Audit 15167

FY End

2023-09-30

Total Expended

$21.01M

Findings

4

Programs

3

Organization: Baraga County Memorial Hospital (MI)

Year: 2023 Accepted: 2024-02-01

Auditor: Eide Bailly LLP

Organization Exclusion Status:

Checking exclusion status...

ID	Ref	Severity	Repeat	Requirement
11334	2023-004	Significant Deficiency	-	N
11335	2023-005	Significant Deficiency	Yes	N
587776	2023-004	Significant Deficiency	-	N
587777	2023-005	Significant Deficiency	Yes	N

ALN	Program	Spent	Major	Findings
14.128	Mortgage Insurance for Hospitals	$20.75M	Yes	2
21.027	Coronavirus State and Local Fiscal Recovery Funds	$250,000	-	0
93.301	Small Rural Hospital Improvement Grant Program	$12,900	-	0

Contacts

Name	Title	Type
PGNCNX94VC91	Gail Jestila	Auditee
9065243348	Jess Paisley	Auditor
No contacts on file

Notes to SEFA

Title: Note 4 ‐ Loan Outstanding Accounting Policies: Note 1 ‐ Basis of Presentation - The accompanying schedule of expenditures of federal awards (the “Schedule”) includes the federal award activity of Baraga County Memorial Hospital and Baraga County Extended Care Corporation (collectively referred to as the “Hospital”) under programs of the federal government for the year ended September 30, 2023. The information in this Schedule is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Because the Schedule presents only a selected portion of the operations of the Hospital, it is not intended to and does not present the financial position, changes in net position or cash flows of the Hospital. Note 2 ‐ Summary of Significant Accounting Policies - Expenditures reported on the Schedule are reported on the accrual basis of accounting. Such expenditures are recognized following the cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement. No federal assistance has been provided to a subrecipient. De Minimis Rate Used: N Rate Explanation: The Hospital has elected not to use the 10‐percent de minimis indirect cost rate allowed under the Uniform Guidance. The Hospital had the following loan balance outstanding at September 30, 2023. The loan balance at October 1, 2022 is included in the federal expenditures in the Schedule. Federal Grantor/Program Title - U.S. Department of Housing and Urban Development ‐ Mortgage Insurance for Hospitals CFDA Number - 14.128 Amount Outstanding - $19,829,088

Finding Details

Finding 2023-004

Federal Agency Name: U.S. Department of Housing and Urban Development Assistance Listing Number: 14.128 Program Name: Mortgage Insurance for Hospitals Compliance Requirement: Special Tests and Provisions Type of Finding: Significant Deficiency in Internal Control Over Compliance and Noncompliance Criteria: As part of its loan agreement with the U.S. Department of Housing and Urban Development (HUD), the Hospital is required to fully fund its mortgage reserve fund (MRF) in accordance with the MRF schedule. Condition: The Hospital’s MRF is underfunded by $167,150 as of September 30, 2023. Cause: The Hospital’s system of internal controls did not allow for management to be properly notified of the MRF being underfunded prior to year‐end. Effect: The Hospital is in violation of a loan covenant from HUD, and the Hospital has 60 days to cure the underfunding. Questioned Costs: None reported. Context: Sampling was not used. Report Finding from Prior Year: No Recommendation: We recommend that management review its operating and review procedures in order to ensure the MRF is not underfunded in subsequent periods. Views of Responsible Officials: Management agrees with the finding. See corrective action plan.

Finding 2023-005

Federal Agency Name: U.S. Department of Housing and Urban Development Assistance Listing Number: 14.128 Program Name: Mortgage Insurance for Hospitals Compliance Requirement: Special Tests and Provisions Type of Finding: Significant Deficiency in Internal Control Over Compliance and Noncompliance Criteria: As part of its loan agreement with HUD, the Hospital is not permitted to hold receivables from affiliated entities that are older than 90 days. Condition: The Hospital has amounts due from affiliate of $678,628 that are older than 90 days as of September 30, 2023. Cause: The Hospital funded significant costs on behalf of affiliate as a result of poor cash flows. The affiliate has been unable to pay the balance back to the Hospital in a timely manner. Effect: The Hospital is in violation of a loan covenant from HUD. The Hospital has implemented a payment plan with affiliate starting at $30,000 per month, increasing by $5,000 increments per quarter, until the balance is paid off. Questioned Costs: None reported. Context: Sampling was not used. Report Finding from Prior Year: Yes Recommendation: We recommend that management follow its payment plan that is currently in place in order to reduce the outstanding receivable balance from affiliate. Views of Responsible Officials: Management agrees with the finding. See corrective action plan.

Finding 2023-004

Federal Agency Name: U.S. Department of Housing and Urban Development Assistance Listing Number: 14.128 Program Name: Mortgage Insurance for Hospitals Compliance Requirement: Special Tests and Provisions Type of Finding: Significant Deficiency in Internal Control Over Compliance and Noncompliance Criteria: As part of its loan agreement with the U.S. Department of Housing and Urban Development (HUD), the Hospital is required to fully fund its mortgage reserve fund (MRF) in accordance with the MRF schedule. Condition: The Hospital’s MRF is underfunded by $167,150 as of September 30, 2023. Cause: The Hospital’s system of internal controls did not allow for management to be properly notified of the MRF being underfunded prior to year‐end. Effect: The Hospital is in violation of a loan covenant from HUD, and the Hospital has 60 days to cure the underfunding. Questioned Costs: None reported. Context: Sampling was not used. Report Finding from Prior Year: No Recommendation: We recommend that management review its operating and review procedures in order to ensure the MRF is not underfunded in subsequent periods. Views of Responsible Officials: Management agrees with the finding. See corrective action plan.

Finding 2023-005

Federal Agency Name: U.S. Department of Housing and Urban Development Assistance Listing Number: 14.128 Program Name: Mortgage Insurance for Hospitals Compliance Requirement: Special Tests and Provisions Type of Finding: Significant Deficiency in Internal Control Over Compliance and Noncompliance Criteria: As part of its loan agreement with HUD, the Hospital is not permitted to hold receivables from affiliated entities that are older than 90 days. Condition: The Hospital has amounts due from affiliate of $678,628 that are older than 90 days as of September 30, 2023. Cause: The Hospital funded significant costs on behalf of affiliate as a result of poor cash flows. The affiliate has been unable to pay the balance back to the Hospital in a timely manner. Effect: The Hospital is in violation of a loan covenant from HUD. The Hospital has implemented a payment plan with affiliate starting at $30,000 per month, increasing by $5,000 increments per quarter, until the balance is paid off. Questioned Costs: None reported. Context: Sampling was not used. Report Finding from Prior Year: Yes Recommendation: We recommend that management follow its payment plan that is currently in place in order to reduce the outstanding receivable balance from affiliate. Views of Responsible Officials: Management agrees with the finding. See corrective action plan.