Finding Text
2025-002 ALN 10.415 – Rural Rental Housing Loan – Reporting Condition and Criteria: USDA Rural Development regulations require borrowers participating in the Rural Rental Housing program to submit complete annual financial reporting information, including Form RD 3560-7 (Multiple Family Housing Project Budget/Financial Information), Form RD 3560-10 (Borrower Balance Sheet), and the Borrower Certification of Performance Standards (HB-2-3560 Attachment 4-C/4-F) as part of the annual reporting process. Handbook HB-2-3560, Chapter 4, Section 5 and 7 CFR 3560.308 require borrowers to maintain and submit these documents to demonstrate compliance with program requirements and the financial and operational condition of the project. Amount of Questioned Costs: None. Context: Management was unable to provide Forms RD 3560-7, RD 3560-10, and the Borrower Certification of Performance Standards for the fiscal year under audit. As a result, auditors were unable to verify that the required annual financial reporting package was prepared and submitted to Rural Development in accordance with program requirements. Cause: Management did not maintain adequate records to ensure required Rural Development reporting forms and certifications were retained and available for review. Additionally, procedures were not in place to monitor compliance with annual reporting requirements. Effect: Failure to prepare, submit, and retain required Rural Development reporting documents may result in noncompliance with loan agreement provisions and USDA Rural Development regulations. The absence of these documents limits Rural Development's ability to assess the project's financial condition, operational performance, and compliance with applicable program requirements. Additionally, the lack of documentation impairs the ability of auditors to verify compliance with federal reporting obligations. Auditor’s Recommendation: Management should establish procedures to ensure all required Rural Development annual financial reporting forms and certifications are prepared, submitted timely, and retained in the project's records. These procedures should include maintaining copies of Forms RD 3560-7, RD 3560-10, the Borrower Certification of Performance Standards, and related submission records to demonstrate compliance with USDA Rural Development reporting requirements. Grantee Response: Current management acknowledges the finding and will follow the auditor’s recommendation.