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Name of Recipient Agreement No.: XX-XXX-550 Project No.: C-06-XXXX-XXX (2) The Recipient may secure future debt on parity with this Obligation if the Recipient's Net Revenues are at least 1.2 times the maximum annual debt service on all senior debts and Net Revenues pledged to pay all System debts are at least 1.1 times the maximum annual debt service. 3.8 Financial Management System and Standards. The Recipient agrees to comply with federal standards for financial management systems.The Recipient agrees that, at a minimum, its fiscal control and accounting procedures will be sufficient to permit preparation of reports required by the federal government and tracking of Project funds to a level of expenditure adequate to establish that such funds have not been used in violation of federal or state law or.the terms of this Agreement. To the extent applicable, the Recipient'agrees to be bound by, and to comply with, the provisions and requirements of the federal Single Audit Act of 1984, Office of Management and Budget(OMB) Circular No. A-133, and updates oKrevisions, thereto, including but not limited to Section 210(a)-(d). (Pub. L. 98-502.) \ 3.9 Accounting and Auditing Standards. �� / \ The Recipient will maintain separate Project accounts,in accordance with generally accepted accounting principles. The Recipient shall comply with "Standardsfor Audit of Governmental Organizations, Programs, Activities and Functions" promulgated by the U.S. General Accounting Office. (40 CFR § 35.3135, subd. (I).) \\/ ,-' 3.10 Federal or State Assistance. , ",• If federal or state funding for Project Costs is made ayaitable to the Recipient from sources other than this Agreement, the Recipient may_retain such funding up to.an amount which,equals the Recipient's local share of Project Costs. To the extent allowed by requirements ofother funding sources, any funding received in excess of the Recipient's local share„not to exceed the total amount funded under this Agreement, shall be remitted to the State Water Boed totie applied.toinstallment Payments due hereunder. - 'ARTICLElV TAXC OV ENANTS 4.1 Purpose: � � \ The purpose of,this Article IV is to;esta6lishhthe reasonable expectations of the Recipient regarding the Project and the Project Funds,and`is intended'to be and may be relied upon for purposes of Sections 103, 141 and 148 Of the Code and a`s a certification described in Section 1.148-2(b)(2) of the Treasury Regulations. This.Article IV sets fortncertain facts, estimates and circumstances which form the basis for the Recipient's expectation that neither the Project nor the Project Funds will be used in a manner that would cause the Obligation-to be classified as"arbitrage bonds" under Section 148 of the Code or"private activity bonds" under Sectiori"141 ofthe Code. 4.2 Tax Covenant. The Recipient agrees that it will not take or authorize any action or permit any action within its reasonable control to be taken, or fail to take any action within its reasonable control, with respect to the Project which would result in the loss of the exclusion of interest on the Bonds from gross income for federal income tax purposes under Section 103 of the Code. 15