Finding Text
Part III - Findings and Questioned Costs Relating to Federal Awards
2021-002 Reserve Account
Compliance Cash Management
Category Significant Deficiency in Internal Control and Noncompliance
ALN 10.770
Program Water and Waste Disposal Loans and Grants (Section 306C)
Agency US Department of Agriculture (Rural Development)
Criteria
Section 4, Protection and Disposition of the Funds of Water and Waste System Grant Agreement
(b) Debt Service Account - For borrowers on other than monthly debt service payments, transfers, in proportion to
income availability, shall be made from the General Account and set aside in an account designated as the Debt
Service Account, in sufficient amount which will accumulate for the next installment on the note.
(c) Reserve Account - From the remaining funds in the General Account, after transfers and payments required in (b)
and (c), there shall be set aside into an account(s) designated as the Reserve Account(s) the sum of $1,684 each
month until the sum of $201,982 is reached. With the prior written approval of the Government, funds may be
withdrawn and used for such things as loan installments, emergency maintenance, extensions to facilities and
replacement of short-lived assets, subject to conditions established by the Government.
Condition
The Authority has a deposit deficiency of $40,416 in the Reserve Account. The balance of the debt service reserve as
of June 30, 2021, shall be $90,936.
Cause
Lack of oversight controls to comply with the cash management compliance requirement.
Effect
The Federal awarding agency could temporarily withhold cash payments pending correction of the deficiency by the
Authority.
Questioned Costs
None
Recommendation
The Authority needs to strengthen its internal controls over the cash management compliance requirements.
Prior year finding
This finding is similar to a prior year finding identify as 2020-012
Views of Responsible Official (Unaudited)
Refer to Corrective Action Plan