Audit 336206

Department of Housing and Urban Development Federal Financial Assistance Listing #14.128 Section 242 – Mortgage Insurance - Hospitals Reporting Material Weakness in Internal Control Over Compliance and Noncompliance 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, 2024, the Organization failed to submit certain reports in accordance with HUD requirements and failed to have a documented review and approval of some of the reports prior to their submission to HUD. Cause: The Organization did not follow their internal control policy to ensure the required reports was filed correctly and with the appropriate level of review and approval. Effect: Some required reports were not submitted in accordance with loan requirements and others were submitted without evidence of review of the report by someone other than then preparer. Questioned Costs: None reported. Context: There was a total of seven reports required to be submitted for the year ended July 31, 2024. All were selected for testing. Three were not submitted as required and two more that were submitted as required did not show evidence of review prior to submission to HUD. Repeat Finding from Prior Years: Yes, Finding 2023-004. Recommendation: We recommend the Organization enhance internal control policies to ensure required reports are filed timely and accurately with documented support for their review and approval. Views of Responsible Officials: Management agrees with the finding.

Department of Housing and Urban Development Federal Financial Assistance Listing #14.128 Section 242 – Mortgage Insurance - Hospitals Special Tests and Provisions 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: During our testing, there was no documentation of review and approval of 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 the 60 in the sample, 15 did not show evidence of proper review and approval prior to payment. Repeat Finding from Prior Year: No. 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.

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: During the fiscal year, the Organization entered into a 5-year lease on equipment. A financing 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 finance 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 fiscal year that was a financing lease. Repeat Finding from Prior Year: No 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.

Department of Housing and Urban Development Federal Financial Assistance Listing #14.128 Section 242 – Mortgage Insurance - Hospitals Reporting Material Weakness in Internal Control Over Compliance and Noncompliance 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, 2024, the Organization failed to submit certain reports in accordance with HUD requirements and failed to have a documented review and approval of some of the reports prior to their submission to HUD. Cause: The Organization did not follow their internal control policy to ensure the required reports was filed correctly and with the appropriate level of review and approval. Effect: Some required reports were not submitted in accordance with loan requirements and others were submitted without evidence of review of the report by someone other than then preparer. Questioned Costs: None reported. Context: There was a total of seven reports required to be submitted for the year ended July 31, 2024. All were selected for testing. Three were not submitted as required and two more that were submitted as required did not show evidence of review prior to submission to HUD. Repeat Finding from Prior Years: Yes, Finding 2023-004. Recommendation: We recommend the Organization enhance internal control policies to ensure required reports are filed timely and accurately with documented support for their review and approval. Views of Responsible Officials: Management agrees with the finding.

Department of Housing and Urban Development Federal Financial Assistance Listing #14.128 Section 242 – Mortgage Insurance - Hospitals Special Tests and Provisions 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: During our testing, there was no documentation of review and approval of 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 the 60 in the sample, 15 did not show evidence of proper review and approval prior to payment. Repeat Finding from Prior Year: No. 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.

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: During the fiscal year, the Organization entered into a 5-year lease on equipment. A financing 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 finance 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 fiscal year that was a financing lease. Repeat Finding from Prior Year: No 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.