Finding 21853 (2022-002)

Significant Deficiency Repeat Finding
Requirement
BL
Questioned Costs
-
Year
2022
Accepted
2023-08-23

AI Summary

  • Core Issue: Internal controls are inadequate for managing the Revolving Loan Fund (RLF), leading to compliance failures with loan terms and reporting requirements.
  • Impacted Requirements: Incorrect loan interest rates, lack of loan monitoring documentation, inaccurate cash balance reporting, and late submission of federal oversight reports.
  • Recommended Follow-Up: Implement procedures for RLF compliance, conduct monthly reviews of cash balances, and ensure timely review of required reports before submission.

Finding Text

Finding 2022-002: Allowable Costs/Cost Principles and Reporting U.S. Department of Commerce Economic Development Cluster Economic Adjustment Assistance ALN 11.307 Condition: There were not adequate internal controls in place to ensure that the following requirements of the submitted `Revolving Loan Fund Plan? (RLF Plan) were being complied with: 1) use of correct loan interest rates in accordance with the RLF Plan and 2) loan monitoring documentation is appropriately obtained and/or maintained. Additionally, we noted that there were not adequate internal controls in place to ensure cash balances are accurately tracked in the general ledger to provide for proper SEFA reporting and that required federal oversight reports are reviewed prior to submission or submitted timely. Criteria: Pursuant to 2 CFR section 200.303(a), the nonfederal entity must establish and maintain effective internal control over the federal award that provides reasonable assurance that the nonfederal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Revolving Loan Fund (RLF) recipients must administer RLFs in accordance with an RLF Plan approved by EDA. Cause: The current internal control system in place does not provide for formal procedures to review loan terms in accordance with the RLF Plan approved by the EDA, obtain/maintain loan monitoring documentation, accurately record cash balances in the general ledger for proper SEFA reporting, or review required federal oversight reports prior to submission by the established due date. Effect: Lack of formal internal control procedures resulted in 1) an incorrect interest rate being used on a loan issued in the current year, 2) loan monitoring documentation not being obtained/maintained, 3) cash balances being inaccurately reported in the general ledger resulting in inaccurate SEFA reporting, 4) required federal oversight report, form ED-209, not being reviewed prior to submission and being submitted after the due date. Question Costs: None Identification as a Repeat Finding: This is a repeat finding of 2021-002. Recommendation: We have the following recommendations: 1) the Authority should implement procedures to ensure that the RLF program is administered in accordance with the plan approved by the EDA, 2) the Authority should review the general ledger on a monthly basis to ensure cash balances are accurately stated for proper SEFA reporting, 3) the Authority should implement procedures to ensure that required reports are reviewed for accuracy prior to being submitted by the due date. View of Responsible Official: Management agrees with the finding. See separate corrective action plan.

Corrective Action Plan

Finding 2022-001: Segregation of Duties / Internal Control Industrial Development Authority Corrective Action Plan: The following procedures have been implemented to improve controls and segregation of duties. 1. Each Accountant has been assigned an authority for monitoring and invoicing. Invoices are sent on the first of the month. The Auditor or Sr. Finance Manger will monitor Quickbooks to ensure invoices are prepared timely and efforts are made for collection. 2. Loan receivable detail including amortization schedules and payment schedules will be maintained monthly and reconciled to Quickbooks each month. 3. Interfund activity will be recorded timely and reconciled monthly. The Sr. Manger or Auditor will review monthly. 4. Only the Auditor or Sr. Finance Manger will make journal entries. Finding 2022-002: Allowable Costs/Cost Principles and Reporting Industrial Development Authority Corrective Action Plan: 1. To prevent incorrect interest rates in the future, a loan process flow document [Exhibit C] has been created. The project and division manager will use this tool prior to drafting an offer letter, which serves as the first official offering of a fixed rate. Rates will be checked again prior to closing. If at this time, the rate is different then what was provided in the offer letter, the division manager will seek approval from EDA. Please see table included in the corrective action plan. 2. Business Development, Finance, and the Deputy Director have set up monthly loan monitoring meetings. Additionally, Business Development staff will send out annual specific requests for loan monitoring materials for all active loans, on top of the monthly reminders already sent with invoices. 3. ACED Business Development will work with ACED Finance to perform a monthly reconciliation to ensure cash balances are reported accurately and timely in all systems. 4. Federal reports are now being prepared by the Manager of Business Development and reviewed by the Sr. Finance Manager, the Assistant Director, and the Deputy Director before submission with an approval memo tracking their review. Reports are now current and were submitted on time for June 30, 2023. Please contact me with questions or concerns regarding the corrective action plans. Sincerely, Simone McMeans Authorized Designate

Categories

Allowable Costs / Cost Principles Reporting Matching / Level of Effort / Earmarking Internal Control / Segregation of Duties Subrecipient Monitoring

Other Findings in this Audit

  • 21854 2022-002
    Significant Deficiency Repeat
  • 598295 2022-002
    Significant Deficiency Repeat
  • 598296 2022-002
    Significant Deficiency Repeat

Programs in Audit

ALN Program Name Expenditures
11.307 Economic Adjustment Assistance $954,456
11.307 Covid-19 Economic Adjustment Assistance $508,405