Finding Text
2022-002 Special Tests and Provisions
Federal Agency United States Department of Agriculture
Assistance Listing Number 10.766 – Community Facilities Loans and Grants
Criteria [ ] Significant Deficiency [X] Material Weakness [X] Compliance Finding
Under the terms and conditions of the District’s loan with the United States Department of Agriculture (USDA), the District is required to maintain separate accounts for annual debt service, as well as a debt reserve account with monthly deposits until a specified balance is reached.
Condition The District’s annual debt service account is co-mingled with capital reserves. The District has not established or funded a debt reserve account.
Context This finding appears to be an isolated problem.
Cause The District’s internal controls over compliance did not include adequate controls over maintenance of annual debt service and debt reserve funds. The District has not established policies and procedures over compliance with Uniform Guidance and USDA compliance requirements.
Effect The District is not in compliance with the USDA compliance requirements and the terms and conditions of the loan.
Recommendation We recommend the District establish separate general ledger accounts for annual debt service and debt reserve funds. We also recommend the District make monthly deposits to the debt reserve fund as required by the terms and conditions of the loan. Written policies and procedures should be established related to Uniform Guidance and USDA compliance requirements.
Views of responsible officials and planned corrective actions The District will open a new bank account that will hold the debt reserve amount. A deposit into the debt reserve account will be made monthly via auto transfer on the 10th of each month until December 2027. There will be one withdrawal from this account done annually to transfer funds to a CD. The annual payment amount will have its own account with the amount of the next years’ payment.