Finding Text
U.S. Department of Agriculture Community Facilities Loans and Grants - 10.766 Criteria or Specific Requirement – Special Test Per 2 CFR 200.303, the non-federal entities receiving federal awards (i.e ., auditee management) must establish and maintain internal control design to reasonably ensure compliance with federal statutes, regulations, and the terms and conditions of the federal award. Per the debt agreement, Section 4(d)1, the Hospital needs to accumulate $521,000 in debt reserve account deposits of $4,000 monthly until fully funded. Condition – During our test work over the USDA loan, we noted the Hospital did not make the required transfers to the debt reserve account from December 2024 to June 2025. Cause – Financial constraints and continued turnover within the accounting department of the Hospital. Effect or Potential Effect – The Hospital is not in compliance with their debt covenant and the USDA has the right to call the debt and make the entire loan balance immediately due and payable. Questioned Costs – None noted. Context – The Hospital has a waiver from the USDA in which the USDA granted permission for the Hospital to use the debt reserve account for debt service payments on the USDA loan up to December 2024. The USDA did not wish to further waive the requirement to make the monthly payments to the debt reserve account. Though, the Hospital and USDA entered into a workout agreement stating as long as the Hospital agreed to their conditions, they would not accelerate the amount due. Identification as a Repeat Finding, if applicable – Not applicable. Recommendation – We recommend the Hospital adhere to the conditions set forth by the USDA per the workout agreement, which includes making the monthly transfer of $4,000 to the debt reserve account. Views of Responsible Official and Planned Corrective Actions – Management agrees with finding. See corrective action plan.