RURAL WATER DISTRICT NO. 2, BOYD COUNTY, NEBRASKALocal Government

2019-005 INTERNAL CONTROL OVER SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS PREPARATION AND REVIEW Criteria As described in our engagement letter, management is responsible for establishing and maintaining internal controls, including monitoring, and for the fair presentation of the schedule of expenditures of federal awards, including the notes to the schedule of expenditures of federal awards. Condition The District does not have a system of internal control that would pro-vide management with the reasonable assurance that the District?s schedule of expenditures of federal awards and related disclosures are complete and presented in accordance with the accounting principles generally accepted in the United States of America. As such, management requested us to prepare a draft of the schedule of expenditures of federal awards, including the related note disclosures. Cause Management does not prepare the schedule of expenditures of federal awards and accounting personnel are not aware of requirements. Potential Effect The potential exists that a material misstatement of the schedule of expenditures of federal awards could occur and not be prevented or detected by the Corporation?s internal control. Recommendation We recommend that the District review and approved the proposed auditor adjusting entries and the adequacy of the schedule of expenditures of federal awards disclosures prepared by the auditors and apply analytic procedures to the draft financial statements, among other procedures as considered necessary by management. Views of Responsible Officials and Planned Corrective Actions The District relies on the auditor to propose adjustments necessary to prepare the schedule of expenditures of federal awards including the related note disclosures. The District reviews the schedule of expenditures of federal awards and approves all adjustments.

2019-006 INTERNAL CONTROL OVER DONATIONS RECEIVED FOR PROJECTS RECEIVING FEDERAL FUNDING Criteria The internal control system should provide for reconciliations of all re-venue sources including donations received for projects receiving federal funding to ensure that the District does not receive a duplication of benefits. All such donations should be formally communicated to the awarding agencies for proper reporting and consideration. Such communication should be in writing and documented. Condition Donations of labor and materials of $3,235 were submitted to the FEMA portal during 2019. The District received $1,207,101 in cash donations through December 2019, that were not initially formally re-ported to FEMA. The District discussed such donations orally with the FEMA representative who indicated that the donations would not be considered to reduce FEMA funding. Cause FEMA reporting requirements and the FEMA portal system were new to all of the staff and management of the District. The District relied on FEMA officials to assemble the information into the format required. In addition, the District relied on the oral advice of the representative that no action was required. Potential Effect The District could substantially understate the donations received if not reviewed and reconciled to the underlying accounting records and receive a duplication of benefits in federal funds. Recommendation Due to the material amount of the donations, the District should have reported the donations in a more formal manner and have written documentation as to the position of FEMA. The District has subsequently contacted FEMA and NEMA and provided a full report of actual donations. FEMA officials have determined that the donations were not a duplication of benefits since the donations were not specifically designated to cover the same work funded by FEMA. Views of responsible officials and corrective action The District has contacted FEMA and NEMA regarding the omission of donations received for the project as described above.