PART 307—ECONOMIC ADJUSTMENT ASSISTANCE INVESTMENTS Authority: 42 U.S.C. 3211; 42 U.S.C. 3149; 42 U.S.C. 3161; 42 U.S.C. 3162; 42 U.S.C. 3233; Department of Commerce Organization Order 10-4. Source: 71 FR 56675, Sept. 27, 2006, unless otherwise noted. Subpart A—General § 307.1 Purpose. The purpose of Economic Adjustment Assistance Investments is to address the needs of communities experiencing adverse economic changes that may occur suddenly or over time, including those caused by: (a) Military base closures or realignments, defense contractor reductions in force, or U.S. Department of Energy defense-related funding reductions; (b) Federally Declared Disaster; (c) International trade; (d) Long-term economic deterioration; (e) Loss of a major community employer; or (f) Loss of manufacturing jobs. [71 FR 56675, Sept. 27, 2006, as amended at 79 FR 76132, Dec. 19, 2014] § 307.2 Criteria for Economic Adjustment Assistance Investments. (a) Economic Adjustment Assistance Investments are intended to enhance a distressed community's ability to compete economically by stimulating private investment in targeted economic sectors through use of tools that: (1) Help develop and implement a CEDS; (2) Expand the capacity of public officials and economic development organizations to work effectively with businesses; (3) Assist in overcoming major obstacles identified in the CEDS; (4) Enable communities to plan and coordinate the use of Federal resources and other resources available to support economic recovery, development of Regional economies, or recovery from natural or other disasters; or (5) Encourage the development of innovative public and private approaches to economic restructuring and revitalization. (b) Economic Adjustment Assistance Investments may be made when the Project funded by the Investment will help the Region meet a Special Need. The Region in which a Project is located must have a CEDS with which the Project is consistent (except that this requirement shall not apply to Strategy Grants described in § 307.3). § 307.3 Use of Economic Adjustment Assistance Investments. Economic Adjustment Assistance Investments may be used to develop a CEDS to alleviate long-term economic deterioration or a sudden and severe economic dislocation (a “Strategy Grant” “Implementation Grant” (a) Strategy Grants support developing, updating or refining a CEDS. (b) Implementation Grants support the execution of activities identified in a CEDS. Specific activities may be funded as separate Investments or as multiple elements of a single Investment. Examples of Implementation Grant activities include: (1) Infrastructure (as defined in § 301.11 of this chapter) improvements, such as site acquisition, site preparation, construction, rehabilitation and equipping of facilities; (2) Provision of business or infrastructure financing through the capitalization of Recipient-administered Revolving Loan Funds (“ RLFs” (3) Market or industry research and analysis; (4) Technical assistance, including organizational development such as business networking, restructuring or improving the delivery of business services, or feasibility studies; (5) Public services; (6) Training; and (7) Other activities justified by the CEDS that satisfy applicable statutory and regulatory requirements. [71 FR 56675, Sept. 27, 2006, as amended at 79 FR 76132, Dec. 19, 2014] § 307.4 Award requirements. (a) General. (b) Strategy Grants. (c) Implementation Grants. (i) Applicable CEDS meets the requirements in § 303.7 of this chapter; and (ii) Proposed Project is identified as a necessary element of or consistent with the applicable CEDS. (2) Implementation Grants involving construction shall comply with the provisions of subpart B of part 305 of this chapter. (3) Implementation Grants that do not involve construction shall comply with the applicable provisions of subpart A of part 306 of this chapter. (d) See [71 FR 56675, Sept. 27, 2006, as amended at 75 FR 4264, Jan. 27, 2010; 79 FR 76132, Dec. 19, 2014] § 307.5 Application requirements. (a) Each application for Economic Adjustment Assistance must: (1) Include or incorporate by reference (if so approved by EDA) a CEDS, except that a CEDS is not required when applying for a Strategy Grant; and (2) Explain how the proposed Project meets the criteria set forth in § 307.2. (b) For a technical assistance Project of significant Regional or national scope under this subpart, EDA may waive the requirement set forth in § 301.2(b) of this chapter that the non-profit organization act in cooperation with officials of a political subdivision of a State. Subpart B—Revolving Loan Fund Program § 307.6 Revolving Loan Funds established for lending. Economic Adjustment Assistance Grants to capitalize or recapitalize RLFs most commonly fund business lending, but also may fund public infrastructure or other authorized lending activities. The requirements in this subpart apply to EDA-funded RLFs. Special award conditions may contain appropriate modifications of these requirements. [82 FR 57054, Dec. 1, 2017] § 307.7 Revolving Loan Fund award requirements. (a) For Eligible Applicants seeking to capitalize or recapitalize an RLF, EDA will review applications for the following, as applicable: (1) Need for a new or expanded public financing tool to: (i) Enhance other business assistance programs and services targeting economic sectors and locations described in the CEDS; or (ii) Provide appropriate support for post-disaster economic recovery efforts in Presidentially Declared Disaster areas; (2) Types of financing activities anticipated; and (3) Capacity of the RLF organization to manage lending activities, create networks between the business community and other financial providers, and implement the CEDS. (b) RLF Grants shall comply with the requirements set forth in this part, as well as relevant provisions of parts 300 through 303, 305, and 314 of this chapter and in the following publications: (1) EDA's RLF Standard Terms and Conditions; and (2) The Compliance Supplement, which is appendix XI to 2 CFR part 200 and is available on the OMB Web site at https://www.whitehouse.gov/omb/circulars_default. [79 FR 76133, Dec. 19, 2014, as amended at 82 FR 57055, Dec. 1, 2017] § 307.8 Definitions. In addition to the defined terms set forth in § 300.3 of this chapter, the following terms used in this part shall have the following meanings: Allowable Cash Percentage Closed Loan Disbursement Phase Exempt Security Prudent Lending Practices Recapitalization Grants Reporting Period, Revolving Phase Risk Analysis System RLF Capital Base RLF Cash Available for Lending RLF Income RLF Recipient RLF Third Party, Sale SEC Commission Securitization Security Voluntary Contributed Capital [71 FR 56675, Sept. 27, 2006, as amended at 73 FR 62867, Oct. 22, 2008; 75 FR 4264, Jan. 27, 2010; 82 FR 57055, Dec. 1, 2017] § 307.9 Revolving Loan Fund Plan. All RLF Recipients shall manage RLFs in accordance with an RLF plan (the “ RLF Plan Plan (a) Format and content. (2) Part II of the Plan titled “Operational Procedures” must serve as the RLF Recipient's internal operating manual and set out administrative procedures for operating the RLF consistent with “Prudent Lending Practices,” as defined in § 307.8, the RLF Recipient's environmental review and compliance procedures as set out in § 307.10, and EDA's conflicts of interest rules set out in § 302.17 of this chapter. (b) Evaluation of RLF Plans. (1) The Plan must be consistent with the CEDS or EDA-approved economic development plan, if applicable, for the Region. (2) The Plan must identify the strategic purpose of the RLF and must describe the selection of the financing strategy and lending criteria, including: (i) An analysis of the local capital market and the financing needs of the targeted businesses; and (ii) Financing policies and portfolio standards that are consistent with EDA's policies and requirements; and (3) The Plan must demonstrate an adequate understanding of commercial loan portfolio management procedures, including loan processing, underwriting, closing, disbursements, collections, monitoring, and foreclosures. It also shall provide sufficient administrative procedures to prevent conflicts of interest and to ensure accountability, safeguarding of assets and compliance with Federal and local laws. (c) Revision and Modification of RLF Plans. (2) An RLF Recipient must notify EDA of any change(s) to its Plan. Any material modification, such as a merger, consolidation, or change in the EDA-approved lending area under § 307.18, a change in critical management staff, or a change to the strategic purpose of the RLF, must be submitted to EDA for approval prior to any revision of the Plan. If EDA approves the modification, the RLF Recipient must submit an updated Plan to EDA in electronic format, unless EDA approves a paper submission. [71 FR 56675, Sept. 27, 2006, as amended at 73 FR 62867, Oct. 22, 2008; 75 FR 4264, Jan. 27, 2010; 79 FR 76133, Dec. 19, 2014] § 307.10 Pre-loan requirements. (a) RLF Recipients must adopt procedures to review the impacts of prospective loan proposals on the physical environment. The Plan must provide for compliance with applicable environmental laws and other regulations, including parts 302 and 314 of this chapter. The RLF Recipient also must adopt procedures to comply, and ensure that potential borrowers comply, with applicable environmental laws and regulations. (b) RLF Recipients must ensure that prospective borrowers, consultants, or contractors are aware of and comply with the Federal statutory and regulatory requirements that apply to activities carried out with RLF loans. Accordingly, RLF loan agreements shall include applicable Federal requirements to ensure compliance and RLF Recipients must adopt procedures to diligently correct instances of non-compliance, including loan call stipulations. (c) All RLF loan documents and procedures must protect and hold the Federal government harmless from and against all liabilities that the Federal government may incur as a result of providing an RLF Grant to assist directly or indirectly in site preparation or construction, as well as the direct or indirect renovation or repair of any facility or site. These protections apply to the extent that the Federal government may become potentially liable as a result of ground water, surface, soil or other natural or man-made conditions on the property caused by operations of the RLF Recipient or any of its borrowers, predecessors or successors. [71 FR 56675, Sept. 27, 2006, as amended at 79 FR 76133, Dec. 19, 2014] § 307.11 Pre-disbursement requirements and disbursement of funds to Revolving Loan Funds. (a) Pre-disbursement requirements. (i) Certification from the RLF Recipient that the Recipient's accounting system is adequate to identify, safeguard, and account for the entire RLF Capital Base, outstanding RLF loans, and other RLF operations. (ii) The RLF Recipient's certification that standard RLF loan documents reasonably necessary or advisable for lending are in place and a certification from the RLF Recipient's legal counsel that the loan documents are adequate and comply with the terms and conditions of the RLF Grant, RLF Plan, and applicable State and local law. The standard loan documents must include, at a minimum, the following: (A) Loan application; (B) Loan agreement; (C) Board of directors' meeting minutes approving the RLF loan; (D) Promissory note; (E) Security agreement(s); (F) Deed of trust or mortgage (as applicable); (G) Agreement of prior lien holder (as applicable); and (H) Evidence demonstrating that credit is not otherwise available on terms and conditions that permit the completion or successful operation of the activity to be financed. (iii) Evidence of fidelity bond coverage for persons authorized to handle funds under the RLF Grant award in an amount sufficient to protect the interests of EDA and the RLF. At a minimum, the amount of coverage shall be the maximum loan amount allowed for in the EDA-approved RLF Plan. (2) The RLF Recipient is required to maintain the adequacy of the RLF's accounting system and maintain and update standard RLF loan documents at all times during the duration of the RLF's operation. In addition, the RLF recipient must maintain sufficient fidelity bond coverage as described in this subsection for the duration of the RLF's operation. The RLF Recipient shall maintain records and documentation to demonstrate the requirements set out in this paragraph (a) are maintained for the duration of the RLF's operation. See also (b) Timing of request for disbursements. (c) Amount of disbursement. (d) Interest-bearing account. (e) Delays. (f) Local Share. (2) When an RLF has a combination of In-Kind Contributions, which must be specifically authorized in the terms and conditions of the RLF Grant and may be used to provide technical assistance to borrowers or for eligible RLF administrative costs, and cash Local Share, the cash Local Share and the Grant funds will be disbursed proportionately as needed for lending activities, provided that the last 20 percent of the Grant funds may not be disbursed until all cash Local Share has been expended. The full amount of the cash Local Share shall remain for use in the RLF. (g) Loan closing and disbursement schedule. (2) If an RLF Recipient fails to meet the prescribed lending schedule, EDA may de-obligate the non-disbursed balance of the RLF Grant. EDA may allow exceptions where: (i) Closed Loans approved prior to the schedule deadline will commence and complete disbursements within 45 days of the deadline; (ii) Closed Loans have commenced (but not completed) disbursement obligations prior to the deadline; or (iii) EDA has approved a time schedule extension pursuant to paragraph (h) of this section. (h) Time schedule extensions. (i) The delay was unforeseen or beyond the control of the RLF Recipient; (ii) The financial need for the RLF still exists; (iii) The current and planned use and the anticipated benefits of the RLF will remain consistent with the current CEDS and the RLF Plan; and (iv) The proposal of a revised time schedule is reasonable. An extension request must also provide an explanation as to why no further delays are anticipated. (2) EDA is under no obligation to grant a time extension. In the event an extension is denied, EDA may de-obligate all or part of the unused Grant funds and terminate the Grant. [71 FR 56675, Sept. 27, 2006, as amended at 75 FR 4264, Jan. 27, 2010; 79 FR 76133, Dec. 19, 2014; 82 FR 57055, Dec. 1, 2017] § 307.12 Revolving Loan Fund Income requirements during the Revolving Phase; payments on defaulted and written off Revolving Loan Fund loans; Voluntarily Contributed Capital. (a) Revolving Loan Fund Income requirements during the Revolving Phase. (1) Such RLF Income is earned and the administrative costs are accrued in the same fiscal year of the RLF Recipient; (2) RLF Income earned, but not used for administrative costs during the same fiscal year of the RLF Recipient is made available for lending activities; (3) RLF Income shall not be withdrawn from the RLF Capital Base in a subsequent fiscal year for any purpose other than lending without the prior written consent of EDA; and (4) An RLF Recipient shall not use funds in excess of RLF Income for administrative costs unless directed otherwise in writing by EDA. In accordance with EDA's RLF Risk Analysis System, RLF Recipients are expected to keep administrative costs to a minimum in order to maintain the RLF Capital Base. The percentage of RLF Income used for administrative expenses will be one of the measures used in EDA's RLF Risk Analysis System to evaluate RLF Recipients. See also (b) Compliance guidance. (1) For RLF Grants made on or after December 26, 2014. (2) For RLF Grants made before December 26, 2014. (i) 2 CFR part 225 (OMB Circular A-87 for State, local, and Indian tribal governments), (ii) 2 CFR part 230 (OMB Circular A-122 for non-profit organizations other than institutions of higher education, hospitals or organizations named in OMB Circular A-122 as not subject to such Circular), and (iii) 2 CFR part 220 (OMB Circular A-21 for educational institutions). (3) For all RLF Grants. (c) Priority of payments on defaulted and written off RLF loans. (1) First, (2) Second, (3) Third (4) Fourth (d) Voluntarily Contributed Capital. [71 FR 56675, Sept. 27, 2006, as amended at 73 FR 62867, Oct. 22, 2008; 79 FR 76134, Dec. 19, 2014; 82 FR 57056, Dec. 1, 2017] § 307.13 Records and retention. (a) Closed Loan files and related documents. (1) Principal, interest, fees, penalties and all other costs associated with the Closed Loan have been paid in full; or (2) Final settlement or discharge and cessation of collection efforts of any unpaid amounts associated with the Closed Loan have occurred. (b) Administrative records. (1) Maintain adequate accounting records and source documentation to substantiate the amount and percent of RLF Income expended for eligible RLF administrative costs. (2) Retain records of administrative expenses incurred for activities and equipment relating to the operation of the RLF for three years from the actual submission date of the report that covers the fiscal year in which such costs were claimed. (3) Consistent with § 307.11(a), for the duration of RLF operations, maintain records to demonstrate: (i) The adequacy of the RLF's accounting system to identify, safeguard, and account for the entire RLF Capital Base, outstanding RLF loans, and other RLF operations; (ii) That standard RLF loan documents reasonably necessary or advisable for lending are in place; and (iii) Evidence of fidelity bond coverage for persons authorized to handle funds under the Grant award in an amount sufficient to protect the interests of EDA and the RLF. (4) Make available for inspection retained records, including those retained for longer than the required period. The record retention periods described in this section are minimum periods and such prescription does not limit any other record retention requirement of law or agreement. In no event will EDA question claimed administrative costs that are more than three years old, unless fraud is at issue. [71 FR 56675, Sept. 27, 2006, as amended at 73 FR 62867, Oct. 22, 2008; 79 FR 76134, Dec. 19, 2014; 82 FR 57057, Dec. 1, 2017] § 307.14 Revolving Loan Fund report. (a) Frequency of reports. (b) Report contents. [82 FR 57057, Dec. 1, 2017] § 307.15 Prudent management of Revolving Loan Funds. (a) Accounting principles. (2) In accordance with GAAP, a loan loss reserve may be recorded in the RLF Recipient's financial statements to show the adjusted current value of an RLF's loan portfolio, provided this loan loss reserve is non-funded and is represented by a non-cash entry. However, loan loss reserves shall not be used to reduce the value of the RLF in the Schedule of Expenditures of Federal Awards (“SEFA”) required as part of the RLF Recipient's audit requirements under 2 CFR part 200. (b) Interest rates General rule. Wall Street Journal, Wall Street Journal. (2) Exception. Wall Street Journal (c) RLF leveraging. (i) Capital invested by the borrower or others; (ii) Financing from private entities; (iii) The non-guaranteed portions and 90 percent of the guaranteed portions of any Federal loan; or (iv) Loans from other State and local lending programs. (2) Private investments shall not include accrued equity in a borrower's assets. (d) RLF certification course. [71 FR 56675, Sept. 27, 2006, as amended at 73 FR 62868, Oct. 22, 2008; 75 FR 4264, Jan. 27, 2010; 79 FR 76134, Dec. 19, 2014; 82 FR 57057, Dec. 1, 2017] § 307.16 Risk Analysis System. (a) EDA shall evaluate and manage RLF recipients using a Risk Analysis System that will focus on such risk factors as: capital, assets, management, earnings, liquidity, strategic results, and financial controls. Risk analysis ratings of each RLF Recipient's RLF program shall be conducted at least annually and will be based on the most recently submitted Form ED-209 RLF report. (b) An RLF Recipient generally will be allowed a reasonable period of time to achieve compliance with risk factors as defined by EDA. However, persistent noncompliance with these factors and their limits as identified through EDA's Risk Analysis System over multiple Reporting Periods may result in EDA taking appropriate remedies for noncompliance as detailed in § 307.21. [82 FR 57057, Dec. 1, 2017] § 307.17 Requirements for Revolving Loan Fund Cash Available for Lending. (a) General. (b) Allowable Cash Percentage. (c) Restrictions on use of RLF Cash Available for Lending. (1) Acquire an equity position in a private business; (2) Subsidize interest payments on an existing RLF loan; (3) Provide a loan to a borrower for the purpose of meeting the requirements of equity contributions under another Federal Agency's loan programs; (4) Enable borrowers to acquire an interest in a business either through the purchase of stock or through the acquisition of assets, unless sufficient justification is provided in the loan documentation. Sufficient justification may include acquiring a business to save it from imminent closure or to acquire a business to facilitate a significant expansion or increase in investment with a significant increase in jobs. The potential economic benefits must be clearly consistent with the strategic objectives of the RLF; (5) Provide RLF loans to a borrower for the purpose of investing in interest-bearing accounts, certificates of deposit, or any investment unrelated to the RLF; or (6) Refinance existing debt, unless: (i) The RLF Recipient sufficiently demonstrates in the loan documentation a “sound economic justification” for the refinancing ( e.g., (ii) RLF Cash Available for Lending will finance the purchase of the rights of a prior lien holder during a foreclosure action which is necessary to preclude a significant loss on an RLF loan. RLF funds may be used for this purpose only if there is a high probability of receiving compensation from the sale of assets sufficient to cover an RLF's costs plus a reasonable portion of the outstanding RLF loan within a reasonable time frame approved by EDA following the date of refinancing. (7) Serve as collateral to obtain credit or any other type of financing without EDA's prior written approval; (8) Support operations or administration of the RLF Recipient; or (9) Undertake any activity that would violate the requirements found in part 314 of this chapter, including § 314.3 (“Authorized Use of Property”) and § 314.4 (“Unauthorized Use of Property”). [82 FR 57057, Dec. 1, 2017] § 307.18 Addition of lending areas; consolidation and merger of RLFs. (a)(1) An RLF Recipient shall make loans only within its EDA-approved lending area, as set forth and defined in the RLF Grant and the RLF Plan. An RLF Recipient may add a lending area (an “ Additional Lending Area” New Lending Area” (i) The Additional Lending Area must meet the economic distress criteria for Economic Adjustment Assistance Investments under this part and in accordance with § 301.3(a) of this chapter; (ii) Prior to EDA's disbursement of additional funds to the RLF Recipient (for example, through a recapitalization), EDA shall determine a new Investment Rate for the New Lending Area based on the criteria set forth in § 301.4 of this chapter; (iii) The RLF Recipient must demonstrate that the Additional Lending Area is consistent with its CEDS, or modify its CEDS for any such Additional Lending Area, in accordance with § 307.9(b)(1); (iv) The RLF Recipient shall modify its Plan to incorporate the Additional Lending Area and revise its lending strategy, as necessary; (v) The RLF Recipient shall execute an amended financial assistance award, as necessary; and (vi) The RLF Recipient fulfills any other conditions reasonably requested by EDA. (2) Following EDA approval, the New Lending Area designation shall remain in place until EDA approves a subsequent request for a New Lending Area. (b) Consolidation and merger of RLFs Single RLF Recipient. (i) It is up-to-date with all reports in accordance with § 307.14; (ii) It demonstrates a rational basis for undertaking the consolidation (for example, the lending area(s) and borrower criteria identified in different RLF Plans are compatible, or will be compatible, for all RLFs to be consolidated); (iii) It amends and consolidates its Plan to account for the consolidation of RLFs, including items such as the New Lending Area (including any Additional Lending Area(s)), its lending strategy and borrower criteria; (iv) Prior to EDA's disbursement of additional funds to the RLF Recipient (for example, through a recapitalization), EDA shall determine a new Investment Rate for the New Lending Area based on the criteria set forth in § 301.4 of this chapter; and (v) The RLF Recipient fulfills any other conditions reasonably requested by EDA. (2) Multiple RLF Recipients. (i) The replacement RLF Recipient is up-to-date with all reports in accordance with § 307.14; (ii) The surviving RLF Recipient amends and consolidates its Plan to account for the merger of RLFs, including items such as the New Lending Area (including any Additional Lending Area(s)), its lending strategy and borrower criteria; (iii) Prior to EDA's disbursement of additional funds to the surviving RLF Recipient (for example, through a recapitalization), EDA shall determine a new Investment Rate for the New Lending Area based on the criteria set forth in § 301.4 of this chapter; (iv) EDA must provide written approval of the merger agreement(s), modifications and revisions to the Plans and any other related amendments thereto; (v) All applicable RLF Grant assets of the discharging RLF Recipient(s) transfer to the surviving RLF Recipient as of the merger's effective date; and (vi) The surviving RLF Recipient becomes fully responsible for administration of the RLF Grant assets transferred and fulfills all surviving RLF Grant requirements and any other conditions reasonably requested by EDA. [71 FR 56675, Sept. 27, 2006, as amended at 73 FR 62869, Oct. 22, 2008; 79 FR 76135, Dec. 19, 2014; 82 FR 57058, Dec. 1, 2017] § 307.19 RLF loan portfolio Sales and Securitizations. EDA may take such actions as appropriate to enable an RLF Recipient to sell or securitize RLF loans, except that EDA may not issue a Federal guaranty covering any issued Security. With prior approval from EDA, an RLF Recipient may enter into a Sale or a Securitization of all or a portion of its RLF loan portfolio, provided: (a) An RLF Recipient must use all proceeds from any Sale or Securitization (net of reasonable transaction costs) to make additional RLF loans; (b) No Security collateralized by RLF loans and other RLF property and offered in a secondary market transaction pursuant to a Securitization shall be treated as an Exempt Security for purposes of the Securities Act of 1933, as amended (15 U.S.C. 77a et seq. et seq. Exchange Act (c) Except as provided in paragraph (b), no provision of this section supersedes or otherwise affects the application of the “securities laws” (as such term is defined in section 3(a)(47) of the Exchange Act) or the rules, regulations or orders issued by the Commission or a self-regulatory organization under the Commission. [71 FR 56675, Sept. 27, 2006, as amended at 79 FR 76135, Dec. 19, 2014] § 307.20 Noncompliance. EDA will take appropriate compliance actions as detailed in § 307.21 for the RLF Recipient's failure to operate the RLF in accordance with the RLF Plan, the terms and conditions of the RLF Grant, or this subpart, including but not limited to: (a) Failing to obtain prior EDA approval for material changes to the RLF Plan, including provisions for administering the RLF; (b) Failing to submit an updated RLF Plan to EDA in accordance with § 307.9(c); (c) Failing to submit timely progress, financial, and audit reports in the format required by the RLF Grant and § 307.14, including the Form ED-209 RLF report; (d) Failing to manage the RLF Grant in accordance with Prudent Lending Practices, as defined in § 307.8; (e) Holding RLF Cash Available for Lending so that it is 50 percent or more of the RLF Capital Base for 24 months without an EDA-approved extension request based on other EDA risk analysis factors or other extenuating circumstances; (f) Making an ineligible loan; (g) Failing to disburse the EDA funds in accordance with the time schedule prescribed in the RLF Grant; (h) Failing to sequester funds or remit the interest on EDA's portion of the sequestered funds to the U.S. Treasury, as directed by EDA; (i) Failing to comply with the audit requirements set forth in subpart F to 2 CFR part 200 and the related Compliance Supplement, including reference to the correctly valued EDA RLF Federal expenditures in the SEFA, timely submission of audit reports to the Federal Audit Clearinghouse, and the inclusion of the RLF program as an appropriately audited program; (j) Failing to implement timely resolutions to audit findings or questioned costs contained in the annual audit, as applicable; (k) Failing to comply with an EDA-approved corrective action plan to remedy persistent noncompliance with RLF-related findings; (l) Failing to comply with the conflicts of interest provisions set forth in § 302.17; and (m) Making unauthorized use of RLF Cash Available for Lending in violation of § 307.18(c). [82 FR 57058, Dec. 1, 2017] § 307.21 Remedies for noncompliance. (a) General. (1) Increased reporting requirements; (2) Implementation of a corrective action plan; (3) A special audit; (4) Sequestration of RLF funds; (5) Repayment of ineligible loans or other costs to the RLF; (6) Transfer or merger of the RLF in accordance with § 307.18; (7) Suspension of the RLF Grant; or (8) Termination of the RLF Grant, in whole or in part. (b) Disallowance of a portion of an RLF Grant, liquidation. (1) Holding RLF Cash Available for Lending so that it is 50 percent or more of the RLF Capital Base for 24 months without an EDA-approved extension request; (2) Failing to disburse the EDA funds in accordance with the time schedule prescribed in the RLF Grant; or (3) Determining that it does not wish to further invest in the RLF or cannot maintain operations at the degree originally contemplated upon receipt of the RLF Grant and requests that a portion of the RLF Grant be disallowed, and EDA agrees to the disallowance. (c) Termination or suspension. (d) Termination, liquidation upon termination. (1) EDA shall have sole discretion in choosing the RLF Third Party; (2) The RLF Third Party may be an Eligible Applicant or a for-profit organization not otherwise eligible for Investment Assistance; (3) EDA may enter into an agreement with the RLF Third Party to liquidate the assets of one or more RLFs or RLF Recipients; (4) EDA may allow the RLF Third Party to retain a portion of the RLF assets, consistent with the agreement referenced in paragraph (d)(3) of this section, as reasonable compensation for services rendered in the liquidation; and (5) EDA may require additional reasonable terms and conditions. (e) Distribution of proceeds. (1) First, (2) Second, (3) Third, (f) RLF Recipient's request to terminate. (g) Distribution of proceeds upon termination. [82 FR 57058, Dec. 1, 2017] § 307.22 Variances. EDA may approve variances to the requirements contained in this subpart, provided such variances: (a) Are consistent with the goals of the Economic Adjustment Assistance program and with an RLF Plan; (b) Are necessary and reasonable for the effective implementation of the RLF; (c) Are economically and financially sound; and (d) Do not conflict with any applicable legal requirements, including Federal, State and local law.