[Code of Federal Regulations]
[Title 7, Volume 11]
[Revised as of January 1, 2003]
From the U.S. Government Printing Office via GPO Access
[CITE: 7CFR1780.47]

[Page 1053-1054]
 
                          TITLE 7--AGRICULTURE
 
    CHAPTER XVII--RURAL UTILITIES SERVICE, DEPARTMENT OF AGRICULTURE
 
PART 1780--WATER AND WASTE LOANS AND GRANTS--Table of Contents
 
            Subpart B--Loan and Grant Application Processing
 
Sec. 1780.47  Borrower accounting methods, management reporting and audits.

    (a) Borrowers are required to provide RUS an annual audit or 
financial statements.
    (b) Method of accounting and preparation of financial statements. 
Annual organization-wide financial statements must be prepared on the 
accrual basis of accounting, in accordance with generally accepted 
accounting principles (GAAP), unless State statutes or regulatory 
agencies provide otherwise, or an exception is granted by the Agency. An 
organization may maintain its accounting records on a basis other than

[[Page 1054]]

accrual accounting, and make the necessary adjustments so that annual 
financial statements are presented on the accrual basis.
    (c) Record retention. Each borrower shall retain all records, books, 
and supporting material for 3 years after the issuance of the audit or 
management reports. Upon request, this material will be made available 
to RUS, Office of the Inspector General (OIG), United States Department 
of Agriculture (USDA), the Comptroller General, or to their assignees.
    (d) Audits. All audits are to be performed in accordance with the 
latest revision of the generally accepted government auditing standards 
(GAGAS), developed by the Comptroller General of the United States. In 
addition, the audits are also to be performed in accordance with various 
Office of Management and Budget (OMB) Circulars. The type of audit each 
borrower is required to submit will be designated by RUS. Further 
guidance on preparing an acceptable audit can be obtained from RUS. It 
is not intended that audits required by this part be separate and apart 
from audits performed in accordance with State and local laws. To the 
extent feasible, the audit work should be done in conjunction with those 
audits. Audits shall be annual unless otherwise prohibited and supplied 
to the processing office as soon as possible but in no event later than 
150 days following the period covered by the audit. OMB Circulars are 
available in any USDA/RUS office.
    (e) Borrowers exempt from audits. All borrowers who are exempt from 
audits, will, within 60 days following the end of each fiscal year, 
furnish the RUS with annual financial statements, consisting of a 
verification of the organization's balance sheet and statement of income 
and expense by an appropriate official of the organization. Forms RD 
442-2, ``Statement of Budget, Income and Equity,'' and 442-3 may be 
used.
    (f) Management reports. These reports will furnish management with a 
means of evaluating prior decisions and serve as a basis for planning 
future operations and financial strategies. In those cases where 
revenues from multiple sources are pledged as security for an RUS loan, 
two reports will be required; one for the project being financed by RUS 
and one combining the entire operation of the borrower. In those cases 
where RUS loans are secured by general obligation bonds or assessments 
and the borrower combines revenues from all sources, one management 
report combining all such revenues is acceptable. The following 
management data will be submitted by the borrower to the processing 
office. These reports at a minimum will include a balance sheet and 
income and expense statement.
    (1) Quarterly reports. A quarterly management report will be 
required for the first year for new borrowers and for all borrowers 
experiencing financial or management problems for one year from the date 
problems were noted. If the borrower's account is current at the end of 
the year, the processing office may waive the required reports.
    (2) Annual management reports. Prior to the beginning of each fiscal 
year the following will be submitted to the processing office. (If Form 
RD 442-2 is used as the annual management report, enter data in column 
three only of Schedule 1, and complete all of Schedule 2.)
    (i) Two copies of the management reports and proposed ``Annual 
Budget''.
    (ii) Financial information may be reported on Form RD 442-2 which 
includes Schedule 1, ``Statement of Budget, Income and Equity'' and 
Schedule 2, ``Projected Cash Flow'' or information in similar format.
    (iii) A copy of the rate schedule in effect at the time of 
submission.
    (g) Substitute for management reports. When RUS loans are secured by 
the general obligation of the public body or tax assessments which total 
100 percent of the debt service requirements, the State program official 
may authorize an annual audit to substitute for other management reports 
if the audit is received within 150 days following the period covered by 
the audit.