Finding Text
Department of Agriculture Federal Financial Assistance Listing #10.766 Community Facilities Loans and Grants Special Tests and Provisions Significant Deficiency in Internal Control over Compliance Criteria: 2 CFR 200.303(a) establishes that the auditee must establish and maintain effective internal control over the federal award that provides assurance that the entity is managing the federal award in compliance with federal statutes, regulations, and conditions of the federal award. Section 4 of the loan resolution security agreement dated December 1, 2016 states the Center must set aside a reserve amount each month until the specified account balance is reached. Condition: The Center’s reserve account is fully funded per the requirements of the loan resolution security agreement. However, there is no documented secondary monitoring of the reserve balance as compared to the required minimum reserve balance. Cause: The reserve balance is maintained within a separate certificate of deposit account with a bank; therefore, there are no monthly reconciliations, and the reserve balance and reserve requirement are not communicated with the board of directors. Effect: The lack of formal review or approval increases the risk of employees participating in the federal award administration not detecting and correcting noncompliance in a timely manner. Questioned Costs: None reported. Context/Sampling: Sampling was not used. Repeat Finding from Prior Year: No Recommendation: We recommend management implement procedures to ensure individuals in management review and approve the reserve balance when the certificate of deposit is renewed or present the reserve balance and the reserve requirement to the board during board meetings. Views of Responsible Officials: Management agrees with the finding.