Title 44 CFR Part 366

§ 206.366

44 CFR Ch. I (10–1–10 Edition)

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of its annual financial reports (operating statements, balance sheets, etc.)
for the fiscal year of the major disaster, and for each of the 3 subsequent
fiscal years.
(2) The Disaster Assistance Directorate, will review the loan periodically. The purpose of the reevaluation
is to determine whether projected revenue losses, disaster-related expenses,
operating budgets, and other factors
have changed sufficiently to warrant
adjustment of the scheduled disbursement of the loan proceeds.
(3) The Disaster Assistance Directorate, shall provide each loan recipient with a loan status report on a quarterly basis. The recipient will notify
FEMA of any changes of the responsible municipal official who executed
the Promissory Note.
(d) Inactive loans. If no funds have
been disbursed from the Treasury, and
if the local government does not anticipate a need for such funds, the note
may be cancelled at any time upon a
written request through the State and
Regional Office to FEMA. However,
since only one loan may be approved,
cancellation precludes submission of a
second loan application request by the
same local government for the same
disaster.
§ 206.366 Loan cancellation.
(a) Policies. (1) FEMA shall cancel repayment of all or part of a Community
Disaster Loan to the extent that the
Assistant Administrator for the Disaster Assistance Directorate determines that revenues of the local government during the full three fiscal
year period following the disaster are
insufficient, as a result of the disaster,
to meet the operating budget for the
local government, including additional
unreimbursed disaster-related expenses
for a municipal operating character.
For loan cancellation purposes, FEMA
interprets that term operating budget to
mean actual revenues and expenditures
of the local government as published in
the official financial statements of the
local government.
(2) If the tax and other revenues rates
or the tax assessment valuation of
property which was not damaged or destroyed by the disaster are reduced
during the 3 fiscal years subsequent to

the major disaster, the tax and other
revenue rates and tax assessment valuation factors applicable to such property in effect at the time of the major
disaster shall be used without reduction for purposes of computing revenues received. This may result in decreasing the potential for loan cancellations.
(3) If the local government’s fiscal
year is changed during the ‘‘full 3 year
period following the disaster’’ the actual period will be modified so that the
required financial data submitted covers an inclusive 36-month period.
(4) If the local government transfers
funds from its operating funds accounts to its capital funds account,
utilizes operating funds for other than
routine maintenance purposes, or significantly
increases
expenditures
which are not disaster related, except
increases due to inflation, the annual
operating budget or operating statement expenditures will be reduced accordingly for purposes of evaluating
any request for loan cancellation.
(5) It is not the purpose of this loan
program to underwrite predisaster
budget or actual deficits of the local
government. Consequently, such deficits carried forward will reduce any
amounts otherwise eligible for loan
cancellation.
(b) Disaster-related expenses of a municipal operation character. (1) For purpose of this loan, unreimbursed expenses of a municipal operating character are those incurred for general
government purposes, such as police
and fire protection, trash collection,
collection of revenues, maintenance of
public facilities, flood and other hazard
insurance, and other expenses normally
budgeted for the general fund, as defined by the Municipal Finance Officers
Association.
(2) Disaster-related expenses do not
include expenditures associated with
debt service, any major repairs, rebuilding, replacement or reconstruction of public facilities or other capital
projects, intragovernmental services,
special assessments, and trust and
agency fund operations. Disaster expenses which are eligible for reimbursement under project applications
or other Federal programs are not eligible for loan cancellation.

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Federal Emergency Management Agency, DHS
(3) Each applicant shall maintain
records including documentation necessary to identify expenditures for unreimbursed disaster-related expenses.
Examples of such expenses include but
are not limited to:
(i) Interest paid on money borrowed
to pay amounts FEMA does not advance toward completion of approved
Project Applications.
(ii) Unreimbursed costs to local governments for providing usable sites
with utilities for mobile homes used to
meet disaster temporary housing requirements.
(iii) Unreimbursed costs required for
police and fire protection and other
community services for mobile home
parks established as the result of or for
use following a disaster.
(iv) The cost to the applicant of flood
insurance required under Public Law
93–234, as amended, and other hazard
insurance required under section 311,
Public Law 93–288, as amended, as a
condition of Federal disaster assistance
for the disaster under which the loan is
authorized.
(4) The following expenses are not
considered to be disaster-related for
Community Disaster Loan purposes:
(i) The local government’s share for
assistance provided under the Act including flexible funding under section
406(c)(1) of the Act.
(ii) Improvements related to the repair or restoration of disaster public
facilities approved on Project Applications.
(iii) Otherwise eligible costs for
which no Federal reimbursement is requested as a part of the applicant’s disaster response commitment, or cost
sharing as specified in the FEMA-State
Agreement for the disaster.
(iv) Expenses incurred by the local
government which are reimbursed on
the applicant’s project application.
(c) Cancellation application. A local
government which has drawn loan
funds from the Treasury may request
cancellation of the principal and related interest by submitting an Application for Loan Cancellation through
the Governor’s Authorized Representative to the Regional Administrator
prior to the expiration date of the loan.

§ 206.366

(1) Financial information submitted
with the application shall include the
following:
(i) Annual Operating Budgets for the
fiscal year of the disaster and the 3
subsequent fiscal years;
(ii) Annual Financial Reports (Revenue and Expense and Balance Sheet)
for each of the above fiscal years. Such
financial records must include copies
of the local government’s annual financial reports, including operating statements balance sheets and related consolidated and individual presentations
for each fund account. In addition, the
local government must include an explanatory statement when figures in
the Application for Loan Cancellation
form differ from those in the supporting financial reports.
(iii) The following additional information concerning annual real estate
property taxes pertaining to the community for each of the above fiscal
years:
(A) The market value of the tax base
(dollars);
(B) The assessment ratio (percent);
(C) The assessed valuation (dollars);
(D) The tax levy rate (mils);
(E) Taxes levied and collected (dollars).
(iv) Audit reports for each of the
above fiscal years certifying to the validity of the Operating Statements.
The financial statements of the local
government shall be examined in accordance with generally accepted auditing standards by independent certified public accountants. The report
should not include recommendations
concerning loan cancellation or repayment.
(v) Other financial information specified in the Application for Loan Cancellation.
(2) Narrative justification. The application may include a narrative presentation to amplify the financial material accompanying the application and
to present any extenuating circumstances which the local government wants the Assistant Administrator for the Disaster Assistance Directorate to consider in rendering a decision on the cancellation request.

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§ 206.367

44 CFR Ch. I (10–1–10 Edition)

(d) Determination. (1) If, based on a review of the Application for Loan Cancellation and FEMA audit, when determined necessary, the Assistant Administrator for the Disaster Assistance Directorate determines that all or part of
the Community Disaster Loan funds
should be canceled, the principal
amount which is canceled will become
a grant, and the related interest will be
forgiven. The Assistant Administrator
for the Disaster Assistance Directorate’s determination concerning loan
cancellation will specify that any
uncancelled principal and related interest must be repaid immediately and
that, if immediate repayment will constitute a financial hardship, the local
government must submit for FEMA review and approval, a repayment schedule for settling the indebtedness on
timely basis. Such repayments must be
made to the Treasurer of the United
States and be sent to FEMA, Attention: Chief Financial Officer.
(2) A loan or cancellation of a loan
does not reduce or affect other disaster-related grants or other disaster
assistance. However, no cancellation
may be made that would result in a duplication of benefits to the applicant.
(3) The uncancelled portion of the
loan must be repaid in accordance with
§ 206.367.
(4) Appeals. If an Application for
Loan Cancellation is disapproved, in
whole or in part, by the Assistant Administrator for the Disaster Assistance
Directorate or designee, the local government may submit any additional information in support of the application
within 60 days of the date of disapproval. The decision by the Assistant
Administrator for the Disaster Assistance Directorate or designee on the
submission is final.
[55 FR 2314, Jan. 23, 1990, as amended at 74
FR 15351, Apr. 3, 2009]

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§ 206.367

Loan repayment.

(a) Prepayments. The local government may make prepayments against
loan at any time without any prepayment penalty.
(b) Repayment. To the extent not otherwise cancelled, Community Disaster
Loan funds become due and payable in
accordance with the terms and condi-

tions of the Promissory Note. The note
shall include the following provisions:
(1) The term of a loan made under
this program is 5 years, unless extended by the Assistant Administrator
for the Disaster Assistance Directorate. Interest will accrue on outstanding cash from the actual date of
its disbursement by the Treasury.
(2) The interest amount due will be
computed separately for each Treasury
disbursement as follows: I=P×R×T,
where I=the amount of simple interest,
P=the principal amount disbursed;
R=the interest rate of the loan; and,
T=the outstanding term in years from
the date of disbursement to date of repayment, with periods less than 1 year
computed on the basis of 365 days/year.
If any portion of the loan is cancelled,
the interest amount due will be computed on the remaining principal with
the shortest outstanding term.
(3) Each payment made against the
loan will be applied first to the interest
computed to the date of the payment,
and then to the principal. Prepayments
of scheduled installments, or any portion thereof, may be made at any time
and shall be applied to the installments
last to become due under the loan and
shall not affect the obligation of the
borrower to pay the remaining installments.
(4) The Assistant Administrator for
the Disaster Assistance Directorate
may defer payments of principal and
interest until FEMA makes its final
determination with respect to any Application for Loan Cancellation which
the borrower may submit. However, interest will continue to accrue.
(5) Any costs incurred by the Federal
Government in collecting the note
shall be added to the unpaid balance of
the loan, bear interest at the same rate
as the loan, and be immediately due
without demand.
(6) In the event of default on this
note by the borrower, the FEMA
claims collection officer will take action to recover the outstanding principal plus related interest under Federal debt collection authorities, including administrative offset against other
Federal funds due the borrower and/or
referral to the Department of Justice
for judicial enforcement and collection.

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