Audit 319492

Criteria Per Assistance Agreement section 1B, the grantee agrees to provide Financial Products and/or Grants in the designated dollar among in Low-or-Moderate-Income Majority Minority Census Tracts that are also ERP-Eligible Geographies to meet the required interim and financial benchmarks. According to the FY 2022 CDFI ERP Supplemental Frequently Asked Questions, Geographic Eligibility is based on the 2010 Census Tract and data. During the period of performance, Recipients will report on activity performed in ERP-Eligible Geographies as they were published by the CDFI Fund concurrent to the release of the FY 2022 CDFI ERP NOFA. Condition A total of twelve (12) loans were included in a pool of eligible loans originated during the audit period. Out of the twelve (12) loans listed, it was noted that four (4) loans were granted in areas that were not in ERP-Eligible Geographies or should have otherwise been excluded from the pool of eligible loans due to the nature of the business. The total for these loans was $710,000. The credit union could potentially replace the ineligible loans with other ERP-eligible loans since the reporting requirements for the ERP grant take place in 2024 going forward. Cause This was an oversight on the part of the credit union. The credit union utilized the CDFI website to qualify the ERP loans and subsequently discovered there was another section on the CDFI website that provided the minority-majority. These members met the low income requirements but did not meet the CDFI minority-majority qualification. Effect There was no monetary effect to this finding. The credit union reported SEFA expenditures which were lower than actual expenditures incurred during the audit period. This finding falls under the audit area of Eligibility. Materiality for this assertion would be instances where the credit union was negligent or did not comply with regulations or material data cannot be substantiated in the credit union’s records. All instances in this assertion would be reported through the compliance audit. The auditor would use professional judgment if the reports were being reconciled in a less than timely manner. In addition, material noncompliance (as defined by TWHC) for this assertion has been determined as an error rate greater than $78,000, individually and/or in aggregate, and a 10% finding rate for items sampled. In evaluating the finding, the auditor determined that the finding does not rise to the level of a significant deficiency or material weakness. Recommendation 2023-003a We recommend that the credit union implement a procedure that assists with correctly identifying eligible loans to be in compliance with the Assistance Agreement. Views of Responsible Officials Responsible/Contact Official Paul Barenfus, CLO, and Sylvia Sanchez, CFO Management Response The ERP Grant is a very different grant from previous grants received by the Credit Union. Although management followed the instructions provided on the CDFI website, it was not clear that running the loan through the ERP track for eligibility was only one of several steps. After auditors noted that 4 loans were ineligible, management searched the website to find the second track that the loans had to be qualified through, the Majority-Minority Census. The team has not had to qualify loans like this in the past, and the additional third step for qualification was not understood. Management has since replaced the unqualified loans on the 2023 SEFA with eligible loans. Documented procedures for the ERP Grant have been completed and are being followed. Anticipated Completion Date This item is complete.

Criteria Per Assistance Agreement section 1B, the grantee agrees to provide Financial Products and/or Grants in the designated dollar among in Low-or-Moderate-Income Majority Minority Census Tracts that are also ERP-Eligible Geographies to meet the required interim and financial benchmarks. According to the FY 2022 CDFI ERP Supplemental Frequently Asked Questions, Geographic Eligibility is based on the 2010 Census Tract and data. During the period of performance, Recipients will report on activity performed in ERP-Eligible Geographies as they were published by the CDFI Fund concurrent to the release of the FY 2022 CDFI ERP NOFA. Condition A total of twelve (12) loans were included in a pool of eligible loans originated during the audit period. Out of the twelve (12) loans listed, it was noted that four (4) loans were granted in areas that were not in ERP-Eligible Geographies or should have otherwise been excluded from the pool of eligible loans due to the nature of the business. The total for these loans was $710,000. The credit union could potentially replace the ineligible loans with other ERP-eligible loans since the reporting requirements for the ERP grant take place in 2024 going forward. Cause This was an oversight on the part of the credit union. The credit union utilized the CDFI website to qualify the ERP loans and subsequently discovered there was another section on the CDFI website that provided the minority-majority. These members met the low income requirements but did not meet the CDFI minority-majority qualification. Effect There was no monetary effect to this finding. The credit union reported SEFA expenditures which were lower than actual expenditures incurred during the audit period. This finding falls under the audit area of Eligibility. Materiality for this assertion would be instances where the credit union was negligent or did not comply with regulations or material data cannot be substantiated in the credit union’s records. All instances in this assertion would be reported through the compliance audit. The auditor would use professional judgment if the reports were being reconciled in a less than timely manner. In addition, material noncompliance (as defined by TWHC) for this assertion has been determined as an error rate greater than $78,000, individually and/or in aggregate, and a 10% finding rate for items sampled. In evaluating the finding, the auditor determined that the finding does not rise to the level of a significant deficiency or material weakness. Recommendation 2023-003a We recommend that the credit union implement a procedure that assists with correctly identifying eligible loans to be in compliance with the Assistance Agreement. Views of Responsible Officials Responsible/Contact Official Paul Barenfus, CLO, and Sylvia Sanchez, CFO Management Response The ERP Grant is a very different grant from previous grants received by the Credit Union. Although management followed the instructions provided on the CDFI website, it was not clear that running the loan through the ERP track for eligibility was only one of several steps. After auditors noted that 4 loans were ineligible, management searched the website to find the second track that the loans had to be qualified through, the Majority-Minority Census. The team has not had to qualify loans like this in the past, and the additional third step for qualification was not understood. Management has since replaced the unqualified loans on the 2023 SEFA with eligible loans. Documented procedures for the ERP Grant have been completed and are being followed. Anticipated Completion Date This item is complete.