Audit 18897

Finding Number:2022-005 Information on the Federal Program: Federal Agency: United States Department of Agriculture Program Name: Intermediary Relending Program CFDA: 10.767 Federal Award Year: 2022 Specific Requirement: In accordance with Title 2 U.S. Code of Federal Regulations Part 200, Subpart D, Section 200.303a, the Organization is required to establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition Found: We noted that there is no consistent control in place that provides evidence of an independent review to verify that each new loan was set up properly in the loan system. Additionally, we noted that there is no secondary review of changes made to loan information subsequent to setup in the loan system to verify the changes were appropriate and correct. See Section II for findings 2022-002 and 2020-003. Context: We noted these conditions while obtaining an understanding of internal control for the respective transaction cycles listed in the findings. Questioned Costs: None noted Cause and Effect: There are no formal procedures documented for a review to verify that new loans or changes made to existing loans were done correctly. As a result, there is potential for errors or fraud that may not be detected and corrected on a timely basis. There is also the risk that an in-eligible borrower is granted a loan under the federal program. Repeat Finding, if Applicable: N/A Recommendation: We recommend that management implement a control to document the review of new loans setup in the loan system. This review can be in the form of a documented review of a daily new loan report or a checklist that is completed to verify that all new loans are setup properly in the loan system. We also recommend that management implement a control to complete a secondary, independent review of loan file maintenance changes. This control should include documentation to evidence review completed by an individual that did not make the maintenance change.

Finding Number: 2022-006 Information on the Federal Program: Federal Agency: United States Department of Agriculture Program Name: Intermediary Relending Program CFDA: 10.767 Federal Award Year: 2022 Specific Requirement: In accordance with Loan Agreement under the Intermediary Relending Program dated March 16, 1995, the Intermediary (VEDA) will require Ultimate Recipients (the borrowers) to provide life insurance, which may be decreasing term insurance, such life insurance will be assigned or pledged to the Intermediary and subsequently to the Government. Condition Found: We noted that VEDA does not require the Ultimate Recipients to maintain appropriate life insurance, nor do they request documentation to verify that adequate cover and assignments are in existence for all loans. Context: We noted these conditions for all four of the seven new loans that were entered into with Ultimate Recipients during the grant year Questioned Costs: None noted Cause and Effect: The Authority was aware of the requirement to obtain support from the borrowers of life insurance that was adequate cover and assignments are in existence for all loans, but they did not have a process to request or maintain these documents. As a result, there is a risk that a borrower does not have adequate life insurance as required under the federal guidelines. Repeat Finding, if Applicable: N/A Recommendation: We recommend that management implement a process to request and maintain the documentation to support that each borrower under the IRP has adequate cover and assignments are in existence for all applicable loans.

Finding Number: 2022-007 Information on the Federal Program: Federal Agency: United States Department of Agriculture Program Name: Intermediary Relending Program CFDA: 10.767 Federal Award Year: 2022 Specific Requirement: In accordance with Subtitle B ? Regulations of Department of Agriculture, Chapter XLII ? Rural Business ? Cooperative Service and Rural Utilities Services, Department of Agriculture, Part 4271 Direct and Insured Loan Making, Subpart D Intermediary Relending Program, Subpart 4274.333 (a) (7)(ii), Workman?s compensation insurance on ultimate recipients (borrowers) is required in accordance with State law. Condition Found: We noted that VEDA does not require the borrowers to maintain appropriate workman?s compensation insurance, nor do they request documentation to verify that adequate coverage maintained. Context: We noted these conditions for all seven new loans that were entered into with Ultimate Recipients during the grant year Questioned Costs:None noted Cause and Effect: The Authority was aware of the requirement to obtain support that the borrower held appropriate workman?s compensation insurance, but they did not have a process to request or maintain these documents. As a result, there is a risk that a borrower does not have workman?s compensation insurance required under the federal guidelines. Repeat Finding, if Applicable: N/A Recommendation: We recommend that management implement a process to request and maintain the documentation to support that each borrower under the IRP has appropriate workman?s compensation insurance

Finding Number:2022-005 Information on the Federal Program: Federal Agency: United States Department of Agriculture Program Name: Intermediary Relending Program CFDA: 10.767 Federal Award Year: 2022 Specific Requirement: In accordance with Title 2 U.S. Code of Federal Regulations Part 200, Subpart D, Section 200.303a, the Organization is required to establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition Found: We noted that there is no consistent control in place that provides evidence of an independent review to verify that each new loan was set up properly in the loan system. Additionally, we noted that there is no secondary review of changes made to loan information subsequent to setup in the loan system to verify the changes were appropriate and correct. See Section II for findings 2022-002 and 2020-003. Context: We noted these conditions while obtaining an understanding of internal control for the respective transaction cycles listed in the findings. Questioned Costs: None noted Cause and Effect: There are no formal procedures documented for a review to verify that new loans or changes made to existing loans were done correctly. As a result, there is potential for errors or fraud that may not be detected and corrected on a timely basis. There is also the risk that an in-eligible borrower is granted a loan under the federal program. Repeat Finding, if Applicable: N/A Recommendation: We recommend that management implement a control to document the review of new loans setup in the loan system. This review can be in the form of a documented review of a daily new loan report or a checklist that is completed to verify that all new loans are setup properly in the loan system. We also recommend that management implement a control to complete a secondary, independent review of loan file maintenance changes. This control should include documentation to evidence review completed by an individual that did not make the maintenance change.

Finding Number: 2022-006 Information on the Federal Program: Federal Agency: United States Department of Agriculture Program Name: Intermediary Relending Program CFDA: 10.767 Federal Award Year: 2022 Specific Requirement: In accordance with Loan Agreement under the Intermediary Relending Program dated March 16, 1995, the Intermediary (VEDA) will require Ultimate Recipients (the borrowers) to provide life insurance, which may be decreasing term insurance, such life insurance will be assigned or pledged to the Intermediary and subsequently to the Government. Condition Found: We noted that VEDA does not require the Ultimate Recipients to maintain appropriate life insurance, nor do they request documentation to verify that adequate cover and assignments are in existence for all loans. Context: We noted these conditions for all four of the seven new loans that were entered into with Ultimate Recipients during the grant year Questioned Costs: None noted Cause and Effect: The Authority was aware of the requirement to obtain support from the borrowers of life insurance that was adequate cover and assignments are in existence for all loans, but they did not have a process to request or maintain these documents. As a result, there is a risk that a borrower does not have adequate life insurance as required under the federal guidelines. Repeat Finding, if Applicable: N/A Recommendation: We recommend that management implement a process to request and maintain the documentation to support that each borrower under the IRP has adequate cover and assignments are in existence for all applicable loans.

Finding Number: 2022-007 Information on the Federal Program: Federal Agency: United States Department of Agriculture Program Name: Intermediary Relending Program CFDA: 10.767 Federal Award Year: 2022 Specific Requirement: In accordance with Subtitle B ? Regulations of Department of Agriculture, Chapter XLII ? Rural Business ? Cooperative Service and Rural Utilities Services, Department of Agriculture, Part 4271 Direct and Insured Loan Making, Subpart D Intermediary Relending Program, Subpart 4274.333 (a) (7)(ii), Workman?s compensation insurance on ultimate recipients (borrowers) is required in accordance with State law. Condition Found: We noted that VEDA does not require the borrowers to maintain appropriate workman?s compensation insurance, nor do they request documentation to verify that adequate coverage maintained. Context: We noted these conditions for all seven new loans that were entered into with Ultimate Recipients during the grant year Questioned Costs:None noted Cause and Effect: The Authority was aware of the requirement to obtain support that the borrower held appropriate workman?s compensation insurance, but they did not have a process to request or maintain these documents. As a result, there is a risk that a borrower does not have workman?s compensation insurance required under the federal guidelines. Repeat Finding, if Applicable: N/A Recommendation: We recommend that management implement a process to request and maintain the documentation to support that each borrower under the IRP has appropriate workman?s compensation insurance