POLK-BURNETT ELECTRIC COOPERATIVE

Criteria: Management is responsible for establishing and maintaining internal controls to assure the Cooperative?s annual financial reporting is in accordance with GAAP. Condition: The potential exists that a material misstatement of the annual financial statements could occur and not be prevented or detected by the Cooperative?s internal controls. Effect: The Cooperative engages the audit firm to prepare drafts of its annual financial statements and related footnote disclosures in accordance with GAAP based on information and trial balances provided by management. Cause: The Cooperative?s staff does not possess the technical expertise, or the time required to draft the year end external financial statements. Recommendation: The Cooperative should continue to evaluate its internal staff and expertise to determine if an internal control policy over the annual financial reporting is beneficial. Management should review key disclosures in a checklist and receive additional education. View of Responsible Official: In the past we have considered what steps we would need to take to prepare annual financial statements and footnote disclosures. The cost for current staff to receive additional training or hiring additional staff with the expertise outweighed the benefit. We will continue to evaluate this in the future. Name of Responsible Person: Heather Gerber Projected Implementation Date: N/A

Criteria: The Cooperative has not documented in writing their grant procedures as they relate to federal funds. 2 CFR 200, subpart D, section 200.302 requires the Cooperative to maintain written procedures for determining the allowability of costs in accordance with subpart E, Cost Principles. Subpart D, 200.305 requires written procedures for minimizing time elapsing between the transfer of funds and disbursement to the Cooperative. Section 200.318 requires written procurement standards including conflicts of interest and 300.319 requires written procurement procedures. Condition: The Uniform Grant Guidance requires all subrecipients of federal funds to document grant procedures relating to verifying allowable cost, cash management, and conflict of interest. Effect: Cooperatives who do not document their federal grant procedures, are not in compliance with Uniform Grant Guidance, subpart D. Cause: The Cooperative was unaware of the requirement to have written grant procedures for federal funds, as it does not regularly have a single audit. Recommendation: We recommend that the Cooperative should consider the need to adopt written policies for federal funds. View of Responsible Official: We are an entity that does not have any experience in the recent past with federal awards. We were not aware of compliance with the regulations stated above. We will research the steps we need to take to implement. Name of Responsible Person: Heather Gerber Projected Implementation Date: N/A