Finding 561883 (2024-001)

FINDING 2024-001 – Significant deficiency in internal controls over compliance and noncompliance over submission of required reports Federal Award: Assistance Listing Number: 14.128 Mortgage Insurance Program Criteria: The Hospital Regulatory Agreement requires the following to be filed with HUD and Lender: (i) Annual audited financial statements from a certified public accountant or other person acceptable to HUD in accordance with program obligations. (ii) Board-certified annual financial statements within 120 days following the close of the borrower’s fiscal year if the annual audited financial statements have not yet been provided to HUD and Lender, or anytime at HUD’s and Lender’s request. (iii) Monthly unaudited financial statements 40 days following the end of the month, in accordance with program obligations, until final endorsement has occurred, or at HUD’s request. (iv) Quarterly unaudited financial statements and utilization statistics within 40 days following the end of each quarter of the borrower’s fiscal year, in accordance with program obligations. Condition/Context: During our testing of the reporting requirement, we tested four quarterly reports and one annual report (100% of the population). We observed that although board approval was received prior to the due date, the annual board-certified financial statements were submitted five days (three business days) after the deadline required by the Hospital Regulatory Agreement. Cause: Management did not have effective internal controls in place to ensure the report was submitted in accordance with the Hospital Regulatory Agreement. Effect: Because there were not effective internal controls in place, the annual board-certified report was submitted past the date required by the Hospital Regulatory Agreement. Questioned Costs: Not applicable. Repeating Finding: Not applicable. Recommendation: We recommend that management implement internal controls to ensure that the required reports are submitted by the deadlines agreed to in the Hospital Regulatory Agreement. View of responsible officials and planned corrective actions: Although the circumstances were unique due to implementation of a new electronic health record system, additional personnel will be involved to ensure redundancy, completion, and compliance with the annual reporting requirement.