Improve Procedures over the Preparation of the Schedule of Expenditure of Federal Awards (Material Weakness)
As part of our audit procedures, we audit the completeness and the accuracy of the Schedule of
Expenditures of Federal Awards. Management is responsible for the preparation of the Schedule of
Expenditures of Federal Awards in accordance with the requirements of the Uniform Guidance. This
schedule is an integral component of the Organization’s reporting in accordance with the Uniform
Guidance as it identifies total federal awards expended for each individual federal program and it serves
as the primary basis for the auditor’s major program determination. During our audit, we became aware
of evidence which indicated that in a prior year loans that had been thought to be forgiven by USDA were
in fact repurchased by USDA. The debt should have been reflected on the Schedule of Expenditures of
Federal Awards under the Section 538 program. The Schedule of Expenditures of Federal Awards was
Corrected during the audit, however, it appears the errors were made due to a lack of sufficient
Internal controls over the preparation of the Schedule of Expenditures of Federal Awards.
Recommendation – We recommend that the Organization implement adequate procedures, including
Staff training and formal review and verification process by supervisory personnel, as part of its annual
process to prepare the Schedule of Expenditures of Federal Awards in order to ensure its accuracy.
Corrective Action Plan – The repurchase of the loans occurred in 2022 and all documents regarding the
Repurchase of the loans were provided to FDHC who then provided all documents to auditors. At that
time it was not made clear to FDHC that the repurchase of the loans should be included on the Schedule
of Expenditures of Federal Awards under the Section 538 program. The repurchase was not included on
the 2022 Schedule of Expenditures of Federal Awards under the Section 538 program and this was not
an issue on FDHC’s 2022 audit which was also provided to and reviewed by USDA. It was not until 2024
that this came into question. FDHC reached out to USDA to verify if this repurchase should be included
on the Schedule of Expenditures of Federal Awards under the Section 538 program. After going through
multiple channels of USDA, it was determined that FDHC should include the repurchase of the Schedule
of Expenditures of Federal Awards under the Section 538 program. Now that FDHC has been made aware
that this needs to be included, CEO, Shelby Garcia, FDHC will get written confirmation from USDA as to
the nature of any future debt restructurings/forgiveness, and the corrective action plan has been in place
since the start of the fiscal year.