(a) Installment payments of the State grant will be made at the request of the municipality. Payments will be based on the cost of work performed, materials and equipment supplied and incorporated in, and services rendered in connection with an approved project.

(b) The department will retain five percent from each payment except the final payment.

(c) If the municipality fails to comply with any of the requirements of the Environmental Conservation Law, the State Sanitary Code or regulations of the department applicable to water quality improvement projects, the department may withhold all or part of further payments pending compliance.

(d) Upon notification from the municipality that the project is complete, the department will conduct a final inspection to determine if the project is operating in accordance with applicable laws and regulations. The cost of any work completed after the final inspection, or after a date established by the department at the final inspection, will not be considered part of the project cost.

(e) A final payment, which brings the total of State grant payments to 100 percent of the State share of the project cost, will be released upon determination by the department that the project is complete and is operating satisfactorily, and that all grant requirements have been met. If the project is complete but not operating satisfactorily, the department may withhold from the final payment an amount sufficient, in the judgement of the department, to ensure correction of deficiencies. The amount withheld will be released when deficiencies are corrected.

(f) Total grant payments may not exceed the State share of either the estimated reasonable cost or the actual project cost, whichever is lower.