Audit 390778

USDA Community Facilities Loan Reserve Accounts Material Weakness U.S. DEPARTMENT OF AGRICULTURE ALN #: 10.766 Community Facilities Loans and Grants Federal Award Identification #: CPAP000000422525, CPAP000000422526, CPAP000000422527, CPAP000000422528, CPAP000000422529, GLSX0002129718 Condition: The College is required to establish and maintain designated reserve accounts for its USDA loans in accordance with the loan agreements. While sufficient assets appear to be available, the required segregation and documentation for three of the four reserve accounts could not be located. Criteria: 7 CFR 1942.17(i)(2) Questioned Costs: $0 Context: The College did not administer its loan reserve accounts in accordance with the requirements outlined in its USDA loan agreements. Cause: Due to turnover in key management positions since the loans originated, the College did not have adequate procedures in place to monitor and ensure ongoing compliance with the loan reserve requirements outlined in the various USDA loan agreements. Effect: Failure to establish and maintain the required reserve accounts increases the risk of noncompliance with the loan agreements and potential adverse action by the lender. Identification as repeat finding, if applicable: Recommendation: We recommend the College consult with its USDA loan representative to confirm the specific reserve requirements for all active loan agreements. The College should establish any required reserve accounts that have not been funded as of June 30, 2025, and implement formal procedures to ensure ongoing compliance with reserve requirements and continuity of oversight during future transitions in key positions. Views of Responsible Officials and Planned Corrective Action: Management agrees with the finding. See corrective action plan.