7 CFR 1744, Subpart C

[Code of Federal Regulations]

[Title 7, Volume 11]

[Revised as of January 1, 2009]

From the U.S. Government Printing Office via GPO Access

[CITE: 7CFR1744.60]

[Page 373]

TITLE 7--AGRICULTURE

CHAPTER XVII--RURAL UTILITIES SERVICE, DEPARTMENT OF AGRICULTURE

PART 1744_POST-LOAN POLICIES AND PROCEDURES COMMON TO GUARANTEED AND

INSURED TELEPHONE LOANS--Table of Contents

Subpart C_Advance and Disbursement of Funds

Sec. 1744.60 General.

Source: 54 FR 12186, Mar. 24, 1989, unless otherwise noted.

Redesignated at 55 FR 39396, Sept. 27, 1990.

(a) The standard loan documents (as defined in 7 CFR part 1758)

contain provisions regarding advances and disbursements of loan funds by telephone borrowers. This part implements certain of the provisions by setting forth requirements and procedures to be followed by borrowers in obtaining advances and making disbursements of loan and nonloan funds.

(b) This part supersedes any sections of RUS Bulletins with which it is in conflict.

Sec. 1744.62 Introduction.

RUS is under no obligation to make or approve advances of loan funds unless the borrower is in compliance with all terms and conditions of the loan documents. The borrower shall use funds in its construction fund only to make disbursements approved by RUS.

Sec. 1744.63 The telephone loan budget.

When the loan is made, RUS provides the borrower a Telephone Loan

Budget, RUS Form 493. This budget divides the loan into budget accounts

such as ``Engineering.'' When a contract or other document is approved

by RUS, funds are encumbered from the appropriate budget account. See 7

CFR part 1753.

Sec. 1744.64 Budget adjustment.

(a) If more funds are required than are available in a budget

account, the borrower may request RUS's approval of a budget adjustment

to use funds from another account. The request shall include an

explanation of the change, the budget account to be used, and a

description of how the adjustment will affect loan purposes. RUS will

not approve a budget adjustment that affects other loan purposes unless

the borrower satisfies RUS that the additional funds are available from

another source, requests a deficiency loan, or scales back the project.

(b) RUS may make a budget adjustment without a formal request by the borrower when a budget account is insufficient to encumber funds for a contract that otherwise would be approved by RUS. See 7 CFR part 1753.

Sec. 1744.65 The construction fund.

(a) The construction fund is used by the borrower primarily to hold

advances until disbursed.

(b) All advances shall be deposited in the construction fund.

(c) RUS may require that other funds be deposited in the

construction fund. These may include equity or general fund

contributions to construction, service termination payments, proceeds

from the sale of property, amounts recovered from insurance for losses

during the construction period, and interest received on loan funds in

savings or interest bearing checking accounts, and similar receipts.

Deposit slips for any deposit to the construction fund shall show the

source and amount of funds deposited and be executed by an authorized

representative of the bank.

(d) Funds shall be disbursed only up to the amount approved for

advance on the FRS as described in Sec. 1744.66. No funds may be

withdrawn from the fund except for loan purposes approved by RUS.

(e) The disbursement of nonloan funds requires the same RUS

approvals as loan funds.

(f) Disbursements must be evidenced by canceled checks. The invoices and supporting documentation needed for construction contracts are specified in the contracts and in 7 CFR part 1753. Disbursements to

reimburse the borrower's general funds shall be documented by a

reimbursement schedule, to be retained in the borrower's files, that

lists the construction fund check number, date, and an explanation of

amounts reimbursed by budget account.

Sec. 1744.66 The financial requirement statement (FRS).

(a) To request advances, the borrower must submit to RUS an FRS, a

description of the advances desired, and other information related to

the transactions when required by RUS.

(b) The FRS is used by RUS and the borrower to record and control

transactions in the construction fund. Approved contracts and other

items are shown on the FRS under ``Approved Purposes.'' Except as noted

below, the amount approved for advance is 100 percent of the amount

encumbered for that item. Funds are approved for advance as follows:

(1) Construction--(i) Construction contracts and force account

proposals. Ninety percent of the encumbered amount (95 percent for

outside plant), with the final 10 percent (5 percent) approved when RUS

approves the closeout documents. When a contract contains supplement

``A'' (See 7 CFR part 1753), 90 percent (95 percent) of the contract is

approved less materials supplied by the borrower. For the Supplement

``A'' materials, which are a separate entry on the FRS, 100 percent of

the material cost is approved.

(ii) Work orders. The portion of the work order summary (See 7 CFR

part 1753) determined by RUS to be for approved loan purposes.

(iii) Work order fund. Based on a borrower's request as described in 7 CFR part 1753.

(iv) Real estate. Upon request by the borrower after submission of

evidence of a valid title.

(v) Right of way procurement. Based on the borrower's itemized

costs.

(vi) Joint use charges. Based on copies of invoices from the other

utility.

(2) Engineering--(i) Preloan engineering. Based on a final itemized

invoice from the engineer.

(ii) Postloan engineering contracts. The amount shown on the

engineering estimate, RUS Form 506, less the amount estimated for

construction contract closeouts. The balance is approved when the

engineering contract is closed.

(iii) Force account engineering. Ninety percent of the total amount

of the RUS approved force account engineering proposal. The balance is

approved when the force account engineering proposal is closed.

(3) Office equipment, vehicles and work equipment. Based on copies

of invoices for the equipment.

(4) General--(i) Organization and loan expenditures. Based on an

itemized list of requirements prepared by the borrower.

(ii) Construction overhead. Based on an itemized list of

expenditures. If funds are required for employee salaries, the

itemization shall include the employee's position, the period covered,

total compensation for the period, and the portion of compensation

attributable to the itemized construction.

(iii) Legal fees. Based on itemized invoices from the attorney.

(iv) Bank stock.Based on the requirements for purchase of class B

Rural Telephone Bank stock established in the loan. Funds for class B

stock will be advanced in an amount equal to 5 percent of the amount,

exclusive of the amount for class B stock, of each loan advance, at the

time of such advance.

(5) Operating expenses--(i) Working capital--new system. Based on

the borrower's itemized estimate.

(ii) Current operating deficiencies. Based on a current and

projected balance sheet submitted by the borrower.

(6) Debt retirement and refinancing. Upon release of the loan, based on the amount in the approved budget.

(7) Acquisitions. Based on final itemized costs, but cannot exceed

the amount in the approved loan budget.

(c) Funds other than loan funds deposited in the construction fund,

which shall include proceeds from the sale of property on which RUS has

a lien, (lines 10 and 11 on the FRS) are reported as a credit under

total disbursements. Disbursements of these funds are subject to the

same RUS approvals as loan funds.

(d) The borrower shall request advances as needed to meet its

obligations promptly. Generally, RUS does not approve an advance

requested more than 60 days before the obligation is payable.

(e) Funds should be disbursed for the item for which they were

advanced. If the borrower needs to pay an invoice for which funds have

not been advanced, and disbursement of advanced funds for another item

has been delayed, the latter funds may be disbursed to pay the invoice

up to the amount approved for advance for that item on the FRS. The

borrower shall make erasable entries on the next FRS showing the changes under ``Total Advances to Date'' and shall explain the changes in writing before RUS will process the next FRS.

(f) Advances will be rounded down to the nearest thousands of

dollars except for final amounts.

(g) The certification on each of the three copies of the FRS sent to RUS shall be signed by a corporate officer of manager authorized by

resolution of the board of directors to sign such statements. At the

time of such authorization a certified copy of the resolution and one

copy of RUS Form 675, Certificate of Authority, shall be submitted to

RUS.

(h) The documentation required for the FRS transactions are the

deposit slips, the canceled construction fund checks and the supporting

invoices or reimbursement schedules. These shall be kept in the

borrower's files for periodic audits by RUS.

[54 FR 12186, Mar. 24, 1989. Redesignated at 55 FR 39396, Sept. 27,

1990, as amended at 56 FR 26600, June 10, 1991]

Sec. 1744.67 Temporary excess construction funds.

(a) When unanticipated events delay the borrower's disbursement of

advanced funds, the funds may be used as follows:

(1) With RUS loan funds for loans approved prior to November 1,

1993, or hardship loan funds, the borrower may invest the funds in 5

percent Treasury Certificates of Indebtedness--RUS Series.

(2) With RUS cost-of-money, FFB or RTB loan funds, the following

apply:

(i) The borrower may invest the funds in short term securities

issued by the United States Treasury.

(ii) If permitted by state law, the borrower may deposit the funds

in savings accounts, including certificates of deposit, of federally

insured savings institutions.

(3) Funds advanced by a guaranteed lender other than the FFB may, if so permitted by such lender, be invested under the terms and conditions described above for FFB advances.

(4) Any security or investment made under this authorization shall

identify the borrower by its corporate name followed by the words

``Trustee, Rural Utilities Service.''

(5) All temporary investments and all income derived from them shall be considered part of the construction fund and be subject to the same controls as cash in that account.

(6) Securities and other investments shall have maturity dates or

liquidating provisions that ensure the availability of funds as required for the completion of projects and the payment of obligations.

(7) Any instrument evidencing a security or other investment herein

authorized to be purchased or made, may not be sold, discounted, or

pledged as collateral for a loan or as security for the performance of

an obligation or for any other purpose.

(8) The Administrator may, at his sole discretion, require a

borrower to pledge any security or other evidence of investment

authorized hereby by forwarding to him all pertinent instruments and

related documentation as he may reasonably require.

(9) Borrowers shall be responsible for the safekeeping of securities and other investments.

(b) All interest and income received from investments of temporary

excess funds, as described in this section, shall be deposited in the

Construction Fund.

(c) The borrower shall account for investment proceeds on the next

FRS submitted to RUS. RUS will make the necessary adjustments on

budgetary records.

(d) The Administrator reserves the right to suspend any borrower's

authorization to invest temporary excess funds contained herein if the

borrower does not comply with the requirements.

(e) For RUS loans approved prior to October 1, 1991, the borrower

may return advanced funds to RUS as a refund of an advance. Interest

stops accruing on the refunded advance upon receipt by RUS. A refunded

advance may be readvanced. A refund of an advance shall be sent to the

Rural Utilities Service, United States Department of Agriculture,

Collections and Custodial Section, Washington, DC, 20250. The borrower

should clearly indicate that this is a refund of an advance, and not a

loan payment or prepayment.

[54 FR 12186, Mar. 24, 1989. Redesignated at 55 FR 39395, Sept. 27,

1990, and amended at 58 FR 66257, Dec. 20, 1993]

Sec. 1744.68 Order and method of advances of telephone loan funds.

(a) Borrowers may specify the sequence of advances of funds under

any combination of approved telephone loans from RUS, RTB, or FFB,

except that for all loans approved on or after November 1, 1993, the

borrower may use loan funds:

(1) Only for purposes for which that type of loan (i.e. Hardship,

RUS cost-of-money, RTB, or FFB) may be made; and

(2) Only in exchanges that qualify for the type of loan from which

the funds are drawn.

(b) The first or subsequent advances of loan funds may be

conditioned on the satisfaction of certain requirements stated in the

borrower's loan contract.

(c) Normally, only one payment is made by the Automatic Clearing

House (ACH) for an advance of funds.

(d) Borrowers of RUS and RTB funds may request advances by wire

service only for amounts greater than $500,000 or for advances to

borrowers outside the Continental United States. FFB advances in any

amount over $100,000 can be sent by wire service.

(e) The following information shall be included with the FRS:

(1) Name and address of borrower's bank.

(2) If borrower's bank is not a member of the Federal Reserve

System, the name and address of its correspondent bank that is a member

of the Federal Reserve System.

(3) American Bankers Association (ABA) nine digit identifier of the

receiving banks (routing number and check digit).

(4) Borrower's bank account title and number.

(5) Any other necessary identifying information.

[54 FR 12186, Mar. 24, 1989. Redesignated at 55 FR 39395, Sept. 27,

1990, and amended at 58 FR 66257, Dec. 20, 1993]