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benefit of its members. Its charter, constitution, or partnership agreement shall be in accordance with the laws of the state and shall specifically authorize the conduct of the cooperative enterprise or service.

The cooperative association shall impose no inequitable restrictions upon membership or participation therein, and its bylaws shall provide that each member shall have only one vote and that, except as the Administrator may rule otherwise with regard to associations to which loans are made, there shall be no voting by proxy.

Assurance of satisfactory management of the cooperative enterprise or service shall be given the Farm Security Administration. Policies and operations shall conform to principles set forth by the Farm Security Administration. Records and books of the cooperative enterprise or service shall be open for inspection and audit by representatives of the Farm Security Administration during the period of the Farm Security Administration loan. At least the majority of the participation members shall be clients of the Farm Security Administration and/or low-income farm families.

The loan shall be justified on the basis of its contribution to the rehabilitation or relief of destitute or low-income farm families or individuals within stricken agricultural areas.

The enterprise or service shall be economically sound. Each unit shall be assured an adequate volume of business to provide sufficient income to maintain the service, pay all operating costs, provide for amortization, and allow for depreciation and reserves.

Duplication of available existing cooperative facilities shall be avoided.

Cooperative enterprises or services will be established only in communities where a cooperative spirit is evident.

There shall be evidence in the facts submitted or in written authoritative statement made that the association is unable to secure a loan from the Farm Credit Administration.

Loans for relief in stricken agricultural areas include those for the establishment of medical care cooperatives which provide certain benefits to participating members. Beneficial memberships in cooperatives for medical care shall be restricted to Farm_Security Administration clients and to persons eligible to become Farm Security Administration clients. Persons may become members of medical care cooperatives if their official duties so require but shall not be entitled to medical care benefits when their membership is granted solely to enable them to exercise supervisory activities.

All loan agreements entered into by the Farm Security Administration and cooperative associations organized or operated in connection with approved resettlement community projects must provide that cooperative associations, insofar as they engage in the cooperative production of goods or performance of services which are to be sold in competition with the goods or services of private enterprises, or insofar as they employ nonmembers in production or in the performance of services, will maintain standards of wages, hours, and conditions of employment, at least equal to those prevailing for similar occupations in private enterprises with which they

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are in direct competition as determined from time to time by the Administrator acting for the Secretary of Agriculture upon the recommendation of the Directors of the Labor Relations and Resettlement Divisions of the Farm Security Administration. Such conditions will be set forth in Notice of Labor Standards which may be authorized from time to time by the Administrator acting for the Secretary of Agriculture, and which will be effective for the duration of the Farm Security Administration's supervision of the cooperative activities. These requirements will not apply to medical and dental cooperatives which do not maintain hospital facilities or which are not located on community projects of the Farm Security Administration.* [Par. 3, A.O. 40, rev. 2, Sept. 26, 1936, as amended by pars 1, 2, Supp. 3, Jan. 14, 1937, and par. 1, Supp. 6, Jan. 18, 1938]

CROSS REFERENCE: For requirements for loans from the Farm Credit Administration to cooperative associations, see Part 44.

304.3 Eligibility for receiving loans. Any community and cooperative association, incorporated or unincorporated, organized or operated, in furtherance of rural rehabilitation or relief in stricken agricultural areas, or in connection with approved resettlement community projects, is eligible for a loan under this subpart, provided that: (a) It is a bona fide agency or cooperative association, and (b) it fulfills the other requirements of this subpart.*1 [Par. 4a]

304.4 Purposes for which loans may be used. (a) Loans may be made to approved community and cooperative associations, either to those which further rural rehabilitation or relief in stricken agricultural areas or to those organized in connection with approved resettlement community projects; or to individuals to participate in such associations or to acquire property or services jointly or individually for joint benefit, for the following purposes: (1) To acquire property, real or personal, or any interest therein, necessary for the proper conduct of the enterprise; (2) to construct buildings, install equipment, and purchase goods and services necessary for the proper conduct of the enterprise; (3) to provide necessary operating capital; (4) to refinance or re-establish existing cooperative associations; and (5) to conduct any cooperative activity for the rural rehabilitation or relief of its members, including the making of advances to producers of products handled by the association under marketing agreements.

(b) The following is a partial list of facilities, services, or coop: erative activities which are acceptable, provided they can be justified in accordance with the policies set forth in this subpart:

(1) Home conveniences: facilities, not feasible economically in individual low-income homes, for laundering, for the making and repairing of wearing apparel, furniture, and other household and home needs.

(2) Food conservation and processing: facilities for canning, preserving, and dehydrating fruits and vegetables; for curing and processing meats for home use.

(3) General farm needs: facilities for farm machinery repairing, mixing of fertilizers, terracing, feed grinding and mixing, seed cleaning and treatment, spraying, and other general farm needs.

**For statutory and source citations, see note to 8 304.1.

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(4) Crop harvesting : facilities for threshing, hulling, baling, ensilage cutting, and other crop harvesting needs.

(5) Processing: facilities for the processing of agricultural and other products for marketing purposes.

(6) Handicrafts: facilities for the making and marketing of handicraft products.

(7) Grading, packing and storing: facilities for the grading, packing, and storing of perishable commodities, including cold storage and warehousing:

(8) Marketing and purchasing: facilities for the purchase or sale of raw or processed materials and goods, including the general merchandising of goods and services.

(9) Livestock improvement: facilities for livestock improvement, such as the acquisition of purebred sires, and so forth.

(10) Medical and health services.

(c) Requests for loans for participation in facilities or services other than those listed above may be submitted, and may be approved, if the facilities or services are determined by the Administrator to be proper purposes for which the Farm Security Administration is authorized to make loans.*1 [Par. 5]

304.5 Security. Where a loan made to an association for the pose of acquiring specific property or for the purpose of producing a crop, such loan shall be secured by a mortgage, chattel mortgage, or lien on the property or crop so acquired or produced, and may be further secured by a mortgage, chattel mortgage, or lien on any other property or crop of the association, and/or by an assignment of fees, tolls, and rights under marketing and service agreements.

Where local law or the individual situation of the association makes a different type of security more desirable, a different form of security may be used on approval of the Solicitor. The Farm Security Administration will not in any case waive its rights as a general creditor.

Loans for purposes other than to acquire specific property or produce a crop shall be secured by such security as may be approved by the Administrator.*+ [Par. Ta]

304.6 Period of loan. Loans will be for the shortest period consistent with the purpose and policies of this subpart, considering the use to which the proceeds thereof are to be put, the financial resources and earning capacity of the borrower, and, in the case of loans to finance the purchase of specific property, the probable rate of depreciation, the estimated life thereof, and the amount of the loan as compared with the total purchase price, but in no case will the period exceed 40 years. When a loan is made for purposes which dictate different maximum periods of payment, repayment will be computed and will be required for each type of loan in accordance with this section.*+ [Par. 8]

304.7 Amortization. Loans which have a maturity of less than 2 years will be repaid in such instalments of principal and interest as the Administrator may determine. Efforts will be made, however, to have such loans repayable in quarterly, semiannual, or annual equal instalments of principal and interest. Page 46

**For statutory and source citations, see note to 304.1.

Loans which have a maturity in excess of 2 years will be repayable in equal annual instalments of principal with interest added or in equal annual instalments including interest, Provided, however, That when the loan is for a period of 5 years or more, and, in the opinion of the Administrator, the financial condition of the organization so justifies, there need be no requirement that any payment be made on the principal during the first 3 years after the loan is made, but, in such cases, interest shall be paid annually each of the 3 years. Provision may be made for repayments in such instalments as the regional director may determine to be in accordance with the anticipated maximum ability of the borrower to repay, Provided only That the total amount of the loan which is required to be repaid by the end of any particular year will not be less than the total amount of the loan that would have been required to be repaid if the loan has been payable in equal annual instalments.** [Pars. 9a, 9b I]

304.8 Rate of interest. In the case of loans to associations, interest will be charged at the rate of 3 percent per annum on balances remaining unpaid from time to time.

In cases where two rates of interest are charged in the same loan, the rate or rates on the portion of the loan to which each applies must be clearly indicated in the Loan Agreement.*[Pars. 10a, 10d]

304.9 Reports. Any association or group which receives a loan will file with the Administrator, during the period of the Loan Agreement, reports, in the form prescribed by the Administrator, and referred to the division concerned.*+ [Par. 11a]

304.10 Bonding of employees of borrowing associations. The regional director or his delegated representative will require that all officers, agents, and employees of the borrowing association, charged with the custody of any of its funds or property shall furnish adequate bond at the expense of the borrower.*+ [Par. 12c]

304.11 Control over expenditures. All Loan Agreements to associations will provide that property and services of the Farm Security Administration may be advanced to the association in lieu of cash, and that the obligation therefor will be in an amount equal to the actual value of such property or services to the Farm Security Administration.

If the Administrator determines that the association, organized in connection with a community resettlement project, has assets sufficient to serve as security for any loans made to it, no detailed control will be extended over the expenditure of any moneys obtained from the proceeds of loans made to it. This does not exempt the cooperative from making such reports as the Administrator may determine to be essential.

If the association organized in connection with a community resettlement project has insufficient assets to secure properly the loans made to it, other than the property to be acquired from the proceeds of loans, the Administrator will indicate for each project the procedure necessary to insure that the funds are expended in accordance with the Loan Agreement.*+ [Par. 13a II]

**For statutory and source citations, see note to g 304.1.

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304.12 Control over construction. All plans and specifications for any new construction for an association organized in connection with a community resettlement project will be submitted to the Administrator for approval if such construction involves a cost exceeding two thousand five hundred dollars ($2,500).

All major construction for an association organized in connection with a community resettlement project will have such inspection as the Administrator will prescribe.** [Par. 13a III A]

304.13 Final inspection. A final inspection and acceptance of all construction undertaken by a cooperative association which requires inspection pursuant to established procedures will be made before the cooperative association makes the final payment on any construction contract entered into with any individual, partnership, corporation, or other contracting party. All resettlement Loan Agreements and such rural rehabilitation Loan Agreements, as the Administrator may require, shall provide for such final inspection, and shall also provide that all construction contracts entered into by the cooperative associations shall make similar provision.

Such final inspection will be made according to the procedure established for final inspections. A copy of the final inspection report and certificate of acceptance will be furnished to the regional director, director of the division concerned, the Budget Officer, the manager of the cooperative association, the agency or contracting party performing the construction for the cooperative association (if there be such an agency or contracting party), and the regional loan approving office to file with other documents concerning the project.* [Par. 6, A.O. 40, rev. 2, Supp. 2, Dec. 31, 1936]

304.14 Inspection costs. All costs incidental to inspection of construction under the jurisdiction of a cooperative association will be paid from administrative funds of the Farm Security Administration.* [Par. 7, A.O. 40, rev. 2, Supp. 2, Dec. 31, 1936]

PART 321–OTHER SERVICES

Sec.

Sec. SUBPART-Grants to individuals 321.3 Purpose for which grants may be for rural rehabilitation and re

made. lief in stricken agricultural areas 321.4 Policies applicable to the exten321.1 Persons eligible.

sion of medical aid to clients. 321.2 Policy with respect to grants. 321.5 Resettlement Information Service.

SUBPART-GRANTS TO INDIVIDUALS FOR RURAL REHABILITATION

AND RELIEF IN STRICKEN AGRICULTURAL AREAS

Section 321.1 Persons eligible. Farm owners, farm tenants, sharecroppers, farm laborers, persons now on the official rolls of the Farm Security Administration, and other persons who now live on farms or in farm areas and who, when last employed, received the major portion of their income from farming operations will be eligible for grants under this subpart, without regard to availability of suitable and adequate soil resources and other conditions and characteristics, other than employability, ordinarily indicating poten

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**For statutory and source citations, see note to $ 304.1.

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