Finding 1081257 (2024-004)

Department of Agriculture Federal Financial Assistance Listing #10.766 Communities Facilities Loans and Grants – 2016 Direct Loans Special Tests and Provisions Significant Deficiency in Internal Control over Compliance Criteria: The System must establish and maintain effective internal control over the reserve fund account that is maintained in accordance with the loan resolution. The Loan Resolution Security Agreement requires a monthly amount to be set aside in a reserve fund until the specified account balance is reached. Condition: There was no documented independent review of the monthly reserve fund account reconciliations as compared to the required minimum balance. Cause: The System did not have a formal process in place to compare the required balance per the Loan Resolution Security Agreement to the monthly reserve fund account balance. Effect: With no formal review or approval in place, the risk increases for employees participating in the federal award administration to not detect and correct noncompliance in a timely manner. Questioned Costs: None reported. The required reserve balance was appropriately funded as of June 30, 2024. Context: Sampling was not used. Repeat Finding from Prior Year: No Recommendation: We recommend management implement procedures to perform an independent review of the monthly account reconciliation of the reserve account to ensure the minimum reserve balance requirement is being met. Views of Responsible Officials: Management agrees with the finding.