(2-6-85, PN 956)
RD Instruction 1942-A
(o) Loan closing.
(1) Closing instructions. Loans will be closed in accordance with the closing instructions issued by OGC.
(2) Obtaining insurance and fidelity bonds. Required property insurance policies, liability insurance policies, and fidelity bonds will be obtained by the time of loan closing or start of construction, whichever occurs first.
(3) Distribution of recorded documents. The originals of the recorded deeds, easements, permits, certificates of water rights, leases, or other contracts and similar documents which are not to be held by Rural Development will be returned to the borrower. The original mortgage(s) and water stock certificates, if any, if not required by the recorder's office will be retained by Rural Development.
(4) Review of loan closing. In order to determine that the loan has been properly closed, the loan docket will be reviewed by the State Director and OGC.
(p) Project monitoring and fund delivery during construction.
(1) Coordination of funding sources. When a project is jointly financed, the State Director will reach any needed agreement or understanding with the representatives of the other source of funds on distribution of responsibilities for handling various aspects of the project. These responsibilities will include supervision of construction, inspections and determinations of compliance with appropriate regulations concerning equal employment opportunities, wage rates, nondiscrimination in making services or benefits available, and environmental compliance. If any problems develop which cannot be resolved locally, complete information should be sent to the National Office for advice.
(2) Multiple advances. In the event interim commercial financing is not legally permissible or not available, multiple advances of Rural Development loan funds are required. An exception to this requirement may be granted by the National Office when a single advance is necessitated by State law or public exigency. Multiple advances will be used only for loans in excess of $50,000. Advances will be made only as needed to cover disbursements required by the borrower over a 30-day period. Advances should not exceed 24 in number nor
§1942.17 (p) (2) (Con.) RD Instruction 1942-A
extend longer than two years beyond loan closing. Normally, the retained percentage withheld from the contractor to assure construction completion will be included in the last advance.
(i) §1942.19 contains instructions for making multiple advances to public bodies.
(ii) Advances will be requested by the borrower in writing. The request should be in sufficient amounts to pay cost of construction, rights-of-way and land, legal, engineering, interest, and other expenses as needed. The applicant may use Form RD 440-11, "Estimate of Funds Needed for 30 Day Period Commencing _________," to show the amount of funds needed during the 30-day period.
(iii) Rural Development loan funds obligated for a specific purpose, such as the paying of interest, but not needed at the time of loan closing will remain in the Finance Office until needed unless State statutes require all funds to be delivered to the borrower at the time of closing. Loan funds may be advanced to prepay costs under paragraph (d)(l)(iv)(G) of this section. If all funds must be delivered to the borrower at the time of closing to comply with State statutes, funds not needed at loan closing will be handled as follows:
(A) Deposited in an appropriate borrower account, such as the debt service account, or
(B) Deposited in a supervised bank account under paragraph (p)(3)(i) of this section.
(3) Use and accountability of funds.
(i) Supervised bank account. Rural Development loan funds and any funds furnished by the applicant/borrower to supplement the loan including contributions to purchase major items of equipment, machinery, and furnishings may be deposited in a supervised bank account if determined necessary as provided in Subpart A of Part 1902 of this chapter. When Rural Development has a memorandum of understanding with another agency that provides for the use of supervised bank accounts, or when Rural Development is the primary source of funds for a project and has determined that the use of a supervised bank account is necessary, project funds from other sources may also be deposited in the supervised bank account. Rural Development shall not be accountable to the source of the other funds nor shall Rural Development undertake responsibility to administer the funding program of the other entity. Supervised bank accounts should not be used for funds advanced by an interim lender. (Revised 3-1-88, SPECIAL PN.)
(2-6-85) PN 956
RD Instruction 1942-A
§1942.17 (p) (3) (Con.)
(ii) Other than supervised bank account. If a supervised bank account is not used, arrangement will be agreed upon for the prior concurrence by Rural Development of the bills or vouchers upon which warrants will be drawn, so that the payments from loan funds can be controlled and Rural Development records are current. If a supervised bank account is not used, use Form RD 402-2, "Statement of Deposits and Withdrawals," or a similar form to monitor funds. Periodic reviews of nonsupervised accounts shall be made by Rural Development at the times and in the manner as Rural Development prescribes in the conditions of loan approval. State laws regulating the depositories to be used shall be complied with.
(iii) Use of minority owned banks. Applicants are encouraged to use minority banks (a bank which is owned at least 50 percent by minority group members) for the deposit and disbursement of funds. A list of minority owned banks can be obtained from the Office of Minority Business Enterprise, Department of Commerce, Washington, D.C. 20230 and is also available in all Rural Development offices.
(4) Development inspections. The District Director will be responsible for monitoring the construction of all projects being financed, wholly or in part, with Rural Development funds. Technical assistance will be provided by the State Director's staff. Project monitoring will include construction inspections and a review of each project inspection report, each change order and each partial payment estimate and other invoices such as payment for engineering/ architectural and legal fees and other materials determined necessary to effectively monitor each project. These activities will not be performed on behalf of the applicant/borrower, but are solely for the benefit of Rural Development and in no way are intended to relieve the applicant/borrower of corresponding obligations to conduct similar monitoring and inspection activities. Project monitoring will include periodic inspections to review partial payment estimates prior to their approval and to review project development in accordance with plans and specifications. Each inspection will be recorded using Form RD 1924-12, "Inspection Reports." The original Form RD 1924-12 will be filed in project case folder and a copy furnished to the State Director. The State Director will review inspection reports and will determine that the project is being effectively monitored. The District Director is authorized to review and accept partial payment estimates prepared by the contractor and approved by the borrower, provided the consulting engineer or architect, if one is being utilized for the project, has approved the estimates and certified that all material purchased or work performed is in accordance with the plans and specifications, or if a consulting engineer or architect is not being utilized, the District Director has determined that the funds requested are for authorized purposes. If there is any indication that construction