Tippecanoe And Chapman Lakes Regional Sewer DistrictLocal Government

Finding 2024-003 Information on the federal program: Subject: Water and Waste Disposal Systems for Rural Communities – Equipment and Real Property Management Federal Agency: U.S. Department of Agriculture Assistance Listing Number: 10.760 Federal Award Number: N/A Pass-Through Entity: N/A Compliance Requirements: Equipment and Real Property Management Audit Finding: Material Weakness, Noncompliance, Qualified Opinion Criteria: 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal awards in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO)...." 2 CFR 200.313(d)(1) states in part: "Property records must be maintained that include a description of the property, a serial number or other identification number, the source of funding for the property (including the federal award identification number), who holds title, the acquisition date, cost of the property, percentage of federal participation in the project costs for the federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sales price of the property" Condition: An effective internal control system was not in place at the District to ensure compliance with requirements related to the grant agreement and the Equipment and Real Property Management compliance requirement. Cause: Management had not established a system of internal control that would have ensured proper procedures are followed to comply with the Equipment and Real Property Management compliance requirements. Effect: The failure to establish an effective internal control system enabled noncompliance to go undetected and the proper tracking of assets acquired with federal funds was not taking place. Noncompliance with the grant agreement and the Equipment and Real Property Management compliance requirement could have resulted in the loss of federal funds to the District. Questioned Costs: There were no questioned costs identified. Context: The District did not maintain an updated asset listing that reflects the construction in process balance related to the project funded with federal funds. There was approximately $25.0 million of disbursements from federal funds related to the project as of December 31, 2024. Identification as a repeat finding, if applicable: This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2023-003. Recommendation: We recommend that the District’s management establish controls related to the grant agreement and the Equipment and Real Property compliance requirement to ensure that assets being purchased with federal funds are added to the capital asset listing and all required information is maintained on the capital asset listing. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.

FINDING 2024-004 Information on the federal program: Subject: Water and Waste Disposal Systems for Rural Communities – Reporting Federal Agency: U.S. Department of Agriculture Assistance Listing Number: 10.760 Federal Award Number: N/A Pass-Through Entity: N/A Compliance Requirements: Reporting Audit Findings: Material Weakness, Noncompliance, Qualified Opinion Criteria: 7 CFR 1780, section 1780.47F states in part: “Prior to the beginning of each fiscal year the following will be submitted to the processing office. … 2 (ii) Financial information may be reported on Form RD442-2 which includes Schedule 1, “Statement of Budget, Income and Equity” and Schedule 2, “Projected Cash Flow” or information in similar format.” The reporting requirements section for assistance listing number 10.760 in the Compliance Supplement states in part: "Form RD 442-2, Statement of Budget, Income and Equity (OMB 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). Form RD 442-3, Balance Sheet (OMB No. 0575-0015) – This report presents the financial status of the borrower’s water and 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)." Condition: The District did not have proper controls in place to ensure that the RD442-2 and RD 442-3 forms were filled out and submitted. Cause: There were not sufficient internal controls in place to ensure submission of the reports. Effect: The failure to establish an effective internal control system placed the District at risk of noncompliance with the grant agreement and the Reporting compliance requirements. Questioned Costs: There were no questioned costs identified. Context: Form RD442-2 and Form RD442-3 were not submitted to the granting agency. The District may submit the financial data in other forms, however, the required reporting information was not submitted at all for the year under audit. The forms are required to be submitted on GAAP accrual basis. Identification as a repeat finding, if applicable: This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2023-004. Recommendation: We recommend that the District ensure all reports are submitted. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.

Finding 2023-003 Information on the federal program: Subject: Water and Waste Disposal Systems for Rural Communities – Equipment and Real Property Management Federal Agency: U.S. Department of Agriculture Assistance Listing Number: 10.760 Federal Award Number: N/A Pass-Through Entity: N/A Compliance Requirements: Equipment and Real Property Management Audit Finding: Material Weakness, Noncompliance, Qualified Opinion Criteria: 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal awards in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO)...." 2 CFR 200.313(d)(1) states in part: "Property records must be maintained that include a description of the property, a serial number or other identification number, the source of funding for the property (including the federal award identification number), who holds title, the acquisition date, cost of the property, percentage of federal participation in the project costs for the federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sales price of the property" Condition: An effective internal control system was not in place at the District to ensure compliance with requirements related to the grant agreement and the Equipment and Real Property Management compliance requirement. Cause: Management had not established a system of internal control that would have ensured proper procedures are followed to comply with the Equipment and Real Property Management compliance requirements. Effect: The failure to establish an effective internal control system enabled noncompliance to go undetected and the proper tracking of assets acquired with federal funds was not taking place. Noncompliance with the grant agreement and the Equipment and Real Property Management compliance requirement could have resulted in the loss of federal funds to the District. Questioned Costs: There were no questioned costs identified. Context: The District did not maintain an updated asset listing that reflects the construction in process balance related to the project funded with federal funds. There was approximately $10.9 million of disbursements from federal funds related to the project as of December 31, 2023. Identification as a repeat finding, if applicable: No Recommendation: We recommend that the District’s management establish controls related to the grant agreement and the Equipment and Real Property compliance requirement to ensure that assets being purchased with federal funds are added to the capital asset listing and all required information is maintained on the capital asset listing. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.

Information on the federal program: Subject: Water and Waste Disposal Systems for Rural Communities – Reporting Federal Agency: U.S. Department of Agriculture Assistance Listing Number: 10.760 Federal Award Number: N/A Pass-Through Entity: N/A Compliance Requirements: Reporting Audit Findings: Material Weakness, Noncompliance, Qualified Opinion Criteria: 7 CFR 1780, section 1780.47F states in part: “Prior to the beginning of each fiscal year the following will be submitted to the processing office. … 2 (ii) Financial information may be reported on Form RD442-2 which includes Schedule 1, “Statement of Budget, Income and Equity” and Schedule 2, “Projected Cash Flow” or information in similar format.” The reporting requirements section for assistance listing number 10.760 in the Compliance Supplement states in part: "Form RD 442-2, Statement of Budget, Income and Equity (OMB 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). Form RD 442-3, Balance Sheet (OMB No. 0575-0015) – This report presents the financial status of the borrower’s water and 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)." Condition: The District did not have proper controls in place to ensure that the RD442-2 and RD 442-3 forms were filled out and submitted. Cause: There were not sufficient internal controls in place to ensure submission of the reports. Effect: The failure to establish an effective internal control system placed the District at risk of noncompliance with the grant agreement and the Reporting compliance requirements. Questioned Costs: There were no questioned costs identified. Context: Form RD442-2 and Form RD442-3 were not submitted to the granting agency. The District may submit the financial data in other forms, however, the required reporting information was not submitted at all for the year under audit. The forms are required to be submitted on GAAP accrual basis. Identification as a repeat finding, if applicable: No Recommendation: We recommend that the District ensure all reports are submitted. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.