FAC Explorer

Finding 497910 (2023-001)

Significant Deficiency Repeat Finding
Requirement
P
Questioned Costs
-
Year
2023
Accepted
2024-09-23
Audit: 320493
Organization: St John's Health Care Corporation (NY)
Auditor: Bonadio & CO LLP

AI Summary

  • Core Issue: The Home took a related-party loan of $500,000 without prior HUD approval, violating regulatory agreements.
  • Impacted Requirements: HUD regulations require written approval before encumbering mortgaged property.
  • Recommended Follow-Up: Ensure compliance by obtaining necessary HUD approvals for any future loans or encumbrances.

Finding Text

Finding 2023-001 Program: U.S. Department of Housing and Urban Development (HUD) Mortgage Insurance - Nursing Homes, Intermediate Care Facilities, Board and Care Homes, and Assisted Living Facilities (Section 232) Assistance Listing #14.129. Condition: During 2023, the Home received a related-party loan without obtaining prior HUD approval. Criteria: The HUD regulatory agreement states there shall not be an encumbrance of any of the mortgaged property without prior written approval of HUD. Context: During testing of debt, it was noted that the Home entered into a loan agreement with a related party. Cause: The Home experienced decreased occupancy, increased labor, benefits, and supply expenditures as a lingering impact of the COVID-19 pandemic. It utilized the U.S. Small Business Administration loan as a means to cover operating expenses. Effect: Failure to obtain written approval from HUD constitutes noncompliance with the HUD regulatory agreement. Gross amounts loaned from the related party amounted to $500,000 during 2023. Recommendation: Adhere to the HUD regulatory agreement in relation to obtaining prior written approval from HUD before encumbering the Project. Views of Responsible Official of the Auditee: The Home obtained the related party loan as a prudent business decision to meet operating expenses.

Corrective Action Plan

CORRECTIVE ACTION PLAN August 29, 2024 U.S. Department of Housing and Urban Development St. John’s Health Care Corporation respectfully submits the following corrective action plan for the year ended December 31, 2023. Name and address of independent public accounting firm: Bonadio & Co., LLP 171 Sully’s Trail Pittsford, NY 14534 Audit Period: January 1, 2023 – December 31, 2023 The findings from the December 31, 2023, schedule of findings and questioned costs are discussed below. The findings are numbered consistently with the number assigned in the schedule. FINDINGS – FEDERAL AWARD PROGRAMS AUDIT FINDING 2023-001: Section 232, CFDA 14.129 Recommendation: Adhere to the HUD regulatory agreement in relation to obtaining prior written approval from HUD before encumbering the Project. Action Taken: The Home obtained the related-party loan as a prudent business decision to meet operating expenses. The Home has implemented procedures to ensure that prior written approval is obtained from HUD before encumbering the Project in the future. If the U.S. Department of Housing and Urban Development has questions regarding this plan, please call Robert Earl at (585)-760-1473. Sincerely yours, Robert Earl Chief Financial Officer

Categories

HUD Housing Programs Matching / Level of Effort / Earmarking

Other Findings in this Audit

  • 1074352 2023-001
    Significant Deficiency Repeat

Programs in Audit

ALN Program Name Expenditures
14.129 Mortgage Insurance Nursing Homes, Intermediate Care Facilities, Board and Care Homes and Assisted Living Facilities $11.53M
97.036 Disaster Grants - Public Assistance (presidentially Declared Disasters) $15,480