Cash Management ALN 10:854: Rural Economic Development Loan and Grant Criteria: For recipients and subrecipients other than States, payment methods must minimize the time elapsing between the transfer of funds from the federal agency or the pass-through entity and the disbursement of funds by the recipient or subrecipient regardless of whether the payment is made by electronic funds transfer or by other means. The recipient or subrecipient must be paid in advance, provided it maintains or demonstrates the willingness to maintain both written procedures that minimize the time elapsing between the transfer of funds and disbursement by the recipient or subrecipient, and financial management systems that meet the standards for fund control and accountability as established in this part. The timing and amount of advance payments must be as close as is administratively feasible to the actual disbursements by the recipient or subrecipient for direct program or project costs (2 CFR 200.305(b)). Condition: The Cooperative does not have written procedures that discuss minimizing the time between the transfer of funds and disbursement. Context: The funds were received by the Cooperative on February 18, 2025, and transferred to the subrecipient on February 25, 2025. The subrecipient disbursed the funds and paid the invoice for the program purposes on April 24, 2025. Effect: The Cooperative is not following federal regulations regarding written procedures for cash management. Questioned Costs: None. Cause: This is the first year the Cooperative received these loan funds, and written procedures were not in place prior to receiving the funds. Auditor Recommendation: We recommend the Cooperative create procedures addressing the requirements in 2 CFR 200.305(b). Fergus Electric Cooperative Response: Fergus worked in conjunction and regularly communicated with the local Montana USDA REDL/G office to understand program requirements, provide requested information, and meet federal guidelines. Loan agreement RD 4280-5, (Dated 10/31/2024) refers to 7 CFR part 4280, Subpart A, as (“Regulations”). Fergus was unaware that 2 CFR 200 regulations are associated with 7 CFR part 4280, Subpart A. Fergus regretfully acknowledges that we were not informed or aware of obligations to meet the regulatory requirements within 2 CFR 200. Fergus has adopted and implemented a policy, Federal Funding Compliance, to establish formal procedures and ensure ongoing compliance with applicable federal regulations, including 7 CFR 4280, Subpart A and 2 CFR 200.
Subrecipient Monitoring ALN 10:854: Rural Economic Development Loan and Grant Criteria: if the Cooperative serves as a passthrough entity, in accordance with 2 CFR 200.332 they must: • Clearly identify the award and applicable requirements to the subrecipient; • Monitor the activities of the subrecipient as necessary to ensure the subrecipient complies with federal requirements; • Verify that a subrecipient is audited. Condition: The Cooperative does not have written procedures that discuss subrecipients and how they will comply with the federal requirements as a passthrough entity, did not verify that the subrecipient was audited, and did not clearly identify to the subrecipient all the information required in the regulations. Context: There was a promissory note and loan agreement signed between the Cooperative and the subrecipient, and the agreement references to 2 CFR 200 via the incorporated Rural Economic Loan Agreement. Effect: The Cooperative is not fully following federal regulations regarding subrecipient monitoring. Questioned Costs: None. Cause: This is the first year the Cooperative received these loan funds, and written procedures were not in place prior to receiving the funds and not all of the requirements for pass through entities were followed. Auditor Recommendation: We recommend the Cooperative create procedures addressing the requirements in 2 CFR 200.332 and retain documentation showing that all required steps for passthrough entities were followed. Fergus Electric Cooperative Response: Fergus worked in conjunction and regularly communicated with the local Montana USDA REDL/G office to understand program requirements, provide requested information, and meet federal guidelines. Loan agreement RD 4280-5, (Dated 10/31/2024) refers to 7 CFR part 4280, Subpart A, as (“Regulations”). Fergus was unaware that 2 CFR 200 regulations are associated with 7 CFR part 4280, Subpart A. Fergus regretfully acknowledges that we were not informed or aware of obligations to meet the regulatory requirements within 2 CFR 200. Fergus has adopted and implemented a policy, Federal Funding Compliance, to establish formal procedures and ensure ongoing compliance with applicable federal regulations, including 7 CFR 4280, Subpart A and 2 CFR 200.
Reporting ALN 10:854: Rural Economic Development Loan and Grant Criteria: The Rural Economic Development Loan Agreement outlines that the Cooperative shall submit a project performance report to Rural Development on an annual basis. The recipient or subrecipient must submit financial reports as required by the federal award (2 CFR 200.328). Condition: The Cooperative submitted a project performance report (Form RD 4280-1) but did not have support for the reported number of actual jobs created or the number of jobs retained/saved as a result of this project. The Cooperative also submitted a financial report (SF-425) and did not have support for the reported total recipient share required and the recipient share of expenditures. Context: The RD 4280-1 report is required annually. Both the SF-425 and RD 4280-1 reports were signed by Cooperative management. Effect: The Cooperative did not retain support for the reported information. Questioned Costs: None. Cause: This is the first year the Cooperative received these loan funds. The information in these reports was provided by the subrecipient, and Cooperative personnel did not retain support for this information in their records. Auditor Recommendation: We recommend the Cooperative retain support for all reported information to ensure accuracy of reporting. Fergus Electric Cooperative Response: Fergus worked in conjunction and regularly communicated with the local Montana USDA REDL/G office to understand program requirements, provide requested information, and meet federal guidelines. Loan agreement RD 4280-5, (Dated 10/31/2024) refers to 7 CFR part 4280, Subpart A, as (“Regulations”). Fergus was unaware that 2 CFR 200 regulations are associated with 7 CFR part 4280, Subpart A. Fergus regretfully acknowledges that we were not informed or aware of obligations to meet the regulatory requirements within 2 CFR 200. Fergus has adopted and implemented a policy, Federal Funding Compliance, to establish formal procedures and ensure ongoing compliance with applicable federal regulations, including 7 CFR 4280, Subpart A and 2 CFR 200.
Reporting ALN 10:854: Rural Economic Development Loan and Grant Criteria: Rural Economic Development Loan and Grant Programs are subject to 2 CFR 200, subpart F Audit Requirements. These regulations state that a non-federal entity that expends $1,000,000 or more during the entity’s fiscal year in federal awards must have a single or program-specific audit conducted for that year in accordance with the provisions of this part. The determination of when a federal award is expended must be based on when the activity related to the federal award occurs. Generally, the activity related to the Federal award pertains to events that require the non-federal entity to comply with federal statutes, regulations, and the terms and conditions of federal awards, such as (2 CFR 200.501 and 2 CFR 200.502): • Expenditure/expense transactions associated with grants, cooperative agreements, cost-reimbursement contracts under the FAR, compacts with Indian Tribes, and direct appropriations; • The disbursement of funds to subrecipients; • The use of loan proceeds under loan and loan guarantee programs; • The receipt of property (including surplus property); • The receipt or use of program income; • The distribution or use of food commodities; • The disbursement of amounts entitling the non-Federal entity to an interest subsidy; and • The period when insurance is in force. Condition: The Cooperative transferred $2,000,000 in loan funds to a subrecipient in 2025. The Cooperative was unaware that they needed a single audit and did not prepare a schedule of expenditures of federal awards (SEFA). There are also no written procedures on how to prepare a SEFA. Context: The Cooperative retained support for the federal funds expended and have documentation from federal agencies to prepare a SEFA, and the Rural Economic Development Loan Agreement refers to 7 CFR 4280, Subpart A, which requires the audit. Effect: Non-compliance with federal regulations. Questioned Costs: None. Cause: This is the first year the Cooperative received these loan funds and were unaware that a single audit was needed. Auditor Recommendation: We recommend the Cooperative retain support for all federal funds expended in order to determine if the $1,000,000 threshold is met, triggering a single audit. We also recommend the Cooperative put procedures in place on how to prepare the SEFA. Fergus Electric Cooperative Response: Fergus worked in conjunction and regularly communicated with the local Montana USDA REDL/G office to understand program requirements, provide requested information, and meet federal guidelines. Loan agreement RD 4280-5, (Dated 10/31/2024) refers to 7 CFR part 4280, Subpart A, as (“Regulations”). Fergus was unaware that 2 CFR 200 regulations are associated with 7 CFR part 4280, Subpart A. Fergus regretfully acknowledges that we were not informed or aware of obligations to meet the regulatory requirements within 2 CFR 200. Fergus has adopted and implemented a policy, Federal Funding Compliance, to establish formal procedures and ensure ongoing compliance with applicable federal regulations, including 7 CFR 4280, Subpart A and 2 CFR 200.