Audit 297302

Department of Agriculture Federal Assistance Listing #10.766 Community Facilities Loans and Grants Cluster Preparation of Consolidated Schedule of Expenditures of Federal Awards Material Weakness in Internal Control Over Compliance ‐ Other Criteria: Proper controls over financial reporting include the ability to prepare the consolidated schedule of expenditures of federal awards (Schedule) and accompanying notes to the Schedule. Condition: The Home does not have an internal control system designed to provide for a complete and accurate consolidated schedule of expenditures of federal awards being audited. We were requested to draft the Schedule. Cause: Auditor assistance with preparation of the Schedule is not unusual, as the Schedule has unique and specialized requirements and preparation is only required with the Home meets a specified threshold of federal expenditures. Effect: There is a reasonable possibility that the Home would not be able to draft a Schedule that is correct without assistance of the auditors. Questioned Costs: None reported. Context: Sampling was not used. Repeat Finding from Prior Years: Yes Recommendation: While we recognize that this condition is not unusual for an organization with limited staffing, we recommend management be aware of the financial reporting requirements relating to the Home’s consolidated schedule of expenditures of federal awards and internal controls that impact financial reporting. Views of Responsible Officials: Management agrees with the finding.

Department of Agriculture Federal Assistance Listing #10.766 Community Facilities Loans and Grants Cluster Special Tests and Provisions Significant Deficiency in Internal Control over Compliance Criteria: 2 CFR 200.303(a) establishes that the auditee must establish and maintain effective internal control over federal award that provides assurance that the entity is managing the federal award in compliance with federal statutes, regulations, and conditions of the federal awards. Condition: During our testing, there was no formal review separate from the preparer over the reserve fund reconciliation or financial covenant calculations for the federal program. Cause: The Home did not have an adequate internal control policy in place to ensure review and approval over the reserve fund or financial covenant calculations. Effect: The lack of adequate policies governing review increases the risk that employees participating in the federal award administration may not be able to detect and correct noncompliance in a timely manner. Questioned Costs: None reported. Context/Sampling: Sampling was not used. The Home has one required reserve account and three financial covenant calculation requirements that were tested. Repeat Finding from Prior Years: Yes Recommendation: We recommend that the Home enhance internal control policies to ensure that formal documentation of reviews is present. Views of Responsible Officials: Management agrees with the finding.

Department of Agriculture Federal Assistance Listing #10.766 Community Facilities Loans and Grants Cluster Preparation of Consolidated Schedule of Expenditures of Federal Awards Material Weakness in Internal Control Over Compliance ‐ Other Criteria: Proper controls over financial reporting include the ability to prepare the consolidated schedule of expenditures of federal awards (Schedule) and accompanying notes to the Schedule. Condition: The Home does not have an internal control system designed to provide for a complete and accurate consolidated schedule of expenditures of federal awards being audited. We were requested to draft the Schedule. Cause: Auditor assistance with preparation of the Schedule is not unusual, as the Schedule has unique and specialized requirements and preparation is only required with the Home meets a specified threshold of federal expenditures. Effect: There is a reasonable possibility that the Home would not be able to draft a Schedule that is correct without assistance of the auditors. Questioned Costs: None reported. Context: Sampling was not used. Repeat Finding from Prior Years: Yes Recommendation: While we recognize that this condition is not unusual for an organization with limited staffing, we recommend management be aware of the financial reporting requirements relating to the Home’s consolidated schedule of expenditures of federal awards and internal controls that impact financial reporting. Views of Responsible Officials: Management agrees with the finding.

Department of Agriculture Federal Assistance Listing #10.766 Community Facilities Loans and Grants Cluster Special Tests and Provisions Significant Deficiency in Internal Control over Compliance Criteria: 2 CFR 200.303(a) establishes that the auditee must establish and maintain effective internal control over federal award that provides assurance that the entity is managing the federal award in compliance with federal statutes, regulations, and conditions of the federal awards. Condition: During our testing, there was no formal review separate from the preparer over the reserve fund reconciliation or financial covenant calculations for the federal program. Cause: The Home did not have an adequate internal control policy in place to ensure review and approval over the reserve fund or financial covenant calculations. Effect: The lack of adequate policies governing review increases the risk that employees participating in the federal award administration may not be able to detect and correct noncompliance in a timely manner. Questioned Costs: None reported. Context/Sampling: Sampling was not used. The Home has one required reserve account and three financial covenant calculation requirements that were tested. Repeat Finding from Prior Years: Yes Recommendation: We recommend that the Home enhance internal control policies to ensure that formal documentation of reviews is present. Views of Responsible Officials: Management agrees with the finding.