2022-003 Department of Housing and Urban Development Federal Financial Assistance Listing #14.128 Section 242 ? Mortgage Insurance - Hospitals Preparation of Schedule of Expenditures of Federal Awards Material Weakness in Internal Control Over Compliance - Other Criteria: Proper controls over financial reporting include the ability to prepare the consolidated schedule of expenditures of federal awards (Schedule) and accompanying notes to the Schedule. Condition: The Organization does not have an internal control system designed to provide for a complete and accurate schedule of expenditures of federal awards being audited. We were requested to draft the Schedule. Cause: Auditor assistance with preparation of the Schedule is not unusual as the Schedule has unique and specialized requirements and preparation is only required when the Organization meets a specified threshold of federal expenditures. Effect: There is a reasonable possibility that the Organization would not be able to draft the Schedule that is correct without the assistance of the auditors. Questioned Costs: None reported. Context: Sampling was not used. Repeat Finding from Prior Years: Yes, Finding 2021-003. Recommendation: While we recognize that this condition is not unusual for an organization with limited staffing, we recommend management be aware of the financial reporting requirements relating to the Organization?s schedule of expenditures of federal awards and the internal controls that impact financial reporting. Views of Responsible Officials: Management agrees with the finding.
2022-004 Department of Housing and Urban Development Federal Financial Assistance Listing/CFDA #14.128 Section 242 ? Mortgage Insurance - Hospitals Reporting Material Weakness in Internal Control Over Compliance Criteria: The OMB Compliance Supplement requires that non-federal entities receiving federal awards establish and maintain internal controls designed to reasonably ensure compliance with federal laws, regulations, and program compliance requirements. Condition: The Section 242 ? Mortgage Insurance - Hospitals Program requires quarterly reports and certain annual reports. For the year ended July 31, 2022, the Organization failed to file the annual budget prior to the start of the year. Cause: There was turnover of key financial personnel during 2021 and 2022. The Organization did not follow their internal control policy to ensure the required reports were filed. Effect: The required reports were not submitted in accordance with loan requirements. Questioned Costs: None reported. Context: There were a total of eight reports required to be submitted for the year ended July 31, 2022. Three were selected for testing. Of the three selected, one was not submitted as required. Through additional inquiry, there were no other reports identified as not being submitted. Repeat Finding from Prior Years: Yes, Finding 2021-004. Recommendation: We recommend the Organization enhance internal control policies to ensure required reports are filed timely and accurately. Views of Responsible Officials: Management agrees with the finding.
2022-005 Department of Housing and Urban Development Federal Financial Assistance Listing #14.128 Section 242 ? Mortgage Insurance - Hospitals Special Tests and Provisions Significant Deficiency in Internal Control Over Compliance Criteria: The OMB Compliance Supplement requires that non-federal entities receiving federal awards establish and maintain internal controls designed to reasonably ensure compliance with federal laws, regulations, and program compliance requirements. Condition: During our testing, there was no documentation of review and approval of check disbursements for a portion of the sample selected. Cause: The Organization did not have an adequate internal control policy in place to ensure review and approval of cash disbursements was documented. Effect: The lack of adequate policies governing cash disbursement increases the risk that employees participating in the federal award administration may not be able to detect and correct noncompliance in a timely manner. Questioned Costs: None reported. Context: A nonstatistical sample of 60 expenditures were selected for testing. Of these 60, 33 did not show evidence of proper review and approval prior to payment. Repeat Finding from Prior Years: Yes, Finding 2022-005. Recommendation: We recommend that the Organization enhance internal control policies to ensure all cash disbursements are reviewed and approved prior to payment to ensure that all payments are necessary and correct. Views of Responsible Officials: Management agrees with the finding.
2022-006 Department of Housing and Urban Development Federal Financial Assistance Listing #14.128 Section 242 ? Mortgage Insurance - Hospitals Special Tests and Provisions Significant Deficiency in Internal Control Over Compliance Criteria: A good system on internal controls over compliance includes processes to ensure all provisions within the agreements are fully followed as well as following generally accepted accounting principles. Condition: The Organization entered into a 5-year lease on equipment. A capital lease is identified in the Mortgage Note Insured by HUD as the incurrence of additional indebtedness which, by terms of the agreement, should be approved by HUD in advance of entering into the capital lease agreement. Cause: During the course of our engagement, we noted that management did not receive approval from HUD in advance of entering into the agreement. Management did get approval from HUD after entering into the agreement. Effect: The Organization violated a covenant within the Mortgage Note Insured by HUD agreement. Question Costs: None reported. Context/Sampling: None as there was only one lease agreement entered into during the year that was a capital lease. Repeat Finding from Prior Year: Yes, Finding 2021-006. Recommendation: We recommend that management should request and receive approval from HUD prior to entering into lease or other debt agreements. Views of Responsible Officials: Management agrees with the finding.
2022-007 Department of Housing and Urban Development Federal Financial Assistance Listing #14.128 Section 242 ? Mortgage Insurance - Hospitals Equipment and Real Property Management Significant Deficiency in Internal Control Over Compliance and Noncompliance Not Considered Material Criteria: The OMB Compliance Supplement requires that non-federal entities receiving federal awards establish and maintain internal controls designed to reasonably ensure compliance with federal laws, regulations, and program compliance requirements. Condition: The Section 242 ? Mortgage Insurance - Hospitals Program requires an inventory of real property and equipment purchased with federal funds to be completed every two years. For the year ended July 31, 2021, the Organization failed to perform this inventory when the last had been performed for the year ended July 31, 2020. Cause: There was turnover of key financial personnel during 2022 and 2021. The Organization did not have an internal control policy to ensure the inventory of real property and equipment would be performed when there was a change in the individual responsible for ensuring the count occurred. Effect: The inventory or real property and equipment was not completed in accordance with requirements. Question Costs: None reported. Context/Sampling: None as there would only be one inventory performed. Repeat Finding from Prior Year: No Recommendation: We recommend that management should implement an internal control to make sure the inventory count is being performed despite any possible changes in staffing. Views of Responsible Officials: Management agrees with the finding.
2022-003 Department of Housing and Urban Development Federal Financial Assistance Listing #14.128 Section 242 ? Mortgage Insurance - Hospitals Preparation of Schedule of Expenditures of Federal Awards Material Weakness in Internal Control Over Compliance - Other Criteria: Proper controls over financial reporting include the ability to prepare the consolidated schedule of expenditures of federal awards (Schedule) and accompanying notes to the Schedule. Condition: The Organization does not have an internal control system designed to provide for a complete and accurate schedule of expenditures of federal awards being audited. We were requested to draft the Schedule. Cause: Auditor assistance with preparation of the Schedule is not unusual as the Schedule has unique and specialized requirements and preparation is only required when the Organization meets a specified threshold of federal expenditures. Effect: There is a reasonable possibility that the Organization would not be able to draft the Schedule that is correct without the assistance of the auditors. Questioned Costs: None reported. Context: Sampling was not used. Repeat Finding from Prior Years: Yes, Finding 2021-003. Recommendation: While we recognize that this condition is not unusual for an organization with limited staffing, we recommend management be aware of the financial reporting requirements relating to the Organization?s schedule of expenditures of federal awards and the internal controls that impact financial reporting. Views of Responsible Officials: Management agrees with the finding.
2022-004 Department of Housing and Urban Development Federal Financial Assistance Listing/CFDA #14.128 Section 242 ? Mortgage Insurance - Hospitals Reporting Material Weakness in Internal Control Over Compliance Criteria: The OMB Compliance Supplement requires that non-federal entities receiving federal awards establish and maintain internal controls designed to reasonably ensure compliance with federal laws, regulations, and program compliance requirements. Condition: The Section 242 ? Mortgage Insurance - Hospitals Program requires quarterly reports and certain annual reports. For the year ended July 31, 2022, the Organization failed to file the annual budget prior to the start of the year. Cause: There was turnover of key financial personnel during 2021 and 2022. The Organization did not follow their internal control policy to ensure the required reports were filed. Effect: The required reports were not submitted in accordance with loan requirements. Questioned Costs: None reported. Context: There were a total of eight reports required to be submitted for the year ended July 31, 2022. Three were selected for testing. Of the three selected, one was not submitted as required. Through additional inquiry, there were no other reports identified as not being submitted. Repeat Finding from Prior Years: Yes, Finding 2021-004. Recommendation: We recommend the Organization enhance internal control policies to ensure required reports are filed timely and accurately. Views of Responsible Officials: Management agrees with the finding.
2022-005 Department of Housing and Urban Development Federal Financial Assistance Listing #14.128 Section 242 ? Mortgage Insurance - Hospitals Special Tests and Provisions Significant Deficiency in Internal Control Over Compliance Criteria: The OMB Compliance Supplement requires that non-federal entities receiving federal awards establish and maintain internal controls designed to reasonably ensure compliance with federal laws, regulations, and program compliance requirements. Condition: During our testing, there was no documentation of review and approval of check disbursements for a portion of the sample selected. Cause: The Organization did not have an adequate internal control policy in place to ensure review and approval of cash disbursements was documented. Effect: The lack of adequate policies governing cash disbursement increases the risk that employees participating in the federal award administration may not be able to detect and correct noncompliance in a timely manner. Questioned Costs: None reported. Context: A nonstatistical sample of 60 expenditures were selected for testing. Of these 60, 33 did not show evidence of proper review and approval prior to payment. Repeat Finding from Prior Years: Yes, Finding 2022-005. Recommendation: We recommend that the Organization enhance internal control policies to ensure all cash disbursements are reviewed and approved prior to payment to ensure that all payments are necessary and correct. Views of Responsible Officials: Management agrees with the finding.
2022-006 Department of Housing and Urban Development Federal Financial Assistance Listing #14.128 Section 242 ? Mortgage Insurance - Hospitals Special Tests and Provisions Significant Deficiency in Internal Control Over Compliance Criteria: A good system on internal controls over compliance includes processes to ensure all provisions within the agreements are fully followed as well as following generally accepted accounting principles. Condition: The Organization entered into a 5-year lease on equipment. A capital lease is identified in the Mortgage Note Insured by HUD as the incurrence of additional indebtedness which, by terms of the agreement, should be approved by HUD in advance of entering into the capital lease agreement. Cause: During the course of our engagement, we noted that management did not receive approval from HUD in advance of entering into the agreement. Management did get approval from HUD after entering into the agreement. Effect: The Organization violated a covenant within the Mortgage Note Insured by HUD agreement. Question Costs: None reported. Context/Sampling: None as there was only one lease agreement entered into during the year that was a capital lease. Repeat Finding from Prior Year: Yes, Finding 2021-006. Recommendation: We recommend that management should request and receive approval from HUD prior to entering into lease or other debt agreements. Views of Responsible Officials: Management agrees with the finding.
2022-007 Department of Housing and Urban Development Federal Financial Assistance Listing #14.128 Section 242 ? Mortgage Insurance - Hospitals Equipment and Real Property Management Significant Deficiency in Internal Control Over Compliance and Noncompliance Not Considered Material Criteria: The OMB Compliance Supplement requires that non-federal entities receiving federal awards establish and maintain internal controls designed to reasonably ensure compliance with federal laws, regulations, and program compliance requirements. Condition: The Section 242 ? Mortgage Insurance - Hospitals Program requires an inventory of real property and equipment purchased with federal funds to be completed every two years. For the year ended July 31, 2021, the Organization failed to perform this inventory when the last had been performed for the year ended July 31, 2020. Cause: There was turnover of key financial personnel during 2022 and 2021. The Organization did not have an internal control policy to ensure the inventory of real property and equipment would be performed when there was a change in the individual responsible for ensuring the count occurred. Effect: The inventory or real property and equipment was not completed in accordance with requirements. Question Costs: None reported. Context/Sampling: None as there would only be one inventory performed. Repeat Finding from Prior Year: No Recommendation: We recommend that management should implement an internal control to make sure the inventory count is being performed despite any possible changes in staffing. Views of Responsible Officials: Management agrees with the finding.