Audit 12308

2022-001 Procurement, Suspension and Debarment ALN Number Name of Federal Program 10.760 Water and Waste Disposal Systems Identification as a Repeat Finding: Repeat of Finding 2021-001 Finding: The Association did not have a written procurement policy that complies with the procurement standards established in 2 CFR sections 200.318 through 200.326 in place for the full compliance year. Criteria: Non-Federal entities other than States must follow the procurement standards set out at 2 CFR sections 200.318 through 200.326. They must use their own documented procurement procedures, which reflect applicable State and local laws and regulations, provided that the procurements conform to applicable Federal statutes and the procurement requirements identified in 2 CFR 200. Condition and context: Sallal Water Association adopted a procurement policy for goods and service providers that complies with federal procurement standards in December 2022. As such, it was non-compliant with the federal standards for 11 months of the compliance year. Sample size and population: Sampling was not applicable to this finding. Effect: The result of the finding is that Sallal Water Association is not in compliance with federal procurement standards for 11 months of the compliance year. Recommendation: None as the Association adopted a written procurement policy in December 2022. Question Costs: None Management Response and Corrective Action Plan: See Corrective Action Plan Contact Person: Kristina Parker, Director of Finance and Operations

2022-002 Fidelity Bond ALN Number Name of Federal Program 10.760 Water and Waste Disposal Systems Identification as a Repeat Finding: Repeat Finding of 2021-002. Finding: The Association has not maintained fidelity bond coverage to comply with loan covenant requirements. Criteria: Per Section 5(g) of the Loan Resolution Security Agreement, the Association shall maintain insurance and Fidelity bond coverage as may be required by the Government. Condition and context: The Association did not carry fidelity bond coverage in 2022. Sample size and population: Sampling was not applicable to this finding. Effect: The Association did not comply with the fidelity bond requirements. Recommendation: We recommend the Association obtain fidelity bonds sufficient to meet the requirements of outstanding loan agreements in 2023. Question Costs: None Management Response and Corrective Action Plan: See Corrective Action Plan Contact Person: Kristina Parker, Director of Finance and Operations

2022-003 Reporting – Late submission of the Single Audit Reporting Package and Data Collection Form to the Federal Audit Clearinghouse (FAC) ALN Number Name of Federal Program 10.760 Water and Waste Disposal Systems Identification as a Repeat Finding: Repeat Finding of 2021-003. Finding: The Association did not file its annual 2022 Single Audit and Data Collection form timely. Criteria: The Single Audit Reporting Package and Data Collection Form shall be submitted to the Federal Audit Clearinghouse 30 days after receipt of the auditor’s report, or 9 months after the end of the fiscal year, whichever comes first. Condition and context: Submission of the Single Audit Reporting Package and Data Collection Form to the FAC was not completed within the timeframe required by the Uniform Guidance. During the audit we noted that the Single Audit Reporting Package and Data Collection Form is expected to be submitted to the FAC during November 2023 for the fiscal year ended December 31, 2022. Cause: A member petition was received by the Board Secretary on June 5, 2023 calling for a vote on the removal of four specified board trustees. The receipt of the petition required that a special election be held July 11, 2023. The time and effort required by the Association’s small staff to respond to and facilitate a special election drew management’s time away from preparing for scheduled audit fieldwork. The delay in submitting the Single Audit Reporting Package is correlated to a one-month delay in the start of audit fieldwork. Sample size and population: Sampling was not applicable to this finding. Effect: Noncompliance with the Uniform Guidance could reduce access to future funding from Federal sources. Recommendation: Due to the unprecedented nature of the cause, it would be unusual for a similar matter to reoccur; however, it considered a best practice to maintain a schedule of regulatory and compliance deadlines to ensure related tasks are completed in advance of deadlines. Question Costs: None Management Response and Corrective Action Plan: See Corrective Action Plan Contact Person: Kristina Parker, Director of Finance and Operations

2022-001 Procurement, Suspension and Debarment ALN Number Name of Federal Program 10.760 Water and Waste Disposal Systems Identification as a Repeat Finding: Repeat of Finding 2021-001 Finding: The Association did not have a written procurement policy that complies with the procurement standards established in 2 CFR sections 200.318 through 200.326 in place for the full compliance year. Criteria: Non-Federal entities other than States must follow the procurement standards set out at 2 CFR sections 200.318 through 200.326. They must use their own documented procurement procedures, which reflect applicable State and local laws and regulations, provided that the procurements conform to applicable Federal statutes and the procurement requirements identified in 2 CFR 200. Condition and context: Sallal Water Association adopted a procurement policy for goods and service providers that complies with federal procurement standards in December 2022. As such, it was non-compliant with the federal standards for 11 months of the compliance year. Sample size and population: Sampling was not applicable to this finding. Effect: The result of the finding is that Sallal Water Association is not in compliance with federal procurement standards for 11 months of the compliance year. Recommendation: None as the Association adopted a written procurement policy in December 2022. Question Costs: None Management Response and Corrective Action Plan: See Corrective Action Plan Contact Person: Kristina Parker, Director of Finance and Operations

2022-002 Fidelity Bond ALN Number Name of Federal Program 10.760 Water and Waste Disposal Systems Identification as a Repeat Finding: Repeat Finding of 2021-002. Finding: The Association has not maintained fidelity bond coverage to comply with loan covenant requirements. Criteria: Per Section 5(g) of the Loan Resolution Security Agreement, the Association shall maintain insurance and Fidelity bond coverage as may be required by the Government. Condition and context: The Association did not carry fidelity bond coverage in 2022. Sample size and population: Sampling was not applicable to this finding. Effect: The Association did not comply with the fidelity bond requirements. Recommendation: We recommend the Association obtain fidelity bonds sufficient to meet the requirements of outstanding loan agreements in 2023. Question Costs: None Management Response and Corrective Action Plan: See Corrective Action Plan Contact Person: Kristina Parker, Director of Finance and Operations

2022-003 Reporting – Late submission of the Single Audit Reporting Package and Data Collection Form to the Federal Audit Clearinghouse (FAC) ALN Number Name of Federal Program 10.760 Water and Waste Disposal Systems Identification as a Repeat Finding: Repeat Finding of 2021-003. Finding: The Association did not file its annual 2022 Single Audit and Data Collection form timely. Criteria: The Single Audit Reporting Package and Data Collection Form shall be submitted to the Federal Audit Clearinghouse 30 days after receipt of the auditor’s report, or 9 months after the end of the fiscal year, whichever comes first. Condition and context: Submission of the Single Audit Reporting Package and Data Collection Form to the FAC was not completed within the timeframe required by the Uniform Guidance. During the audit we noted that the Single Audit Reporting Package and Data Collection Form is expected to be submitted to the FAC during November 2023 for the fiscal year ended December 31, 2022. Cause: A member petition was received by the Board Secretary on June 5, 2023 calling for a vote on the removal of four specified board trustees. The receipt of the petition required that a special election be held July 11, 2023. The time and effort required by the Association’s small staff to respond to and facilitate a special election drew management’s time away from preparing for scheduled audit fieldwork. The delay in submitting the Single Audit Reporting Package is correlated to a one-month delay in the start of audit fieldwork. Sample size and population: Sampling was not applicable to this finding. Effect: Noncompliance with the Uniform Guidance could reduce access to future funding from Federal sources. Recommendation: Due to the unprecedented nature of the cause, it would be unusual for a similar matter to reoccur; however, it considered a best practice to maintain a schedule of regulatory and compliance deadlines to ensure related tasks are completed in advance of deadlines. Question Costs: None Management Response and Corrective Action Plan: See Corrective Action Plan Contact Person: Kristina Parker, Director of Finance and Operations