2022-007 Reserve Requirement not Met for the Sewerage System Mortgage Revenue Bond Condition: The District did not meet the reserve requirement for the bond issuance during the audit period. Criteria: The Sewerage System Mortgage Revenue Bond agreement, as outlined in Resolution No. 22-02, species that the District must maintain an amount equal to the least of (a) the amount required by the District ($86,500), (b) maximum annual debt service on the Bond in any Bond Year and (c) 125% of average annual debt service on the Bond, to ensure compliance with the terms and conditions of the bond issuance. Cause: The failure to meet the reserve requirement was primarily attributed to not transferring money to the reserve account. Effect: Failure to meet the reserve requirements could result in regulatory penalties. Auditor's Recommendation: We recommend the District develops a plan to replenish the reserve to meet the bond issuance requirements, implements a robust financial monitoring system to track compliance with bond issuance terms and ensure the reserve requirement is met on an ongoing basis, and conduct a comprehensive review of financial planning processes to prevent future reserve shortfalls. Management Response: The District acknowledges the audit finding and is committed to taking corrective measures in line with the recommendations provided. We will develop a detailed action plan to replenish the reserve and enhance financial monitoring and planning processes to prevent similar issues in the future. Contact Person: Dawn Bauer Anticipated Completion: December 31, 2023