FAC Explorer

Audit 339746

FY End
2024-06-30
Total Expended
$72.34M
Findings
2
Programs
1
Organization: Tri-City Healthcare District (CA)
Year: 2024 Accepted: 2025-01-24
Auditor: Moss Adams LLP

Organization Exclusion Status:

Findings

ID Ref Severity Repeat Requirement
520161 2024-002 Significant Deficiency - L
1096603 2024-002 Significant Deficiency - L

Programs

ALN Program Spent Major Findings
14.128 Mortgage Insurance Hospitals $72.34M Yes 1

Contacts

Name Title Type
CLGDKURJ4MK9 Anh Nguyen Auditee
7609407331 Stacy Stelzriede Auditor
No contacts on file

Notes to SEFA

Title: Note 1 – Basis of Presentation Accounting Policies: Expenditures reported on the Schedule are reported on the accrual basis of accounting. Under the accrual basis of accounting, expenditures are recognized when incurred. 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. The District has not elected to use the 10 percent de minimis indirect cost rate as allowed under the Uniform Guidance. De Minimis Rate Used: N Rate Explanation: The District has not elected to use the 10 percent de minimis indirect cost rate as allowed under the Uniform Guidance. The accompanying schedule of expenditures of federal awards (the “Schedule”) includes the federal grant activity of Tri-City Healthcare District (the “District”) under programs of the federal government for the year ended June 30, 2024. The information in this Schedule is presented in accordance with the requirements of the Title 2 U.S. Code of Federal Regulations (CFR) 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 District, it is not intended to and does not present the financial position, results of operations, or cash flow of the District.
Title: Note 2 – Summary of Significant Accounting Policies Accounting Policies: Expenditures reported on the Schedule are reported on the accrual basis of accounting. Under the accrual basis of accounting, expenditures are recognized when incurred. 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. The District has not elected to use the 10 percent de minimis indirect cost rate as allowed under the Uniform Guidance. De Minimis Rate Used: N Rate Explanation: The District has not elected to use the 10 percent de minimis indirect cost rate as allowed under the Uniform Guidance. Expenditures reported on the Schedule are reported on the accrual basis of accounting. Under the accrual basis of accounting, expenditures are recognized when incurred. 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. The District has not elected to use the 10 percent de minimis indirect cost rate as allowed under the Uniform Guidance.
Title: Note 3 – Loan Balance Accounting Policies: Expenditures reported on the Schedule are reported on the accrual basis of accounting. Under the accrual basis of accounting, expenditures are recognized when incurred. 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. The District has not elected to use the 10 percent de minimis indirect cost rate as allowed under the Uniform Guidance. De Minimis Rate Used: N Rate Explanation: The District has not elected to use the 10 percent de minimis indirect cost rate as allowed under the Uniform Guidance. Loans outstanding at the beginning of the year plus the new value of new loans received during the year are included in the federal expenditures presented in the schedule of expenditures of federal awards. The balance of the loans outstanding as of June 30, 2024, consisted of: Program Name Section 242 – Mortgage Insurance for Hospitals Federal Assistance Listing Number 14.128 Loans outstanding as of June 30, 2023 $ 72,340,971 Loans awarded during the year ended June 30, 2024 - Less: loan principal repaid ( 2,544,666) Loans outstanding as of June 30, 2024 $ 69,796,305
Title: Note 4 – Subrecipient Awards Accounting Policies: Expenditures reported on the Schedule are reported on the accrual basis of accounting. Under the accrual basis of accounting, expenditures are recognized when incurred. 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. The District has not elected to use the 10 percent de minimis indirect cost rate as allowed under the Uniform Guidance. De Minimis Rate Used: N Rate Explanation: The District has not elected to use the 10 percent de minimis indirect cost rate as allowed under the Uniform Guidance. The District did not provide any federal awards to subrecipients during the year ended June 30, 2024.

Finding Details

Finding 2024-002
Finding 2024-002 – Reporting – Significant Deficiency in Internal Control Over Compliance and Instance of Noncompliance Federal Program: Mortgage Insurance for Hospitals (Assistance Listing #14.128) Federal Agency: U.S. Department of Housing and Urban Development Award Year: 2024 Criteria – In accordance with the Regulatory Agreement, Section 13 (a) under the Mortgage Insurance for Hospitals Program, the Borrower is required to file with U.S. Department of Housing and Urban Development (HUD) and lender, annual audited financial statements in accordance with Program Obligations, which include ensuring the annual audited financial statements are submitted within 120 days following the close of the Borrower’s fiscal year. If the audited financial statements are not available, the Borrower is required to submit Board-certified annual financial statements in lieu of the annual audited financial statements. Condition – During our testing of the reporting compliance requirements of the Mortgage Insurance for Hospitals Program, we noted that the annual audited financial statements for the fiscal year ended June 30, 2023, which were filed during the fiscal year ending June 30, 2024, were submitted to HUD and the lender on December 18, 2023, which was 171 days after the close of the Borrower’s fiscal year ended June 30, 2023. There were no Board-certified financial statements submitted in lieu of the annual audited financial statements. Cause – The annual audited financial statements were not available to be submitted within 120 days of the close of the fiscal year ended June 30, 2023 due to the District’s decision to delay issuance of the annual financial statements. Effect or potential effect – As the District made the decision to delay the issuance of the annual audited financial statements pending receipt of loan proceeds of $33.2 million from the California Distressed Hospital Loan Program, they were not available for issuance within 120 days of the District’s fiscal year ended June 30, 2023. Questioned costs – None to be reported. Context – Due to escalating costs and declining reimbursement during the fiscal year ended June 30, 2023, the District had a working capital deficiency and increased operating losses which lead to doubt about the District’s ability to continue as a going concern. As the District was expecting additional funding and anticipated improved operations that may have prevented a going concern issue to be disclosed in the annual audited financial statements, the District made the decision to delay the issuance of the annual audited financial statements until the additional funding was received, which was in December 2023. Identification as a repeat finding, if applicable: This is not a repeat finding. Recommendation – We recommend that Tri-City Healthcare District implement review controls to ensure timely submission of required reports in accordance with the terms and conditions of the Mortgage Insurance Program. Views of responsible officials – The District agrees with the findings and management has implemented a corrective action plan to ensure the required reports are filed timely. Starting January 2024, all financial reports were filed on time.
Finding 2024-002
Finding 2024-002 – Reporting – Significant Deficiency in Internal Control Over Compliance and Instance of Noncompliance Federal Program: Mortgage Insurance for Hospitals (Assistance Listing #14.128) Federal Agency: U.S. Department of Housing and Urban Development Award Year: 2024 Criteria – In accordance with the Regulatory Agreement, Section 13 (a) under the Mortgage Insurance for Hospitals Program, the Borrower is required to file with U.S. Department of Housing and Urban Development (HUD) and lender, annual audited financial statements in accordance with Program Obligations, which include ensuring the annual audited financial statements are submitted within 120 days following the close of the Borrower’s fiscal year. If the audited financial statements are not available, the Borrower is required to submit Board-certified annual financial statements in lieu of the annual audited financial statements. Condition – During our testing of the reporting compliance requirements of the Mortgage Insurance for Hospitals Program, we noted that the annual audited financial statements for the fiscal year ended June 30, 2023, which were filed during the fiscal year ending June 30, 2024, were submitted to HUD and the lender on December 18, 2023, which was 171 days after the close of the Borrower’s fiscal year ended June 30, 2023. There were no Board-certified financial statements submitted in lieu of the annual audited financial statements. Cause – The annual audited financial statements were not available to be submitted within 120 days of the close of the fiscal year ended June 30, 2023 due to the District’s decision to delay issuance of the annual financial statements. Effect or potential effect – As the District made the decision to delay the issuance of the annual audited financial statements pending receipt of loan proceeds of $33.2 million from the California Distressed Hospital Loan Program, they were not available for issuance within 120 days of the District’s fiscal year ended June 30, 2023. Questioned costs – None to be reported. Context – Due to escalating costs and declining reimbursement during the fiscal year ended June 30, 2023, the District had a working capital deficiency and increased operating losses which lead to doubt about the District’s ability to continue as a going concern. As the District was expecting additional funding and anticipated improved operations that may have prevented a going concern issue to be disclosed in the annual audited financial statements, the District made the decision to delay the issuance of the annual audited financial statements until the additional funding was received, which was in December 2023. Identification as a repeat finding, if applicable: This is not a repeat finding. Recommendation – We recommend that Tri-City Healthcare District implement review controls to ensure timely submission of required reports in accordance with the terms and conditions of the Mortgage Insurance Program. Views of responsible officials – The District agrees with the findings and management has implemented a corrective action plan to ensure the required reports are filed timely. Starting January 2024, all financial reports were filed on time.