Finding 584019 (2023-004)

Material Weakness Repeat Finding
Requirement
P
Questioned Costs
-
Year
2023
Accepted
2024-01-05

AI Summary

  • Core Issue: The Organization underfunded the reserve account by $521 due to a clerical error and withdrew $100,000 without proper federal approval.
  • Impacted Requirements: Compliance with 2 CFR 200.303(a) and the Loan Resolution Security Agreement regarding reserve account management and federal agency approval.
  • Recommended Follow-Up: Implement a formal review process for disbursements from the reserve account to ensure federal approval is obtained as required.

Finding Text

2023-004 Department of Agriculture Federal Financial Assistance Listing #10.766 Communities Facilities Loans and Grants Cluster Special Tests & Provisions Significant Deficiency in Internal Control over Compliance and Noncompliance Criteria: 2 CFR 200.303(a) establishes that the auditee must establish and maintain effective internal control over the federal award that provides assurance that the entity is managing the federal award in compliance with federal statutes, regulations, and conditions of the federal award. Section 4 of the Loan Resolution Security Agreement dated October 18, 2012, states the Organization must set aside a reserve amount which may be established as a bookkeeping account or as a separate bank account. Funds may be deposited in institutions insured by the state or federal government or invested in marketable securities backed by the full faith and credit of the United States. When approved by the federal agency, funds may be withdrawn for certain specified Facility purposes. Condition: Management created the reserve account of $114,600 in December 2022 which was established as a separate bookkeeping and bank account. However, management transposed the $116,400 amount that was required to be in the reserve account according to the Letter of Conditions. The Organization underfunded the actual reserve balance after interest earnings by $521 as of June 30, 2023. Additionally, the Organization withdrew $100,000 in May 2023 from the reserve account to deposit into the operating account and subsequently replenished the reserve account within 14 days without obtaining proper federal agency approval. Cause: Due to a clerical error, the amount required to be included in the reserve account was underfunded in December 2022. Also, management did not have a control process in place to obtain federal agency approval over the disbursement from the reserve account. Effect: The Organization could be in violation of the reserve amount requirements if the federal agency does not approve of any short-term disbursements of the reserve account. Questioned Costs: None reported. Context/Sampling: Sampling was not used. Repeat Finding from Prior Year: No Recommendation: We recommend management have a formal review and approval process in place which monitors any disbursements or replenishments of the reserve account and obtains federal agency approval, as required. Views of Responsible Officials: Management agrees with the finding.

Categories

Special Tests & Provisions Significant Deficiency Matching / Level of Effort / Earmarking Internal Control / Segregation of Duties

Other Findings in this Audit

  • 7575 2023-003
    Material Weakness Repeat
  • 7576 2023-003
    Significant Deficiency
  • 7577 2023-004
    Material Weakness Repeat
  • 7578 2023-004
    Significant Deficiency
  • 584017 2023-003
    Material Weakness Repeat
  • 584018 2023-003
    Significant Deficiency
  • 584020 2023-004
    Significant Deficiency

Programs in Audit

ALN Program Name Expenditures
10.766 Community Facilities Loans and Grants $5.11M
93.498 Covid-19 Provider Relief Fund $251,311