Finding Text
Condition: Project funds including restricted funds (taxes and insurance) were invested in investments other than in accordance with the USDA Handbook. Criteria: In accordance with the USDA Handbook project funds should be in the form of a cash deposit or invested in obligations backed by the U.S. Government or an Agency of the U.S. Government, Triple A-rated Government National Mortgage Association or Triple A-rate pre-refunded bond. Cause: Management invested a portion of project funds and restricted deposits (taxes and insurance) in mutual funds in an effort to generate higher investment income for the Project. Effect of Potential Effect: The effect of this finding, which cannot be quantified, is that funds invested in mutual funds are exposed to various risks such as market and credit risks. Recommendation: We recommend that management invest Project funds and restricted funds in investments that are in accordance with the USDA Handbook. View of Responsible Officials and Planned Corrective Action: Management is aware of such market and credit risks and, therefore the Project Sponsor (Good Shepherd Home) is committed to reimburse the Project for any net cumulative realized investment losses that the Project incurs. There is a cumulative net gain through December 31, 2022.