Finding Text
Finding 2024-005: Material Weakness - Noncompliance in Internal Controls over Required Reserves
Condition: The Facility’s internal control over compliance related to debt service reserve account requirements were not effective. During 2024, it was identified the Facility’s balance in the debt service reserve account was below the required level and required monthly deposits were not completed.
Criteria: Under terms of the Facility’s April 29, 2014, loan agreement with the USDA, the Facility is required to make monthly deposits of $2,304 in a debt service reserve account until the balance reaches $276,432.
Cause: Internal controls over compliance related to debt service reserve account deposits were not operating effectively.
Effect: During 2024, monthly deposits were not made to the debt service reserve account and the Facility’s balance in the debt service account were below required levels.
Recommendation: We recommend management put processes in place over monitoring the balance in the debt service reserve account to ensure required monthly deposits are completed until the balance in the account reaches the required level of funding.
View of responsible officials: Upon the discovery of the underfunding of the debt service reserve account, the Facility discussed the situation with the Facility’s USDA contact. The USDA has approved an action plan for the Facility to replenish the debt service reserve account by February 2028 with $5,000 monthly deposits which began in December 2024.