FAC Explorer

Audit 335033

FY End
2023-06-30
Total Expended
$1.66M
Findings
6
Programs
1
Organization: Big Sky Economic Development Corporation (MT)
Year: 2023 Accepted: 2024-12-30
Auditor: Kcoe Isom LLP

Organization Exclusion Status:

Findings

ID Ref Severity Repeat Requirement
517141 2023-001 Significant Deficiency - L
517142 2023-002 Significant Deficiency - L
517143 2023-003 Significant Deficiency - N
1093583 2023-001 Significant Deficiency - L
1093584 2023-002 Significant Deficiency - L
1093585 2023-003 Significant Deficiency - N

Programs

ALN Program Spent Major Findings
11.307 Economic Adjustment Assistance $1.66M Yes 3

Contacts

Name Title Type
NSLQZJAHYMM5 Tami Fleetwood Auditee
4062566871 Sarah Stanger Auditor
No contacts on file

Notes to SEFA

Title: 2. MATCHING COSTS Accounting Policies: The accompanying schedule of expenditures of federal awards (the Schedule) includes the federal award activity of the Organization under programs of the federal government for the year ended June 30, 2023. The information in this Schedule is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Because the Schedule presents only a selected portion of the operations of the Organization, it is not intended to and does not present the financial position, changes in net assets, or cash flows of Big Sky Economic Development Corporation. Expenditures reported on the Schedule are reported on the accrual basis of accounting. Such expenditures are recognized following the cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement. De Minimis Rate Used: Y Rate Explanation: The Organization has elected to use the 10 percent de minimis indirect cost rate allowed under the Uniform Guidance. In accordance with the terms of the grant, the Organization has expended matching costs of $184,612.
Title: 4. FEDERALLY FUNDED REVOLVING LOAN FUND Accounting Policies: The accompanying schedule of expenditures of federal awards (the Schedule) includes the federal award activity of the Organization under programs of the federal government for the year ended June 30, 2023. The information in this Schedule is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Because the Schedule presents only a selected portion of the operations of the Organization, it is not intended to and does not present the financial position, changes in net assets, or cash flows of Big Sky Economic Development Corporation. Expenditures reported on the Schedule are reported on the accrual basis of accounting. Such expenditures are recognized following the cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement. De Minimis Rate Used: Y Rate Explanation: The Organization has elected to use the 10 percent de minimis indirect cost rate allowed under the Uniform Guidance. The Organization has a revolving loan fund program which was originally funded with federal assistance through U.S Department of Commerce - Economic Development Administration (EDA). EDA retains a federal interest in the RLF awards until the RLF award is terminated or EDA releases its federal interest in the RLF award funds. As such, required reporting and EDA oversight of the RLF continues until the award is terminated or EDA releases its federal interest in RLF award funds. The outstanding balance on these loans at June 30, 2023 was $1,109,069. The calculation for the federal awards expended is displayed in the tables below:

Finding Details

Finding 2023-001
Compliance with Single Audit Requirements Assistance Title: COVID-19 - Economic Adjustment Assistance - Coronavirus Aid, Relief, and Economic Security (CARES) Act Revolving Loan Fund Assistance Listing Number: 11.307 Federal Agency: U.S. Department of Commerce Type of Finding: Significant Deficiency and Noncompliance Category of Finding: Audit Requirements Known Questioned Costs: $0 Likely Questioned Costs: $0 Criteria According to the Uniform Guidance (2 CFR Part 200.501), non-federal entities that expend $750,000 or more in federal awards during their fiscal year are required to have a single audit conducted. The audit report must be submitted to the Federal Audit Clearinghouse (FAC) within the earlier of 30 calendar days after receipt of the auditor's report or nine months after the end of the audit period (2 CFR Part 200.512). Condition The Organization did not engage to conduct a single audit for FY23 despite meeting the expenditure threshold, and the required audit report was not submitted within the prescribed due dates. This oversight necessitated the reissuance of the FY23 financial statement audit to complete and issue a single audit. Cause The oversight occurred due to inadequate internal controls, a lack of understanding of federal expenditure calculation for the loan program, and turnover in the Finance Director’s role. The transition in finance leadership led to an isolated weakness in the Organization’s control process as it relates to the management of this federal award. Management did not apply the appropriate methodology for calculating federal expenditures related to the revolving loan fund for reporting in the Schedule of Federal Expenditures. There was also insufficient oversight and review processes to detect and correct the error in a timely manner. Effect As a result of the incorrect calculation, the Organization did not engage to conduct the required single audit within the stipulated deadlines, leading to noncompliance with federal regulations. Failure to submit the single audit report within the required timeframe increases the risk of noncompliance with federal regulations, which could lead to sanctions, penalties, or the retraction of federal funding. Late submission may also affect the organization's eligibility for future federal awards and could result in increased scrutiny from federal agencies. Repeat Finding This is not a repeat finding. Recommendation We recommend that management implement robust policies and internal control procedures to ensure accurate calculation and reporting of federal expenditures in the Schedule of Federal Expenditures, particularly for complex programs like revolving loan funds. We also recommend an increase in oversight by senior management and the board to ensure that financial reporting and compliance responsibilities are adequately fulfilled. Management’s Response Management concurs with this finding. See Management’s Response and Corrective Action plan section.
Finding 2023-002
Financial Reporting and Review Processes Assistance Title: COVID-19 - Economic Adjustment Assistance - Coronavirus Aid, Relief, and Economic Security (CARES) Act Revolving Loan Fund Assistance Listing Number: 11.307 Federal Agency: U.S. Department of Commerce Type of Finding: Significant Deficiency and Noncompliance Category of Finding: Reporting Known Questioned Costs: $0 Likely Questioned Costs: $0 Criteria Per the Uniform Guidance (2 CFR Part 200.303), non-federal entities must establish and maintain effective internal control over the federal award to provide reasonable assurance that they are managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Per the Uniform Guidance (2 CFR Part 200.307), program income means gross income earned by the non-federal entity that is directly generated by a supported activity or earned as a result of the federal award during the period of performance. Additionally, the Form ED-209 Instructions specify that loan origination fee income and interest income must be included in the appropriate line items when completing the ED-209 report. Condition The Program Finance Director creates the financial report using information from the Senior Director of Finance. Once completed, the report is sent to directly to the Federal EDA without further review, except by their main contact at the Federal EDA. Additionally, the compliance test over the ED-209 report revealed that the Organization is consistently omitting loan origination fee income and interest income from federal program income calculations, with a discrepancy of $3,614 identified. Cause The lack of a secondary review process allowed errors and omissions to go undetected. There was a misunderstanding regarding what constitutes program income under federal guidelines, leading to the exclusion of certain income sources from reports. Effect Potential inaccuracies and errors in financial reporting could lead to misrepresentation of the Organization's financial position and noncompliance with federal regulations. This could result in financial penalties, increased scrutiny from federal agencies, or impacts on future funding eligibility. Repeat Finding This is not a repeat finding. Recommendation We recommend that the Organization establish a formal review process for financial reports before submission to federal agencies. This should include verification of all income sources that qualify as program income under federal guidelines. Management’s Response Management concurs with this finding. See Management’s Response and Corrective Action plan section.
Finding 2023-003
Noncompliance with Davis-Bacon Wage Requirements Assistance Title: COVID-19 - Economic Adjustment Assistance - Coronavirus Aid, Relief, and Economic Security (CARES) Act Revolving Loan Fund Assistance Listing Number: 11.307 Federal Agency: U.S. Department of Commerce Type of Finding: Significant Deficiency and Noncompliance Category of Finding: Special Tests and Provisions – Davis-Bacon Act Known Questioned Costs: $0 Likely Questioned Costs: $0 Criteria In accordance with section 602 of PWEDA (42 U.S.C. § 3212), all laborers and mechanics employed by contractors or subcontractors on construction-related projects receiving investment assistance under PWEDA shall be paid wages not less than those prevailing on similar construction in the locality, as determined by the U.S. Secretary of Labor in accordance with subchapter IV of chapter 31 of title 40, United States Code. See 13 CFR § 302.13. Condition The Organization failed to comply with Davis-Bacon wage requirements for a loan disbursed to one entity due to a lack of awareness of Davis-Bacon wage requirements. Cause There are no controls in place to verify compliance with prevailing wage rates for federally funded projects, risking legal and financial penalties due to potential noncompliance with federal wage laws. Effect Noncompliance in prevailing wages rates for federally funded projects, risking legal and financial penalties. Repeat Finding This is not a repeat finding. Recommendation We recommend that the Organization implement procedures to ensure compliance with Davis-Bacon wage requirements. This includes training staff on federal wage laws, incorporating compliance checks into the loan disbursement process, and regularly monitoring contractor adherence to prevailing wage rates. Management’s Response Management concurs with this finding. See Management’s Response and Corrective Action plan section.
Finding 2023-001
Compliance with Single Audit Requirements Assistance Title: COVID-19 - Economic Adjustment Assistance - Coronavirus Aid, Relief, and Economic Security (CARES) Act Revolving Loan Fund Assistance Listing Number: 11.307 Federal Agency: U.S. Department of Commerce Type of Finding: Significant Deficiency and Noncompliance Category of Finding: Audit Requirements Known Questioned Costs: $0 Likely Questioned Costs: $0 Criteria According to the Uniform Guidance (2 CFR Part 200.501), non-federal entities that expend $750,000 or more in federal awards during their fiscal year are required to have a single audit conducted. The audit report must be submitted to the Federal Audit Clearinghouse (FAC) within the earlier of 30 calendar days after receipt of the auditor's report or nine months after the end of the audit period (2 CFR Part 200.512). Condition The Organization did not engage to conduct a single audit for FY23 despite meeting the expenditure threshold, and the required audit report was not submitted within the prescribed due dates. This oversight necessitated the reissuance of the FY23 financial statement audit to complete and issue a single audit. Cause The oversight occurred due to inadequate internal controls, a lack of understanding of federal expenditure calculation for the loan program, and turnover in the Finance Director’s role. The transition in finance leadership led to an isolated weakness in the Organization’s control process as it relates to the management of this federal award. Management did not apply the appropriate methodology for calculating federal expenditures related to the revolving loan fund for reporting in the Schedule of Federal Expenditures. There was also insufficient oversight and review processes to detect and correct the error in a timely manner. Effect As a result of the incorrect calculation, the Organization did not engage to conduct the required single audit within the stipulated deadlines, leading to noncompliance with federal regulations. Failure to submit the single audit report within the required timeframe increases the risk of noncompliance with federal regulations, which could lead to sanctions, penalties, or the retraction of federal funding. Late submission may also affect the organization's eligibility for future federal awards and could result in increased scrutiny from federal agencies. Repeat Finding This is not a repeat finding. Recommendation We recommend that management implement robust policies and internal control procedures to ensure accurate calculation and reporting of federal expenditures in the Schedule of Federal Expenditures, particularly for complex programs like revolving loan funds. We also recommend an increase in oversight by senior management and the board to ensure that financial reporting and compliance responsibilities are adequately fulfilled. Management’s Response Management concurs with this finding. See Management’s Response and Corrective Action plan section.
Finding 2023-002
Financial Reporting and Review Processes Assistance Title: COVID-19 - Economic Adjustment Assistance - Coronavirus Aid, Relief, and Economic Security (CARES) Act Revolving Loan Fund Assistance Listing Number: 11.307 Federal Agency: U.S. Department of Commerce Type of Finding: Significant Deficiency and Noncompliance Category of Finding: Reporting Known Questioned Costs: $0 Likely Questioned Costs: $0 Criteria Per the Uniform Guidance (2 CFR Part 200.303), non-federal entities must establish and maintain effective internal control over the federal award to provide reasonable assurance that they are managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Per the Uniform Guidance (2 CFR Part 200.307), program income means gross income earned by the non-federal entity that is directly generated by a supported activity or earned as a result of the federal award during the period of performance. Additionally, the Form ED-209 Instructions specify that loan origination fee income and interest income must be included in the appropriate line items when completing the ED-209 report. Condition The Program Finance Director creates the financial report using information from the Senior Director of Finance. Once completed, the report is sent to directly to the Federal EDA without further review, except by their main contact at the Federal EDA. Additionally, the compliance test over the ED-209 report revealed that the Organization is consistently omitting loan origination fee income and interest income from federal program income calculations, with a discrepancy of $3,614 identified. Cause The lack of a secondary review process allowed errors and omissions to go undetected. There was a misunderstanding regarding what constitutes program income under federal guidelines, leading to the exclusion of certain income sources from reports. Effect Potential inaccuracies and errors in financial reporting could lead to misrepresentation of the Organization's financial position and noncompliance with federal regulations. This could result in financial penalties, increased scrutiny from federal agencies, or impacts on future funding eligibility. Repeat Finding This is not a repeat finding. Recommendation We recommend that the Organization establish a formal review process for financial reports before submission to federal agencies. This should include verification of all income sources that qualify as program income under federal guidelines. Management’s Response Management concurs with this finding. See Management’s Response and Corrective Action plan section.
Finding 2023-003
Noncompliance with Davis-Bacon Wage Requirements Assistance Title: COVID-19 - Economic Adjustment Assistance - Coronavirus Aid, Relief, and Economic Security (CARES) Act Revolving Loan Fund Assistance Listing Number: 11.307 Federal Agency: U.S. Department of Commerce Type of Finding: Significant Deficiency and Noncompliance Category of Finding: Special Tests and Provisions – Davis-Bacon Act Known Questioned Costs: $0 Likely Questioned Costs: $0 Criteria In accordance with section 602 of PWEDA (42 U.S.C. § 3212), all laborers and mechanics employed by contractors or subcontractors on construction-related projects receiving investment assistance under PWEDA shall be paid wages not less than those prevailing on similar construction in the locality, as determined by the U.S. Secretary of Labor in accordance with subchapter IV of chapter 31 of title 40, United States Code. See 13 CFR § 302.13. Condition The Organization failed to comply with Davis-Bacon wage requirements for a loan disbursed to one entity due to a lack of awareness of Davis-Bacon wage requirements. Cause There are no controls in place to verify compliance with prevailing wage rates for federally funded projects, risking legal and financial penalties due to potential noncompliance with federal wage laws. Effect Noncompliance in prevailing wages rates for federally funded projects, risking legal and financial penalties. Repeat Finding This is not a repeat finding. Recommendation We recommend that the Organization implement procedures to ensure compliance with Davis-Bacon wage requirements. This includes training staff on federal wage laws, incorporating compliance checks into the loan disbursement process, and regularly monitoring contractor adherence to prevailing wage rates. Management’s Response Management concurs with this finding. See Management’s Response and Corrective Action plan section.