SANGAMON VALLEY PUBLIC WATER DISTRICT

Criteria – The U.S. Code of Federal Regulations at Title 2, Subtitle A, Chapter II, Part 200, Subpart D, Section 200.305(b) explains that federal award recipients and subrecipients must minimize the time elapsing between the transfer of federal funds and their actual disbursement. The regulations do not define “minimize the time elapsing” but the period is commonly considered by oversight agencies to be for immediate cash needs to be disbursed within three business days of the federal awardee’s receipt. Condition – Our audit procedures identified that the Sangamon Valley Public Water District (the District) drew down and received $1,203,229 federal loan cash on December 19, 2025 before making corresponding vendor payments on January 30, 2026 ($1,059,163) and February 10, 2026 ($144,066), leading to idle federal funds in the District’s bank accounts for over a month. Cause of Condition – The cause was identified as an administrative delay in processing vendor payments and inadequate secondary review to ensure prompt disbursement of cash from a federally funded loan. Effects of Conditions – By holding unspent federal funds, the District violated cash management compliance requirements. This increases the risk of fraud or improper use of federal funds, as well as potential interest liabilities and program restrictions imposed by the federal agency or pass-through entity. This finding has caused a qualified opinion on the District’s compliance with its major federal program requirements. Questioned Costs – None noted. Perspective Information – There were three federally funded loan draws in 2025 totaling $1,656,722. One draw was tested for $1,210,372, which consisted of three vendor invoices for the funded project. One invoice for $7,143 was paid prior to the loan draw. The other two invoices totaling $1,203,229 were paid over one month after the draw and cash receipt date of December 19, 2025. Identification of Repeat Finding – This finding does not repeat a prior finding. Recommendations - 1. Strengthen written cash management policies and procedures to require that cash drawdowns are requested as close as administratively feasible to actual cash outlays (e.g., cash outlays are within a few days of the cash drawdown receipt). 2. Establish formal monitoring procedures over cash management activities, including tracking the timing of federal fund receipts and related disbursements, performing periodic reviews of outstanding contractor invoices, and implementing follow-up procedures to ensure payments are made timely. Views of Responsible Officials - Management of the District will take measures to ensure compliance with the finding noted above.

Criteria Per 2 CFR Part 200, Appendix II, non-Federal entities must include specific provisions in all contracts made under federal awards. Conditions Our audit procedures identified that clauses required by the Uniform Guidance, and other award-specific procurement requirements, were not included in executed contract documents associated with a federally funded project. Population of Items Tested One contract was selected for detailed review. The following required clauses were not included in the executed contract: The contract did not contain language required by 2 CFR Part 200, Appendix II(G) concerning compliance with the Clean Air Act and the Federal Water Pollution Control Act. The contract did not contain language addressing specific federal compliance requirements outlined in the Loan Agreement with the Illinois Environmental Protection Agency, including: The Americans with Disabilities Act of 1990, as amended (42 USC 12101); Restrictions on Lobbying per 40 CFR Part 34; Immigration and Naturalization Service Employment Eligibility Verification (I-9 Forms); Section 504 of the Rehabilitation Act of 1973; Title VI of the Civil Rights Act of 1964; Archaelogical and Historic Preservation Act (Pub. L. 113-287, 54 USC 312501-312508); and Native American Graves Protection and Repatriation Act (NAGPRA) (Pub. L. 101-601, 25 USC 3001-3013). Causes of Conditions Management did not ensure that all federally required and award-specific contract provisions were incorporated into the final executed agreement with the contractor. Effects of Conditions The executed contract associated with a federally funded project was not fully compliant with 2 CFR Part 200 and the applicable loan agreement. As a result, the District entered into a binding agreement that did not include all federally and state grantor required provisions, limiting enforceability of certain federal and state compliance obligations. Auditor's Recommendations Management should develop and implement and federal procurement compliance checklist to be used during contract drafting and execution to ensure all required clauses are included in contracts funded by federal awards. Contracts should be reviewed by a knowledgeable member of management or legal counsel familiar with 2 CFR Part 200 and any award-specific agreements before execution. Where deficiencies in prior contracts are identified, management should consider executing contract amendments to retroactively include the required federal language, as appropriate and allowable by law. View of Responsible Official Management of the District will take measures to ensure compliance with the finding noted above.