FAC Explorer

Audit 341022

FY End
2022-06-30
Total Expended
$88.73M
Findings
2
Programs
4
Organization: Avita Health System (OH)
Year: 2022 Accepted: 2025-02-03
Auditor: Plante & Moran PLLC

Organization Exclusion Status:

Findings

ID Ref Severity Repeat Requirement
521081 2022-002 Material Weakness - N
1097523 2022-002 Material Weakness - N

Programs

ALN Program Spent Major Findings
10.766 Community Facilities Loans and Grants $87.29M Yes 1
93.697 Covid-19 - Testing for Rural Health Clinics $707,086 - 0
93.498 Covid-19 - Provider Relief Fund and American Rescue Plan Rural Distribution $583,997 - 0
93.155 Covid-19 - Rural Health Research Centers $143,282 - 0

Contacts

Name Title Type
M2Q4MZVZ8HY9 Eric Draime Auditee
6144684841 Jordan Pace Auditor
No contacts on file

Notes to SEFA

Title: Loan Balances Accounting Policies: The accompanying schedule of expenditures of federal awards (the “Schedule”) includes the federal grant activity of Avita Health System (the “System”) under programs of the federal government for the year ended June 30, 2022. 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 (the “Uniform Guidance”). Because the Schedule presents only a selected portion of the operations of the System, it is not intended to and does not present the financial position, changes in net assets, or cash flows of the System. Expenditures reported in the Schedule are reported on the accrual basis of accounting. Such expenditures are recognized following the cost principles contained in Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, wherein certain types of expenditures are not allowable or are limited as to reimbursement, except for expenditures related to ALN 93.498, Provider Relief Fund and American Rescue Plan Rural Distribution (PRF). PRF does not apply the cost principles contained in Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, but rather applies the U.S. Department of Health and Human Services’ (HHS) guidance. For the PRF program, HHS has indicated that the amounts on the Schedule should be reported in correspondence with reporting requirements of the HHS PRF Reporting Portal. Payments from HHS for PRF are assigned to one of the payment periods based upon the date each PRF payment was received. Each period has a specified period of availability and timing of reporting requirements. The System has elected not to use the 10 percent de minimis indirect cost rate to recover indirect costs, as allowed under the Uniform Guidance. De Minimis Rate Used: N Rate Explanation: The System has elected not to use the 10 percent de minimis indirect cost rate to recover indirect costs, as allowed under the Uniform Guidance. Loans outstanding at the beginning of the year and loans made during the year are included in the federal expenditures presented in the schedule of expenditures of federal awards. The balances of loans outstanding at June 30, 2022 consist of the following: See the Notes to the SEFA for chart/table

Finding Details

Finding 2022-002
Assistance Listing Number, Federal Agency, and Program Name 10.766, United States Department of Agriculture, Community Facilities Loans and Grants Federal Award Identification Number and Year N/A Pass through Entity N/A Finding Type Material weakness and material noncompliance with laws and regulations Repeat Finding No Criteria: The Loan Agreement between Avita Health System (the "System") and the United States Department of Agriculture ("USDA") requires the System to establish and maintain a separate debt service reserve fund. If the required debt service reserve falls below the minimum required balance, the System is required to make monthly deposits until the minimum required debt service reserve has been accumulated. Condition: The System failed to make the monthly debt service reserve fund deposits required by the USDA loan agreement. Questioned Costs: None Identification of How Questioned Costs Were Computed: N/A Context: The debt service reserve fund was fully funded upon issuance of the loan. Prior to fiscal year 2022, the System had not made any withdrawals from the debt service reserve fund; therefore, there were no monthly deposit requirements. However, during 2022, approximately $4,200,000 was withdrawn from the debt service reserve fund. In accordance with the loan agreement, when the debt service reserve fund falls below one year of annual debt service on the outstanding USDA loans, the System is required to make monthly deposits until the required debt service reserve balance is met. After the withdrawals were made during 2022, the debt service reserve fund balance was approximately $873,000, whereas the required debt service reserve balance was approximately $1,720,000 as of June 30, 2022. The System made no deposits to replenish the debt service reserve fund during the year ended June 30, 2022. Cause and Effect: The lack of review of the debt service reserve requirements in the loan agreement resulted in the underfunding of the debt service reserve account during 2022. Recommendation The System should review the loan agreement and applicable compliance requirements related to their loan program to ensure maintenance of the debt service reserve fund is executed in accordance with the required by the USDA loan agreement and other relevant regulations and requirements. Views of Responsible Officials and Corrective Action Plan Once it was determined that it was necessary to keep the balance of the fund at an amount equal to one year of debt service prorated by 10 years, we began funding it and met that requirement by the end of fiscal year 2023, and we have maintained the required funding since.
Finding 2022-002
Assistance Listing Number, Federal Agency, and Program Name 10.766, United States Department of Agriculture, Community Facilities Loans and Grants Federal Award Identification Number and Year N/A Pass through Entity N/A Finding Type Material weakness and material noncompliance with laws and regulations Repeat Finding No Criteria: The Loan Agreement between Avita Health System (the "System") and the United States Department of Agriculture ("USDA") requires the System to establish and maintain a separate debt service reserve fund. If the required debt service reserve falls below the minimum required balance, the System is required to make monthly deposits until the minimum required debt service reserve has been accumulated. Condition: The System failed to make the monthly debt service reserve fund deposits required by the USDA loan agreement. Questioned Costs: None Identification of How Questioned Costs Were Computed: N/A Context: The debt service reserve fund was fully funded upon issuance of the loan. Prior to fiscal year 2022, the System had not made any withdrawals from the debt service reserve fund; therefore, there were no monthly deposit requirements. However, during 2022, approximately $4,200,000 was withdrawn from the debt service reserve fund. In accordance with the loan agreement, when the debt service reserve fund falls below one year of annual debt service on the outstanding USDA loans, the System is required to make monthly deposits until the required debt service reserve balance is met. After the withdrawals were made during 2022, the debt service reserve fund balance was approximately $873,000, whereas the required debt service reserve balance was approximately $1,720,000 as of June 30, 2022. The System made no deposits to replenish the debt service reserve fund during the year ended June 30, 2022. Cause and Effect: The lack of review of the debt service reserve requirements in the loan agreement resulted in the underfunding of the debt service reserve account during 2022. Recommendation The System should review the loan agreement and applicable compliance requirements related to their loan program to ensure maintenance of the debt service reserve fund is executed in accordance with the required by the USDA loan agreement and other relevant regulations and requirements. Views of Responsible Officials and Corrective Action Plan Once it was determined that it was necessary to keep the balance of the fund at an amount equal to one year of debt service prorated by 10 years, we began funding it and met that requirement by the end of fiscal year 2023, and we have maintained the required funding since.