Audit 335089

Finding 2018-001 - Timely Completion of Audit under Uniform Guidance, Loan Agreement, and Submission to Federal Audit Clearinghouse (Noncompliance and Material Weakness in Internal Controls over Compliance – Federal Program CFDA 10.766/10.780 Community Facilities Loans and Grants Cluster) Criteria: 2 CFR 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, £200.512 (a)(1) states that the auditee must complete and submit the single audit report (including financial statements and the schedule of expenditures of federal awards) within nine months of the organization’s year-end. In addition, a Workout Agreement with USDA Rural Development required completion of the single audit by November 15, 2020 to comply with its original community program loan agreement with USDA. Condition and Context: The auditors were not engaged until December 2020, fifteen months after the due date. Shortly thereafter, the previous audit firm merged with the current audit firm, and due to COVID-19, staffing and scheduling issues, and delays in responding to audit requests, the completion of the audit was delayed significantly. Cause: Lack of planning for the audit to begin prior to the December 31, 2018 year end. Effect: The audit was completed well beyond the due date of September 30, 2019. Although it has not occurred as of this report date, the Government has the right to declare the entire balance immediately due and payable. Questioned Costs: None Recommendation: Management should determine prior to each year-end if an audit is required based upon that years’ grant funding and begin planning prior to year-end. In addition, responsibilities should be assigned to staff for timely completion of audit work and requested information. Views of Responsible Officials and Planned Corrective Actions: The 2023 staffing plan includes the addition of a controller and financial analyst. Initially we anticipate this controller to be a half time position growing to full time within 12-15 months. The analyst position will likely be a 2024 hire. These positions would be responsible for implementing the recommendation. We have created a job description for the controller and posted the position in early 2023. We did not find a suitable candidate and will repost.

Finding 2018-002 – Lack of Policies/Procedures & Documentation Related to Procurement/Suspension and Debarment (Material Weakness in Internal Controls over Compliance – Federal Program CFDA 10.766/10.780 Community Facilities Loans and Grants Cluster) Criteria: 2 CFR 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, £200.318 requires that the auditee must have and use documented procurement procedures for the purchase/acquisition of any property or services under a Federal award. These must include written standards of conduct covering conflicts of interest, consideration of the most economical purchase, rationale for the method of procurement, selection of contractors including whether they have been barred from doing business with the federal government, and the basis for the contract price. Also, £200.319 requires all procurement transactions be conducted in a manner that provides full and open competition, and develop specific procurement methods in compliance with £200.320, “Methods of procurement to be followed.” Condition and Context: The Organization has no documented procedures over the procurement process, contractor selection, or established methods in place to assure free and open competition as required by the Procurement Standards contained in the Uniform Guidance. Cause: Lack of understanding relating to the requirements of federal awards and loans considered to be financial assistance under the Uniform Guidance. Effect: Lack of documented controls over the Organization’s procurement process creates a material weakness in internal controls over compliance. Questioned Costs: None Recommendation: Management should become familiar with the Uniform Guidance, and in particular, the application section on Procurement, and seek additional training for those staff involved in all phases of the procurement process. Views of Responsible Officials and Planned Corrective Actions: We are creating a job description for a financial analyst. Part of this role will be to implement the recommendation, including development of bid specifications, participation in the selection of supplies and contractors, and monitoring/documenting results.

Finding 2018-003 – Reporting (Noncompliance and Material Weakness in Internal Controls over Compliance – Federal Program CFDA 10.766/10.780 Community Facilities Loans and Grants Cluster) Criteria: The Compliance Supplement for the program contained financial reporting requirements consisting of an RD 442-2, Statement of Budget, Income, and Equity and an RD-442-3, Balance Sheet. Condition and Context: The Organization did not file the reports. Cause: The Organization was not aware of the report filing requirements as contained in the compliance supplement. Effect: Compliance with the grant/loan reporting requirements was not met. Questioned Costs: None Recommendation: We recommend that management monitor any federal grants and/or loans received for any reporting requirements contained in the grant/loan documents themselves, as well as contained in the applicable compliance supplement related to the federal funding as issued by the federal Office of Management and Budget annually. Views of Responsible Officials and Planned Corrective Actions: As stated in the prior finding, we are creating a position and job description for a financial analyst. Grants and loans compliance and documentation will be a key portion of the job criteria, which will cover all types of loans (both construction and mortgages) and any other debt instruments the organization assumes.

Finding 2018-001 - Timely Completion of Audit under Uniform Guidance, Loan Agreement, and Submission to Federal Audit Clearinghouse (Noncompliance and Material Weakness in Internal Controls over Compliance – Federal Program CFDA 10.766/10.780 Community Facilities Loans and Grants Cluster) Criteria: 2 CFR 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, £200.512 (a)(1) states that the auditee must complete and submit the single audit report (including financial statements and the schedule of expenditures of federal awards) within nine months of the organization’s year-end. In addition, a Workout Agreement with USDA Rural Development required completion of the single audit by November 15, 2020 to comply with its original community program loan agreement with USDA. Condition and Context: The auditors were not engaged until December 2020, fifteen months after the due date. Shortly thereafter, the previous audit firm merged with the current audit firm, and due to COVID-19, staffing and scheduling issues, and delays in responding to audit requests, the completion of the audit was delayed significantly. Cause: Lack of planning for the audit to begin prior to the December 31, 2018 year end. Effect: The audit was completed well beyond the due date of September 30, 2019. Although it has not occurred as of this report date, the Government has the right to declare the entire balance immediately due and payable. Questioned Costs: None Recommendation: Management should determine prior to each year-end if an audit is required based upon that years’ grant funding and begin planning prior to year-end. In addition, responsibilities should be assigned to staff for timely completion of audit work and requested information. Views of Responsible Officials and Planned Corrective Actions: The 2023 staffing plan includes the addition of a controller and financial analyst. Initially we anticipate this controller to be a half time position growing to full time within 12-15 months. The analyst position will likely be a 2024 hire. These positions would be responsible for implementing the recommendation. We have created a job description for the controller and posted the position in early 2023. We did not find a suitable candidate and will repost.

Finding 2018-002 – Lack of Policies/Procedures & Documentation Related to Procurement/Suspension and Debarment (Material Weakness in Internal Controls over Compliance – Federal Program CFDA 10.766/10.780 Community Facilities Loans and Grants Cluster) Criteria: 2 CFR 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, £200.318 requires that the auditee must have and use documented procurement procedures for the purchase/acquisition of any property or services under a Federal award. These must include written standards of conduct covering conflicts of interest, consideration of the most economical purchase, rationale for the method of procurement, selection of contractors including whether they have been barred from doing business with the federal government, and the basis for the contract price. Also, £200.319 requires all procurement transactions be conducted in a manner that provides full and open competition, and develop specific procurement methods in compliance with £200.320, “Methods of procurement to be followed.” Condition and Context: The Organization has no documented procedures over the procurement process, contractor selection, or established methods in place to assure free and open competition as required by the Procurement Standards contained in the Uniform Guidance. Cause: Lack of understanding relating to the requirements of federal awards and loans considered to be financial assistance under the Uniform Guidance. Effect: Lack of documented controls over the Organization’s procurement process creates a material weakness in internal controls over compliance. Questioned Costs: None Recommendation: Management should become familiar with the Uniform Guidance, and in particular, the application section on Procurement, and seek additional training for those staff involved in all phases of the procurement process. Views of Responsible Officials and Planned Corrective Actions: We are creating a job description for a financial analyst. Part of this role will be to implement the recommendation, including development of bid specifications, participation in the selection of supplies and contractors, and monitoring/documenting results.

Finding 2018-003 – Reporting (Noncompliance and Material Weakness in Internal Controls over Compliance – Federal Program CFDA 10.766/10.780 Community Facilities Loans and Grants Cluster) Criteria: The Compliance Supplement for the program contained financial reporting requirements consisting of an RD 442-2, Statement of Budget, Income, and Equity and an RD-442-3, Balance Sheet. Condition and Context: The Organization did not file the reports. Cause: The Organization was not aware of the report filing requirements as contained in the compliance supplement. Effect: Compliance with the grant/loan reporting requirements was not met. Questioned Costs: None Recommendation: We recommend that management monitor any federal grants and/or loans received for any reporting requirements contained in the grant/loan documents themselves, as well as contained in the applicable compliance supplement related to the federal funding as issued by the federal Office of Management and Budget annually. Views of Responsible Officials and Planned Corrective Actions: As stated in the prior finding, we are creating a position and job description for a financial analyst. Grants and loans compliance and documentation will be a key portion of the job criteria, which will cover all types of loans (both construction and mortgages) and any other debt instruments the organization assumes.