PART 1777 ‑ Section 306C WWD Loans and Grants

## **Table of Contents**

1777.1 General

1777.2 \[Reserved\]

1777.3 Objective

1777.4 Definitions

1777.5 ‑ 1777.10 \[Reserved\]

1777.11 Making, processing, and servicing loans and grants

1777.12 Eligibility

1777.13 Project priority

1777.14 ‑ 1777.20 \[Reserved\]

1777.21 Use of funds

1777.22 ‑ 1777.30 \[Reserved\]

1777.31 Rates

1777.32 ‑ 1777.40 \[Reserved\]

1777.41 Individual loans and grants

1777.42 Delegation of authority

1777.43 Bulletins

1777.44 ‑ 1777.99 \[Reserved\]

1777.100 OMB control number

Authority: 5 U.S.C. 301; 7 U.S.C. 1989; 16 U.S.C. 1005.

PART 1777 ‑ Section 306C WWD Loans and Grants

§1777.1 [General.]{.underline}

\(a\) This part outlines Rural Utilities Service (RUS) policies and
procedures for making Water and Waste Disposal (WWD) loans and grants
authorized under Section 306C of the Consolidated Farm and Rural
Development Act (7 U.S.C. 1926(c)), as amended.

\(b\) Agency officials will maintain liaison with officials of other
Federal, State, regional, and local development agencies to coordinate
related programs to achieve rural development objectives.

\(c\) Agency officials shall cooperate with appropriate State agencies
in making loans and/or grants that support State strategies for rural
area development.

\(d\) Funds allocated in accordance with this part will be considered
for use by Indian tribes within the State regardless of whether State
development strategies include Indian reservations within the State\'s
boundaries. Indians residing on such reservations must have an equal
opportunity to participate in this program.

\(e\) Federal statutes provide for extending the Agency\'s financial
programs without regard to race, color, religion, sex, national origin,
marital status, age, or physical/mental handicap (provided the
participant possesses the capacity to enter into legal contracts).

§1777.2 \[Reserved\]

§1777.3 [Objective]{.underline}.

The objective of the Section 306C WWD Loans and Grants program is to
provide water and waste disposal facilities and services to low‑income
rural communities whose residents face significant health risks.

§1777.4 [Definitions]{.underline}.

[Applicant]{.underline}. Entity that receives the Agency loan or grant
under this part. The entities can be public bodies such as
municipalities, counties, districts, authorities, or other political
subdivisions of a State, and organizations operated on a not‑for‑profit
basis such as associations, cooperatives, private corporations, or
Indian tribes on Federal and State reservations, and other Federally
recognized Indian tribes.

[Colonia]{.underline}. Any identifiable community designated in writing
by the State or county in which it is located; determined to be a
colonia on the basis of objective criteria including lack of potable
water supply, lack of adequate sewage systems, and lack of decent, safe,
and sanitary housing, inadequate roads and drainage; and existed and was
generally recognized as a colonia before October 1, 1989.

[Cooperative]{.underline}. A cooperative formed specifically for the
purpose of the installation, expansion, improvement, or operation of
water supply or waste disposal facilities or systems.

[Individual]{.underline}. Recipient of a loan or grant through the
applicant to facilitate use of the applicant\'s water and/or waste
disposal system.

[Rural areas]{.underline}. Includes unincorporated areas and any city or
town with a population not in excess of 10,000 inhabitants according to
the most recent decennial census of the United States. They can be
located in any of the 50 States, the Commonwealth of Puerto Rico, the
Western Pacific Territories, Marshall Islands, Federated States of
Micronesia, Republic of Palau, and the U.S. Virgin Islands.

[Statewide Nonmetropolitan Median Household Income (SNMHI)]{.underline}.
Median household income of the State's nonmetropolitan counties and
portions of metropolitan counties outside of cities, towns or places of
50,000 or more population.

§§1777.5 ‑ 1777.10 \[Reserved\]

§1777.11 [Making, processing, and servicing loans and
grants]{.underline}.

Unless specifically modified by this part, loans and/or grants will be
made, processed, and serviced in accordance with part 1780 of this
chapter.

§1777.12 [Eligibility]{.underline}.

\(a\) The provisions of paragraphs (a)(1) and (2) of this section do not
apply to a rural area recognized as a colonia. Otherwise, the facility
financed under this part must provide water and/or waste disposal
services to rural areas of a county where, on the date preapplication is
received by the Agency, the:

\(1\) Per capita income of the residents is not more than 70 percent of
the most recent national average per capita income, as determined by the
Department of Commerce; and

\(2\) Unemployment rate of the residents is not less than 125 percent of
the most recent national average unemployment rate, as determined by the
Bureau of Labor Statistics.

\(b\) Residents of the rural area to be served must face significant
health risks due to the fact that a significant proportion of the
community\'s residents do not have access to, or are not served by,
adequate, affordable, water and/or waste disposal systems. The file
should contain documentation to support this determination.

§1777.13 [Project priority]{.underline}.

Paragraphs (a) through (d) indicate items and conditions which must be
considered in selecting preapplications for further development. When
ranking eligible preapplications for consideration for limited funds,
Agency officials must consider the priority items met by each
preapplication and the degree to which those priorities are met.

\(a\) [Preapplications]{.underline}. The preapplication and supporting
information submitted with it will be used to determine applicant
eligibility and the proposed project\'s priority for available funds.
Applicants determined ineligible will be advised of their appeal rights
in accordance with 7 CFR part 11.

\(b\) [State Office review]{.underline}. All preapplications will be
reviewed and scored for funding priority at each State Office using RUS
Bulletin 1777-2. Funds will be requested from the National Office,
Attention: Water and Waste Processing, using RUS Bulletin 1777-3.
Eligible applicants that cannot be funded should be advised that funds
are not available and advised of their appeal rights as set forth in 7
CFR part 11.

\(c\) [National Office]{.underline}. The National Office will allocate
funds on a project‑by‑project basis as requests are received. If the
amount of funds requested exceeds the amount of funds available, the
total project score will be used to select projects for funding. The RUS
Administrator may assign up to 35 additional points that will be
considered in the total points for items such as geographic distribution
of funds, severity of health risks, etc.

\(d\) [Selection priorities]{.underline}. The priorities described below
will be used to rate preapplications and in selecting projects for
funding. Points will be distributed as indicated in paragraphs (d)(1)
through (d)(5) of this section and will be used in selecting projects
for funding. A copy of RUS Bulletin 1777-2, used to rate applications,
should be placed in the case file for future reference.

\(1\) [Population]{.underline}. The proposed project will serve an area
with a rural population:

\(i\) Not in excess of 1,500 ‑ 30 points.

\(ii\) More than 1,500 and not in excess of 3,000 ‑ 20 points.

\(iii\) More than 3,000 and not in excess of 5,500 ‑ 10 points.

\(2\) [Income]{.underline}. The median household income of population to
be served by the proposed project is:

\(i\) Not in excess of 50 percent of the statewide nonmetropolitan
median household income ‑ 40 points.

\(ii\) More than 50 percent and not in excess of 60 percent of the
statewide nonmetropolitan median household income ‑ 20 points.

\(iii\) More than 60 percent and not in excess of 70 percent of the
statewide nonmetropolitan median household income ‑ 10 points.

\(3\) [Joint financing]{.underline}. The amount of joint financing
committed to the proposed project is:

\(i\) Twenty percent or more private, local, or State funds except
Federal funds channeled through a State agency ‑ 10 points.

\(ii\) Five to 19 percent private, local, or State funds except Federal
funds channeled through a State agency ‑ 5 points.

\(4\) [Colonia]{.underline}. (See definition in §1777.4). The proposed
project will provide water and/or waste disposal services to the
residents of a colonia ‑ 50 points.

\(5\) [Discretionary]{.underline}. In certain cases, the State Program
Official may assign up to 15 points for items such as natural disaster,
to improve compatibility/coordination between the Agency\'s and other
agencies\' selection systems, to assist those projects that are the most
cost effective, high unemployment rate, severity of health risks, etc. A
written justification must be prepared and attached to RUS Bulletin
1777-2 each time these points are assigned.

§§1777.14 ‑ 1777.20 \[Reserved\]

§1777.21 [Use of funds]{.underline}.

\(a\) [Applicant]{.underline}. Funds may be used to:

\(1\) Construct, enlarge, extend, or otherwise improve community water
and/or waste disposal systems. Otherwise improve would include extending
service lines to and/or connecting residence\'s plumbing to the system.

\(2\) Make loans and grants to individuals for extending service lines
to and/or connecting residences to the applicant\'s system. The approval
official must determine that this is a practical and economical method
of connecting individuals to the community water and/or waste disposal
system. Loan funds can only be used for loans, and grant funds can only
be used for grants.

\(3\) Make improvements to individual\'s residence when needed to allow
use of the water and/or waste disposal system.

\(4\) Grants can be made up to 100 percent of eligible project costs.

\(b\) [Individuals]{.underline}. Funds may be used to:

\(1\) Extend service lines to residence.

\(2\) Connect service lines to residence\'s plumbing.

\(3\) Pay reasonable charges or fees for connecting to a community water
and/or waste disposal system.

\(4\) Pay for necessary installation of plumbing and related fixtures
within dwellings lacking such facilities. This is limited to one
bathtub, sink, commode, kitchen sink, water heater, and outside spigot.

\(5\) Construction and/or partitioning off a portion of dwelling for a
bathroom, not to exceed 4.6 square meters (48 square feet) in size.

\(6\) Pay reasonable costs for closing abandoned septic tanks and water
wells when necessary to protect the health and safety of recipients of a
grant in paragraphs (b)(1) or (b)(2) of this section and is required by
local or State law.

§§1777.22 ‑ 1777.30 \[Reserved\]

§1777.31 [Rates]{.underline}.

\(a\) Applicant loans will bear interest at the rate of 5 percent per
annum.

\(b\) Individual loans will bear interest at the rate of:

\(1\) Five percent per annum; or

\(2\) The Federal Financing Bank rate for loans of a similar term at the
time of Agency loan approval, whichever is less.

§§1777.32 ‑ 1777.40 \[Reserved\]

§1777.41 [Individual loans and grants]{.underline}.

\(a\) The amount of loan and grant funds approved by the Agency will be
based on the need shown in the application and an implementation plan
submitted by the applicant. The implementation plan will include such
things as: purpose, how funds will be used, proposed application
process, construction requirements, control and disbursement of funds,
etc. The implementation plan will be attached to RUS Bulletin 1777-1.

\(b\) RUS Bulletin 1777-1 is a Memorandum of Agreement which sets forth
the procedures and regulations for making and servicing loans and grants
made by applicants to individuals. The State Program Official is
authorized to enter into a Memorandum of Agreement with any applicant
providing loans and/or grants to individuals. The Memorandum of
Agreement can be amended to comply with State law and recommendations by
the Office of General Counsel. It may also be amended to eliminate
references to loans and/or grants if no loan and/or grant is involved.
The State Program Official is responsible for:

\(1\) Ensuring that all provisions of the Agreement are understood.

\(2\) Determining that the applicant has the ability to make and service
loans and/or grants in the manner outlined in the Agreement.

\(c\) Agency funds remaining after providing individual loans and/or
grants will be returned to the Agency. The funds should be disbursed to
individuals within 1 year from the date water and/or waste disposal
service is available to the individuals. The State Program Official can
make an exception to this 1 year requirement if written justification is
provided by the applicant.

§1777.42 Delegation of authority.

The State Program Official is responsible for the overall implementation
of the authorities contained in this part and may redelegate any such
authority to appropriate Agency employees.

§1777.43 Bulletins.

RUS Bulletin 1780-12 referenced in part 1780 of this chapter and RUS
Bulletins 1777‑1, 1777-2 and 1777-3 are for use in administering loans
and/or grants made under this part. Bulletins, instructions and forms
are available from any USDA/Rural Development office or the Rural
Utilities Service, United States Department of Agriculture, Washington,
D.C. 20250-1500.

§§1777.44 ‑ 1777.99 \[Reserved\]

§1777.100 [OMB control number]{.underline}.

The reporting and recordkeeping requirements contained in this part have
been approved by the Office of Management and Budget and assigned OMB
control number 0570‑0001. Public reporting burden for this collection of
information is estimated to vary from 5 to 30 hours per response with an
average of 17.5 hours per response, including the time for reviewing
instructions, searching existing data sources, gathering and maintaining
the data needed, and completing and reviewing the collection of
information. Send comments regarding this burden estimate or any other
aspect of this collection of information, including suggestions for
reducing this burden, to U.S. Department of Agriculture, Clearance
Officer, OIRM, Room 404‑W, Washington, D.C. 20250; and to the Office of
Information and Regulatory Affairs, Office of Management and Budget,
Washington, D.C. 20503.

Memorandum of Agreement Between

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and the Rural Utilities Service (RUS)

This Memorandum of Agreement establishes authorities and procedures
whereby
the\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
(Name of Organization),
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\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_, (Phone No.),
a\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
system, (enter type of system such as waste disposal, or water)
hereinafter referred to as the \"system,\" will process and service
water and waste loans and grants authorized under Section 306C of the
Consolidated Farm and Rural Development Act, as amended, to facilitate
individual\'s use of the system. It is agreed that the system will
receive applications, process, close, and service loans or grants as
provided in this agreement and the attached implementation plan. The
system\'s files should be adequately documented to show the basis for
individual loan and grant eligibility.

[Effective date of this agreement]{.underline}: This agreement shall be
effective on the date of the last signature and date hereto.

[Duration of agreement]{.underline}: This agreement shall continue to be
in effect until all loans made are collected or otherwise satisfied by
the system and any loan made by the Agency for such purpose is paid in
full or otherwise satisfied.

[Purpose]{.underline}: The system will inform individual residents that
loans and/or grants will be made available to eligible users through the
system. Loans and grants will only be made to users to extend service
to, connect their residence to, or make improvements needed to
facilitate use of the system. Regulations and guidance for loan/grant
making and loan servicing are provided in this part of the agreement.
The individuals must reside in a community whose residents face
significant health risks due to the fact that a significant portion of
the community\'s residents do not have access to, or are not served by,
adequate, affordable, water supply systems or waste disposal facilities.

A. [Loan Eligibility]{.underline}.

Loans may be made to individuals who:

1\. Are individuals who are neither eligible for, nor have received a
grant under this agreement; and

2\. Have an ownership interest in the dwelling to be connected to the
system or improved and located in a rural area; and

3\. Have a total taxable household income of not more than 125 percent
of the most recent poverty income guidelines established by Department
of Health and Human Services. The household income will be based on the
latest Federal income tax form or signed statement that their income is
below the level required to file a Federal income tax form from all
individuals residing in the household; and

4\. Are unable to pay for the costs of improvements without a loan.

B. [Grant Eligibility]{.underline}.

Grants may be made to individuals who:

1\. Have an ownership interest in the dwelling to be connected to the
system or improved and located in a rural area; and

2\. Have a total taxable household income that is below the most recent
poverty income guidelines established by Department of Health and Human
Services. The household income will be based on the latest Federal
income tax form or signed statement that their income is below the level
required to file a Federal income tax form from all individuals residing
in the household; and

3\. Are unable to repay a loan under paragraph A of this bulletin if
funds are available.

C. [Terms]{.underline}.

1\. The interest rate on loans made under this agreement will be\_
percent per annum.

2\. Loan repayment terms will not exceed the Agency loan repayment
terms.

3\. Loans will be evidenced by a promissory note developed in accordance
with State law by the system.

4\. The loan will be collected at the same time as the regular service
bill is collected for such residence. Payments of the loan will be
considered as part of the service rendered to users of the service until
the loan is paid or otherwise satisfied.

D. [Loan/Grant Purposes.]{.underline}

Funds may be used to:

1\. Extend service lines to, or connect the dwelling\'s plumbing to, the
system to allow use of the system.

2\. Pay reasonable costs of connection fees and other charges regularly
charged by the system.

3\. Pay for necessary installation of plumbing and related fixtures
within dwellings lacking such facilities. This is limited to one
bathtub, sink, commode, kitchen sink, water heater, and outside spigot.

4\. Construction and/or partitioning off a portion of the dwelling for a
bathroom, not to exceed 4.6 square meters (48 square feet) in size.

5\. Pay reasonable costs for closing abandoned septic tanks and water
wells when necessary to protect the health and safety of recipients of a
grant in paragraphs D.1. or D.2. of this bulletin and is required by
local or State law.

E. [Restrictions on Use of Funds]{.underline}.

Funds cannot be used to:

1\. Make improvements to the residence, except for the improvements
authorized by paragraph D of this bulletin.

2\. Pay individuals for their own labor.

F. [Loan/Grant Processing]{.underline}.

1\. The system will develop its own application for processing loans and
grants.

2\. The system will assist individuals in completing an application and
promissory note.

3\. The system will provide or arrange for technical assistance, as
needed, to determine improvements to be made, their costs, and that the
costs are reasonable.

4\. The system may contract with the individuals to do the work or
arrange for the improvements to be installed by a contractor
satisfactory to the system and the individual. In either case, the
individual will sign a contract agreement covering the planned
improvements.

G. [Payment for the Work]{.underline}.

1\. The system will pay the contractor after making such inspection of
the work as it deems necessary and acceptance by the individual. The
agreement between the contractor and the individual must require the
contractor to warrant and guarantee, for a period of 12 months from the
date of completion, that the work is free from all defects due to faulty
materials or workmanship, and that the contractor shall promptly make
such corrections as may be necessary by reason of such defects.

2\. The system will advance funds, as needed, to individuals acting as
his/her own contractor, to pay for materials and labor other than labor
of the individual. The system will inspect the work as it deems
necessary to assure that the improvements are being installed
satisfactorily.

H. [Account Servicing]{.underline}.

1\. The system will follow generally acceptable accounting practices in
maintaining and servicing the borrower\'s account during the life of the
loan. Scheduled note payments will be collected with the borrower\'s
utility service billing and be deposited in the account used to make
Agency\'s loan payment.

2\. Interest on unpaid interest shall not be charged.

3\. Late charges may be assessed at the option of the system on
delinquent accounts.

I. [Inspection of Records]{.underline}.

The system will provide the Agency (or other appropriate Federal
agencies), at all reasonable times, access to all books and records
relating to loans made under the provisions of this Agreement.

J. [Personal Benefit Clause]{.underline}

No member of or delegate to Congress or residence commissioner shall be
admitted to any share or part of this agreement or to any benefit to
arise therefrom, unless it be made with a corporation for its general
benefit.

K. [Payment for Services]{.underline}.

Individuals may be charged customary fees for technical services
provided in determining the type and amount of improvements, obtaining
costs estimates, and for inspections made to insure that the
improvements have been properly completed. Loan funds may only be used
for these purposes to the extent set forth in paragraph D of this
bulletin. However, neither the Agency nor the system will pay a loan
origination or packaging fee, nor will a fee be paid for servicing the
account during the life of the loan.

L. [Administrative Policy]{.underline}.

1\. The State Program Official will provide to the system the most
recent poverty income guidelines.

2\. The State Program Official will provide guidance needed by the
system in carrying out this program.

3\. When all funds covered by this agreement have been disbursed by the
system, the system will provide the State Program Official a report on
how the funds were used. The report will include the names of
individuals that received assistance, the type of assistance (loan or
grant), and the amount of assistance.

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(Name)

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(Title of System Representative)

Date: \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

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(Name)

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(State Program Official)

Date: \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Section 306C WWD Loans and Grants

Project Selection Criteria

State Program Official\'s Project Score
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Name of Applicant
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State \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ County
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Per Capita Income of County \_\_\_\_\_\_\_\_\_\_\_\_ Percent of National
Average \_\_\_\_\_

Unemployment Rate of Residents \_\_\_\_\_\_\_\_\_ Percent of National
Average \_\_\_\_\_

Statewide Median Household Income \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Median Household Income of Population Served
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Congressional District No. \_\_\_\_\_\_\_\_\_\_

Loan Request \$\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ Grant Request
\$\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

[Priorities]{.underline} [Points]{.underline}

A. Population: The proposed project will serve an area

with a rural population:

1\. Not in excess of 1,500 30

2\. More than 1,500 and not in excess of 3,000 20

3\. More than 3,000 and not in excess of 5,500 10

B. Income: The median household income of population

to be served by the proposed project is:

1\. Not in excess of 50 percent of the statewide

nonmetropolitan median household income 40

2\. More than 50 percent and not in excess of 60

percent of the statewide nonmetropolitan median

household income 20

3\. More than 60 percent and not in excess of 70

percent of the statewide nonmetropolitan median

household income 10

C. Joint financing: The amount of joint financing

committed to the proposed project is:

1\. Twenty percent or more private, local, or State funds

except Federal funds channeled through a

State agency 10

2\. Five to 19 percent private, local, or State funds

except Federal funds channeled through a

State agency 5

D. Colonia: The proposed project will provide water

and/or waste disposal services to the residents of a

colonia 50

E. Discretionary: In certain cases, the State Program

Official may assign up to 15 points for items such as

natural disaster, improve compatibility/coordination

between the Agency\'s and other agencies\' selection

systems, to assist those projects that are the most

cost effective, high unemployment rate, severity

of health risks, etc. A written justification must be

prepared and attached to this bulletin each time the

State Program Official assigns these points. Enter

number of discretionary points, if any, assigned by

the State Program Official \_\_\_\_

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Date State Program Official

Instructions: In parts A through E of this bulletin, circle the points
for those priorities that are met by the proposed project and enter the
total project score on page one. The State Program Official can
recommend discretionary points by providing a written justification
which is attached to this bulletin. If necessary discretionary points
will be assigned by the RUS Administrator.

TO: Administrator, RUS

Washington, DC 20250

Attention: Water and Waste

STOP: 1570

State
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Name of Applicant
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Amount of Section 306C loan funds requested
\$\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Amount of Section 306C grant funds requested
\$\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

The proposed project serves a colonia \_\_\_\_\_\_\_ Yes \_\_\_\_\_\_\_
No

Comments:

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Date State Program Official

FOR USE BY NATIONAL OFFICE

State Program Official\'s Project Score
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Administrator\'s Discretionary Points \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Total Project Score \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Instructions: This bulletin is the transmittal memorandum used for
requesting funds from the National Office. Complete and attach this
bulletin to the front of RUS Bulletin 1777-2 of this part and submit to
the National Office.