CHESTERFIED-MARLBORO ECONOMIC OPPORTUNITY COUNCIL INC

2022-001 ? Accounting for Notes Payable Condition: In 2016 the Agency closed on a U.S. Department of Agriculture Rural Development (?USDA-RD?) loan. In 2018 and 2019 the Agency borrowed a total of $143,098 under this loan. The liability associated with this note payable was not recorded in the Agency?s financial records. Internal controls over financial reporting should be in place to provide reasonable assurance that notes payable are recorded in the Agency?s financial books and records at inception and are reported in accordance with accounting principles generally accepted in the United States. Criteria: Generally accepted accounting standards issued by the Financial Accounting Standards Board. Cause: There appears to have been a lack of communication between the Agency?s administrative and financial management when the Agency entered into the note agreement with USDA-RD, and financial management did not receive the note documentation needed to record the obligation in the financial records. Effect: As a result of this condition, the Agency?s financial records did not include the liability associated with this loan. It was necessary for the external auditors to make significant adjustments to the Agency?s accounting records so that the financial statements would be presented in accordance with generally accepted accounting standards. Recommendation: The Agency should ensure that there is strong communication between administrative and financial management so as to identify all transactions requiring recording in the financial books and records. Response: The Agency is committed to presenting its financial statement in accordance with generally accepted accounting principles and will emphasize the importance of regular, ongoing communication of all financial transactions.

Finding 2022-001 ? Accounting for Notes Payable Condition: In 2016 the Agency closed on a U.S. Department of Agriculture Rural Development (?USDA-RD?) loan. In 2018 and 2019 the Agency borrowed a total of $143,098 under this loan. The liability associated with this note payable was not recorded in the Agency?s financial records. Internal controls over financial reporting should be in place to provide reasonable assurance that notes payable are recorded in the Agency?s financial books and records at inception and are reported in accordance with accounting principles generally accepted in the United States. As a result of this condition, the Agency?s financial records did not include the liability associated with this loan. It was necessary for the external auditors to make adjustments to the Agency?s accounting records so that the financial statements would be presented in accordance with generally accepted accounting standards. Corrective Action Planned: The Agency will establish procedures to ensure that there is strong communication between administrative and financial management so as to identify any borrowing transactions requiring recording in the financial books and records. Name of Contact Person Responsible for Corrective Action: Deborah E. Clyburn, Deputy/Fiscal Director Anticipated Completion Date: August 1, 2023

2022-002 ? Reporting of Loan Proceeds and Balances on Schedule of Expenditures of Federal Awards Condition: In 2016 the Agency closed on a U.S. Department of Agriculture Rural Development (?USDA-RD?) loan. In 2018 and 2019 the Agency borrowed a total of $143,098 under this loan. These loan proceeds should have been recorded as a liability in the Agency?s financial records and included as federal expenditures on the Schedule of Expenditures of Federal Awards (?SEFA?) for 2018 and 2019, as loan proceeds were expended. The loan balance as of the beginning of each year should have been included in each subsequent SEFA. Criteria: Provisions of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (?Uniform Guidance?) Cause: The liability associated with the USDA-RD note payable was not recorded in the Agency?s financial records. Therefore, those funds were not identified as federal funds to be included on the SEFA. Effect: As a result of this condition, the Agency?s financial records did not include the liability associated with the USDA-RD loan and its SEFA for 2018 and 2019 did not include the receipt and expenditure of the loan funds. Further, the SEFA for 2020 and 2021 did not include the appropriate disclosure of the beginning balance of the loan amount, as required by Uniform Guidance. Recommendation: The Agency should ensure that its financial records include all of its liabilities incurred and its Schedule of Expenditure of Federal Awards is accurately and completely presented. Response: The Agency is committed to presenting its Schedule of Expenditure of Federal Awards is presented in accordance with Uniform Guidance.

2022-002 ? Reporting of Loan Proceeds and Balances on Schedule of Expenditures of Federal Awards Condition: In 2016 the Agency closed on a U.S. Department of Agriculture Rural Development (?USDA-RD?) loan. In 2018 and 2019 the Agency borrowed a total of $143,098 under this loan. These loan proceeds should have been recorded as a liability in the Agency?s financial records and included as federal expenditures on the Schedule of Expenditures of Federal Awards (?SEFA?) for 2018 and 2019, as loan proceeds were expended. The loan balance as of the beginning of each year should have been included in each subsequent SEFA. As a result of this condition, the Agency?s financial records did not include the liability associated with the USDA-RD loan and its SEFA for 2018 and 2019 did not include the receipt and expenditure of the loan funds. Further, the SEFA for 2020 and 2021 did not include the appropriate disclosure of the beginning balance of the loan amount, as required by Uniform Guidance. Corrective Action Planned: The Agency will establish procedures to ensure that its financial records include all of its liabilities incurred and its Schedule of Expenditure of Federal Awards is accurately and completely presented. Name of Contact Person Responsible for Corrective Action: Deborah E. Clyburn, Deputy/Fiscal Director Anticipated Completion Date: August 1, 2023

2022-003 ? Maintenance of Reserve Account Condition: In 2016 the Agency closed on a U.S. Department of Agriculture Rural Development (?USDA-RD?) loan. This loan requires that the Agency establish and maintain a Reserve Account, contributing to it until the account balance equals one annual payment amount. The balance as of December 31, 2022, should be $3,271.44. The Agency has not yet established such a Reserve Account. Criteria: Provisions of USDA-RD loan document Cause: The liability associated with the USDA-RD note payable was not recorded in the Agency?s financial records. Therefore, the Agency did not establish the required Reserve Account. Effect: As a result of this condition, the Agency did not have the Reserve Account required by the terms of its USDA-RD loan. Recommendation: The Agency should establish a Reserve Account, contribute an amount so as to meet the required balance at that date and continue monthly contributions until the maximum required balance is met. Response: The Agency will establish a Reserve Account and contribute the required amounts on a regular basis.

2022-003 ? Maintenance of Reserve Account Condition: In 2016 the Agency closed on a U.S. Department of Agriculture Rural Development (?USDA-RD?) loan. This loan requires that the Agency establish and maintain a Reserve Account, contributing to it until the account balance equals one annual payment amount. The balance as of December 31, 2022, should be $3,271.44. The Agency has not yet established such a Reserve Account. As a result of this condition, the Agency did not have the Reserve Account required by the terms of its USDA-RD loan. Corrective Action Planned: The Agency will establish a Reserve Account, contribute an amount so as to meet the required balance at that date and continue monthly contributions until the maximum required balance is met. Name of Contact Person Responsible for Corrective Action: Deborah E. Clyburn, Deputy/Fiscal Director Anticipated Completion Date: October 31, 2023