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Publications: Rural Development Audit Program

Attachment I - Rural Rental Housing Loans (10.415/10.427)

I.  Program Objectives

TThe objective of the Rural Rental Housing (RRH) Loan Program is to provide loans to construct, rehabilitate, and repair housing suited for very low, low and moderate income individuals living in rural areas. Additionally loans are provided to provide housing for senior citizens living independently or living in congregate care facilities, and handicapped individuals living in rural areas.

II.  Program Procedures

Loans are provided to state and local public agencies, individuals, trusts, associations, partnerships, consumer cooperatives, and profit and nonprofit corporations upon approval of an application to construct or rehabilitate rural rental housing. Loan funds can only be used for authorized purposes within the prescribed loan limits and use limitations. Most borrowers are required to contribute a certain percentage of the development costs and initial operating capital.

After the RRH facilities become operational, borrowers have ongoing management and reporting responsibilities. In this regard, borrowers are responsible for complying with applicable Agency regulations and conditions of their Loan Agreement which include, but are not limited to, the following:

  1. Providing for proper and efficient management of the RRH project;

  2. Renting only to eligible tenants;

  3. Verifying and certifying tenant income and/or employment;

  4. Entering into lease agreements with tenants;

  5. Properly computing rental charges and obtaining Agency approval for any changes in basic or market rental rates;

  6. Providing for proper maintenance of the RRH property to protect the Agency's security interests;

  7. Limiting returns on investments and any advances/paybacks of operating funds;

  8. Properly accounting for RRH project operations and maintaining required accounts;

  9. Providing accurate monthly and/or annual reports to the Agency; and

  10. Promptly computing and remitting loan repayments to reflect interest credits, averages and rental assistance.

III.  Compliance Requirements and Audit Procedures

Entities receiving RRH loans are subject to the audit requirements contained in 7 CFR Part 3560.308(a) and (b), Reinvention of the Sections 514, 515, 516, and 521 Multi-Family Housing Programs.

In addition to the audit requirements contained in 7 CFR Part 3560.308(a) and (b), the United States Department of Agriculture's (USDA) Office of Inspector General (OIG) has developed the RRH Audit Program for RRH properties. In cooperation with the AICPA, OIG developed an Agreed-Upon-Procedures (AUP) Audit Program that focuses the audit tests and steps so that the engagement would be more successful in identifying equity skimming. The AUP can be accessed via the Rural Development website at: The AUP is located in Handbook 2 HB-2-3560, Chapter 4, Attachment 4-B.

The AUP Audit Program is effective for the first time for audits ending June 30, 2006, and thereafter.

Questions concerning RRH audit requirements should be directed to Stephanie White, of Multi-Family Housing, at (202) 720-1615 or

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Rural Development is within the U.S. Department of Agriculture and administers rural business, cooperative, housing, utilities and community development programs.

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