Finding 1182152 (2024-003)

Finding 2024-003 Repeat Finding:No Program Name:Community Facilities Loans and Grants Assistance Listing #:10.766 Federal Agency:U.S. Department of Agriculture Type of Finding:Noncompliance, Significant Deficiency Compliance Requirement:Special Tests and Provisions Condition:El Dorado County Community Health Center did not deposit the required funds into the reserve account related to its USDA loan as required by the loan agreement. As a result, the account is under reserved for the year ended June 30, 2024. Criteria:USDA Rural Development Community Facilities loan agreements and related program regulations require borrowers to fund specific reserve accounts, including a debt service reserve, to ensure adequate funding is available to meet future principal and interest obligations. These requirements constitute Special Tests and Provisions under 2 CFR Part 200, Subpart F, and are binding terms of the federal award. Cause:El Dorado County Community Health Center did not fully understand or implement the reserve account funding requirements outlined in the loan agreement. Effect:Failure to properly fund the required reserve accounts places the entity at risk of noncompliance with federal award requirements and could impair its ability to meet future debt service obligations. Recommendation:We recommend El Dorado County Community Health Center properly fund the required reserve account in accordance with loan provisions, and implement procedures to periodically monitor compliance. View of Responsible Officials:Management acknowledged that the required reserve account was not funded as specified in the loan agreement. Subsequent to year end, Management has deposited the funds to meet the requirements.