Rule2023-10413
Policy on Audits of RUS Awardees
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Published
May 18, 2023
Issuing agencies
Agriculture DepartmentRural Utilities Service
Abstract
The Rural Utilities Service (RUS or Agency), an agency in the United States Department of Agriculture (USDA) Rural Development Mission area, published a final rule with comment in the Federal Register on February 6, 2023, to revise its Policy on Audits to change the title, remove an unnecessary report, update terminology, clarify Agency contacts and filing requirements, and update or remove any outdated references. The document also made conforming changes to other regulations. These changes provide uniformity and consistency for all RUS awardees. Through this action, RUS is confirming the final rule as it was published and providing responses to the public comments that were received.
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<title>Federal Register, Volume 88 Issue 96 (Thursday, May 18, 2023)</title>
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[Federal Register Volume 88, Number 96 (Thursday, May 18, 2023)]
[Rules and Regulations]
[Pages 31603-31604]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-10413]
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Rules and Regulations
Federal Register
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having general applicability and legal effect, most of which are keyed
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Federal Register / Vol. 88, No. 96 / Thursday, May 18, 2023 / Rules
and Regulations
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DEPARTMENT OF AGRICULTURE
Rural Utilities Service
7 CFR Parts 1709, 1719, 1734, 1738, 1739, 1770, and 1773
[Docket No. RUS-22-AGENCY-0053]
RIN 0572-AC61
Policy on Audits of RUS Awardees
AGENCY: Rural Utilities Service, USDA.
ACTION: Final rule; confirmation and response to comments.
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SUMMARY: The Rural Utilities Service (RUS or Agency), an agency in the
United States Department of Agriculture (USDA) Rural Development
Mission area, published a final rule with comment in the Federal
Register on February 6, 2023, to revise its Policy on Audits to change
the title, remove an unnecessary report, update terminology, clarify
Agency contacts and filing requirements, and update or remove any
outdated references. The document also made conforming changes to other
regulations. These changes provide uniformity and consistency for all
RUS awardees. Through this action, RUS is confirming the final rule as
it was published and providing responses to the public comments that
were received.
DATES: The final rule published February 6, 2023, at 88 FR 7557, is
confirmed as of May 8, 2023.
FOR FURTHER INFORMATION CONTACT: Jurleme Grey, Chief, Technical
Accounting Review Branch, External Compliance Division, Rural
Development, U.S. Department of Agriculture, 1400 Independence Avenue
SW, Washington, DC 20250, Telephone: (202) 540-9200, Email:
<a href="/cdn-cgi/l/email-protection#89eae6e4f9e5e0e8e7eaeca7fde8fbebc9fcfaede8a7eee6ff"><span class="__cf_email__" data-cfemail="8deee2e0fde1e4ece3eee8a3f9ecffefcdf8fee9eca3eae2fb">[email protected]</span></a>.
SUPPLEMENTARY INFORMATION: Rural Development is a mission area within
the USDA comprising RUS, Rural Housing Service, and Rural Business-
Cooperative Service. Rural Development's mission is to increase
economic opportunity and improve the quality of life for all rural
Americans. The mission is met by providing loans, loan guarantees,
grants, and technical assistance through numerous programs aimed at
creating and improving housing, business, and infrastructure throughout
rural America.
The final rule that published February 6, 2023 (88 FR 7557),
included a 60-day comment period that ended on April 7, 2023. The
intent of the changes outlined in the final rule are to update
regulations, clarify audit policy, and streamline procedures. The
uniformity and consistency for all awardees should benefit both the
awardees and Agency. Professional standards and guidance provide a
framework for conducting high quality audits.
The Agency received comments from 3 respondents. The following are
the comments received and the Agency's responses:
Respondent One: Aur[eacute]lien Enthoven.
Comment: The ``Policy on Audits of Awardees'' should address the
disparate impact of the RUS on Native American Tribe borrowers.
Agency response: We disagree. This policy is specific to RUS
Awardees who do not meet the requirements of non-Federal entities
subject to 2 CFR part 200, subpart F. Per 2 CFR 200.1, the definition
of non-Federal entity is a State, local government, Indian tribe,
Institution of Higher Education (IHE), or nonprofit organization that
carries out a Federal award as a recipient or subrecipient.
Respondent Two: Eide Bailly, CPAs and Business Advisors.
Comment (1): We believe that revising 7 CFR 1773.3(e) to read as
follows would further clarify RUS's audit requirements for nonprofit
organizations: ``Subpart F of 2 CFR part 200 shall apply to audits of
RUS electric and telecommunications cooperatives and for-profit
telecommunications awardees only if the awardee has expenditures of
federal awards from Federal agencies other than the Department of
Agriculture RUS and has contractually agreed with another Federal
agency (e.g., Federal Emergency Management Agency) to provide a
financial audit performed in accordance with 2 CFR part 200, subpart F.
If the awardee has expenditures of federal awards from Federal agencies
other than the Department of Agriculture RUS, all applicable Department
of Agriculture RUS expenditures shall be included in the audit
performed in accordance with 2 CFR part 200, subpart F.''
Agency response (1): We disagree with the comment. This policy is
specific to all RUS electric and telecommunication Awardees, which are
defined as entities that have an outstanding RUS or Federal Financing
Bank (FFB) loan or loan guarantee and/or a continuing responsibility
under a grant agreement with RUS. The language in Sec. 1773.3(e) uses
language to clarify when the audit should not be in accordance with 2
CFR part 200, subpart F. We believe the current language in Sec.
1773.3(e) is sufficient as it relates specifically to RUS electric and
telecommunications awardees only.
Comment (2): The requirement in 1709.21(a), 1719.13(b), 1734.8(a),
1738.254(b)(1), and 1739.20(a) conflict with other guidance because it
requires all nonprofit organizations to obtain a Uniform Guidance audit
in accordance with 2 CFR 200 Subpart F; however, it appears that RUS's
updates intend to impose a Uniform Guidance audit requirement on a
nonprofit organization receiving RUS funding only when the nonprofit
organization has received other Federal awards that would require the
performance of the audit in accordance with 2 CFR 200 Subpart F.
Agency response (2): We disagree with the comment. We do not
believe this language creates a conflict, as the primary language in
Sec. Sec. 1709.21(a), 1719.13(b)(1), 1734.8(a), 1738.254(b)(1), and
1739.20(a) states that if the awardee (borrower, grantee, or recipient)
is a for-profit entity, an electric or telecommunications cooperative,
or any other entity not covered by paragraph (b) (paragraph (b)(2)),
the recipient shall provide an independent audit report in accordance
with 7 CFR part 1773.
And paragraph (b) (paragraph (b)(2)) states that if the awardee
(borrower, grantee, or recipient) is a non-Federal entity, as defined
in 2 CFR 200.1, the awardee shall provide an audit in accordance with
subpart F of 2 CFR part 200.
The Agency believes this language is sufficient.
Respondent Three: American Institute of CPAs (AICPA). This
respondent provided a detailed response with the following items
highlighted as their overarching comments:
[[Page 31604]]
Comment (1): (1) Clarify what the effective date means for
borrowers.
Agency response (1): Thank you for pointing this out. We will
provide additional guidance on the website to assist in explaining the
effective date. In addition, RUS will notify current awardees of the
revisions to this part.
Comment (2): RUS should be aware that the Government Accountability
Office has issued an Exposure Draft that proposes changes to the
Government Auditing Standards (GAS).
Agency response (2): The Agency acknowledges that the standards are
being revised and will review those changes, when available, to see
what changes that may entail. However, the desire is not to hold these
needed revisions up until such time as updates are done and have been
analyzed to determine what changes RUS needs to make.
Comment (3): Paragraphs 1773.9 and 1773.32 include details about
the GAS that fail to accurately reflect the requirements and
mischaracterize that the results of an audit are an opinion of the
effectiveness of internal controls and the role of the audit.
Agency response (3): RUS agrees to amend the language in Sec. Sec.
1773.9(b) and 1773.32(a) introductory text and (a)(2) and (3) with the
next revision. This language was in the current version and has not
been changed or amended with this revision. RUS disagrees with the
suggested removal of Sec. 1773.32(a)(4) and believes the current
language is sufficient.
Comment (4): Other sections of 1773 are overly prescriptive. (a)
Part 1773.40 seems to require that audit documentation evidence that
all regulatory assets and liabilities be tested for compliance which
implies that sampling is not acceptable. That is not consistent with
standard auditing procedures. (b) Similar issues exist in Parts 1773.42
and 1773.45.
Agency response (4): Sections 1773.40 and 1773.45 were not amended
thru this final rule and therefore, these sections were not open for
public comment. Sections 1773.40 and 1773.45 apply to all RUS Electric
and Telecom awardees, stating they must follow Financial Accounting
Standards Board (FASB) requirements. Electric awardees have additional
requirements to receive RUS approval for all regulatory assets or
liabilities. Section 1773.42 was amended to remove all contents and
reserve the section.
Comment (5): The amendment to Parts 1719.13(b)(1) and 1738.254
includes an incorrect reference to 1773.5 and should be 1773.4.
Agency response (5): RUS agrees. The reference in Sec. Sec.
1719.13(b) and 1738.254(b) will be amended to Sec. 1773.4 in the next
revision. RUS does not consider this a significant deviation because
while Sec. 1773.4 addresses RUS approval of the auditor, Sec. 1773.5
references the specific requirements for an auditor to be considered
satisfactory to RUS.
Comment (6): Amendment to Part 1770.13(a) does not agree with
changes made to 1773.3.
Agency response (6): The only change made to Sec. 1770.13(a) was
to remove the title of 7 CFR part 1773 in the last sentence. Your
comments will be considered in future revisions to these parts.
Comment (7): RUS uses the terms must, shall and should in the
various parts impacted by the FR notice. We recommend RUS eliminate
``shall'' throughout the various Parts, define what is meant by
``must'' and ``should'' and then ensure the appropriate term is used
throughout the Parts.
Agency response (7): We understand your concern. We are leaving the
final rule as is, but will look at the use of must, should, and shall
for when future updates are made.
Comment (8): We believe the RUS intent is to not include any
appendices or exhibits to Part 1773. However, we noted the following
document on the USDA website at: <a href="https://www.rd.usda.gov/files/UET_Bulletin_1773-1.pdf">https://www.rd.usda.gov/files/UET_Bulletin_1773-1.pdf</a>. This document appears to include several
exhibits including illustrative auditor reports. If RUS plans to
include any type of exhibit including information that would be issued
by the auditor, we ask that the AICPA be provided an opportunity before
it is issued.
Agency response (8): The RUS Bulletin 1773-1 will be officially
rescinded when this final rule becomes effective. The Agency will
ensure the bulletin is removed from the website.
The Agency appreciates the time that AICPA took to review, comment
and question each section and will use that when the Agency next looks
to update these sections.
No change to the rulemaking is necessary at this time. The RUS
appreciates the comments received. The Agency confirms the final rule
without change.
Andrew Berke,
Administrator, Rural Utilities Service.
[FR Doc. 2023-10413 Filed 5-17-23; 8:45 am]
BILLING CODE 3410-15-P
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