Audit 400243

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 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 quarterly reports and certain annual reports. For the year ended July 31, 2025, the Organization failed to timely and accurately submit certain reports in accordance with HUD requirements. Cause: The Organization did not follow their internal control policy to ensure the required reports was filed correctly and timely. Effect: Some required reports were not submitted in accordance with loan requirements deadlines and others were submitted with misstatements. Questioned Costs: None reported. Context: There was a total of seven reports required to be submitted for the year ended July 31, 2025. Four were selected for testing. Three were submitted with misstatements regarding a duplicated line on the balance sheet and some slight statistic differences and the fourth was not submitted to HUD by the deadline. Repeat Finding from Prior Years: Yes, Finding 2024-004. 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 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 two new short term loans. A new loan 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 loan agreement unless the loan meets certain requirements. If those requirements are met, then the Organization just needs to inform HUD of the new loan agreement. Cause: During the course of our engagement, we noted that management did not receive approval from HUD in advance of entering into the agreements. The new loans would have met the exception require approval from HUD prior to entering into the agreement. However, management did not make this evaluation prior to entering into the agreements. Effect: The Organization violated a covenant within the Mortgage Note Insured by HUD agreement. Question Costs: None reported. Context/Sampling: None as there were only one lease agreement and two new loan agreements entered into during the fiscal year that was additional financing and all were tested. Repeat Finding from Prior Year: No Recommendation: We recommend that management should request and receive approval from HUD prior to entering into lease agreements and complete the necessary evaluation of short-term loans prior to entering into the short-term loan to determine whether approval or notification to HUD is required. 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 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, 2025, the Organization failed to document the performance of this inventory when the last had been performed for the year ended July 31, 2023. Cause: There was turnover of key financial personnel during the year. 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 of 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 ensure the inventory count is being performed despite any possible changes in staffing. Views of Responsible Officials: Management agrees with the finding.