[Federal Register Volume 59, Number 230 (Thursday, December 1, 1994)]
[Unknown Section]
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From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-29555]
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[Federal Register: December 1, 1994]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Administration For Children and Families
45 CFR Part 1309
RIN 0970-AB31
Head Start Program
AGENCY: Administration on Children, Youth and Families (ACYF),
Administration for Children and Families (ACF).
ACTION: Notice of proposed rulemaking.
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SUMMARY: The Administration on Children, Youth and Families is issuing
this Notice of Proposed Rulemaking to implement a new statutory
provision that authorizes Head Start grantees to use grant funds to
purchase facilities in which to operate Head Start programs.
DATES: In order to be considered, comments on this proposed rule must
be received on or before January 30, 1995.
ADDRESSES: Please address comments to the Associate Commissioner, Head
Start Bureau, Administration for Children, Youth and Families, P.O. Box
1182, Washington, D.C. 20013. Beginning 14 days after close of the
comment period, comments will be available for public inspection in
Room 2219, 330 C Street S.W., Washington, D.C. 20201, Monday through
Friday between the hours of 9 a.m. and 4 p.m.
FOR FURTHER INFORMATION CONTACT:
Douglas Klafehn, Deputy Associate Commissioner, Head Start Bureau,
Administration for Children, Youth and Families, P.O. Box 1182,
Washington, D.C. 20013; (202) 205-8569.
SUPPLEMENTARY INFORMATION:
I. Program Purpose
Head Start is authorized under the Head Start Act (42 U.S.C. 9801
et seq.). It is a national program providing comprehensive
developmental services primarily to low-income preschool children, age
three to the age of compulsory school attendance, and their families.
To help enrolled children achieve their full potential, Head Start
programs provide comprehensive health, nutritional, educational, social
and other services. Additionally, Head Start programs are required to
provide for the direct participation of the parents of enrolled
children in the development, conduct, and direction of local programs.
Parents also receive training and education to foster their
understanding of and involvement in the development of their children.
In fiscal year 1993, Head Start served 720,000 children through a
network of almost 2,000 grantees and delegate agencies.
While Head Start is intended to serve primarily children whose
families have incomes at or below the poverty line, or who receive
public assistance, Head Start policy permits up to 10 percent of the
children in local programs to be from families who do not meet these
low-income criteria. The Act also requires that a minimum of 10 percent
of the enrollment opportunities in each program be made available to
children with disabilities. Such children are expected to participate
in the full range of Head Start services and activities with their non-
disabled peers and to receive needed special education and related
services.
II. Summary of the Proposed Regulation
The authority for this Notice of Proposed Rulemaking (NPRM) is
section 644(f) of the Head Start Act (42 U.S.C. 9839). Paragraph (f)
was added by Public Law 102-401, the Head Start Improvement Act of
1992. It directs the Secretary to establish uniform procedures for Head
Start agencies to request approval to purchase facilities and
authorizes grantees to apply for grant funds to purchase facilities to
carry out Head Start programs. Additional authority is found in section
644(c) of the Head Start Act, which mandates the Secretary to prescribe
rules or regulations to supplement section 644(f). The ability of
grantees to purchase facilities as discussed in this NPRM is subject to
the availability of funds.
The Act specifies that grantees applying to use grant funds to
purchase facilities must submit an application which contains the
following information: (1) A description of the site of the facility
proposed to be purchased; (2) the plans and specifications of such
facility; (3) information demonstrating that the proposed purchase will
result in savings when compared to the costs that would be incurred to
acquire the use of an alternative facility to carry out such program,
or that the lack of alternative facilities will prevent the operation
of the program; and (4) such other information and assurances as the
Secretary may require.
Since the passage of Public Law 102-401, section 644(f) of the Head
Start Act was amended further by Public Law 103-218, the ``Technology-
Related Assistance for Individuals with Disabilities Amendment of
1993''. This amendment provides that grantees may request approval of
previously purchased facilities for use for Head Start programs. In
accordance with the amendment, requests for retroactive approval can be
for facilities purchased after December 31, 1986. In order to obtain
approval, the grantee will be required to submit an application that
provides the same information as prospective applicants.
On May 18, 1994, the President signed into law the Human Services
Amendments of 1994 (Pub. L. 103-252) which, among other actions,
reauthorized the Head Start Act for fiscal years 1995 through 1998.
This statute amended section 644(g) to the Head Start Act to allow the
Secretary, under certain circumstances, to authorize the use of Head
Start grant funds for the construction of Head Start facilities. The
statute requires the Secretary to establish uniform procedures for Head
Start agencies to follow in requesting approval to use Federal funds in
such a manner. This NPRM does not include those procedures, since the
statutory change occurred too close to the date of publication of this
NPRM to allow their development. The construction procedures will be
promulgated in a subsequent NPRM.
The proposed rule:
Specifies what information must be included in the written
application grantees must submit to request to use grant funds to
purchase a facility, including what must be included in the cost
comparison which grantees must submit as part of their application;
Requires certain measures to be taken to protect the
Federal interest in real property purchased in whole or in part with
grant funds;
Requires that grantees which acquire facilities with grant
funds obtain specified types of insurance and maintain the property
acquired in a manner consistent with the purpose for which funds were
provided and in compliance with applicable building codes and
standards; and
Includes within the definition of ``facility'' modular
units, and requires grantees which seek funding to purchase a modular
unit to comply with these regulations, which include provisions
applicable only to the purchase of modular units.
III. Section by Section Discussion of the NPRM
Section 1309.2--Approval of Previously Purchased Facilities
In Sec. 1309.2, we propose to require Head Start grantees that want
to request retroactive approval for facilities purchased after December
31, 1986 and before October 7, 1992 (effective date of earlier Head
Start amendment to section 644(f) of the Head Start Act in Pub. L. 102-
401), to submit an application that conforms to the requirements of
part 1309 and the Head Start Act.
Section 1309.3--Definitions
Section 1309.2 provides definitions of the terms used in the
proposed rule. Key words and phrases defined include ``facility''
(defined as real property or a modular unit appropriate for use by a
grantee to carry out a Head Start program); ``purchase'' a facility
(defined to mean buy an existing facility, either outright or through a
mortgage); ``modular unit'' (defined as a prefabricated portable
structure moved to a site for use by a Head Start grantee to carry out
a Head Start program); and ``alternative facility'' (the facility with
which the cost comparison required as part of the application is made).
Section 1309.10--Application
This section specifies the information which grantees must provide
in applications to use grant funds to purchase facilities. In addition
to the statutory requirements (see section 644(f)(2) (A) through (D) of
the Head Start Act) we propose that the grantee provide information on
how the purchase of the facility will affect program operations in a
number of important areas, information on renovations necessary to make
the facility suitable for use as a Head Start program, and assurances
of compliance with several relevant Federal statutes. We propose these
additional requirements because the purchase of a facility will have
implications, both fiscal and programmatic, across a large number of
areas of concern to ACF and the grantee. The process of developing the
application will require the grantee to think about and address the
myriad consequences of such a significant undertaking, and the
information required by this section will give ACF the data needed to
thoroughly evaluate the application.
Section 1309.10 provides that grantees must state the intended uses
of the facility, provide assurance that the facility complies with
licensing and code requirements and the access requirements of the
Americans with Disabilities Act, if applicable, and section 504 of the
Rehabilitation Act of 1973, state what renovations must be made to the
building proposed to be purchased, and include statements on the effect
that purchase of a facility would have on non-Federal share
requirements, the 15 percent limitation on administrative costs, and
the grantee's ability to collaborate with other child care, social
services and health providers.
Section 1309.10(g), which requires grantees claiming that a lack of
alternative facilities would prevent operation of the program to state
how it determined that there is a lack of alternative facilities, is
necessary to implement section 644(f)(2)(C)(ii) of the Head Start Act.
A showing by the grantee that the lack of alternative facilities will
prevent operation of the program is one of the two statutory bases for
approving a grantee's application to purchase a facility. The statement
required by Sec. 1309.10(g) should be supported, whenever possible, by
a letter from a licensed real estate professional in the grantee's
service area.
The engineer who provides the certification required under
Sec. 1309.10(j) should refer to the Head Start Performance Standard on
facilities' safety (45 CFR 1304.2-3(a)), which provides minimum
physical requirements for Head Start facilities.
With respect to the limitation on administrative costs,
Sec. 1309.10(k) exempts one-time fees and expenses necessary to the
purchase, such as the down payment, renovation expenses, and attorney,
engineer, and appraiser fees, from the administrative cost limitation.
This puts into effect a 1992 amendment to the Head Start Act which
added the phrase ``exempt as provided in subsection (f)'' to the
beginning of section 644(b) of the Act. We interpret the addition of
this phrase as indicating Congress' desire that the administrative cost
limitation not operate to bar the purchase of facilities by grantees
which would otherwise qualify to use grant funds to purchase a facility
under section 644(f) of the Act. Expenses related to the facility which
arise after the purchase, such as mortgage payments and maintenance
costs, may be subject to the 15 percent limitation on administrative
costs found in the Act and implemented in 45 CFR part 1301. A
determination of whether these expenses are classifiable as
administration or program costs will depend on the facts of the
particular situation and the rules laid out in part 1301.
Section 1309.10(n) provides that applicants must include in their
application an assessment of the environmental impact of the proposed
acquisition on the human environment if it involves significant
renovation or a significant change in land use, including substantial
increases in traffic in the surrounding area due to the provision of
Head Start transportation services. ACF's view is that there are
incidental changes in land use which by their nature have no
environmental impact and applicants should not be required to provide
information in response to paragraph (n) in such situations. Applicants
with questions about whether a particular effect is significant enough
to trigger the requirement in this provision should consult ACF staff.
Section 1309.11--Cost Comparison
Section 1309.11 details what grantees must include in the cost
comparison part of the application. The cost comparison requires that
the grantee submit a detailed estimate of the cost of the proposed
facility and the cost of obtaining an alternative facility in the
grantee's service area. All costs of purchase, including any renovation
costs that would be necessary, must be identified, and one-time and
ongoing costs must be separately delineated.
The cost comparison will generally be made between the grantee's
current facility and the facility the grantee proposes to purchase. If,
however, the grantee has an existing facility but it is shown to the
satisfaction of the responsible HHS official that the facility is
inadequate to ensure the operation of a program in full compliance with
the Head Start Performance Standards (see 45 CFR part 1304 and related
guidance), then the cost of the proposed facility may be compared to
the cost of an available, appropriate facility of comparable size for
rent in the grantee's community. Without this provision grantees which
have the use of inadequate but inexpensive (or free) facilities would
never be able to show that they can achieve the required cost savings
by purchasing a facility. For example, a program may be housed in a
church basement for which the grantee pays little or no rent. The
program must take down and put away all of its equipment every Friday
and reassemble the equipment every Monday because the church uses the
same space for its own needs on the weekend. In addition, the basement
is poorly ventilated and too small for the program's needs. The
grantee's current space costs are so low, however, that it would not be
able to demonstrate the cost savings required by the statute if it were
required to compare its current rent to the cost of the facility it
proposes to purchase. In this case the grantee, upon showing to the
satisfaction of the responsible HHS official the inadequacy of its
current facility, may compare the cost of the proposed facility to the
cost of rental space in the community which would be suitable for use
as a Head Start facility.
In the cast of a request for approval of a previously purchased
facility, the grantee must compare the cost of the facility (including
any renovations made since the purchase) to the cost of rental of an
alternative facility.
If the grantee has no facility (for example, in the cast of a
grantee whose lease has expired) or if the grantee will operate its
current facility after it purchases the new facility, then the
comparison is between the proposed facility and an available,
appropriate facility of comparable size for rent in the grantee's
community. Substantiation of the availability and cost of appropriate
rental properties in the grantee's service area will normally require a
letter or other documentation from a local real estate professional.
For facilities other than modular units, the period of the cost
comparison is twenty years. We have chosen this period to insure
simplicity and consistency in the preparation and review of this very
important part of the application. In deciding on twenty years as the
period of comparison we have taken into consideration a number of
factors, realizing that the circumstances of every application will be
different. These factors include the expected useful life of the
facilities which will be purchased, the indeterminate nature of the
Head Start grant itself, and the period of the loan most grantees will
need to purchase a facility. The cost comparison should be based on
present conditions and be expressed in constant dollars, without taking
inflation into account.
The period of cost comparison for modular units is ten years. We
chose a shorter time period for modular units because the span of use
for such units is generally less than for a non-modular unit facility.
Section 1309.11(f) deals with situations in which the proposed
facility is to be used for purposes in addition to the operation of the
Head Start program. Shared ownership of facilities purchased with grant
funds is prohibited but a grantee may charge for the use of a facility
that is not needed for its operation of the Head Start program. Such
charge for use of the facility must conform with the Office of
Management and Budget Cost Principles.
Section 1309.20--Title
The requirement found in Sec. 1309.20 is derived from existing
regulations applicable to grantee purchases of real property. These are
found in 45 CFR 74.133 and 92.31. In jurisdictions in which title to
mortgaged property passes to the mortgage lender, the possession by the
grantee of equitable title satisfies this section.
Section 1309.21--Recording of Federal Interest and Other Protection of
Federal Interest
The requirements of 45 CFR 74.134 and 92.31 on use and disposition
of property, transfer of title, and determination of the Federal share
of property at disposition apply to grantees using Head Start funds to
purchase facilities. The provisions of this section supplement those
provisions.
The Federal government has an interest in property purchased with
Head Start grant funds. The purpose of the requirements of this
section, which include the requirement that grantees which purchase
real property with grant funds file a notice of Federal interest in
appropriate local records, is to safeguard the Federal interest in the
property in the event that the grantee seeks to sell, lease, or
encumber the property. The provisions of Sec. 1309.21(a), as a rule,
would not apply to modular units which are attached to land owned by
someone other than the grantee.
The provisions of Sec. 1309.21(e), on notification of a default on
the part of a grantee under a mortgage, covers both real property
mortgages an chattel mortgages that may be obtained for the purchase of
modular units. It sets forth provisions for protection of Federal
interests that the mortgage agreement and the security agreement,
whichever is applicable, must contain.
Section 1309.22--Insurance, Bonding and Maintenance
This section, like the previous section, has as its purpose
protection of the Federal interest in real property purchased in whole
or in part with grant funds. The requirement that grantees which
purchase real property obtain title and hazard insurance, and also
maintain the property in a manner consistent with the purposes for
which it was purchased, is reasonable and necessary to protect the
Federal interest.
Section 1309.30--Modular Units--General
Modular units are considered as facilities for the purpose of this
regulation, and the purchase of a modular unit is subject to all the
requirements of this Part. In several instances, however, the rules
which apply to the purchase of facilities generally would not be
appropriate to the purchase of modular units. Sections 1309.31,
1309.32, 1309.33, and 1309.34 contain provisions applicable to the
special circumstances of modular unit purchases.
Section 1309.31--Site Description
The requirements of this section are in addition to the
requirements for the site description information in Sec. 1309.10(b) of
this part. This section requires an application for the purchase of a
modular unit to state where the modular unit will be installed and
whether the land on which the unit will be placed must be purchased by
the grantee. A grantee proposing to purchase a modular unit may or may
not own land on which to install the unit. If the grantee does not own
the land, the application must state who owns the land, and whether an
easement, right-of-way or rental of land is necessary to provide access
to the modular unit.
Section 1309.32--Statement of Procurement Procedure
In the case of the proposed purchase of a modular unit the Regional
Office will not be able to rely on an appraisal of the property to
satisfy itself that the purchase price of the property is fair and
reasonable. This section requires a grantee proposing to purchase a
modular unit to include in its application a statement describing the
procurement procedures which will be used to purchase the modular unit,
including the specifications to be used in making the procurement and
assurance that the requirements in 45 CFR parts 74 and 92 have been
met. This information will be the basis for ACF's evaluation that the
purchase price of the modular unit is fair and reasonable.
Section 1309.33--Inspection
Modular unit installations, unlike conventional buildings, cannot
be adequately inspected before the purchase of the unit, because the
unit is not moved to the site and installed until after purchase.
Therefore, the pre-purchase inspection by a licensed engineer called
for in Sec. 1309.10(j) cannot apply to the purchase of a modular unit.
This section adapts the need for an inspection to the circumstances of
a modular unit purchase by requiring an engineer's inspection within 15
calendar days of the unit's installation and submission of the
engineer's inspection report to HHS within 30 days of the inspection.
Section 1309.34--Costs of Installation of Modular Unit
This section makes clear that all necessary and reasonable costs
incurred by the grantee in connection with the installation of a
modular unit are payable with grant funds.
Section 1309.40--Copies of Documents
The requirement of this section that certified copies of specified
legal documents related to the purchase of real property or the
discharge of any debt secured by the real property be submitted to ACF
is intended to provide the information necessary to maintain adequate
records of the real property purchased by Head Start grantees in which
the Federal government has an interest.
Section 1309.41--Record Retention
The requirement that records pertinent to the purchase and debt be
retained by the grantee for the period of its ownership plus three
years is based on 45 CFR parts 74 and 92.
Section 1309.42--Audit of Mortgage; Five Year Appraisal
This section includes provisions intended to provide information
which the Federal Government will need to keep current its records on
real property in which it has an interest.
Section 1309.43--Use of Grant Funds to Pay Fees
This section authorizes the use of grant funds to pay the
professional fees and related costs necessary to the purchase of real
property, with the prior, written approval of the responsible HHS
official.
Section 1309.44--Program Income
This section, which requires that program income derived from
facilities purchased with grant funds be deducted from the total
allowable costs of the budget period in which it was produced, is based
on 45 CFR 74.42(b) and (c) and 45 CFR 92.25(g).
Section 1309.45--Independent Analysis
This section proposes to allow the responsible HHS official the
option of obtaining an independent professional analysis of the cost
comparison submitted by a grantee pursuant to Sec. 1309.11 and the
statement under Sec. 1309.10(g) that a lack of facilities will prevent
operation of the program.
IV. Impact Analysis
Executive Order 12866
Executive Order 12866 requires that regulations be drafted to
ensure that they are consistent with the priorities and principles set
forth in the Executive Order. The Department has determined that this
rule is consistent with these priorities and principles. This Notice of
Proposed Rulemaking implements the statutory authority for Head Start
grantees to apply to use grant funds to purchase facilities. Congress
made no additional appropriation to fund this new authority, however,
and so any money spent toward the purchase of facilities for Head Start
programs is money that would have been spent otherwise by the program
or other programs from the same appropriation amount.
Regulatory Flexibility Act of 1980
The Regulatory Flexibility Act (5 U.S.C. CH. 6) requires the
Federal government to anticipate and reduce the impact of rules and
paperwork requirements on small businesses. For each rule with a
``significant economic impact on a substantial number of small
entities'' an analysis must be prepared describing the rule's impact on
small entities. Small entities are defined by the Act to include small
businesses, small non-profit organizations and small governmental
entities. While these regulations would affect small entities, they
would not affect a substantial number. For this reason, the Secretary
certifies that this rule will not have a significant impact on
substantial numbers of small entities.
Paperwork Reduction Act
Under the Paperwork Reduction Act of 1980, Public Law 96-511, all
Departments are required to submit to the Office of Management and
Budget (OMB) for review and approval any reporting or record-keeping
requirement inherent in a proposed or final rule. This NPRM contains
information collection and record-keeping requirements in
Secs. 1309.10, 1309.40 and 1309.41 which will be submitted to OMB for
review and approval in accordance with section 3504(h) of the Paperwork
Reduction Act.
Organizations and individuals desiring to submit comments on the
information collection and recordkeeping requirements should direct
them to the agency official designated for this purpose, whose name
appears in this preamble, and to the Office of Information and
Regulatory Affairs, OMB, New Executive Office Building (Room 3002),
Washington, DC 20503, Attention: Desk Officer ACF/HHS.
List of Subjects in 45 CFR Part 1309
Acquisition, Facilities purchase, Head start, Real property.
(Catalog of Federal Domestic Assistance Program Number 93.600,
Project Head Start)
Dated: May 10, 1994.
Mary Jo Bane,
Assistant Secretary for Children and Families.
Approved: August 19, 1994.
Donna E. Shalala,
Secretary.
For the reasons set forth in the Preamble, 45 CFR chapter XIII is
proposed to be amended by adding part 1309 as follows:
PART 1309--HEAD START FACILITIES PURCHASE
Subpart A--General
Sec.
1309.1 Purpose and application.
1309.2 Approval of previously purchased facilities.
1309.3 Definitions.
Subpart B--Application Procedures
1309.10 Application.
1309.11 Cost comparison.
Subpart C--Protection of Federal Interest
1309.20 Title.
1309.21 Recording of Federal interest and other protection of
Federal interest.
1309.22 Insurance, bonding, and maintenance.
Subpart D--Modular Units
1309.30 General.
1309.31 Site description.
1309.32 Statement of procurement procedure.
1309.33 Inspection.
1309.34 Costs of installation of modular unit.
Subpart E--Other Administrative Provisions
1309.40 Copies of documents.
1309.41 Record retention.
1309.42 Audit of mortgage; Five year appraisal.
1309.43 Use of grant funds to pay fees.
1309.44 Program income.
1309.45 Independent analysis.
Authority: 42 U.S.C. 9801 et seq.
Subpart A--General
Sec. 1309.1 Purpose and application.
This part prescribes regulations implementing section 644(f) of the
Head Start Act, 42 U.S.C. 9801 et seq., as it applies to grantees
operating Head Start programs under the Act. It prescribes the
procedures for applying for Head Start grant funds to purchase
facilities in which to operate Head Start programs, and the conditions
under which grant funds may be awarded to purchase facilities. It also
specifies the measures which must be taken to protect the Federal
interest in real property purchased with Head Start grant funds.
Sec. 1309.2 Approval of previously purchased facilities.
Head Start grantees which purchased facilities after December 31,
1986, and before October 7, 1992, may request retroactive approval of
the purchase by submitting an application which conforms to the
requirements of this part and the Act. Grant funds may be used only to
pay facility purchase costs incurred after the responsible HHS official
grants an application for approval of a previously purchased facility.
Sec. 1309.3 Definitions.
As used in this part,
ACF means the Administration for Children and Families in the
Department of Health and Human Services, and includes the Regional
Offices.
Acquired with grant funds means purchased in whole or in part with
Head Start grant funds and refers to payments made with grant funds in
satisfaction of a mortgage agreement (both principal and interest), as
a down payment, for professional fees, for closing costs, and for any
other costs associated with the purchase of the property that are usual
and customary for the locality.
Act means the Head Start Act, 42 U.S.C. section 9801, et seq.
ACYF means the Administration on Children, Youth and Families in
the Department of Health and Human Services.
Alternative facility means the facility with which the grantee must
make the cost comparison required in the application.
Facility means real property or a modular unit appropriate for use
by a Head Start grantee to carry out a Head Start program.
Grant funds means Federal financial assistance received by a
grantee from ACF to administer a Head Start program pursuant to the
Head Start Act.
Grantee means the local public or private non-profit agency which
has been designated as a Head Start agency under 42 U.S.C. 9836 and
which has been granted financial assistance by the responsible HHS
official to operate a Head Start program.
Modular Unit means a prefabricated portable structure moved to a
site for use by a Head Start grantee to carry out a Head Start program.
Purchase a facility means buy an existing facility, either outright
or through a mortgage.
Real Property means land, including land improvements, structures
and appurtenances thereto, excluding movable machinery and equipment.
Responsible HHS official means the official who is authorized to
make the grant of financial assistance to operate a Head Start program,
or such official's designee.
Useful life means the period during which a facility is capable of
being used as a Head Start facility.
Subpart B--Application Procedures
Sec. 1309.10 Application.
A grantee which proposes to use grant funds to acquire a facility
or requests approval of the previous purchase of a facility must submit
a written application to the application to the responsible HHS
official. The application must include the following information:
(a) A legal description of the site of the proposed or previously
purchased facility, and an explanation of the appropriateness of the
location to the grantee's service area, including a statement of the
effect that purchase of the facility has had and will have on the
transportation of children to the program, on the grantee's ability to
collaborate with other child care, social services and health
providers, and on all other program activities and services.
(b) Plans and specifications of the proposed or previously
purchased facility, including information on the size and type of
structure, the number and a description of the rooms, and the lot on
which the building is located (including the space available for a
playground and for parking).
(c) The cost comparison described in Sec. 1309.11.
(d) If renovations are necessary to make the proposed facility
suitable for use to carry out the Head Start program, a description of
the renovations, and the plans and specifications required by paragraph
(b) of this section for the facility as it will be after renovations
are complete.
(e) The intended uses of the proposed or previously purchased
facility, including information demonstrating that the facility will be
used principally as a Head Start center, or a direct support facility
for a Head Start program. (A Head Start center, or a direct support
facility for a Head Start program means a facility used for direct Head
Start services to children and their families, or administrative or
other activities necessary to the conduct of the Head Start program.)
If the facility is to be used for purposes other than the operation of
the Head Start program, the grantee must state what portion of the
facility is to be used for such other purposes.
(f) Assurance that the facility complies (or will comply after
completion of the renovations described in paragraph (d) of this
section) with local licensing and code requirements, the access
requirements of the Americans with Disabilities Act (ADA), if
applicable, and section 504 of the Rehabilitation Act of 1973. The
grantee also will assure that it has met the requirements of the Flood
Disaster Protection Act of 1973, if applicable.
(g) If the grantee is claiming that the lack of alternative
facilities will prevent or would have prevented operation of the
program, a statement of how it was determined that there is or was a
lack of alternative facilities. If a grantee requesting approval of the
previous purchase of a facility is unable to provide such a statement
based on circumstances which existed at the time of the purchase, the
grantee may use present conditions as a basis for making the
determination.
(h) The terms of any proposed or existing loan(s) related to the
purchase of the facility and the repayment plans.
(i) A statement of the effect that the purchase of the facility or
the approval of a previous purchase of a facility would have on the
grantee's meeting of the non-Federal share requirement of section
640(b) of the Head Start Act, including whether the grantee is seeking
a waiver of its non-Federal share obligation under that section of the
Act.
(j) Certification by a licensed engineer that the building is
structurally sound and safe for use as a Head Start facility. If
renovations are necessary to make the facility suitable for use to
carry out a Head Start program, the application must include a
certification by a licensed engineer as to the cost and technical
appropriateness of the proposed renovation.
(k) A statement of the effect that the purchase of a facility or
the approval of a purchase of a facility would have on the grantee's
ability to meet the limitation on development and administrative costs
of section 644(b) of the Head Start Act. One-time fees and expenses
necessary to the purchase, such as the down payment, the cost of
necessary renovation, and fees paid to attorneys, engineers, and
appraisers, are not subject to the limitation on administrative costs.
(l) A proposed schedule for acquisition, renovation and occupancy
of the facility.
(m) Reasonable assurances that the applicant will obtain or has
obtained, in the case of an application for the approval of a previous
purchase of a facility, a fee simple or such other estate or interest
in the site sufficient to assure undisturbed use and possession for the
purpose of operating the Head Start program for the useful life of the
facility. If the grantee proposes to purchase or has previously
purchased a facility without also purchasing the land on which the
facility is situated, the application must describe the easement, right
of way or land rental it will obtain or has obtained to allow it
sufficient access to the facility.
(n) An assessment of the impact of the proposed acquisition on the
human environment if it involves significant renovation or a
significant change in land use, including substantial increases in
traffic in the surrounding area due to the provision of Head Start
transportation services, pursuant to section 102(2)(C) of the National
Environmental Policy Act of 1969 (42 U.S.C. 4332(2)(C) and its
implementing regulations (40 CFR parts 1500-1508), and such information
as may be necessary to comply with the National Historic Preservation
Act of 1966 (16 U.S.C. 470f).
(o) Assurance that the grantee will comply with the requirements of
the Uniform Relocation Assistance and Real Property Acquisition
Policies Act of 1970, as amended (42 U.S.C. 4601 et seq. and 45 CFR
part 15), and information about the costs that may be incurred due to
compliance with this Act.
(p) A statement of the share of the cost of purchase that will be
paid with grant funds.
(q) For a grantee seeking approval of a previous purchase, a
statement of the extent to which it has attempted to comply and will be
able to comply with the provisions of Sec. 1309.21(e) of this part.
Sec. 1309.11 Cost comparison.
(a) A grantee proposing to purchase with grant funds or to receive
approval for a previous purchase of a facility must submit a detailed
estimate of the cost of the proposed facility and any necessary
renovations, or the cost of the previously purchased facility and any
necessary renovations, and must compare the cost of purchasing the
proposed facility or the cost of the previously purchased facility to
the cost of rental of an alternative facility.
(b) All costs of purchase and ownership must be identified,
including, but not limited to, professional fees, renovation costs,
moving expenses, additional transportation costs, maintenance, taxes,
insurance, and easements, rights of way or land rentals. An independent
appraisal of the current value of the facility proposed to be purchased
or previously purchased, made by a professional appraiser, must be
included.
(c) The comparison described in paragraph (a) of this section must
compare the cost of the proposed facility to the cost of the facility
currently used by the grantee (if one exists), except where it is shown
to the satisfaction of the responsible HHS official that the grantee's
existing facility is inadequate. If the grantee's current facility is
deemed to have been inadequate by the responsible HHS official, or if
the grantee has no current facility, or if the grantee intends to
continue to use its current facility after it purchases the new
facility, the alternative facility shall be a facility (or facilities)
of comparable size, suitable for use as a Head Start facility (or which
can be made suitable through renovation, the cost of which shall be
included in the cost comparison), available for rent in the grantee's
service area. In the case of an application for approval of the
previous purchase of a facility, the cost of the present facility must
be compared to the cost of the facility used by the grantee before
purchase of its current facility. If the facility used by the grantee
before the purchase of its present facility was deemed inadequate by
the responsible HHS official, or if the grantee had no previous
facility, of if the grantee continued to use its previous facility
after it purchased the current facility, the alternative facility shall
be an available, appropriate facility (or facilities) of comparable
size that was available for rent in the grantee's service area at the
time of its purchase of the current facility.
(d) The grantee must separately delineate the following expenses in
the application:
(1) One-time costs, including, but not limited to, the down
payment, professional fees, moving expenses, the cost of site
preparation and installation of a modular unit, and the costs of
necessary renovations; and
(2) Ongoing costs, including, but not limited to, mortgage
payments, insurance premiums, maintenance costs, and property taxes. If
the grantee is exempt from the payment of property taxes, this fact
must be stated.
(e) For proposed purchases and for approvals of previously
purchased facilities the period of the comparison is twenty years
except that for the purchase of a modular unit the period of comparison
is ten years. For a proposed purchase the period of comparison begins
on the date on which the proposal is made; for approvals of previous
purchases the period of comparison begins on the date the purchase of
the facility took place.
(f) If the facility is to be used for purposes in addition to the
operation of the Head Start program, charges for use of the part of the
facility used for such other purposes must be made by the grantee, in
accordance with the applicable Office of Management and Budget cost
principles.
Subpart C--Protection of Federal Interest
Sec. 1309.20 Title.
Title to facilities acquired with grant funds vests with the
grantee upon acquisition, subject to the provisions of this part.
Sec. 1309.21 Recording of Federal interest and other protection of
Federal interest.
(a) Immediately upon purchasing a facility with grant funds or
after receiving approval of a previous facility purchase, the grantee
shall record a Notice of Federal Interest in the appropriate official
records for the jurisdiction in which the facility is located. The
Notice shall include the following information:
(1) The date of the award of grant funds for the purchase of the
property to be used as a Head Start facility, and the address and legal
description of the property to be purchased;
(2) That the grant incorporated conditions which include
restriction on the use of the property and provide for a Federal
interest in the property;
(3) That the property may not be used for any purpose inconsistent
with that authorized by the Head Start Act and applicable regulations;
(4) That the property may not be mortgaged or used as collateral,
or sold otherwise transferred to another party, without the written
permission of the Secretary, DHHS (or employee who has the authority to
give this permission on behalf of DHHS);
(5) That these grant conditions and requirements cannot be altered
or nullified through a transfer of ownership; and
(6) The name (including signature) and title of the person who
completed the Notice for the grantee agency, and the date of the
Notice.
(b) Facilities acquired with grant funds may not be sold, leased,
conveyed, transferred, assigned, mortgaged or in any other manner
encumbered by the grantee except as expressly authorized in writing by
the responsible HHS official.
(c) Use of the facility during its useful life for other than the
purpose for which the facility was funded, without the express written
approval of the responsible HHS official, is prohibited.
(d) Modular units which are purchased with grant funds and which
are not permanently affixed to land, or which are affixed to land which
is not owned by the grantee, must have posted in a conspicuous place
the following notice: ``On (date), the Department of Health and Human
Services (DHHS) awarded (grant number) to (Name of grantee). The grant
provided Federal funds for conduct of a Head Start program, including
purchase of this modular unit. The grant incorporated conditions which
included restrictions on the use and disposition of this property, and
provided for a continuing Federal interest in the property.
Specifically, the property may not be used for any purpose other than
the purpose for which the facility was funded, without the express
written approval of the responsible DHHS official, or sold or
transferred to another party without the written permission of the
Secretary, DHHS (or employee who has the authority to give this
permission on behalf of DHHS). These conditions are in accordance with
the statutory provisions set forth in 42 United States Code, section
9839; the regulatory provisions set forth in 45 CFR, part 1309, 45 CFR
part 74 and 45 CFR part 92; and Administration for Children and
Families grants policy.''
(e) The grantee must provide the responsible HHS official with both
telephonic and written notification of a default of any description on
the part of the grantee under a real property or chattel mortgage. The
mortgage agreement or security agreement in the case of a modular unit
which is proposed to be purchased under a chattel mortgage, shall
specifically allow in the case of default that ACF or its designee may
assume the role of mortgagor or debtor and continue to make payments.
The mortgage agreement or security agreement shall further provide
that, in the case HHS (or its designee) chooses not to assume the role
of mortgagor or debtor in the case of default, the mortgagee or
creditor shall pay ACF an amount equal to the share of the sales
proceeds otherwise due the grantee (mortgagor or debtor) times the
Federal share of the property. Additionally, the agreement shall
provide that the mortgagee or creditor must notify ACF at least 30 days
prior to initiating foreclosure action. Any ACF assignment of the
facility and mortgage responsibilities to any party, other than ACF,
will be subject to prior approval of the mortgagee or creditor. A
grantee seeking approval of the use of grant funds to purchase a
previously acquired facility must attempt to comply, to the greatest
extent possible, with the requirements of this paragraph.
(f) Grantees must meet all of the requirements in 45 CFR parts 74
and 92 pertaining to the purchase and disposition of real property, or
the use and disposal of equipment, as appropriate.
Sec. 1309.22 Insurance, bonding, and maintenance.
(a) The grantee shall obtain the following forms of insurance at
the time of acquiring a facility or receiving approval for the previous
purchase of a facility:
(1) A title insurance policy which insures the fee interest in the
facility for an amount not less than the full appraised value as
approved by ACF, which contains an endorsement identifying ACF as a
loss payee that will reimburse ACF is the title fails; and
(2) An insurance policy which insures from risk of partial and
total physical destruction the full appraised value as approved by ACF.
The insurance policy is to be maintained for the period of time the
facility is owned by the grantee.
(b) The grantee shall submit copies of such insurance policies to
ACF within five days of acquiring the facility or receiving approval
for the previous purchase of a facility. If the grantee has not
received the policies in time to submit copies within this period, it
shall submit evidence that it has obtained the appropriate insurance
policies within five days of acquiring the facility or receiving
approval for the previous purchase of a facility, and it shall submit
copies of the policies within five days of its receipt of them.
(c) The grantee must maintain facilities acquired with grant funds
in a manner consistent with the purposes for which the funds were
provided and in compliance with State and local government property
standards and building codes for the useful life of the facility.
Subpart D--Modular Units
Sec. 1309.30 General.
In addition to the special requirements of Secs. 1309.31-1309.34 of
this part, the proposed purchase or request for approval of a previous
purchase of a modular unit is subject to all of the requirements of
this part with the following exceptions:
(a) Section 1309.10(j) of this part, regarding certification by a
licensed engineer, does not apply to the proposed purchase or requests
for approval of a previous purchase of modular units; and
(b) Section 1309.21(a) of this part does not apply to the proposal
or requests for approval of a previous purchase of modular units if the
land on which the unit is installed is not owned by the grantee.
Sec. 1309.31 Site description.
An application for the purchase or approval of a previous purchase
of a modular unit must state specifically where the modular unit will
be installed, and whether the land on which the modular unit will be
installed must be purchased by the grantee. If the grantee does not
propose to purchase land on which to install the modular unit or if the
previously purchased modular unit is located on land not owned by the
grantee, the application must state who owns the land on which the
modular unit is or will be situated and describe the easement, right-
of-way or land rental it will obtain or has obtained to allow it
sufficient access to the modular unit.
Sec. 1309.32 Statement of procurement procedure.
(a) An application for the purchase of a modular unit must include
a statement describing the procedures which will be used by the grantee
to purchase the modular unit.
(b) This statement must include a copy of the specifications for
the unit which is proposed to be purchased and assurance that the
grantee will comply with procurement procedures in 45 CFR parts 74 and
92, including assurance that all transactions will be conducted in a
manner to provide, to the maximum extent practical, open and free
competition. A grantee requesting approval of a previous purchase of a
modular unit also must include a copy of the specifications for its
unit.
Sec. 1309.33 Inspection.
Instead of the certification by a licensed engineer required by
Sec. 1309.10(j), a grantee which purchases a modular unit with grant
funds or receives approval of a previous purchase must have the modular
unit inspected by a licensed engineer within 15 calendar days of its
installation or approval of a previous purchase, and must submit to the
responsible HHS official the engineer's inspection report within 30
calendar days of the inspection.
Sec. 1309.34 Costs of installation of modular unit.
Consistent with the cost principles referred to in 45 CFR part 74
and 45 CFR part 92, all reasonable costs necessary to the installation
of a modular unit the purchase of which has been approved by the
responsible HHS official are payable with grant funds. Such costs
include, but are not limited to, payments for public utility hook-ups,
site surveys and soil investigations.
Subpart E--Other Administrative Provisions
Sec. 1309.40 Copies of documents.
Certified copies of the deed, loan instrument, mortgage, and any
other legal documents related to the purchase of the facility or to the
discharge of any debt secured by the facility must be submitted to the
responsible HHS official within ten days of their execution.
Sec. 1309.41 Record retention.
All records pertinent to the purchase of a facility must be
retained by the grantee for a period equal to the period of the
grantee's ownership of the facility plus three years.
Sec. 1309.42 Audit of mortgage; Five year appraisal.
Any audit of a grantee which has purchased a facility with grant
funds shall include an audit of any mortgage or encumbrance on the
facility. The audit must be supplemented by an independent appraisal of
the value of the facility at least once every five years. Reasonable
and necessary fees for this audit and appraisal are payable with grant
funds.
Sec. 1309.43 Use of grant funds to pay fees.
Consistent with the cost principles referred to in 45 CFR part 74
and 45 CFR part 92, reasonable fees and costs associated with and
necessary to the purchase of a facility (including reasonable and
necessary fees and costs incurred prior to the submission of an
application under Sec. 1309.10 of this part or prior to the purchase of
the facility) are payable with grant funds, but require prior, written
approval of the responsible HHS official.
Sec. 1309.44 Program income.
Income from the sale of equipment or real property purchased in
whole or in part with grant funds is subject to the provisions of 45
CFR parts 74 and 92 governing such income. All other program income
derived from a facility purchased with grant funds (including rent
referred to in Sec. 1309.11(f) of this part) must be deducted from the
total allowable costs of the budget period in which the income was
produced.
Sec. 1309.45 Independent analysis.
(a) The responsible HHS official may obtain an independent analysis
of the cost comparison submitted by the grantee pursuant to
Sec. 1309.11 of this part, or the statement under Sec. 1309.10(g) of
this part, or both, if, in the judgment of the official, such an
analysis is necessary to adequately review a proposal submitted under
this Part.
(b) The analysis shall be made by a qualified real estate
professional in the community in which the property, proposed to be
purchased is situated, and shall be in writing.
(c) Section 1309.43 of this part applies to payment of the cost of
the analysis.
[FR Doc. 94-29555 Filed 11-30-94; 8:45 am]
BILLING CODE 4184-01-M
