Finding Text
Assistance Listing, Federal Agency, and Program Name - ALN 10.766, Department of Agriculture, Community Facilities Loans and Grants
Federal Award Identification Number and Year - N/A
Pass through Entity - N/A
Finding Type - Material weakness and material noncompliance with laws and regulations
Repeat Finding - No
Criteria - Prior to issuance of the 2022 Compliance Supplement the USDA instructed borrowers that loans under ALN 10.766 did not have continuing compliance requirements and thus were not required to be audited under 2 CFR Part 200 Subpart F in the years after project completion. However, with the issuance of the 2022 Compliance Supplement the USDA changed this position and determined these loans have continuing compliance requirements and thus are subject to audit under 2 CFR Part 200 Subpart F.
Condition - The schedule of expenditures of federal awards (SEFA) as originally issued did not include loans with continuing compliance requirements.
Questioned Costs - None
Identification of How Questioned Costs Were Computed - N/A
Context - Prior to the June 30, 2022 fiscal year end, the USDA did not classify loans outstanding under ALN 10.766 as having continuing compliance requirements. The USDA changed its position and began treating these loans as having continuing compliance and issued a notice to loan recipients that they must report the loan balances on their schedule of expenditures of federal awards beginning with fiscal years ending June 30, 2022. The College did not identify this change in policy and incorrectly excluded the loan entered into during the year ($38,970,352) from the originally issued schedule of expenditures of federal awards.
Cause and Effect - Controls in place did not ensure the SEFA was complete and accurate. The resulting error had the following impact:
$38,970,352 received under ALN 10.766 was excluded from the total expenditures reported on the SEFA, resulting in the initial major program determination being incorrect.
Recommendation - The College should implement process to ensure that the SEFA is complete and accurate.
Views of Responsible Officials and Corrective Action Plan - In December 2023 management identified that with its participation as borrower on a Community Facilities Loan, guaranteed by the USDA, that it had a compliance obligation to include the loan program in the SEFA. The College has designed and implemented controls that require the VP of Business Affairs (or designee) to identify new and modified compliance and reporting obligations under the currently enrolled programs or for any new programs in which the College may participate.