SOUTHERN IOWA COUNCIL OF GOVERNMENTS

Loan Requirements (Repeat Finding) Criteria: The EDA requires the Government to obtain, maintain and retain certain documentation from borrowers in relation to loans made by them. Condition: It does not appear the Government enforces the borrowers loan covenant requirements for continuing compliance requirements. Specifically, it was noted where the Government did not determine whether the borrower in question met the loan covenant requirements in relation to job creation. Cause: Procedures have not been designed to ensure loan covenants are enforced to ensure comliance with the continuing compliance requirements. Effect: Due to the failure to follow procedures, the Government may be out of conmpliance with its internal requirements and with the EDA requirements. Recommendation: The Government should ensure all loan covenant requirements for its borowers are followed in the future. Response and Corrective Action Planned: We will implement this recommendation in the future. Conclusion: Response acknowledged.

Loan Requirements - It does not appear the Government analyzes its borrowers loan covenant requirements for continuing compliance requirements. Specifically one instance was noted where the Government did not determine whether the borrower in question met the loan covenant requirements in relation to employment requirements and proof of insurance.

III-A-21 Undocumented Costs (2021-001) Criteria ? Title 2, U.S. Code of Federal Regulations, Part 200.430, Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards (Uniform Guidance) requires all federal costs for employee compensation reasonably reflect the total activity for which the employee was compensated, not exceeding 100% of the compensated activities. Condition ? Supporting documentation was not available to substantiate $11,193 of personnel related costs. Cause ? Procedures have not been designed and implemented to ensure federal expenditures are properly supported. Effect ? The Southern Iowa Council of Governments (Government) is not in compliance with Federal regulations pertaining to proper documentation and support of federal costs. Unsupported costs cannot be paid with federal funds. Federal reimbursements of unsupported costs must be returned to the grantee, making these a local expense. Recommendation ? The Government should implement procedures to ensure supporting documentation is retained for all costs charged to federally funded projects. Response and Corrective Action Planned ? We are working with the EDA to resolve this issue. Conclusion ? Response acknowledged.

III-B-21 Loan Requirements (2021-002) Criteria ? The EDA requires the Government to obtain, maintain and retain certain documentation from borrowers in relation to loans made by them. Condition ? It does not appear the Government analyzes its borrowers loan covenant requirements for continuing compliance requirements. Specifically, one instance was noted where the Government did not determine whether the borrower in question met the loan covenant requirements in relation to company dividends. Cause ? Procedures have not been designed to ensure loan covenants are reviewed to ensure compliance with the continuing compliance requirements. Effect ? Due to the failure to follow procedures, the Government may be out of compliance with its internal requirements and with the EDA requirements. Recommendation ? The Government should ensure all loan covenant requirements for its borrowers are followed in the future. Response and Corrective Action Planned - We will implement this recommendation in the future. Conclusion ? Response acknowledged.

III-A-20 Economic Adjustment Assistance Grant (2020-001) Criteria ? The Economic Development Administration (EDA) requires that semi-annual financial reports (ED-209 Form) be filed with the EDA. The EDA requires that these reports be properly documented and supported. Condition - Our review of the semi-annual reports filed with the EDA document amounts on these reports which could not be supported by the accounting records of the Southern Iowa Development Group, Inc. Cause ? Procedures have not been designed and implemented to ensure amounts reported on the semi-annual reports filed with the EDA are properly supported and documented. Effect ? The EDA may require the Southern Iowa Development Group, Inc. to determine why these differences exist. This issue could also negatively affect the perception the EDA has on the Southern Iowa Development Group, Inc. Recommendation ? The Southern Iowa Development Group, Inc. should implement procedures to ensure the amounts reported on the semi-annual reports filed with the EDA are supported by the accounting records of the Southern Iowa Development Group, Inc. Response and Corrective Action Planned ? In relation to the semi-annual reports filed with the EDA, the numbers in question are calculated by the EDA computer program, and we do not know how the EDA came up with them. In the future, we will attempt to ensure that the numbers on these semi-annual reports agree to the accounting records of the Southern Iowa Development Group, Inc. Conclusion ? Response acknowledged.

III-B-20 Loan Requirements (2020-002) Criteria ? The EDA requires the Southern Iowa Development Group, Inc. to obtain and maintain certain documentation from borrowers in relation to loans made by them. Condition - The Southern Iowa Development Group, Inc. made loans even though some of the required loan documents were not obtained from the recipients. Specifically, for part of the year, in two instances it was noted that the Southern Iowa Development Group, Inc. did not obtain key man life insurance, even though this was required by the terms of the loans. Cause ? Procedures have not been designed to ensure required loan documentation is received prior to the closing of the loans. Effect ? Due to the failure to follow procedures, the Southern Iowa Development Group, Inc. may be out of compliance with its internal requirements and with the EDA requirements. Recommendation ? The Southern Iowa Development Group, Inc. should ensure all loan requirements are followed in the future. Response and Corrective Action Planned ? As of September 30, 2020, this is no longer an issue. In the future, we will ensure compliance with these provisions on future loans we make. Conclusion ? Response acknowledged.

III-A-19 Economic Adjustment Assistance Grant (2019-001) Criteria ? The Economic Development Administration (EDA) requires that semi-annual financial reports (ED-209 Form) be filed with the EDA. The EDA requires that these reports be properly documented and supported. Condition - Our review of the semi-annual reports filed with the EDA document amounts on these reports which could not be supported by the accounting records of the Southern Iowa Development Group, Inc. Cause ? Procedures have not been designed and implemented to ensure amounts reported on the semi-annual reports filed with the EDA are properly supported and documented. Effect ? The EDA may require the Southern Iowa Development Group, Inc. to determine why these difference exist. This issue could also negatively affect the perception the EDA has on the Southern Iowa development Group, Inc. Recommendation ? The Southern Iowa Development Group, Inc. should implement procedures to ensure the amounts reported on the semi-annual reports filed with the EDA are supported by the accounting records of the Southern Iowa Development Group, Inc. Response and Corrective Action Planned ? In relation to the semi-annual reports filed with the EDA, the numbers in question are calculated by the EDA computer program, and we do not know how the EDA came up with them. In the future, we will attempt to ensure that the numbers on these semi-annual reports agree to the accounting records of the Southern Iowa Development Group, Inc. Conclusion ? Response acknowledged.

III-B-19 Loan Requirements (2019-002) Criteria ? The EDA requires the Southern Iowa Development Group, Inc. to obtain and maintain certain documentation from borrowers in relation to loans made by them. Condition - The Southern Iowa Development Group, Inc. made loans even though some of the required loan documents were not obtained from the recipients. Specifically, in two instances it was noted that the Southern Iowa Development Group, Inc. did not obtain key man life insurance, even though this was required by the terms of the loans. Cause ? Procedures have not been designed to ensure required loan documentation is received prior to the closing of the loans. Effect ? Due to the failure to follow procedures, the Southern Iowa Development Group, Inc. may be out of compliance with its internal requirements and with the EDA requirements. Recommendation ? The Southern Iowa Development Group, Inc. should ensure all loan term requirements are followed in the future. Response and Corrective Action Planned ? We will continue to encourage the purchase of key man life insurance from the individuals in question. Conclusion ? Response acknowledged.

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