FAC Explorer

Audit 306951

FY End
2023-12-31
Total Expended
$15.16M
Findings
2
Programs
3
Organization: Fahrney-Keedy Memorial Home, Inc. (MD)
Year: 2023 Accepted: 2024-05-22
Auditor: Smith Elliott Kearns & Company LLC

Organization Exclusion Status:

Findings

ID Ref Severity Repeat Requirement
398258 2023-001 - Yes P
974700 2023-001 - Yes P

Programs

ALN Program Spent Major Findings
10.766 Community Facilities Loans and Grants $7.59M Yes 0
10.760 Water and Waste Disposal Systems for Rural Communities $2.14M Yes 0
21.027 Coronavirus State and Local Fiscal Recovery Funds $130,002 - 0

Contacts

Name Title Type
EMS7NL2KJNP3 Stephen Coetzee Auditee
3016715017 Timothy E. Peters, CPA Auditor
No contacts on file

Notes to SEFA

Title: NOTE 1 BASIS OF PRESENTATION Accounting Policies: The accompanying Schedule, presented on the accrual basis of accounting, includes all federal grants and loan programs of the Home which had expenditures or continuing loan compliance requirements. This Schedule has been prepared in accordance with accounting principles generally accepted in the United States of America. The Home charges only direct costs to federal award programs and has not negotiated an indirect cost rate with grantors or elected to use the 10% de minimus indirect cost rate as allowed under the Uniform Guidance. De Minimis Rate Used: N Rate Explanation: The Home charges only direct costs to federal award programs and has not negotiated an indirect cost rate with grantors or elected to use the 10% de minimus indirect cost rate as allowed under the Uniform Guidance. The schedule of expenditures of federal awards (the Schedule) reflects the federal grant activity of Fahrney-Keedy Memorial Home, Inc. (Home) under programs of the federal government for the year ended December 31, 2023. The information in the 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 Home, it is not intended to and does not present the financial position, changes in net assets, or cash flows of the Home.
Title: NOTE 2 FISCAL PERIOD AUDITED Accounting Policies: The accompanying Schedule, presented on the accrual basis of accounting, includes all federal grants and loan programs of the Home which had expenditures or continuing loan compliance requirements. This Schedule has been prepared in accordance with accounting principles generally accepted in the United States of America. The Home charges only direct costs to federal award programs and has not negotiated an indirect cost rate with grantors or elected to use the 10% de minimus indirect cost rate as allowed under the Uniform Guidance. De Minimis Rate Used: N Rate Explanation: The Home charges only direct costs to federal award programs and has not negotiated an indirect cost rate with grantors or elected to use the 10% de minimus indirect cost rate as allowed under the Uniform Guidance. Single audit testing procedures were performed for program transactions occurring during the fiscal year ended December 31, 2023.
Title: NOTE 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Accounting Policies: The accompanying Schedule, presented on the accrual basis of accounting, includes all federal grants and loan programs of the Home which had expenditures or continuing loan compliance requirements. This Schedule has been prepared in accordance with accounting principles generally accepted in the United States of America. The Home charges only direct costs to federal award programs and has not negotiated an indirect cost rate with grantors or elected to use the 10% de minimus indirect cost rate as allowed under the Uniform Guidance. De Minimis Rate Used: N Rate Explanation: The Home charges only direct costs to federal award programs and has not negotiated an indirect cost rate with grantors or elected to use the 10% de minimus indirect cost rate as allowed under the Uniform Guidance. The accompanying Schedule, presented on the accrual basis of accounting, includes all federal grants and loan programs of the Home which had expenditures or continuing loan compliance requirements. This Schedule has been prepared in accordance with accounting principles generally accepted in the United States of America. The Home charges only direct costs to federal award programs and has not negotiated an indirect cost rate with grantors or elected to use the 10% de minimus indirect cost rate as allowed under the Uniform Guidance.
Title: NOTE 4 FEDERALLY FINANCED LOANS Accounting Policies: The accompanying Schedule, presented on the accrual basis of accounting, includes all federal grants and loan programs of the Home which had expenditures or continuing loan compliance requirements. This Schedule has been prepared in accordance with accounting principles generally accepted in the United States of America. The Home charges only direct costs to federal award programs and has not negotiated an indirect cost rate with grantors or elected to use the 10% de minimus indirect cost rate as allowed under the Uniform Guidance. De Minimis Rate Used: N Rate Explanation: The Home charges only direct costs to federal award programs and has not negotiated an indirect cost rate with grantors or elected to use the 10% de minimus indirect cost rate as allowed under the Uniform Guidance. The Home received permanent financing from the United States Department of Agriculture (USDA) under the Facilities Loans and Grants program (Assistance Listing #10.766) to construct an adult day care center and expand the Home’s memory care unit. A summary of the beginning loan program balance, current year expenditures and ending loan program balances related to the USDA Community Facilities Loans and Grants program commitment is as follows:
Title: NOTE 5 RECONCILIATION OF SEFA TO GOVERNMENT GRANTS REVENUE Accounting Policies: The accompanying Schedule, presented on the accrual basis of accounting, includes all federal grants and loan programs of the Home which had expenditures or continuing loan compliance requirements. This Schedule has been prepared in accordance with accounting principles generally accepted in the United States of America. The Home charges only direct costs to federal award programs and has not negotiated an indirect cost rate with grantors or elected to use the 10% de minimus indirect cost rate as allowed under the Uniform Guidance. De Minimis Rate Used: N Rate Explanation: The Home charges only direct costs to federal award programs and has not negotiated an indirect cost rate with grantors or elected to use the 10% de minimus indirect cost rate as allowed under the Uniform Guidance. The accompanying schedule of expenditures of federal awards includes expenditures of federal awards that are reported differently from the way they are presented in the financial statements. Following is a reconciliation of federal expenditures per the SEFA to total government grants revenue recognized in the financial statements:

Finding Details

Finding 2023-001
CFDA #10.766 USDA Community Facilities Loans and Grants Continuing Compliance Requirement Finding 2023‐001 – Failure to Meet Required Loan Covenants Criteria: The USDA loan agreements require the Home to maintain a debt service coverage ratio of 1.25x and 65 days of unrestricted cash on hand, as of December 31, 2023. Condition: At December 31, 2023, the Home did not meet either covenant. The Home has 41 days of unrestricted cash on hand as of December 31, 2023. The debt service coverage ratio was -.40x as of December 31, 2023. Cause: Due to increased expenses of the Home and negative operating cash flows, as well as certain cash balances which are restricted to use, management was unable to meet the loan covenants. Effect: As a continuing compliance requirement, violation of a loan covenant could place the loan in default status, which could jeopardize future funding from the lender. Questioned Costs: There were no questioned costs. Context: The Home received multiple USDA loans which have ongoing continuing compliance requirements, including maintaining debt covenants. Repeat Finding: This is a repeat finding. While the Home did meet the debt service coverage requirement in 2022, the Home did not meet the days cash on hand requirement in 2022. Recommendation: We recommend management track cash flows monthly to ensure a minimum of 65 days cash on hand at the end of each six-month reporting period (every June 30th and December 31st). We further recommend expenses be managed in a way that will allow the Home to meet its debt service requirements. Views of Responsible Officials and Planned Corrective Action: Management agrees with the above finding and has implemented a plan to reduce expenses and increase cash flows going forward. Specifically, we have outlined the following steps that we are taking as an organization to get back on track: o Outsourcing of finance function to an outside CPA firm with focus on cleaning up resident billings and enhanced collection efforts of the Home’s outstanding patient receivables. o Outsourcing of dining services at both locations, which is expected to save the Home approximately $100,000 annually. o Workforce reduction in management and ancillary level staff.Establishment of a committee to focus primarily on recruitment of in-house staff, in order to fill open positions and thereby seek to minimize reliance on higher cost contracted/agency staff. o Review of all contracts and monthly expenses to identify further opportunities to reduce expenses. o With the completion of the stormwater infrastructure project in early 2024, the Home is also planning a 36-unit independent living expansion, which is expected to increase cash flows in the future.
Finding 2023-001
CFDA #10.766 USDA Community Facilities Loans and Grants Continuing Compliance Requirement Finding 2023‐001 – Failure to Meet Required Loan Covenants Criteria: The USDA loan agreements require the Home to maintain a debt service coverage ratio of 1.25x and 65 days of unrestricted cash on hand, as of December 31, 2023. Condition: At December 31, 2023, the Home did not meet either covenant. The Home has 41 days of unrestricted cash on hand as of December 31, 2023. The debt service coverage ratio was -.40x as of December 31, 2023. Cause: Due to increased expenses of the Home and negative operating cash flows, as well as certain cash balances which are restricted to use, management was unable to meet the loan covenants. Effect: As a continuing compliance requirement, violation of a loan covenant could place the loan in default status, which could jeopardize future funding from the lender. Questioned Costs: There were no questioned costs. Context: The Home received multiple USDA loans which have ongoing continuing compliance requirements, including maintaining debt covenants. Repeat Finding: This is a repeat finding. While the Home did meet the debt service coverage requirement in 2022, the Home did not meet the days cash on hand requirement in 2022. Recommendation: We recommend management track cash flows monthly to ensure a minimum of 65 days cash on hand at the end of each six-month reporting period (every June 30th and December 31st). We further recommend expenses be managed in a way that will allow the Home to meet its debt service requirements. Views of Responsible Officials and Planned Corrective Action: Management agrees with the above finding and has implemented a plan to reduce expenses and increase cash flows going forward. Specifically, we have outlined the following steps that we are taking as an organization to get back on track: o Outsourcing of finance function to an outside CPA firm with focus on cleaning up resident billings and enhanced collection efforts of the Home’s outstanding patient receivables. o Outsourcing of dining services at both locations, which is expected to save the Home approximately $100,000 annually. o Workforce reduction in management and ancillary level staff.Establishment of a committee to focus primarily on recruitment of in-house staff, in order to fill open positions and thereby seek to minimize reliance on higher cost contracted/agency staff. o Review of all contracts and monthly expenses to identify further opportunities to reduce expenses. o With the completion of the stormwater infrastructure project in early 2024, the Home is also planning a 36-unit independent living expansion, which is expected to increase cash flows in the future.