Finding 42159 (2022-007)

Material Weakness
Requirement
N
Questioned Costs
-
Year
2022
Accepted
2023-05-15

AI Summary

  • Core Issue: The Authority failed to make required monthly deposits into the reserve fund starting April 2021, leading to noncompliance with bond agreement.
  • Impacted Requirements: Compliance with the Supplemental Bond Indenture and USDA program requirements was not met until October 2021, with ongoing issues in timely payments.
  • Recommended Follow-Up: Implement a monthly process to ensure timely deposits and monitor the reserve fund balance to meet requirements.

Finding Text

U.S. Department of Agriculture Federal Financial Assistance Listing #10.766 Community Facilities Loans and Grants Cluster Special Tests and Provisions Material Weakness in Internal Control Over Compliance and Noncompliance Not Considered Material Criteria: Article IV of the Authority's Supplemental Bond Indenture agreement dated June 1, 2006, requires the Authority to establish a reserve fund. As approved by the USDA Community Programs Director, the Authority was required to make monthly deposits of $1,350 into the reserve fund beginning in April 2021, until the fund reaches $162,000. Condition: The Authority did not deposit the required funds into the debt service fund until October 2021. In addition, the Authority?s June 2022 payment was not received by the bank until July 11, 2022. Cause: In May 2020, the Authority received approval from the United States Department Agriculture (USDA) to use debt reserve funds in response to the COVID Pandemic. The new management team was not aware of the arrangement with USDA and that deposits to the debt reserve funds were to commence in April 2021. In addition, the June 2022 reserve deposit was not submitted to the bank until July 2022 due to lack of management oversight. Effect: The Authority's reserve account was not in compliance with the Supplemental Bond Indenture and program requirements until October 2021. Additionally, missing or late payments continued to result in noncompliance with program. Questioned Costs: None reported. Context: Sampling was not used. Repeat Finding from Prior Years: No Recommendation: The Authority needs to establish a monthly process to ensure the reserve deposit is made and posted by the bank on a timely basis. Additionally, the Authority should monitor to ensure the reserve fund has an adequate balance based on the requirements. Views of Responsible Officials: Management agrees with the finding.

Corrective Action Plan

Maintenance of Debt Service Reserve Account Finding: 2022-007 Federal Agency Name: U.S. Department of Agriculture Program Name Community Facilities Loans and Grants Federal Financial Assistance Listing Number 10.766 Finding Summary: The Authority did not deposit the required funds into the debt service fund until October 2021 and the Authority?s June 2022 deposit was not received by the bank until July 11, 2022. Responsible Individual: Priacilla Leatherman Interim Chief Financial Officer Corrective Action Plan: The Authority is in the process of revising controls to ensure deposits are made timely and they are establishing controls to aid with the monitoring the debt service requirements are being met. Anticipated completion date: Ongoing

Categories

Internal Control / Segregation of Duties Special Tests & Provisions Material Weakness Matching / Level of Effort / Earmarking

Other Findings in this Audit

  • 42160 2022-008
    Significant Deficiency
  • 618601 2022-007
    Material Weakness
  • 618602 2022-008
    Significant Deficiency

Programs in Audit

ALN Program Name Expenditures
10.766 Community Facilities Loans and Grants $2.44M
93.697 Covid-19 Testing and Mitigation for Rural Health Clinics $66,943
93.461 Hrsa Covid-19 Claims Reimbursement for the Uninsured Program and the Covid-19 Coverage Assistance Fund $16,892