|On November 10, 2019, The Department of Agriculture’s Rural Development office officially released chapter 4 of Handbook 2-3560. Appendix I to Chapter 4 contains the 2019 Audit Guide that has been promised for the last year. A copy of the complete chapter can be found here. That copy has been adjusted by AHACPA to contain bookmarks and other features to enable the user to navigate the document easier.The release of this was not accompanied by any announcement or other commentary on implementation of the Audit Guide. This Guide is intended to be used in conjunction with the Unnumbered Letter issued February 7, 2019. Excerpts of that document with AHACPA comments can be found here.
Per conversations with the personnel at RD, they recognize that the lateness of the release of this Guide presents challenges to CPAs and clients in meeting the 90-day filing deadline. Although there is no official statement on this, RD officials assured us that extensions would be available on a case-by-case basis by calling the relevant state office. We hope to see a formal announcement of this in the future.
The Handbook is organized in the following Sections:
Section 1 – Accounting Systems
Appendices are as follows:
4-A – Capital Budgets
Summary of Changes in the Attachments to Chapter 4
Attachment 4-I – Comments on Audit Requirements
This attachment gives general instructions on implementation of the chapter 4 guidance. Here are a few clarifications on statements made in this attachment. The statements are based on conversations with RD officials. We hope to obtain printed guidance from RD at a later date.
Major programs are defined at $500,000 of total Federal awards for for-profits and $750,000 for NFP entities.
Group Project-Based Testing as defined by the HUD Audit Guide is not allowed. This phrase was discussed with RD officials. Based on those discussions, they indicated that their intent was to require that the auditor is required to test each project on a stand-alone basis. This phrase should not be construed to mean that another method of group testing is allowed.
Non-Major Program Testing – There is no non-major testing under this Guide.
Sample Tables and Methodology – Although RD did not implement the complete HUD Appendix A on sampling, they have included minimum sample size requirements similar to the HUD Audit Guide. They have also adopted attribute sampling methodology.
Internal Control Over Compliance – The auditor is required to test internal control over compliance. This is in alignment with both the HUD Audit Guide and Uniform Guidance.
Findings – Material noncompliance, significant deficiencies or material weaknesses, as well as equity skimming are to be reported as findings. All non-material noncompliance is to be reported to management in writing.
Additional Comments related to the Audit Guide
The actual Audit Guide is an adaptation of the HUD Audit Guide. However, there are certain aspects of the HUD Guide that were not used. For instance, there is no tenant file testing in the RD Audit Program. A comparison of the two Audit Guides follows: