Finding Text
Finding 2025-003 - Noncompliance with Required Debt Covenant Financial Ratio Condition: As of December 31, 2025, the Facility’s debt service coverage ratio was 1.14, which is below the Facility’s required ratio under their debt agreement covenant of at least 1.25 to 1.00. Criteria: Under the terms of the Facility’s October 1, 2012, debt indenture agreement for the loan with Compeer Financial Agricultural Credit Association that is a USDA guaranteed loan, the Facility is required to maintain a debt service coverage ratio of at least 1.25 to 1.00 measured annually based upon the audited financial statements. Cause: The Facility’s level of revenue in excess of expenses for the year ended December 31, 2025, compared to current future debt payments resulted in not meeting the debt service coverage ratio debt covenant requirement of at least 1.25 to 1.00 as of December 31, 2025. Effect: The Facility’s debt service coverage ratio as of December 31, 2025, was below the required level. Recommendation: We recommend management put processes into place to evaluate the Facility’s resident mix and increase resident days, while continuing to contain related variable and fixed expenses to increase the Facility’s profitability. View of responsible Officials: Management will continue to evaluate the Facility’s resident mix and manage resident days while continuing to contain related variable and fixed expenses to increase the Facility’s profitability.