Finding Text
U.S. Department of Agriculture
Federal Assistance Listing #10.766
Community Facilities Loans and Grants
Applicable Federal Award Number – Direct Loan and Guaranteed Loan
Special Tests and Provisions
Significant Deficiency in Internal Control Over Compliance and Noncompliance Not Considered Material
Criteria: 2 CFR 200.303(a) establishes that the auditee must establish and maintain effective internal control over the federal award that provides assurance that the entity is managing the federal award in compliance with federal statutes, regulations, and conditions of the federal award.
Condition: The Medical Center was required to establish reserve accounts with deposits equal to 10% of the annual debt service requirement on the direct loan and guaranteed loan for the entire year. The Medical Center did not establish these accounts until August 2024. Although the reserve was fully funded by year-end, the reserve was not funded the entire year, as required.
Cause: This deficiency is due to a misunderstanding of establishing reserve accounts as Salina Regional Health Center is the centralized cash management agent for the Medical Center. Once this was identified, the Medical Center worked with the bank to establish a
reserve.
Effect: The Medical Center was not in compliance with the terms of the loan agreements related to the reserve funds until August 2024.
Questioned Costs: None.
Context: Sampling was not used.
Repeat Finding from Prior Years: Yes.
Recommendation: We recommend management implement a control process to ensure the reserve is fully funded throughout the entire year.
Views of Responsible Officials: Management agrees with the finding.