Rd instruction 1924-a table of Contents




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63

(Revision 2)


(05-12-87) SPECIAL PN

RD Instruction 1924-A

§1924.13 (e)(2)(ii) (Con.)

(C) The total development cost of the project does not exceed that which is typical for similar type projects in the area. The total development cost recognized by Rural Development for each individual case will be determined by the MFH Coordinator with the advice of the State Architect. (Revised 03-16-94, SPECIAL PN.)


(D) The owner-builder has provided sufficient information on all contracts or subcontracts in excess of $10,000 to permit compliance with §1924.6 (a)(11)(iv) of this subpart.
(iii) In addition to the requirements for the State Director to authorize the owner-builder method of construction as indicated in §1924.13 (e)(2)(i) and (ii) of this subpart, the following additional steps will be taken by the State Director.
(A) If, after a full review of the case documents by the appropriate members of the State Office staff, the State Director determines that the requirements have been met and the construction cost is reasonable, an exception to competitive bidding may be granted. Written documentation of the State Office review results will be placed in the application file.

(Revised 03-16-94, SPECIAL PN.)


(B) If, after the full review by the State Office staff, the State Director determines that the construction cost is not competitive with other similar projects in construction and design being built in the area, the applicant will be requested to competitively bid the construction of the project in accordance with paragraph (e)(1)(i) of this section.
(C) If there is no agreement by Rural Development and the applicant as to construction cost and the applicant is not agreeable to any of the aforementioned alternatives, the State Director will cease any further action on the preapplication and inform the applicant of the right to appeal, in accordance with Subpart B of Part 1900 of this chapter.
(iv) The development cost of the project may include a typical allowance for general overhead, general requirements and a builder's profit. These amounts may be determined by local investigation and also from HUD data

64

(Revision 2)


RD Instruction 1924-A

§1924.13 (e)(2)(iv) (Con.)


for the area. The applicant/owner-builder and any subcontractors, material suppliers, and equipment lessors having or sharing an identity of interest with the applicant/owner-builder may not be permitted a builder's profit, general overhead, and general requirements which exceed the amounts represented on their cost breakdown. (Revised 03-16-94, SPECIAL PN.)
(v) Under no circumstances will loan funds be used to pay the owner-builder or its stockholders, members, directors or officers, directly or indirectly, any profits from the construction of the project except a typical builder's fee for performing the services that would normally be performed by a general contractor under the contract method of construction. Discounts and rebates given the owner-builder in advance must be deducted before the invoices are paid. If discounts or rebates are given after the invoices are paid, the funds must be returned to the supervised bank account or applied on the interim construction loan, as appropriate. Under no circumstances will the dollar amount be placed in the reserve account. (Revised 03-16-94, SPECIAL PN.)
(vi) The plans and specifications must be specific and complete so that there is a clear understanding as to how the facility will be constructed and the materials that will be used.
(vii) When architectural services are required by §1924.13(a) during the construction and warranty phases they must be provided by an architect who has no identity of interest with the applicant/owner-builder. The services to be rendered during the construction and warranty phases include, but are not limited to inspections, changes in the scope of project or work to be done, administration of construction accounts, rejection of work and materials not conforming to the Rural Development approved drawings and specifications, and other appropriate service listed in §1924.13 (a)(5)(v) and (vi) of this subpart.
(viii) The applicant/owner-builder and any subcontractor, material supplier, or equipment lessor sharing an identity of interest as defined in §1924.4 (i) of this subpart must each provide certification as to the actual cost of the work performed in connection with the construction of the project on Form RD 1924-13 prior to final payment. The construction costs, as reported on Form RD 1924-13, must be audited by a CPA, or LPA licensed on or before

65

(Revision 2)


(05-12-87) SPECIAL PN

RD Instruction 1924-A

§1924.13 (e)(2)(viii) (Con.)
December 31, 1970, in accordance with Government Auditing Standards, and certain agreed upon procedures (available in any Rural Development office) performed in accordance with Attestation Standards. In some cases, Rural Development will contract directly with a CPA or LPA for the cost certification. In that event, documentation necessary to have the costs of construction certified by an Rural Development contractor that they were the actual costs of the work performed, as reported on Form RD 1924-13, will be provided. Funds which were included in the loan for cost certification and which are ultimately not needed because Rural Development contracts for the cost certification will be returned on the loan. (Revised 03-16-94, SPECIAL PN.)
(A) The CPA or LPA's audit, performed in accordance with Government Auditing Standards, will include such tests of the accounting records and such other auditing procedures of the applicant/owner-builder (and any subcontractor, material supplier, or equipment lessor sharing an identity of interest) concerning the work performed, services rendered, and materials supplied in connection with the construction of the project he/she considers necessary to express an opinion on the construction costs as reported on Form RD 1924-13. Upon completion of construction and prior to final payment, the CPA or LPA will provide an opinion as to whether the construction costs as reported on Form RD 1924-13 present fairly the costs of construction in conformity with eligible construction costs as prescribed in Rural Development regulations. Rural Development reserves the right to determine, upon receipt of the certified Form RD 1924-13 and the auditor's report, whether they are satisfactory to Rural Development. At a minimum, the CPA or LPA shall also perform any additional agreed upon procedures (available in any Rural Development office) specified by Rural Development, performed in accordance with Attestation Standards, of the owner-builder (and any subcontractor, material supplier, or equipment lessor sharing an identity of interest) concerning the work performed, services rendered, and materials supplied in connection with the construction. There will exist no business relationship between the CPA or LPA and the borrower except for the performance of the examination of the cost certification, accounting systems work, and tax preparation. Any CPA or LPA who acts as the borrower's accountant (performing manual or automated bookkeeping services or maintains the official accounting records) will not be the same CPA or LPA who cost certifies the project.

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