Four Directions Development CorporationNon-Profit

Criteria: Uniform Guidance requires that salaries charged to Federal awards are subject to its Standards of Documentation which state that salaries and wages must be based on records that accurately reflect the work performed. CDFI award states fringe benefits such as annual leave and holiday are allowable as long as they are made under formally established and consistently applied policies and subject to Uniform Guidance requirements. . UG states leave such as holidays and paid time off are allowable under specific circumstances, one of which is that they are equally allocated to all activities and Federal awards. The award also prohibits indirect costs. Condition: During our audit we tested a sample of salary charges and cash disbursements to the award during the period ended September 30, 2023. One charge to salaries was a journal entry posted at year end and the other a journal entry to expenditures for the respective fringe benefits. The timesheets provided to support these charges did not have time directly charged to the CDFI FA award. In addition, the PAR report provided to support the entries included time that would be in normal circumstances classified as indirect activities based on definitions in the Uniform Guidance section 200.413 and not allowable under the award. Cause: An analysis was performed by Management at year end to review salaries charged to funding sources. General journal entries were then posted to salaries and fringe to reallocate time and fringe charged to unrestricted awards to the CDFI award but not to any other award. The methodology used to charge and time and fringe in the analysis was not consistent with the methodology used throughout the year. In addition, there was confusion as to the requirements of the award and the requirements imposed by the Uniform Guidance and how the two interact. For instance, some items such as leave and holiday were considered allowable in the analysis, but Uniform Guidance puts specific criteria that must be met for it to be allowable. There was also confusion on what is considered a direct administrative cost (costs identified with a specific award) and indirect costs which apply to multiple awards. Effect: This process overrode the bi-weekly internal controls and created errors in the reclassification. The reclassification included indirect costs charged as direct costs and benefits such as annual leave and holidays not charged appropriately or consistently across the multiple awards as required by Uniform Guidance. Question Costs None. The Organization had met the terms of the award through the deployment of loan products.

Loan and Allowance for Loan Loss Policy Exceptions (Significant Deficiency) Program 21.020 Community Development Financial Institutions Program Criteria Under the Community Development Financial Institutions Program (CDFI), the Organization must use the financial assistance to support its financial assistance activities which include, but are not limited to, financial products (i.e. loans) and loan loss reserve. Pursuant to these requirements, the Organization is required to establish policies related to loan processing, eligibility and underwriting, and for establishing and monitoring its loan loss reserve allowance estimate. Condition and Context During our audit, we selected a sample of 15 new loans originated during the year ended September 30, 2019 and performed various control and compliance testing procedures deemed direct and material. Out of the sample of 15 loans, the Organization approved interest rates on 5 loans that were below the Organization?s loan policy amounts. During our audit, we also performed procedures over the Organization?s loan loss reserve allowance estimate and we noted that the calculated allowance for loan loss on 13 out of 99 total housing and commercial loans was not consistent with established loan policy criteria. Questioned Costs None Cause and Effect Management has determined that, due to turnover in personnel and lack of defined controls and procedures, there were issues with the process it uses to monitor compliance with established loan policies. Recommendation We recommend that any exceptions to established loan policy guidelines during the loan origination process be formally approved and documented. We also recommend implementing routine review and monitoring procedures over the allowance for loan loss summary to ensure accuracy and compliance with established policy.

Reporting (Significant Deficiency) Program 21.020 Community Development Financial Institutions Program Criteria The Community Development Financial Institutions Program (CDFI) requires the Organization to submit various financial and programmatic reports in accordance with reporting schedules contained in the contractual agreement. Condition and Context We selected all financial and programmatic reports required to be filed in accordance with the Organization?s CDFI contractual agreement and performed control and compliance testing. Procedures performed included agreeing information included in the reports to applicable supporting documentation, determining whether reports were reviewed and approved prior to submission to CDFI, reviewed the reports for general consistency with requirements outlined in the compliance supplement and CDFI contractual agreement, and reviewed to determine if the report was filed timely. We noted that the following reports were filed beyond their due date: ? Performance Goals & Measures ? Performance Progress Report ? Use of Awards Questioned Cost None noted Cause and Effect The Organization did not follow procedures for determining that programmatic reports were filed in accordance with the reporting schedule outlined in the CDFI contractual agreement. Recommendation We recommend that Organization review and modify as necessary internal policies and procedures related to timely filing of CDFI programmatic reports.

Procurement Policy (Significant Deficiency) Program 21.020 Community Development Financial Institutions Program Criteria Uniform Guidance procurement standards were required to be implemented effective October 1, 2018. Condition During our audit, we noted that the Organization had not updated its procurement policy to comply with Uniform Guidance procurement standards. Questioned Costs None Cause and Effect Management has determined that, due to turnover in personnel and lack of defined controls and procedures, there were issues with reviewing and updating its procurement policy to comply with the Uniform Guidance. Recommendation We recommend that the Organization continue to review and modify as necessary it?s procurement policies and procedures to ensure compliance with the Uniform Guidance. Written policies and procedures are required for the Organization?s procurement standards, conflicts of interest as it relates to procurement and allowable cost standards.