Audit 30069

FY End
2022-06-30
Total Expended
$1.33M
Findings
2
Programs
3
Organization: Village of Cimarron (NM)
Year: 2022 Accepted: 2023-03-21

Organization Exclusion Status:

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Findings

ID Ref Severity Repeat Requirement
29209 2022-001 Significant Deficiency Yes P
605651 2022-001 Significant Deficiency Yes P

Contacts

Name Title Type
WBVJSV8AHH75 Shawn Jeffrey Auditee
5753762232 Rose Fierro, CPA Auditor
No contacts on file

Notes to SEFA

Title: Loan/loan guarantee outstanding balances Accounting Policies: The accompanying Schedule of Expenditures of Federal Awards (the Schedule) includes the federal grant activity of the Village under programs of the federal government for the year ended June 30, 2022. The information in this Schedule is presented in accordance with the requirements of the Office of Management and Budget (OMB) Uniform Guidance. Because the Schedule presents only a selected portion of the operations of the Village, it is not intended to and does not present the financial position and changes in net position of the Village. All federal programs considered active during the year ended June 30, 2022, are reflected on the Schedule. An active federal program is defined as a federal program for which there were receipts or disbursements of funds or accrued (deferred) grant revenue adjustments during the fiscal year or a federal program considered as not completed or closed out at the beginning of the fiscal year. The Schedule is prepared using the modified accrual basis of accounting. Grant revenues are recorded for financial reporting purposes when the Village has met the qualifications for the respective grant. Various reimbursement procedures are used for Federal awards received by the Village. Consequently, timing differences between expenditures and program reimbursements can exist at the beginning and end of the year. Accrued balances at year-end represent an excess of reimbursable expenditures over receipts to date. Deferred balances at year-end represent an excess of cash receipts over reimbursable expenditures to date. Generally, accrued or deferred balances covered by differences in timing of cash receipts and expenditures will be reversed in the remaining grant period. De Minimis Rate Used: N Rate Explanation: The auditee did not use the de minimis cost rate. WATER AND WASTE DISPOSAL SYSTEMS FOR RURAL COMMUNITIES (10.760) - Balances outstanding at the end of the audit period were 603379. CAPITALIZATION GRANTS FOR CLEAN WATER STATE REVOLVING FUNDS (66.458) - Balances outstanding at the end of the audit period were 238866.
Title: Scope of Audit Pursuant to OMB Uniform Grant Guidance Accounting Policies: The accompanying Schedule of Expenditures of Federal Awards (the Schedule) includes the federal grant activity of the Village under programs of the federal government for the year ended June 30, 2022. The information in this Schedule is presented in accordance with the requirements of the Office of Management and Budget (OMB) Uniform Guidance. Because the Schedule presents only a selected portion of the operations of the Village, it is not intended to and does not present the financial position and changes in net position of the Village. All federal programs considered active during the year ended June 30, 2022, are reflected on the Schedule. An active federal program is defined as a federal program for which there were receipts or disbursements of funds or accrued (deferred) grant revenue adjustments during the fiscal year or a federal program considered as not completed or closed out at the beginning of the fiscal year. The Schedule is prepared using the modified accrual basis of accounting. Grant revenues are recorded for financial reporting purposes when the Village has met the qualifications for the respective grant. Various reimbursement procedures are used for Federal awards received by the Village. Consequently, timing differences between expenditures and program reimbursements can exist at the beginning and end of the year. Accrued balances at year-end represent an excess of reimbursable expenditures over receipts to date. Deferred balances at year-end represent an excess of cash receipts over reimbursable expenditures to date. Generally, accrued or deferred balances covered by differences in timing of cash receipts and expenditures will be reversed in the remaining grant period. De Minimis Rate Used: N Rate Explanation: The auditee did not use the de minimis cost rate. All federal grant operations of the Village of Cimarron (the Village) are included in the scope of the Office of Management and Budget (OMB) Uniform Grant Guidance audit (the Single Audit). The Single Audit was performed in accordance with the provisions of the OMB Circular Compliance supplement (Revised April 2022, the Compliance Supplement). Compliance testing of all requirements are described in the Compliance Supplement, which was performed for the grant programs noted below. These programs represent all federal award programs, and other grants with fiscal year 2022 expenditures to ensure coverage of at least 40% (HIGH risk auditee) of federally granted funds. Actual coverage is approximately 78% of total federal award program expenditures. Total expenditures were in the amount of $1,325,133.

Finding Details

Finding 2022-001 (2021-001)?Significant Deficiency?Compliance with USDA Loan Requirements Federal Program Information: Federal agency: U.S. Department of Agriculture Title: Water & Waste Disposal Systems for Rural Communities Assistance Listing No: 10.760 Award Number: 04-19-0088 Award Year: 2020 Questioned Costs: $29,833 Statement of Condition ? The Village?s water treatment plant rehabilitation project is funded through the United States Department of Agriculture?s (USDA) Rural Utilities Services (RUS) with a loan of $617,000 and a grant of $1,757,800. On September 28, 2018, the USDA wrote a letter to the Village to indicate the terms and conditions for this project?s funding. As part of the loan terms, the Village was required to create two new funds once the loan was finalized. The loan was finalized in April 2021. The two new funds are: 1) Debt Service Reserve and 2) Short-Lived Asset Reserve. Based on the loan terms, as of June 30, 2022, the Debt Service Reserve Fund should have had a balance of $7,774 and the Short-Lived Asset Reserve Fund should have had a balance of $50,666. During the fiscal year, the Village set up and funded these two funds. As of June 30, 2022, the Village?s Debt Service Reserve Fund had a balance of $23,916 and the Short-Lived Asset Reserve Fund has a balance of $20,833. The Village failed to deposit the annual requirement amount of $29,833 to the Short-Lived Asset Reserve Fund. Criteria ? Within the funding documents, Section II discusses loan terms. Number 8 within this section discussions reserves. The loan documents state, Reserves must be properly budgeted to maintain the financial viability and sustainability of any operation. Reserves are important to fund unanticipated emergency maintenance and repairs and assist with debt service should the need arise. The following reserves are required to be established as a condition of this loan: a) Short-Lived Asset Reserve ? In addition to the debt service reserve fund, you must establish a short-lived asset reserve fund. Based on the preliminary engineering report, you must deposit at least $29,833 into the short-lived asset reserve fund annually for the life of the loan to pay for repairs and/or replacement of major system assets. It is your responsibility to assess your facility?s short-lived asset needs on a regular basis and adjust the amount deposited to meet those needs. The Village failed to deposit the annual requirement amount within the Short-Lived Asset Reserve Fund. Effect ? The Village is not in compliance with 2 CFR 255, which could result in the loss or delay of future federal grant or loan awards. Cause ? Village staff misunderstood the loan terms as they believed after the two funds had been created, no additional funding was needed in either fund, unless funds were expended within either fund. Recommendation ? We recommend the Village staff to review the USDA loan/grant documents to ensure the amount within the funds meets the requirements. Further, we recommend the Village to transfer the annual funding requirements for the Short-Lived Asset Reserve Fund for this fiscal year. Finally, we recommend the Village to create a schedule of transfers to ensure the annual funding requirements is met for the Short-Lived Asset Reserve Fund.
Finding 2022-001 (2021-001)?Significant Deficiency?Compliance with USDA Loan Requirements Federal Program Information: Federal agency: U.S. Department of Agriculture Title: Water & Waste Disposal Systems for Rural Communities Assistance Listing No: 10.760 Award Number: 04-19-0088 Award Year: 2020 Questioned Costs: $29,833 Statement of Condition ? The Village?s water treatment plant rehabilitation project is funded through the United States Department of Agriculture?s (USDA) Rural Utilities Services (RUS) with a loan of $617,000 and a grant of $1,757,800. On September 28, 2018, the USDA wrote a letter to the Village to indicate the terms and conditions for this project?s funding. As part of the loan terms, the Village was required to create two new funds once the loan was finalized. The loan was finalized in April 2021. The two new funds are: 1) Debt Service Reserve and 2) Short-Lived Asset Reserve. Based on the loan terms, as of June 30, 2022, the Debt Service Reserve Fund should have had a balance of $7,774 and the Short-Lived Asset Reserve Fund should have had a balance of $50,666. During the fiscal year, the Village set up and funded these two funds. As of June 30, 2022, the Village?s Debt Service Reserve Fund had a balance of $23,916 and the Short-Lived Asset Reserve Fund has a balance of $20,833. The Village failed to deposit the annual requirement amount of $29,833 to the Short-Lived Asset Reserve Fund. Criteria ? Within the funding documents, Section II discusses loan terms. Number 8 within this section discussions reserves. The loan documents state, Reserves must be properly budgeted to maintain the financial viability and sustainability of any operation. Reserves are important to fund unanticipated emergency maintenance and repairs and assist with debt service should the need arise. The following reserves are required to be established as a condition of this loan: a) Short-Lived Asset Reserve ? In addition to the debt service reserve fund, you must establish a short-lived asset reserve fund. Based on the preliminary engineering report, you must deposit at least $29,833 into the short-lived asset reserve fund annually for the life of the loan to pay for repairs and/or replacement of major system assets. It is your responsibility to assess your facility?s short-lived asset needs on a regular basis and adjust the amount deposited to meet those needs. The Village failed to deposit the annual requirement amount within the Short-Lived Asset Reserve Fund. Effect ? The Village is not in compliance with 2 CFR 255, which could result in the loss or delay of future federal grant or loan awards. Cause ? Village staff misunderstood the loan terms as they believed after the two funds had been created, no additional funding was needed in either fund, unless funds were expended within either fund. Recommendation ? We recommend the Village staff to review the USDA loan/grant documents to ensure the amount within the funds meets the requirements. Further, we recommend the Village to transfer the annual funding requirements for the Short-Lived Asset Reserve Fund for this fiscal year. Finally, we recommend the Village to create a schedule of transfers to ensure the annual funding requirements is met for the Short-Lived Asset Reserve Fund.