Audit 334657

Finding 2023 – 001: Special Tests and Provisions: Protection and Disposition of Funds (Compliance and Internal Control Over Compliance) Significant Deficiency ALN 10.766 Community Facilities Loans and Grants Cluster Criteria: The Loan Resolution and 7 CFR §1942.17(i)(2) states that the Facility must maintain a fully insured loan reserve to protect the Agency's interest during the repayment period of the loan. Condition: The Facility has set aside the required loan reserve balance of $210,564; however, this amount has not been placed in an account that is fully insured or collateralized as required by the Program. The lack of adequate insurance or collateralization exposes these funds to potential risk of loss in the event of financial institution failure or market volatility. Questioned Costs: None. Cause: The Facility has not taken adequate steps to ensure that the loan reserve account is fully insured because they were unaware of the requirement. Effect: In the event of bank failure, the Facility’s ability to make payments on the outstanding loan balance may be compromised, potentially violating loan repayment requirements and jeopardizing the funding agency’s interest. Recommendation: We recommend the Facility move the reserve funds to an account that is insured by either the Federal Deposit Insurance Corporation (FDIC) or the National Credit Union Administration (NCUA), ensuring coverage up to the applicable insurance limits. We further recommend, the Facility implement a monitoring process to ensure ongoing compliance with insurance or collateralization requirements. Views of Responsible Officials: See the corrective action plan that accompanies the schedule of findings and questioned costs.

Finding 2023 – 001: Special Tests and Provisions: Protection and Disposition of Funds (Compliance and Internal Control Over Compliance) Significant Deficiency ALN 10.766 Community Facilities Loans and Grants Cluster Criteria: The Loan Resolution and 7 CFR §1942.17(i)(2) states that the Facility must maintain a fully insured loan reserve to protect the Agency's interest during the repayment period of the loan. Condition: The Facility has set aside the required loan reserve balance of $210,564; however, this amount has not been placed in an account that is fully insured or collateralized as required by the Program. The lack of adequate insurance or collateralization exposes these funds to potential risk of loss in the event of financial institution failure or market volatility. Questioned Costs: None. Cause: The Facility has not taken adequate steps to ensure that the loan reserve account is fully insured because they were unaware of the requirement. Effect: In the event of bank failure, the Facility’s ability to make payments on the outstanding loan balance may be compromised, potentially violating loan repayment requirements and jeopardizing the funding agency’s interest. Recommendation: We recommend the Facility move the reserve funds to an account that is insured by either the Federal Deposit Insurance Corporation (FDIC) or the National Credit Union Administration (NCUA), ensuring coverage up to the applicable insurance limits. We further recommend, the Facility implement a monitoring process to ensure ongoing compliance with insurance or collateralization requirements. Views of Responsible Officials: See the corrective action plan that accompanies the schedule of findings and questioned costs.