RD Instruction 2012-A

PART 2012 -- AUDITS AND INVESTIGATIONS

SUBPART A - Audits

[TABLE OF CONTENTS]{.underline}

[Sec]{.underline}. [Page]{.underline}

2012.1 Purpose. 1

2012.2 Policy. 1

2012.3 Scope. 2

2012.4 References. 2

2012.5 Definitions. 3

2012.6 - 2012.10 \[Reserved\] 9

2012.11 Frequency of audits. 9

2012.12 Responsibilities. 9

\(a\) Secretary of Agriculture. 9

\(b\) Departmental Audit Resolution Official. 10

\(c\) Under Secretary for Rural Development. 10

\(d\) Agency Administrator. 10

\(e\) Rural Development Audit Liaison. 11

\(f\) Rural Development State Director. 14

2012.13 - 2012.20 \[Reserved\] 16

2012.21 Distribution of final audit reports. 16

2012.22 Restriction on distribution of draft audit reports. 17

2012.23 Action on audit reports. 17

\(a\) Management Alert of program or

administrative deficiency. 17

\(b\) Discussion draft. 17

\(c\) Statement of facts. 17

\(d\) Official draft. 17

\(e\) OIG final audit report. 19

\(f\) GAO final audit report. 19

2012.24 Audit correspondence. 19

2012.25 - 2012.30 \[Reserved\] 20

2012.31 Tracking audit recommendations and follow-up

for final action. 20

2012.32 Retention of audit reports. 21

2012.33 - 2012.50 \[Reserved\] 21

Exhibit A - OIG Audit Process.

Exhibit B - Directory of OIG Regional Offices.

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RD Instruction 2012-A

PART 2012 -- AUDITS AND INVESTIGATIONS

Subpart A - Audits

§ 2012.1 [Purpose]{.underline}.

This Instruction establishes the procedures for audits conducted on
United States Department of Agriculture (USDA) Rural Development
activities by the Office of Inspector General (OIG), Government
Accountability Office (GAO), and the Single Audit Clearinghouse (SAC).
It provides the policies, procedures, and responsibilities for achieving
management decisions and taking final actions on recommendations
resulting from audit reports.

§ 2012.2 [Policy]{.underline}.

Rural Development employees will request official identification from
anyone visiting their offices that identifies themselves as OIG or GAO
auditors. Employees will be cooperative with the auditors and provide
all requested information, files, records, and correspondence. Managers
will: promptly evaluate findings and recommendations reported by the
auditors, determine proper actions in response to audit findings and
recommendations, and complete, within established timeframes, all
actions that correct or otherwise respond to the matters brought to
management\'s attention. When a potential problem or significant
weakness is reported by auditors before issuance of a report, managers
will take prompt corrective action when sufficient information is
provided. Managers will take all necessary actions to fully comply with
the requirements for a management decision on recommendations resulting
from audit reports and on final actions, including the establishment and
disposition of monetary claims. Management decisions include a
determination or a plan for those actions deemed necessary to be taken
on each recommendation, proposed dates for implementation, and agreement
on the monetary amounts. For any monetary amounts that are owed to the
Government, an accounts receivable must be established before reaching
management decision. In addition, a Letter of Determination must have
been sent to individuals found to have received unauthorized financial
assistance notifying them of the debt and the amount owed. The OIG audit
process for management decisions and final actions is described in the
flow chart in Exhibit A of this Instruction.

DISTRIBUTION: WSAL Administration

Audits and Investigations

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§ 2012.3 [Scope]{.underline}.

\(a\) OIG and GAO have authority to audit all program operations and
administrative functions within Rural Development at any time. OIG has
authority to oversee the work of other auditors performed in connection
with Rural Development programs.

\(b\) OIG audit findings may include irregularities that could result in
formal adverse action requiring fiscal charges and disciplinary, civil,
or criminal actions. However, such adverse actions are usually made as a
result of investigations. (See RD Instructions 2012-B and 2012-C.)

\(c\) States, Local Governments, and Non-Profit Organizations that
expend \$500,000 or more in Federal awards per fiscal year must undergo
a single audit conducted in accordance with the requirements of Office
of Management and Budget (OMB) Circular A-133.

\(d\) GAO is the investigative arm of Congress and is charged with
examining all matters relating to the receipt and disbursement of public
funds. GAO performs a variety of services; the most prominent being
audits of Government programs and activities.

§ 2012.4 [References]{.underline}.

The following acts, regulations, and directives define authorities and
responsibilities, and establish procedures, timeframes and other
requirements for management decisions and final actions on audit
recommendations:

\(a\) Public Law (Pub. L.) 96-304, \"Supplemental Appropriations and
Rescission Act of 1980\" (Section 305).

\(b\) 31 U.S.C. 3711 [et seq]{.underline}., \"Federal Claims Collection
Act of 1966.\"

\(c\) 31 Code of Federal Regulations (CFR) Parts 900-904, Chapter IX,
\"Federal Claims Collection Standards.\" November 22, 2000.

\(d\) OMB Circular A-50 Revised, \"Audit Follow-up.\"

\(e\) OMB Circular A-129 (Rev.), \"Managing Federal Credit Programs.\"

\(f\) OMB Circular A-133, \"Audits of States, Local Governments, and\
Non-Profit Organizations.\"

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RD Instruction 2012-A

§ 2012.4 (Con.)

\(g\) 5 U.S.C. App. \"Inspector General Act Amendments of 1988.\"\
(Pub. L. 100-504), as amended.

\(h\) Departmental Regulation (DR) 1700-2, \"OIG Organization and
Procedures.\"

\(i\) DR 1720-1, \"Audit Follow-up and Management Decisions.\"

\(j\) Treasury Financial Manual (TFM) 6-8000.

\(k\) 31 U.S.C. 1105, 1113, 3512, \"Federal Managers\' Financial
Integrity Act of 1982\" (Pub. L. 97-255).

\(l\) 31 U.S.C. 7501 [et seq]{.underline}., PUB. L. 98-502, \"Single
Audit Act of 1984\" (PUB. L. 98-305) and PUB. L. 104-156, \"Single Audit
Act Amendments of 1996.\"

\(m\) 7 CFR 3052, \"Subpart B - Audits.\"

\(n\) National Finance Center, Title III, Billings and Collection
Manual, Bulletin Number 87-1, \"Utilization of the Administrative
Billings and Collections (ABCO) System.\"

\(o\) The Debt Collection Improvement Act of 1996, April 26, 1996.

\(p\) The Federal Financial Management Improvement Act of 1996.

\(q\) GAO-03-232SP, GAO's Agency Protocols, December 2002.

\(r\) 31 U.S.C. 718, "Availability of Draft Reports" under Chapter 7,
GAO (Pub. L. 97-258).

\(s\) 31 U.S.C. 720, "Agency Reports" under Chapter 7, GAO\
(PUB. L. 97-258).

§ 2012.5 [Definitions]{.underline}.

> [Assistant Inspector General -- Audit (AIG--A)]{.underline}. The
> National Office OIG official that is responsible for the audit
> assignment.

[Audit finding]{.underline}. Statement of problem(s) identified by the
auditors during an audit and having a condition, effect, and cause that
meet the objectives of the audit.

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§ 2012.5 (Con.)

[Audit follow-up]{.underline}. The process to ensure that prompt and
responsive action is taken once management decision has been reached on
recommendations contained in final audit reports. Final action should be
taken on audit recommendations by the estimated completion date agreed
to in the management decision or within one (1) year of the management
decision date.

[Audit recommendation]{.underline}. A course of action recommended by
the auditors to correct an audit finding or set of findings.

[Change in management decision]{.underline}. A change in the originally
agreed-upon corrective action(s) to be taken to implement an audit
recommendation and/or estimated completion date. Both changes must be
approved by OIG.

[Corrective action plan]{.underline}. A written statement from the
auditee in response to each reportable condition, audit finding, or
questioned cost in an audit report, and the action(s) management has
taken or will take to correct the situation.

[Departmental GAO Audit Liaison]{.underline}. Within USDA, OIG's Food
and Marketing Division of the AIG-A is designated as the Departmental
GAO Audit Liaison. The Secretary of Agriculture has designated OIG to
provide liaison and coordination on audit matters between USDA agencies
and GAO.

[Departmental OIG Audit Liaison]{.underline}. The Office of the Chief
Financial Officer (OCFO) is the Departmental OIG Audit Liaison for audit
follow-up.

[Departmental Single Audit Liaison]{.underline}. The OCFO is the
Departmental Single Audit Liaison. OMB Circular A-133 single audit
reports are initially received within USDA by the OCFO. The OCFO's
Planning and Accountability Division is responsible for forwarding OMB
Circular A-133 single audit reports pertaining to Rural Development to
the Financial Management Division (FMD) for resolution.

[Disallowed costs/loans]{.underline}. A questioned cost that management,
in a management decision, has sustained or agreed should not be charged
to the Government. A questioned cost is also defined as:

> \(1\) A cost that is questioned by OIG because of a reported violation
> of a provision of a law, regulation, contract, grant, cooperative
> agreement, or other agreement or document including loans governing
> the expenditure of funds;

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§ 2012.5 (Con.)

[Disallowed costs/loans (continued)]{.underline}.

> \(2\) A finding that, at the time of the audit, such cost is not
> supported by adequate documentation; or
>
> \(3\) A finding that the expenditure of funds for the intended purpose
> is unnecessary, unreasonable or fictitious/false.

[Discussion draft]{.underline}. A written audit report prepared by OIG
at the completion of their field work. OIG issues the discussion draft
to Rural Development prior to the exit conference. The discussion draft
is the basic document used at the exit conference for obtaining agency
and auditors\' verbal agreement or disagreement on findings and
recommendations.

[Engagement letter]{.underline}. A letter from OIG to Rural Development
management, issued prior to the start of an audit specifying the nature,
scope, terms and conditions of the audit engagement in order to minimize
any possible misunderstandings.

[Entrance conference]{.underline}. A conference requested by OIG or GAO
to inform Rural Development management of the beginning work on a survey
or an audit. During this conference, OIG or GAO identifies the
objectives, scope, and methodology of the audit and estimated timeframes
for completion of the field work and issuance of the report.

[Exit conference]{.underline}.

\(1\) A conference requested by OIG with Rural Development management
after a discussion draft has been issued. This conference permits the
agency and auditors to verbally agree or disagree with findings and
recommendations prior to the issuance of the official draft and final
report.

\(2\) A conference requested by GAO with Rural Development management
and other Departmental officials, if applicable, to discuss GAO's
Statement of Facts (SOF). This conference permits the agency and
auditors to verbally agree or disagree with GAO's SOFs prior to the
issuance of the official draft and final report.

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§ 2012.5 (Con.)

[Final action]{.underline}.

\(1\) For each audit recommendation, the measures taken by Rural
Development to comply/implement the specific actions of the management
decision. Final action is achieved on OIG audits when the OCFO has
accepted the agency's corrective actions on all recommendations included
in the audit report. Final action is achieved on GAO audits when GAO
accepts the agency's corrective actions on all recommendations included
in the audit report.

\(2\) In the event that OIG and Rural Development conclude that no
additional action is necessary, the Rural Development Audit Liaison will
provide a written request for final action to the OCFO. See Exhibit A of
this Instruction for the processing steps for final action on OIG
audits.

[Final audit report]{.underline}. A report issued by OIG or GAO that
includes Rural Development's written comments to the official draft
report and further auditor comments. This report is transmitted to Rural
Development by memorandum, and it includes the status of the report and
follow-up actions needed to reach management decision and final action.

[Funds be put to better use]{.underline}. A recommendation by the
auditors that funds could be used more efficiently if management took
actions to implement and complete the audit recommendation, including:

\(1\) Reductions in outlays;

\(2\) De-obligation of funds from programs or operations;

\(3\) Withdrawal of interest subsidy costs on loans or loan guarantees,
insurance, or bonds;

\(4\) Costs not incurred by implementing recommended improvements
related to the operations of the establishment, a contractor, or
grantee;

\(5\) Avoidance of unnecessary expenditures noted in pre-award reviews
of contract or grant agreements; or

\(6\) Any other savings which are specifically identified.

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§ 2012.5 (Con.)

[Management Alert of program or administrative deficiency]{.underline}.
A report issued by OIG to Rural Development management, prior to the
issuance of the discussion draft and resolution of report
recommendations, covering audit matters considered to be of sufficient
importance to warrant immediate attention or corrective action.

[Management decision]{.underline}. An agreement between Rural
Development and the auditor on the action(s) taken or to be taken to
address recommendations cited in an audit report.

\(1\) For OIG audits, management decision is reached when OIG approves
Rural Development's proposed corrective action to the audit
recommendations. The management decision must include the agreed upon
dollar amount affecting the recommendation and an estimated completion
date. See Exhibit A of this Instruction for the process needed to reach
management decision on each recommendation and on the entire OIG audit.

\(2\) For GAO audits, management decision is reached when the Secretary
of Agriculture signs the Statement of Action (SOA).

[Notification of Assignment (NOA)]{.underline}. GAO's written
notification to Rural Development of the start of an audit. The NOA
includes a brief description of the objectives and scope, assignment
number, requester, agency(ies) to be contacted, and the start and
completion dates.

[Official draft]{.underline}.

\(1\) A report issued by OIG after the exit conference corrections have
been made to the discussion draft. The official draft requires a written
proposed management decision by Rural Development usually within 30
calendar days unless otherwise specified by OIG. Rural Development's
response to the official draft will become a part of the final audit
report and is the beginning basis for reaching management decisions on
the audit recommendations.

\(2\) A report issued by GAO after the exit conference corrections have
been made. This report requires a written reply from Rural Development
usually within 7 to 30 calendar days from receipt of the official draft
report. The Rural Development or Departmental response to the official
draft will become a part of the final audit report and is the beginning
basis for reaching management decisions on the audit recommendations.

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§ 2012.5 (Con.)

[Questioned costs/loans]{.underline}.

\(1\) A cost that is questioned by OIG because of an alleged violation
of a provision of a law, regulation, contract, grant, cooperative
agreement, or other agreement or document (including loan documents)
governing the expenditure of funds;

\(2\) A finding that, at the time of the audit, such cost is not
supported by adequate documentation; or

\(3\) A finding that the expenditure of funds for the intended purposes
is unnecessary or unreasonable.

[Regional Inspector General - Audit (RIG-A)]{.underline}. The OIG
official for the region of the country that is responsible for the audit
assignment. Exhibit B of this Instruction is a directory for all of the
OIG regions.

[Resolved audit]{.underline}. An audit report where management decision
has been reached for all audit recommendations contained in the report,
but final action has not been completed.

[Rural Development Audit Liaison]{.underline}. The Director of FMD is
the Rural Development Audit Liaison. FMD is located in the National
Office.

[Schedule of Expenditures of Federal Awards]{.underline}. A schedule,
included in OMB Circular A-133 single audit reports, of all Federal
expenditures for the fiscal year, usually shown by Federal agency,
Federal Grantor/Pass-through Grantor/Program Title, Catalog of Federal
Domestic Assistance (CFDA) Number, Grantor or Pass-through Grantor
Number, and amounts.

[Schedule of Findings and Questioned Costs]{.underline}. A schedule,
within OMB Circular A-133 single audit reports, detailing Findings and
Questioned Costs by Major Federal Award Programs. This schedule may also
include a Summary of Audit Results; Findings -- Audited Financial
Statements; and Findings and Questioned Costs for specific projects or
areas.

[Single audit]{.underline}. An audit conducted in accordance with the
requirements of OMB Circular A-133, for Non-Federal entities (States,
local governments, and non-profit organizations) that expend \$500,000
or more per fiscal year in Federal awards.

[Single Audit Clearinghouse (SAC)]{.underline}. An entity established by
the Single Audit Act, and assigned the responsibility for processing OMB
Circular A-133 single audit report packages and distributing those
reports with audit findings to individual Federal agencies for audit
resolution. The SAC is administered by the U. S. Department of the
Census.

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§ 2012.5 (Con.)

[Statement of Facts (SOF)]{.underline}. GAO's critical facts and key
information used to formulate their analysis and findings and prepare
the official draft audit report.

[Statement of Action (SOA)]{.underline}. The agency or Departmental
response to the recommendations in GAO's final audit report.

[Unsupported cost/loan]{.underline}. A cost that is questioned by OIG
because it is not supported by adequate documentation.

§§ 2012.6 - 2012.10 \[Reserved\]

§ 2012.11 [Frequency of audits]{.underline}.

\(a\) GAO conducts audits in response to specific Congressional
requests, the requirements of law, or in accordance with GAO's basic
legislative responsibilities.

\(b\) OIG prepares an annual plan of audit activity to be conducted each
year. The annual plan includes both scheduled and requested audits.
However, OIG may also elect to conduct audits that are not in the plan
or are not requested by Rural Development.

\(1\) The Rural Development Audit Liaison will notify the Agency
Administrators, Associate Administrators, Deputy Administrators,
Assistant Administrators, and State Directors in writing of OIG's audit
plans.

\(2\) Rural Development managers may request changes to OIG's audit
plans and request special audits as needed. Requests for audits should
be directed to the appropriate RIG-A, with a copy to the Rural
Development Audit Liaison. See Exhibit B of this Instruction for a
directory of OIG's RIG-A.

§ 2012.12 [Responsibilities]{.underline}.

\(a\) [Secretary of Agriculture]{.underline}. The Secretary is
responsible for signing the agency or Departmental SOA.

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§ 2012.12 (Con.)

\(b\) [Departmental Audit Resolution Official]{.underline}. The Deputy
Secretary is the Departmental Audit Resolution Official. The Deputy
Secretary will:

\(1\) Render management decisions on recommendations, resulting from
audit reports when agreement is not reached between OIG and the Under
Secretary for Rural Development and the agency; and

\(2\) Ensure that final actions resulting from management decisions are
achieved.

\(c\) [Under Secretary for Rural Development]{.underline}. The Under
Secretary will:

> \(1\) Review and attempt to resolve disagreements on management
> decisions before elevation to the Deputy Secretary; and
>
> \(2\) Sign agency or Departmental responses to GAO official drafts and
> SOAs.

\(d\) [Agency Administrator]{.underline}. The Agency Administrator will:

\(1\) Ensure that responses to OIG and GAO official draft and final
audit reports and SOAs are submitted to the Rural Development Audit
Liaison within the required timeframe;

\(2\) Ensure that OIG Management Alert responses are submitted to the
Rural Development Audit Liaison within the required timeframe;

\(3\) Ensure that management decisions are achieved and final actions
are taken in accordance with the management decisions. The Agency
Administrator will also attempt to resolve all disagreements regarding
management decisions for nationwide and state audits before elevation to
the Under Secretary;

\(4\) Ensure management decisions and final actions are consistent with
the agency's laws and regulations;

\(5\) Ensure management decision is reached and corrective actions
completed for all OMB Circular A-133 single audit reports within the
required timeframe;

\(6\) Delegate authority for management decision and final action within
the agency, as appropriate;

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§ 2012.12(d) (Con.)

\(7\) Review final action documentation to ensure that it:

\(i\) Supports the corrective action implementing the\
agreed-upon management decision;

\(ii\) Is well organized and explains the materials being submitted;

\(iii\) Identifies any principal and interest amounts collected; and

\(iv\) Highlights the specific final action documentation that applies
to the management decision;

\(8\) Ensure that timeliness and quality of management decisions and
final actions are a factor in determining bonuses for members of the
Senior Executive Service.

\(e\) [Rural Development Audit Liaison]{.underline}. The Rural
Development Audit Liaison will:

> \(1\) Coordinate and facilitate all OIG and GAO entrance and exit
> conferences;

\(2\) Notify selected State Offices of inclusion in a nationwide audit
and upcoming auditor visits to field offices;

> \(3\) Ensure that the Informational Memorandums regarding OIG and GAO
> entrance and exit conferences are provided to the Under Secretary for
> Rural Development in a timely manner;

\(4\) Ensure that responses to OIG Management Alerts are rendered within
the required timeframe;

\(5\) Ensure that agency responses to OIG and GAO official draft and
final audit reports and SOAs are submitted within the required
timeframe;

> \(6\) Ensure that all agency or Departmental responses to GAO official
> draft reports are cleared through the appropriate Agency
> Administrator, Operations & Management (O&M), Office of General
> Counsel (OGC), Office of Budget and Program Analysis (OBPA), signed by
> the Under Secretary for Rural Development and provided to GAO within
> the required timeframe;

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§ 2012.12(e) (Con.)

\(7\) Ensure that written management decisions on audit recommendations
are submitted to OIG for audits having nationwide jurisdiction or state
audits that have been elevated to the Agency Administrator for achieving
management decision;

\(8\) Work with OIG to achieve management decisions on audits having
nationwide jurisdiction or state audits that have been elevated to the
Agency Administrator;

> \(9\) Alert the appropriate Agency Administrator of the possibility
> that an audit may be elevated by OIG if management decision has not
> been reached within 90 calendar days of the audit release date;

\(10\) Ensure that management decisions are reached on a timely basis
and that final actions fully comply with the management decisions, which
includes compliance with timeframes and agreement on monetary amounts on
audits having nationwide jurisdiction or state audits that have been
elevated to the Agency Administrator;

\(11\) Coordinate with the OCFO from the date of the management decision
through completion of the final actions on audits having nationwide
jurisdiction or state audits that have been elevated to the Agency
Administrator;

\(12\) Provide the OCFO with documentation on final actions on audits
having nationwide jurisdiction or state audits that have been elevated
to the Agency Administrator;

\(13\) Review final action documentation to ensure that it:

\(i\) Supports the corrective action implementing the\
agreed-upon management decision;

\(ii\) Is well organized and explains the materials being submitted;

\(iii\) Identifies any principal and interest amounts collected; and

\(iv\) Highlights the specific final action documentation that applies
to the management decision;

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RD Instruction 2012-A

§ 2012.12(e) (Con.)

\(14\) Provide quarterly status reports to the OCFO for audits that have
not reached final action one (1) year or more past the management
decision date. The status reports will include explanatory language on
revised management decision dates and dollar amounts associated with
recommendations, and any deviations to the corrective action plan;

\(15\) Monitor and track all audit activity in the Automated Reports
Tracking System (ARTS) to ensure that:

\(i\) Draft and final audit report responses are rendered within the
required timeframe,

\(ii\) Management decisions are rendered within the legislatively
mandated 6-month period after report issuance,

\(iii\) Final actions resulting from management decisions are completed
within one (1) year of the management decision date, and

\(iv\) At a minimum, ARTS will provide:

\(A\) Accurate and complete documentation of management decisions
rendered on audit recommendations, the status and progress related
thereto, and status on final actions, and

\(B\) An audit trail of management decisions and final actions for each
audit for use by OIG, GAO, OCFO, and Rural Development;

> \(16\) Coordinate with the OCFO from the date of receipt of OMB
> Circular A-133 single audit reports through completion of corrective
> actions, which includes tracking and monitoring of all audit
> recommendations in ARTS;

\(17\) Ensure that all agency or Departmental SOAs are cleared through
the appropriate Agency Administrator, O&M, OGC, OBPA, signed by the
Under Secretary for Rural Development and provided to the Departmental
GAO Audit Liaison within the required timeframe;

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§ 2012.12(e) (Con.)

\(18\) Ensure that:

\(i\) The Deputy Chief Financial Officer (DCFO) for Rural Development is
an addressee on all OIG and GAO entrance and exit conference
memorandums, and included in the courtesy copy (cc) list on all other
OIG and GAO correspondence,

\(ii\) The Director, Legislative and Public Affairs Staff is included in
the cc list on all GAO correspondence, and

\(iii\) The Departmental GAO Audit Liaison is included in the cc list on
all GAO entrance, exit, and official draft report correspondence; and

\(19\) Provide Rural Development's comments to other USDA agencies
responsible for responding to GAO official draft reports and SOAs within
the required timeframe.

\(f\) [Rural Development State Director]{.underline}. The State Director
will designate oversight responsibility to a State Management Control
Officer (MCO) in accordance with RD Instruction 2006-M. The MCO will
serve as the state's focal point of contact for all audit activity. The
State Director and MCO will:

\(1\) Participate in all audit entrance and exit conferences either by
attendance or teleconference. If the State Director cannot participate
in the entrance and exit conferences, he/she should designate someone
other than the MCO to serve as their representative;

> \(2\) Ensure that responses to audit reports are rendered within the
> required timeframe;
>
> \(3\) After issuance of the OIG final audit report, ensure that a copy
> of all subsequent correspondence is forwarded to the Rural Development
> Audit Liaison;

\(4\) Ensure that written management decisions are made on audit
recommendations and provide the information to OIG on audits within
their state jurisdiction;

\(5\) Work with OIG to achieve management decisions on audits within
their state jurisdiction;

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RD Instruction 2012-A

§ 2012.12(f) (Con.)

\(6\) Ensure that management decisions are reached on a timely basis and
that final actions fully comply with the management decisions, which
includes compliance with timeframes and agreement on monetary amounts on
audits within their state jurisdiction;

> \(7\) Notify the Rural Development Audit Liaison when an audit has not
> reached management decision within 90 calendar days of the audit
> release date. The Rural Development Audit Liaison will then alert the
> appropriate Agency Administrator that the audit may be elevated by
> OIG. DR 1720-1, Appendix A, 4(b), provides guidance on the process
> when OIG disagrees with Rural Development's management decision;

\(8\) Coordinate with the OCFO from the date of the management decision
through completion of the final action on audits within their state
jurisdiction;

\(9\) Provide the OCFO with documentation on final actions on audits
within their state jurisdiction, with a copy to the Rural Development
Audit Liaison;

\(10\) Review final action documentation to ensure that it:

\(i\) Supports the corrective action implementing the agreed-upon
management decision;

\(ii\) Is well organized and explains the materials being submitted;

\(iii\) Identifies any principal and interest amounts collected; and

\(iv\) Highlights the specific final action documentation that applies
to the management decision;

\(11\) Work with National Office officials to achieve management
decision for each recommendation contained in OMB Circular A-133 single
audit reports;

\(12\) Establish appropriate accounting and collection controls over
amounts determined to be due to the Government on audits within their
state jurisdiction;

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§ 2012.12(f) (Con.)

\(13\) Monitor and track all audit activity in ARTS to:

\(i\) Provide an audit trail on all GAO on-site visits and/or requests
for information using the GAO NOA number (e.g., 250197-SC),

\(ii\) Ensure that draft and final OIG audit report responses are
submitted to OIG within the required timeframe,

\(iii\) Ensure that management decisions are rendered within the
legislatively mandated 6-month period after report issuance,

\(iv\) Ensure that final actions resulting from management decisions are
completed within one (1) year of the management decision date, and

\(v\) At a minimum, ARTS will provide:

\(A\) Accurate and complete documentation of management decisions
rendered on audit recommendations, the status and progress related
thereto, and status on final actions, and

\(B\) An audit trail of management decisions and final actions for each
audit for use by OIG, GAO, OCFO, and Rural Development;

\(14\) Inform Area and Local Offices within the state of OIG audit
findings and recommendations by written state issuance; and

\(15\) Evaluate audit findings to determine training needs when
developing the state's Annual Training Plan.

§§ 2012.13 - 2012.20 \[Reserved\]

§ 2012.21 [Distribution of final audit reports]{.underline}.

\(a\) OIG will send copies of each final audit report to the Rural
Development officials responsible for taking action on the audit
recommendations (e.g., state audits to the appropriate State Director;
nationwide audits to the Rural Development Audit Liaison). The audit
report will be forwarded by transmittal memorandum indicating the
approximate due date for initial reply, normally 60 calendar days.
Additional copies of nationwide and state audit reports are distributed
to the Rural Development Audit Liaison.

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RD Instruction 2012-A

§ 2012.21 (Con.)

\(b\) The Departmental GAO Audit Liaison will deliver copies of the
final audit report to the Rural Development Audit Liaison. The Rural
Development Audit Liaison will forward the final audit report to the
appropriate Rural Development officials.

§ 2012.22 [Restriction on distribution of draft audit
reports]{.underline}.

\(a\) OIG and GAO control the release of all draft audit reports. Draft
audit reports are not to be released, shared, or discussed with any
individual outside the Department except with specific authorization
from OIG and GAO. Circulation of draft audit reports within the
Department is limited to only those officials who have a need for the
information.

\(b\) Any requests for release of information from a draft audit report
should be sent to the National Office, Attention: Rural Development
Audit Liaison for referral to OIG or GAO.

§ 2012.23 [Action on audit reports]{.underline}.

The following requirements are mandatory for all draft and final audit
reports:

\(a\) [Management Alert of program or administrative
deficiency]{.underline}. Immediately upon receipt of a Management Alert
from OIG, action will be initiated by Rural Development to correct the
reported condition. A written reply, as outlined by OIG, will be sent by
Rural Development to the AIG-A or the applicable RIG-A issuing the
Management Alert within the specified action date. A copy of the
response will also be sent to the Rural Development Audit Liaison.

\(b\) [Discussion draft]{.underline}. A written audit report prepared by
OIG at the completion of their field work. OIG issues the discussion
draft to Rural Development prior to the exit conference. The discussion
draft is the basic document used at the exit conference for obtaining
agency and auditors\' verbal agreement or disagreement on findings and
recommendations. The discussion draft may be elevated to an official
draft by OIG at the time of the exit conference with concurrence of the
Rural Development officials responding to the audit. Elevation of the
discussion draft to official draft may occur when OIG and Rural
Development agree that only minor changes are needed to the discussion
draft.

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(12-22-04) PN 381

RD Instruction 2012-A

§ 2012.23 (Con.)

\(c\) [Statement of Facts (SOF)]{.underline}. Critical facts and key
information prepared by GAO at the completion of their field work and
provided to Rural Development prior to the exit conference. Rural
Development will review the SOF for accuracy and content. The SOF is the
basic document used at the exit conference for obtaining
agency/Departmental and auditors' verbal agreement or disagreement on
findings and recommendations prior to the issuance of the official draft
report.

\(d\) [Official draft]{.underline}.

\(1\) Immediately upon notification that OIG's discussion draft is
elevated to an official draft or upon receipt of an official draft,
appropriate action must be taken by Rural Development to reach
management decision on each recommendation in the audit. Exhibit A of
this Instruction provides the specific processing steps for achieving
management decisions and final actions on OIG audits. A written proposed
management decision will be sent to OIG, usually within 30 calendar days
or within the time specified in OIG's transmittal memorandum. A copy of
Rural Development's response will be sent to the Rural Development Audit
Liaison in the National Office.

\(2\) Immediately upon receipt of GAO's official draft report, the
appropriate Agency Administrator will prepare the agency or Departmental
response to the recommendations. The Rural Development Audit Liaison is
responsible for obtaining the official draft response clearances from
the Agency Administrator, O&M, OGC, OBPA, obtaining the signature of the
Under Secretary for Rural Development and providing the response to GAO
within the required timeframe (usually within 7 to 30 calendar days from
receipt of the official draft report). If an agency other than Rural
Development is responsible for preparing the response, the Rural
Development Audit Liaison will provide Rural Development's comments to
the responding agency within the required timeframe. If Rural
Development is coordinating the Departmental response, including any
comments from other USDA agencies, the Rural Development Audit Liaison
ensures these comments are incorporated into the Departmental response.

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RD Instruction 2012-A

§ 2012.23 (Con.)

\(e\) [OIG final audit report]{.underline}. Immediately upon receipt of
the final audit report in Rural Development, action will be taken on
each recommendation that is without management decision. The agency's
written comments to the official draft report and further auditor
comments will be included in the final audit report. The final audit
report is transmitted to Rural Development and includes the status of
the report and follow-up actions needed to achieve management decision
and final action. For those recommendations in the final audit report
that have not reached management decision, Rural Development must submit
a proposed management decision to OIG within 60 calendar days of the
date of report issuance. A copy of Rural Development's response will be
sent to the Rural Development Audit Liaison in the National Office.
Exhibit A of this Instruction provides the specific processing steps and
timeframes for achieving management decisions and final actions on OIG
audits. Audit recommendations are legislatively mandated to reach
management decision within 6 months after the date the final audit
report is issued.

\(f\) [GAO final audit report]{.underline}. Immediately upon receipt of
the final audit report, the appropriate Agency Administrator will
prepare the agency or Departmental SOA in response to the
recommendations. The agency's written comments to the official draft
report and further auditor comments will be included in the final audit
report. The Rural Development Audit Liaison is responsible for obtaining
the SOA clearances from the Agency Administrator, O&M, OGC, OBPA,
obtaining the signature of the Under Secretary for Rural Development and
providing the SOA to the Departmental GAO Audit Liaison within the
required timeframe (usually within 30 days from receipt of the final
report). If an agency other than Rural Development is responsible for
preparing the SOA, the Rural Development Audit Liaison will provide
Rural Development's comments to the responding agency within the
required timeframe. If Rural Development is coordinating the
Departmental response, including any comments from other USDA agencies,
the Rural Development Audit Liaison ensures these comments are
incorporated into the Departmental response.

§ 2012.24 [Audit correspondence]{.underline}.

\(a\) All Rural Development audit correspondence will:

\(1\) List the report number and title;

\(2\) Show the distribution of copies;

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RD Instruction 2012-A

§ 2012.24(a) (Con.)

\(3\) Refer to the audit recommendation and/or audit result being
answered; and

\(4\) Include appropriate exhibits and attachments when referenced in
the reply.

\(b\) A copy of audit correspondence will be provided to the Rural
Development Audit Liaison as follows:

\(1\) For OIG nationwide audits, a copy of all correspondence should be
forwarded to the Rural Development Audit Liaison.

\(2\) For OIG state audits, a copy of all correspondence prepared after
the final audit report is issued should be forwarded to the Rural
Development Audit Liaison.

\(3\) For GAO audits, a copy of all correspondence should be forwarded
to the Rural Development Audit Liaison.

\(4\) For OMB Circular A-133 single audit reports, a copy of all
correspondence should be forwarded to the Rural Development Audit
Liaison.

§§ 2012.25 - 2012.30 \[Reserved\]

§ 2012.31 [Tracking audit recommendations and follow-up for final
action]{.underline}.

\(a\) DR 1720-1 establishes the policy that managers will:

\(1\) Promptly evaluate findings and recommendations reported by
auditors;

\(2\) Determine proper actions in response to audit findings and
recommendations; and

\(3\) Within established timeframes, complete all actions that correct
or otherwise implement each recommendation included in the final report.

\(b\) Follow-up actions are monitored in ARTS to determine the status of
recommendations for management decision and final action. After
management decision has been achieved, submission of final action
documentation for each recommendation is submitted to the OCFO, with a
copy to the Rural Development Audit Liaison.

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##  

RD Instruction 2012-A

§ 2012.32 [Retention of audit reports]{.underline}.

\(a\) OIG and GAO audit reports and all related correspondence will be
retained by the National Office and applicable State Offices for 8
fiscal years after the date final action (closure) has occurred.

\(b\) Audit reports and related material will be maintained in locked
cabinets or other locked repository when not in use.

\(c\) OMB Circular A-133 single audit reports and all related
correspondence will be retained by the National Office and applicable
State Office for 5 fiscal years after final action (closure) has
occurred.

§§ 2012.33 - 2012.50 \[Reserved\]

Attachments: Exhibits A (PDF ONLY) and B.

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(12-22-04) PN 381

Exhibit A in PDF ONLY.

RD Instruction 2012-A

Exhibit B

Page 1

**Directory of OIG Regional Offices**

**[AUDIT]{.underline} [INVESTIGATIONS]{.underline}**

**REGION & STATES REGIONAL INSPECTOR GENERAL SPECIAL AGENTS IN CHARGE**

**SERVED ADDRESS/TELEPHONE ADDRESS/TELEPHONE**

**NORTHEAST**

CT, DE, DC, MD, 5601 Sunnyside Ave.

ME, MA, NH, NJ, Suite 2-2230

NY, PA, RI, VA, Beltsville, MD 20705-5300

VT, WV (301) 504-2100

FAX (301) 504-2437

**NORTHEAST**

CT, DE, DC, ME, 5601 Sunnyside Ave.

MD, MA, NH, NJ, Suite 2-2230

NY, NC, PA, RI, Beltsville, MD 20705-5300

VA, VT, WV (301) 504-2000

FAX (301) 504-2025

**SOUTHEAST**

AL, FL, GA, KY, 401 W. Peachtree St., NW.

MS, NC, PR, SC, Room 2328

TN, VI Atlanta, GA 30308

\(404\) 730-3210

FAX - (404) 730-3221

**SOUTHEAST**

AL, FL, GA, PR, 401 W. Peachtree St., NW.

SC, TN, VI Room 2329

Atlanta, GA 30308

\(404\) 730-3170

FAX (404) 730-3181

(12-22-04) PN 381

RD Instruction 2012-A

Exhibit B

Page 2

**Directory of OIG Regional Offices (CON.)**

**[AUDIT]{.underline} [INVESTIGATIONS]{.underline}**

**REGION & STATES REGIONAL INSPECTOR GENERAL SPECIAL AGENTS IN CHARGE**

**SERVED ADDRESS/TELEPHONE ADDRESS/TELEPHONE**

**MIDWEST**

IL, IN, MI, 111 N. Canal St.

MN, OH, WI Suite 1130

Chicago, IL 60606-7295

\(312\) 353-1352

FAX (312) 353-3017

**MIDWEST**

IN, KY, MI, OH 111 N. Canal St.

WI -- Eastern District Suite 1130

IL -- Northern District Chicago, IL 60606-7295

\(312\) 353-1358

FAX (312) 353-8963

**SOUTHWEST**

AR, LA, OK, 101 South Main St.

TX, NM Room 324

Temple, TX 76501

\(254\) 743-6565

FAX - (254) 298-1373

**SOUTHWEST**

AZ, AR, LA, MS, 101 South Main St.

NM, OK, TX, Room 311

Temple, TX 76501

\(254\) 743-6535

FAX (254) 298-1358

**GREAT PLAINS**

CO, IA, KS, 8930 Ward Parkway

MO, MT, NE, ND, Suite 3016

SD, WY, UT Kansas City, MO 64114

\(816\) 926-7667

FAX (816) 926-7676

RD Instruction 2012-A

Exhibit B

Page 3

**Directory of OIG Regional Offices (CON.)**

**[AUDIT]{.underline} [INVESTIGATIONS]{.underline}**

**REGION & STATES REGIONAL INSPECTOR GENERAL SPECIAL AGENTS IN CHARGE**

**SERVED ADDRESS/TELEPHONE ADDRESS/TELEPHONE**

**GREAT PLAINS**

CO, IA, KS, MN 8930 Ward Parkway

MO, MT, NE, ND, Suite 3016

SD, WY, UT Kansas City, MO 64114

WI -- Western District (816) 926-7606

IL -- Southern District FAX (816) 926-7699

**WESTERN**

AK, AZ, CA, 75 Hawthorne Street

HI, ID, NV, OR Suite 200

Territory of San Francisco, CA 94105

Guam, Trust (415) 744-2851

Territories FAX (415) 744-2871

of Pacific, WA

**WESTERN**

AK, CA, HI, ID, 75 Hawthorne Street

NV, OR, Suite 200

Territory of Guam, San Francisco, CA 94105

Trust Territories (415) 744-2887

Of Pacific, WA FAX (415) 744-2896

**FINANCIAL & INFORMATION**

**TECHNOLOGY OPERATIONS (FITO)** 8930 Ward Parkway

National Information Suite 3016

Technology Center, Kansas City, MO 641314

Kansas City, MO; (816) 926-7657

Farm Service Agency, FAX (816) 823-3949

Kansas City, MO;

Fort Collins Computer Center,

Ft. Collins, CO;

OCFO National Finance Center,

New Orleans, LA;

Rural Development Finance

Office, St. Louis, MO

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(12-22-04) PN 381