Finding 396143 (2023-002)

-
Requirement
P
Questioned Costs
-
Year
2023
Accepted
2024-05-08

AI Summary

  • Core Issue: The Agency awarded a $1 million loan for stock acquisition without proper justification, violating 13 CFR Section 307.17(c)(4).
  • Impacted Requirements: The loan documentation lacked necessary justification to support the exception for lending funds for stock purchases.
  • Recommended Follow-Up: The Agency’s Board of Directors should document the justification and obtain approval for the exception to comply with federal regulations.

Finding Text

Condition and Criteria: During the current year, the Agency awarded a loan from its Economic Development Loan Fund to a corporation for the purpose of acquiring stock from former owners. 13 CFR Section 307.17(c)(4) prohibits lending for such purpose unless sufficient justification as outlined in the Section is provided in the loan documentation. Cause: The Agency failed to document the justification that it relied upon as an exception to the restriction to lend funds for the acquisition of stock. Questioned Cost: The loan awarded was $1 million. Auditor’s Recommendation: We recommend that the Agency’s Board of Director’s document the justification and approval for the exception to the Federal requirement related to stock acquisition.

Corrective Action Plan

Auditor’s Recommendation: We recommend that the Agency’s Board of Director’s document the justification and approval for the exception to the Federal requirement related to stock acquisition. Agency’s Response: At its March 26th Meeting, the CCIDA Board approved an amendment to the Resolution 9-26-23-01 originally approved on September 26, 2023. The amendment includes new language that justifies the lending of funds for the acquisition of stock, which is an exception to 13 CFR Section 307.17(c)(4). Richard Dixon, CFO of the CCIDA, will oversee the process of documenting justification for similar exceptions effective immediately.

Categories

Matching / Level of Effort / Earmarking

Other Findings in this Audit

Programs in Audit

ALN Program Name Expenditures
11.307 Covid-19 Economic Adjustment Assistance $11.03M
14.218 Community Development Block Grants/entitlement Grants $500,000