Finding 1206069 (2025-003)

Criteria: 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. The loan resolution security agreement states the Hospital must set aside a capital asset replacement account which may be established as a bookkeeping account or as a separate bank account. Funds may be deposited in institutions insured by state and federal government or invested in marketable securities backed by the full faith and credit of the United States. Condition: The funds that represented the capital asset replacement fund were commingledwith an existing board-designated CD account. Cause: The Hospital did not maintain a separate bank account or general ledger account for the capital asset replacement fund. Effect: The capital asset replacement funds were commingled with board-designated funds within a certificate of deposit account. Questioned Costs: None reported. Context: Sampling was not used. Recommendation: We recommend that management maintain a separate bank account or general ledger account for the capital asset replacement fund. Views of Responsible Officials and Planned Corrective Action: Management agrees with the funding and will deposit the required capital asset replacement funds in either a separate bank account or general ledger account.