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(c) Housing Assistance Council, December 1999

Permission is granted ONLY to nonprofit community-based organizations to reproduce and/or adapt this document, and only for their own use.

IV.  REQUIREMENTS OF THE SECTION 514/516 FARM LABOR HOUSING PROGRAM

The purpose of the Section 514/516 program is to provide decent, safe, and sanitary rental housing and related facilities for domestic farm laborers.  It is intended to benefit farm laborers primarily where the greatest need exists.

A.  Eligible Borrowers and Grantees

The vast majority of non-farmowner LH sponsors receive both loans and grants.

A loan recipient must fall into one of the following categories: a farmowner, family farm partnership or corporation, association of farmers, broad-based nonprofit organization, nonprofit organization of farmworkers, federally recognized Indian Tribe, an agency or political subdivision of state or local government, or a limited partnership in which the general partner is a nonprofit entity.

B.  Applicant Eligibility Criteria for Farm Labor Housing Loans

In addition to those above, a potential loan recipient must meet the following criteria.

1. A potential borrower must ultimately own the housing and operate it on a nonprofit basis.

2. Except for a state and local public agency or a political subdivision thereof, a borrower must be unable to provide the necessary housing from its own resources and must be unable to obtain the necessary credit from any other source upon terms and conditions it could reasonably be expected to fulfill.

Individual or organizational farmer applicants must withstand the above credit test individually and as a group.  Resources of individual members of a family farm corporation or partnership with less than a 10 percent interest in the farm need not be considered.

The Rural Development State Director may make an exception to the requirement that an individual farmowner, family farm corporation, or family farm partnership or association be unable to obtain the necessary credit elsewhere when both of the following conditions exist:

1. There is a need in the area for housing for domestic farmworkers who are migrants and the applicant will provide such housing:

2. There are no qualified state or political subdivisions or public or private nonprofit organizations currently available or likely to become available within a reasonable period of time that are willing and able to provide the housing.

The interest rates for these loans change in accordance with 7 CFR, Part 1810, Subpart A.  Rural Development offices can provide this information (the rate on May 12, 1999 was 8.828 percent).

3. A potential borrower must have sufficient initial operating capital to pay property and liability insurance premiums, fidelity bond premiums, if required, utility hook-up deposits, maintenance equipment costs, moveable furnishings and equipment costs, lease printing costs, and other initial expenses.  LH loans made to nonprofit organizations and to state or local public agencies or political subdivisions thereof may include up to 2 percent of the development cost for this purpose.

4. A potential borrower must have prospective income sufficient to pay operating expenses, make necessary capital replacements, make the payment on the loan and other authorized debts, and accumulate reasonable reserves.

5. A potential borrower must possess the legal and actual capacity, character, ability, and experience to carry out the undertakings and obligations required for the loan.  Organizations operating in more than one local area are required to indicate their ability to provide local management and supervision of the day-to-day operation of the housing project.

6. An individual farmer, family farm corporation or partnership, or an association of farmers must intend to use the housing for labor operations of the applicant or farming operations of its members.  A nonprofit organization, on the other hand, cannot link occupancy to employment on a particular farm.  (See 8(c) below.)

7. A borrower must own or become the owner of the land to be used for the proposed housing.  An owner may include a lessor of land owned by a state or local subdivision or a public body or agency, or of Indian tribal lands not available for purchase.  A State Director may approve leasing of other land if this is a well established practice in the area, if such leaseholds are fully marketable, and if certain conditions apply.  (See RD Instruction 1944.157(a)(7).)

8. If the applicant is a private broad-based nonprofit organization or a nonprofit organization of farmworkers, it must meet the following additional requirements.

   1. Except for an association of farmworkers, it must be certified tax exempt.

   2. It must have by-laws vesting responsibility for management of the housing in the applicant’s board of directors.

   3. It must be prohibited from requiring or preventing employment on any particular farm or farms as a condition of occupancy.

   4. A local broad-based nonprofit organization, operating in one employment area, must have at least 25 members (for projects with up to $100,000 development cost; additional cost may require more members) representing a variety of interests and must be governed by a board of directors of not less than five members who are experienced in such fields as real estate management, finance, or related businesses and who will not use the farmworkers housed in the project (see 1944.153).

   5. A regional or state-wide nonprofit organization must be broadly representative of the region and have at least eight members from each market area served.

   6. A nonprofit organization of farmworkers must have board representation from the area where the housing is located.  Directors may be elected who are not members of the organization but are experienced in such fields as real estate management, finance, or related businesses, provided member directors represent a majority of the board.

9. If the applicant is an individual farmowner, she/he must be a citizen of the United States; be legally admitted for permanent residence in the United States, the Commonwealth of Puerto Rico, the Virgin Islands, the territories and possessions of the United States, or the Trust Territory of the Pacific Islands; or be on indefinite parole.  If the applicant is an organization other than a state or political subdivision, the majority of the members and controlling interests must be individuals who meet these citizenship requirements.

C.  Applicant Eligibility Criteria for Farm Labor Housing Grants

In addition to the criteria listed in Sections A and B above, a potential grantee must:

1. have an assured life sufficient to provide, maintain, and repair low-rent housing for domestic farm labor (normally not less than 50 years);

2. be unable to provide housing from its own resources (including levying of taxes, assessments, etc.) or to obtain other credit suitable to farmworker needs (not applicable for public applicants);

3. possess legal and actual capacity, ability, and experience to carry out the purposes of the grant; and

4. legally obligate itself through a grant agreement not to divert income from the housing for other purposes.  

As noted above, limited partnerships are not eligible for Section 516 grants.

D.  Financing Plans, Rates and Terms

The following rates and terms apply for RHS LH loans:

1. LH loans are made for up to 33 years.

2. The interest rate is 1 percent.  Farmer applicants who can get credit elsewhere may obtain loans at the cost of Treasury borrowing.

3. Eligible organizations may receive grants for up to 90 percent of development costs.

4. Rental Assistance (RA) can be provided to tenants to bring rent, including utilities, to within 30 percent of adjusted income.  It is RHS policy to attempt to use less than a 90 percent grant when RA is used.  RA can be used with a leveraged loan only when the total interest cost does not exceed the cost of using 100 percent 514 loan financing.

E.  Conditions for Making Grants

Grants are available to eligible applicants only when all of the following criteria are met.

1. The applicant contributes at least 10 percent of the total development costs from its own resources, other sources, or an LH loan.

2. The housing fills a “pressing need” documented by information in the preapplication, and there is a reasonable doubt that the units are affordable to farmworkers without the grant.

3. The housing meets the guidelines in Exhibit A-3 to RD Instruction 1944-D (Appendix 6 to this guide) and is not elaborate in design or material.  Year-round housing should be comparable in design and cost, taking into account Davis-Bacon wage rates, to that financed under the Section 515 Rural Rental Housing program.  (RHS/Rural Development will be looking at comparable square footage construction costs.)

4. The housing is suitable for year-round use unless the need is seasonal and year-round occupancy is not practical or necessary.

5. The housing is designed and constructed for energy efficiency.

F.  Eligible Occupants

Eligible tenants are domestic farm laborers who receive a substantial portion of their income from farm labor and are citizens or legally admitted for permanent residence.  Legally admitted temporary laborers are not eligible.  Retired or disabled farm laborers may remain as tenants if initially eligible.  A domestic farm laborer is:

1. the farm employee of an owner, tenant, labor contractor, or other operator in connection with raising or harvesting agricultural or aquacultural commodities;

2. in the employ of a farm operator, handling planting, drying, packing, grading, storing, delivering to storage or market, or carrying to market agricultural or aquacultural commodities produced by the operator; or

3. doing work described in 2 as the employee of a group of farm operators only when the group produced all of the commodities.  The definition is not applicable for commercial processing or marketing facilities.  It does, however, include on-farm packing for more than one farmer.

Farm income is considered to be “substantial” for off-farm housed workers when:

1. actual dollars from farm income for domestic farmworkers, other than migrants, equal at least 65 percent of Federal Regional Income Limits for Hired Farmworkers (see Appendix 1);

2. migrant farm laborers living in seasonal housing earn a minimum of 50 percent of Federal Regional Income Limits for Hired Farmworkers from farmwork; or

3. dollar information is not available and farm laborers have worked 110 days (based on a whole day equivalent of 7 hours) during the preceding 12 months.

When natural disasters have occurred, figures for the last full year of work will be used to determine “substantial” portion of income.

Household income limits may not exceed moderate income limits (shown in Exhibit C to HB-I-3550), and income (as defined in RD Instruction 1930-C, Paragraph II C of Exhibit B) also includes the full amount of periodic payments received from Social Security (including Social Security payments received by adults on behalf of minors and by minors intended for their own support), annuities, insurance policies, retirement funds, pension, disability or death benefits (except lump sum settlements), and other similar types of periodic receipt, as well as any payments that will begin during the next 12 months, including payments in lieu of earnings, such as unemployment and disability compensation, worker compensation, and severance pay.

G.  Priority for Occupancy

A complex scheme determines priorities for LH occupancy (see 1944.154 for details).  The first priority is for people currently employed as farmworkers, ranked by proportion of earnings from farm labor:

1. First rank:  households with 71-100 percent of total earnings from farm labor.

2. Second rank:  households with 51-70 percent of total earnings from farm labor.

3. Third rank:  households with 26-50 percent of total earnings from farm labor.

4. Lowest rank:  households with 25 percent or less of total earnings from farm labor.

For LH units without RA, priority within each of the above ranked categories is further prioritized by income: very low-income, then low-income, then moderate-income.  For LH units with RA, essentially the same determination is used, except that all very low-income tenants are served first, followed by low-income tenants.  Moderate-income tenants can be served only when there are no very low- or low-income farmworkers on waiting lists, and moderate-income workers are not eligible to receive RA.

After active farm laborers, the second priority is for retired or disabled farmworkers who were in the same market area when disabled (see 1944.154(a)(2)).  Those with the lowest incomes receive first consideration.

Third priority is for other retired or disabled farmworkers.   

With the permission of the Rural Development Manager or State Director, ineligible persons may occupy the housing during the off season or when it is otherwise not needed, but their leases should not exceed 30 days.  The housing should be designed with such use in mind.

H.  Eligible Uses of Loan and Grant Funds

Loan and grant funds may be used to:

1. build, buy, improve, or repair housing;

2. purchase and improve land;

3. develop and/or install a water supply system, a sewage disposal system, roads, storm water facilities, and lighting systems, including off-site facilities, under conditions outlined in 1944.158(c);

4. install related facilities, including community rooms or buildings, cafeterias or dining halls, child care facilities, maintenance workshop, and storage facilities;

5. purchase household furnishings, including stoves, refrigerators, drapes and rods, tables, chairs, dressers, and beds;

6. install recreational facilities;

7. install a laundry room with equipment (unless it is customary in the area to provide a washer and dryer in the individual units);

8. provide essential equipment which becomes part of the property;

9. provide walks, parking areas, landscaping, etc.;

10. cover related costs such as legal, architectural, and engineering fees;

11. pay for consulting services from qualified consulting organizations or foundations that operate on a nonprofit basis, if the State Director determines:

    1. the applicant cannot meet all requirements without the assistance of a consultant or Rural Development staff (however, few Rural Development offices have staff or time to provide such services); and

    2. the charges are reasonable;

12. cover construction interest;

13. cover normal charges necessary to obtain interim financing;

14. provide initial operating expenses up to 2 percent of the development costs for nonprofit and public organizational applicants;

15. convert Rural Development inventory to farm labor housing;

16. pay related costs incurred in compliance with the Uniform Relocation and Real Property Acquisition Act of 1970; and

17. provide administrative funding for organizations producing farm labor housing.  (The 1983 Rural Housing Amendments require that up to 10 percent of Section 516 grant funds be used to assist nonprofit organizations that encourage the development of farm labor housing.)

I.  Ineligible Uses of Loan and Grant Funds

Farm labor housing funds cannot be used for:

1. housing for the applicant or the applicant’s immediate family;

2. housing or furnishings which are extravagant in design or material;

3. movable furnishings except those authorized in RD Instruction 1944.158;

4. payment of fees or commissions for solicitation or referral of the loan;

5. refinancing debts; or

6. payment of fee, salary, commission, profit, or compensation to any applicant, officer, director, trustee, stockholder member, or agent of the applicant (except as approved by the State Director, and this is limited to legal, architectural, engineering, and technical services).

J.  Type of Housing and Standards

RHS prefers that LH units be in multifamily structures.  However, single-family detached units may be utilized under certain unusual circumstances.  Lower density projects should be planned for family housing.  Single-family units situated in subdivisions or on scattered sites must meet the site criteria in RD Instruction 1924-C.

RHS has developed three sets of construction standards for farm labor housing, which are:

1. Year-Round Housing must meet the Voluntary National Model Codes as referenced and amended in RD Instruction 1924-A.

2. Seasonal Occupancy Housing (to be occupied for up to six months) must meet the Rural Development seasonal standards, which are Exhibit I to Instruction 1924-A.  (See Appendix 7.)

3. Long Season Occupancy Housing (to be occupied for more than six months but less than year-round) must be in substantial conformance with, as well as readily convertible to, the applicable Voluntary National Model Code.

K.  Seasonal Housing Design

Seasonal standards are intended to reduce cost.  For example, housing used only in June, July and August does not need a heating system and should not be required to meet the full RHS thermal standards (see IV. C3 in Exhibit D to Instruction 1924-A).  For this reason, RHS has developed seasonal standards which afford the opportunity to provide decent housing at lower cost.

Seasonal housing should be:  

1. modest in size and design;

2. comfortable and safe;

3. attractive;

4. less expensive than year-round MPS housing; and

5. affordable to maintain during the off-season.

In efforts to assist in the development of acceptable seasonal housing, some state universities have produced seasonal plans for RHS/Rural Development projects in their area.

L.  Other Requirements and Conditions

1. Intergovernmental review is required by Executive Order 12327 (except on Indian  reservations) for (a) ten or more individual detached units or (b) 25 or more multifamily units (RD Instruction 1940-J).

2. Environmental assessment regulations apply as per RD Instruction 1940-G.

3. All projects are subject to the flood plain requirements outlined in RD Instruction 424.6 and in 1940-G.  Despite the possibility for corrective compliance, HAC advises applicants to look for problem-free land.  It is usually counterproductive to locate in a flood plain.

4. Loans may not be prepaid for 20 years except under limited conditions, and the housing must be maintained during the term of the loan for the purpose of housing farmworkers.

5. A written contract for architectural and engineering services is required.  See 1924.13 in RD Instruction 1924-A.

6. Planning and construction must be accomplished as per RD Instructions 1924-A, 1924-C (7 CFR Part 1924 Subparts A and C), and Exhibit A-3 to Instruction 1944-D.  Construction will normally be contracted through competitive bids, but nonprofit applicants have the right to use negotiated bids if they can be justified.  When multifamily and commercial contractors have plenty of work it usually pays to negotiate.  When work is slow, competitive bidding will normally provide a better price.

7. Davis-Bacon wage rates are applicable when Section 516 grant funds are used.  See RD Instruction 1901-D (not in 7 CFR), and Department of Labor regulations at 29 CFR Parts 1, 3, and 5.

8. Land use objectives of the Farmland Protection Policy Act must be met.  To the extent possible, a farm labor housing project must not irrevocably convert prime agricultural land for another use.  The USDA Natural Resources Conservation Service (NRCS), which catalogues farm land designations, will provide assistance to the public.  NRCS should be contacted prior to making a decision to use or purchase prime agricultural land.

9. Options such as Form RD 440-34 or purchase contracts must be utilized when loan or grant funds are used to purchase the site.  Options should control the land, with limited investment risk, long enough for the applicant to gain necessary RHS/Rural Development and local government approvals (certainly no less than six months and preferably for a year or more).

10. Public bodies and any agencies with the power of eminent domain must comply with the Uniform Relocation Assistance and Real Property Acquisition Act of 1970.

11. No grant recipient or nonfarm organization borrower is permitted to require that occupancy be subject to working on a particular farm or for a particular owner.  Domestic farm workers must be give absolute priority for renting units.

M.  Comments on Housing Location

Farm labor housing may consist of single-unit structures or multi-unit structures.  Preferably, multi-unit projects will be situated in a residential neighborhood within a community that offers schools, shopping, medical facilities, recreation, and other services.  The site may be located in an urban or rural area.  However, if the work site is not nearby, adequate transportation must be provided.  Since farmworker incomes are often low, the cost associated with commuting to work should be considered when choosing a site.

N.  Security Requirements

Normally, RHS requires a mortgage on the real estate being developed (or a leasehold if the loan is to Native Americans on trust or restricted land).  If a public or quasi-public organization cannot legally provide a mortgage, the USDA Office of General Counsel determines the form of security to be taken.

O.  Loan and Grant Resolution

Eligible recipients must adopt a resolution similar to Exhibit E of Instruction 1944-D that authorizes signing of a grant agreement, attests to the need for the grant, agrees to establish special accounts, and agrees to adhere to RHS management policies and other regulations.  (See Appendix 13.)

P.  Grant Agreement

The grant agreement specifies the amount and conditions of the grant.  It should be read before preparing an application.  (See Appendix 14, Exhibit F to Instruction 1944-D.)  It should include:

1. a prohibition of discrimination in construction or tenancy;

2. a provision for repayment of the grant at 5 percent interest in the event of default on conditions;

3. an agreement that, in the event the project is no longer used for its original purpose, RHS will decide how the property will be used (the time limit on RHS’s authority over the property’s use is unclear);

4. provisions for disposition of nonexpendable property, when no longer needed;

5. a provision that local government grantees must account for and repay RHS the interest earned on grant funds pending disbursement (this provision is now essentially obsolete since funds are transmitted to grantees in multiple advances rather than all at once, and there is little opportunity for interest to accrue);

6. an acknowledgement that Davis-Bacon wage rates apply during the construction phase of the project; and

7. an acknowledgement that all contracts in excess of $100,000 are subject to Section 114 of the Clean Air Act and Section 308 of the Water Pollution Control Act (40 CFR 15.4 and 40 CFR 17126, April 16, 1975).

R.  Rental Assistance

The Rental Assistance Program (RA) subsidizes low- and very low-income farmworkers by paying the difference between 30 percent of the farmworker-tenant’s adjusted income and farm labor housing rentals (including utilities).  Borrowers interested in receiving rental assistance should fill out form 1944-25 and include it with the preapplication.  (See Exhibit E to RHS Instruction 1930-C for the regulations.)

Tenants have the right to petition for RA and must be informed of that right.  The petition must be made in writing to the borrower and contain the signature of the head of each eligible household.  A copy of the petition must be submitted to the Rural Development Manager or to the Rural Development State Office.  A borrower or grantee who has not previously applied for RA may be encouraged to do so by Rural Development if (a) RA units are available and (b) at least 20 percent of the tenants eligible for RA have petitioned to the borrower to apply on their behalf.

If Rental Assistance is provided, the borrower and RHS will sign a Rental Assistance Agreement, Form RD 1944-27 (Appendix 11).

Recent legislation authorizes the optional use of Section 521 RA for up to 90 percent of operating costs, for migrant projects only.  As of July 1999 RHS has not yet implemented this provision, but intends to include it in “reinvention” regulations.

S.  Management Plan

Management and supervisory requirements for the LH program are contained in RHS Instruction 1930-C.  Additionally, Exhibit B to Instruction 1944-D (Appendix 12) requires a management plan which includes policies and procedures for:

1. staffing;

2. marketing of units, which includes opening and closing dates for seasonal projects;

3. tenant selection, which demonstrates absolute priority for farmworkers;

4. occupancy for ineligible tenants (Rural Development managers or Rural Development State Directors may approve occupancy for nonfarm laborers on a short-term basis only when the units are not needed by farm laborers);

5. lease or occupancy agreements that clearly detail the responsibilities of both tenant and landlord;

6. pre- and post-occupancy counseling services;

7. rent collection;

8. eviction;

9. maintenance and repair schedules;

10. recordkeeping and reporting requirements of RHS;

11. fidelity bonding for persons responsible for receipt, custody, and disbursement of funds;

12. encouragement of tenant councils;

13. rent increases; and

14. nondiscrimination.

T.  Management Information

The regulations contain specific details related to management and to the use of RA, some of which are listed below.

1. Marketing.  Eligible tenants must be made aware of housing availability long before the units are completed.  Management plans for marketing should include consultation with farmers and state employment security officials.  (In the past, LH projects have been constructed only to encounter difficulty in obtaining full occupancy by the targeted group.  This is a risk not only to the viability of the project, but also to the farm labor housing movement.)

2. Tenant Selection.  During construction, a waiting list of potential tenants should be developed.  Income certification of selected tenants is required.  In the case of migrant farmworkers, certification is required to the extent possible.  (An affidavit from the laborer may be needed to supplement available employer information.)

3. Leases for Those Receiving RA.  Leases for families receiving RA must include standard language defining the tenant’s payment as 30 percent of adjusted family income, which will change as the tenant’s income does, and which may not exceed the total rent.  The leases also must describe the functioning and impact of the utility allowance on the tenant contribution.  RHS Instruction 1930-C, Exhibit B includes lease clauses which are prohibited.

4. Utility Allowances.  Although utility allowances are required only when RA is utilized, HAC suggests that they always be used.  Instructions for developing utility allowances are found in Exhibit A-6 to RHS Instruction 1944-E (see Appendix 10).

In processing utility allowances subsequent to loan approval, the borrower must provide previous utility bills and records of fees for public services that were charged to units in the project.  These data should cover a period of at least 24 months and should include bills for all of the sizes of the units in the project.  If data are not available on the specific project, data from similar projects may be substituted.  Current rate schedules should also be consulted to estimate utility allowances.  The RHS utility allowance form computes use in dollars.  Unit use should be computed and the form should be maintained so that rate increases can quickly be converted to an allowance change.

Projects that do not have individually metered units can determine the pro-rated share of utility costs per living unit by following the instructions in Exhibit A-6.  HAC strongly recommends individual metering.

5. Rent Increases.  All proposed rent increases must be preapproved by Rural Development before a borrower can increase rent.  (Exhibit C to RHS Instruction 1930-C details the process.)  The first step requires that the borrower submit an application letter for a rent increase to the Rural Development Manager or to the State Office as appropriate.  The letter should include:

   1. need and justification for the increase;

   2. operating budget from the previous year;

   3. an operating budget for the next year of operation using the old rental rates;

   4. an operating budget for the next year of operation using the proposed rental rates;

   5. current Tenant Certifications (Form 1944-8);

   6. a dated copy of the notice of proposed rent increases that was submitted to the tenants in accordance with III B of Exhibit C to 1930-C;

   7. an application for Rental Assistance on Form 1944-25 (if the project is eligible and if the proposed increase will adversely affect tenants by raising rent to a level in excess of 30 percent of tenant’s adjusted monthly income);

   8. an energy audit for the project; and

   9. any other information deemed necessary.

Tenants must be informed in writing of any proposed rent increases and be given the opportunity to inspect all materials justifying the increase.  After being informed of the proposed increase, tenants have 30 days to submit written comments to the Rural Development Manager or to the State Office as appropriate.

When the 30-day period has expired, Rural Development reviews all borrower and tenant submissions, prepares a written statement summarizing the general tenor of the tenant’s comments, and submits a recommendation to the State Office within ten days.  The State Director makes the final decision and sends a letter to the borrower explaining the decision.  If the increase is approved, the letter of approval must be posted for the tenants.

6. Evictions.  Tenant evictions are covered in RHS Instruction 1930-C.

7. Monthly Payments.  Each month, the borrower must submit a report to the District Director, using Form 444-29, “Project Worksheet for Multiple Family Housing Projects,” which certifies that all units are occupied by eligible tenants (or ineligible tenants with written permission for temporary occupancy).  This form also allows monthly adjustment of the amount of RA due to changes in the incomes of existing tenants or to occupancy by new tenants.

U.  Nondiscrimination in Use and Occupancy

Borrowers and project managers must comply with fair housing laws.  Any tenant or prospective tenant who believes s/he has been discriminated against because of age, race, color, religion, sex, marital or familial status, handicap, or national origin may file a complaint at any Rural Development office or any Department of Housing and Urban Development (HUD) office.  Rural Development field office staff will help complainants to fill out forms and file complaints. 

HUD and USDA have established procedures for processing and investigating complaints.

V.  RHS/Rural Development Review and Reports

Once the project has been rented up, the owner must submit two reports to Rural Development each month.  These include the “Monthly Report” (Form 1930-6; see Instruction 1930-C, Exhibit B-6) and “Certification and Payment Transmittal” (RHS Form 1944-9).

The “Monthly Report” shows income and expenses by budget line item for the month.  It should be on the same basis as the project’s accounting system, i.e., accrual or cash basis.  The project worksheet (Form 1944-29) reflects the unit-by-unit rent and subsidy situation.  It accompanies the monthly payment to RHS/Rural Development.  (See RHS/Rural Development Forms Manual Inserts for instructions on preparation.)

The following annual reports are required by RHS:

An audit is required for projects with 21 or more units.  The audit must be prepared by a Certified Public Accountant or a Licensed Public Accountant and must comply with the RHS booklet, “Instruction to Independent Certified Public Accountants and Licensed Public Accountants Performing Audits for RHS Borrowers and Grantees.”  The State Director may waive the audit requirement with prior authorization of the National Office if all the following conditions are met.

1. The borrower submits a written request for waiver.

2. The negotiated cost of the audit will increase the monthly rental rate more than $2.00 per unit.

3. All required reports from the previous year’s operations are in order.

Verifications are required for projects with 20 or fewer units (although the Rural Development State Director can require an audit).  The owner must provide a verification in accordance with the “Year End Report.”  Verification must be made by either (a) a competent individual independent of the borrower; or (b) a committee of the membership, excluding officers, directors, or employees of the owner.

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