Finding Text
Finding 2023-003 – U.S. Department of Agriculture – Community Facilities Loan and Grant, CFDA# 10.766
Compliance Requirement: Other Information
Condition: U.S. Department of Agriculture (“USDA”) covenants and requirements were not adhered to.
Criteria: Borrowers are required to fund reserves, maintain insurance, deposit funds in Federally insured banks, meet financial covenants, maintain sufficient debt service ratios, and in some cases comply with additional requirements established as part of the loan approval process. These requirements indicate the continuing compliance requirements that borrowers must meet.
Cause: The University had turnover in the business department and non-quantitative requirements were not closely monitored.
Context: The University was not able to meet covenants during the year but obtained a covenant waiver through fiscal year 2024. Additionally, the University did not meet the all the requirements per the USDA loan agreement dated as of December 16, 2021. The following requirements were not met during the fiscal year ended June 30, 2023:
1. Internally produced financial statements within 45 days (Article V, 5.8 (b))
2. Compliance certificate (Article V, 5.8 (c))
3. Budget provided 30 days prior to the beginning of the new fiscal year (Article V, 5.8 (d))
4. Student housing rent roll (Article V, 5.16)
Effect: Lack of compliance with loan covenants and requirements.
Recommendation: The University’s management should read and follow all USDA loan covenants and requirements.
Management Response: The University concurs with this finding.
Corrective Action Plan: See attached management’s corrective action plan.