(1) The department may make a determination that assistance should be terminated and may issue an order recommending that the authority take appropriate action to terminate assistance.

  (2) Cause for making a determination under subsection (1) includes, but is not limited to, 1 or more of the following:

  (a) Substantial failure to comply with the terms and conditions of the agreement providing assistance.

  (b) A legal finding or determination that the assistance was obtained by fraud.

  (c) Practices in the administration of the project that are illegal or that may impair the successful completion or organization of the project.

  (d) Misappropriation of assistance for uses other than those set forth in the agreement providing assistance.

  (e) Failure to accept an offer of assistance from the fund within a period of 30 days after receipt of a proposed loan agreement from the authority.

  (3) The department shall give written notice to the water supplier by certified letter of the intent to issue an order of termination. This notification shall be issued not less than 30 days before the department forwards the order recommending that the authority take appropriate action to terminate assistance.

  (4) The termination of assistance by the authority shall not excuse or otherwise affect the water supplier’s requirement for repayment of the outstanding loan balance to the fund. The water supplier shall repay the outstanding loan proceeds according to a schedule established by the authority.

  (5) Termination of assistance under this section does not relieve the water supplier of any requirements that may exist under state or federal law to construct the project.

  (6) Any settlement costs incurred in the termination of project assistance are the responsibility of the water supplier.