Commercial District Revitalization Policies and Procedures

Revision History

1. Overview

1.1 Introduction

In response to the widespread damage caused by Hurricane Helene in September 2024, the U.S. Department of Housing and Urban Development (HUD) allocated $1,428,120,000 in Community Development Block Grant – Disaster Recovery (CDBG-DR) funding to the State of North Carolina (the State) as appropriated by Public Law 118-158. This allocation addresses unmet needs and promotes resilient recovery in counties designated as the Most Impacted and Distressed (MID) areas. To maximize the coordination of recovery and rebuilding efforts in municipalities throughout North Carolina affected by Hurricane Helene, the Governor directed that the North Carolina Department of Commerce – Division of Community Revitalization (DCR) be the lead agency. DCR was thus charged with overseeing the recovery effort across State agencies and with units of local government.

DCR outlined the use of these disaster recovery funds by creating a suite of recovery programs, published in the State’s Action Plan for Use of Community Development Block Grant Program Disaster Recovery funds which was submitted and approved by HUD. The Action Plan included creating programs to address the significant damage to commercial districts in the MID areas. To meet these recovery challenges, the State established the Commercial District Revitalization (CDR) Program to support economic opportunity and the recovery of commercial areas in HUD- and State-designated MID areas (Combined MID area). The CDR Program is a core component of the HUD-approved 2025 North Carolina Action Plan (“Action Plan”) for Disaster Recovery.

1.2 Program Overview

The CDR Program is a $111,140,000 initiative designed to restore jobs, commercial tenants, and customers in commercial areas affected by Hurricane Helene. By facilitating the return of commercial districts and businesses to profitability, jobs will be created or retained within the community and residents will continue to have access to the products and services they need within their local community. The program will support acquisition, demolition, site preparation, or rehabilitation of commercial structures carried out by a subrecipient; assistance to small businesses for rehabilitation and physical improvements to their places of business; mixed-use projects involving commercial revitalization and housing components; facade improvements to private or public structures in commercial areas; and more. Funding may be up to 100 percent of project costs, but application evaluation will consider whether a project leverages other funding sources. The most impacted commercial districts will receive priority. The CDR Program is not a direct grant program; No funds will be paid directly to businesses seeking rehabilitation of their physical structures. 

CDR activities must demonstrate a direct or indirect tie-back to the impacts of Hurricane Helene or be a mitigation activity funded through the mitigation set-aside. A tie-back refers to a clear and documented connection between the proposed activity and the impacts of the disaster, such as physical damage, economic damage, or vulnerability revealed or exacerbated by Hurricane Helene, however preference will be given to projects that are a response to physical damage. Mitigation activities are those that increase resilience to future disasters and reduce or eliminate the long-term risk of loss of life, injury, damage to and loss of property, and suffering and hardship. All Program activities must also meet a national objective as required by the CDBG-DR regulations at 24 CFR 570.483 and the 2025 Revised Universal Notice.

Eligible Activities include but are not limited to:

• Acquisition, demolition, site preparation, or rehabilitation of commercial structures carried out by a subrecipient;
• Assistance for small businesses for rehabilitation and physical improvements to their places of business; 
• Mixed-use projects involving commercial revitalization and housing components, only the commercial revitalization portion being covered by these funds; 
• Facade improvements to private or public structures in commercial areas; and
• Non-federal (local) match: Funds may be used to meet a matching, share, or contribution requirement for another federal program when used to carry out an eligible CDBG-DR activity. This includes programs or activities administered by FEMA or the U.S. Army Corps of Engineers (USACE).

1.3 Program Authority

The CDR Program is governed by:

• HUD’s 2025 Revised CDBG-DR Universal Notice;
• HUD Memorandum 25-02, issued March 19, 2025;
• The Housing and Community Development Act of 1974;
• The Disaster Relief Supplemental Appropriations Act, 2025 (Public Law 118-158, Division B, December 21, 2024); 
• 24 CFR Part 570, including Subpart I for state-administered CDBG programs;
• 2 CFR Part 200, Uniform Administrative Requirements;
• Robert T. Stafford Act provisions;
• Any future or amended HUD guidance;
• Applicable federal environmental, labor, nondiscrimination, and relocation regulations.

The North Carolina Department of Commerce (NCDOC) Division of Community Revitalization (DCR) is the designated and lead administrator for the CDR Program. DCR ensures compliance with all federal and state mandates and will manage program implementation, oversight, reporting, and monitoring.

1.4 Funding Structure

Most of the CDBG-DR appropriations under this program require funds to be used for necessary expenses related to disaster relief, long-term recovery, and commercial district rehabilitation or restoration in the most affected and distressed areas. Projects must be financially feasible and are encouraged to leverage other funding sources. DCR may revise the final amount of CDBG-DR funding awarded to any project based on funding availability, project feasibility, and alignment with program objectives. 

Local government subrecipients may design and implement grant programs funded with CDBG-DR funds for the purpose of supporting the recovery and revitalization of commercial districts affected by the declared disaster. Eligible program types may include façade improvement grants, commercial building rehabilitation, and other activities that contribute to the economic recovery of disaster-impacted commercial districts. All subrecipient-operated programs must comply with CDBG-DR requirements. Program guidelines must be submitted to DCR for approval prior to implementation. 

1.5 Purpose of Guide

This Program Guide serves as the authoritative manual for the implementation of the CDR Program. It is intended for use by subrecipients, contractors, and other program stakeholders.
Specifically, this Guide:

• Defines eligibility criteria for applicants and activities;
• Describes the application, evaluation, and award process;
• Outlines program funding limits;
• Establishes standards for statutory compliance;
• Ensures adherence to all applicable federal and state regulations, including the 2025 Revised CDBG-DR Universal Notice under which this allocation falls.

The contents of this Guide are subject to revision based on HUD guidance, amendments to North Carolina’s Action Plan, or programmatic updates or changes.

2. Program Administration

DCR will administer the CDR Program through direct implementation and contracted support services. Program activities must comply with the requirements set forth in:

• HUD’s 2025 Revised Universal Notice, published at 90 FR 1754 (January 8, 2025), and as amended by HUD Memorandum 25-02 (March 19, 2025),
• 24 CFR Part 570 
• 2 CFR Part 200 (to the extent applicable),
• The State’s HUD-approved CDBG-DR Action Plan for Helene funding.

2.1 Roles and Responsibilities

2.1.1 North Carolina Department of Commerce (NCDOC) Division of Community Revitalization (DCR)

• Serving as the program administrator and CDBG-DR fund manager;
• Issuing Notices of Funding Availability (NOFOs) and application materials;
• Overseeing application intake, eligibility determination, and award determinations;
• Conducting cost reasonableness reviews for each application determined responsive to a NOFO; 
• Executing necessary documents with selected subrecipients;
• Providing technical assistance throughout the application and construction process;
• Ensuring program compliance with all federal and state mandates and managing program implementation and oversight; and
• Reporting to HUD on program expenditures, milestones, and deliverable outcomes through the Disaster Recovery Grant Reporting (DRGR) system.

2.1.2 Subrecipients

• Submitting complete applications, including all required documentation;
• Complying with all program requirements and cross-cutting federal laws;
• Developing and implementing policies, procedures, and processes to deliver and maintain projects;
• Undertaking construction in accordance with approved plans, codes, and timelines;
• Ensuring timely contribution of any leveraged financial resources consistent with approved application;
• Providing all necessary invoice and cost information to DCR to enable timely draws of CDBG-DR funds to cover project expenses;
• Maintaining documentation of compliance and submitting required reports to DCR;
• If applicant is a non-profit organization, applicant must submit documentation of a partnership agreement with a unit of local government. This partnership agreement should detail roles and responsibilities of the Lead Applicant, Collaborating Entities, and community residents or community-selected representatives for implementing, managing, and overseeing the application’s project activities, including how regularly they will meet to discuss project implementation.

2.1.3 Third-Party Consultants / Contractors (if applicable)

• Supporting DCR with various tasks, including potentially environmental review and construction inspections;
• Providing application intake support or outreach under DCR direction;
• Assisting with financial or performance monitoring, as assigned by DCR.

3. Applicant and Project Eligibility

3.1 "Tie-back" to the Storm

CDR Program activities must demonstrate a direct or indirect tie-back to the impacts of Hurricane Helene or be a mitigation activity funded through the mitigation set-aside. A tie-back refers to a clear and documented connection between the proposed activity and the impacts of the disaster, such as physical damage or vulnerability revealed or exacerbated by Hurricane Helene. Tie-back must be established through methods such as damage assessments, insurance claims, Federal Emergency Management Agency (FEMA) data, or other verifiable evidence. Mitigation activities are those that increase resilience to future disasters and reduce or eliminate the long-term risk of loss of life, injury, damage to and loss of property, and suffering and hardship. 

3.2 Meeting a National Objective

All activities funded through funded through the CDR Program must meet a national objective as required by the CDBG-DR regulations at 24 CFR 570.483 and the 2025 Revised Universal Notice. For the CDR Program, DCR specifies that the Low- and Moderate-Income Jobs (LMJ) and Low- and Moderate-Income Area (LMA) objectives are the primary pathways for demonstrating eligibility, with Urgent Need (UN) and preventing or eliminating slums and blight (Slum/Blight) available as secondary pathways to eligibility. This is because DCR is required to spend at least 70% of the CDBG-DR funds for activities that meet a LMI national objective. 

An activity will be considered to address the objective of benefiting LMI persons if it meets one of the criteria in paragraph (b) of 24 CFR 570.483, unless there is substantial evidence to the contrary. The activities, when taken as a whole, must not benefit moderate-income persons to the exclusion of low-income persons. 

Income limits for CDBG-DR programs can be found on the HUD Exchange website. 

This section explains the national objectives applicable to the CDR Program and the applicability and documentation requirements tied to CDBG-DR funding under each.

3.2.1 Primary National Objectives – Low- and Moderate-Income Job Creation or Retention (LMJ) and Low- and Moderate-Income Area Benefit (LMA)

3.2.1.1 Low- and Moderate-Income Job Creation or Retention (LMJ)

Citation: 24 CFR 570.483(b)(4) 

To meet the LMJ objective, the following criteria must be met:

• For job creation, at least 51 percent of the jobs will be held by, or will be made available to low- and moderate-income persons; or 
• For job retention, the jobs would actually be lost without the CDBG-DR assistance and the job is known to be held by a low or moderate income person or the job can reasonably be expected to turn over within the following two years and that it will be filled by, or that steps will be taken to ensure that it is made available to, a low or moderate income person upon turnover. 
• There is no certain number of jobs that have to be created or retained, however, the number of jobs created or retained will factor into both scoring criteria and reasonableness in regard to overall project cost; Jobs must be permanent and full-time equivalent.  
• LMI status is based on wages or salary of the job below 80% LMI for a two-person family; HUD publishes LMI data and potential applicants should access LMI data on HUD’s website. As an example, per HUD data, in Burke County 80% LMI for a 2-person family is $49,700; therefore, if wages of a job are $49,000 whoever takes the job is considered LMI and that job is qualified.  

Required Documentation:

• For job creation, track and report all jobs created, collecting job title, wage/salary information, and full/part-time status; this information will be collected at the time of application, and at close out.
• For job retention, document either that the job is currently held by an LMI person, or that the job is not tied to a specific person but will be made available to LMI applicants in the future, ensuring hiring practices support this prioritization. Jobs will be considered to be available to low and moderate income persons for these purposes only if special skills that can only be acquired with substantial training or work experience or education beyond high school are not a prerequisite to fill such jobs, or the business agrees to hire unqualified persons and provide training; or the unit of general local government and the assisted business take actions to ensure that low and moderate income persons receive first consideration for filling such jobs.
• Wage data is self-certified by the employer and subrecipients must collect payroll journal, registers, or pay stubs to support job creation and retention 
• This information will be collected at the time of application and verified during close-out. 

3.2.1.2 Low- and Moderate-Income Area Benefit (LMA)

Citation: 24 CFR 570.483(b)(1) 

To meet the LMA objective, the following criteria must be met:

• An activity, the benefits of which are available to all the residents in a particular area, where at least 51 percent of the residents are LMI persons.

Required Documentation:

• Map(s) showing the boundaries of the service area; and
• Narrative justification describing why the service area is reasonable given the activity and how the activity will benefit all residents within the area.

3.2.2 Alternative National Objectives – Urgent Need (UN) and Slum/Blight

3.2.2.1 Urgent Need

Citation: 24 CFR 570.483(d) 

The UN national objective may be used only after an applicant first attempts to meet an LMJ or LMA national objectives:

• The project directly addresses a documented disaster-related impact due to Hurricane Helene;
• LMJ or LMA is not feasible or practical based on project location, population served, or other demonstrated conditions; and
• The project can be said to alleviate conditions that pose a serious and immediate threat to the health and welfare of the community.
• Per the Universal Notice, use of the Urgent Need national objective is allowable for 36 months after the AAN, which is January 16, 2028.

Required Documentation:

• Written justification of the urgent need tied to Hurricane Helene’s impacts;
• Document how each program and/or activity funded under the Urgent Need national objective responds to the urgency, type, scale, and location of the disaster-related impact as described in the North Carolina Unmet Needs assessment contained in the State Action plan;
• Certification that the condition poses a serious and immediate threat;
• Documentation that no other financial resources are available.

Per HUD’s 2025 Revised CDBG-DR Universal Notice, the alternative UN national objective is in effect for a period of 36 months following the applicability date of the Allocation Announcement Notice. After 36 months, DCR is required to follow the criteria established in 42 U.S.C. § 5304(b)(3) and its implementing regulations in 24 CFR part 570 when using the UN national objective.

3.2.2.2 Slum/Blight

Citation: 24 CFR 570.483(c)

The aid in the prevention or elimination of slum or blight (Slum/Blight) national objective may be used only after an applicant first attempts to meet an LMJ or LMA national objectives:

• The project directly addresses a documented disaster-related impact due to Hurricane Helene;
• LMJ or LMA is not feasible or practical based on project location, population served, or other demonstrated conditions; and
• The project activity addresses conditions of slum/blight and not just general community development.

Slum/Blight can be defined on a Spot Basis, on an Area Basis, or with regard to Urban Renewal:    

• Spot Basis: A project meets the national objective of preventing or eliminating slums and blight on a spot basis when it addresses conditions of blight or physical decay on a single property or a limited number of properties not located within a designated slum or blighted area. 
• Area Basis: A project meets the national objective of preventing or eliminating slums and blight on an area basis when the activity is carried out in a designated area that meets HUD’s definition of a slum, blighted, deteriorated, or deteriorating area under state or local law.
• Urban Renewal: An urban renewal area refers to a defined geographic area designated by a local government for redevelopment, rehabilitation, or conservation activities intended to reverse physical, social, or economic decline.

Required Documentation:

• 24 CFR 570.483(c)(1) Area basis: 
  • Official designation, under state or local law, of the slum/blight area;
  • Boundaries of the area;
  • Descriptions of the specific physical conditions present and supporting data;
  • Evidence the activity will address one or more of the deteriorated conditions.
• 24 CFR 570.483(c)(2) Spot basis:
  • Location and description of the structure(s) or site(s);
  • Evidence of blight/deterioration;
  • Evidence the activity will directly eliminate those conditions.
• 24 CFR 570.483(c)(3) Urban renewal area basis: 
  • Evidence the activity is in an area with an approved Urban Renewal Plan; and
  • Reference to the specific plan and confirmation the activity is consistent with it. 

Projects seeking to use UN or Slum/Blight instead of LMJ or LMA may receive a lower priority during evaluation unless they address a critical gap in recovery.
Projects that fail to meet any of the above national objectives are not eligible for CDR Program funding. CDBG-DR regulations state that a project is not considered as meeting a national objective until the project is complete. DCR monitors each project through the completion and closeout phase to ensure that the national objective is met.

3.2.3 Public Benefit Standards

CDBG Public Benefit Standards are waived in the UN, however, DCR will collect the following information from subrecipients to report to HUD:

• Creation and retention of total jobs; 
• The number of jobs created and the salary ranges; 
• The average amount of assistance provided per job, by activity or program; and 
• The types of jobs.

3.3 Eligible Entities    

DCR will accept applications for the CDR Program from all eligible applicants. The following list are examples of those entities eligible to apply for CDR funding:

• Units of local government;
• Non-profits primarily engaged in community revitalization activities that applies in partnership with a unit of local government.

Applicant Requirements:

• Must be located in or serving a HUD- or state-identified MID area;
• A non-profit organization must have an IRS determination letter, articles of incorporation, and an active SAM.gov registration; 
• A non-profit organization must have a signed partnership agreement or Memorandum of Understanding with a local government prior to execution of the subrecipient agreement with DCR; and
• Must not be debarred, suspended, or otherwise excluded from participation in federal programs.

3.4 Eligible Properties and Sites

To qualify for assistance under the CDR Program, properties and sites must generally be located in a MID area as defined by HUD or the State of North Carolina. As outlined in HUD’s 2025 Revised Universal Notice, at least 80% of funding awarded to the State must be spent to benefit the HUD-identified MID areas, with up to 20% permitted to benefit the State-identified MID areas. 

3.4.1 Eligible Combined MID areas

HUD-Identified MID Areas: 

• Full Counties: Ashe, Avery, Buncombe, Burke, Haywood, Henderson, McDowell, Mitchell, Rutherford, Transylvania, Watauga, Yancey 
• Full Counties Based on HUD-Identified zip code: Caldwell (zip code 28645); Cleveland (zip code 28150); Madison (zip code 28753); Polk (zip code 28782) 
• Partial Counties Based on HUD-Identified zip code: Mecklenburg (zip code 28214) 

State-Identified MID Areas:

• Full Counties: Alexander, Alleghany, Catawba, Clay, Gaston, Jackson, Lincoln, Macon, Surry, Swain, Wilkes, Yadkin

3.4.2 Commercial District Criteria

Sites must be suitable for commercial development and meet environmental, legal, and zoning requirements prior to funding award or project initiation. Specifically:

• Zoning and Land Use: Zoning is not required; However, if an area is zoned, it must be zoned for commercial use or demonstrate a clear path to rezoning approval within 90 days of award; a clear path can be demonstrated through formal documentation of intent, process, and feasibility. 
• Environmental Review: All sites are subject to environmental review under 24 CFR Part 58. 
• A commercial district is a geographically identifiable area within a community that contains a concentration of commercial activity and functions as an economic driver for a community. This may include retail stores, service providers, restaurants, offices, markets, or other businesses that primarily serve the public or facilitate local economic activity. The designation of a commercial district does not require specific zoning classifications but must demonstrate a predominant economic or commercial function based on land use or business activity. 
• To promote equitable economic recovery and local entrepreneurship, eligible commercial districts must demonstrate that the majority of existing or planned businesses are small or locally owned. Projects that primarily benefit large national or regional chains, or franchise operations, are not eligible for funding.
  • Priority will be given to districts that:
    • Support locally owned, independent, or family-run enterprises;
    • Encourage the development or retention of microenterprises or small businesses;
    • Contribute to the vitality of downtowns, main streets, or community-serving corridors; and
    • Demonstrate community-driven planning or investment to sustain local business activity.
• The NOFO and/or application will outline required documentation. 

Examples may include:

• Downtowns, historic districts, and main streets;
• Areas that function as a commercial corridor, regardless of number of businesses;
• Areas designed, organized, and promoted as a commercial district.

3.4.3 Additional Site Considerations

• Displacement and Relocation: If the project involves acquisition or redevelopment of an occupied property, applicants must comply with the Uniform Relocation Assistance and Real Property Acquisition Act (URA) and provide appropriate relocation benefits that comply with DCR’s URA and Residential Anti-displacement and Relocation Assistance Plan (RARAP) policies.
• Historic Preservation: Projects that involve historic structures must comply with Section 106 of the National Historic Preservation Act and coordinate with the State Historic Preservation Office (SHPO) as necessary.
• Proximity Considerations: Preference may be given to sites located near public infrastructure, community services, and employment centers.

3.5 Eligible Activities 

For a detailed overview of the eligible activity requirements for CDBG-DR, please refer to 24 CFR 570 – Community Development Block Grants Subpart C – Eligible Activities. CDR Program activities primarily use the HUD-eligible activities listed below, subject to approval by DCR; however, DCR reserves the right to use other eligible activities as necessary for recovery projects:

• §5305(a)(1) – Acquisition 
• §5305(a)(2) – Acquisition, Construction, Reconstruction, and Installation of Public Facilities and Other Site Improvements 
• §5305(a)(3) – Code Enforcement 
• §5305(a)(4) – Clearance, Rehabilitation, Reconstruction and Construction of Buildings, including housing 
• §5305(a)(5) – Removal of Architectural Barriers 
• §5305(a)(7) – Disposition 
• §5305(a)(9) – Non-Federal Match 
• §5305(a)(11) – Relocation Payments 
• §5305(a)(13) – Administrative Costs 
• §5305(a)(14) – Assistance to Non-Profit Entities 
• §5305(a)(15) – Assistance to Neighborhood-Based Organizations 
• §5305(a)(17) – Assistance to For-Profit Entities 
• §5305(a)(25) – Tornado Shelters 
• §5305(a)(26) – Lead-Based Paint Hazard Evaluation and Reduction

All activities must meet a CDBG-DR national objective, as outlined above in National Objective Compliance: LMJ or LMA, Urgent Need, or Slum/Blight. 

3.6 Mitigation Requirement

All CDR projects funded under this program must incorporate measures that reduce future disaster risk and promote long-term resilience of the commercial corridor. Such mitigation measures and strategies to reduce natural hazard risks must be integrated into the construction, reconstruction, or rehabilitation of residential or non-residential buildings.

Such measures can include but are not limited to:

• Elevation of structures, equipment, or utilities above base flood elevation;
• Dry or wet floodproofing of structures;
• Relocation of critical equipment above flood levels;
• Installation of permeable pavements; and
• Integration of green infrastructure into sidewalks, plazas, and parking areas.

CDBG-DR investments will be designed and constructed to withstand chronic stress and extreme weather events by identifying and implementing resilience performance measures.

3.7 Costs Guidance

Program funds may be used to cover the costs associated with the costs associated with the revitalization of commercial districts, provided those costs meet the standard of being necessary and reasonable and comply with all applicable federal cost principles outlined in 2 CFR Part 200, Subpart E. All expenditures must be clearly related to eligible activities under the CDBG-DR program and will be verified to ensure they are both necessary and aligned with program objectives. These include:

• Acquisition costs of land or buildings (if applicable);
• Hard construction costs, including materials and labor;
• Soft costs, including design, engineering, permitting and legal fees;
• Environmental review and mitigation expenses;
• Cost as permitted by the NOFO and cost reasonableness standards.

Funding for any approved project will be capped in accordance with the limitations expressed in the Action Plan and may be evaluated consistently with industry standards for project size and type. All costs are subject to duplication of benefits analysis (per the Revised Universal Notice) and reviewed for cost reasonableness.

Activity delivery costs (ADCs) must be tied to the time staff and contractors dedicated to a specific project. Applicants must show how the proposed ADCs are or will be cost reasonable through procurement of professional services and/or cost of in-house staff to provide program or project related services. All ADCs must be included as part of the total project costs in a request for CDBG-DR funding. Please include a cost reasonable estimate for all administrative ADCs associated with the proposed project.  

For additional information, see Section 7.1 Allowable Costs.

3.8 Ineligible Activities

Unless clearly related to eligible activities and costs described above, all other activities and associated costs are deemed ineligible for CDR Program funding. Ineligible activities are defined in 24 CFR 570.207. These include, but are not limited to: 

• Choice limiting actions incurred prior to environmental clearance (likely disqualifying the project for eligibility) such as land acquisition, construction bidding, site clearance, and other construction related activities;
• Luxury improvements not essential to health and safety (e.g., high-end amenities, etc.);
• Routine costs of government operations;
• Political, lobbying, or legal fees unrelated to program delivery.

DCR reserves the right to make the final determination on cost eligibility based on federal regulations and program policy.

3.9 Timely Expenditure of Funds

CDBG-DR funds must be obligated and expended within six years of the date funds are obligated, unless a waiver is granted by HUD.

3.10 Order of Assistance and Duplication of Benefits (DOB) Review

DCR has instituted a variety of checks to ensure that CDBG-DR funds are used only as the recovery funding source of last resort. CDBG-DR funds may not typically be used for activities reimbursable by or for which funds are made available by other Federal disaster recovery programs, including FEMA and U.S. Army Corps of Engineers (USACE). This means that DCR must verify whether FEMA or USACE funds are available for an activity or the costs are reimbursable by FEMA or USACE before awarding CDBG-DR assistance for costs of carrying out the same activity. If FEMA or USACE are accepting applications for the activity, the applicant must seek assistance from those sources before receiving CDBG-DR assistance. If the applicant’s costs for the activity will be reimbursed by FEMA or USACE, DCR cannot provide CDBG-DR assistance for those same costs. In the event that FEMA or USACE assistance is awarded after CDBG-DR to pay the same costs, DCR must recapture any duplicative assistance. 

The program follows the steps below to ensure the Order of Assistance requirement is met.

1. Review of State and local priorities.
2. Recommendation of appropriate funding source(s) by CDR staff to Program Manager. Possible funding sources are considered in the following order:
   • FEMA PA Program: The PA Program aids State, Tribal and local governments, and certain types of private nonprofit organizations to help communities quickly respond to and recover from major disasters or emergencies.
   • FEMA HMGP: HMGP provides grants to States and local governments to implement long- term hazard mitigation measures after a major disaster declaration.
   • FEMA Community Disaster Loan Program (CDL): FEMA CDL supports local governments or other eligible jurisdictions in a designated disaster area that have demonstrated a substantial tax loss and a need for financial assistance to perform their governmental functions.
   • USACE: USACE works with Federal, State and local partners to reduce risk to lives, property and the environment, and to strengthen community resilience.
   • Other relevant disaster recovery funding sources, including State funds.
3. Confirmation of funding source(s) available by CDR Program Grants Manager.
4. Development of appropriate project information forms or assisting potential recipients and with project information form development as applicable.
5. Coordination with federal funding agencies prior to DCR CDR Program approval and commitment of CDBG-DR funds.

CDR Program applicants must show that CDBG-DR funds will not duplicate other funding already received for the same purpose. A duplication of benefits happens when money from different sources is used for the same cost, and the total exceeds what is needed. This doesn’t just apply to disaster recovery programs like FEMA or USACE—it also includes insurance payouts, tax credits, HUD programs like HOME or HTF, USDA loans, state or local grants, and even philanthropic funding if they cover the same construction or rehab expenses. Applicants must disclose all assistance, provide documentation (such as award letters, loan statements, or insurance claims), and sign a certification. If overlapping funds are found, the award will be reduced, or repayment may be required later. Failure to disclose or the misrepresentation of information can result in denial of funding, repayment, or further investigation. 

For additional information, see DCR’s DOB Policy.

3.10.1 Offsetting Awards and Monitoring

If duplicative funds are received after the CDR Program award is made, the applicant must:

• Report the funds to DCR within 15 calendar days of receipt, either through the online system or by email to the designated program contact;
• Have the award amount adjusted downward accordingly, to reflect the reduced unmet need; or
• Return the duplicative amount to DCR, which will reprogram the funds to other eligible recovery activities.

This requirement is enforced through a signed Subrogation Agreement and DOB Certification, which bind the applicant to disclose any additional assistance received for the same scope of work throughout the period of performance. All duplicative funding received must be remitted to or accounted for, regardless of when the applicant received it.

Failure to disclose additional assistance may result in:

• Recapture of part or all of the CDBG-DR award;
• Suspension or termination of the funding agreement;
• Referral to oversight or investigative authorities in cases of suspected fraud or willful nondisclosure. 

DCR will monitor projects for DOB compliance throughout the program lifecycle. This includes:

• Periodic file reviews during implementation to detect any newly disclosed or previously unreported sources of assistance;
• Cross-checking data against FEMA, SBA, insurance, and other federal/state/local sources to verify compliance;
• Follow-up communication with applicants when potential duplications arise. 

3.11 Site Control and Readiness Requirements 

Applicants must demonstrate that the proposed project site is suitable for commercial development and ready for timely implementation. The following requirements must be met:

3.11.1 Site Control

Applicants must have legal control of the development site at the time of application. Acceptable forms of site control include but are not limited to:

• Fee simple ownership;
• An executed purchase agreement or option contract that remains valid for at least 90 days beyond the application deadline;
• Long-term lease or easement; 
• Right of way documentation;
• An executed agreement with a business owner to complete façade improvements.  

3.11.2 Zoning and Land Use

The site must be:

• If the jurisdiction is subject to zoning, properly zoned for commercial use, or 
• Capable of being rezoned within 90 days of award. Documentation must demonstrate a reasonable path to approval.
• Lack of zoning in a jurisdiction does not render a project ineligible. 

3.11.3 Infrastructure Readiness

Site must have or plan for access to:

• Water and wastewater services;
• Electricity and other utilities necessary for occupancy;
• Public roadways or easements sufficient for site access.

If off-site infrastructure improvements are necessary, applicants must:

• Identify responsible parties and sources of funding, and 
• Demonstrate that improvements will not delay project start or completion.

3.11.4 Environmental Review & Reevaluation 

All sites must undergo environmental review under 24 CFR Part 58. Sites located in floodways, airport runway approach zones, or other unsuitable zones may be ineligible if not subject to various regulatory exceptions or appropriate mitigation is feasible. DCR, the Responsible Entity, must also assess:

• Site topography and soil conditions;
• Hazardous materials and contamination concerns;
• Compatibility with surrounding land uses;
• Whether any prohibited “Choice-Limiting Actions” occurred before environmental clearance.

Common Choice-Limiting Actions include:

• Acquisition of real property;
• Executing binding leases or long-term options;
• Site preparation or ground disturbance;
• Construction, rehabilitation, or demolition activities; and 
• Disbursement of funds or financial commitments tied to development.

Any Choice-Limiting Actions taken before completion of environmental clearance may result in:

• Project disqualification;
• Ineligibility of all pre-agreement costs for reimbursement;
• Potential cancellation of project funding.

Any change to the project scope needs to be cleared through DCR environmental so DCR can be sure to incorporate anything necessary in the review.

DCR will verify compliance through application documentation and environmental review records. It is the subrecipients’ responsibility to comply with any and all mitigations noted in the environmental review. Failure to follow mitigations can result in recapture of federal funding and the prohibition of any new funds. 

3.11.5 Additional Site Readiness Considerations

Relocation Requirements: If the site is occupied by households or businesses at the time of application, the applicant must comply with the Uniform Relocation Assistance and Real Property Acquisition Policies Act (URA).

Historic Preservation: Sites involving historic properties must comply with Section 106 of the National Historic Preservation Act and consult with the SHPO, if required.

4. Application Process

Prior to the application submission cycle opening, a pre-screening form will be made available. This pre-screening form is not a required step and is meant to help DCR assess unmet need and to assist potential applicants in understanding whether certain projects are likely to meet the threshold requirements; this process will remain open and can also be utilized after the application window opens. It is the intent of DCR that the submission of the application will federalize the project for which an applicant is applying, after which it will be subject to all applicable federal cross-cutting requirements. Once a project is federalized, the applicant may not undertake any choice-limiting actions, including acquisition, demolition, construction, or rehabilitation, until the required environmental review has been completed. The applicant must also comply with all applicable federal procurement requirements, labor standards, and nondiscrimination, relocation, and accessibility requirements. DCR recommends consulting with CDR Program staff prior to submitting a formal application.

4.1 Notice of Funding Opportunity (NOFO)

DCR will implement the CDR Program through the release of a Notice of Funding Opportunity (NOFO). DCR will release a public notice announcing the program and funds available, and a request for applications through the following platforms:

• Social media
• Website
• Press release to local news sources
• Other public channels

The NOFO will establish all relevant application parameters, including:

• Available funding for the round;
• Eligible applicants and activities;
• Application instructions and deadlines;
• Threshold requirements and award limits;
• Program priorities; and 
• Evaluation and scoring methodology.

DCR will use a scoring-based application review to ensure awards are made to projects that demonstrate the greatest potential to support long-term recovery and resilience in disaster-affected areas. 

While all eligible projects may apply under the initial NOFO, the CDR Program will prioritize projects that are located in HUD-identified Most Impacted and Distressed (MID) areas. Targeting CDBG-DR funding to these areas will support recovery and ensure resources are directed to communities with demonstrated need and high potential for impact.

4.1.1 Technical Assistance

DCR will conduct information sessions as needed to provide an overview of the program and the application and scoring process. DCR will remain available to answer questions and potential applicants will have an opportunity to discuss issues specific to their project throughout the application process.

4.1.2 Future Funding Rounds

A NOFO will initiate the opening of a program funding opportunity. DCR may release multiple NOFOs at its discretion, based on:

• Remaining funding availability;
• The result of ongoing unmet needs assessment;
• Geographic or market coverage gaps; and
• The overall volume and readiness of submitted projects. 

Any subsequent NOFO will clearly articulate updated goals, timelines, and selection criteria based on emerging recovery priorities. 

4.2 Competitive Application Process

Applications will be evaluated through a competitive scoring process guided by the CDBG-DR Action Plan, and DCR’s recovery objectives. Scoring criteria will be fully detailed in the NOFO and are expected to include:

• Applicant capacity;
• Community need;
• Soundness of development approach;
• Leverage of other resources; and
• Projected outcomes and long-term results.

Projects will be scored and ranked by total score. Awards will be given to the highest-ranking projects, subject to threshold compliance, readiness, and availability of funds.

4.2.1 Steps

1. Issuance of NOFO.
2. Submission of Applications: Applicants submit optional pre-screening and/or full application packages electronically via the platform designated in the NOFO.
3. Threshold Review: DCR will review applications to determine if they meet minimum threshold criteria. Applications that fail any threshold item will not proceed to scoring.
4. Scoring and Ranking: Eligible applications that pass threshold review will be evaluated and ranked based on published scoring criteria, including capacity, need, soundness of approach, leverage, and impact.
5. Environmental Review and Grant Execution: DCR will complete environmental reviews in accordance with 24 CFR Part 58 and execute grant agreements with selected applicants. 

4.2.2 Application Submission Requirements

Applicants must submit a complete application package by the application deadline established by the NOFO. Required materials may include:

• Completed Application Form – All required fields must be completed.
• All supporting materials as identified by the NOFO.
• Project Narrative – Including tie-back to Hurricane Helene (detailed and documented description of damage) and alignment with program goals.
• Budget & Sources/Uses – Preliminary estimates with identified or anticipated funding sources.
• Preliminary Engineering reports, Site Plan and Design, or other schematics (if available) 
• Organizational Experience and Capacity with federal grants – Narrative and resumes of key staff, as well as plan to partner with a third party to augment staff capacity, if applicable.
• Project Schedule – Milestones from acquisition through completion.
• Zoning Documentation – Proof of current commercial zoning or path to approval, if applicable.
• Site Control Documentation – Deed, long-term lease, purchase option, etc.
• Environmental and Risk Information – Known conditions, FEMA flood zones, and potential hazards.

The NOFO will contain the full list of requirements and acceptable documentation. 

4.2.3 Additional Notes

The full application package must be submitted by the deadline established in the NOFO. Late or incomplete submissions will be considered non-responsive. However, DCR reserves the right to request minor clarifications or administrative corrections from applicants, provided such updates do not materially affect eligibility or scoring.

4.3 Threshold Criteria

Applications must meet all threshold criteria below to advance to scoring:

1. Eligible Applicant
   • Units of local government; 
   • Non-profit organizations.
2. Eligible Project Location
   • Must be located within the Combined MID area as defined in the HUD-approved Action Plan.
3. Disaster Tie-Back & Unmet Need
   • Project must address an unmet need tied to damage caused by Hurricane Helene
4. Project must include mitigation measures
5. Project must meet a National Objective, as outlined above.
6. Project must be financially viable and include a preliminary budget and financing plan that demonstrates feasibility and that the project is consistent with cost standards;
7. Project must be an eligible activity; and
8. Complete and Timely Submission
   • Application and all required documentation must be submitted in full by the NOFO deadline.

Applications that fail to meet the threshold criteria shall be disqualified and shall receive a disqualification letter/email sent to the point of contact listed in the application.

4.4 Scoring Criteria

Applications that successfully meet all threshold criteria will be evaluated and scored based on objective criteria outlined in the NOFO. Scoring will be used to rank applications and determine awards based on project impact, readiness, cost reasonableness and leveraging of other financial sources, feasibility, and alignment with program goals and recovery priorities. 

The HUD-approved Action Plan established the competitive framework for this program, identifying the high-level criteria that would guide competitive funding decisions. This P&P builds upon the framework by defining each competitive framework criterion in greater detail and specifying how points will be assigned to each framework. 

Each of the five major scoring factors will be assigned a weighted percentage, with a one-to-one correlation between percentage points and scoring points (e.g., 1% = 1 point). Subfactors within each major factor will be assigned point values that align with the weighted factor. Applicants will receive points based on their performance against these subfactors. Detailed scoring breakdowns, including specific weights, subcategories, and descriptions, will be published in each NOFO.

Scoring may be awarded at varying levels – “full points,” “partial points,” or “no points” – based on the extent to which an application meets each criterion. The NOFO will include a matrix that clearly explains what is required to achieve each level within the scoring range. In the event of a scoring tie, projects that have a higher LMI or are located within HUD designated MID areas will be considered first.

4.4.1 Capacity of the Applicant (10 percent/10 points)

This criterion evaluates the qualifications, experience, and organizational infrastructure of the applicant. Applicants must demonstrate the skill and experience necessary for implementing the proposed services and performing all grant functions, including financial management and compliance. This includes, but is not limited to:

• Experience with federally-funded programs;
• Financial and staff capacity to oversee the project, compliance, and reporting;
• Demonstrated ability to deliver projects on time and within budget.

Strong capacity ensures that the project can be executed efficiently, within budget, and in compliance with all applicable regulations. The augmented capacity third-party partners bring to a project to support the applicant will be considered so long as a plan for support is included in the application. Non-profit applicant’s capacity will be comprehensively assessed, and more information will be available in the NOFO evaluation criteria. 

4.4.2 Community Need for Commercial Area Investment (20 percent/20 points)

This factor measures the degree to which the proposed project responds to a critical unmet need in the area affected by Hurricane Helene. This includes, but is not limited to:

• Extent to which the commercial area sustained direct physical damage or functional damage due to Hurricane Helene;
• Degree to which the commercial area was economically distressed pre-disaster and is at risk of further decline without investment;
• The project’s alignment with recovery priorities outlined in the NOFO;
• Location in a HUD-identified MID area;
• LMI demographic need;
• Feedback from community engagement.

The NOFO will include examples of documentation types.

4.4.3 Soundness of Approach (40 percent/40 points)

This is the highest-weighted scoring category and assesses the overall viability and completeness of the proposed project. It includes, but is not limited to:

• A clear, feasible project timeline with key milestones, indicating project preparedness;
• Site readiness, including zoning, and infrastructure access;
• Project design that meets applicable building and resilience standards and incorporates hazard mitigation or resilient design;
• Realistic cost estimates supported by industry-standard tools or contractor estimates; and
• A strong plan for construction management and oversight.

This criterion also considers the degree to which the project can be executed without major delays or funding gaps.

4.4.4 Leverage of Other Resources (20 percent/20 points)

This criterion evaluates the extent to which the applicant brings non-CDBG-DR funds to the project. Leverage demonstrates financial commitment and enhances the efficiency of public investment.

Leverage sources may include, but are not limited to:

• Philanthropic or local government contributions;
• In-kind contributions; and
• Other public funds.

Projects that minimize reliance on CDBG-DR funds will be prioritized. 

4.4.5 Achieving Results (10 percent/10 points)

This category assesses the anticipated outcomes and long-term benefits of the project, include, but not limited to:

• The number of jobs created or retained;
• Impact of the project in expanding permanent employment opportunities for LMI persons;
• The project’s ability to promote commercial district revitalization and stability; and
• Number of businesses helped.

4.4.6 Bonus or Priority Considerations

In the event of a scoring tie, DCR may prioritize applications based on readiness to proceed or geographic distribution. Relatedly, DCR may adjust project selection in competitive rounds to achieve various goals with the highest priority being given to achieving the overall requirement of expending at least 80 percent of CDBG-DR grant funds in the HUD-identified MID areas. Additional priority may be given to projects that, among other factors:

• Are located in geographic areas underrepresented in earlier funding rounds;
• Include enhanced accessibility features or supportive services for persons with disabilities or elderly residents;
• Align with broader state or local housing and recovery strategies; or
• Demonstrate innovation in financing, design, or partnerships.

These and other factors, including their potential weight, may be set forth in individual NOFOs. 

4.5 Award and Funding Caps

The maximum award per project is $10,000,000, subject to review and adjustments based on the project’s specific scope, cost reasonableness, and alignment with program priorities.

Each award will be at the discretion of DCR and will be determined based on the following project criteria:

• Scope of work (SOW);
• Cost reasonableness, including comparison to industry benchmarks and regional pricing data;
• Duplication of Benefits (DOB) analysis;
• Geographic and market considerations; and
• Availability of funds within the applicable NOFO round.

On a case-by-case basis, DCR may authorize awards that exceed the standard cap if the project when necessary to comply with federal accessibility standards or to reasonably accommodate a person with disabilities. All awards must be cost reasonable and applications will be subject to a standard cost estimation.

All applications will be subject to a standardized cost estimation, which may include:

• Per-unit or per-square-foot cost benchmarking;
• Review of preliminary engineering report containing costs;
• Third-party cost reasonableness analysis; and
• Review of construction bids or contractor estimates.

This approach ensures that funding is distributed efficiently across projects, with safeguards in place to control costs while addressing the commercial district needs of impacted areas.

4.6 Additional Review Components

4.6.1 Duplication of Benefits (DOB) Review

All projects will undergo a DOB analysis consistent with HUD requirements to ensure that CDBG-DR funds do not duplicate assistance from FEMA, SBA, private insurance, or other sources. Applicants must disclose all prior disaster recovery funding received. DCR will apply its DOB guidance to adjust awards as needed. 

For additional information, see DCR’s DOB Policy.

4.6.2 Geographic Distribution Consideration

DCR may adjust project selection in competitive rounds to achieve various goals with the highest priority being given to achieving the overall requirement of expending at least 80 percent of CDBG-DR grant funds in the HUD-identified MID area.  A secondary consideration will be achieving a geographic balance across the Combined MID counties.

4.6.3 Environmental Review Coordination

Projects selected for funding are subject to an environmental review under 24 CFR Part 58. Environmental conditions identified (e.g., location in floodplain, wetlands, or historic properties) may affect project timing, scope, or eligibility.

4.6.4 Resubmission Protocol

If a project is determined to be noncompetitive or incomplete during the initial threshold review, but the deficiencies are determined by DCR to be minor and correctable (e.g., incomplete documentation, minor inconsistencies in budget or market data, or clarifications to sources and uses), the applicant will be provided a written notice of deficiencies and offered a debrief.

Applicants will be permitted to resubmit corrected materials within a defined timeframe (e.g., 15 calendar days) from the date of the deficiency notification.

Resubmissions will not be permitted for applications that fail to meet threshold eligibility criteria or demonstrate critical feasibility issues (e.g., site control, cost reasonableness, zoning compliance).

Note: Participation in the resubmission process does not guarantee funding.

4.7 Project Selection

Projects that rank highest under the scoring framework will be selected for award, subject to funding availability and geographic distribution considerations.

4.8 Debriefing 

The purpose of the debriefing is to provide applicants with a clear understanding of the evaluation outcome, including identification of any threshold deficiencies, scoring results, or compliance issues that impacted their funding determination. Debriefing sessions will be scheduled upon written request from the applicant within 10 calendar days of receiving notice of denial, disqualification, or non-selection. DCR will make reasonable efforts to provide the debriefing within 15 calendar days of the request. 

If a project is determined to be noncompetitive or incomplete during the initial threshold review, but the deficiencies are determined by DCR to be minor and correctable (e.g., incomplete documentation, minor inconsistencies in budget or market data, or clarifications to sources and uses), the applicant will be provided a written notice of deficiencies and offered a debrief. See also Section 4.6.4 Reevaluation or Resubmission Protocol.

During the debriefing, DCR staff will review the basis of the decision and respond to applicant questions regarding the evaluation process. However, debriefings will not include comparisons with other applications or disclosure of proprietary or confidential information. Completion of a debriefing is a prerequisite for initiating the formal appeals process. Applicants who wish to pursue an appeal must participate in a debriefing session before submitting an appeal request.

Note: Participation in the debriefing process or resubmission process does not guarantee funding approval.

4.9 Appeals Process

Applicants whose CDR Program applications are denied, disqualified, or not selected for funding may submit a formal appeal to DCR via email at DCR.Appeals@commerce.nc.gov. Appeals will only be accepted under specific circumstances and must adhere to the procedures and deadlines established by DCR.

4.9.1 Grounds for Appeal

Appeals may be submitted only for the following reasons:

1. Threshold Determination Error - The applicant believes that its application met all threshold criteria, and the determination of ineligibility was made in error.
2. Scoring Miscalculation - In competitive rounds, the applicant believes there was a mathematical or procedural error in the scoring of its application.
3. Procedural Irregularity - The applicant believes its application was not processed or evaluated in accordance with the procedures and requirements outlined in the NOFO or program guidelines.
4. Duplication of Benefits Error - The applicant believes that DCR incorrectly determined that a duplication of benefits occurred or that DCR made a mathematical miscalculation error.
5. Recapture - The applicant believes there was a mathematical miscalculation error in the amount sought by DCR to be recaptured; the basis for or propriety of the recapture is not a valid ground for appeal.

Note: Appeals will not be accepted solely on the basis of disagreement with evaluative judgments or scoring unless the appeal includes evidence of mathematical or procedural error. An applicant cannot appeal Program policies, federal regulations, or state statutes. Appeals filed based on these reasons will be denied.

4.9.2 Appeal Submission Requirements

To timely appeal, within 30 calendar days of receiving a written notice of denial or disqualification, applicants must electronically submit (via email) a written appeal which, at a minimum, includes each of the following:

• A statement identifying the specific grounds for the appeal;
• Supporting documentation demonstrating the alleged error; and
• A copy of the denial or disqualification notice received from DCR.

If any of these items are missing, or the grounds for the appeal may not be reasonably ascertained, DCR may, in its sole discretion, deny the appeal on that basis.  

NOTE: The 30-day period in which to appeal is determined by calendar days, meaning that if the last day in which to timely appeal falls on a weekend or holiday, the time in which to take appeal is not tolled until the next business day. All written appeals must be submitted to DCR.Appeals@commerce.nc.gov (unless another email address is identified in the NOFO specific to the application). All appeals must be submitted by 11:59:59 p.m. on the last day of the appeal period. Service and receipt of the written notice of denial or disqualification will be deemed to have occurred on the date the email was electronically sent by DCR to the contact email provided by the applicant in its application; the submission of the appeal will be deemed to have occurred at the time the appeal was electronically sent by the applicant directed to the proper email address for appeal.

Appeals that are not timely are deemed denied and will not be substantively reviewed. DCR may, in its sole discretion, mistakenly or intentionally choose to substantively review an untimely appeal. Exercise of this discretion in one or many other cases is not grounds for waiver of an untimeliness determination in another. 

An appeal may be withdrawn by the applicant at any time by way of its electronically submitting a written statement indicating the same. Appeals that are withdrawn may not be resubmitted unless the original time period in which to appeal has not lapsed. Withdrawal and resubmission does not toll the time in which to take timely appeal.

4.9.3 Appeal Review and Determination

DCR will acknowledge receipt of the appeal and will conduct a review within 30 calendar days. During the review process, DCR may:

• Re-examine the application file;
• Review scoring records or procedural documentation; or
• Request clarifying information from the applicant.

Following the review, DCR will issue a written determination and deliver it to applicant via the contact email provided by the applicant in its application. The failure of DCR to acknowledge receipt of the appeal or to issue its determination within 30 days is not grounds for further appeal or the basis for a successful appeal determination.   

All appeal determinations made by DCR are final with no further administrative review and are not subject to judicial review. If the appeal is upheld, DCR may reinstate the application for further consideration or scoring. If the appeal is denied, no further review will be conducted.

5. Subrecipient Selection and Award

This section outlines the procedures and responsibilities governing the implementation of projects under the CI Program and is intended to guide subrecipients through key steps from pre-development through construction and completion.

5.1 Funding Agreement Execution

Upon successful completion of risk assessment, the applicant will receive a funding agreement for execution. This agreement serves as the binding legal contract and outlines all terms and conditions associated with the CDR award.

The funding agreement will include:

• The total amount of the award;
• The scope of work and budget;
• Construction timeline and key performance milestones;
• Federal and state compliance requirements (e.g., NEPA, Davis-Bacon, Section 3, URA, etc.);
• Provisions governing the use of CDBG-DR funds in coordination with other funding sources;
• Recordkeeping and reporting responsibilities; and
• Enforcement and recapture provisions.

No reimbursement or disbursement of CDBG-DR funds may occur until the funding agreement is fully executed and an Authorization to Use Grant Funds (AUGF) from the environmental review is received from HUD. DCR will provide guidance and templates to assist project sponsors in understanding their responsibilities under the agreement.

5.2 Pre-Construction Readiness Review

Before construction can begin, each funded project must undergo a Pre-Construction Readiness Review conducted by DCR or its designee. The purpose of this review is to confirm that the project is prepared to proceed and that all conditions precedent to construction have been met.

As part of the review, subrecipients must submit or verify:

• Finalized and approved construction plans and specifications;
• Confirmation of site control and zoning approvals;
• If applicable, procurement documentation for contractors and vendors in compliance with 2 CFR 200 that also includes value engineering and additions/alternatives;
• Proof of insurance, bonding, and required permits; and
• Completion of environmental clearance under 24 CFR Part 58.

5.3 Construction Timeline and Milestones

Each project must adhere to a construction schedule defined in the funding agreement. This schedule will include key milestones that must be met to maintain project compliance and progress, including:

• Construction start date;
• Completion of site grading and foundations;
• Mechanical, electrical, and plumbing (MEP) installation;
• Final inspection and Certificate of Occupancy; and
• Completion of lease-up activities and unit occupancy.

Subrecipients must report progress toward these milestones to DCR on a regular basis, which at a minimum would include required quarterly status updates. Any deviation from the approved timeline must be reported in writing with an explanation and proposed corrective actions. DCR reserves the right to impose corrective actions and other remedies if performance milestones are not met, if the project becomes noncompliant with program requirements, or if risk considerations are identified.

5.4 Change Orders and Scope Modifications

After execution of the funding agreement, any change to the project scope, timeline, or budget must be submitted to DCR for review and prior written approval. This includes:

• Construction cost increases or reallocation of line items;
• Modifications to unit mix, number of assisted units, or LMI targeting;
• Schedule extensions or contractor changes; and
• Changes that impact environmental clearance or federal cross-cutting compliance.

Subrecipients must submit a formal Change Order Request that includes a narrative justification, revised project documents (e.g., budget, schedule), and any supporting documentation required. DCR will review proposed changes to ensure continued compliance with program guidelines, cost reasonableness, and unmet needs objectives. Unauthorized changes may result in disallowed costs, corrective action, or termination of the grant.

5.5 Debarment and Suspension Policy

Subrecipients are responsible for ensuring that all contractors, subcontractors, consultants, and vendors engaged in the project are eligible to participate in federally funded programs. Prior to contract execution, the project sponsor must verify each entity’s status using the federal System for Award Management (SAM.gov) and document the results.

If an entity is found to be suspended, debarred, or otherwise ineligible, the project sponsor must exclude them from the project and immediately notify DCR. Failure to conduct this verification or engaging with a debarred entity may result in the loss or recapture of funds, audit findings, or additional enforcement action.

Subrecipients must maintain records of all SAM.gov checks and include this documentation in the project file for monitoring and audit purposes.

5.6 Property Standards, Resilience, and Environmental Health

CDR Program-funded projects must meet federal, state, and local property standards that ensure safety, resilience, long-term habitability, and environmental quality. These requirements apply to all new construction and substantial rehabilitation activities and are grounded in HUD’s 2025 Revised Universal Notice and HUD Memorandum 2025-02, issued March 19, 2025. 

5.6.1 Construction Standards

All CDR-funded projects must be constructed using modern, high-quality, and durable materials appropriate to the building’s scale and use. Projects must support long-term performance, structural integrity, and occupant safety. Construction must comply with applicable codes and be executed by licensed professionals. Where required, construction plans must be certified by an architect or engineer.

5.6.2 Resilience Requirements

Projects located in flood- or wind-prone areas must integrate resilience measures into the building design and site planning.

• Flood-Prone Areas (Special Flood Hazard Areas): Projects located in FEMA-designated Special Flood Hazard Areas (SFHAs) must elevate the lowest occupied floor at least two (2) feet above Base Flood Elevation (BFE). All critical building systems must also be located above BFE. Materials used below the lowest occupied floor must be flood-resistant.
• Wind-Prone Areas: Projects in wind-prone areas must include wind-resistant design measures that follow applicable FEMA guidance and local building code requirements for wind safety.

Compliance with these requirements must be documented during design review. DCR will not approve final construction without confirmation that these standards are met. 

5.6.3 Building Code Requirements

Projects must comply with the following building code and property standards:

• HUD Minimum Property Standards (24 CFR §§ 200.925–200.926);
• North Carolina State Building Code, including the International Building Code (IBC), International Residential Code (IRC), and International Energy Conservation Code (IECC);
• Local building, zoning, and permitting requirements.

When federal, state, and local codes differ, the most stringent standard will apply. All applicable permits, inspections, and approvals must be secured prior to and during construction. DCR will monitor compliance at multiple project stages.

5.6.4 Sustainable and Energy-Efficient Design Considerations

While HUD no longer mandates a specific green building certification, the CDR Program encourages sustainable design and energy efficiency. These features can reduce utility costs, improve resilience, and extend the useful life of the structure.

Projects funded through programs like LIHTC or USDA Rural Development must comply with the energy standards of those programs. In cases of overlapping requirements, the most stringent standard applies unless waived by DCR.

Applicants are encouraged to submit design documentation demonstrating sustainable features at application and provide certifications, if applicable, prior to project closeout. 

5.7 Accessibility Standards

CDR-funded projects must comply with all applicable federal accessibility laws to ensure that individuals with disabilities have equal access to housing opportunities, including:

• Section 504 of the Rehabilitation Act of 1973 (24 CFR Part 8);
• Americans with Disabilities Act (ADA), Titles II and III;
• Fair Housing Act design and construction requirements (24 CFR Part 100, Subpart D); and
• Uniform Federal Accessibility Standards (UFAS) or 2010 ADA Standards, depending on the funding source and occupancy.

5.7.1 Common Area and Site Access

All shared spaces must be accessible, including leasing offices, mailrooms, and community spaces. Sites must include accessible parking, routes between buildings, and vertical access in multistory buildings when required.

5.8 Environmental Hazards

To protect occupant health, all environmental hazards must be identified and addressed prior to construction or occupancy. These requirements apply to both new construction and rehabilitation projects.

5.8.1 Lead-Based Paint (LBP)

Projects involving buildings constructed before 1978 must comply with the HUD Lead Safe Housing Rule (24 CFR Part 35). Requirements include:

• Evaluation by a certified professional (e.g., visual inspection, risk assessment);
• Hazard reduction (interim controls or abatement);
• Clearance testing after remediation; and
• Use of EPA-certified firms and Lead Safe Work Practices

5.8.2 Asbestos and Mold

If asbestos-containing materials are present, removal or encapsulation must follow standards set by the Occupational Safety and Health Administration (OSHA), the U.S. Environmental Protection Agency (EPA), and the North Carolina Department of Environmental Quality (NC DEQ) standards. Mold remediation must address both the contamination and the source of moisture and ensure that the unit meets HUD’s decent, safe, and sanitary housing standard.

5.8.3 Radon and Indoor Air Quality

Radon testing is required in EPA-designated high-risk areas. If elevated levels are found, mitigation systems must be installed before occupancy. Applicants must also avoid materials known to emit toxic chemicals (e.g., high-VOC adhesives, paints, or flooring).

5.8.4 Other Site Hazards

Environmental review under 24 CFR Part 58 will assess:

• Contaminated soils or groundwater
• Proximity to hazardous sites or infrastructure
• Flood and erosion risks
• Noise and vibration hazards
• Environmental justice concerns

DCR may determine that a site is ineligible if environmental hazards cannot be mitigated to an acceptable level.

5.8.5 Documentation and Oversight

Applicants must submit all required documentation related to environmental hazards, including evaluations, mitigation plans, and clearance reports. DCR will verify compliance throughout the review and implementation process. Projects that fail to meet these requirements may be deemed ineligible or subject to funding recovery.

6. Federal and State Requirements

All CDR Program-funded activities must comply with all applicable federal and State laws, rules, regulations, and policies governing nondiscrimination, accessibility, labor standards, environmental protections, relocation, and privacy. DCR is responsible for ensuring compliance and monitoring implementation across all projects. This section provides a summary of the significant cross-cutting requirements for CDR Program activities and is not meant to be comprehensive. To the extent this summary conflicts with, or is ambiguous or incomplete, applicable federal and State law controls. 

6.1 Civil Rights Compliance

All program activities must comply with all applicable federal civil rights and fair housing requirements, including:

• Title VI of the Civil Rights Act of 1964
• Fair Housing Act (42 U.S.C. §§ 3601–3620)
• Section 504 of the Rehabilitation Act of 1973
• Title II and III of the Americans with Disabilities Act (ADA)
• Section 109 of the Housing and Community Development Act of 1974
• HUD’s implementing regulations at 24 CFR Parts 8, 100, and 91

Among other things, these provisions preclude exclusion from participation in, or denial of the benefits of, the CDR Program and discrimination based upon race, color, religion, sex, disability, familial status, age, or national origin. 

6.2 Americans with Disabilities Act (ADA) 

The Americans with Disabilities Act of 1990 (ADA) prohibits discrimination and ensures equal opportunity for persons with disabilities in employment, State and local government services, public accommodations, commercial facilities, and transportation. DCR takes affirmative steps to ensure that people with disabilities have equal access to the programs offered by DCR, and that any services are delivered in the most integrated manner possible. DCR also ensures that reasonable modifications or changes to policies, practices, or procedures are made in order to guarantee people with disabilities equal access to services and programs.

CDR Program projects must be designed, constructed, or rehabilitated in full compliance with applicable federal accessibility standards. These include Section 504 of the Rehabilitation Act and HUD’s Uniform Federal Accessibility Standards (UFAS), the 2010 Americans with Disabilities Act (ADA) Standards for common areas and public accommodations, and the Fair Housing Act (FHA) design and construction requirements for covered multifamily dwellings consisting of four or more units first occupied after March 13, 1991.

6.3 Section 504 Accessibility and Compliance 

Section 504 of the Rehabilitation Act and HUD’s implementing regulations at 24 CFR Part 8 are triggered by the receipt of federal financial assistance. The entire project is covered by Section 504 because of this receipt of federal funding. This includes, for example, reasonable accommodation requirements, effective communication obligations, and ensuring program accessibility for individuals with disabilities.

6.4 Limited English Proficiency Access

To comply with federal and State law, all CDR Program activities must ensure meaningful access to program information and services for individuals with limited English proficiency (LEP). 

6.5 Davis-Bacon and Related Acts

As required by Section 110 of the Housing and Community Development Act, and as outlined in HUD Handbook 1344.1 Rev 3, Federal Labor Standards Requirements in HUD Programs, project sponsors are responsible for ensuring compliance with the requirements of the Davis-Bacon Act (DBA), as well as with the Copeland Anti-Kickback Act, the Contract Work Hours and Safety Standards Act (CWHSSA) and the Fair Labor Standards Act (FLSA), collectively referred to herein as Davis-Bacon and Related Acts (DBRA). For projects funded through the CDR Program, the requirements of DBRA apply to contractors and subcontractors carrying out federally funded or federally assisted contracts in excess of $2,000 for the construction, alteration, or repair of public buildings or public works or for the construction work of a residential property consisting of 8 or more units. In some cases, North Carolina Prevailing Wage Law is in effect. In these cases, the higher prevailing wage rate between the Federal and State requirements must be adhered to and made applicable. 

The “Anti-Kickback” provision of the Copeland Act (40 USC, Chapter 3, Section 276c and 18 USC, Part 1, Chapter 41, Section 874; and 29 CFR Part 3) requires that workers be paid weekly, that deductions from workers’ pay be permissible, and that contractors maintain and submit weekly payrolls. The U.S. Department of Labor describes the Copeland Act’s Anti-Kickback as prohibiting contractors and subcontractors performing work on covered contracts from in any way inducing an employee to give up any part of entitled compensation. The Copeland Act and implementing regulations also require contractors and subcontractors performing on covered contracts to pay their employees on a weekly basis and in cash or a negotiable instrument payable on demand and to submit weekly payroll reports.

Prime contractors and subcontractors on DBRA contracts in excess of $150,000, or related Act contracts in excess of $100,000, are also required, under the applicable provisions of CWHSSA (40 USC, Chapter 5, Sections 326- 332; and 29 CFR Part 4, 5, 6 and 8; 29 CFR Part 70 to 240), as amended, to pay laborers and mechanics, including guards and watchmen, at least one and one-half times their regular pay for all hours worked over 40 in a work week. Additionally, DCR must follow the reporting requirements per HUD and U.S. Department of Labor regulations. This requirement also extends to DCR subrecipients, recipients, and contractors.

DCR is required to monitor compliance and, as a result, may require subrecipients, recipients, or contractors to provide to it or its designee all necessary and supporting documentation for DCR to ensure compliance with DBRA and other labor law requirements, including conducting payroll checks and worker interviews prior to execution of funding agreements and throughout project completion. Any failure to cooperate or comply may result in corrective action, including repayment, de-obligation of funds, or other enforcement actions as determined by DCR.

6.6 Section 3 

Section 3 is a provision of the Housing and Urban Development Act of 1968 (Section 3) (implementing regulation at 24 CFR Part 75), that helps foster local economic development, neighborhood economic development, and individual self-sufficiency. Section 3 requires that economic opportunities generated by CDBG-DR funds be targeted toward Section 3 residents. Section 3 eligible residents are low- and very low-income persons, particularly those who live or reside in public or government assisted housing.

For CDR Program projects receiving more than $200,000 in CDBG-DR funds, Section 3 requires, to the greatest extent feasible, that contractors provide training and job and business opportunities to low-income residents, especially those in the project area. The goal is for 25% of total work hours to be done by Section 3 workers and 5% by targeted workers (such as public housing residents). Contractors must include Section 3 language in contracts, keep detailed hiring and labor records, and report to DCR. 

DCR is required to monitor Section 3 compliance and, as a result, may require subrecipients, recipients, or contractors to provide to it or its designee all necessary and supporting documentation for DCR to ensure the same. For those entities that receive more than $200,000 in HUD CDBG-DR assistance, and contractors that are awarded covered contracts that exceed $100,000, DCR requires that an approved Section 3 plan be in place before the project is awarded and approved. Any failure to cooperate or comply may result in corrective action, including repayment, de-obligation of funds, or other enforcement actions as determined by DCR. 

6.7 Minority- and/or Women-Owned Businesses

Minority-owned business enterprises (MBEs) must be at least 51 percent unconditionally and directly owned by one or more socially and economically disadvantaged individuals who are citizens of the United States (13 CFR Part 124). Women-owned business enterprises (WBEs) must be at least 51 percent owned and controlled by women who are U.S. citizens (13 CFR Part 127, Subpart B).

2 CFR 200.321 requires DCR to take all necessary steps to ensure that all subrecipients, contractors, or subcontractors funded in whole or in part with HUD CDBG-DR financial assistance ensure that contracts and other economic opportunities are directed to small businesses, M/WBEs, veteran-owned businesses, and labor surplus area firms when possible.

North Carolina ensures that public entities utilize M/WBEs through its Historically Underutilized Businesses (HUB) Program managed at the Division of Administration. As noted in the State’s Executive Order 25, Section 5 (EO 25), the HUB Program works to incorporate HUD’s programmatic requirements into contracting opportunities. Pursuant to EO 25, and as applicable, DCR, and through its subrecipients and contractors, must make best efforts to achieve an overall M/WBE participation goal of 10% of the entire contract.

6.8 Force Account Labor 

Force account occurs when a local government subrecipient decides to perform specific duties using its own employees or equipment to perform CDBG-DR project related work, as opposed to using a contractor or vendor to complete those services. Force account may be used for services including construction, inspection, administration, project delivery, engineering, or other professional services. For example, a locality may procure a contractor to replace storm-damaged sewer lines but may choose to make the necessary post-construction street repairs using force account labor and equipment. In order to use force account labor, subrecipients must demonstrate that they have the staff, experience, equipment, and capacity to perform the work and must request and receive prior approval from DCR. This may be documented by approval of a project budget that includes force account labor as a line item. When using local staff, the subrecipient must have written personnel and employment policies that address specifically prohibited discriminatory practices against federally protected classes. These policies must comply with all applicable federal and state statutes and regulations. 

Subrecipients that proceed without prior approval risk disallowance of all costs incurred. If eligible and properly documented, force account work may be reimbursable from the subrecipient’s project budget. Force account may also help subrecipients leverage funds to use for other expenditures for which the subrecipient lacks in-house capacity.

6.9 Residential Anti-Displacement

When applicable, DCR and its subrecipients shall make every effort to minimize displacement of families from their homes and/or neighborhood, according to its Residential Anti-displacement and Relocation Assistance Plan (RARAP).

6.10 Uniform Relocation Assistance and Real Property Acquisition Policies Act (URA) 

As a HUD-assisted program, the CDR Program is subject to the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970 (URA), as amended, 42 U.S.C. § 4601 et seq., Section 104(d) of the Housing and Community Development Act of 1992, as amended (HCDA), 42 U.S.C. § 5304(d), to the extent HUD has not waived or provided alternative requirements, and HUD’s implementing regulations including 49 CFR Part 24, 24 CFR Part 42, and 24 CFR Part 570, as applicable. These requirements apply to any acquisition, rehabilitation, or demolition of property funded in whole or in part with CDBG-DR funds that results in the temporary or permanent displacement of persons and businesses, as defined by 49 CFR Part 24.2, including tenants displaced due to rehabilitation, demolition, or acquisition or any physical or economic displacement associated with a federally assisted real estate project.

6.11 Environmental Review

All activities under the CDR Program are subject to environmental review in accordance with 24 CFR Part 58, the National Environmental Policy Act (NEPA), and other applicable federal and state environmental laws. The purpose of the environmental review process is to ensure that proposed projects do not negatively affect the environment (natural and human) and any identified environmental mitigation conditions are required to be met.

6.11.1 Responsible Entity

DCR is the Responsible Entity (RE) for environmental review under 24 CFR Part 58. In this role, DCR will:

• Complete all required environmental reviews;
• Publish and distribute public notices as required;
• Maintain the Environmental Review Record (ERR);
• Prepare as needed the Request for Release of Funds (RROF);
• Verify that no choice limiting actions have occurred prior to the Authorization to Use Grant Funds (AUGF) is received; and
• Ensure that projects do not proceed until environmental clearance is issued.

In limited cases, DCR may delegate certain environmental review responsibilities or adopt environmental reviews conducted by other authorized local governments or state agencies, where permitted under 24 CFR Part 58. Any such delegation will be documented through a written agreement (e.g., Memorandum of Understanding or Interagency Agreement) that clearly outlines roles and responsibilities. Regardless of delegation, DCR remains the Responsible Entity and retains ultimate responsibility for ensuring compliance with NEPA and all applicable federal and state environmental requirements. 

6.11.2 Timing and Restrictions on Commitment of Funds

In accordance with 24 CFR § 58.22, no commitment of CDBG-DR funds may occur, nor may any legally binding agreement for the purchase of property, or the commencement of physical work, including demolition, site clearing, or construction, be undertaken prior to DCR’s completion of the environmental review process and the issuance of a formal Notice to Proceed. The primary purpose of a notice to proceed (NTP) is to control the timing of construction activities and avoid initiation of construction without proper permits or authorization by the Program. Any activity undertaken prior to environmental clearance is considered a choice-limiting action and may render the project ineligible for CDBG-DR assistance.

6.11.3 Scope of Review

Depending on the nature and location of the project, the environmental review may examine a range of potential impacts. These include but are not limited to compliance with historic preservation laws, such as Section 106 of the National Historic Preservation Act; evaluation of floodplain and wetlands risks; noise and vibration hazards; and the presence of hazardous materials or contamination, including proximity to toxic or explosive sites and the suitability of soils.

The review may also consider land use compatibility, including zoning, siting, and conformance with local and regional plans, as well as the project’s impact on infrastructure and public services, such as water and sewer systems, stormwater drainage, transportation access, and emergency response capacity. In addition, reviewers will assess socioeconomic and demographic impacts, including the potential for displacement and compliance with environmental justice principles.

Finally, the environmental review may address impacts on natural resources and ecosystems, including air and noise quality, endangered species, and protected habitats. All reviews will be conducted in accordance with 24 CFR Part 58 and HUD environmental assessment guidance, including Form HUD-4128 where applicable.

Projects located in the FFRMS floodplain will require documentation of flood mitigation compliance per 24 CFR Part 55, and may require elevation, flood insurance, or alternative siting. Minimum flood insurance requirements are governed by applicable federal, state, local, and tribal laws and regulations related to both flood insurance and floodplain management and are set forth in HUD’s 2025 Revised Universal Notice at Section III.B.11.a.

6.11.4 Environmental Conditions for Approval

As a condition of receiving CDBG-DR assistance, project sponsors must cooperate fully with environmental review staff, provide all necessary project information, and comply with any mitigation or remediation measures identified through the environmental review process. Environmental clearance must be secured before the project undertakes any choice limiting actions. 

6.12 Protecting Sensitive and Personal Identifiable Information

CDR Program subrecipients, recipients, and contractors must protect any personal data—like Social Security numbers, income details, or disability status—when carrying out CDR Program activities. Access should be limited to authorized staff, records must be securely stored, and electronic files must be encrypted and password protected. Sensitive information should never be shared by unsecured email, and any breaches must be reported to DCR right away. Until the State issues its full policy, federal privacy laws and HUD guidance apply. 

6.13 Conflict of Interest (COI)

All parties involved in the CDR Program (e.g., DCR Staff, subrecipients, recipients, and contracted consultants, etc.) must comply with applicable state and federal conflict of interest requirements, including 2 CFR Parts 200.112, 200.318, and 200.319, and 24 CFR 570.489(h). Individuals or entities may not participate in the selection, award, or administration of any contract or activity supported by CDR Program funds if a real or apparent conflict of interest exists or potential conflicts have not been addressed administratively.

Each participant must disclose any financial or personal interest that could affect objectivity or result in personal gain. DCR will review all disclosures and determine whether a waiver is allowable under federal regulations. A Conflict of Interest Certification must be signed by applicable entities during application, contracting, or assignment of program roles, and must be updated as often as necessary to keep the information current and accurate. 

Failure to disclose or resolve conflicts of interest may result in disqualification, funding recapture, or other corrective action.

7. Financial Management and Disbursement

7.1 Allowable Costs

Costs charged to the CDR Program must be consistent with 2 CFR Part 200 (Cost Principles), the 2025 Revised Universal Notice, and HUD guidance on eligible infrastructure activities under Title I of the Housing and Community Development Act of 1974, as further defined in HUD Notice CPD-16-02 and 24 CFR § 570.201–204.

7.1.1 Pre-Award or Pre-Agreement Costs

Under the CDR Program, certain pre-award or pre-agreement costs incurred after the federal disaster declaration (September 28, 2024) may be eligible for reimbursement if they:

• Are directly tied to eligible project activities;
• Are necessary for project implementation; and
• Are documented at the time of application.

Examples include architectural design and environmental assessment. Applicants are required to document such costs and submit them for DCR review for eligibility and cost reasonableness. All pre-award or pre-agreement costs are incurred at the applicant’s own risk and may only be considered for reimbursement if the project:

• Is awarded;
• Completed environmental clearance;
• Enters into a fully executed grant agreement; and
• No prohibited “Choice-Limiting Actions” occur before environmental clearance.

7.1.2 Examples of Allowable Direct Costs

Acquisition of land and/or buildings (if not previously owned by the applicant)

• Environmental review costs (if not performed by DCR)
• Architectural and engineering services
• Demolition and site preparation
• Hard construction costs including:
  • Structural work,
  • Interior and exterior finishes,
  • Accessibility improvements,
• Mitigation measures (e.g., elevation, floodproofing)
• Utility and infrastructure connections
• Green building and energy efficiency improvements
• Builder profit and overhead (within program caps)
• Relocation costs, if applicable under the Uniform Relocation Act

7.1.3 Examples of Allowable Direct Soft Costs

The following costs may be allowable if directly tied to project development, properly budgeted, and approved in advance. These are direct costs and are not considered indirect or general administrative expenses (e.g., general overheard):

• Activity (or program) delivery costs, including administrative costs directly related to carrying out eligible activities;
• Market studies and appraisals;
• Construction management services;
• Legal and closing costs;
• Insurance and permit fees directly attributable to construction;
• Third-party inspections and certifications (e.g., lead/mold/asbestos/radon clearance, green building verification).

7.1.4 Activity Delivery Costs 

The activity (or program) delivery costs (ADCs) of subrecipients, which include administrative costs that are directly related to carrying out CDBG-DR eligible activities, see 24 CFR § 570.206, are allowable costs directly related to the implementation and administration of eligible activities under the CDR Program. These costs are distinct from indirect or general administrative costs and must be:

• Reasonable and allocable, as defined by 2 CFR § 200.404 and 405;
• Documented in accordance with 2 CFR § 200.302 (Financial management); and
• Consistent with HUD guidance in CPD Notices 2013-07 and 2023-06, which outline eligible activity delivery costs for CDBG-DR and Mitigation funds.

ADCs include, but are not limited to:

• Environmental review services;
• Construction inspections and progress monitoring;
• Administrative costs directly related to carrying out CDBG-DR eligible activities;
• Contractor technical assistance;
• Legal services related to program agreements;
• Application intake and documentation review.

ADCs may be charged to the individual project budget as appropriate. All such costs must be adequately documented and will be evaluated for cost reasonableness and compliance with 2 CFR Part 200 cost principles. Caps on ADCs may be included in individual NOFOs.

Beneficiaries (e.g., contractors, business owners, and homeowners) are not recipients or subrecipients (see 2 CFR 200.1 and 570.500(c)) and therefore cannot incur ADCs. 

7.2 Unallowable Costs

The indirect or general administrative expenses of subrecipients that are not directly related to carrying out CDBG-DR eligible activities, see 24 CFR § 570.206, i.e., those that are not ADCs, will not be reimbursed. Unallowable costs also include those prohibited under federal cost principles or those associated with activities deemed ineligible pursuant to 24 CFR § 570.207.

7.3 Procurement and Bidding 

Procurement under the CDR Program must comply with the most restrictive applicable Federal, State, or local requirements. CDR Program projects must follow federal procurement standards (2 CFR 200, Subpart D) to the extent applicable to state and local government grantees and their subrecipients, as well as all applicable state and local rules that ensure fair competition and reasonable costs. Local government subrecipients must have in place or adopt a procurement policy that complies with the requirements of 2 CFR 200.318-327. 

Designs must be prepared by licensed professionals, include backup bid options (adds and deducts), and go through value engineering to find cost savings. Projects must also meet resilience, energy, accessibility, and environmental requirements. Bids must be based on approved plans, fully documented, and awarded to qualified contractors who meet licensing, insurance, and labor compliance requirements. 

For additional information, see DCR’s Procurement and Bidding Policy.

7.4 Invoicing and Payment Requests

All requests for reimbursement or disbursement of CDR Program funds must follow an established invoicing and payment process administered by DCR. These requests must comply with applicable federal and DCR financial management regulations, including:

• 2 CFR § 200.302 (Financial management),
• 2 CFR § 200.305 (Federal payment),
• 24 CFR § 570.502 (Applicability of uniform administrative requirements),
• 2025 Revised CDBG-DR Universal Notice, Section V.C (Grant administration and financial management), and
• DCR’s Timely Expenditures of Grant Funds Policy.

7.4.1 General Requirements

• All CDR Program funds must be drawn on a reimbursement basis, unless otherwise authorized (e.g., relocation payments in accordance with 49 CFR Part 24).
• Payment requests may only be submitted after execution of the funding agreement and must correspond to the approved project budget, scope of work, and construction timeline.
• The timing and amount of disbursement must minimize the time between receipt and expenditure of funds in accordance with 2 CFR § 200.305(b).
• Expenditures must be supported by adequate documentation and demonstrate that costs are:
  • Allowable under 2 CFR Part 200, Subpart E,
  • Reasonable and allocable pursuant to 2 CFR § 200.404–200.405, and
  • Incurred for eligible activities under 24 CFR § 570.201–570.207.

7.4.2 Required Payment Request Package Components

Each payment request must include the following elements:

• Payment Summary Form provided by DCR;
• Itemized invoices from contractors, vendors, or service providers;
• Proof of incurred cost, such as canceled checks, executed contracts, or payment certifications;
• Documentation of work completed, such as progress photos, inspection reports, or architect’s certifications;
• Updated budget-to-actual expenditure tracking;
• Signed draw certification by the authorized applicant representative, affirming compliance with all applicable federal requirements.

DCR reserves the right to request additional documentation to support payment requests, in accordance with 2 CFR § 200.302(b)(3)–(7).

7.4.3 Review and Approval Process

Payment requests will be reviewed and approved, by program managers, using the following process:

1. Submission: Payment packages must be submitted electronically via DCR’s designated grants management system.
2. Review for Completeness: DCR will verify eligibility and compliance under the applicable program rules and 24 CFR § 570.502.
3. Clarifications or Corrections: If deficiencies are identified, the applicant will be notified and given an opportunity to revise and resubmit the package.
4. Approval and Disbursement: Once approved, funds will be disbursed in accordance with the draw schedule and 2 CFR § 200.305(b) requirements.

7.4.4 Retainage and Withholding

DCR may retain up to 10 percent of requested amounts until certain project milestones are met or until project closeout. Additional amounts may be withheld if:

• The request is incomplete or unsupported;
• Monitoring identifies unresolved findings (2 CFR § 200.339); or
• The project is out of compliance with grant terms or federal regulations.

7.5 Construction Payment Process

The Construction Payment Process under the CDR Program governs the disbursement of CDBG-DR funds tied specifically to construction-related costs. This process is designed to ensure timely payments to contractors while maintaining federal compliance, cost reasonableness, and appropriate documentation standards.

All construction payment requests must align with federal financial and grant management regulations, including:

• 2 CFR § 200.302 – Financial management;
• 2 CFR § 200.305 – Federal payment;
• 2 CFR § 200.317–200.327 – Procurement standards (if applicable);
• 24 CFR § 570.502 – Applicability of uniform administrative requirements;
• 24 CFR § 570.200(a)(5) – Cost principles.

7.5.1 Payment Timing and Frequency

Payment requests for construction activities must be submitted based on verified progress. The payment schedule should be established in coordination with DCR and should generally follow milestone-based or monthly intervals, depending on project size and scope.

No more than one payment request may be submitted per month unless a waiver is granted.

7.5.2 Required Documentation

Each construction payment request must include:

• Contractor pay application (e.g., AIA G702/G703 or equivalent);
• Supporting invoices for labor and materials;
• Updated construction budget and payment ledger;
• Evidence of work completed, such as:
  • Photos,
  • Third-party inspector signoffs,
  • Architect’s certification (if applicable);
• Lien waivers or conditional releases for previously reimbursed payments;
• Certified payrolls (if Davis-Bacon applies under 24 CFR § 570.603).

All documentation must be retained by the recipient in accordance with the most restrictive Federal, State or local requirements and made available to DCR or HUD upon request.

7.5.3 DCR Review and Oversight

Upon submission, DCR will:

1. Verify consistency with the approved construction budget and scope of work;
2. Confirm eligibility and reasonableness of costs;
3. Conduct site inspections, when necessary, to validate progress;
4. Review labor standards compliance, if applicable;
5. Issue payment authorization once all requirements are satisfied.

DCR reserves the right to delay or withhold payment approval if discrepancies, cost concerns, or documentation deficiencies arise (per 2 CFR § 200.339).

7.5.4 Retention and Final Payment

• A retainage of up to 10 percent may be held from each payment until substantial completion or closeout.
• Final construction payments must include:
  • Completion photos;
  • Final mechanic’s lien releases;
  • Final inspection report or punch list approval;
  • Final budget reconciliation.

Final disbursement will not occur until all program, environmental, and contractual conditions are met.

7.6 Program Income 

Program income activities must comply with the requirements set out in Section III.B.12 of HUD’s 2025 Revised Universal Notice, which applies to state or local government grantees, as well as all subrecipients of those grantees. For-profit and non-profit developers are not subject to these program income requirements.

Program income is generally defined as any gross income generated from the use of CDBG-DR funds. When program income is generated by an activity that is only partially assisted with CDBG-DR funds, the income shall be prorated to reflect the percentage of CDBG-DR funds used. 

All program income must be:

• Reported in the Disaster Recovery Grant Reporting (DRGR) system and recorded in internal financial records;
• Returned to DCR unless an alternative use or retention is expressly authorized in writing;
• Expended on eligible CDBG-DR activities prior to the drawdown of additional federal funds, in accordance with 24 CFR § 570.504.

DCR is responsible for the tracking, reporting, and management of all program income in compliance with HUD regulations and DRGR guidance.

Subrecipients that generate program income must:

• Promptly report program income and remit to DCR;
• Comply with all remittance and documentation requirements specified in their grant agreements;
• Ensure that all use of program income meets CDBG-DR eligibility standards and federal cost principles under 2 CFR Part 200.

Failure to comply with program income requirements may result in repayment, de-obligation of funds, or other enforcement actions as determined by DCR.

7.7 Financial Reporting and Audit 

All project sponsors of CDR Program funds must maintain financial records and reporting practices that ensure transparency, accountability, and compliance with federal grant requirements. These responsibilities are governed by:

• 2 CFR § 200.302 – Financial management;
• 2 CFR § 200.328–200.330 – Financial and other program reporting;
• 2 CFR Part 200, Subpart F – Audit requirements;
• 24 CFR § 570.502 – Applicability of uniform administrative requirements;
• Other State and local requirements.

7.7.1 Financial Reporting Requirements

CDR Program participants must submit financial reports to DCR as required in its funding agreements. Reports must include:

• Expenditure-to-budget comparisons;
• Line-item budget updates reflecting actual costs to date;
• Cash on hand balances, if any advance payments were made;
• Construction progress tied to financial payments.

Reporting frequency (typically quarterly or monthly) will be determined by DCR based on project size, risk level, and funding structure. Reports must be accurate, complete, and submitted on time, as required by 2 CFR § 200.328.

7.7.2 Annual Single Audit Requirement

Any non-Federal entity that expends $1,000,000 or more in total federal funds (all sources including CDBG-DR) during its fiscal year is subject to the Single Audit Act and must:

• Conduct an independent audit in accordance with 2 CFR § 200.501;
• Submit the audit to the Federal Audit Clearinghouse (FAC) within 30 calendar days of receipt of the auditor’s report or 9 months after the end of the fiscal year (whichever is earlier);
• Provide a copy of the audit or audit confirmation to DCR.

If the CDR Program project is part of a larger organizational audit, the project sponsor must ensure that the Schedule of Expenditures of Federal Awards (SEFA) clearly identifies CDBG-DR funds by CFDA/Assistance Listing Number 14.228.

Local governments and public authorities must adhere to N.C. Gen. Stat. § 159-34 and the requirements of the Local Government Commission (LGC). All non-state entities except contractors and local governments must follow the NC Administrative Code (NCAC) Chapter 09, Subchapter 03M, Section .0100 (09 NCAC 03M .0100), et seq. 

7.7.3 Corrective Action and Resolution

If the audit identifies material weaknesses, questioned costs, or noncompliance:

• The project sponsor must submit a Corrective Action Plan within 30 days;
• DCR will work with the entity to ensure timely resolution and monitor progress per 2 CFR § 200.511;
• Unresolved or repeated findings may result in suspension of payments, repayment of disallowed costs, or other remedies under 2 CFR § 200.339.

7.7.4 DCR Monitoring

In addition to external audit requirements, DCR will conduct periodic internal financial monitoring to:

• Review accounting practices;
• Assess payment documentation and disbursement controls;
• Confirm compliance with cost principles under 2 CFR Part 200, Subpart E;
• Ensure adherence to matching, leveraging, and DOB requirements.

8. Compliance and Monitoring

8.1 Performance Monitoring and Site Inspections

DCR or DCR’s representative will conduct performance monitoring and physical site inspections to verify that projects funded under the CDR Program are developed and operated in accordance with all applicable federal, state, and program-specific requirements.

This monitoring aligns with the requirements of:

• 2 CFR §§ 200.328-332 – Monitoring responsibilities;
• 24 CFR § 570.503(b) – Agreements with subrecipients;
• 2025 Revised Universal Notice.

8.1.1 Monitoring Objectives

• Ensure that project construction and operations meet program goals;
• Identify and address noncompliance or performance issues early;
• Verify the eligibility of costs and beneficiaries;
• Confirm that environmental, labor, accessibility, and other legal requirements are met.

8.1.2 Monitoring Schedule

Monitoring visits will occur based on a risk analysis conducted by DCR. The frequency and type of monitoring will depend on factors such as project complexity, prior compliance history, stage of development, and expenditure levels. Monitoring visits may include: 

• Pre-construction (to confirm site conditions and readiness);
• During construction (to review progress and compliance with Davis-Bacon, Section 3, and accessibility requirements); and
• At completion.

8.1.3 Onsite Inspections

DCR or its designee will conduct at least one onsite inspection. Additionally, for projects determined to require additional oversight, based on risk assessment and monitoring plan, DCR or its designee may conduct further onsite inspections. Findings will be documented in a Monitoring Report, which may include required corrective actions and deadlines for resolution. Failure to comply with the monitoring and inspection process or to resolve findings may result in suspension of payments or recapture of funds under 2 CFR § 200.339, as well as other remedial actions such as technical assistance mandates, increased oversight or reporting frequency, or suspension from future funding rounds.

8.2 Record Retention and Reporting

State law (09 NCAC 03M .0703) requires all program-related records to be retained for a minimum of 5 years from project closeout or until all audit exceptions have been resolved, whichever is longer. All records – including all books, accounts, records, reports, files, and other papers, or property pertaining to the administration, receipt and use of CDBG funds and necessary to facilitate such reviews and audits – must be accessible to DCR, representatives of HUD, the HUD Office of the Inspector General (OIG), and the General Accounting Office, and other oversight bodies upon request. Reports must be submitted regularly, and missing or incomplete records may trigger corrective actions or withheld payments. 

8.3 Fraud, Waste, and Abuse 

Grantees and subrecipients must ensure that CDR Program funds are spent properly and efficiently. As a result, each must have adequate policies and procedures in place to prevent fraud, waste, and abuse and to provide CDBG-DR beneficiaries with information to prevent, become aware of, and assist in reporting, the same, as set forth in Section II.A.1.d of HUD’s 2025 Revised Universal Notice. All grantees receiving funds for the first time shall attend and require subrecipients to attend fraud-related training provided by HUD Office of the Inspector General (OIG), when offered, to assist in the proper management of CDBG-DR grant funds.

In accordance with 2 CFR 200.113, grantees and subrecipients of CDBG-DR must promptly inform in writing the OIG and HUD when it has credible evidence of violations of federal criminal law involving fraud, bribery, or gratuities or a violation of the civil False Claims Act that could potentially affect the federal award at https://www.hudoig.gov/hotline/report-fraud (a subrecipient must also inform DCR of the same). All other instances of fraud, waste, and abuse should be referred to the HUD OIG Fraud Hotline (phone: 1-800-347-3735 or email: hotline@hudoig.gov).

Moreover, anyone can report suspected fraud, waste, or abuse to DCR, state agencies, HUD, or the U.S. Treasury. DCR supports compliance through training and oversight. 

For additional information, see DCR’s Fraud, Waste, and Abuse Policy.

8.4 Corrective Action and Risk-Based Monitoring

8.4.1 Risk-Based Monitoring Approach

In accordance with 2 CFR § 200.332(c), DCR will implement a risk-based monitoring strategy to assess the level and frequency of monitoring required for each CDR Program recipient.

Key risk factors include:

• Size of the award or subgrant;
• Complexity of the project (e.g., multi-phase developments, layered funding);
• Past performance, including timeliness and quality of reporting;
• Results of previous monitoring visits;
• Environmental review level; and
• Organizational capacity and staffing changes.

Based on this assessment, DCR will assign recipients to a low, moderate, or high-risk category.

8.4.2 Corrective Action Process

If noncompliance is identified through monitoring, DCR will issue a formal Notice of Finding or Concern, which outlines:

• The nature of the issue;
• The regulatory requirement violated;
• Required corrective actions;
• A deadline for resolution (typically 30–60 days).

In cases of serious or repeated noncompliance, DCR may:

• Impose payment holds or conditions;
• Require reimbursement of disallowed costs;
• Refer the issue for further review or enforcement.

Corrective actions must be documented and verified by DCR staff prior to closing the issue. Continued failure to resolve findings may result in suspension or termination of funding, consistent with 2 CFR § 200.339.

9. Closeout and Program Amendments 

In accordance with 2 CFR § 200.344 and the 2025 Revised Universal Notice, DCR will initiate closeout procedures once all construction work has been completed, all funds disbursed, and any performance or occupancy benchmarks have been met. Final reports, documentation, and certification of compliance will be required prior to grant closeout.

9.1 Project Completion and Closeout Checklist

Once a project funded through the CDR Program reaches physical completion and final disbursement of funds, DCR will initiate the closeout process. This involves verifying that all program requirements have been met and that no outstanding obligations remain.

Subrecipients must submit at a minimum Project Closeout Package, which includes:

• Final budget and expenditure report;
• Final inspection report;
• Certification of compliance with Davis-Bacon, Section 3, and Section 504 (if applicable);
• Environmental clearance or mitigation documentation (as required);
• Documentation of final draw;
• List of completed activities and proof of completion; 
• National Objective documentation; 
• Duplication of benefits verification.

DCR will conduct a closeout review and issue a formal closeout letter, documenting that all funds were used appropriately and that the project has complied.

9.2 Program Amendments and Policy Revisions

DCR may amend the CDR Program’s policies, procedures, or implementation strategy in response to evolving recovery needs, regulatory changes, public feedback, or HUD direction. Amendments may involve adjustments to funding allocations, program priorities, compliance requirements, or eligibility criteria.

Any substantial amendment to the CDR Program will be made consistent with the provisions of the Action Plan and subject to HUD’s substantial amendment requirements, as defined in the 2025 Revised Universal Notice. DCR will also issue updated program documents, policies, or NOFOs as necessary to communicate changes to stakeholders and applicants.

Subrecipients and contractors will be required to comply with the most current program guidance, unless otherwise specified in their executed funding agreements.

9.3 Revisions to Program Scope or Budget 

Any changes to the scope, budget, or timeline of an awarded CDR Program project must be reviewed and approved by DCR in writing prior to implementation.

Examples of project-level amendments include:

• Changes to location, ownership entity, or design specifications;
• Material changes to project financing, including leveraged sources ;
• Budget revisions involving reallocation across major line items (e.g., soft costs to hard costs), including any revision that results in a cumulative change of 10 percent or more of the total project budget, will require a written amendment and prior approval by DCR; and
• Requests for extensions to construction timelines.

Project sponsors must submit a written amendment request with justification, revised project documents, and any applicable third-party approvals. DCR will evaluate whether the change:

• Remains compliant with the project’s original purpose and federal eligibility;
• Does not result in a duplication of benefits; and
• Continues to meet the requirements of all applicable regulations.

If the revision is approved, an amendment to the funding agreement will be issued and signed before changes take effect. Amendments must be documented and retained in the project file per 2 CFR § 200.334.

10. Citizen Participation and Public Engagement

DCR is committed to engaging the public in a transparent and effective manner throughout the design and implementation of the CDR Program. Citizen participation is a required element under the CDBG-DR program and ensures that recovery investments reflect the needs of communities affected by Hurricane Helene. Additionally, each local government receiving assistance from DCR must also follow a detailed citizen participation plan that satisfies the requirements of 24 CFR Part 570.486 (except as provided for in waivers and alternative requirements). 

For additional information, see DCR’s Citizen Participation Plan (CPP).

10.1 Overview and Regulatory Requirements

DCR’s citizen participation approach is guided by the requirements set forth in:

• The 2025 Revised Universal Notice;
• 24 CFR Part 570.486 (Citizen Participation);
• The State’s HUD-approved CDBG-DR Action Plan; and
• DCR’s Citizen Participation Plan (CPP).

These policies and regulations require that DCR provide opportunities for the public to review and comment on major program decisions and ensure that program information is accessible, inclusive, and publicly available throughout the recovery process.

10.2 Ongoing Community Engagement

DCR will continue engaging the public and stakeholders during program implementation. Engagement activities may include:

• Stakeholder meetings with local governments;
• Public informational sessions or webinars;
• Program updates posted online; or
• Outreach to communities with significant housing recovery needs.

Additional input may be solicited prior to the release of future funding rounds or NOFO updates.

10.3 Public Comments and Incorporation

Public comments submitted during formal comment periods or outreach events will be reviewed and considered by DCR. A summary of comments and responses will be published on the program website for each applicable comment period.

Feedback may be used to refine program policies, adjust application requirements, or improve future public outreach efforts.

10.4 Complaints

Should any applicant or member of the public have complaints concerning the award or administration of CDBG-DR funds, complaints should be addressed using the following official channels:

• Online: The Complaint Submission Form can be found under the Complaints section at https://www.commercerecovery.nc.gov/about/contact-us.
• Phone: DCR Complaint Line at 919-707-1560
• Email: dcr.constituentservices@commerce.nc.gov
• Mail:
  • Division of Community Revitalization – Constituent Services 
    301 North Wilmington Street 
    4301 Mail Service Center 
    Raleigh, NC 27699-4301

The Constituent Services team will make every effort to provide a timely written response upon receipt of a citizen’s petition, within fifteen (15) business days, as expected by HUD, where practicable.

Reports of suspected fraud, waste, or abuse of government funds may also be directed to the Office of State Budget and Management at FWA@osbm.nc.gov.  

10.5 Contact Information and Public Access

Program updates, Action Plan materials, and information on how to submit public comments are available on DCR’s disaster recovery website.

These, and other related DCR policies, are also available on DCR's disaster recovery website.

10.6 Local Government Citizen Participation Requirements

Each local government receiving assistance must follow a detailed citizen participation plan that satisfies the requirements of 24 CFR 570.486. The records must demonstrate that it has notified affected residents through electronic mailings, press releases, statements by public officials, media advertisements, social media, public service announcements, and/or contacts with neighborhood organizations. All applicants must submit evidence of a publicly noticed meeting or public comment period to discuss the proposed project and application for the CDR Program. Counties eligible to receive funds must consider the needs of all municipalities (and federally recognized tribes) within the incorporated and unincorporated area of the county (and reservations contiguous to the county).

DCR is allowing applicants to receive public input on their CDR Program application by the following meeting formats:  

1. Posting information about the project online: An applicant posts the information about the project and the program to its public website and allows for a 14-day public comment period. Please submit a copy of the post and any public comments to DCR as part of the application. In choosing this option for public comment, the entity will still need to follow proper public noticing guidelines such as advertising the posting in a newspaper of general circulation for five days.  
2. Virtual public meetings: An applicant would need to supply the same documentation that would normally be required to demonstrate if a meeting was held, including meeting minutes and a public meeting notice.  

Evidence of public meeting with city and tribal governments must meet the following requirements:  

• Notice of the public meeting must be provided at least five days prior to the meeting.  
• Documentation of the meeting must include sign-in sheets and meeting minutes.  

Prior to applying for CDBG-DR funding, applicants are required to post a public notice in a newspaper of general circulation and to their website that states the types of projects to be undertaken, the source and amount of funding available for the activities, the date by which comments must be made, and a contact person for a copy of the proposed application. Applicants must provide for a 10-day comment period, which must be published prior to the submission of the application.  

Evidence of the public notice must meet the following requirements:  

• Documentation of newspaper advertisement;  
• Print-out of county webpage showing public notice; and  
• Documentation that the needs of non-English speaking citizens have been met where a significant number of non-English speaking citizens can be reasonably expected to participate. In this case, documentation will need to be translated into Spanish.