TOWN OF LODGE GRASS, MONTANALocal Government

2019-004 Water and Waste Disposal Systems for Rural Communities Reporting Internal Control and Compliance CFDA Title: Water and Waste Disposal Systems for Rural Communities CFDA Number: 10.760 Federal Award Number: 00-03, 00-04, 92-05 Federal Agency: U.S. Department of Agriculture Pass-through Entity: Direct Condition: The Town did not submit have internal control procedures in place to ensure the reporting requirements for the Water and Waste Disposal Systems for Rural Communities funding were met. Context: We reviewed the reporting compliance requirements per the 0MB Compliance Supplement and the USDA Rural Development Letter of Conditions, reviewed to determine if internal control procedures were in place and reviewed for reports submitted as required. Criteria: Per the 0MB Compliance Supplement the following reports were required. "Financial Reporting 3. Form RD 442-2, Statement of Budget, Income and Equity (0MB No. 0575-0015) - This report covers financial operations relating to the borrower's water or waste disposal project. A borrower may submit this financial data on other forms, provided the forms are in a similar format and signed and dated by the organization's official to certify the correctness of the information. Also, an annual audit may be submitted in lieu of this form (7 CFR 1780, section 1780.47). 4. Form RD 442-3, Balance Sheet (0MB No. 0575-0015) - This report presents the financial status of the borrower's water or waste disposal project. A borrower may submit this financial data on other forms, provided the forms are in a similar format and signed and dated by the organization's official to certify the correctness of the information. Also, an annual audit may be submitted in lieu of this form (7 CFR 1780, section 1780.47)." Per the USDA Rural Development letter of Conditions, the following reports were required. 5. An annual report at the end of each fiscal year 6. An annual_ audit if the entity expended over $750,000 in federal financial assistance 7. If the entity expended less than $750,000 in federal financial assistance, a balance sheet and income and expense statement is to be filed within 60 days of the fiscal year end. 8. Quarterly income and expense statements are required unless the USDA RD office waives this requirement. Effect: Internal control procedures did not ensure the required reports were filed and the Town is not in compliance with the reporting compliance requirement. Cause: The Town had not established an adequate internal control structure to ensure timely report completion and filing. Recommendation: The Town should implement internal control procedures to ensure compliance with grant reporting requirements.

2019-007 Audit Report Deadline CFDA Title: Water and Waste Disposal Systems for Rural Communities CFDA Number: 10.760 Federal Award Number: 00-003, 00-04, 92-05 Federal Agency: U.S. Department of Agriculture Pass-through Entity: Direct Condition: Montana local governments with a June 30th fiscal year end must submit their audit report to the MT Department of Administration and the Federal Clearing house by March 31st (later postponed to September 30th due to COVID), following the fiscal year end. The Town did not have an audit completed until January 2023. Context: Per review of the audit compliance requirements for both the State of Montana and the Federal government. Criteria: The audit for the fiscal year ended June 30th 2019 was due to the State and the Federal government by September 30th, 2020 as required by MT Administrative Rules 2.4.411 and the Federal Uniform Guidance/A-133 rules. Effect: The Town was over 2 years late in completing their fiscal year 2019 audit. Cause: Audit costs can be significant to a small Montana Town. Recommendation: We recommend the Town complete their annual audits in compliance with MT Administrative Rules 2.4.411 and federal rules described in the Uniform Guidance/A-133.

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