(a) The authority shall administer loans made under this part. In so doing, the authority may adopt rules and regulations necessary for the effective administration of this part, including the promulgation of prerequisites that must be fulfilled by the local government unit in order to be eligible for a loan, procedures to be followed in making loan applications to the authority, procedures to be followed in the disbursement of loan funds, and procedures for enforcing agreements entered into by local government units with the authority.

(b) Any one (1) or more local government units entering into a loan agreement with the authority must state in the loan application, in addition to any requirements established by the authority, if the capital project is a correctional facility, that:

(1) The plans for the construction of such correctional facility have been submitted to the Tennessee corrections institute for review and comment; and

(2) The plans for construction of such correctional facility conform to standards established by the Tennessee corrections institute pursuant to § 41-4-140 and title 41, chapter 7, and the Life and Safety Code, as adopted by regulation of the department of commerce and insurance.

(c) Prior to being placed into use, any project that is a correctional facility financed by the loan agreement must first be inspected, approved and certified by the Tennessee corrections institute pursuant to § 41-4-140 and title 41, chapter 7. Certification must be submitted to the authority within thirty (30) days of receipt by the local government unit.

(d) If the capital project is a qualified energy conservation project, the local government unit shall first apply to the department of environment and conservation. Any loan agreement for such qualified energy conservation project must be recommended by the commissioner of that department.