Finding Text
Department of Agriculture
Federal Financial Assistance Listing #10.766
Community Facilities Loans and Grants Cluster
Special Tests and Provisions
Material Weakness in Internal Control Over Compliance and Material Noncompliance for Special Tests and Provisions
Criteria: 2 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.
Condition: The Hospital did not maintain a reserve account or request the Department of Agriculture’s (USDA) permission prior to entering into new debt in compliance with their debt agreements. As of June 30, 2023, the Hospital should have USDA debt reserves at least equal to $417,954.
Cause: The lack of adequate policies governing the understanding and execution of loan agreement requirements.
Effect: The Hospital was not in compliance with their provisions of the USDA debt agreements.
Questioned Costs: None reported.
Context: Sampling was not used.
Repeat Finding from Prior Years: No
Recommendation: We recommend the Hospital enhance internal control policies to ensure that loan requirements are met. In additional we recommend the Hospital reach out to USDA to inform them of the situation and request clarification on how to best remedy the situation including establishing and funding the USDA debt reserves.
Views of Responsible Officials: Management agrees with the finding.