Audit 404103

Department of Agriculture Federal Financial Assistance Listing #10.766 Community Facilities Loans and Grants Special Tests and Provisions Material Weakness in Internal Control Over Compliance Criteria: 2 CFR 200.303(a) establishes that the auditee must establish and maintain effective internal controls over the federal award that provides assurance that the entity is managing the federal award in compliance with federal statutes and conditions of the award. Condition: During our testing, it was noted that funds were disbursed from the loan reserve accounts without proper prior approval from the USDA, causing the accounts to be underfunded. Cause: The Hospital did not have an adequate internal control policy in place to ensure the proper disbursement and funding of the reserve account. Effect: Although management obtained a waiver for the noncompliance, the lack of adequate policies governing proper funding of reserve 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: Sampling was not used. The Hospital has two reserve accounts that were tested. Repeat Finding from Prior Year: No Recommendation: We recommend that the Hospital enhance internal control policies to ensure that there is proper funding of the reserve accounts. Views of Responsible Officials: Management agrees with the finding.