Finding Text
CFDA #10.766 USDA Community Facilities Loans and Grants Continuing Compliance Requirement Finding 2022-001 ? Failure to Meet Required Loan Covenants riteria: The USDA loan agreements require the Home to maintain a debt service coverage ratio of 1.25x and 65 days of unrestricted cash on hand, as of December 31, 2022. Condition: At December 31, 2022, the Home did not meet the days cash on hand requirement. The Home has 52 days of unrestricted cash on hand as of December 31, 2022. Cause: Due to increased expenses of the Home and a decrease in cash flows, as well as certain cash balances which are restricted to use, management was unable to meet the loan covenant. Effect: As a continuing compliance requirement, violation of a loan covenant could place the loan in default status, which could jeopardize future funding from the lender. Questioned Costs: There were no questioned costs. Context: The Home received multiple USDA loans which have ongoing continuing compliance requirements, including maintaining debt covenants. Repeat Finding: This is a repeat finding. The Home did not meet the days cash on hand requirement in 2021. Recommendation: We recommend management track cash flows monthly to ensure a minimum of 65 days cash on hand at the end of each six-month reporting period (every June 30th and December 31st). Views of Responsible Officials and Planned Corrective Action: Management agrees with the above finding and has implemented a three-phase plan to reduce overhead and managerial costs while maintaining a Skilled Nursing Census in the mid to high 80s.