FIN-2000-8551

This report presents the results of our financial statement audit of the North Carolina Rural Rehabilitation Corporation (the Corporation), a component unit of the State of North Carolina, for the year ended June 30, 2000. As part of the audit work necessary for the CAFR and the Single Audit Report, the accounts and operations of the Corporation were subject to audit procedures, as we considered necessary. In addition, we performed auditing procedures that we considered necessary for us to report on the accompanying financial statements that relate solely to the Corporation. The purpose of this report is to present the results of our audit on the accompanying financial statements. A summary of our audit results are: The financial statements present fairly the amounts and disclosures made in accordance with generally accepted accounting principles. These matters are described in the Independent Auditor's Report on the Financial Statements. Our tests disclosed no instances of noncompliance and the following three instances of significant deficiencies in internal control which requires disclosure herein under Government Auditing Standards. 1. Control Environment 2. Loan Process 3. Payroll Charges Inappropriate These matters are described in the Independent Auditor's Report on Compliance and on Internal Control over Financial Reporting and the Audit Findings and Recommendations section of this report.