Finding 384078 (2023-001)

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: 2023 Compliance Requirement: Special Tests and Provisions Questioned Costs: None Criteria: Section 4.5 of the USDA's Community Facilities Loan Agreement stipulates that the borrower must maintain a debt service reserve account with monthly deposits of $1,117 each month until there is an accumulated sum $133,980. Condition and Context: The Organization did not remit funds to the debt service reserve account for the year end 2023 and the account had a balance of $71,030 at year end. The Organization did not have sufficient internal controls in place to monitor on-going compliance with the loan agreement. Effect: The Organization has failed to comply with the terms of the debt covenants. Cause: The Organization did not have sufficient internal controls in place to monitor on-going compliance with the loan agreement. 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. View of Responsible Officials: Management agrees with this finding and has implemented controls to monitor on-going compliance with both financial and non-financial covenants. Additionally, when management became aware of the non-compliance, a payment was made to the debt service account in July 2023 for the 2023 missed payments.