Purchase Area Development DistrictLocal Government

The Purchase Area Development District Lacks Adequate Internal Controls Over Economic Adjustment Assistance Reporting Federal Program: ALN 11.307 Economic Adjustment Assistance Award Number and Year: ALN 11.307 Economic Adjustment Assistance 2021 Name of Federal Agency: U.S. Department of Commerce Compliance Requirements: Reporting Type of Finding: Material Weakness and Material Noncompliance Amount of Questioned Costs: None Opinion Modification: Qualified Opinion COVID Related: YesThe Purchase Area Development District (PADD) lacks adequate controls over federal Economic Assistance grant reporting. The following deficiencies were noted for the 2023 fiscal year: • PADD reported the incorrect amount of principal outstanding on loans on the EDA 209 Report submitted for the American Rescue Plan Act Revolving Loan Fund (RLF). The amount reported as principal outstanding was $963,797. This amount represents the total amount of principal outstanding as of July 14, 2023. The amount outstanding as of June 30, 2023 was $523,151. This resulted in the report being materially overstated by $440,646. The report included three RLF loans that were issued in July of 2023. For a total of $439,250. There were also minor differences on two other RLF loans were payments made at the end of the year totaling $1,396 were not accounted for in the principal balance. The report was also not submitted by July 31, 2023 as required • PADD overstated their notes to the SEFA by $107,010. The balance for the Intermediary Relending Program was listed as $696,834 which was the amount of the loan from IRP not the amount expended/granted to local business. The total outstanding as of June 30, 2023 was $589,824.The inaccurate EDA 209 report was primarily due to an oversight by the preparer, but it also appeared that the report was not reviewed by another employee prior to being submitted. The overstated SEFA notes were due to the PADD’s reliance on an external party to prepare the financial statements and notes to the financial statements. A lack of a review from the PADD of the external party’s work resulted in a misstatement. Due to the lack of controls over the reporting process for federal awards, the PADD has an increased risk of misappropriation of funds, and noncompliance with grant requirements. This could result in potential questioned costs and being denied grants in the future. 13 CFR 307.14 (b) provides the requirements for the EDA RLF reports and states: “RLF Recipients must certify as part of the RLF report to EDA that the RLF is operating in accordance with the applicable RLF Plan, and that the information provided is complete and accurate.” Additionally, strong internal controls over federal grant reporting are vital in ensuring that federal awards are accounted for properly. Strong internal controls are also important in safeguarding the area development district’s assets and those given the responsibility of accounting for them, as well as helping make certain PADD complied all requirements. We recommend PADD follow the guidance contained within 13 CFR Chapter 307 for completing the Form ED-209 RLF Report. We also recommend PADD strengthen controls over federal awards by implementing review processes to ensure grant details and amounts reported on financial reports agree to amounts reported on financial statements. Furthermore, we recommend controls be put in place to ensure deadlines are met for all reporting requirements.

1. Sub-grantee Monitoring - Title III (CFDA 93.044, 93.045, and 93.053) program services are performed by sub-grantees, and Purchase Area Development District, Inc. provides technical assistance and administrative oversight to the sub-grantees. The Title III grant agreement requires Purchase Area Development District, Inc. to ensure that the sub-grantees are in compliance with the Title III grant terms. Onsite monitoring is a materially significant part of the administrative oversight process. The Purchase Area Development District, Inc. conducted onsite monitoring of its Title III sub-grantees for fiscal year end June 30, 2019, however, formal monitoring reports were never written and the findings were never communicated to the sub-grantees. While policies and procedures exist to ensure that the onsite monitoring results are communicated to sub-grantees and that a formal corrective action plan is implemented by the sub-grantees, Purchase Area Development District, Inc.?s personnel did not follow the established policies and procedures. This material weakness could result in material non-compliance with the Title III grant terms.