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
Section 2 – Project Accounts
Section 3 – Reserve Accounts
Section 4 – Project Budgets
Section 5 – Reporting and Financial Examination

Appendices are as follows:

4-A – Capital Budgets
4-B – Amendments to Loan Agreements
4-C – Allowable and Unallowable Project Expenses
4-D – Proposed Budget and Year End Analysis
4-E – Audit Program, Cost Certification Engagements
4-F – Performance Standards/Borrower Self-Certification Letter
4-G – MFH Program Determination Worksheet
4-H – Example Engagement Letter – For-profit >$500,000
4-I – Annual RD Compliance Audit
4-J – Compliance Requirements and Audit Areas
4-K – Example Independent Accountants’ Compilation Report
4-L – Owner Certified Prescribed Forms
4-M – Example Reports
4-N – Year End Financial Reporting Requirements
4-O – Agency Review of Annual Financial Reports

Summary of Changes in the Attachments to Chapter 4

• 4-A – Not many changes, just a few rewordings and one addition. Also, lawnmowers and snowblowers were taken off the list.
• 4-C – The boxes giving clarification have been updated, with some being moved around and new clarification given.
• 4-D – One word change
  • Alaska is now part of Group 10
• 4-E – Mostly minor changes:
  • Requirement of 3560-7 was removed from the first paragraph of section B
  • The paragraph on Management of Ongoing Operations no longer mentions instructions on eligible costs
  • The fourth paragraph of section A part two, no longer mentions that contractors, etc., need to serve the general public to be considered.
  • The page titled “Annual Agreed Upon Procedures for Annual Attestation Engagement” has been removed.
• 4-F – One addition, see document for details
• 4-G – Some additions, mostly clarifications in Step 2 on the audit determination worksheet
• 4-H – Entirely new
• 4-I – One addition, see document for details
• 4-J – Minor rewording, plus the addition of one new suggested audit procedure for cash disbursements
• 4-K – Added an example title page and an example table of contents
  • Additions to the example compilation report, see document for details
• 4-L – Entirely new
• 4-M – Added an example title page and an example table of contents
  • New words added to the example independent auditor’s reports
  • New examples provided
• 4-N – Entirely new
• 4-O – Some rewording
  • Major additions
  • New questions in the agency review of annual financial reports
  • Section K is new
  • Added a single audit checklist

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: