Finding Text
2022-006 Department of Housing and Urban Development Federal Financial Assistance Listing #14.128 Section 242 ? Mortgage Insurance - Hospitals Special Tests and Provisions Significant Deficiency in Internal Control Over Compliance Criteria: A good system on internal controls over compliance includes processes to ensure all provisions within the agreements are fully followed as well as following generally accepted accounting principles. Condition: The Organization entered into a 5-year lease on equipment. A capital lease is identified in the Mortgage Note Insured by HUD as the incurrence of additional indebtedness which, by terms of the agreement, should be approved by HUD in advance of entering into the capital lease agreement. Cause: During the course of our engagement, we noted that management did not receive approval from HUD in advance of entering into the agreement. Management did get approval from HUD after entering into the agreement. Effect: The Organization violated a covenant within the Mortgage Note Insured by HUD agreement. Question Costs: None reported. Context/Sampling: None as there was only one lease agreement entered into during the year that was a capital lease. Repeat Finding from Prior Year: Yes, Finding 2021-006. Recommendation: We recommend that management should request and receive approval from HUD prior to entering into lease or other debt agreements. Views of Responsible Officials: Management agrees with the finding.