Finding 583040 (2022-003)

Finding 2022-003 Federal Agency: U.S. Department of Agriculture Federal Program Name: Community Facilities Loans and Grants Assistance Listing Number: 10.766 Award Period: July 1, 2021 - June 30, 2022 Type of Finding: Significant Deficiency in Internal Control over Compliance and Nonmaterial Noncompliance. Compliance Requirement: Borrowers shall establish accounts into which borrower funds shall be deposited in accordance with the loan resolutions authorizing the incurrence of indebtedness related to the Agency loan proceeds. Criteria or Specific Requirement: The Organization’s loan resolutions require establishment of a general account and reserve account. The accounts will be maintained in accordance with the loan resolutions as long as the authorized indebtedness to the agency is outstanding. Per the loan resolutions, the Organization shall set aside into the reserve account the sum of $521,016. Condition: No separate reserve account has been established. All funds related to the loan resolutions’ deposit requirements are retained in the general account. Questioned Costs: None Context: The Organization maintains sufficient deposits to meet the debt service reserve requirements in accordance with the loan resolutions. The resolutions require that certain reserves be deposited into distinct accounts. A separate reserve account was not established in accordance with those requirements. Cause: Management was not aware of the requirement for a separate reserve account. Effect: As a result of this condition, the Organization was not in compliance with the loan resolutions. This did not result in any questioned costs or material noncompliance. Recommendation: The Organization should establish a separate reserve as set forth in the loan resolutions. Views of responsible officials: There is no disagreement with the audit finding.