Audit 412630

Department of Agriculture Federal Financial Assistance Listing #10.766 Community Facilities Loans and Grants Preparation of the Schedule of Expenditures of Federal Awards Material Weakness in Internal Control Over Compliance - Other Criteria Proper controls over financial reporting include the ability to prepare the Consolidated Schedule of Expenditures of Federal Awards (Schedule) and accompanying notes to the Schedule. Condition The Medical Center does not have an internal control system designed to provide for a complete and accurate schedule of expenditures of federal awards being audited. We were requested to draft the Schedule. Cause Auditor assistance with preparation of the Schedule is not unusual, as the Schedule has unique and specialized requirements and preparation is only required when the Medical Center meets a specified threshold of federal expenditures. Effect There is a reasonable possibility that the Medical Center would not be able to draft a Schedule that is correct without assistance of the auditors. Questioned Costs None reported. Context Sampling was not used. Repeat Finding from Prior Years Yes Recommendation While we recognize that this condition is not unusual for an organization with limited staffing, we recommend management be aware of the financial reporting requirements relating to the Medical Center’s Consolidated Schedule of Expenditures of Federal Awards and internal controls that impact financial reporting. Views of Responsible Officials Management agrees with the finding.

Department of Agriculture Federal Financial Assistance Listing #10.766 Community Facilities Loans and Grants Lack of Timely Reconciliations of the General Cash, Construction, and Required Reserve Accounts Material Weakness in Internal Control Over Compliance – Special Tests and Provisions Criteria The Medical Center is required to establish accounts into which borrower funds, loan proceeds, the revenue of the facility financed, and any other income shall be deposited in accordance with loan resolutions authorizing the incurrence of indebtedness related to the loan proceeds. These accounts shall be maintained in accordance with the loan resolutions as long as the authorized indebtedness is outstanding. These accounts include the general account (i.e., operating checking account), construction account, debt service account, and reserve account (USDA Accounts). Condition The Medical Center does not have an internal control system designed to ensure that the USDA Accounts noted above are reconciled on a timely basis. The lack of timely reconciliations required several adjustments to be made during the audit. Cause The Medical Center had turnover in the Chief Financial Officer position along with a construction project that utilized significant finance department time and resources. Effect There is a reasonable possibility that errors related to the USDA Accounts and other accounts impacted by the USDA Accounts, including construction in progress, are not properly stated in the consolidated financial statements. In addition, there could be amounts expended from the USDA Accounts that do not meet the requirements, and those expenditures would not be identified in a timely manner. Questioned Costs None reported. Context Sampling was not used. There are four USDA Accounts currently in use and all USDA Accounts were reviewed. Repeat Finding from Prior Years Yes Recommendation We recommend that a formalized process be established to ensure timely reconciliation of the USDA Accounts as well as a review process of those reconciliations each month. Views of Responsible Officials Management agrees with the finding.