Finding 35341 (2022-003)

Finding 2022-003 ? Special Tests Reserve Deposits Department of Agriculture Community Facilities Loans and Grants Cluster Assistance Listing #10.766 Significant Deficiency and Special Tests Noncompliance Criteria: The Loan Resolution Security Agreement (LRSA) requires that a deposit in the amount of $200,000 should be funded to the debt service reserve account on each anniversary of the closing date of the related loan (October 2021). Appropriate internal controls over the debt service reserve account including timely bank account reconciliations are important to ensuring compliance with the LRSA requirements. Condition: Inadequate controls exist over monitoring compliance with the debt service reserve account requirements. Additionally, documentation was not maintained of the supervisory review of the debt service account bank reconciliations. Cause: The System acquired MMC-Dickinson during 2022 and has not yet fully implemented existing System internal controls to the new subsidiary. Effect: The annual debt service reserve deposit due in October 2022 was not made until February 2023. Furthermore, no documentation was maintained of supervisor review of the debt service reserve bank account monthly reconciliations. Questioned costs: None reported. Context: The annual $200,000 deposit that was due in October 2022 was not made in a timely manner until February 2023. Repeat finding from prior year: No Recommendation: We recommend that management implement appropriate controls over the debt service reserve fund to ensure compliance with LRSA requirements including timely deposits. Controls should include timely debt service reserve bank account reconciliations with documented supervisory review of bank reconciliations for compliance with debt service reserve requirements. Views of responsible officials and planned corrective actions: Management agrees with this finding. Please refer to pages 64 and 65 for the Corrective Action Plan.