(a) A loan made from the account must be subject to the following conditions:
(1) the loan must be made at or below market interest rates for a term not to exceed 10 years; and
(2) the loan proceeds must be expended by the eligible political subdivision solely for disaster recovery projects.
(b) The comptroller shall credit to the account all principal and interest payments on a loan from the account.

(c) If the term of a loan from the account exceeds two years, the state auditor shall, on the second anniversary of the date on which the eligible political subdivision received the loan, conduct a limited audit of the political subdivision to determine whether the political subdivision has the ability to repay the loan under the terms of the loan. The division may forgive a loan made to an eligible political subdivision if the state auditor determines that the political subdivision is unable to repay the loan. The state auditor’s participation under this subsection is subject to approval by the legislative audit committee for inclusion in the audit plan under § 321.013(c).