Finding Text
2022 ? 002 Federal agency: U.S. Department of Housing and Urban Development Federal program: Section 232 Mortgage Insurance for Nursing Homes Federal Assistance Listing Number: 14.129 Award Period: 2022 Type of Finding: ? Material Weakness in Internal Control Over Compliance ? Other Matters Criteria or specific requirement: The Project?s Borrower Regulatory Agreement with HUD requires the Organization to deposit any excess Surplus Cash into a residual receipts account within 90 days after the end of the annual or semi-annual fiscal period for which Surplus Cash is calculated. Condition: The Organization had surplus cash as of June 30, 2021 which it had not deposited into a residual receipts account by September 2021 because the semi-annual calculation was not performed timely. The Organization deposited $622,564 of surplus cash for the period ended December 31, 2020 into the residual receipts account during 2022. Questioned costs: None Context: The Surplus Cash balance was $2,111,922 at June 30, 2021. Cause: As the Organization had deficiencies in Surplus Cash in all prior periods except for December 31, 2020, management was not expecting a Surplus Cash position as of June 30, 2021 and a residual receipts account was therefore not established. The Organization has not deposited June 30, 2021 surplus cash in order to maintain sufficient levels of cash flow. Effect: No negative effect was discovered during the audit. Repeat finding: Yes, prior year finding 2021-002 Recommendation: Management should deposit the amount of Surplus Cash at June 30, 2021 into the residual receipts account as soon as possible and monitor surplus cash closely during each annual and semi-annual period. Views of responsible officials and planned corrective actions: The Organization was fortunate to have sufficient cash on hand in order to continue to provide the highest-quality of care to its residents during the COVID-19 pandemic, primarily as a result of federal and state stimulus funds, which were restricted in usage, received during 2020 and 2021. The Organization made it a priority to ensure that its staff continued to be compensated throughout the pandemic. Accordingly, the Organization kept cash on hand in order to meet the needs of the residents cared for daily and the dedicated staff who serve them. The Organization was not expecting a surplus cash situation at December 31, 2020 or June 30, 2021. Had the Organization not received stimulus funds through programs such as the Provider Relief Fund and Paycheck Protection Program, the Organization would not have had surplus cash at both December 31, 2020 and June 30, 2021. The required deposit due to the residual receipt account for the year ended December 31, 2020 was made on May 31, 2022. The Organization is currently in the process of discussing repayment terms for the deposit due for the period June 30, 2021 with its asset manager.