RD Instruction 1951-0

Table of Contents

Page 1

PART 1951 - SERVICING AND COLLECTIONS

Subpart O - Servicing Cases Where Unauthorized Loan(s) or Other
Financial

Assistance Was Received\--Community and Insured Business Programs

## [TABLE OF CONTENTS]{.underline}

## 

[Sec]{.underline}. [Page]{.underline}

1951.701 Purpose. 1

1951.702 Definitions. 1

1951.703 Policy. 2

1951.704 - 1951.705 \[Reserved\] 2

1951.706 Initial determination that unauthorized 2

assistance was received.

1951.707 Determination of the amount of unauthorized

assistance. 4

\(a\) Unauthorized loan amount. 4

\(b\) Unauthorized grant amount. 4

1951.708 Notification to recipient. 4

1951.709 Decision on servicing actions. 6

\(a\) Payment in full. 6

\(b\) Continuation with recipient. 7

\(c\) Appeals. 7

\(d\) Liquidation of loan(s) or legal action\
to enforce collection. 7

1951.710 \[Reserved\] 9

1951.711 Servicing options in lieu of liquidation or legal

action to collect. 9

\(a\) Continuation on modified terms. 10

\(b\) Continuation on existing terms. 11

1951.712 - 1951.714 \[Reserved\] 11

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RD Instruction 1951-0

Table of Contents

Page 2

[Sec]{.underline}. [Page]{.underline}

*1951.715 Account adjustments. 11*

*(a) Entire loan unauthorized. 12*

*(b) Portion of loan unauthorized. 12*

*(c) Unauthorized subsidy benefits received. 13*

*(d) Liquidation pending. 13*

*(e) Liquidation not initiated. 13*

*(f) Unauthorized grant assistance. 13*

*(g) Delinquent accounts. 14*

*1951.716 Reporting requirements to National Office. 14*

1951.717 Exception Authority. 14

1951.718 -- 1951.750 \[Reserved\] 14

Attachments: Exhibits A and B

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RD Instruction 1951-O

PART 1951 - SERVICING AND COLLECTIONS

Subpart O - Servicing Cases Where Unauthorized Loan(s) or Other
Financial

Assistance Was Received\--Community and Insured Business

Programs

§ 1951.701 [Purpose]{.underline}.

This subpart prescribes the policies and procedures for servicing
Community and Business Program loans and/or grants made by Rural
Development when it is determined that the borrower or grantee was not
eligible for all or part of the financial assistance received in the
form of a loan, grant, or subsidy granted, or any other direct financial
assistance. It does not apply to guaranteed loans. Loans sold without
insurance by Rural Development to the private sector will be serviced in
the private sector and will not be serviced under this subpart. The
provisions of this subpart are not applicable to such loans. Future
changes to this subpart will not be made applicable to such loans. This
subpart does not apply to Water and Waste Programs of the Rural
Utilities Service, Watershed loans, and Resource Conservation and
Development loans, which are serviced under part 1782 of this title.
(Revised 10-29-07, SPECIAL PN.)

§ 1951.702 [Definitions]{.underline}.

As used in this subpart, the following definitions apply:

[Active borrower]{.underline}. A borrower who has an outstanding account
in the records of the office of the Deputy Chief Financial Officer
(DCFO), including collection-only or an unsatisfied account balance
where a voluntary conveyance was accepted without release from liability
or foreclosure did not satisfy the indebtedness.

[Assistance]{.underline}. Financial assistance in the form of a loan,
grant, or subsidy received.

[Debt instrument]{.underline}. Used as a collective term to include
promissory note, assumption agreement, grant agreement, or bond.

[False information]{.underline}. Information, known to be incorrect,
provided with the intent to obtain benefits which would not have been
obtainable based on correct information.

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

DISTRIBUTION: WSAL Account Servicing

Servicing and Collections

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RD Instruction 1951-0

§ 1951.702 (Con.)

[Inaccurate information]{.underline}. Incorrect information provided
inadvertently without intent to obtain benefits fraudulently.

[Inactive borrower]{.underline}. A former borrower whose loan(s) has
(have) been paid in full or assumed by another party(ies) and who does
not have an outstanding account in the records of the DCFO.

[Recipient]{.underline}. \"Recipient\" refers to an individual or entity
that received a loan, or portion of a loan, an interest subsidy, a
grant, or a portion of a grant which was unauthorized.

[Rural Development]{.underline}. A mission area within the U.S.
Department of Agriculture consisting of the Office of the Under
Secretary for Rural Development, Office of Community Development, Rural
Business-Cooperative Service, Rural Housing Service and Rural Utilities
Service and their successors.

*[Servicing official]{.underline}. For Community Programs, the servicing
official is the Rural Development Manager, the Assistant Rural
Development Manager, or the Rural Development Specialist so designated.
For Business Programs, the servicing official is the State Director or
Designee.*

[Unauthorized assistance]{.underline}. Any loan, interest subsidy,
grant, or portion thereof received by a recipient for which there was no
regulatory authorization or for which the recipient was not eligible.
Interest subsidy includes subsidy benefits received because a loan was
closed at a lower interest rate than that to which the recipient was
entitled, whether the incorrect interest rate was selected erroneously
by the approval official, or the documents were prepared in error.

§ 1951.703 [Policy]{.underline}.

When unauthorized assistance has been received, an expeditious effort
must be made to collect from the recipient the sum which is determined
to be unauthorized, regardless of amount.

§ 1951.704 - 1951.705 \[Reserved\]

§ 1951.706 [Initial determination that unauthorized assistance was
received]{.underline}.

Unauthorized assistance may be identified through audits conducted by
the USDA Office of the Inspector General (OIG); through reviews made by
Rural Development personnel; or through other means such as information
provided by a private citizen who documents that unauthorized assistance
has been received by a recipient of Rural Development assistance.

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RD Instruction 1951-0

§ 1951.706 (Con.)

*If the servicing official has reason to believe unauthorized assistance
as received, but is unable to determine whether or not the assistance
was in fact unauthorized, the case file including the advice of the
Regional Office of the General Counsel (OGC) will be referred to the
National Office for review and comment.*

*In every case where it is known or believed by Rural Development that
the assistance was based on false information, investigation by the OIG
will be requested. (See RD Instruction 2012-A in the case of audits and
Instruction 2012-B in the case of investigations.)*

*If OIG conducts an audit or investigation, the notification actions
outlined in\
§ 1951.708 will be deferred until the OIG investigation is completed and
the report is received by the Agency.*

*For each recommendation identified in an OIG audit report that is
associated with the recovery of a monetary amount, the demand letter as
prescribed in § 1951.708 of this subpart must be sent to the recipient
within 30 days of the date of the audit report. A copy of the demand
letter(s) will be needed to be received by OIG in order to meet the
requirements of Appendix A of DR 1720-1 and to reach a management
decision on a course of action. In essence, the final OIG report is
issued, and within 30 days the demand letter must be sent to the
recipient, OIG and DCFO. This allows DCFO 30 days to process the demand
letter and establish an account receivable on the Agency\'s accounting
records. This process will allow for reaching a management decision
within 60 days of report issuance as contemplated in Departmental
Regulations.*

In all cases, the reason(s) for the unauthorized assistance being
received by the recipient will be well documented in the case file, and
will specifically state whether it was due to:

\(1\) Submission of inaccurate information by the recipient;

\(2\) Submission of false information by the recipient;

\(3\) Submission of inaccurate or false information by another
authorized party acting on the recipient\'s behalf including
professional consultants such as engineers, architects, and attorneys,
when the recipient did not know the other party had submitted inaccurate
or false information;

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RD Instruction 1951-0

§ 1951.706 (Con.)

## 

## 

\(4\) Error by Rural Development personnel, either in making
computations or failure to follow published regulations or other Agency
issuances; or

\(5\) Error in preparation of a debt instrument which caused a loan to
be closed at an interest rate lower than the correct rate in effect when
the loan was approved.

§ 1951.707 [Determination of the amount of unauthorized
assistance]{.underline}.

\(a\) [Unauthorized loan amount]{.underline}. The unauthorized loan
amount will be the unauthorized principal plus any interest accruing on
the unauthorized principal at the note interest rate until the date paid
unless otherwise agreed to in writing by Rural Development.

\(b\) [Unauthorized grant amount]{.underline}. The unauthorized grant
amount is the amount actually expended under the grant agreement plus
interest accrued beginning on the date of the demand letter at the
interest rate stipulated in the respective executed grant agreement for
default cases until the date paid unless otherwise agreed in writing by
Rural Development.

*Interest would ordinarily accrue beginning on the date of the demand
letter unless the demand letter specifies another date for the onset of
interest accrual. For example, the demand letter may state the recipient
may avoid accrued charges if the stated demand amount is received by
Rural Development by a specified date. Accrual of amounts owed are
unaffected by the suspension of the obligation to pay in the event of an
extension pursuant to § 1951.708(b).*

§ 1951.708 [Notification to recipient]{.underline}.

\(a\) Upon determination that unauthorized assistance was received,
Rural Development will send a demand letter to the recipient that:

\(1\) specifies the amount of unauthorized assistance, including any
accrued interest to be repaid, and the standards for imposing accrued
interest;

\(2\) states the amount of penalties and administrative costs to be
paid, the standards for imposing them and the date on which they will
begin to accrue;

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RD Instruction 1951-0

§ 1951.708(a) (Con.)

\(3\) provides detailed reason(s) why the assistance was determined to
be unauthorized;

\(4\) states the amount is immediately due and payable to Rural
Development;

\(5\) describes the rights the recipient has for seeking review of Rural
Development\'s determination pursuant to 7 CFR Part 11;

\(6\) describes the Agency\'s available remedies regarding enforced
collection, including referral of debt delinquent more than 180 days for
Federal salary, benefit and tax offset under the Department of Treasury
Offset Program (TOP); and

\(7\) provides an opportunity for the recipient to meet with Rural
Development and to provide to Rural Development facts, figures, written
records or other information which might refute Rural Development\'s
determination.

\(b\) If the recipient meets with Rural Development, Rural Development
will outline to the recipient why the assistance was determined to be
unauthorized. The recipient will be given an opportunity to provide
information to refute Rural Development\'s findings. When requested by
the recipient, Rural Development may grant additional time for the
recipient to assemble documentation. Such extension of time for payment
will be valid only if Rural Development documents the extension in
writing and specifies the period in days during which period the payment
obligation created by the demand letter (but not the ongoing accrual of
interest) will be suspended. Interest and other charges will continue to
accrue pursuant to the initial demand letter during any extension period
unless the terms of the demand letter are modified in writing by Rural
Development.

\(c\) Unless Rural Development modifies the original demand, it will
remain in full force and effect.

*Copies of all correspondence between Rural Development and the
recipient pursuant to this section must be relayed to the DCFO, and the
Direct Loan and Grant Branch (DLGB), Mail Stop FC 340.*

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RD Instruction 1951-0

§ 1951.708(c) (Con.)

*The demand letter substantially similar to Exhibit A must be sent at
the earliest practicable time (sent by Certified Mail, Return Receipt
Requested). Note that § 1951.706(d) indicates that the timing of this
letter should coincide with the issuance of the OIG report to the Agency
in cases where OIG is conducting an investigation. In all other cases,
the Agency should send this demand letter when it makes its initial
determination, with a copy to the State Director, and for a case
identified in an OIG audit report, a copy to the OIG office which
conducted the audit, and the Financial Management Division of the
National Office. In cases where unauthorized grant assistance was
identified, a copy of the letter will also be sent to the DCFO, DLGB,
Mail Stop FC 340.*

*When a recipient is granted additional time to provide information to
refute Rural Development\'s findings, the servicing official must
document support in the file for the decision to grant an extension for
time to respond. Accruals are independent of and not affected by the
suspension of the payment obligation created by the demand letter.
Interest will continue to accrue during the extension period.*

*Where the unauthorized assistance is not a direct loan, an account
receivable should be established at the time the demand letter is sent,
the terms of which correspond to the terms of the demand letter.*

§ 1951.709 [Decision on servicing actions]{.underline}.

*When the servicing official is the same individual who approved the
unauthorized assistance, the next-higher supervisory official must
review the case before further actions are taken by the servicing
official. Determinations pursuant to §§ 1951.709(b) and 1951.711(b) may
only be made by the Administrator.*

*The Agency must timely pursue liquidation or other legal action in the
absence of Administrator-approved alternatives.*

\(a\) [Payment in full]{.underline}. If the recipient agrees with Rural
Development\'s determination or will pay the amount in question, Rural
Development may allow a reasonable period of time (usually not to exceed
90 days) for the recipient to arrange for repayment. The amount due will
be determined according to § 1951.707.

*The servicing official will remit collections according to the Forms
Manual Insert (FMI) for Form RD 451-2, \"Schedule of Remittances,\" with
a copy of the notification letter as prescribed in Exhibit A. Note that
accruals continue to run until the payoff date.*

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RD Instruction 1951-0

§ 1951.709 (Con.)

\(b\) [Continuation with recipient]{.underline}. If the recipient agrees
with Rural Development\'s determination or is willing to pay the amount
in question but cannot repay the unauthorized assistance within a
reasonable period of time, continuation is authorized and servicing
actions outlined in\
§ 1951.711 will be taken provided all of the following conditions are
met:

\(1\) The recipient did not provide false information as defined in\
§ 1951.702;

\(2\) It would be highly inequitable to require prompt repayment of the
unauthorized assistance; and

\(3\) Failure to collect the unauthorized assistance in full will not
adversely affect Rural Development\'s financial interests.

> *The servicing official must document support in the file for the
> determination that the required conditions for continuing with the
> recipient have been met. Until and unless repayment terms pursuant to
> a continuation arrangement have been agreed to in writing by the
> Agency and the recipient, or are otherwise precluded by appeal
> proceedings, the Agency may not cease efforts to pursue liquidation
> and collection.*
>
> *Note that determinations under this paragraph may only be made by the
> Administrator, including what constitutes a reasonable repayment
> period, per § 1951.709 above.*
>
> \(c\) [Appeals]{.underline}. Appeals resulting from the letter
> prescribed in\
> § 1951.708 will be handled according to 7 CFR Part 11. All appeal
> provisions will be concluded before proceeding with further actions.
>
> *In the event the recipient does not pursue an appeal within
> prescribed time frames, withdraws its appeal, or is not successful in
> its appeal, the servicing official will document the case file
> accordingly and proceed to service the case in accordance with the
> applicable sections of this regulation.*
>
> \(d\) [Liquidation of loan(s) or legal action to enforce
> collection]{.underline}. When a case cannot be handled according to
> the provisions of paragraphs (a) or (b) of this section, or if the
> recipient refuses to execute the documents necessary to establish an
> obligation to repay the unauthorized assistance as provided in §
> 1951.711 of this subpart, one of the following actions will be taken:

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RD Instruction 1951-0

§ 1951.709(d) (Cont.)

\(1\) [Active borrower with a secured loan]{.underline}.

\(i\) Rural Development will attempt to have the recipient liquidate
voluntarily. If the recipient does not agree to voluntary liquidation,
or agrees but it cannot be accomplished within a reasonable period of
time (usually not more than 90 days), forced liquidation action will be
initiated in accordance with applicable provisions of subpart A of part
1955 of this chapter unless:

\(A\) The amount of unauthorized assistance outstanding, including
principal, accrued interest, and any recoverable costs charged to the
account, is less than \$1,000; or

\(B\) It would not be in the best financial interest of the Government
to force liquidation. *If the servicing official wishes to make an
exception to forced liquidation on this basis, a request for an
exception in accordance with § 1951.717 of this subpart may be made.*

*If the recipient agrees to liquidate voluntarily, this will be
documented in the case file. Where real property is involved, a letter
will be prepared by the servicing official and signed by the recipient
agreeing to voluntary liquidation. A resolution of the governing body
may be required.*

\(ii\) When all of the conditions of paragraphs (a) or (b) of this
section are met, but the recipient does not repay or refuses to execute
documents to effect necessary account adjustments according to the
provisions of § 1951.711, forced liquidation action will be initiated as
provided in paragraph (d)(1)(i) of this section.

\(iii\) When forced liquidation would be initiated except that the loan
is being handled in accordance with paragraph (d)(1)(i)(A) or
(d)(l)(i)(B) of this section, continuation with the loan on existing
terms may be provided. *(In these cases, the recipient will be notified
by letter of the actions taken.)*

\(iv\) If the debt is not otherwise resolved, Rural Development will
take appropriate debt collection actions in accordance with 7 C.F.R.
part 3, subparts B and C, and the Federal Claims Collection Standards at
31 C.F.R. parts 900-904.

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RD Instruction 1951-0

§ 1951.709 (d)(2) (Cont.)

*No additional notice to the recipient of a transfer to U.S. Treasury
for TOPS or cross servicing is required, however, this transfer should
not be made earlier than 60 days after the date of the demand letter.*

\(2\) [Grantee, inactive borrower, or active borrower with unsecured
loan (such as collection-only, or unsatisfied balance after
liquidation)]{.underline}. Rural Development may pursue all reasonable
legal remedies. *The servicing official will document the facts in the
case file and submit it to the State Director, if the servicing official
is other than the State Director, who will request the advice of the OGC
on pursuing legal action to effect collection.*

*The case file, the recommendation of the State Director and OGC
comments will be forwarded to the National Office for review and
authorization to implement recommended servicing actions. The State
Director will tell OGC what assets, if any, are available from which to
collect.*

*The account receivable that is established pursuant to § 1951.708 is a
claim for purposes of the Debt Collection Improvement Act and is subject
to transfer to U.S. Treasury for collection when it is 180 days past
due. It is USDA policy to send out a 60 day notice letter advising the
recipient that the claim will be transferred, but the 60 day notice
letter is not legally required if the initial demand letter is in the
form of Exhibit A to these instructions. It is the practice of the St.
Louis office to consult with the state office on the timing of this 60
day notice; the system is not programmed to automatically send this
letter out for these account receivables.*

§ 1951.710 \[Reserved\]

§ 1951.711 [Servicing options in lieu of liquidation or legal action to
collect]{.underline}.

When the conditions outlined in § 1951.709(a) or (b) of this subpart are
met, the servicing options outlined in this section will be considered.
Accounts will be serviced according to this section. *(See § 1951.715 as
well.)*

> *In the event the receivable is fully paid, a letter acknowledging
> that the demand letter has been satisfied may be sent by Rural
> Development to the recipient.*

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RD Instruction 1951-0

§ 1951.711 (Con.)

\(a\) [Continuation on modified terms]{.underline}. When the recipient
has the legal and financial capabilities, the case will be serviced
according to one of the following, as appropriate.

*In each instance, the servicing official will advise the DCFO by
memorandum of the actions necessary to effect the account adjustment in
accordance with § 1951.715 below.*

\(1\) [Unauthorized loan]{.underline}. A loan for the unauthorized
amount determined according to § 1951.707(a) will remain accelerated per
the demand letter sent in accordance with § 1951.708 unless modified
terms are timely reached with the recipient, and accrue at the interest
rate specified in the outstanding debt instrument or at the present
market interest rate, whichever is greater, for the respective Community
and Business program area. The loan will be amortized per a repayment
schedule satisfactory to Rural Development but in no event may the
revised repayment schedule exceed a period of fifteen (15) years, the
remaining term of the original loan, or the remaining useful life of the
facility, whichever is shorter.

\(2\) [Unauthorized grant]{.underline}. The unauthorized grant amount
determined according to § 1951.707(b) will be converted to a loan at the
market interest rate for the respective Community and Business program
area in effect on the date the financial assistance was provided. In all
cases, the receivable will be amortized per a repayment schedule
satisfactory to Rural Development but in no event may the amortization
period exceed fifteen (15) years. The recipient will be required to
execute a debt instrument to evidence this receivable, and the best
security position practicable in a manner which will adequately protect
Rural Development's interest during the repayment period will be taken
as security.

*For rural business program grants, the interest rate charged on the
receivable will be fixed at the 26-week Treasury Bill rate in effect as
of the date the recipient was originally notified of the unauthorized
assistance as provided in § 1951.708. For community facilities program
grants, the interest rate will be the market rate in effect for
community facilities program loans as of the date the recipient was
originally notified of the unauthorized assistance as outlined in\
§ 1951.708.*

\(3\) [Unauthorized subsidy benefits received]{.underline}. When the
recipient was eligible for the loan but should have been charged a
higher interest rate than that in the debt instrument, which resulted in
the receipt of unauthorized subsidy benefits, the case will be handled
as follows:

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RD Instruction 1951-0

§ 1951.711 (a)(3) (Con.)

\(i\) the recipient will be given the option to submit a written request
that the interest rate be adjusted to the lower of the rate for which
they were eligible that was in effect at the date of loan approval or
loan closing (See Exhibit B for interest rates); and

\(ii\) any accrued unauthorized subsidy will be handled in accordance
with § 1951.709.

*Rural Development servicing officials will make a concerted effort to
collect all unauthorized subsidy benefits from the recipient and will
contact the OGC in each case for advice in accomplishing corrective
actions.*

\(b\) [Continuation on existing terms]{.underline}. When the recipient
does not have the legal and/or financial capabilities for the options
outlined in paragraph (a)(1), (a)(2), or (a)(3) of this section, the
recipient may be allowed to continue to meet the loan obligations
outlined in the existing loan instruments. Rural Development will not
continue with unauthorized grants on existing terms.

*For cases of unauthorized grants, where the final determination is made
that liquidation or legal action to enforce collection will not be
pursued, or servicing options will not be pursued, the servicing
official will advise the DCFO, DLGB, Mail Stop FC 340, by memorandum, of
this determination. The DCFO will use this notification to remove the
accounts receivable from the financial records that was established by
the original letter of notification submitted in accordance with\
§ 1951.708 of this subpart.*

> *Note that determinations under this paragraph may only be made by the
> Administrator according to § 1951.709.*

§§ 1951.712 -- 1951.716 \[Reserved\]

*§ 1951.715 [Account adjustments.]{.underline}*

*Cases of unauthorized assistance which require DCFO notification and
action will be submitted to the DCFO, DLGB, Mail Stop FC 340, by
memorandum from the servicing official, as provided in § 1951.711.*

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RD Instruction 1951-0

§ 1951.715 (Con.)

*(a) [Entire loan unauthorized]{.underline}. When the entire loan is
unauthorized because the recipient was not eligible or because the loan
was approved for unauthorized purposes, the servicing official will
advise the DCFO, DLGB, Mail Stop FC 340, by memorandum, which of the
following servicing actions will be taken. Each memorandum should
include account (borrower) name, case number, fund code, loan number,
and an explanation of the actions to be taken.*

*(1) [Repayment in full]{.underline}. If the recipient has arranged to
repay the unauthorized loan in full through refinancing or other
available resources, the payment will be remitted with Form RD 451-2, in
accordance with § 1951.709 (a). The schedule number assigned to Form RD
451-2 will be included in the memorandum.*

*(2) [Continuation with loan on existing or modified terms]{.underline}.
When it is determined, according to § 1951.711(a)(1) or (b), that
continuation with the loan or account receivable on existing or modified
terms will be provided, the servicing official will advise the DCFO by
memorandum of this determination and, if applicable, include an
explanation of the modified terms.*

*(b) [Portion of loan unauthorized]{.underline}. When only a portion of
the loan has been determined to be for unauthorized purposes, the
servicing official will advise the DCFO, DLGB, Mail Stop FC 340, by
memorandum which of the following actions will be taken. Each memorandum
should include account (borrower) name, case number, fund code, loan
number, and an explanation of the actions to be taken.*

*(1) [Repayment in full of unauthorized portion]{.underline}. If the
recipient has arranged to repay the unauthorized portion of the loan
through refinancing or other available resources, the remittance will be
submitted with Form RD 451-2 in accordance with § 1951.709(a). The
schedule number assigned to Form RD 451-2 will be included in the
memorandum.*

*(2) [Continuation with unauthorized portion of loan on existing or
modified terms]{.underline}. When it is determined, according to §
1951.711 (a) (1) or (b), that continuation with the unauthorized portion
of the loan on existing or modified terms will be provided, the
servicing official will advise the DCFO, DLGB, Mail Stop FC 340, by
memorandum of this determination, and, if applicable, include an
explanation of the modified terms. The authorized portion will retain
the original loan number with installments adjusted*

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RD Instruction 1951-0

§ 1951.715(b)(2) (Con.)

*accordingly. Payments previously made will not be reversed and
reapplied. The amortized unauthorized amount will be assigned the next
available loan number. Installments for the authorized and unauthorized
loans will be scheduled and paid concurrently. Failure to timely pay on
one loan shall constitute a cross default for purposes of the other
loan.*

*(c) [Unauthorized subsidy benefits received]{.underline}. The
unauthorized subsidy benefits received will be serviced according to §
1951.711(a)(3) or (b).*

*(d) [Liquidation pending]{.underline}. When liquidation is initiated
under the provisions of this subpart, the servicing official will advise
the DCFO, DLGB, Mail Stop FC 340, by memorandum, that an unauthorized
assistance account is to be established. This account will be flagged
\"FAP\" (Foreclosure Action Pending) or \"CAP\" (Court Action Pending),
as applicable.*

*(e) [Liquidation not initiated]{.underline}. Cases in which liquidation
would normally be initiated, but where it is not because of the
provisions\
of § 1951.709(d)(l), will be serviced in accordance with\
§ 1951.709(d)(l)(iii).*

*(f) [Unauthorized grant assistance]{.underline}. A grant that is to be
repaid will be serviced as follows:*

*(1) [Rural business program grants.]{.underline} When it is determined
that a rural business program grant is to be repaid according to\
§ 1951.711(a)(2), the servicing official will advise the DCFO, DLGB,
Mail Stop, FC 340, by memorandum. The memorandum should include the
account (borrower) name, address, phone number, address of the location
of any security property (if applicable), tax ID/social security number,
amount of receivable, effective date, interest rate, term of repayment
to include repayment period, name and phone number of the servicing
official, a copy of the original grant agreement and/or a copy of the
debt instrument, and a copy of the OIG audit report of investigation, if
applicable.*

*The DCFO will establish a receivable based on the repayment terms. The
servicing official will collect all payments from the recipient and
remit the payments to the Wholesale Lockbox in accordance with the FMI
for Form RD 451-2, and subpart B of part 1951. If provided for in the
debt instrument, recipients that do not make their payments by the
installment due date may be assessed late fees in the amount of 4
percent of the payment due. However, interest will not accrue on late
fees.*

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RD Instruction 1951-0

§ 1951.715(f) (Con.)

*(2) Community facilities program grants. When it is determined that a
community facilities program grant is to be repaid according to\
§ 1951.711(a)(2), the servicing official will advise the DCFO, DLGB,
Mail Stop FC 340, by memorandum. Each memorandum should include account
(recipient's) name, case number, amount of receivable, effective date,
interest rate, term of repayment to include repayment period, a copy of
the original grant agreement and/or a copy of the debt instrument. The
DCFO will establish a receivable based on the repayment terms. The
servicing official will collect all payments from the recipient and
remit the payments to the Wholesale Lockbox in accordance with the FMI
for Form RD 451-2, and subpart B of part 1951.*

*(g) [Delinquent accounts]{.underline}. The organization maintaining the
receivable will report delinquent receivables to the applicable
servicing official for collection efforts. Delinquent receivables will
be subject to referral under the TOP or Cross Servicing, as applicable,
in accordance with subpart C of part 1951.*

*§ 1951.716 [Reporting requirements to National Office]{.underline}.*

*An annual report will be submitted by the State Office to the Deputy
Administrators for each of the respective program areas within 30 days
following the end of the Government\'s fiscal year for each case of
unauthorized assistance or subsidy benefits. The report will include for
each case the account name, case number, fund code, OIG audit number (if
applicable), amount collected during period, and the balance owed on the
unauthorized assistance. Each State Office is responsible for
coordinating with the servicing official\'s office so that this
information can be accumulated and consolidated by the State Office
within the allotted time.\
A negative report is required from States which have no unauthorized
assistance cases.*

§ 1951.717 [Exception authority]{.underline}.

The Administrator may, in individual cases, make an exception to any
requirement or provision of this subpart, provided that any such
exception is not inconsistent with any applicable law or opinion of the
Comptroller General and provided further, the Administrator determines
that application of the requirement or provision would adversely affect
the Government\'s interest.

14

RD Instruction 1951-0

§ 1951.717 (Con.)

*Requests for exceptions must be made in writing by the State Director
and submitted through the Deputy Administrator for Community Programs or
Deputy Administrator for Business Programs, as applicable. Requests will
be supported with documentation to explain the adverse effect on the
Government\'s interest,* *propose alternative courses of action, and
show how the adverse effect will be eliminated or minimized if the
exception is granted.*

§§ 1951.718 - 1951.750 \[Reserved\]

Attachments: Exhibits A and B

oOo

15

(03-30-07) SPECIAL PN

RD Instruction 1951-O

Exhibit A

\[Purpose: This letter will be sent to demand repayment of unauthorized
assistance from individual and entity debtors/grantees. Do not send this
letter if the recipient has filed for protection under the Bankruptcy
Code.\]

## Guide Letter to Recipients of Unauthorized Assistance

\_\_\_ \_\_\_

\|For audit cases, show: \|

\|Re: Audit report number \|

\|\_\_\_ and Finding number \_\_\_\|

(Recipient\'s Name and Address)

Dear \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_,

Rural Development has determined that you received unauthorized
financial assistance in the form of a (loan, grant, subsidy) in the
amount of \$\_\_\_\_\_\_\_\_\_.

\[Insert a paragraph briefly describing the circumstances under which
the unauthorized assistance was extended, including any detailed reasons
why the assistance was determined to be unauthorized. Include references
to applicable regulations.\]

Accordingly, the unauthorized assistance amount above is immediately due
and payable to \[Name of Agency. Please submit your check or money order
payable to \[Name of Agency\] to our office at the following address for
payment in full:

\[Insert address where payment should be sent\]

The unauthorized assistance amount will accrue interest from the date of
this notice at the \[note interest rate/interest rate stipulated in the
grant agreement for default/interest rate agreed to in writing by Rural
Development\] rate of \_\_\_% until your date of payment. *\[note to
agency: If none of these apply, the default rate is that established by
Treasury annually in accordance with 31 U.S.C. 3717 and 31 CFR 901.9\]*
This standard for accruing interest is established by Rural Development
regulation, 7 CFR 1951.707.

Beginning on the date of this notice, Rural Development will also assess
administrative costs incurred for processing and handling the debt based
on the actual cost to the agency in accordance with 31 CFR, section
901.9.

(03-30-07) SPECIAL PN

RD Instruction 1951-O

Exhibit A

Page 2

Interest and administrative costs will be waived on any portion of the
debt paid within 30 days from the date of this notice.

If the debt is delinquent for more than 90 days, Rural Development will
charge a penalty of \_\_\_% per year on the amount due in accordance
with 31 CFR section 901.9. *\[note: the penalty fee may not exceed 6%
and must be the same for all cases unless some distinction is
established by regulation.\]* The charge will accrue from the date of
this notice.

[Debt Collection Actions]{.underline}

If this debt is not resolved through payment or use of Debtor's Rights
(listed below), Rural Development will begin collection actions. Rural
Development will notify USDA agencies to collect the debt by
administrative offset. Rural Development also must transfer debts
delinquent for more than 180 days to the U.S. Department of Treasury
(Treasury) for collection. Treasury will collect the debt by centralized
administrative offset from the following Federal Government sources:

\(1\) Treasury Offset Program (TOP) (To obtain income tax refunds;
contract or vendor payments; certain Federal benefit payments such as
Social Security (other than Supplement Security Income), Railroad
Retirement (other than tier 2), and Black Lung (part B) benefits; and
other Federal payments including certain loans to you that are not
exempt from offset.

\(2\) Federal salary pay, including military pay (through Treasury's
centralized computer matching program, not to exceed 15 percent of
disposable pay.)

\(3\) Federal retirement and disability fund, including military
retirement pay (from the Office of Personnel Management, in most cases
not to exceed 50 percent of the net annuity.)

Rural Development intends to enforce collection by referring the debt to
the Department of Justice to initiate litigation if you fail to pay or
otherwise resolve the debt.

Debtor's Rights

\(1\) Meeting. We have scheduled an appointment at
\_\_\_\_\_\_\_\[AM/PM\] on \_\_[\[insert date -- SUGGESTED: within 15
calendar days of notice\]]{.underline} for you to come into this office
\[specify address if different from where payment should be sent\] to
discuss the basis for Rural Development's claim. You may provide facts,
figures, written records, or other information you have that might alter
Rural Development's determination that the assistance you have received
was unauthorized. Necessary servicing actions also will be discussed. If
you are unable to keep

RD Instruction 1951-O

Exhibit A

Page 3

> this appointment, please telephone this office at [\[insert telephone
> number\]]{.underline} to change the appointment.

\(2\) File review. You may inspect and copy your Agency file regarding
this debt. If you wish to review your Agency file, you must notify the
Rural Development office below in writing within 20 calendar days from
your receipt of this notice. In response, Rural Development will notify
you regarding a time and place for your review. If you desire copies of
any documents, one copy will be provided at our expense.

\(3\) Repayment agreement. At any time within 20 calendar days of your
receipt of this notice, you may present a written agreement to repay the
debt as an alternative to administrative offset. Your proposed repayment
agreement must document your ability to pay the amount due within a
short period of time.

\(4\) Appeal. You may appeal this determination directly to the National
Appeals Division (NAD), United States Department of Agriculture (USDA),
pursuant to regulations published at 7 C.F.R. part 11 (copy attached).
If you wish to appeal this decision, your written request for appeal
must be postmarked no later than 30 calendar days from the date you
received this notice. Send the request for appeal to the office of the
Area Supervisor, NAD, [\[insert NAD address\]]{.underline}. Your request
for appeal must include a copy of this letter and a statement explaining
why you think the notice is incorrect. A copy should be sent to this
office. NAD will advise you of the time and place of any hearing and any
procedural requirements. When you request appeal, there will be an
immediate stay of administrative offset until a final NAD decision is
issued.

Please do not delay in paying the amount due or exercising the debtor's
rights offered in this notice. No additional advance notice will be sent
before referral of the debt to Treasury for collection. You should
advise your local RD office if you or another person liable for this
debt files bankruptcy.

*\[for individual recipients only\]*

The Federal Equal Credit Opportunity Act prohibits creditors from
discriminating against credit applicants on the basis of race, color,
religion, national origin, sex, marital status, age (provided the
applicant has the capacity to enter into a binding contract); because
all or part of the applicant's income derives from any public assistance
program; or because the applicant has in good faith exercised any right
under the Consumer Credit Protection Act. The Federal agency that
administers compliance with this law is the Federal Trade Commission,
Equal Credit Opportunity, Washington, D.C. 20580.

(03-30-07) SPECIAL PN

RD Instruction 1951-O

Exhibit A

Page 4

USDA regulations prohibit discrimination in USDA programs because of
your race, color, religion, sex, age, national origin, marital status,
familial status, sexual orientation, disability; or because all or part
of your income derives from any public assistance program; or because
you filed a program complaint, participated in any program complaint
proceeding, or opposed a prohibited practice. If you believe you have
been discriminated against for any of the reasons stated above, you may
file a complaint with the Director, Office of Civil Rights, United
States Department of Agriculture, Room 326-W, Whitten Building, 1400
Independence Avenue, SW, Washington, DC 20250-9410.

Sincerely,

\[*to be signed by the servicing official\]*

Rural Development

United States Department of Agriculture

Attachment

\[Attach a copy of 7 CFR part 11\]

## 

## 

## oOo 

RD Instruction 1951-O

Exhibit B

Page 1

## Effective Dates and Interest Rates 

## Community and Business Programs

## COMMUNITY PROGRAMS

Rate in effect on January 1, 1977, and through September 30, 1981, was
5.00 percent.

Poverty Line Intermediate Market

[Effective Date]{.underline} [Rate (%)]{.underline} [Rate
(%)]{.underline} [Rate (%)]{.underline}

October 1, 1981 5.0 \-\-\-\-- 12.250

January 1, 1982 5.0 \-\-\-\-- 11.375

April 1, 1982 5.0 \-\-\-\-- 12.375

July 1, 1982 5.0 \-\-\-\-- 11.625

July 9, 1982 5.0 8.375 11.625

October 1, 1982 5.0 7.875 10.625

January 1, 1983 5.0 7.375 9.750

April 1, 1983 5.0 7.125 9.125

October 1, 1983 5.0 7.250 9.500

April 1, 1984 5.0 7.250 9.625

July 1, 1984 5.0 7.750 10.500

October 1, 1984 5.0 7.500 10.000

April 1, 1985 5.0 7.250 9.500

July 1, 1985 5.0 6.750 8.625

October 1, 1985 5.0 7.000 9.000

January 1, 1986 5.0 6.625 8.375

April 1, 1986 5.0 6.125 7.125

July 1, 1986 5.0 6.375 7.625

October 1, 1986 5.0 6.000 6.875

January 1, 1987 5.0 5.875 6.625

April 1, 1987 5.0 5.750 6.500

July 1, 1987 5.0 6.500 7.875

January 1, 1988 5.0 6.375 7.750

April 1, 1988 5.0 6.125 7.375

July 1, 1988 5.0 6.375 7.750

January 1, 1989 5.0 6.250 7.500

April 1, 1989 5.0 6.250 7.375

July 1, 1989 5.0 6.000 7.125

October 1, 1989 5.0 6.000 7.000

April 1, 1990 5.0 6.000 7.125

October 1, 1990 5.0 6.125 7.250

January 1, 1991 5.0 6.000 7.000

April 1, 1991 5.0 5.875 6.750

July 1, 1991 5.0 5.875 6.875

October 1, 1991 5.0 5.875 6.750

(03-30-07) SPECIAL PN

RD Instruction 1951-0

Exhibit B

Page 2

## Effective Dates and Interest Rates 

## Community and Business Programs

## 

## COMMUNITY PROGRAMS (CON.)

Poverty Line Intermediate Market

[Effective Date]{.underline} [Rate (%)]{.underline} [Rate
(%)]{.underline} [Rate (%)]{.underline}

January 1, 1992 5.0 5.750 6.625

July 1, 1992 5.0 5.625 6.375

October 1, 1992 5.0 5.500 6.125

January 1, 1993 5.0 5.625 6.250

April 1, 1993 5.0 5.250 5.625

October 1, 1993 5.0 5.125 5.250

January 1, 1994 5.0 5.125 5.375

April 1, 1994 4.5 5.000 5.500

July 1, 1994 4.5 5.250 6.125

January 1, 1995 4.5 5.625 6.875

April 1, 1995 4.5 5.250 6.000

July 1, 1995 4.5 5.125 5.750

October 1, 1995 4.5 5.250 6.000

January 1, 1996 4.5 5.000 5.500

April 1, 1996 4.5 4.875 5.375

July 1, 1996 4.5 5.125 5.875

October 1, 1996 4.5 5.125 5.750

January 1, 1997 4.5 5.000 5.500

October 1, 1997 4.5 4.875 5.375

January 1, 1998 4.5 4.875 5.250

April 1, 1998 4.5 4.750 5.125

October 1, 1998 4.5 4.750 5.000

July 1, 1999 4.5 4.750 5.125

October 1, 1999 4.5 5.000 5.500

January 1, 2000 4.5 5.125 5.750

April 1, 2000 4.5 5.125 5.875

October 1, 2000 4.5 5.000 5.500

April 1, 2001 4.5 4.750 5.125

July 1, 2001 4.5 4.875 5.250

October 1, 2001 4.5 4.750 5.000

January 1, 2002 4.5 4.750 5.125

April 1, 2002 4.5 4.750 5.000

July 1, 2002 4.5 4.750 5.125

October 1, 2002 4.5 4.625 4.875

April 1, 2003 4.5 4.625 4.750

July 1, 2003 4.5 4.375 4.250

October 1, 2003 4.5 4.750 5.000

January 1, 2004 4.5 4.500 4.625

April 1, 2004 4.5 4.375 4.375

RD Instruction 1951-O

Exhibit B

Page 3

## (Revision 6)

## 

## Effective Dates and Interest Rates 

## Community and Business Programs

## 

## COMMUNITY PROGRAMS (CON.)

Poverty Line Intermediate Market

[Effective Date]{.underline} [Rate (%)]{.underline} [Rate
(%)]{.underline} [Rate (%)]{.underline}

## 

## 

## April 1, 2004 4.5 4.375 4.375

## July 1, 2004 4.5 4.750\` 5.000

## October 1, 2004 4.5 4.500 4.625

## January 1, 2005 4.5 4.500 4.500

## April 1, 2005 4.5 4.375 4.250

## July 1, 2005 4.5 4.250 4.125

## October 1, 2005 4.5 4.375 4.250

## January 1, 2006 4.5 4.500 4.500

## April 1, 2006 4.5 4.375 4.375

## July 1, 2006 4.5 4.500 4.500

## October 1, 2006 4.5 4.375 4.375

## January 1, 2007 4.5 4.250 4.125

## July 1,2007 4.5 4.375 4.250

## October 1, 2007 4.5 4.500 4.500

## January 1, 2008 4.5 4.375 4.375 

## April 1, 2008 4.5 4.625 4.750

## July 1, 2008 4.5 4.500 4.500

## January 1,2009 4.5 4.750 5.125

## 

## 

## 

## 

## 

## 

## 

## 

## 

## 

## 

## 

(03-30-07) SPECIAL PN

RD Instruction 1951-O

Exhibit B

Page 4

(Revision 6)

## BUSINESS & INDUSTRY INSURED PROGRAM

Insured Rate (%) Used To

[Effective Date]{.underline} [Insured Rate (%)]{.underline} [Finance
Community Facilities]{.underline}

November 1, 1979 10.750 5.0

December 15, 1979 11.625 5.0

January 8, 1980 12.500 5.0

April 7, 1980 13.500 5.0

April 12, 1980 14.500 5.0

June 28, 1980 12.875 5.0

August 14, 1980 11.500 5.0

December 11, 1980 14.000 5.0

October 1, 1981 14.000 12.250

January 1, 1982 14.000 11.375

April 1, 1982 14.000 12.375

July 1, 1982 14.000 11.625

October 1, 1982 14.000 10.625

January 1, 1983 14.000 9.750

April 1, 1983 14.000 9.125

December 1, 1983 14.000 9.500

## oOo