Audit 366802

Federal Program/Award Identification: 11.307 COVID-19 Economic Adjustment Assistance – Economic Development Cluster Federal Award Project Number: 01-79-15100 Federal Award Project Year: 2019 Name of Federal Agency: United States Department of Commerce Name of the Applicable Pass-Through Entity: N/A 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. The Organization is required to comply with all terms and conditions of the grant agreement with the Revolving Loan Fund (RLF) Award granted by the U.S. Department of Commerce, Economic Development Administration (EDA). Per 13 CFR section 307.11(a)(1)(ii), the Organization’s standard loan documentation must include evidence demonstrating that credit is not otherwise available on terms and conditions that permit the completion or successful operation of the activity to be finance. Condition: We noted that the Organization’s Loan Committee did not include in its loan documentation evidence demonstrating that credit was not otherwise available on terms and conditions that permit the completion or successful operation of the activity being financed. Cause: The EDA temporarily waived the requirement to collect evidence demonstrating that credit was not otherwise available. The Organization believed the requirement related to the evaluation of other available credit was waived, but this waiver expired on June 30, 2022. Effect or Potential Effect: Loan recipients could have been approved that had access to other credit, making them ineligible to be granted an RLF under the grant agreement. Loan documentation does not meet the requirements of 13 CFR section 307.11(a)(1)(ii). Questioned Costs: None Context: UHY selected and tested 4 of 8 EDA RLFs outstanding as of December 31, 2024. None of the loans selected for testing had documentation evidencing that credit was not otherwise available on terms and conditions that permit the completion or successful operation of the activity being financed. Recommendation: The loan committee should implement a checklist of all required loan documentation. The checklist should be reviewed by a member of management prior to execution of the loan agreement. Views of Responsible Officials and Planned Corrective Action: See “Management’s Response and Corrective Action” plan section.

Federal Program/Award Identification: 11.307 COVID-19 Economic Adjustment Assistance – Economic Development Cluster Federal Award Project Number: 01-79-15100 Federal Award Project Year: 2019 Name of Federal Agency: United States Department of Commerce Name of the Applicable Pass-Through Entity: N/A Criteria: The Organization is required to comply with all terms and conditions of the grant agreement with the Revolving Loan Fund (RLF) Award granted by the U.S. Department of Commerce, Economic Development Administration (EDA). Per the Uniform Guidance (2 CFR section 200.414(f), recipients that do not have a current Federal negotiated indirect cost rate may elect to charge a de minimis rate up to 10 percent of modified total direct costs (MTDC). MTDC excludes capital expenditures including revolving loan fund capital. Condition: Management’s requests for reimbursement of indirect costs were not based on 10% of allowable modified total direct costs (MTDC). Reimbursements submitted were based on the amount included in the authorized budget from the EDA but not in accordance with the Uniform Guidance requirements for a de minimis indirect cost rate. Cause: The Organization is a small entity with limited resources to ensure all grant requirements are met. The Organization believed the calculation was allowed based on verbal conversations with the EDA representatives, but it was never documented in writing. Effect or Potential Effect: The Organization could have recognized revenue for indirect costs in excess of what was allowable under the Uniform Guidance. Questioned Costs: None Context: UHY requested that management calculate its indirect cost reimbursement under the requirements of Uniform Guidance and compare the amount paid by EDA to the calculation. The results of the calculation indicated that the Organization had not collected in excess of what it was entitled to, therefore, no questioned costs were identified. Recommendation: Management should implement a process to ensure the calculation of indirect costs charged against the EDA grant are in accordance with the Uniform Guidance and exclude any costs that are not allowed to be included in the MTDC. Views of Responsible Officials and Planned Corrective Action: See “Management’s Response and Corrective Action” plan section.

Federal Program/Award Identification: 11.307 COVID-19 Economic Adjustment Assistance – Economic Development Cluster Federal Award Project Number: 01-79-15100 Federal Award Project Year: 2019 Name of Federal Agency: United States Department of Commerce Name of the Applicable Pass-Through Entity: N/A Criteria: The Organization is required to comply with all terms and conditions of the grant agreement with the Revolving Loan Fund (RLF) Award granted by the U.S. Department of Commerce, Economic Development Administration (EDA). 2 CFR 200.303(a) requires that a non-federal entity must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statues, regulations, and the terms and conditions of the Federal award. According to the “Specific Award Conditions” document provided by the EDA to the Organization, the Organization must submit the “Federal Financial Report (form SF-425) on a semiannual basis during the period of performance of the Award. The Report must be submitted within 30 calendar days of the midpoint and end of the fiscal year. Condition: We noted that management did not submit form SF-425 for the reporting period December 31, 2024, within the thirty-day requirement specified in the “Specific Award Conditions” document. Cause: The Organization did not have an effective internal control in place to ensure the semiannual SF-425 report was submitted by the due date. Effect or Potential Effect: The Organization did not comply with reporting due dates. Questioned Costs: None Context: UHY tested the two semiannual SF-425 reports submitted for reporting periods within 2024. One of the two were not submitted within the 30-day requirement. In addition, UHY tested submission of two “RLF Financial Report” (ED-209) reports, which were required to be submitted semi-annually, and found they were submitted within the 30-day requirement. Recommendation: We recommend the Organization design and implement an internal control to ensure reports are submitted by the required due dates. Views of Responsible Officials and Planned Corrective Action: See “Management’s Response and Corrective Action” plan section.