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Fidelity Bond obtained in accordance with $ 391.7 (d) (2).

(c) Preferably, loan funds should be deposited in banks covered by Federal Deposit Insurance. If the bank is not covered by Federal Deposit Insurance, or the amount deposited in a bank covered by Federal Deposit Insurance is not fully protected, the bank shall place in escrow account sufficient obligations of the United States to cover the amount of loan funds not protected.

(d) Funds deposited in joint bank accounts or in special bank accounts shall be pledged to the United States of America as security for the loan until expended for authorized purposes under a deposit agreement approved by the Farmers Home Administration.

(e) As long as any loan funds remain in a bank account, such account shall be subject to inspection by the Farmers Home Administration and to such periodic audits as the Farmers Home Administration may require. The borrower shall furnish to the County Supervisor for examination each bank statement.

(f) Payments to contractors or for other expenses incurred in the planning and construction of works of improvement will be made by checks drawn on a supervised or special bank account. Payments may be made in a lump sum at the completion of a job, or partial payments may be made as work progresses in accordance with partial payment provisions of construction contracts or other prearranged agreements with suppliers of materials or services. All payments for construction items will be based upon Form SCS-49a, "Contract Payment Estimate,” prepared in an original and two copies by the borrower and approved by the Soil Conservation Service. Payments for personal services will be based upon periodic payrolls, and payments for other purposes such as title clearance and miscellaneous supplies will be based upon invoices or bills.

(1) If payments are to be made from & supervised bank account, the borrower will present Form SCS-49a, a periodic payroll, and an invoice or a bill, as appropriate, to the County Supervisor before checks are countersigned.

(2) If payments are to be made from a special bank account, the borrower will make a report to the County Supervisor covering such period as agreed upon by the borrower and the Farmers Home Ad

ministration, showing the payee, amount, and purpose of each check drawn during the period. The borrower will attach to the report a copy of the payroll, Form SCS-49a, receipts, or receipted bills or invoices for the checks issued. The receipts and receipted bills or invoices will be returned to the borrower. $ 391.15 Accounts and records of local

organization. Borrowers shall establish and maintain such accounts and other records pertaining to transactions related to the installation, operation, and maintenance of works of improvement as may be required by the Farmers Home Administration. These accounts and records shall be kept in a form and manner satisfactory to the Farmers Home Administration and shall be open to inspection and audits by representatives of the Farmers Home Administration during the borrower's regular business hours. The borrower shall prepare and furnish to the County Supervisor at intervals designated by the State Director such written reports as may be required by the Farmers Home Administration. Subpart B-Processing and

Servicing SOURCE: $$ 391.21 to 391.25 appear at 23 F. R. 243, Jan. 14, 1958. § 391.21 General.

This subpart and regulations contained in Part 354 of this chapter will be used as a guide for processing Watershed loans. These regulations will be supplemented on an individual loan basis by special instructions, approval memorandums, and closing instructions. To the exte

possible, the National Office of the Farmers Home Administration will provide technical assistance to State Directors for developing and submitting loan dockets. Watershed loans will be serviced in accordance with regulations contained in Parts 361 and 362 of this chapter applicable to Soil and Water Conservation loans to associations. State Directors will utilize the authorities contained in subparagraphs (3), (6), (7), (8), (11), (12), and (14) of $ 361.43(a) of this chapter only with the prior approval of the National Office on an individual case basis. The Administrator may prescribe such special instructions on a case basis which he deems necessary for making and servicing of Watershed loans.

(2) Supply or assist in obtaining information that is required by Farmers Home Administration personnel in preparing the narrative report on the application that will become a part of the loan docket.

(3) Prepare all documents that may have been required by the National Office in previous correspondence regarding the particular loan.

(d) The completed docket together with the recommendations of the State Director will be forwarded to the National Ofice.

§ 391.22 Application for loan.

Loan applications will be processed in accordance with the provisions of $ 391.2. $ 391.23 County Committee recommen

dations. County Committee recommendations will be obtained on each application in accordance with the provisions of $ 391.4. $ 391.24 Preparation, assembly, and

submission of loan dockets. (a) The preparation of a loan docket will not be started until the National Office has reviewed the application letter and has issued to the State Director such special instructions as may be needed, as provided in $ 391.2.

(b) If the National Office determines that favorable consideration should be given to the application, the County Supervisor will proceed with the assembly of the loan docket and will be responsible for its submission to the State Director.

(c) The applicant, with the advice and guidance of Farmers Home Administration personnel will:

(1) Prepare and execute Form FHA28, “Association Proposal and Request for Funds."

§ 391.25 Approval of loans.

The Administrator will authorize the approval of loans and issue any special instructions needed for completing the processing of loans. When the State Director exercises the approval authority delegated to him by the Administrator, he will issue a memorandum of approval to the County Supervisor pursuant to $ 391.10. When authorization cannot be given for the approval of a loan, the Administrator will notify the State Director, who in turn will notify the applicant.

CHAPTER IV-[VACATED; RESERVED]

Note: Regulations formerly contained in Chapter IV (Parts 400 to 485) were transferred to Title 7, Chapter XIV, and redesignated Parts 1400 to 1485, respectively, 28 F.R. 581, January 23, 1963; 28 F.R. 681, January 25, 1963.

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