Finding 568214 (2024-001)

Finding 2024-001 U.S. Department of the Treasury Community Development Financial Institutions Fund Equitable Recovery Program (CDFI ERP) Assistance Listing No. 21.033 Criteria – 2 CFR 200.510(b) of the Uniform Guidance states that the auditee is responsible for preparing the Schedule of Expenditures of Federal Awards (SEFA). 2 CFR 200.302(b) of the Uniform Guidance states that a nonfederal entity must identify in its accounts all federal awards received and expended, as well as the federal programs under which they were received, and those amounts must be accurately and completely reported on the SEFA. Condition – The Organization consists of Hawaiian Community Assets, Inc. (HCA) and its subsidiary Hawaii Community Lending, Inc. (HCL). The CDFI ERP program is managed by HCL. During the year ended September 30, 2024, HCL used the CDFI ERP grant award amount of $500,000 to fund seven loans. Subsequent to the fiscal year end, but prior to the audit, HCL determined the borrower for five of the seven loans, totaling approximately $299,882, did not meet the geographical eligibility requirements. HCL was able to identify other non-federal funding to fund the five loans deemed ineligible and made the necessary corrections in its grant reporting to the federal agency. However, HCL did not make corrections to its accounting records and SEFA. Cause – HCL did not have a process in place to ensure the accurate reporting of its federal expenditures in its SEFA. Effect or Potential Effect – Federal expenditures are over/under reported or in the wrong fiscal period. A federal program may be misidentified as a major or non-major program and thus, may be improperly included or excluded from required audit procedures. Questioned Costs – None. Context – Total federal expenditures in the SEFA were reduced from $7,459,199 to $7,159,317. CDFI ERP expenditures were reduced from $500,000 to $200,118. The CDFI ERP grant award period does not end until September 30, 2028 and HCL has $299,882 remaining in CDFI ERP funding to fund future loans to borrowers who meet the eligibility requirements. Recommendation – HCL should implement procedures to ensure accurate reporting of its federal expenditures in its SEFA, including having an appropriate member of management review the SEFA. Responsible Official’s Response and Corrective Action Planned – Refer to the Corrective Action Plan.