AUTHORITY: Implementing and authorized by the Rural Diversification Act (Ill. Rev. Stat. 1989, ch. 5, pars. 2251 et seq.).

SOURCE: Adopted at 15 Ill. Reg. 7558, effective May 7, 1991.

SUBPART A: RURAL DIVERSIFICATION LOAN PROGRAM

 

Section 640.5  Incorporation by Reference

 

Any incorporation by reference in this Part of standards of a nationally recognized organization or association includes no new amendments or editions after the date specified.

 

Section 640.10  Purpose of Loan Program

 

Through the Rural Diversification Loan Program, the Department of Commerce and Community Affairs will provide direct loans at market or below market rate interest to rural businesses or agribusinesses for the purpose of rural economic diversification, and the creation and retention of jobs.

 

Section 640.20  Definitions

 

            "Act" - The Rural Diversification Act (Ill. Rev. Stat. 1989, ch. 5, pars. 2251 et seq.).

 

            "Application" - A request for program funds, including the required statistical and narrative information and attachments.

 

            "Department" - The Illinois Department of Commerce and Community Affairs.

 

            "Financing" - Direct loans at market or below market rate interest provided to or on behalf of rural businesses or agribusinesses for purposes of rural diversification.

 

            "Program" - The Rural Diversification Loan Program.

 

            "Recipient" - Any eligible applicant receiving funds under this program.

 

Section 640.30  Eligible Projects

 

Loan proceeds shall be used to support rural diversification projects or agricultural diversification projects.

 

a)         "Rural Diversification Project" means a specific activity undertaken to promote:

 

1)         The improvement and expansion of business and industry in rural areas;

 

2)         Creation of entrepreneurial and self-employment businesses;

 

3)         Industry or region wide research directed to profit oriented uses of rural resources, and

 

4)         Value added agricultural supply, production processing or reprocessing facilities or operations and shall include but not be limited to agricultural diversification projects (Section 3(d) of the Act).

 

b)         "Agricultural Diversification Project" means a specific activity undertaken to promote diversification of the farm economy of this State through

 

1)         Profit oriented nonproduction uses of Illinois land resources;

 

2)         Growth and development of new crops or livestock not customarily grown or produced in this State; "new crops or livestock not customarily grown or produced in this State" does not include corn, soybeans, wheat, swine, or beef or dairy cattle; or

 

3)         Developments which emphasize a vertical integration of grain or livestock produced or raised in this State into a finished product for consumption or use. "Vertical integration of grain or livestock produced or raised in this State" includes any new or existing grain or livestock grown or produced in this State (Section 3(f) of the Act).

 

Section 640.40  Eligible Applicants

 

Any Rural Business or Agribusiness operating in Illinois may make application for financial assistance under the Rural Diversification Loan program. Personal service businesses are not eligible to receive funding.

 

a)         Agribusiness – Any sole proprietorship, limited partnership, co-partnership, joint venture, corporation, or cooperative which operates or will operate a facility located within the State of Illinois that is related to the:

 

1)         Processing of agricultural commodities or

 

2)         The manufacturing, production or construction of agricultural buildings, structures, equipment implements or supplies, or any other facilities or processes used in agricultural production (Section 2(i) of the Illinois Farm Development Act (Ill. Rev. Stat. 1989, ch. 5, par. 1202)).

 

b)         Rural Business – Any cooperative, proprietorship, partnership, corporation, or other entity:

 

1)         Engaged in manufacturing, mining, agriculture, wholesale, transportation, tourism, or utilities or in research and development or services to these basic industrial sectors and;

 

2)         Is located or will be located in an incorporated area of 20,000 population or less, but not in contiguous incorporated areas (cities, towns or villages) with a combined population greater than 20,000 or in an unincorporated area, of any county with a population of less than 350,000.

 

Section 640.50  Eligible Uses of Loan

 

Financing to or on behalf of rural businesses or agribusinesses in the State shall be for the purpose of assisting in the cost of agricultural or rural diversification projects including costs of:

 

a)         Acquisition, construction, reconstruction, replacement, repair, rehabilitation, alteration, expansion or extension of real property, buildings or machinery and equipment but not the acquisition of unimproved land for the production of crops or livestock;

 

b)         Working capital items including, but not limited to, inventory, accounts receivable, and prepaid expenses (but not debt refinancing or contingency funding;)

 

c)         Organizational expenses including, but not limited to, architectural and engineering costs, legal services, marketing analyses, production analyses, or other professional services;

 

d)         Needed leasehold improvements, easements, and other amenities required to prepare a site (Section 5(a) of the Act).

 

Section 640.60  Fund Availability and Submission Deadlines

 

a)         Availability of funding will be published in the State-recognized newspaper. Upon request, the Department will supply applicants with an application package.

 

b)         Applications for funding under the Rural Diversification Loan Program will be accepted on an ongoing basis as long as funding is available.

 

Section 640.70  Loan Application Package

 

Applications for loans must include the following documentation as appropriate:

 

a)         Agricultural or Rural Diversification Project Description – A summary description of the project including a description of what the company plans to do with the proceeds of the loan.

 

b)         Need for Funds – A statement and proof (justification) of a need for State supported low-interest, long term funds as evidenced by rate of return, inadequate private market financing, inability to acquire financing from other state authorities or agencies, interstate competition of facilities, or other similar evidence of essential need for public financing (Section 6(b)(i) of the Act).

 

c)         Project Impact and Employment Projections – A statement documenting an increase or potential increase in taxes or employment, a potential to retain existing jobs, or a potential improvement in the diversification of the rural economy or job market in relation to the financing requested (Section 6(b)(iii) of the Act).

 

d)         Company History – A brief history of the applicant, past employment growth, and other facts detailing the past and present condition and structure of the company, as well as identification of the common name of the company if different from the legal name.

 

1)         Subsidiaries and Parents – Name and identification of the relationship to parent companies, subsidiaries, or affiliates.

 

2)         Articles of Incorporation – Copy of the articles of incorporation and bylaws or partnership agreement, as appropriate.

 

e)         Market Information and Future Market Prospects – A description of the primary business of the company, types of products and services offered, information on the applicant's present and future market prospects, and identification of existing and potential major customers and competitors.

 

f)         Management Qualifications – A listing of those people who are responsible for the management of the applicant firm, their positions, and percentage of ownership;

 

1)         Personal resumes for senior staff at the proposed project site; and

 

2)         Personal financial statement(s) for each principal owning more than 20 percent of the applicant firm.

 

g)         Actual and Pro forma Financial Statements – Financial statements must be submitted by the applicant as follows, unless the firm is a start up operation. Audited financial statements are preferred; prepared statements are the minimum which is acceptable. Financial statements shall include:

 

1)         Historical corporate financial statements for the past three years, including profit and loss statements, balance sheets, and disclosure of contingent liabilities;

 

2)         Interim financial statements (profit and loss statements and balance sheets) dated not more than ninety days prior to application; and

 

3)         Three year projections of the profit and loss statement and balance sheet and a monthly cash flow projection for the first year.

 

h)         Site Map – An outline of the general location of the project on a site map, including the location of any floodplain areas.

 

i)          Uses of Funds Statement – As appropriate;

 

1)         Land and Building Information – If funds are to be used for land and/or building acquisition, an appraisal and a copy of the purchase option or agreement; for building construction or renovation, a contractor or architect's cost estimates.

 

2)         Description of Machinery and Equipment – If major equipment or classes of equipment are to be acquired with the Department's program funds, identification of the equipment; if for acquisition of new machinery and equipment, reliable vendor cost estimates; for moving and installation costs to be incurred, attachments of written estimates; if for used machinery and equipment acquisition, an appraisal demonstrating that the fair market value is in line with the purchase price.

 

3)         Description of Working Capital – A detailed explanation of the need for and use of funds; for acquisition of new inventory, written estimates of cost must be provided from the vendor.

 

j)          Letters of Commitment – Commitment letters documenting all sources of leveraging; loans from financial institutions must have language indicating the loan amount, the specified term and interest, collateral, conditions attendant to the loan, and the fact that the loan is approved.

 

k)         Project Implementation Schedule – A list of the timelines for major project milestones and/or activities including the start date and end date of each activity.

 

Section 640.80  Committee Review of Loan Applications

 

a)         Confidentiality – Any document, materials or data made or received by any member, agent, or employee of the Department, to the extent that such material or data consist of trade secrets or commercial or financial information regarding the operation of any business conducted by a beneficiary or recipient of any form of assistance which the Department is empowered to render under this Act, or regarding the competitive position of such entity in a particular field of endeavor, is confidential and shall not be deemed public records, provided that information relating to the ownership of such recipient or beneficiary is not to be exempt under this Section from public disclosure requirements (Section 9 of the Act).

 

b)         Application Screening – The Department shall screen all loan applications to determine that all requirements of the application package have been addressed. Applicants will be notified of deficiencies in applications and given the opportunity to correct such deficiencies through resubmission. Complete applications will be reviewed and evaluated by Department staff and review committee. The review and evaluation process will be completed within forty-five (45) working days after the receipt of application.

 

c)         The Department shall establish an internal review committee with the Director of the Rural Affairs Council, or his designee, the Director of the Department of Agriculture, or his designee, and the Director of the Illinois Farm Development Authority, or his designee, as members to assist in the review of all project applications (Section 5(c) of the Act).

 

d)         At the discretion of the Department, the "Internal Review Committee" will meet to review applications and recommend applications for Department loan consideration. The Committee's determination shall be based upon analysis of the operating history of the applicant, the project's readiness and additional similar information as determined by the Committee in accordance with subsections (e) and (f) of this Section.

 

e)         The applicant must demonstrate a meaningful operating history through documentation including:

 

1)         Company history – history of company growth through the analysis of facts provided by the applicant detailing the company's past and present condition and structure;

 

2)         Market information – information provided by the applicant detailing the existence of the company's present and future market prospects and existing and potential customers;

 

3)         Management qualifications – the background and experience of those in management and at least 20% ownership positions of the applicant company at the project site to determine qualification to administer the project.

 

f)         The applicant must demonstrate project readiness through documentation, including:

 

1)         Lender Commitments – identifying loan and investment commitments from all lenders and investors on letterhead, signed and dated;

 

2)         Time Schedule – a written time schedule for immediate project initiation; and

 

3)         Cost Estimates – firm, written cost estimates from architects, contractors or suppliers which support project costs.

 

Section 640.90  Department Technical Review

 

Each application will be reviewed by the Department to assure compliance with the technical program requirements as specified in subsections (a) through (d) of this Section.

 

a)         Loan Project Type – The application will be evaluated to assure that:

 

1)         the loan project meets the requirements for a Rural Diversification Project or an Agricultural Diversification Project as defined in Section 640.30 of this Part;

 

2)         the entity meets the conditions outlined as an eligible loan applicant as contained in Section 640.40 of this Part;

 

3)         that the rural business or agribusiness costs being funded are allowable expenses as defined in Section 640.50 of this Part; and

 

4)         that applicant certifications in accordance with Section 640.130 of this Part have been signed.

 

b)         Evidence of Need for Loan Program Funding – The applicant must show the essential need which must be documented for agricultural or rural diversification financing as evidenced by (Section 6(b)(i) of the Act):

 

1)         the project's inability to acquire financing from other State authorities or agencies (Section 6(b)(i) of the Act) with proof, such as a denial letter, failure to respond within the applicable program(s)' specified time frame(s), identification of the project's ineligibility for other public programs or other evidence that other State and federal program funding has been considered;

 

2)         calculation showing the rate of return is below the average return on investment for the company or industry, or similar evidence showing Department participation is needed at an interest rate and term which makes the project viable;

 

3)         compelling economic benefit to the State for the business project because of interstate competition for facilities (Section 6(b)(i) of the Act); or

 

4)         lender documentation that capital is not available to complete the project.

 

c)         Leverage Financing – The rural business or agribusiness must:

 

1)         Provide a minimum of fifteen (15) percent of the equity in the project (Section 7(c) of the Act);

 

2)         Show evidence that the loan will be leveraged with other funds such that program financing covers no more than 25 percent of the total costs of the diversification project unless the Director of the Department waives the 25 percent limitation (Section 7(c) of the Act) in accordance with Section 640.110.

 

d)         Financial Statements – The applicant's financial statements, including annual balance sheets and profit and loss statements for the past three years as well as an interim statement not more than ninety (90) days old; actual and pro forma income statements; a three-year projected balance sheet and profit and loss statement as well as a one-year monthly cash flow statement will be reviewed through a standard credit analysis. This credit analysis will determine the financial viability of the business as compared to similar data for the industry using the 1990 "RMA Annual Statement Studies" (published by Robert Morris Associates, P.O. Box 8500, S-1140, Philadelphia, PA 19178) if such commerce or industry is evaluated by this source. The application must:

 

1)         Demonstrate liquidity and debt coverage for the project showing that balance sheet indicators support the project size; that days receivable, days payable, and inventory are within a normative range; and that working capital is positive.

 

2)         Address quality of debt and debt management showing the debt-to-equity ratio is within the industry's normative range, that short-term and long-term sources and uses of funds are matched; and that contingent liabilities with parent companies, subsidiaries, partners, and other related parties will not have a material adverse effect on loan repayments.

 

3)         Reflect positive and stable sales growth, profit margins, operating margins, and overhead, and show other positive, supportive trends and projections.

 

4)         Show projected market prospects and earnings report that demonstrate a consistency between past performance, assumptions, and projected performance.

 

5)         Demonstrate a positive cash flow as evidenced by a net income before taxes of five (5) percent of the gross income of the rural business or agribusiness based on actual or projected income and expenses (Section 7(c) of the Act).

 

Section 640.100  Selection for Financing

 

Applicants that best meet the objectives of the Act through satisfaction of the evaluation criteria of Sections 640.80 and 640.90 will be funded until all available loan financing is expended. The amount of loan financing made available by the Department will be based upon the extent to which the applicant provides evidence of economic benefit to the community. Economic benefit evidence includes:

 

a)         evidence the loan project will diversify or increase the structure of the local economy with documentation of an increase or potential increase in employment (Section 6(b)(iii) of the Act);

 

b)         identification of the amount and documentation of an increase or potential increase in taxes (Section 6(b)(iii) of the Act) with the types and amounts of increased state or local taxes expected to be generated in relation to funds used;

 

c)         evidence that the loan project will create additional personal income for the community through a potential improvement in the diversification of the rural economy (Section 6(b)(iii) of the Act) for example, the project adds new types of industries to the local economy, the projects' goods and/or services to be produced are to be sold outside the community or the final goods and/or services are to be produced and sold locally to substitute for those goods and/or services from outside the state; or

 

d)         A potential to retain existing jobs (Section 6(b)(iii) of the Act), with a written assurance from the rural business or agribusiness which identifies the number of, the occupational type, and wage level of jobs to be created/retained in relation to funds used.

 

Section 640.110  Loan Funding Limitations

 

In accordance with Section 7(c) of the Act, a waiver of limitations on the percentage of leverage in accordance with Section 640.90 (c)(2) of this Part will be allowable when it is determined that this funding limitation would prohibit an otherwise approved project, and subsequent rural diversification from occurring if the applicant demonstrates severe need, including but not limited to:

 

a)         Distressed community or county with an unemployment rate which is 25 percent higher than the State average, or a per capita income which is less than the State average;

 

b)         Area with limited economic development as evidenced by absence of development activities within the last two years or as evidenced by new job growth rate less than the state or national average;

 

c)         Funding would support business which has provided assurance that the project will generate business growth and job creation in the community as a result of spinoff businesses, and thus evidence that the additional jobs will be created or retained;

 

d)         Funding is needed to avert loss of a major employment source (more than 100 jobs or 2 percent of the local employment base) in the community;

 

e)         Jobs to be created or retained offer wages substantially higher than the prevailing wage in the industry as determined by the Illinois Department of Labor pursuant to (Ill. Rev. Stat. 1989, ch. 48, pars. 39sl-s12) and Section 6-3 of the Illinois Purchasing Act (Ill. Rev. Stat. 1989, ch. 127, par. 132.6-3) or an annual wage higher than the State's median income as completed by the Department's Division of Research and Analysis, 620 E. Adams St., Springfield, Illinois 62701, (217) 782-1438.

 

Section 640.120  Allowable Leverage

 

a)         Each rural business receiving funds under the program must leverage financial resources for the project over and above Department funding. Owner equity or other private sector equity shall be a significant part of the project. Sources other than public funds shall serve as the primary sources of financing for the project.

 

b)         In calculating the Department's share, allowable leverage by the applicant may include such tangible contributions as:

 

1)         Cash expended by the applicant (during the period of the project) derived from any source other than the Department including expenditure of retained earnings, use of owner equity, or use of proceeds of debt of the applicant, and used on project-eligible expenses;

 

2)         The purchase price of project-related machinery and equipment leased by the company (for or after the start of the project) provided the company shall own, or may purchase for a nominal fee, the asset at the end of the lease;

 

3)         The unutilized portion of buildings which are made a part of the project whose value shall be determined by taking the depreciated cost of the area used exclusively on the project (thus excluding common areas);

 

4)         Previously purchased but unutilized machinery and equipment at book value provided it has not been in productive use in the past year but will be placed in productive use for the benefit of the project; and

 

5)         Project-related machinery and equipment brought into the State from another state, country or territory (provided the first productive use in Illinois occurs after the Department's letter of commitment).

 

c)         All contributions of cash, real property or machinery and equipment must meet each of the following criteria:

 

1)         are verifiable from the applicant's records;

 

2)         are utilized (if real property) or expended (if cash) after the Department's commitment during the period of the project;

 

3)         are necessary and reasonable for the accomplishment of the project.

 

d)         The following items are not allowable leverage:

 

1)         Cash expended prior to the date of the Department's loan commitment letter;

 

2)         Existing in-state land, building, furnishings, inventory or supplies already owned and productively utilized;

 

3)         Actual or donated operational and general overhead expenses (e.g., salaries, utilities, rent, supplies) incurred before, during or after the project is completed; and

 

4)         Debt-refinancing, lines of credit or other unexpended available funds.

 

Section 640.130  Applicant Certifications

 

Each loan applicant for program financing will be required to satisfy the following certifications:

 

a)         Farmland Preservation (if applicable) – Certification that the proposed project is compatible with established State policy regarding farmland preservation pursuant to the Farmland Preservation Act (Ill. Rev. Stat. 1989, ch. 5, pars. 1301 et seq.).

 

b)         Floodplain – Certification that the proposed project will comply with the Flood Disaster Protection Act of 1973 (42 U.S.C. 4001 et seq. (1984)) and Executive Order 79-4, effective June 1, 1979, which requires special environmental procedures if any activities will be carried out in a flood hazard area.

 

c)         Nondiscrimination – Certification that the recipient shall comply with all applicable laws and regulations which prohibit discrimination on the basis of race, sex, religion, national origin, age or handicaps, including but not limited to the Illinois Human Rights Act (Ill. Rev. Stat. 1989, ch. 68, pars. 1-101 et seq.).

 

d)         Student Loan – Where the recipient is an individual, the recipient certifies that he/she is not in default on an educational loan as provided in Section 3 of the Educational Loans Act (Ill. Rev. Stat. 1989, ch. 127, par. 3553).

 

e)         Historic Preservation – Recipient certifies that this project does not involve the destruction, alteration, renovation, transfer or sale, or utilization, of an historic property, structure or structures, or the introduction of visual, audible or atmospheric elements to an historic property, structure or structures, and will, therefore, not result in any changes in the character or use of any historic property, in accordance with the State Agency Historic Resources Preservation Act (Ill. Rev. Stat. 1989, ch 127, pars. 133c21 et seq.).

 

f)         Bribery Certification – That neither the applicant nor the applicant's employees have been convicted of bribery or attempting to bribe an officer or employee of the State of Illinois nor has there been an admission of guilt of such conduct which is a matter of public record pursuant to Section 10.1 of the Illinois Purchasing Act (Ill. Rev. Stat. 1989, ch. 127, par. 132.10-1).

 

g)         Interest of Public Officials – Recipient certifies that it is in compliance with the provisions of Section 11.4 of the Illinois Purchasing Act prohibiting conflict of interest (Ill. Rev. Stat., 1989, ch. 127, pars. 132.11-4).

 

h)         Bidding on State Contracts – Applicant certifies that it has not been barred from bidding on or entering into State contracts as a result of a violation of the Criminal Code of 1961 (Ill. Rev. Stat. 1989, ch. 38, pars. 33E-3 and 33E-4).

 

Section 640.140  Loan Terms

 

a)         Financing shall be made available to the borrower in periodic allotments as determined by the fund balance position of appropriated funds available to the Department for this program in comparison to the cash needs of all recipients.

 

b)         Financing awarded by the Department is subject to the following conditions:

 

1)         The repayment period shall not exceed 10 years (Section 7(b) of the Act);

 

2)         Financial assistance for any one project shall not exceed $200,000 (Section 7(c) of the Act).

 

c)         Loans for real estate will be amortized over a period of up to 10 years; loans primarily utilized for machinery and equipment will generally vary from 7 to 10 years. Loans primarily intended for short term working capital needs will normally extend for 3 to 5 years.

 

d)         Working capital loans may require personal guarantees from all individuals owning or controlling 20 percent or more of the applicant company. For small companies without major identifiable principals (e.g., no one owns 20 percent or more of the company), the amount of the loan is limited to 80 percent of the value of the fixed asset securing the loan. The Department shall be authorized to require personal guarantees for asset-based loans not secured by a lien on the fixed asset. The Department shall require personal guarantees in any loan transaction in which the loan to asset collateral ratio is less than one to one.

 

e)         Monthly installments shall be due and payable to the Department at a time specified in the loan agreement.

 

Section 640.150  Loan Agreement

 

A loan agreement will be developed for each business borrower that receives loan funds. The loan agreement will contain, at a minimum, the following items:

 

a)         Definition Section – Defining the key terms used in the agreement.

 

b)         Loan Conditions – Including statements relating to representations and warranties, evidence of other financing, note, collateral, corporate or partnership document, and legal matters.

 

c)         Borrower Representations and Warranties – Concerning form of ownership, authorization of agreement, binding effect, accuracy of application, collateral, accuracy of financial statements, absence of loan defaults, absence of litigation, absence of tax delinquencies, and possession of appropriate licenses and permits.

 

d)         Covenants and Continuing Agreements – To expend public funds in accordance with approved budget, keep detailed project records, furnish proof that its corporate or partnership existence is in full effect, pay all applicable taxes and required insurance, prohibit loans to officers/directors/stockholders, and comply with all applicable state and federal laws.

 

e)         Default Provisions – Listing the conditions under which the borrower would be in default of the agreement.

 

f)         Use of Loan Proceeds – Briefly describing the business project for which the loan is being made and the exact use of loan funds.

 

g)         Financing of Borrower – Information on primary lender, the amount of the lender's loan, terms of this loan, etc., as well as information and schedule of expected payout of the Department's loan commitment to the borrower.

 

h)         Labor Compliance Requirements – As appropriate, including equal opportunity employment, minimum wage, and other state or federal labor standards.

 

i)          Other – Such other terms and conditions necessary to secure or document the loan, including, but not limited to:  key man life insurance, liens, and Uniform Commercial Code (U.C.C.) (Ill. Rev. Stat. 1989, ch. 26, pars. 1-101 et seq.) filings.

 

Section 640.160  Loan Security

 

Financial assistance shall be secured by first, second, or third mortgage positions on real or personal property, by royalty payments, by personal notes or guarantees, or by any other security satisfactory to the Department to secure repayment, if required, by the financial assistance agreement. Security for Department loans shall include but is not limited to any or all of the following:

 

a)         First or second lien security interest in favor of the Department on all personal property of the borrower.

 

b)         First or second position real estate mortgage in favor of the Department on real estate of the borrower.

 

c)         Personal guarantees and/or corporate guarantees in the amount of the loan.

 

d)         Irrevocable letter of credit.

 

e)         First or second security interest in negotiable securities of the borrower or business principle owners.

 

Section 640.170  Maintenance and Insurance of Property

 

a)         The recipient shall at all times maintain the property provided as security for the loan in such condition and repair as a reasonably prudent person would who held title to the property.

 

b)         The recipients shall maintain, during the term of the loan, fire and hazard insurance policies, covering the amount of the loan with a loss payee clause in favor of the Department.

 

c)         The recipient shall, if at any time during the life of the loan the recipient's property is declared to be within a flood hazard area, purchase federal flood insurance if available, and in an amount equal to the amount of the loan.

 

d)         The recipient shall maintain liability and workers' compensation insurance.

 

e)         The recipient shall provide written notice to the Department of any public hearing or meeting before any administrative or other public agency which may, in any manner, affect the personal property or real estate securing the loan.

 

Section 640.180  Administrative Requirements

 

a)         Financial Management – The loan recipient's financial management system shall be structured under the Accounting Standards of the Financial Accounting Standards Board of the American Institute of Certified Public Accountants (AICPA) (September 19, 1987) to maintain control and accountability over the loan funds.  The AICPA is located at 1211 Avenue of the Americas, New York, New York 10036-8775.

 

b)         Reporting – The loan recipient shall provide, at least annually, information and reports on project impact, job creation/retention, and company financial statements.

 

c)         Department Monitoring and Evaluation – Loan recipients shall permit any agent authorized by the Department, upon presentation of credentials, to have full access to and the right to:

 

1)         inspect, examine or audit any documents, papers, and records involving transactions related to a loan from the Department, including making copies thereof, and

 

2)         inspect or appraise any of the loan recipient's business assets.

 

d)         Authorizations – The loan recipient shall, upon written request by the Department issue any necessary authorization to the appropriate Federal, State or local authority or private person or entity for the release of information concerning a business or project financed under the provisions of this program, with the information requested to include, but not be limited to, financial reports, returns, or records relating to that business or project.

 

Section 640.190  Audits

 

a)         It shall be the loan recipient's responsibility to secure any compliance audit of the use of loan proceeds. Such audit must be performed by an independent certified public accountant, licensed by authority of the State of Illinois pursuant to the Illinois Public Accounting Act (Ill. Rev. Stat. 1989, ch. 111, pars. 5500 et seq.). The audit shall be conducted in accordance with generally accepted auditing standards adopted by the AICPA (1989).

 

b)         The Department reserves the right to conduct special audits of funds expended under Department loans, at any time during normal working hours.

 

Section 640.200  Events of Default

 

a)         The entire unpaid principal of the loan, and the interest then accrued thereon, shall become and be immediately due and payable upon the written demand of the Department, without any other notice or demand of any kind or any presentment of protest, if any one of the following events (hereafter an "event of default") shall occur and be continuing at the time of such demand, whether voluntarily or involuntarily, or without limitation, occurring or brought about by operation of law or pursuant to or in compliance with any judgment, decree or order of any court or any order:

 

1)         Non-Payment of Loan – If the recipient shall fail to make payment when due of any installment of principal on the loan, or interest accrued thereon and if the failure to make payment shall remain unremedied for fifteen (15) working days.

 

2)         Non-Payment of Other Indebtedness – If default shall be made in the payment when due of any installment of principal or of interest on any of the recipient's other indebtedness (any creditor the recipient owes) and if such default shall remain unremedied for fifteen (15) working days.

 

3)         Incorrect Representation or Warranty – If any representation or warranty contained in, or made in connection with the execution and delivery of, the loan agreement, or in any certificate furnished pursuant hereto, shall prove to have been incorrect.

 

4)         Default in Covenants – If the recipient shall default in the performance of any other term, covenant or agreement contained in the loan agreement, and such default shall continue unremedied for thirty (30) working days after either:

 

A)        it becomes known to an executive officer of the recipient, or

 

B)        written notice thereof shall have been given to the recipient by the Department.

 

5)         Voluntary Insolvency – If the recipient shall cease to pay its debts as they mature or shall voluntarily file a petition seeking reorganization of, or the appointment of a receiver, trustee, or liquidation of its assets or to effect a repayment plan with creditors, or shall be adjudicated bankrupt, or shall make a voluntary assignment for the benefit of creditors.

 

6)         Involuntary Insolvency – If an involuntary petition shall be filed against the recipient under any bankruptcy or insolvency law or seeking the reorganization of or the appointment of any receiver, trustee or liquidator for the recipient, or the property of the recipient, or a writ or warrant of attachment shall be issued against the property of the recipient and such petition shall not be dismissed, or such writ or warrant of attachment shall not be released or bonded within thirty (30) working days after filing or levy.

 

7)         Judgments – If any final judgment for the payment of money that is not fully covered by liability insurance shall be rendered against the recipient, and within thirty (30) working days, shall not be discharged, or an appeal therefrom taken and execution thereon effectively stayed pending such appeal, and, if such judgment be affirmed on such appeal, the same shall not be discharged within thirty (30) working days.

 

b)         Notice of Default – The recipient agrees to give written notice to the Department of any event, within fifteen (15) working days of the event, which constitutes an event of default.

SUBPART B: RURAL DIVERSIFICATION GRANT PROGRAM

 

Section 640.210  Purpose of Grant Program

 

Through the Rural Diversification Grant Program, the Department of Commerce and Community Affairs will provide grants to local governments and not-for-profit agencies for the purpose of rural economic diversification.

 

Section 640.220  Definitions

 

            "Act" – The Rural Diversification Act (Ill. Rev. Stat. 1989, ch. 5, pars. 2251 et seq.) which creates the Rural Diversification Program.

 

            "Application" – A request for program funds, including the required statistical and narrative information and attachments.

 

            "Department" – The Illinois Department of Commerce and Community Affairs.

 

            "Financing" – Grants to or on behalf of local governments or not-for-profit agencies for purposes of rural diversification, except that no grants under this Program shall be made directly with a rural business.

 

            "Program" – The Rural Diversification Grant Program.

 

            "Recipient" – Any eligible applicant receiving funds under this program.

 

Section 640.230  Eligible Applicants

 

Applications shall be accepted from the chief elected official of cities, villages, towns, counties, college districts and from officials of not-for- profit agencies including regional planning and development commissions, economic development organizations, or community based organizations which are located in or serve any incorporated area (including contiguous cities, towns or villages combined) of 50,000 population or less or any unincorporated area, of a non urban county with a population of less than 350,000.

 

Section 640.240  Eligible Program Activities

 

a)         The Department may provide financing to or on behalf of an eligible applicant in the State for the purpose of industry or region wide research directed to profit oriented uses of rural resources (Section 3(d)(iii) of the Act) including:

 

1)         Region-wide research, such as feasibility studies, opportunity analyses, reuse studies, needs assessments, cost/benefit analyses or other studies required by a rural community in order to explore its options for economic development or diversification.

 

2)         Business and industry research and reports such as market analyses, production analyses, customer surveys, feasibility studies, and related research to explore, identify or create new markets for actual or potential rural businesses.

 

b)         The Department may provide financing to or on behalf of an eligible applicant in the State for the purpose of information, technical support and technical assistance contracts regarding private, State and federal resources, programs or grant assistances and the needs and opportunities for diversification (Section 5 (a)(v) of the Act) including:

 

1)         Community information and training including conferences and workshops and technical or reference guides on private, local, state and federal programs, services or resources related to community or economic development needs, opportunities, strategies and programs.

 

2)         Technical support and technical assistance including on-site technical advice and problem solving or self-help technical assistance related to the needs or opportunities for public or private responses to rural or agricultural diversification.

 

Section 640.250  Eligible Program Costs

 

Project costs which shall be eligible for reimbursement with Grant proceeds include contractual services, consultant fees, commodities, materials and supplies, travel and other project-related direct expenses necessitated by the project.

 

Section 640.260  Fund Availability and Submission Deadlines

 

a)         Upon request, the Department will supply applicants with an application package. Public notice of the availability of funding and the application due dates will be published in the State-recognized newspaper.

 

b)         Applications for funding under the Rural Diversification Grant Program will be made available at least quarterly on a schedule determined by the Department and published in the State-recognized newspaper. Applications received after 5:00 p.m. on the appropriate submission date will be held for consideration during the next review cycle. Final award announcements will be made within forty-five (45) working days of the application deadline.

 

Section 640.270  Grant Application Package

 

Applications for grants must include the following documentation:

 

a)         Project Summary – a brief statement and description of the project for which funds are being sought.

 

b)         Evidence of Need – a description of the conditions of the community requiring study or action such as absence of opportunities, over-reliance on limited industries, history of low wages or high unemployment, or level of knowledge or education.

 

c)         Background of Applicant – a brief discussion of the applicant's organization, purpose, history and capabilities to carry out the proposed project.

 

d)         Project Description – a description of the proposed research or technical assistance project for which the grant would be used, including a project work statement detailing project objectives, work activities and deadlines as well as identification of the individual(s) or group(s) responsible for carrying out the project.

 

e)         Project Results – identification of the anticipated results of the proposed project in terms such as rural or agricultural diversification, potential for creation or retention of jobs, or number of communities to be served.

 

f)         Follow-up Work and Timelines – a description of the expected follow-up work of the organization to continue the work begun by the project.

 

g)         Project Management – identification and information on the staff and/or consultants to be involved in the proposed project, including qualifications, functional responsibilities, percent of time and related information.

 

h)         Financial Statements – if necessary, financial statements of the applicant.

 

i)          Coordination – description of any cooperative working relationships which are or will be developed with other organizations involved in similar or related activities, and the relationship of the project to existing local, regional or state economic development plans.

 

j)          Related Activities or Assistance Sought – information concerning project-related activities undertaken within the last two years, and information concerning any other public financing applied for or received.

 

k)         Budget – a project budget by cost categories, including quarterly projections of fund requirements, as required in the Department's application package.

 

Section 640.280  Review of Grant Applications

 

a)         Application Screening – The Department shall screen all grant applications to determine that all elements of the application package have been addressed. Applicants will be notified of deficiencies in applications and given the opportunity to correct such deficiencies through resubmission during the next cycle of funding. Complete applications will be reviewed and evaluated by Department staff in accordance with the criteria listed in subsections (b) through (h) of this Section. This review and evaluation process will be completed within forty-five (45) working days of the due date for applications.

 

b)         Basic Eligibility Evaluation – Each grant application will be reviewed to assure compliance with the eligibility requirements as detailed below:

 

1)         Eligible Applicant – Eligible applicant as detailed in Section 640.230.

 

2)         Eligible Project Type – Project activities consistent with the eligible activities of a Rural Diversification Project as detailed in Section 640.240.

 

c)         Evidence of Need – The applicant must show:

 

1)         The essential need which must be documented for agricultural or rural diversification (Section 6 (b)(i) of the Act):  for example, absence of development projects; lack of knowledge, education or skills of economic development; potential opportunity for economic benefit, or related need.

 

2)         proof of the project's inability to acquire financing from other state authorities or agencies (Section 6(b)(i) of the Act), in an amount adequate to complete the project, such as a letter of partial funding or indication that other state and federal program funding has been considered.

 

d)         Costs – The applicant must demonstrate that the project costs:

 

1)         are eligible program costs as defined in Section 640.250;

 

2)         can be substantiated given the amount of work to be undertaken and the results expected; and

 

3)         the amount to be paid from the Department's share does not exceed the maximum percentage participation as detailed in Section 640.310.

 

e)         Program Objectives and Methodology – The applicant must demonstrate the activities and outcomes of the project are accomplishable, such that:

 

1)         objectives are measurable and describe benefit to the population or area being served;

 

2)         methods and sequence of activities logically address the problems or opportunities identified and achieve the objectives that have been set.

 

Section 640.290  Rural Diversification Review Committee

 

a)         There is created an internal review committee with the Director of the Rural Affairs Council, or his designee, the Director of the Department of Agriculture, or his designee, and the Director of the Illinois Farm Development Authority, or his designee and other members as deemed necessary by the Director of the Department to assist in the review of all project applications (Section 5(c) of the Act).

 

b)         Within 10 working days of the application due date, the "Internal Review committee" shall meet to review all project applications. The committee will identify applications for grant consideration based upon analysis of the applicant organization, the project design and the project's readiness in accordance with the requirements of subsections (c) through (e) of this Section.

 

c)         Project Implementation Readiness – The applicant must demonstrate project readiness, including:

 

1)         a time schedule for immediate project initiation;

 

2)         written cost estimates which support project costs; and

 

3)         scope of activities which can be conducted within the grant agreement time period.

 

d)         Project Administrative Capacity – The applicant must demonstrate:

 

1)         its capability of successfully completing the proposed project, based on past experience or previous performance; and

 

2)         its capability of complying with grant agreement based on past experience, or previous performance.

 

e)         Program Objectives and Methodology – The applicant must demonstrate the activities and outcomes of the project are accomplishable, such that:

 

1)         objectives are measurable and describe benefit to the population or area being served; and

 

2)         methods and sequence of activities logically address the problems or opportunities identified and achieve the objectives that have been set. 

 

Section 640.300  Selection for Financing

 

Applications that meet the criteria of Sections 640.280 and 640.290 will be funded until all available grant financing is expended. The amount of grant financing made available by the Department will be based on the extent to which the application provides evidence of economic benefit to the community including:

 

a)         the degree to which the proposed project ameliorates the problems or needs identified within the area;

 

b)         the extent to which the project addresses substate regional, rather than individual, community concerns;

 

c)         the innovativeness and replicability of the proposed projects in relation to approaches used in the past; and

 

d)         the residual economic benefit to the community, such as jobs created or retained, increase tax base or revenues, added community wealth or similar benefits.

 

Section 640.310  Grant Limitations

 

a)         The Department shall approve Grants in amounts necessary to pay up to 25 percent of eligible costs as defined in Section 640.250, incurred by or on behalf of an eligible entity up to a maximum of $200,000, unless the Director waives the percent share or maximum amount in accordance with Section 640.320.

 

b)         In calculating the Department's share of costs, total financing for the project shall include cash amounts or other contributions of in-kind goods or services provided by the applicant, derived from any source, and used on the project's eligible expenses, and included as a part of the grant agreement budget. Funds derived from other departmental programs will be considered as matching funds if they are:

 

1)         verifiable from the applicant's records, and

 

2)         utilized or expended after the Department commitment during the period of the project, and

 

3)         clearly identified in the project's scope of work and related to the accomplishment of the project objective.

 

Section 640.320  Waivers

 

In accordance with Section 7(c) of the Act, a waiver of limitations on the percentage of leverage in accordance with Section 640.310 of this Part shall be allowable when it is determined that these funding limitations would prohibit an otherwise approved project, and subsequent rural diversification, including job creation or retention, from occurring if the application demonstrates severe need, including but not limited to:

 

a)         The area to be served is a distressed community or county with an average unemployment rate for the last two years which is 25 percent higher than the State average, or a per capita income which is less than the State average;

 

b)         Area with limited economic development potential as evidenced by absence of development activities within the last two years or as evidenced by new job growth rate less than the State or national average;

 

c)         Funding would support a project which has provided assurance that it will generate business growth and job creation in the community as a result;

 

d)         Funding is needed to avert loss of a major employment source (more than 100 jobs or 2 percent of the local base) in the community;

 

e)         The project is designed to benefit multiple rural jurisdictions across the State; or

 

f)         The project is a model project, new program innovation or demonstration effort with the potential for replicability within numerous regions or areas of the State.

 

Section 640.330  Applicant Certifications

 

Each applicant for program financing will be required to satisfy the following certifications, when applicable:

 

a)         Farmland Preservation (if applicable) – certification that the proposed project is compatible with established State policy regarding farmland preservation pursuant to the Farmland Preservation Act.

 

b)         Floodplain – certification that the proposed project will comply with the Flood Disaster Protection Act of 1973 (42 U.S.C. 4001 et seq. (1984)) and Executive Order 79-4, effective June 1, 1979, which requires special environmental procedures if any activities will be carried out in a flood hazard area.

 

c)         Nondiscrimination – Certification that the recipient shall comply with all applicable laws and regulations which prohibit discrimination on the basis of race, sex, religion, national origin, age or handicaps, including but not limited to the Illinois Human Rights Act, and the Equal Employment Opportunity Clause promulgated pursuant thereto.

 

d)         Historic Preservation – Recipient certifies that this project does not involve the destruction, alteration, renovation, transfer or sale, or utilization, of an historic property, structure or structures, or the introduction of visual, audible or atmospheric elements to an historic property, structure or structures, and will, therefore, not result in any changes in the character or use of any historic property in accordance with the State Agency Historic Resources Preservation Act.

 

e)         Bribery Certification – That neither the applicant nor the applicant's employees have been convicted of bribery or attempting to bribe an officer or employee of the State of Illinois nor has there been an admission of guilt of such conduct which is a matter of public record pursuant to Section 10.1 of the Illinois Purchasing Act.

 

f)         Interest of Public Officials – Recipient certifies that it is in compliance with the provisions of Section 11.4 of the Illinois Purchasing Act prohibiting conflict of interest.

 

g)         Bidding on State Contracts – Applicant certifies that it has not been barred from bidding on or entering into State contracts as a result of a violation of the Criminal Code of 1961 (Ill. Rev. Stat. 1989, ch. 38, par. 1-1 et seq.).

 

Section 640.340  Administrative Standards for Grant Recipients

 

a)         Grant Agreement – The Department will negotiate as needed with the applicant. The grant agreement will set out the scope of work of the grant, the terms and conditions of the grant, and the budget of the grant agreement.

b)         Grant Period – The grant shall have a period of completion as determined by the Department.

c)         Complaint Process – In the event of a recipient complaint, the Department will follow the procedures outlined in 47 Ill. Adm. Code 10 (Review and Appeal Procedures).

d)         Fund Availability – Payments pursuant to a grant are subject to the availability of funds appropriated to the Department by the Illinois General Assembly. Grant funds must be expended or obligated within the period of the grant agreement and liquidated within the period of time in accordance with the Illinois Grant Funds Recovery Act (Ill. Rev. Stat. 1989, ch. 127, pars. 2301 et seq.).

e)         Disbursement of Funds – Payments to the recipient pursuant to a grant are subject to the initiation of an invoice voucher and receipt of an expenditure summary or documentation of expenses. Further, financing shall be made available to the recipient in periodic allotments as determined by the fund balance position of appropriated funds available to the Department for this program in comparison with the cash needs of the various recipients under this program.

f)         Financial Management – The recipient is accountable for funds received under this grant and shall maintain effective control and accountability over all funds and other assets under the grant. The recipient shall keep records which detail and accurately document the recipient's expenditures of grant funds for a period of two years from the end of the grant agreement.

g)         Interest on Grant Funds – In accordance with Section 10 of the Illinois Grant Funds Recovery Act, all interest earned under the grant shall become part of the grant when earned. Any interest earned during the term of the grant, and not expended as grant principal during the term of the grant, shall be returned to the Department.

h)         Recovery of Funds – If the grant recipient expends funds contrary to the provisions of the grant agreement, such action shall require the repayment of those funds.

i)          Department Monitoring and Evaluation – Recipients and their subcontractors, if any, must permit any agent authorized by the Department, upon presentation of credentials, to have full access to and the right to examine any documents, papers, and records of the recipient involving transactions related to a grant from the Department.

j)          Reports – Grant recipients must submit, at least semi-annually during the period of the grant agreement, reports on the financial status of the project and narrative reports on the activities and achievement of objectives and results.

k)         Audits – The recipient shall be responsible for securing any compliance audit required of grant records. Such audit must be performed by an independent certified public accountant, licensed by authority of the State of Illinois pursuant to the Illinois Public Accounting Act. The audit must be conducted in accordance with generally accepted government auditing standards adopted by the AICPA (1989).

l)          Special Audits – The Department reserves the right to conduct special audits, including but not limited to an agency-wide audit, at any time during normal working hours, of the funds expended under Department grants.

 

Section 640.350  Modification, Breach and Termination of Grants

 

a)         Modification and Amendment of the Grant – The grant award is subject to revision as follows:

 

1)         Modifications by Operation of Law – The grant award is subject to such modifications as may be required by changes in State law or regulations. Any such required modification shall be incorporated into and made a part of the grant as within the provisions of the Illinois Grant Funds Recovery Act (Ill. Rev. Stat. 1989, ch. 127, pars. 2301 et seq.). The Department shall notify the recipient in writing of any amendment to such regulations and the effective date.

 

2)         Modifications in Budget – A recipient's request for budget variations in the amount or line item costs shall be in writing by registered letter and shall give justifications for the requested variations. The Department may approve modification requests, if, the Department determines such is necessary to achieve program objectives. Any changes in cost categories or line items shall not alter the activities or deliverables for the project. If the Department approves the modification request, the recipient will be notified in writing of the change and the effective date of the change.

 

3)         Other Modifications by Department or Recipient – If either the Department or the recipient requests to modify the terms of the grant award other than as set forth in subsections (a)(1) and (2) above, written notice of the proposed modification shall be given to the other party. No modification shall take effect unless agreed to in writing by both the Department and the recipient.

 

b)         Breach – Should the recipient fail, refuse or elect not to complete the grant agreement, the recipient shall notify the Department within ten (10) days after the date upon which performance ceases.

 

c)         Suspension

 

1)         If the Department determines that a recipient has failed to perform the terms and conditions of the scope of work of the project, then the Department shall, after notice and an opportunity to correct has been provided to the recipient, suspend the grant and withhold further payments until the grant is terminated, or the recipient's failure has been corrected.

 

2)         The Department will determine that a recipient has failed to faithfully perform the terms and conditions of the scope of work of the project when:

 

A)        The Department has notified the recipient in writing of the existence of circumstances such as repeated failure to submit required reports, misapplication of grant funds, failure to match Department funds, evidence of fraud and abuse, repeated failure to meet performance timelines or standards, or failure to resolve negotiated points of the agreement; and

 

B)        The recipient fails to develop and implement a corrective action plan within 30 calendar days of the Department's notice.

 

d)         Termination – A grant shall be terminated for any of the following reasons:

 

1)         Termination Due to Loss of Funding – In the absence of State funding for a specific year, all grants that year will be terminated in full. In the event of a partial loss of State funding, the Department will make proportionate cuts to all recipients.

 

2)         Termination for Cause – If the Department determines that the recipient has failed to comply with the terms and conditions of the grant agreement the Department shall terminate the grant in whole, or in part, at any time before the date of completion. Such termination may be appealed by the recipient through the complaint process outlined in Section 640.340(c).

 

3)         Termination by Agreement – The Department and the recipient shall terminate the grant in whole, or in part, when the Department and recipient agree that the continuation of the project would not produce beneficial results commensurate with the further expenditures of funds.