Finding 34584 (2022-001)

2022-001 - Significant Deficiency in Internal Control Federal Program: Community Facilities Loans and Grants Cluster: Community Facilities Loans and Grants Assistance Listing Number: 10.766 Federal Agency: U.S. Department of Agriculture Pass-through Agency: N/A Award Number: N/A Award Year: 2013 Compliance Requirement: Special Tests and Provisions Questioned Costs: None Criteria: Section 4.4 of the Community Facilities Direct Loan agreement stipulates that the borrower must maintain funds in accounts in accordance with Section 4 of the Loan Resolution. The Loan Resolution stipulates that the borrower must establish a General Account and Reserve Account. The Reserve account must be funded to an amount equaling or exceeding $1,167,219. Condition and Context: The Association did not have a specific Reserve Account established in accordance with the Loan Resolution. Effect: While the Association did have sufficient funds available to fund the Reserve Account, no such account was established. Cause: The Association did not have sufficient internal controls in place to monitor on-going compliance with loan agreements. Recommendation: We recommend that management implement procedures to ensure that all grant and loan agreements are reviewed on an on-going basis and that compliance requirements are recorded and tracked to ensure on-going compliance. We additionally recommend that management establish the required reserve account. View of Responsible Officials: Management agrees with the above noted finding and has implemented sufficient controls to ensure on-going compliance requirements are met. Management is also in the process of establishing the appropriate reserve account.