Audit 396710

Finding Type: Immaterial noncompliance with major program requirements Title and ALN of Federal Program: 59.046 – Small Business Administration Microloan Program and 93.570 – Community Services Block Grant Discretionary Awards Finding Resolution Status: In review. Information on Universe and Population Size: Salaries and wages pursuant to approved budget for the period July 1, 2024 to June 30, 2025. Sample Size Information: A sample of 20 allocations of salaries and wages allocated to each of the programs during the budget period were selected for testing compliance, including to approved time allocations within the payroll processor and as compared to the Executive Level II Salary max amounts in effect during the budget period. Identification of Repeat Finding and Finding Reference Number: 2024-001 Criteria: Under 2 CFR 200 Subpart E, payroll costs charged to a federal award must be based on actual costs incurred, be allocable to the award, and be supported by accurate records of the compensation paid for work performed on the award during the period being charged. Payroll allocations should be calculated using the pay rates in effect during the period for which the costs are charged. In addition, for programs subject to the federal Executive Level II salary limitation, compensation charged to the award for any individual must not exceed the Executive Level II rate in effect for the applicable period. Statement of Condition: During our testing of allocated salaries and wages, we identified errors in how employee time was allocated to the program, and salaries and wages allocated to the program in excess of the Executive Level II Salary maximum. One employee in each program, 59.046 and 93.570, had an inappropriate wage rate applied to allocated time to the program. Additionally, for the 59.046 program only, one employee had compensation levels allocated to the program in excess of the Executive Level II Salary maximum amount in effect for the respective period. Cause: The Organization did not have adequate procedures in place to ensure that payroll costs were supported by accurate time and rates reporting. Effect or Potential Effect: Salaries and wages charged to the programs included unsupported amounts, resulting in known and likely questioned costs that are less than $25,000 in total across both programs and were not material to the programs. The questioned costs relate to misallocated time and rates for both programs and to Executive Level II Salary exceedances for the 59.046 program only. Auditor Noncompliance Code: A – Activities allowed or unallowed Reporting Views of Responsible Officials: Management agrees with the noncompliance with no sanctions imposed conclusion. Context: No additional context identified by the Organization which is not otherwise presented herein. Recommendation: The Organization should strengthen internal controls over payroll cost allocations, including regular reconciliation of payroll charges to actual time records and rates. Time and rate documentation should be properly reviewed and approved. Auditor’s Summary of the Auditee’s Comments on the Findings and Recommendations: Management should complete regular reconciliations of payroll charges to actual time records and rates. Time and rate documentation should be properly reviewed and approved. Response Indicator: Agree Completion Date: In process. Response: Management acknowledges noncompliance in the current fiscal year and is reviewing its internal controls over payroll cost allocations. Questioned Costs: < $25,000 (not material)

Finding Type: Immaterial noncompliance with major program requirements Title and ALN of Federal Program: 10.870 – United States Department of Agriculture Rural Microentrepreneur Assistance Program (USDA RMAP) Finding Resolution Status: In review. Information on Universe and Population Size: Loans disbursed during the period July 1, 2024 to June 30, 2025 from USDA RMAP loan fund. There were 8 unique loans disbursed totaling $227,000. Sample Size Information: All 8 loans were selected for testing eligibility compliance. Identification of Repeat Finding and Finding Reference Number: N/A Criteria: USDA RMAP is governed by 7 CFR part 4280, subpart D, which requires that loans made from the RMAP revolving loan fund be provided to eligible microentrepreneurs located in rural areas as defined in the regulations and the approved work plan for the award. These regulations, together with the Organization’s USDA RMAP agreement and approved work plan, require that loans be made only within the approved rural service area. In addition, 2 CFR 200.303 requires the auditee to establish and maintain effective internal control over compliance with federal statutes, regulations, and the terms and conditions of federal awards, including eligibility requirements for RMAP loan recipients. Statement of Condition: During eligibility testing of loan disbursements under the RMAP program, one of eight disbursements tested was made to a borrower located outside of the eligible area. The loan was disbursed in fiscal year 2025 for $10,000. Cause: Management did not verify the borrower’s business address against the approved rural service area map prior to disbursement. Effect or Potential Effect: Disbursement of RMAP loan funds to an ineligible borrower constitutes noncompliance with program eligibility requirements and may result in questioned costs of $10,000. Auditor Noncompliance Code: E – Eligibility Reporting Views of Responsible Officials: Management agrees with the noncompliance with no sanctions imposed conclusion. Context: No additional context identified by the Organization which is not otherwise presented herein. Recommendation: The Organization should strengthen eligibility review controls over RMAP loan disbursements by implementing procedures to verify and document that each borrower’s business location is within the approved service area prior to loan approval and disbursement. Auditor’s Summary of the Auditee’s Comments on the Findings and Recommendations: The Organization concurs with the finding and states that it will enhance its RMAP loan review procedures to ensure borrower locations are verified and documented as being within the approved rural service area prior to loan approval and disbursement. Response Indicator: Agree Completion Date: In process. Response: Management acknowledges noncompliance in the current fiscal year and is reviewing its internal controls over loan disbursements. Questioned Costs: $10,000

Finding Type: Immaterial noncompliance with major program requirements Title and ALN of Federal Program: 10.870 – United States Department of Agriculture Rural Microentrepreneur Assistance Program (USDA RMAP) Finding Resolution Status: Resolved Information on Universe and Population Size: All quarterly and annual reports pursuant to the mutually agreed upon Reporting Schedule. Sample Size Information: A sample of 3 reports for fiscal year 2025 were selected for testing compliance with reporting pursuant to the mutually agreed upon Reporting Schedule. Identification of Repeat Finding and Finding Reference Number: N/A Criteria: The Organization is required to submit the quarterly reports within 30 days following the reporting period. Statement of Condition: The Organization failed to submit the quarterly activity report as of September 30, 2024 by October 30, 2024. The report was filed November 7, 2024. Cause: The Organization did not have procedures in place to ensure adherence to the formal 30‑day submission requirement and instead followed an informal reporting practice that allowed submissions after the required deadline. Effect or Potential Effect: The Organization is noncompliant for the performance period ended September 30, 2024 with no sanctions imposed. The Organization submitted the requested report late. Auditor Noncompliance Code: L - Reporting Reporting Views of Responsible Officials: Management agrees with the noncompliance with no sanctions imposed conclusion. Context: No additional context identified by the Organization which is not otherwise presented herein. Recommendation: All requested reports should be submitted in accordance with the mutually agreed upon Reporting Schedule. Auditor’s Summary of the Auditee’s Comments on the Findings and Recommendations: Management should submit all requested reports in accordance with the mutually agreed upon Reporting Schedule. Response Indicator: Agree Completion Date: March 1, 2025 Response: Management acknowledges noncompliance in the current fiscal year and has submitted the requested report to the awarding agency. Questioned Costs: None