U.S. Department of Agriculture Community Facilities Loans and Grants - 10.766 Criteria or Specific Requirement – Special Test Per 2 CFR 200.303, the non-federal entities receiving federal awards (i.e ., auditee management) must establish and maintain internal control design to reasonably ensure compliance with federal statutes, regulations, and the terms and conditions of the federal award. Per the debt agreement, Section 4(d)1, the Hospital needs to accumulate $521,000 in debt reserve account deposits of $4,000 monthly until fully funded. Condition – During our test work over the USDA loan, we noted the Hospital did not make the required transfers to the debt reserve account from December 2024 to June 2025. Cause – Financial constraints and continued turnover within the accounting department of the Hospital. Effect or Potential Effect – The Hospital is not in compliance with their debt covenant and the USDA has the right to call the debt and make the entire loan balance immediately due and payable. Questioned Costs – None noted. Context – The Hospital has a waiver from the USDA in which the USDA granted permission for the Hospital to use the debt reserve account for debt service payments on the USDA loan up to December 2024. The USDA did not wish to further waive the requirement to make the monthly payments to the debt reserve account. Though, the Hospital and USDA entered into a workout agreement stating as long as the Hospital agreed to their conditions, they would not accelerate the amount due. Identification as a Repeat Finding, if applicable – Not applicable. Recommendation – We recommend the Hospital adhere to the conditions set forth by the USDA per the workout agreement, which includes making the monthly transfer of $4,000 to the debt reserve account. Views of Responsible Official and Planned Corrective Actions – Management agrees with finding. See corrective action plan.
U.S. Department of Health and Human Services Congressional Directives - 93.493 Award# CE152271 Criteria or Specific Requirement – Procurement and Suspension and Debarment subawards under covered transactions to parties that are suspended or debarred. “Covered transactions” include contracts for goods and services awarded under a non-procurement transaction (e.g ., grant or cooperative agreement) that are expected to equal or exceed $25,000 or meet certain other criteria as specified in 2 CFR Section 180.220. All non-procurement transactions entered into by a pass-through entity (i.e ., subawards to subrecipients), irrespective of award amount, are considered covered transactions, unless they are exempt as provided in 2 CFR Section 180.215. Per 2 CFR 200.303, the non-federal entities receiving federal awards (i.e ., auditee management) establish and maintain internal control design to reasonably ensure compliance with federal statutes, regulations, and the terms and conditions of the federal award. Condition – The Hospital's Procurement Policy and Procedure is not in alignment with the requirements of 2 CFR Section 200.320. The policy does not document different procurement methods for documentation to be retained, etc. Additionally, formalized documentation supporting the Hospital is in compliance with policies and regulations supporting its procurement decisions did not exist. Lastly, there was no suspension and debarment check completed prior to purchases made with federal funds. Cause – The Hospital's procurement policies are not in accordance with the Uniform Guidance, nor are there controls in place to ensure policies are followed, and lastly, there are no controls to ensure suspension and debarment checks are performed on vendors receiving federal funds. Effect or Potential Effect – Federal funds could be used to make an unauthorized purchase including paying paying an entity that is suspended or debarred. Questioned Costs – None noted. Context – During fiscal year 2025, only one vendor was subject to procurement and suspension and debarment requirements and was therefore selected for testing. The Hospital expended $1,100,000 for goods goods and services from this vendor during the fiscal year. The Hospital was able to provide bid documentation related to vendor selection; however, the Hospital did not have formally documented written procurement policies addressing compliance with Uniform Guidance requirements, including procedures for suspension and debarment verification. As part of audit testing, it was noted that the vendor had not been evaluated for suspension or debarment at the time of procurement. A subsequent check performed during the audit indicated that the vendor was not suspended or debarred. Identification as a Repeat Finding, if applicable – Not applicable. Recommendation – Policies and procedures should be modified to ensure that procurement policies are in alignment with federal regulations, support for procurement decisions are maintained and suspension and debarment checks on vendors are performed prior to making purchases with federal funds and are in alignment with the Uniform Guidance requirements. Views of Responsible Official and Planned Corrective Actions – Management agrees with finding. See corrective action plan.
U.S. Department of Health and Human Services Congressional Directives - 93.493 Award# CE152271 Criteria or Specific Requirement – Reporting and Significant Deficiency Per 2 CFR 200.303, the non-federal entities receiving federal awards (i.e ., auditee management) establish and maintain internal control design to reasonably ensure compliance with federal statutes, regulations, and the terms and conditions of the federal award. Condition – During our test work over the Congressional Directive grant, we noted the Hospital did not maintain effective internal controls over reporting. Reports were prepared and submitted by a single individual without evidence of supervisory or independent review prior to submission. Cause – The Hospital's controls to ensure reports are filed timely and accurately were not operating effectively. Effect or Potential Effect - Without an established review process, there is an increased risk that required federal reports may contain errors, omissions, or noncompliant information, which may not be detected or corrected timely. Questioned Costs – None noted. Context – One federal financial report was required to be submitted and selected for testing. We noted there was no review process in place over the report submitted. While no material errors were identified during audit testing, the control deficiency increases the risk of noncompliance with federal reporting requirements. Identification as a Repeat Finding, if applicable – Not applicable. Recommendation – We recommend the Hospital incorporate a review and reconciliation process of the required reports to the underlying grant and accounting records. Views of Responsible Official and Planned Corrective Actions – Management agrees with finding. See corrective action plan.
U.S. Department of Health and Human Services Congressional Directives - 93.493 Award# CE152271 Criteria or Specific Requirement – Cash Management and Significant Deficiency Non-federal entities must minimize the time elapsing between the transfer of funds from the U.S. Treasury or pass-through entity and disbursement by the non-federal entity for direct program or project costs and the proportionate share of allowable indirect costs, whether the payment is made by electronic funds transfer, or issuance or redemption of checks, warrants, or payment by other means (2 CFR Section 200.305(b)). Condition – During our test work over the Congressional Directive grant, we noted the Hospital received the grant funds in October 2023. The funds were placed in a restricted cash account and were not expended until January 2025, when the MRI equipment was invoiced and subsequently paid for. As such, grant funds were drawn in advance of the incurrence of allowable costs. Cause – Management indicated that, at the time the grant funds were drawn, a former Chief Financial Officer was responsible for grant administration. Management believes the funds were drawn early to demonstrate receipt of grant funding in order for construction on the MRI suite to proceed. However, management was unable to locate written authorization, correspondence, or other documentation from HRSA approving an advance drawdown. Effect or Potential Effect – The Hospital did not comply with federal cash management requirements, as grant funds were drawn in advance of the incurrence of allowable costs and without documented federal approval. Questioned Costs – None noted. Context – The MRI equipment could not be purchased until remodeling of the imaging suite was completed, patient safety concerns were addressed, and inspection was completed. The Hospital did maintain the grant proceeds in restricted cash and did not use the funds for other purposes. No documentation was provided evidencing HRSA approval to draw funds prior to expenditure. Identification as a Repeat Finding, if applicable – Not applicable. Recommendation – Management should strengthen controls to ensure federal grant funds are drawn only as allowable costs are incurred and in accordance with grant agreement terms. Controls should require documented evidence of incurred costs prior to drawdown and retention of any federal approvals authorizing advance funding. Views of Responsible Official and Planned Corrective Actions – Management agrees with finding. See corrective action plan.