Finding Text
United States Department Agriculture Federal Financial Assistance Listing #10.766 Community Facilities Loans and Grant Special Tests and Provisions Significant Deficiency in Internal Control Over Compliance and Noncompliance 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. Condition – During our testing, there was no formal review separate from the preparer over the reserve fund reconciliation for the federal program and there was no formal review of the balance in comparison to the required minimum reserve balance. Cause – The Health Center did not have an adequate internal control policy in place to ensure review and approval over the amount of the reserve fund. Effect – The lack of adequate policies governing review increases the risk that employees participating in the federal award administration may not be able to detect and correct noncompliance in a timely manner. Questioned Costs – None reported. Context – Sampling was not used. The Health Center has one reserve account, which includes the debt service and emergency and replacement reserve, that was tested. Due to there being no formal review of the balance in comparison to the required minimum reserve balances, the reserve balance was underfunded as of June 30, 2025, in the amount of $17,486. Repeat Finding from Prior Years – Yes, Finding 2024-003 Recommendation – While noncompliance was identified due to the minimum reserve balance being underfunded as of June 30, 2025, it is noted that Management has corrected the reserve balance to in compliance after year-end. We recommend that the Health Center enhance internal control policies to ensure that a formal review over the reserve fund reconciliation and a formal review of the balance in comparison to the required minimum reserve balances be completed by staff separate from the preparer. Views of Responsible Officials – Management agrees with the finding.