Audit 414238

Reserve Account Compliance – Federal Agency: U.S. Department of Agriculture. Award Name: Community Facilities Loans and Grants Program. Program Year: January 1, 2025 – December 31, 2025. Assistance Listing Number: 10.766. Type of Finding: Material weakness in internal controls over major federal program. Criteria: Ecology Education, Inc. (the School) is required to fund certain loan reserve accounts on a monthly basis in accordance with requirements prescribed by the United States Department of Agriculture. Condition: During 2025, the School did not fulfill its loan reserve requirements, causing the School to be in default of its loan agreement. Cause: The School was unable to fulfill the reserve requirements as a result of cash flow challenges encountered during the fiscal year. Effect: Reserve requirements are not fulfilled in accordance with federal guidelines. Recommendation: We recommend that management should develop and implement a systematic process to restore and maintain the required levels to maintain compliance with reserve requirements going forward. View of Responsible Officials: Management will continue to work with USDA Rural Development on workout plan including implementing a systematic process to restore and maintain on a monthly basis the required levels to maintain compliance with reserve requirements going forward.

Loan Payment Compliance – Federal Agency: U.S. Department of Agriculture. Award Name: Community Facilities Loans and Grants Program. Program Year: January 1, 2025 – December 31, 2025. Assistance Listing Number: 10.766. Type of Finding: Material weakness in internal controls over major federal program. Criteria: Ecology Education, Inc. (the School) is required to make monthly payments of principal and interest towards its loan balance in accordance with the United States Department of Agriculture Requirements. Condition: During 2025, the School was in monetary default under the terms of its loan agreement due to missed loan payments. Cause: The School was unable to fulfill loan payment requirements as a result of cash flow challenges encountered during the fiscal year. Effect: Loan payments are not made in accordance with federal guidelines. Recommendation: We recommend that management should develop and implement stronger controls to ensure compliance with future loan payment requirements. View of Responsible Officials: Management will continue to work with USDA Rural Development on workout plan including implementing stronger controls to ensure compliance with future loan payment requirements. This includes implementing Year 3 of the Fiscal Strategy Plan as part of the workout agreement.