Sec. 05.04.15.12. Grant Disbursements

A. Monitoring of Disbursements.

(1) The local administrator or Department shall monitor grants and disbursement of grant funds during rehabilitation to assist grantees and to assure that grant funds are properly used.

(2) The local administrator or Department shall determine the frequency and level of inspections during rehabilitation based on Program guidelines.

B. Payments Generally.

(1) If a grant is originated by a local administrator, Grant funds may be disbursed in full at the closing of the grant to an account established under §C of this regulation.

(2) Grant proceeds shall be disbursed for modifications in accordance with the requirements of §B(3)—(5) of this regulation.

(3) The local administrator shall return any unused grant proceeds to the Department.

(4) Payments of draws shall be by joint payee check issued to the grantee and contractor unless an alternative payment method is approved by the Program Director.

(5) Except as provided in §D of this regulation, payments shall be made only for work completed.

C. Grant accounts established by a local administrator shall comply with the following:

(1) Grant funds shall be held in a non-interest-bearing account established by the local administrator or the subcontractor and approved by the Department.

(2) The account may be:

(a) An account with a depository institution that is separate from the other operating accounts of the local administrator or subcontractor;

(b) An account with a depository institution that is not separate from the other operating accounts of the local administrator or subcontractor using a separate reconciled general ledger account for all Program funds;

(c) An escrow account or attorney’s trust account held and managed by an escrow agent if the escrow agent meets the following minimum criteria to the satisfaction of the Department:

(i) Any employee of the escrow agent with access to the account shall be covered by a fidelity bond, or insured with employee dishonesty liability insurance, in an amount not less than $100,000;

(ii) The escrow agent shall provide the local administrator or the subcontractor, if any, and the Department with any statements required under this subsection; and

(iii) Any other requirements established by the Department; or

(d) Another type of account approved by the Department.

(3) The Department may require the local administrator or the subcontractor to provide periodic statements to the Department of all grant funds in an account.

(4) If the statements do not correspond with the Department’s records of grant funds in the account, the local administrator or the subcontractor shall work with the Department to reconcile the differences.

(5) The Department may revoke, at any time, its approval of any grant account established under this regulation.

D. Advance Payments. Advances or down payments may be made to contractors to purchase materials delivered on site or valid purchase requisitions not to exceed 10 percent of the contract costs.

E. Progress Payments.

(1) Progress payments may not be made until the grantee has delivered satisfactory evidence, such as receipts or bills, of the amount of the payment requested.

(2) Progress payments may not be made without an inspection to verify completion of the work, except at the discretion of the Department or the local administrator.

(3) A grantee shall be notified in writing by the Department or the local administrator, as applicable, if their request for payment is refused.

F. Final Payment. Final payment shall be made as follows:

(1) A grantee shall submit a certificate of completion, executed by the grantee and contractor, certifying that all work has been completed in accordance with the contract documents.

(2) Upon final inspection and receipt and approval of the certificate of completion, final payment shall be processed.

(3) If, in the opinion of the local administrator or Department, the contractor has satisfied the contract and the grantee refuses to request or release the final payment, then the following procedures shall apply:

(a) The grantee shall be notified in writing by the local administrator or Department;

(b) The grantee shall explain in writing within 10 days of receiving the written notification why direct payment to the contractor should not be made;

(c) If the grantee responds within the 10-day period and requests a meeting, the local administrator or Department shall hold a meeting at which the grantee shall present the grantee’s objections to requesting or releasing the final payment; and

(d) The local administrator or Department may then either approve or disapprove direct payment to the contractor or the grantee.

(4) If the local administrator or Department receives written notice that subcontractors, materialmen, or suppliers have not been paid for work done or material supplied to and for the project, it shall retain an amount equal to the lesser of all funds not yet disbursed and the amount needed to satisfy the claims.

G. Retainage.

(1) The local administrator or Department may retain until final payment 10 percent of the contract costs.

(2) The retainage shall be released at final payment upon verification that all contracted rehabilitation items are complete and acceptable to the Department.

H. Closeout Procedures. After final payment is made, the local administrator or the subcontractor shall reconcile all receipts and disbursements and prepare a close-out statement. A copy of the close-out statement shall be forwarded to the Program.