Internal Control Questionnaires and Verification Procedures

Construction Loan Applications

1. Does the bank require:

   1. Detailed resumes of the contractor’s and major subcontractors’ construction experience, as well as other projects currently under construction?

   2. Current and historical financial statements?

   3. Trade reputation checks?

   4. Credit checks?

   5. Bonding company checks?

2. Do project cost estimates include:

   1. Land and construction costs?

   2. Off-site improvement expenses?

   3. The cost of legal services?

   4. Loan interest, supervisory fees, and insurance expenses?

3. Does the bank require an estimated cost breakdown for each construction stage?

4. Does the bank require that cost estimates of more complicated projects be reviewed by qualified personnel, i.e., an architect, construction engineer, or independent estimator?

5. Do cost budgets include the amount and source of the builder’s and/or owner’s equity contribution?

6. Are commitment fees required on approved construction loans, and if so, are computations based on interest rate structure and/or risk considerations?

7. Does bank policy require personal guarantees of construction loans by the borrowers?

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