Finding 519102 (2024-003)

Significant Deficiency – Outstanding Receivable from Affiliate Federal Agency Name: U.S. Department of Housing and Urban Development Assistance Listing Number: 14.128 Program Name: Mortgage Insurance for Hospitals Compliance Requirement: Special Tests and Provisions Type of Finding: Significant Deficiency in Internal Control Over Compliance and Noncompliance Criteria: As part of its loan agreement with HUD, the Hospital is not permitted to hold receivables from affiliated entities that are older than 90 days. Condition: The Hospital has amounts due from affiliate of $697,310 that are older than 90 days as of September 30, 2024. Cause: The Hospital funded significant costs on behalf of affiliate as a result of poor cash flows. The affiliate has been unable to pay the balance back to the Hospital in a timely manner. Effect: The Hospital is in violation of a loan covenant from HUD. The Hospital has implemented a payment plan with affiliate. There will be ten months of $30,000 payments, per month, with a lump sum payment of $433,059 to be paid in March 2025. Questioned Costs: None reported. Context: Sampling was not used. Repeat Finding from Prior Year: Yes Recommendation: We recommend that management follow its payment plan that is currently in place in order to reduce the outstanding receivable balance from affiliate. Views of Responsible Officials: Management agrees with the finding. See corrective action plan.