Finding Text
Identification: 10.766 United States Department of Agriculture (USDA), Community Facilities Loans and Grants; Noncompliance Finding; Special Tests and Provisions Compliance Requirement
Criteria: The USDA direct loan and guaranteed loan were entered into in 2010 for renovation of the Medical Center's healthcare facility. One direct loan and one guaranteed loan were received. In connection with the loans, the Medical Center entered into the 2010 bond trust indenture and agreed to the letter of conditions dated November 30, 2009, set forth by the USDA which the Medical Center is required to follow. Section 506 of the 2010 bond trust indenture states the facility shall maintain a Debt Service Coverage Ratio that is not less than 1.25, and maintain a balance of days cash on hand of not less than 75 days.
Condition: The Medical Center did meet either the debt service coverage ratio nor the days cash on hand ratio for the year ended December 31, 2024.
Cause: The Medical Center did not obtain operational results such that the financial liquidity and cash generation was sufficient to meet the debt service coverage ratio or the days cash on hand ratio.
Effect: The Medical Center is not complying with Section 506 of the 2010 bond indenture.
Questioned Costs: None
Perspective Information: We performed an independent computation of the Medical Center's debt service coverage ratio and days cash on hand ratio. The results of our independent computations indicate the covenants were not met.
Repeat Finding: No
Recommendations: We recommend that the Medical Center review Section 506 of the 2010 bond trust indenture which outlines the required steps and notify the bond trustee that the debt service coverage ratio and days cash on hand ratio were not met.
Views from Responsible Officials:
The Medical Center notified the bond trustee in May 2025 that the debt service coverage ratio and days cash on hand ratio were not met for the year ended December 31, 2024, and will follow up with the bond trustee following completion of the audit regarding the necessary steps to take as outlined in the bond trust indenture.