**U. S. Department of Agriculture**

**Rural Utilities Service**

**1400 Independence Avenue SW**

**STOP 1570**

**Washington, DC 20250**

**PROCEDURE NOTICE**

**EFFECTIVE DATE: November 20, 1997 NOTICE NO: WW-6**

  -----------------------------------------------------------------------
  **NOTICE**

  **RUS Staff Instruction 1780-4 and Bulletins 1780-12 , 1780-16 and
  1780-17 have been revised. The revised instruction will only be
  available from the water and waste home page which can be accessed at
  \"http: // www.usda.gov/rus/water/\"**
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+-----------------------------------+----------------------------------+
|                                   |                                  |
+-----------------------------------+----------------------------------+
| **RUS Staff Instruction**         |                                  |
+-----------------------------------+----------------------------------+
|                                   |                                  |
+-----------------------------------+----------------------------------+
| RUS Staff Instruction 1780-4      | Revised the title of Auditor's   |
|                                   | opinion on schedule of           |
| Replace page 8                    | expenditures of Federal awards.  |
+-----------------------------------+----------------------------------+
|                                   |                                  |
+-----------------------------------+----------------------------------+
| **RUS BULLETINS**                 |                                  |
+-----------------------------------+----------------------------------+
|                                   |                                  |
+-----------------------------------+----------------------------------+
| RUS Bulletin 1780-12              | Paragraph T has been removed as  |
|                                   | this applied to projects that    |
| Replace page 6                    | require wage standards under     |
|                                   | Davis-Bacon and the RUS grant    |
|                                   | program is not subject to        |
|                                   | Davis-Bacon. Paragraph U has     |
|                                   | been relettered as T. The amount |
|                                   | of contracts and legal citations |
|                                   | in paragraph T have been         |
|                                   | corrected or removed.            |
+-----------------------------------+----------------------------------+
|                                   |                                  |
+-----------------------------------+----------------------------------+
| RUS Bulletin 1780-16              | Several changes to the audit     |
|                                   | review questions.                |
| Replace entire Bulletin           |                                  |
+-----------------------------------+----------------------------------+

+-----------------------------------+-----------------------------------+
| RUS Bulletin 1780-17              | Several changes to the audit      |
|                                   | review questions.                 |
| Replace entire Bulletin           |                                   |
+-----------------------------------+-----------------------------------+

RUS Bulletin 1780-12

Page 6

R. Not encumber, transfer or dispose of the property or any part
thereof, furnished by the Grantor or acquired wholly or in part with
Grantor funds without the written consent of the Grantor except as
provided in item K above.

S. To include in all contracts for construction or repair a provision
for compliance with the Copeland \`\`Anti-Kick Back\'\' Act (18 U.S.C.
874) as supplemented in Department of Labor regulations (29 CFR, Part
3). The Grantee shall report all suspected or reported violations to the
Grantor.

T. To include in all contracts in excess of \$100,000 a provision that
the contractor agrees to comply with all the requirements of the Clean
Air Act (42 U.S.C. §7414 ) and Section 308 of the Water Pollution
Control Act (33 U.S.C. §1318) relating to inspection, monitoring, entry,
reports, and information, as well as all other requirements specified in
Section 114 of the Clean Air Act and Section 308 of the Water Pollution
Control Act and all regulations and guidelines issued thereunder after
the award of the contract. In so doing the Contractor further agrees:

***\[Revision 1, 11/20/1997\]***

1\. As a condition for the award of contract, to notify the Owner of the
receipt of any communication from the Environmental Protection Agency
(EPA) indicating that a facility to be utilized in the performance of
the contract is under consideration to be listed on the EPA list of
Violating Facilities. Prompt notification is required prior to contract
award.

2\. To certify that any facility to be utilized in the performance of
any nonexempt contractor subcontract is not listed on the EPA list of
Violating Facilities pursuant to 40 CFR Part 32 as of the date of
contract award.

***\[Revision 1, 11/20/1997\]***

3\. To include or cause to be included the above criteria and the
requirements in every nonexempt subcontract and that the Contractor will
take such action as the Government may direct as a means of enforcing
such provisions.

As used in these paragraphs the term \`\`facility\'\' means any
building, plan, installation, structure, mine, vessel or other floating
craft, location, or site of operations, owned, leased, or supervised by
a Grantee, cooperator, contractor, or subcontractor, to be utilized in
the performance of a grant, agreement, contract, subgrant, or
subcontract. Where a location or site of operation contains or includes
more than one building, plant, installation, or structure, the entire
location shall be deemed to be a facility except where the Director,
Office of Federal Activities, Environmental Protection Agency,
determines that independent facilities are co-located in one
geographical area.

Grantor Agrees That It:

A. Will make available to Grantee for the purpose of this Agreement not
to exceed \$\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ which it will advance to
Grantee to meet not to exceed \_\_\_\_\_\_\_ percent of the project
development costs of the project in accordance with the actual needs of
Grantee as determined by Grantor.

B. Will assist Grantee, within available appropriations, with such
technical assistance as Grantor deems appropriate in planning the
project and coordinating the plan with local official comprehensive
plans for sewer and water and with any State or area plans for the area
in which the project is located.

C. At its sole discretion and at any time may give any consent,
deferment, subordination, release, satisfaction, or termination of any
or all of Grantee\'s grant obligations, with or without valuable
consideration, upon such terms and conditions as Grantor may determine
to be (1) advisable to further the purpose of the grant or to protect
Grantor\'s financial interest therein and (2) consistent with both the
statutory purposes of the grant and the limitations of the statutory
authority under which it is made.

\(6\) [OMB Circular A-133 Audit Reports]{.underline}.

The following reports should be included in an OMB Circular A-133 audit:

\(i\) Independent Auditor\'s Report (the auditor\'s opinion)

\(ii\) Financial statements (including notes to the financial
statements).

\(iii\) Report on Compliance and on Internal Control Over Financial
Reporting Based on an Audit of Financial Statements Performed in
Accordance with GAGAS. ***\[Revision 1, 09/05/1997\]***

\(iv\) Report on Compliance With Requirements Applicable To Each Major
Program and Internal Control Over Compliance in Accordance With OMB
Circular A-133. ***\[Added 09/05/1997\]***

\(v\) Schedule of expenditures of Federal awards.

\(vi\) Auditor\'s Opinion on schedule of expenditures of Federal awards
(may be included as a separate paragraph in the Auditor's Report).
***\[Revision 1, 11/20/1997\]***

\(vii\) Schedule of findings and questioned costs (if applicable).

Items (ii) and (v) are prepared by the borrower. The auditor is
responsible for preparing items (i), (iii), (iv), (vi) and (vii).

In addition to the reports listed above, the OMB Circular requires the
borrower to submit a data collection form and, if applicable, a
corrective action plan and summary schedule of prior audit findings, as
outlined in Section 4(iv) of this part. RUS Bulletin 1780-16 should be
used for reviewing OMB Circular A‑133 audit reports.

\(7\) [Water and Waste Audit Reports]{.underline}.

The following reports should be included in a Water and Waste audit
(i.e., a GAGAS audit):

\(i\) Independent Auditor\'s Report (the auditor\'s opinion).

\(ii\) Financial statements (including notes to the financial
statements).

\(iii\) Report on Compliance and on Internal Control Over Financial
Reporting Based on an Audit of Financial Statements Performed in
Accordance with GAGAS. ***\[Revision 1, 09/05/1997\]***

\(iv\) Schedule of audit findings (if applicable).

The Agency should request that borrowers provide a schedule of
expenditures of Federal awards and, if applicable, a corrective action
plan with each Water and Waste audit report. RUS Bulletin 1780-17 should
be used for reviewing Water and Waste audit reports.

**REVIEW GUIDE FOR AUDITS**

**PERFORMED IN ACCORDANCE WITH**

OMB CIRCULAR A-133 REQUIREMENTS

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  ----------------------- ----------------------- -----------------------
  **DATE REPORT           **DATE REVIEW           **DATE ENTERED IN
  RECEIVED**              COMPLETED**             RCFTS**

  **REVIEW APPROVED                               **TITLE**
  (SIGNATURE)**                                   

                                                  

                                                  
  ----------------------- ----------------------- -----------------------

-   Organization
    Name:\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

```{=html}
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-   City:
    \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
    County: \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

-   

-   Type of Organization: Public Body: \_\_\_\_\_ Nonprofit: \_\_\_\_\_
    Indian Tribe: \_\_\_\_\_

-   

-   Auditor's Name:
    \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ Audit
    Period: \_\_\_\_\_\_\_\_\_\_\_\_ to \_\_\_\_\_\_\_\_\_\_\_\_

-   

-   

REVIEW ITEMS SHOULD BE RESPONDED TO AS FOLLOWS: Y (YES); N (NO); N/A
(NOT APPLICABLE).

**REVIEW ITEMS REQUIRING WRITTEN EXPLANATION SHOULD BE REFERENCED BY
ITEM NUMBER AND DETAILED IN THE NOTES BELOW.**

  ---------------------------------- ------------------------------------
                                     

  ---------------------------------- ------------------------------------

General Review

Review Item Response

1\. Was the audit report and accompanying information received within

13 months of the end of the borrower's fiscal year? \_\_\_\_\_\_\_\_\_\_

2\. Does the audit report cover a 12 month period? \_\_\_\_\_\_\_\_\_\_

3\. Was a Data Collection Form, signed by both the borrower and the
auditor,

submitted with the audit report? \_\_\_\_\_\_\_\_\_\_

**Auditor's Report**

Review Item Response

4\. Did the auditor sign and date the Auditor's Report?
\_\_\_\_\_\_\_\_\_\_

5\. Does the Auditor's Report include a statement that the audit was
conducted

in accordance with generally accepted auditing standards (GAAS) and

generally accepted government auditing standards (GAGAS)?
\_\_\_\_\_\_\_\_\_\_

6\. Does the Auditor's Report include a statement that the financial
statements

were prepared in accordance with generally accepted accounting
principles

(GAAP)? Note: If the financial statements were prepared on a basis other

than GAAP, did the auditor disclose the nature of the variance

(i.e., cash basis, modified cash basis)? \_\_\_\_\_\_\_\_\_\_

7\. Did the auditor issue an unqualified opinion? Note: If an
unqualified

opinion was not issued, did the auditor disclose the reason(s) for the

qualification in the Auditor's Report? \_\_\_\_\_\_\_\_\_\_

# Financial Statements

Review Item Response

8\. Did the borrower submit a complete set of financial statements:

[Public Body:]{.underline}

a\. Combined Balance Sheet - All Fund Types and Account Groups;
\_\_\_\_\_\_\_\_\_\_\_\_

b\. Combined Statement of Revenues, Expenditures, and Changes in

Fund Balances - All Government Fund Types; \_\_\_\_\_\_\_\_\_\_\_\_

# Financial Statements

Review Item Response

> c\. Combined Statement of Revenues, Expenditures, and Changes in
>
> Fund Balances - Budget and Actual (for all fund types for which there
>
> is a legally adopted budget including General and Revenue Funds);
> \_\_\_\_\_\_\_\_\_\_
>
> d\. Combined Statement of Revenue, Expenses, and Changes in Retained
>
> Earnings, or Equity / Fund Balances - All Proprietary Fund Types; and
> \_\_\_\_\_\_\_\_\_\_

e\. Combined Statement of Cash Flows - All Proprietary Fund Types.
\_\_\_\_\_\_\_\_\_\_

[Nonprofit Organization:]{.underline}

> f\. Statement of Financial Position (Balance Sheet);
> \_\_\_\_\_\_\_\_\_\_
>
> g\. Statement of Activities (Revenue and Expense); and
> \_\_\_\_\_\_\_\_\_\_
>
> h\. Statement of Cash Flows. \_\_\_\_\_\_\_\_\_\_

9\. Does a review of the financial statements disclose any items that
require

follow-up by Rural Development (i.e., unusual items, negative balances,

significant changes from previous year)? \_\_\_\_\_\_\_\_\_\_

10\. Does the audit report contain the following supplemental reports:

> a\. Report on Compliance and on Internal Control over Financial
> Reporting
>
> Based on an Audit of Financial Statements Performed in Accordance
>
> with Government Auditing Standards; \_\_\_\_\_\_\_\_\_\_
>
> b\. Report on Compliance with Each Major Program and Internal Control
>
> Over Compliance in Accordance with OMB Circular A-133;
> \_\_\_\_\_\_\_\_\_\_
>
> c\. Opinion on Schedule of Expenditures of Federal Awards; (May be
>
> included as a separate paragraph in the Auditor's Report)
> \_\_\_\_\_\_\_\_\_\_
>
> d\. Schedule of Expenditures of Federal Awards; \_\_\_\_\_\_\_\_\_\_
>
> e\. Schedule of Findings and Questioned Costs; \_\_\_\_\_\_\_\_\_\_

# Financial Statements

Review Item Response

> f\. Corrective Action Plan; and \_\_\_\_\_\_\_\_\_\_

g\. Schedule of Prior Audit Findings. \_\_\_\_\_\_\_\_\_\_

11\. Did the auditor sign and date the Report on Compliance and on
Internal

Control over Financial Reporting Based on an Audit of Financial
Statements

Performed in Accordance with Government Auditing Standards, the Report

on Compliance with Each Major Program and Internal Control Over
Compliance

in Accordance with OMB Circular A-133, and the Opinion on Schedule of

Expenditures of Federal Awards? \_\_\_\_\_\_\_\_\_\_

12\. Does the Report on Compliance and on Internal Control Over
Financial

Reporting Based on an Audit of Financial Statements Performed in

Accordance with Government Auditing Standards include a statement that
the

audit was conducted in accordance with generally accepted government

auditing standards (GAGAS)? \_\_\_\_\_\_\_\_\_\_

13\. Does the Report on Compliance with Each Major Program and Internal

Control Over Compliance in Accordance with OMB Circular A-133 include

a statement that the audit was conducted in accordance with generally

accepted government auditing standards (GAGAS) and the requirements of

OMB Circular A-133? \_\_\_\_\_\_\_\_\_\_

# Notes to Financial Statements

Review Item Response

14\. Do the notes to financial statements disclose any significant
deficiencies,

noncompliance with RUS regulations, contingent liabilities, or illegal
acts? \_\_\_\_\_\_\_\_\_\_

15\. Do the notes to financial statements contain adequate disclosure on
items

presented in the financial statements? \_\_\_\_\_\_\_\_\_\_\_\_\_

# Notes to Financial Statements

Review Item Response

16\. Does a review of the notes to financial statements disclose any
items

that require follow-up by Rural Development? \_\_\_\_\_\_\_\_\_\_\_\_

# 

# Audit Resolution

Review Item Response

17\. Did the auditor issue audit findings that require follow-up by the
borrower? \_\_\_\_\_\_\_\_\_\_

18\. If so, did the borrower submit a corrective action plan that

adequately addresses each finding or questioned cost?
\_\_\_\_\_\_\_\_\_\_\_\_\_

19\. Are there any items in the Auditor's Report, corrective action
plan, Report

on Compliance and on Internal Control Over Financial Reporting Based on

an Audit of Financial Statements Performed in Accordance with Government

Auditing Standards, Report on Compliance with Each Major Program and
Internal

Control Over Compliance in Accordance with OMB Circular A-133, or
Schedule

of Findings and Questioned Costs that require follow-up by Rural
Development? \_\_\_\_\_\_\_\_\_\_\_\_

20\. Do the audit findings require that Rural Development issue a
written

management decision to the borrower? \_\_\_\_\_\_\_\_\_

[REF No.]{.underline} [REVIEW NOTES (Detail deficiencies, telephone
contacts, follow-up, etc.)]{.underline}

**BASED ON THE REVIEW OF THE AUDIT REPORT, I HAVE DETERMINED THE
FOLLOWING:**

**\_\_\_\_\_\_\_\_\_\_** The audit is acceptable and requires no
follow-up by Rural Development.

**\_\_\_\_\_\_\_\_\_\_** The audit is acceptable with minor follow-up
with the (auditor) / (borrower).

**\_\_\_\_\_\_\_\_\_\_** The audit is unacceptable due to significant
deficiencies that require written

correspondence or telephone contact with the (auditor) / (borrower).

**REVIEW GUIDE FOR AUDITS**

**PERFORMED IN ACCORDANCE WITH**

WATER AND WASTE REQUIREMENTS

  -----------------------------------------------------------------------

  -----------------------------------------------------------------------

  ----------------------- ----------------------- -----------------------
  **DATE REPORT           **DATE REVIEW           **DATE ENTERED IN
  RECEIVED**              COMPLETED**             RCFTS**

  **REVIEW APPROVED                               **TITLE**
  (SIGNATURE)**                                   

                                                  

                                                  
  ----------------------- ----------------------- -----------------------

-   Organization
    Name:\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

-   

-   City: \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
    County:\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

-   

-   Type of Organization: Public Body: \_\_\_\_\_ Nonprofit: \_\_\_\_\_
    Indian Tribe: \_\_\_\_\_\_

-   

-   Auditor's Name:
    \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ Audit
    Period: \_\_\_\_\_\_\_\_\_\_\_\_ to \_\_\_\_\_\_\_\_\_\_\_\_

-   

-   

REVIEW ITEMS SHOULD BE RESPONDED TO AS FOLLOWS: Y (YES); N (NO); N/A
(NOT APPLICABLE).

**REVIEW ITEMS REQUIRING WRITTEN EXPLANATION SHOULD BE REFERENCED BY
ITEM NUMBER AND DETAILED IN THE NOTES BELOW.**

  ---------------------------------- ------------------------------------
                                     

  ---------------------------------- ------------------------------------

General Review

Review Item Response

1\. Was the audit report and accompanying information received within

150 days of the end of the borrower's fiscal year? \_\_\_\_\_\_\_\_\_\_

2\. Does the audit report cover a 12 month period? \_\_\_\_\_\_\_\_\_\_

**Auditor's Report**

Review Item Response

3\. Did the auditor sign and date the Auditor's Report?
\_\_\_\_\_\_\_\_\_\_

4\. Does the Auditor's Report include a statement that the audit was
conducted

in accordance with generally accepted auditing standards (GAAS) and

generally accepted government auditing standards (GAGAS)?
\_\_\_\_\_\_\_\_\_\_

5\. Does the Auditor's Report include a statement that the financial
statements

were prepared in accordance with generally accepted accounting
principles

(GAAP)? Note: If the financial statements were prepared on a basis other

than GAAP, did the auditor disclose the nature of the variance (i.e.,
cash

basis, modified cash basis)? \_\_\_\_\_\_\_\_\_\_

6\. Did the auditor issue an unqualified opinion? Note: If an
unqualified

opinion was not issued, did the auditor disclose the reason(s) for the

qualification in the Auditor's Report? \_\_\_\_\_\_\_\_\_\_

# Financial Statements

Review Item Response

7\. Did the borrower submit a complete set of financial statements:

[Public Body:]{.underline}

a\. Balance Sheet; \_\_\_\_\_\_\_\_\_\_\_\_

b\. Statement of Revenues, Expenses, and Changes in

Retained Earnings; \_\_\_\_\_\_\_\_\_\_\_\_

> c\. Statement of Cash Flows; and \_\_\_\_\_\_\_\_\_\_

# Financial Statements

Review Item Response

d\. Combining Financial Statements (If more than one Enterprise Fund

exists). \_\_\_\_\_\_\_\_\_\_

[Nonprofit Organization:]{.underline}

> e\. Statement of Financial Position (Balance Sheet);
> \_\_\_\_\_\_\_\_\_\_
>
> f\. Statement of Activities (Revenue and Expense); and
> \_\_\_\_\_\_\_\_\_\_
>
> g\. Statement of Cash Flows. \_\_\_\_\_\_\_\_\_\_

8\. Does a review of the financial statements disclose any items that
require

follow-up by Rural Development (i.e., unusual items, negative balances,

significant changes from previous year)? \_\_\_\_\_\_\_\_\_\_

9\. Does the audit report contain the following supplemental reports:

a\. Report on Compliance and on Internal Control over Financial

Reporting Based on an Audit of Financial Statements Performed

in Accordance with Government Auditing Standards (GAGAS);
\_\_\_\_\_\_\_\_\_\_\_\_

> b\. Opinion on Schedule of Expenditures of Federal Awards; (May be
> included as a separate paragraph in the Auditor's Report)
> \_\_\_\_\_\_\_\_\_\_
>
> c\. Schedule of Expenditures of Federal Awards; \_\_\_\_\_\_\_\_\_\_
>
> d\. Schedule of Findings and Questioned Costs; and
> \_\_\_\_\_\_\_\_\_\_
>
> e\. Corrective Action Plan. \_\_\_\_\_\_\_\_\_\_

10\. Did the auditor sign and date the Report on Compliance and on
Internal

Control over Financial Reporting Based on an Audit of Financial
Statements

Performed in Accordance with Government Auditing Standards?
\_\_\_\_\_\_\_\_\_\_

# Financial Statements

Review Item Response

11\. Does the Report on Compliance and on Internal Control over
Financial

Reporting Based on an Audit of Financial Statements Performed in

Accordance with Government Auditing Standards include a statement

that the audit was conducted in accordance with generally accepted

government auditing standards (GAGAS)? \_\_\_\_\_\_\_\_\_\_\_\_

# Notes to Financial Statements

Review Item Response

12\. Do the notes to financial statements disclose any significant
deficiencies,

noncompliance with RUS regulations, contingent liabilities, or illegal
acts? \_\_\_\_\_\_\_\_\_\_\_\_

13\. Do the notes to financial statements contain adequate disclosure on
items

presented in the financial statements? \_\_\_\_\_\_\_\_\_\_\_\_

14\. Does a review of the notes to financial statements disclose any
items

that require follow-up by Rural Development? \_\_\_\_\_\_\_\_\_\_\_\_

# 

# Audit Resolution

Review Item Response

15\. Did the auditor issue audit findings that require follow-up by the
borrower? \_\_\_\_\_\_\_\_\_\_

16\. If so, did the borrower submit a corrective action plan that
adequately

addresses each finding or questioned cost? \_\_\_\_\_\_\_\_\_\_\_\_\_

# 

# Audit Resolution

Review Item Response

17\. Are there any items in the Auditor's Report, corrective action
plan, Report on

Compliance and on Internal Control over Financial Reporting Based on an

Audit of Financial Statements Performed in Accordance with Government

Auditing Standards, or Schedule of Findings and Questioned Costs that

require follow-up by Rural Development? \_\_\_\_\_\_\_\_\_\_\_\_\_

[REF No.]{.underline} [REVIEW NOTES (Detail deficiencies, telephone
contacts, follow-up, etc.)]{.underline}

**BASED ON THE REVIEW OF THE AUDIT REPORT, I HAVE DETERMINED THE
FOLLOWING:**

**\_\_\_\_\_\_\_\_\_\_** The audit is acceptable and requires no
follow-up by Rural Development.

**\_\_\_\_\_\_\_\_\_\_** The audit is acceptable with minor follow-up
with the (auditor) / (borrower).

**\_\_\_\_\_\_\_\_\_\_** The audit is unacceptable due to significant
deficiencies that require written

correspondence or telephone contact with the (auditor) / (borrower).