocated grant programs included in this part. Upon approval from the Administrator, the Agency would then notify the public of the priority categories and associated points approved by the Administrator for each affected State-allocated program.

2. Acceptance of Applications. As noted above, Nationally-competed grant programs establish defined "windows" for when applications can be submitted and both types of programs (Nationally-competed and State-allocated) frequently specify the Rural Development office (field, State, National) to which applications are to be submitted. Under the new platform, the Agency is proposing to implement two application submittal schemes, depending on the needs of the individual program:

. An open application period; and

. A specified application deadline.

Under the open application period scheme, the Agency would accept applications at any time during the year. By accepting applications at any time, there would no longer be any "window" for when to submit an application. This feature eliminates the need for the public to wait on the Agency to publish Federal Register notices, or use other methods, to solicit applications. It is

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important to note, however, that the Agency will still undertake activities to promote the various grant programs.

The second scheme (a specified application deadline) is similar to current Nationally-competed grant programs, but the date for application submittal would be fixed in the regulation in subpart B. By providing a date, the public will not have to wait for the Agency to publish a notice identifying when applications are due. This will allow applicants to plan for the preparation of their applications with certainty.

By accepting applications at any Rural Development office under either scheme, the Agency is seeking to make it more convenient for applicants to submit their applications. To the extent that this facilitates interaction between Rural Development staff and the applicants, the Agency expects better communication will occur. The Agency will implement internal procedures to ensure all applications are delivered to the appropriate Agency program office.

3. Eligibility. Under the current programs, Rural Development offices (National and State offices, as appropriate) determine both applicant and project eligibility based on the individual grant program's requirements. As described below, the proposed rule continues this determination process mainly unchanged.

Applicant eligibility is based on the applicant meeting the common requirements, which are citizenship and legal authority and responsibility, and program-specific criteria, which are contained in proposed subpart B. The proposed rule also identifies applicants who would be categorically ineligible. In terms of eligible and ineligible applicants, little has changed under the new platform compared to the current programs. In addition, these criteria cannot be voided under the exception authority provided in the proposed rule.

Project eligibility is based on the proposed project meeting criteria found in Subparts A and B, as applicable. Subpart A requires each project to meet the following criteria, as applicable and unless otherwise modified by a specific provision in subpart B for a program:

. Being primarily for the benefit of a rural area;

. For those projects and purposes that acquire or improve real or personal property, the applicant must be the owner of the property or have leasehold interest acceptable to the Agency in the property and control the revenues and expenses of the project, including operation and maintenance; and

. For projects and purposes that are determined by a service area, on the boundaries of the proposed service area meeting a non-discrimination criterion.

Projects that do not meet the applicable proposed criteria (as found in Subparts A and B, as applicable) would be ineligible under the new platform. In addition, these criteria (as found in subpart A and as may be modified in subpart B) cannot be voided under the exception authority provided in the proposed rule.

The applicable program-specific project eligibility requirements, which are located in subpart B, remain essentially unchanged for those of the current programs. Some differences are being proposed and these are discussed in section II of this preamble.

In addition to identifying eligible projects, the proposed rule identifies specific projects and purposes that are ineligible under all circumstances from receiving a grant. The Agency assembled this list from the list of ineligible projects and purposes identified in the regulations and associated program notices for the programs being included in the proposed rule. In addition, the Agency added the following projects and purposes as ineligible:

. Investment or arbitrage, or speculative real estate investment;

. Prostitution or projects generating income from activities of a prurient sexual nature;

. Any project eligible for Rural Rental Housing and Rural Cooperative Housing loans under sections 515, 521, and 538 of the Housing Act of 1949, as amended;

. Any project generating income from the sale of illegal drugs, drug paraphernalia, or any other illegal product or activity;

. Any project located in a special flood or mudslide hazard area as designated by the Federal Emergency Management Agency in a community that is not participating in the National Flood Insurance Program unless the project is an integral part of a community's flood control plan; and

. Any other similar project or purpose that the Agency determines is ineligible for funding under this part and publishes in a Federal Register notice.

4. Applying for a Grant. All applicants would be required to submit an application. For some applicants (i.e., a government that is proposing a project that is for construction, land acquisition, or land development and that would require more than $100,000 of Federal funding), a preapplication would be required (as is currently the situation). For all other applicants, however, the submittal of a preapplication would be optional. The following paragraphs discuss briefly preapplications and applications.

Preapplications. The primary purpose of the preapplication is for the Agency to make an assessment as to both applicant eligibility and project eligibility. In addition, use of preapplications facilitates early communication between the Agency and the applicant. By reviewing preapplications, the Agency reduces the time and effort spent by applicants in preparing full applications where the applicant and/or project are clearly not eligible.

Applications. Because of the varying nature of the projects that are associated with the grant programs, the Agency has determined that the information to be included in a grant application should be program specific, as it is currently. The contents of grant applications will be made available to applicants through any Rural Development office, the Agency's Web site, or National Headquarters. The information associated with a grant application will not be significantly different than currently required under the current programs.

However, an applicant would be allowed to submit an application (including preapplications) to any Rural Development office. Under the current programs, applications are submitted to specified locations. As noted earlier, the Agency is proposing this change to make it more convenient for applicants to submit their applications and to foster communication between Rural Development staff and applicants.

Rather than identifying the specific documents that must accompany each application for each program in the regulation, the Agency would provide all the necessary forms and instructions in program-specific application packages. This proposed process is similar to the current process for several existing grant programs, but represents a change for those Nationally-competed programs where the regulations and/or Federal Register notice identify specifically what is required in each application under each of those programs. The Agency believes that implementing the proposed process for all grant programs affected by this rule will provide administrative flexibility to each program as well as consistency in implementation.

5. Processing Applications. The Agency would review each application for the determination of applicant and project eligibility and the likelihood of the project's feasibility. It is at this stage of the process that the Agency would

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make the formal determination of eligibility, unless it has already been made.

In order to determine eligibility, the application must contain sufficient and necessary information to allow the Agency to make the eligibility determination. The Agency will also review the application for assessing whether or not the project is likely to be feasible. To further process an application for a project or purpose that is likely to be unfeasible would be an inefficient use of Agency resources. At the same time, the amount of information that is needed to make this assessment varies between programs because of the differing complexity of projects and purposes. The information provided to the applicant for preparation of an application will assist the applicant in identifying the amount of information necessary to allow the Agency to make this feasibility assessment.

When reviewing an application for applicant and project eligibility, if the Agency finds that there is insufficient information, including for example if a form has not been signed, to make an eligibility determination, the Agency will notify the applicant. Once an eligibility determination has been made, the Agency will notify the applicant. If the Agency determines that either the applicant or the project is ineligible, the applicant would have the right to appeal the decision to the National Appeals Division (NAD). The steps associated with eligibility under the new platform are essentially the same as under the current programs.

Similarly, if the Agency makes an assessment that a project is not likely to be feasible, the Agency will notify the applicant of its concerns. The applicant will then have the opportunity to address those concerns before the Agency continues processing the application.

For programs with open application periods, an application that is revised and resubmitted to the Agency will be processed at the next applicable ranking date for that program. For example, if a revised application is received on January 15, the Agency will consider it at the March 15 ranking date, which is the next applicable ranking date. For grant programs with a specified application deadline, each revised grant application will be processed by the Agency if it is received on or before the application deadline for that grant program. If such revised applications are not received by the specified application deadline for the grant program, the Agency will not process the application.

6. Scoring Applications. For those applications for which the applicant and project are eligible and the project is feasible (or is likely to be feasible), the Agency will continue processing the application by scoring it. The Agency will score applications on the basis of the information provided when the Agency receives the application. Thus, it is the responsibility of the applicant to provide all information necessary at the time of application for the Agency to score the application.

The Agency will score each application using a set of program-specific priority categories, a set of State Director priority categories, and a set of Administrator priority categories and their associated points that are specific to each grant program. State Director priority categories and points are only applicable to State-allocated grant programs. In addition, Administrator priority categories and points may be applied to State-allocated grant applications only when applications are submitted for the national pool of funds.

These sets of priority categories are identified in subpart B of the proposed rule. As noted earlier (Section I. D. 1.), the Agency may use a revised set of Administrator and State Director priority categories and point allocations through the issuance of a notification.

Priority Categories. As noted above, the Agency is distinguishing between program-specific priority categories and Administrator and State Director priority categories. Program-specific priority categories are those priority categories that the Agency must use in scoring each application for that grant program. In contrast, Administrator and State Director priority categories are not mandatory; that is, the Administrator and State Director are not obligated to use their specified priority categories in scoring applications. If the Administrator or State Director elects not to use their priority categories, then neither can affect the scoring of an application.

The specification of priority categories for the Administrator and the State Directors is a major difference from the current process. Currently, the Administrator and State Directors have significant discretion to reflect their priorities. In contrast, the proposed rule eliminates this discretionary aspect by specifying the sets of Administrator and State Director priority categories for each program that will be considered each year. This change provides the public with a much greater understanding of how their applications can be evaluated by the Administrator and the State Directors. Furthermore, these priority categories would be used each year, unless otherwise specified in a notification issued under proposed [Section] 5002.15. Note that program-specific priority categories can only change, however, if the Agency subsequently revises subpart B of the regulation.

Points. Currently, the total available points vary considerably between grant programs. The Agency is proposing to standardize the total points (to 100) that can be awarded to an application under any of the grant programs. Standardizing point totals is intended to help the Agency administer the grant programs.

One difference from the current programs is the proposed Administrator and State Director points that could be awarded to an application. Except for the Community Facilities grant program, as discussed in the following paragraph, both State Director points and Administrator points would be each limited to 10 points (10 percent of the total potential points) and can only be awarded for the specific set of priority categories in effect for that program. In other words, the Administrator or State Director could not use discretionary categories to establish specific earmarks. Note that only State-allocated grant programs would be allowed to award points for State Director priority categories.

For the Community Facilities grant program, the Agency is proposing to limit Administrator points to 20 points (20 percent of the total potential points). The Community Facilities grant program applies to projects that are "essential community facilities." The types of projects that may qualify as essential community facilities are very broad, much broader than any of the other grant programs being included in the new platform. This diversity of community facility projects presents unique challenges for meeting the overall goals of the program. The Agency believes, regarding these broad based programs, that it is appropriate to provide greater flexibility in order to meet the goals and objectives of the program. Therefore, the Administrator would be allowed to award up to 20 points for community facilities applications. As noted earlier, Administrator points may be applied to State- allocated programs only when the National Office makes the determination of which grant applications to fund from the national pool of funds.

As with the sets of Administrator and State Director priority categories, the procedures used for awarding Administrator and State Director points each year would be as specified in subpart B, unless a notification is issued as specified in proposed [Section] 5002.15. The

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maximum number of points that the Administrator and the State Director can award, however, can only be changed through a revision to the regulation.

Changes in Administrator and State Director priority categories and points. As noted earlier in this preamble, if there is a change in Administrator or State Director priority categories and/or point allocation to be considered for a particular year, the proposed rule allows the Administrator or State Director to change the priority categories and/or point allocation (but not the Administrator's or State Director's point total) contained in the rule by issuing an appropriate notification in a timely fashion. To illustrate the award of Administrator and State Director priority categories and points under the new platform, consider the following examples.

Examples. These examples are for State Director priority categories for community facility grants, which allow the State Director to award up to 10 points to an individual application. These examples are also illustrative of the award of State Director priority categories and points for other programs.

. Example 1. The Agency does not issue a notification for an upcoming fiscal year and an application meets each of the 10 priority categories listed in subpart A of [Section] 5002.42(b)(2). In this situation, the scoring procedure specified in subpart B for community facility grants ( [Section] 5002.101(f)(3)) would be used to score the application for awarding State Director points. The Agency determines that the application can be awarded full points for all 10 priority categories. This would total 100 points. However, because the rule limits the total number of State Director points to 10 points for any one application, this application would receive 10 State Director points.

. Example 2. The Agency issues a notification indicating that only four of the 10 State Director priority categories in subpart A will receive consideration. In this case, the notification also identifies the specific points to be awarded to the four priority categories, such that the total points to be awarded do not exceed 10 points. For example, Priority Category 6--up to 3 points; Priority Category 7--up to 3 points; Priority Category 8-- up to 2 points; and Priority Category 9--up to 2 points. Note that in this example the point distribution totals 10. In evaluating this application, the Agency determines that the application should be awarded full points for Priority Categories 6, 7, and 8, but only one point for Priority Category 9. The application would, therefore, receive nine (9) State Director points.

7. Award process for applications. The Agency is establishing a consistent process for selecting applications for funding. The two main areas of the proposed award process are:

. Ranking of applications; and

. Selection of applications for funding.

In addition, the proposed rule addresses the disposition of applications not selected for funding.

Ranking of applications. For those grant programs that have an open application period, which would receive applications on a continuous basis, the Agency is establishing a process for ranking applications that sufficiently demonstrates competition for grant funds. To accomplish this, the Agency is proposing that all scored applications for a program be ranked by the Agency four times per year. The four proposed ranking dates are, in order of occurrence during the fiscal year, December 15, March 15, July 15, and August 15. If any of these dates fall on a weekend or a Federally-observed holiday, the affected ranking date would move to the next Federal business day. Further, as noted earlier in this preamble, a program may change one or more ranking dates in a fiscal year if it publishes a notification as specified in proposed [Section] 5002.15.

The first three ranking dates were selected to provide an even spacing of ranking dates to help even out the work flow. The first date was selected with enough time after the beginning of the fiscal year and after the publication of any applicable notification for the upcoming fiscal year to allow applicants to prepare and submit an application to be considered during the first ranking period. The last date, August 15, was included because some programs need to obligate funds prior to the end of the fiscal year and this date provides sufficient lead time to accommodate such obligations. While only a month after the July 15 date, the Agency is including it because it provides additional time for applicants to submit applications for consideration during the current fiscal year.

Applications submitted after August 15 of a given fiscal year, however, will not be ranked until December 15 of the following fiscal year. In this situation, the Agency will retain these applications through the next ranking date (i.e., through December 15 of the following fiscal year). Such applications would be evaluated and scored based on that program's priority categories for the following fiscal year. Therefore, if a program's Administrator and/or State Director priority categories selected to score applications were to change between the current fiscal year and the next, applicants should consider whether their retained applications need to be resubmitted in order to better address the change in the program's selected Administrator and/or State Director priority categories.

It is important to note that the ranking dates for programs with an open application period are not the same as application deadlines. Under the new platform, applicants can submit applications for such programs at any time. Once the application is determined to be eligible, the Agency will rank the application on or after the next ranking date. Consider the following examples for grant programs with an open application period.

Example 1. Applicant A submits an application to the Agency on November 1, 2008. The Agency determines that the application is eligible for further processing on November 30, 2008. The Agency will rank the application on or after December 15, 2008.

Example 2. Applicant B submits an application to the Agency on December 16, 2008. The Agency determines that the application eligible for further processing on January 5, 2009. The Agency will rank the application on or after March 15, 2009.

Example 3. Applicant C submits an application to the Agency on August 17, 2009. The Agency determines that the application is eligible for further processing on September 23, 2009. The Agency will rank the application on or after December 15, 2009.

Example 4. Applicant D submits an application to the Agency on November 15, 2009. The Agency determines that the application is eligible on December 20, 2009, after the December 15 ranking date has passed. The Agency will rank Applicant D's application at the next scheduled ranking date after December 15, which would be, in this example, on or after March 15, 2010.

For grant programs that have a specified application deadline, such as the Distance Learning and Telemedicine grant program, either a single ranking date--July 15--or two ranking dates--March 15 and July 15--is being proposed, depending on the needs of the specific program. The July 15 date was selected to ensure sufficient time for the Agency to obligate funds to those applications selected for funding. As noted earlier in this preamble, a program office may determine that it is necessary to move the application deadline to earlier in the year in order to better manage Agency resources and program funds. In such instances, the

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Agency would provide notification to the public.

Whether for a grant program with an open application period or for a grant program with a specified application deadline, applications that are ranked in a given fiscal year will be considered for selection for funding or for potential funding, as applicable, during that fiscal year. For grant programs with an open application period, this means that applications received early in the fiscal year will have a longer timeframe to be considered for selection for potential funding than those received later in the fiscal year.

Selection of applications for funding or potential funding. For all grant programs, the Agency will create, on or after each ranking date, a priority list of ranked applications from which to select applications for consideration for (potential) funding. In considering which applications to select for (potential) funding, the Agency will consider three basic criteria, which are discussed below, and any program-specific criteria, as specified in subpart B. For each application that is selected for (potential) funding, the Agency will so notify the applicant.

As noted in the previous paragraph, the Agency will consider three basic criteria selecting applications for (potential) funding. These criteria are: (1) Ranking, (2) availability of funds, and (3) other funding sources.

. Ranking. This refers to an application's place on the program's priority list, which is based on the score each application receives. Higher scoring applications would receive first consideration for (potential) funding. However, as discussed below for the two other basic criteria and as may be specified in subpart B for a specific program, a lower scoring application may be selected for (potential) funding ahead of a higher scoring application. For example, if there is insufficient funding for the higher scoring project, the Agency may pass over that project to fund a lower scoring project in order to fully expend the budget authority.

. Availability of funds. This refers to the size of the grant request relative to the program funds that remain available to the program during the fiscal year. In order for the Agency to better manage the availability of program funds, the Agency could select, under the new platform, a lower scoring application before an eligible, higher-scoring application when the higher scoring application:

. Would require grant assistance in an amount greater than the funds remaining in a particular funding period,

. Would require more than 25 percent of a State's allocated funds, or

. Would require more than 25 percent of a Nationally-competed grant program's funds.

In these situations, the Agency would notify the applicant associated with the higher scoring application and provide the applicant an opportunity to revise the amount of funds being requested in their application, provided the reduced funding request does not change the project's purposes and financial feasibility. The applicant would then be able to resubmit the application before the Agency selects the next highest scoring application for funding.

The Agency is proposing the 25 percent threshold for nationally-competed grant programs based on current practice in the Agency's water and waste disposal grant program. The Agency is willing to consider a different threshold. The Agency is concerned that too low of a threshold might create a situation, especially in smaller nationally-competed grant programs, where this provision could be used to override the selection of applications based on their scores. The Agency is also concerned that too high of a threshold might not be effective at limiting applications that commit too high a percentage of a fiscal year's available funding for a particular program. As stated later in this preamble, the Agency is requesting comment on this threshold level.

. Availability of other funding sources. This refers to whether Rural Development loans and other, non-Rural Development funding sources should be available to an applicant. If an applicant with a higher scoring application can accomplish the project using Rural Development loans or other non-Rural Development funding sources, the Agency may consider the next highest scoring application ahead of the higher scoring application.

Disposition of applications not selected for potential funding--grant programs with an open application period. There are four scenarios in which a ranked application may not receive funding:

. Application selected for potential funding, but not funded due to the Agency's lack of funds;

. Application selected for potential funding, but not funded due to missing information;

. Application not selected for potential funding due to its ranking and the available level of funds to the Agency; and

. Application not selected for potential funding due to very low ranking.

As summarized in Table 1 and described in the following paragraph, the process for handling these four situations would be slightly different.

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See Illustration in Original Document.

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An application that is selected for potential funding, but is not funded due to the Agency's lack of funds, will be carried forward in the fiscal year in which it was selected for potential funding until either it is funded or the end of the fiscal year in which it was selected, whichever occurs first. If the selected application is not funded by the end of the fiscal year in which it was selected for potential funding, the Agency will carry the application forward into the next fiscal year unless the applicant requests in writing the Agency to withdraw the application from further consideration. Unless there is a change to the regulation or authorizing statute that would affect this process, a selected application that is carried forward into the next fiscal year would not be subject to re-evaluation or re-scoring, even if the priority categories applicable to that application change for the next fiscal year, because it has already been completed. However, the application may be required to be updated if information in it becomes outdated.

If a ranked application has been selected for potential funding, but has not been funded because additional information is needed, the Agency will notify the applicant as to what information is needed, including a timeframe for the applicant to provide the information. If the applicant does not provide the information within the specified timeframe, the Agency will remove the application from further processing.

If a ranked application has not been selected for potential funding because of its ranking and the available level of funds to the Agency, it will be included in the set of applications considered in each subsequent ranking date in the fiscal year in which it was ranked until it is either selected for potential funding, funded, or the end of the fiscal year in which the application was ranked is reached, whichever occurs first. The Agency will retain the application for consideration in the next fiscal year. All such retained applications must be updated by the applicant as required by the Agency (e.g., financial conditions, change in supporting documentation requirements). In this instance and in addition to satisfying Agency requirements, the appl