(a) When FEMA withholds funds from recipient under this regulation, the Administrator may, if allowable under the statute governing the assistance, disburse the withheld funds directly to an alternate recipient: Any public or nonprofit private organization or agency, or State or political subdivision of the State.

(b) The Administrator will require any alternate recipient to demonstrate:

(1) The ability to comply with this regulation; and

(2) The ability to achieve the goals of the Federal statute authorizing the Federal financial assistance.