2021
(0572-0095)
7 CFR Part 1773, Policy on Audits of RUS Borrowers and Grantees
SUPPORTING STATEMENT
This is a request for regular extension of an approved collection. While annual time burden in hours did not change, there was an increase to annual number of responses from 1,787 to 1,797 due to an Agency adjustment.
A. Justification
1. Explain the circumstances that make the collection of information necessary.
The intent of the Rural Electrification Act is to encourage utilities investments in rural communities to increase the quality of life for residents in those areas. Under the authority of the Rural Electrification Act of 1936 (Act), as amended 7 U.S.C. 901 et seq.:
“The Administrator is authorized and empowered to make loans in the several States and Territories of the United States for rural electrification and the furnishing of electric energy to persons in rural areas who are not receiving central station service, and for the purpose of furnishing and improving telephone service in rural areas, as hereinafter provided; to make or cause to be made, studies, investigations, and reporting concerning the condition and progress of the electrification of and the furnishing of adequate telephone service in rural areas in the several States and Territories; and to publish and disseminate information with respect thereto.” (May 20, 1936, Ch. 432, s2,49 Stat. 1363; Oct. 28, 1949, ch 776, s3,63 State. 948; 7 U.S.C. 902.)
Article V, Section 5.19, of the Rural Utilities Service (RUS) loan contract states:
“The Borrower shall cause to be prepared and furnished to RUS a full and complete annual report of its financial condition and of its operations in form and substance satisfactory to RUS, audited and certified by Independent certified public accountants satisfactory to RUS and accompanied by a report of such audit in form and substance satisfactory to RUS. The Borrower shall also furnish to RUS from time to time such other reports concerning the financial condition or operations of the Borrower, including its Subsidiaries, as RUS may reasonably request or RUS Regulations require.”
RUS relies on information provided by the borrowers in their annual audited financial report to allow RUS to analyze the borrowers’ financial strength. If financial downturns or accounting irregularities are detected, RUS can act in a timely manner to protect the government’s security interest by assisting the borrower in taking timely corrective action.
Indicate how, by whom, and for what purpose the information is to be used. Except for a new collection, indicate the actual use the agency has made of the information received from the current collection.
RUS, in representing the federal government as mortgagee and in furthering the objectives of the Act, relies on information provided by the borrowers in financial statements to make lending decisions as to borrowers’ credit worthiness and to assure loan funds are approved, advanced, and disbursed for proper RE Act purposes. These financial statements are audited by a certified public accountant (CPA) to provide independent assurance that reported data is properly measured and fairly presented. 7 CFR 1773 requires borrowers to furnish a full and complete report of financial condition, operations, and cash flows, in form and substance satisfactory to RUS, audited and certified by an independent certified public accountant, satisfactory to RUS, and accompanied by a report of such audit, in form and substance satisfactory to RUS. The regulation also requires information in accordance with generally accepted government auditing standards (GAGAS). The specific burden required by RUS, not covered by GAGAS, is as follows:
FORMS APPROVED WITH THIS DOCKET:
Form RD 1773-1, Certified Public Accountant Information: The borrower must notify the agency when CPA firms are changed. It is estimated that approximately 75 borrowers select a different CPA firm from the previous year and preparation of the notification takes approximately 15 minutes.
REPORTING REQUIREMENTS - NO FORMS:
Submission of auditor’s report: The borrower submits to RUS the required auditor’s report reflecting compliance and internal control over financial reporting and has a management letter. Approximately 1,300 borrowers submit the auditor’s report and preparation time of those items not covered by GAGAS is an estimated 11 hours.
Submission of plan of corrective action: The borrower is required to submit written comments to RUS on the findings and recommendations in the auditor’s report, including a plan of corrective action. An estimated 400 RUS borrowers have recommendations of corrective actions of some nature and submit the plan, which is estimated at 15 minutes.
Scope limitation: The CPA must inform the agency of any limitation of the scope of the audit by the borrower. Scope limitations are rare and estimated at no more than 2 each year. Notification is estimated at 15 minutes by telephone.
Irregularities: The CPA must report irregularities and indications or instances of illegal acts, whether material or not, to the president of the borrower’s board of directors, to RUS, and the Regional OIG. Approximately 10 irregularities per year require an average of one hour each of professional time and clerical time to report for total of 20 burden hours.
3. Describe whether, and to what extent, the collection of information involves the use of automated, electronic, mechanical, or other technological collection techniques or other forms of information technology, e.g. permitting electronic submission of responses, and the basis for the decision for adopting this means of collection.
Rural Development is committed to meeting the requirements of the E-Government Act, which requires government agencies in general to provide the public the option of submitting information or transacting business electronically to the maximum extent possible. RUS accepts information concerning the change in CPA firm via e-mail and notification of limitations of scope of audits can be reported by telephone. In addition, the agency accepts CPA audits electronically from borrowers and has begun receiving audits in PDF format. The documents are then posted to a document management system for internal review by staff. The agency receives approximately 100 percent of audits in this manner.
4. Describe efforts to identify duplication. Show specifically why any similar information already available cannot be used or modified for use for the purposes described in Item 2 above.
General purpose financial information is provided by December 31 for all borrowers; however, it is not audited and does not contain compliance testing required by GAGAS. The general-purpose financial statements for RUS borrowers with fiscal dates other than December 31 are not duplicated on any other report. The reports required by GAGAS on compliance testing and internal controls are not duplicated in any other format. RUS does not require interim financial reports that may duplicate data submitted in the annual report. If borrowers elect to prepare interim reports for management's evaluations, they are not required to furnish these reports to RUS.
5. If the collection of information impacts small businesses or other small entities (item 7 of OMB Form 81-I), describe any methods used to minimize burden.
The information reported in financial statements may be taken directly from accounting records normally maintained by borrowers; therefore, no additional burden is imposed that would impact small businesses or small entities. The agency estimates that according to the table of Small Business Size Standards established by the Small Business Administration (SBA) which is matched to the North American Industry Classification System (NAICS), all of the estimated 1,300 borrowers (or 100 percent of the respondents) for this collection are considered small businesses.
6. Describe the consequences to Federal program or policy activities if the collection is not conducted or conducted less frequently, as well as any technical or legal obstacles to reducing burden.
The annual reporting of financial information is considered the standard for all business enterprises. Collecting information less frequently would delay RUS’ analysis of the borrower’s financial strength, thereby adversely impacting current lending decisions. It would also delay discovery of accounting irregularities and financial downturns possibly jeopardizing the government’s security interest. Review of the collected information allows RUS to detect improper use of funds and take corrective action.
7. Explain any special circumstances that would cause an information collection to be conducted in a manner:
Requiring respondents to report information more than quarterly.
There are no requirements to report more frequently than quarterly.
b. Requiring written responses in less than 30 days.
There is no requirement to report in less than 30 days.
c. Requiring more than an original and two copies.
There is no requirement to submit more than an original and two copies.
d. Requiring respondents to retain records for more than 3 years.
Recordkeeping requirements are in accordance with 7 CFR 1770 and 7 CFR 1767 and normally do not exceed three years, except for records supporting plant accounts which are required to be maintained for 25 years or the life of the plant.
e. In connection with a statistical survey, that is not designed to produce valid and reliable results that can be generalized to the universe of study.
This collection is not a survey.
f. Requiring use of statistical sampling which has not been reviewed and approved by OMB.
This collection does not employ statistical sampling.
g. Requiring a pledge of confidentiality that is not supported by authority established in statute or regulation, that is not supported by disclosure and data security policies that are consistent with the pledge, or which unnecessarily impedes sharing of data with other agencies for compatible confidential use.
No pledge of confidentiality is required.
h. Requiring respondents to submit proprietary trade secrets, or other confidential information unless the agency can demonstrate that it has instituted procedures to protect the information’s confidentiality to the extent permitted by law.
There is no requirement to submit trade secrets.
8. If applicable, identify the date and page number of publication in the Federal Register of the agency’s notice soliciting comments on the information collection. Summarize public comments received and describe actions taken by the agency in response to these comments. Describe efforts to consult with persons outside the agency to obtain their views on the availability of data, frequency of collection, the clarity of instructions and recordkeeping, disclosure, reporting format (if any), and on data elements to be recorded, disclosed, or reported.
As required by 5 CFR 1320.9(d), a Notice to request comments was published on
February 9, 2021, at 86 FR 8755. One comment was received, which was of a general nature and did not pertain to the information collection or to the agency’s audit policies.
Part 1773 is published in the Code of Federal Regulations and is transmitted to all RUS borrowers. The Agency’s Field Accountants have direct contact with borrowers and work closely with borrowers in the field regarding RUS accounting and auditing requirements and provide technical assistance if it is requested. RUS management attends industry accounting and regulatory conferences to provide insight on accounting requirements. In addition, RUS actively requests borrower suggestions and comments to improve program operations. Additionally, RUS contacted and interviewed the following users of 7 CFR 1773 and discussed the burden placed on their utilities in connection with the information collection required by the regulation. Interviewee’s names, contact information and a summary of comments is below:
CFO
Triangle Telephone Cooperative/Hill County Electric Cooperative
P.O Box 1220
2121 Highway #2 N.W.
Havre, MT 59501-1220
406-394-7807
The CFO stated that the information submitted according to the requirements of 7 CFR 1773 was not difficult to obtain and would have to be obtained for an audit even if the organization was not a borrower. The CFO had no suggestions for improvement or of information collection or submission for this collection.
CFO
Naknek Electric Association
P.O. Box 118
Naknek, AK 99633
The CFO indicated that Naknek would be compiling the same information and completing the same reviews if the electric cooperative was not a RUS borrower due to audit requirements of the cooperative’s bylaws. They also indicated uploading the audit documents was seamless.
Accountant
PO Box 150
York, SC 29745-0150
803-684-4248
The Accountant indicated that the requirements of 1773 were not burdensome, submission requirements did not take long but indicated that instructions for submitting table format information would be helpful.
9. Explain any decision to provide any payment or gift to respondents, other than remuneration of contractors or grantees.
Payments or gifts are not provided to respondents.
10. Describe any assurance of confidentiality provided to respondents and the basis for the assurance in statute, regulation, or agency policy.
There is no assurance of confidentiality provided.
11. Provide additional justification for any question of a sensitive nature, such as sexual behavior or attitudes, religious beliefs, and other matters that are commonly considered private.
There are no questions of a sensitive nature.
12. Provide estimates of the hour burden of the collection of information.
The average number of respondents was calculated by taking the average of the actual number for the past three years. The number of borrowers submitting Auditors reports, CPA Selections, Plans of Corrective Actions, Scope limitations and Reports of Irregularities for each year of the reporting period was totaled and the average is the estimate for the respondents. The number of borrowers submitting Auditor’s reports for the reporting period is 1,300. CPA information forms were submitted by an average of 75 of those borrowers. It is estimated that thirty percent, or 400 of the respondents submit written comments to the Agency concerning a plan of corrective action. The average annual number of CPA reports on irregularities is 10 irregularities per year requiring one-hour professional time and one hour of clerical time. This activity was previously reported as one activity requiring two hours to complete. The Agency's decision to report both professional and clerical time results in no increase in total time but does increase Total Annual Responses by 10.
RUS estimates a total annualized cost of $628,923 for respondents to comply with these regulations. Wages for the calculations are based on information from the U.S. Department of Labor, Bureau of Labor Statistics, Occupational Employment Statistics (OES) retrieved from http:www.bls.gov/oes/current/oes_nat.htm#42-0000. There are three wage categories, Auditors, Clerical/Administrative, and Professional (Chief Executive). The median hourly wage for Clerical/Administrative is $18.81 (OES Occupational Code 43-3031. The wage rate for Auditor is $33.34 (OES Occupational Code 13-2011), and the median hourly wage rate for the Professional category is $48.27 (OES Occupational Code 11-1021, General Manager). Benefits as a percentage of total compensation for private trades was 30.7 percent.1 The total hourly wage and benefits for Clerical/Administrative is $24.66; total hourly wage and benefits for Auditor category is $43.58; and total hourly wage and benefit for Professional is $63.09. A breakdown of the reporting requirements by section is indicated on the spreadsheet (RUS Form 36) attached to this package and the following is a summary of the respondent cost calculation for this information:
Regulation |
Number of Respondents |
Total Annual Responses |
Total Hours |
7 CFR 1773 |
1,300 |
1,787 |
14,439 |
The cost per burden item is estimated as follows:
Selection of CPA
Clerical Time:
75 x .25 X $24.66 = $ 462.37
Auditor’s Report
Auditor time
1,300 X 11 hrs X $43.58 = ___ $ 623,194.00
Submission of Plan of Corrective Action
Auditor Time:
400 X .25 hrs X $43.58 = $ 4,358.00
Notification of Scope Limitation
Professional Time:
2 X .25 hrs X $63.09 = $ 31.55
Notice of Irregularities
Professional Time:
10 X 1 hr X $63.09 = $ 630.90
Clerical Time:
Total Cost to Respondents is = $628,923.42
Provide an estimate of the total annual cost burden to respondents or recordkeepers resulting from the collection of information.
(a) Total capital and start-up cost component (annualized over its expected useful life); and (b) Total operation and maintenance and purchase of services component.
There are no capital/start-up or operation and maintenance costs involved.
14. Provide estimates of annualized cost to the Federal Government.
The annualized cost to the Federal Government is estimated at $402,115 based on an hourly professional rate of $47.38 at the GS-13, Step 5 level (Rest of U.S.) and an hourly clerical rate of $22.46 at the GS-6, Step 5 level (Washington, DC Locality). The Federal Government wage information was obtained from the Office of Personnel Management 2018 General Schedule Tables located at: https://www.opm.gov/policy-data-oversight/pay-leave/salaries-wages/2018/general-schedule/. After calculating the cost of total benefits, the hourly professional rate is $64.56 and the hourly cost for wage and benefits for clerical rate is $30.60.2 For each of the 1,300 borrowers/respondents submitting audit reports, it is estimated that 4 hours of Staff Accountant time (at GS13/Step 5) is required to review the audit report and 1 hour of Clerical time (GS5/Step 5) is required for processing. In addition, each of the estimated 400 plans of corrective action that are submitted require an estimated one hour of review by Staff Accountants. It is estimated that 10 reports of irregularities will be submitted annually and will require one hour of time for review by Staff Accountant and .50 hour of time for clerical processing. The calculation of estimated annualized cost to the Federal Government is shown below:
Review of audit report @$64.56/hour X 4 hours $258.24
Processing @$30.60/hour X 1 hours (clerical) $ 30.60
Attributed to an Accountant – GS 13, step 5)
Attributed to a clerical-type – GS 6, step 5)
1,300 Electric and Telephone @$288.84 X 1,300 borrowers $375,492.00
Borrowers
400 Plans of Corrective Action @400 X $64.56 hour $ 25,824.00
10 irregularities @10 X $64.56 $ 645.00
@10 X .5 X $30.60 $ 153.00
The cost to the Federal Government is: $402,114.00
15. Explain the reasons for any program changes or adjustments reported in items 13 or 14 or the OMB Form 83-I.
The agency increased its number of respondents in selection of a CPA and irregularities. Due to an increase in the number of respondents changing CPA firms, the number of respondents in that category increased from 60 to 75 which resulted in an increase in total hours from 15 to 18.75. There was also an increase in audit irregularities from 2 to 10. The agency also recognized that not all the work associated with reporting these irregularities was done by CPAs so an "irregularities - clerical" was added with a total of 10 respondents and 1 hour of time requested.
16. For collection of information whose results will be published, outline plans for tabulation and publication.
There are no plans for publication.
17. If seeking approval to not display the expiration date for OMB approval of the information collection, explain the reasons that display would be inappropriate.
The agency is not seeking such approval.
18. Explain each exception to the certification statement identified in item 19 on OMB 83-1.
None requested.
Collection of Information Employing Statistical Methods.
This information collection does not employ statistical methods.
1 See, Employer Cost for Employee Compensation – May 2017 at https://www.bls.gov/oes/current/oes_nat.htm#13-0000 reporting benefits were 30.7% of total compensation for private industry.
2Cost of total benefits as a percentage of total hourly compensation for Federal Government employees has been calculated by multiplying 36.25% by the hourly OPM wage in accordance with OMB Memorandum M-08 13.
| File Type | application/vnd.openxmlformats-officedocument.wordprocessingml.document |
| File Title | 10/2009 |
| Author | Hunt, Rebecca - RD, Washington, DC |
| File Modified | 0000-00-00 |
| File Created | 2022-04-12 |