Finding 394330 (2023-001)

2023-001 Eligibility Community Development Financial Institutions Fund (CDFI), Equitable Recovery Program (ERP); ALN 21.033; 22ERP061321; U.S. Department of the Treasury. Finding Type: Significant Deficiency in Internal Control Criteria: The CDFI ERP grant states that the recipient of the grant must provide financial products and/or grants in a dollar amount equal to 70% of the CDFI ERP award amount expended to minority individuals or minority-owned or controlled businesses. Additionally, the reporting of Beneficiary Demographic Data for the grant state that recipients will be required to report beneficiary demographic data pertaining to borrowers and/or beneficiaries as part of their reporting requirements. Condition: We noted that for one of six loans we tested for eligibility, the loan recipient indicated on their application a race that did not qualify as a minority, however the recipient’s profile in Opportunity Resource Fund‘s information system indicated the recipient qualified as a minority. Cause: The apparent isolated incident occurred as a result of a manual input error into Opportunity Resource Fund‘s information system at the time of the origination of the loan. The review process in place over the applicant’s profile information was not adequate to identify and correct the error. Effect: Opportunity Resource Fund has a requirement to issue loans in compliance with the grant requirements stating 70% of the loans must be issued to minority recipients. Incorrectly categorizing the demographic information for applicants could result in noncompliance with grant requirements and erroneous reporting of demographic information. Exclusive of this issue, Opportunity Resource Fund indicated that 100% of the loans issued under this federal program were issued to minorities. The one loan described above was approximately 3.5% of the entire dollar value of all loans issued under the program. Questioned Costs: None Recommendation: We recommend Opportunity Resource Fund, in the future, implement a review process of applicant information to ensure that all data input into the loan system is accurate.