1773.4—Borrower responsibilities.

(a) Selection of a qualified CPA. The borrower's board of directors is responsible for the selection of a qualified CPA that meets the requirements set forth in § 1773.5. When selecting a CPA, the borrower should consider, among other matters:
(1) The qualifications of CPAs available to do the work;
(2) The CPA's experience in performing audits of utilities; and
(3) The CPA's ability to complete the audit and submit the reports and management letter within 90 days of the as of audit date.
(b) Board approval of selection. The board's approval of a CPA must be recorded by a board resolution that states:
(1) The CPA meets RUS's qualifications to perform an audit; and
(2) The borrower and CPA will enter into an audit agreement in accordance with § 1773.6.
(c) Notification of selection. When the initial selection or subsequent change of a CPA by a borrower has been made, the borrower must notify RUS, in writing, at least 90 days prior to the as of audit date.
(1) RUS will notify the borrower, in writing, within 30 days of the date of receipt of such notice, if the selection or change in CPA is not satisfactory.
(2) Notification to RUS that the same CPA has been selected for succeeding audits of the borrower's financial statements is not required; however, the procedures outlined in this part must be followed for each new CPA selected, even though such CPA may previously have been approved by RUS to audit records of other RUS borrowers. Changes in the name of a CPA firm are considered to be a change in the CPA.
(d) Audit engagement letter. The borrower must enter into an audit engagement letter with the CPA that complies with § 1773.6.
(e) Debarment certification. The borrower is responsible for the receipt, from the selected CPA, of a lower tier covered transaction certification, as required under the provisions of Executive Orders 12549 and 12689, Debarment and Suspension, and any rules or regulations issued thereunder.
(f) Submission of auditor's report. The borrower must submit to RUS the required auditor's report, report on compliance and on internal control over financial reporting, and management letter as set forth in § 1773.21.
(1) An annual auditor's report, report on compliance and on internal control over financial reporting, and management letter that fail to meet the requirements detailed in this part will be returned to the borrower with a written explanation of noncompliance.
(2) The borrower must, within 60 days of the date of the letter detailing the noncompliance, submit corrected reports to RUS.
(3) If corrected reports are not received within 60 days of the date of the letter detailing the noncompliance, RUS may notify the borrower that a default has occurred under its security instrument or take other appropriate action. The default notice will set forth the period of time during which the default will be remedied.
(g) Submission of plan of corrective action. The borrower must submit written comments to RUS on the findings and recommendations in the auditor's report, report on compliance and on internal control over financial reporting, and management letter. The borrower must also submit to RUS:
(1) A written plan for corrective action taken or planned; and
(2) Comments on the status of corrective action taken on previously reported findings and recommendations.
If corrective action is not necessary, a written statement describing the reason it is not should accompany the auditor's report.

Code of Federal Regulations

[56 FR 63360, Dec. 3, 1991, as amended at 66 FR 27835, May 21, 2001]