Form RD 442-2, the Statement of Budget, Income and Equity, is completed by pulling your year-end accrual figures into Schedule 1 (income, expenses, and equity) and then working those numbers through Schedule 2 to project cash flow. To fill out Form RD 442-2 correctly, you need to know which of the two roles you are filing it in: an annual management report (a budget submitted before your fiscal year starts) or an annual financial statement (actual results submitted after year-end). That choice determines which columns you complete.
Gather Your Records First
Before opening the form, pull together:
- Your general ledger and trial balance for the reporting period.
- Beginning and ending bank statements.
- Accounts receivable and payable aging reports.
- Your depreciation schedule (you need the annual figure twice — once as an expense on Schedule 1, once as a non-cash add-back on Schedule 2).
- Loan amortization schedules with principal and interest broken out separately for your USDA loan and any other debt.
- Capital improvement records: construction, equipment, property additions.
- Your current rate schedule and current board or director list (both must accompany the form when it is submitted as your annual management report).
The figures on the form must be on the accrual basis in accordance with generally accepted accounting principles. If you keep day-to-day books on a cash basis, make adjusting entries before you transfer numbers to the form.1eCFR. 7 CFR 1780.47 – Borrower Accounting Methods, Management Reporting and Audits
Keep every supporting record for at least three years after the report is issued. USDA, the Office of Inspector General, and the Comptroller General can all request it.1eCFR. 7 CFR 1780.47 – Borrower Accounting Methods, Management Reporting and Audits
Which Columns to Fill In
Schedule 1 has six columns, and this trips up first-time filers. When you are submitting the form as your annual management report — the budget for the coming year — you enter data only in column three of Schedule 1, and you complete all of Schedule 2 with projected figures.1eCFR. 7 CFR 1780.47 – Borrower Accounting Methods, Management Reporting and Audits When you are reporting actual year-end results, you complete the columns that compare your budget against what actually happened. Quarterly reports (when required) use columns 4 through 6 as appropriate, along with Schedule 1 page 2.
Completing Schedule 1: Income, Expenses, Equity
Most line-item labels on Schedule 1 are blank. You fill them in to match your own chart of accounts.
Lines 1–7: Operating Income
Enter your revenue sources on lines 1 through 4 — water sales, sewer fees, tap fees, penalties, and similar items. Line 5 is miscellaneous income. Line 6 is allowances and deductions. Line 7 totals the section.
Lines 8–17: Operating Expenses
Lines 8 through 14 are open for major expense categories: salaries, utilities, chemicals, insurance, repairs, contracted services, and the rest. Line 15 is specifically for interest expense. Line 16 is depreciation. Line 17 totals operating expenses.
Line 18: Net Operating Income
Line 7 minus line 17. This figure tells the agency whether your rates are covering day-to-day costs.
Lines 19–22: Nonoperating Income and Net Income
Lines 19 and 20 capture income outside normal operations, such as investment income or grants applied to operations. Line 21 totals them. Line 22 is your bottom-line net income (line 18 plus line 21).
Lines 23–26: Equity
Enter beginning equity on line 23, contributed capital or other adjustments on lines 24 and 25, and ending equity on line 26.
Page 2: Supplemental Data
Your servicing office may ask for operational metrics here — number of connections, gallons treated, and so on. Check what your office expects before you file.
Completing Schedule 2: Projected Cash Flow
Schedule 2 converts your accrual net income into a cash-flow picture. It starts with line 22 from Schedule 1 and walks through several sections.2United States Department of Agriculture. Form RD 442-2 – Statement of Budget, Income and Equity
Section A: Net Income
Carry line 22 from Schedule 1 into Section A.
Section B: Non-Cash Items
Add back depreciation and any other non-cash charges that reduced net income but did not require cash.
Section C: Cash Provided From
Enter proceeds from your USDA loan or grant, proceeds from other lenders, changes in accounts payable and accrued liabilities, changes in receivables and inventory, and any other cash sources.
Line D: Total Cash Available
Sum of sections A, B, and C.
Section E: Cash Extended For
List construction and equipment costs funded by the loan, replacements and additions to existing property, principal payments on your USDA loan, principal payments on other loans, and any other cash outlays.
Line F: Beginning Cash Balance
Your cash on hand at the start of the period.
Line G: Ending Cash Balance
Line D, minus total from section E, plus line F. This is the number the servicing office watches most closely, because it shows whether you will have enough cash to operate and service debt.
Reconcile Before You Submit
The ending cash balance on line G of Schedule 2 must match the cash figure on your Form RD 442-3 balance sheet. If it does not, your servicing office will flag it. Check the reconciliation before you send the form in, and download Form RD 442-3 at the same time as 442-2, because the two are designed to be submitted together.
If revenues from multiple sources are pledged as security for a Rural Utilities Service loan, you owe two reports: one for the USDA-financed project and one covering the borrower’s entire operation.1eCFR. 7 CFR 1780.47 – Borrower Accounting Methods, Management Reporting and Audits Easy to overlook if your system has revenue streams beyond the USDA project.
When you file as an annual management report, attach your current rate schedule and current list of board members or directors.
How to Submit
You have two paths.
Electronic Through USDA eForms
The USDA eForms portal at forms.sc.egov.usda.gov lets you fill out, save, and submit RD 442-2 online. Electronic submission requires a USDA eAuthentication account with Level 2 access. With Level 2 credentials you can also bundle RD 442-2 and RD 442-3 into a single submission package.3USDA. eForms Home
Without eAuthentication, you can still use the portal to fill the form on screen, then print and mail or fax it.
Paper
Print the completed form and mail or fax it to your Rural Development servicing office. Your original loan documents identify your assigned servicing official; the USDA state office directory lists contact information by state.4U.S. Department of Agriculture Rural Development. State Offices
Keep a copy of everything you submit, either way.
Deadlines
- Annual management report (budget): due at least 30 days before the start of your new fiscal year. Column three of Schedule 1, plus all of Schedule 2.
- Annual financial statements (for audit-exempt borrowers): due within 60 days after the end of your fiscal year, submitted with Form RD 442-3.1eCFR. 7 CFR 1780.47 – Borrower Accounting Methods, Management Reporting and Audits
- Quarterly reports (when required): due 30 days after the end of each of the first three quarters.5eCFR. 7 CFR Part 1942 Subpart A – Community Facility Loans
Quarterly filing does not apply to most borrowers. It is required during the first full year after loan closing, when a borrower begins operating a new or substantially different facility, when a major expansion is proposed, or when the servicing office imposes it on a borrower experiencing financial or management problems.5eCFR. 7 CFR Part 1942 Subpart A – Community Facility Loans
If your organization is required to submit a full audit rather than financial statements, the audit is due no later than nine months after the end of the audit period, and you still file Form RD 442-2 as your annual budget.1eCFR. 7 CFR 1780.47 – Borrower Accounting Methods, Management Reporting and Audits
If You Are Going to Be Late
Contact your servicing official before the deadline. The USDA has stated that unless the Portfolio Management and Risk Assessment division grants an extension, a late report constitutes a breach of your loan terms. Consequences can include frozen advances on remaining loan or grant funds, required repayment of already-disbursed award funds in serious cases, and a compliance record that follows you into future federal financial assistance applications.6USDA. Reporting and Compliance
Where to Download the Form
A blank fillable PDF of Form RD 442-2 is available on the USDA Rural Development website.2United States Department of Agriculture. Form RD 442-2 – Statement of Budget, Income and Equity You can also find it through the USDA eForms portal by searching “442-2.”3USDA. eForms Home Download Form RD 442-3 at the same time.