Finding Text
U.S. Department of Agriculture Federal Financial Assistance Listing #10.766 Community Facilities Loans and Grants Cluster Special Tests and Provisions Material Weakness in Internal Control Over Compliance and Noncompliance Not Considered Material Criteria: Article IV of the Authority's Supplemental Bond Indenture agreement dated June 1, 2006, requires the Authority to establish a reserve fund. As approved by the USDA Community Programs Director, the Authority was required to make monthly deposits of $1,350 into the reserve fund beginning in April 2021, until the fund reaches $162,000. Condition: The Authority did not deposit the required funds into the debt service fund until October 2021. In addition, the Authority?s June 2022 payment was not received by the bank until July 11, 2022. Cause: In May 2020, the Authority received approval from the United States Department Agriculture (USDA) to use debt reserve funds in response to the COVID Pandemic. The new management team was not aware of the arrangement with USDA and that deposits to the debt reserve funds were to commence in April 2021. In addition, the June 2022 reserve deposit was not submitted to the bank until July 2022 due to lack of management oversight. Effect: The Authority's reserve account was not in compliance with the Supplemental Bond Indenture and program requirements until October 2021. Additionally, missing or late payments continued to result in noncompliance with program. Questioned Costs: None reported. Context: Sampling was not used. Repeat Finding from Prior Years: No Recommendation: The Authority needs to establish a monthly process to ensure the reserve deposit is made and posted by the bank on a timely basis. Additionally, the Authority should monitor to ensure the reserve fund has an adequate balance based on the requirements. Views of Responsible Officials: Management agrees with the finding.