Finding Text
United States 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
Criteria: The Center must establish and maintain effective internal control over the reserve fund account that is maintained in accordance with the loan resolution. The Loan Resolution Security Agreement requires a monthly amount to be set aside in a reserve fund until the specified account balance is reached.
Condition: There was no documented independent review of the monthly reserve fund account reconciliations as compared to the required minimum balance.
Cause: The Center did not have a formal process in place to compare the required balance per the Loan Resolution Security Agreement to the monthly reserve fund account balance.
Effect: With no formal review or approval in place, the risk increases for employees participating in the federal award administration to not detect and correct noncompliance in a timely manner.
Questioned Costs: None reported. The required reserve balance was appropriately funded as of December 31, 2023.
Context/Sampling: Sampling was not used.
Repeat Finding from Prior Years: Yes, prior year finding 2022-006.
Recommendation: We recommend management implement procedures to include monitoring over special test and provisions related to federal expenditures including an independent review of the monthly account reconciliation to ensure the minimum reserve balance requirement is being met.
Views of Responsible Officials: Management agrees with the finding.