Finding Text
2023-004 Department of Agriculture
Federal Financial Assistance Listing #10.766
Communities Facilities Loans and Grants Cluster
Special Test and Provisions
Material Weakness in Internal Control over Compliance
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 awards. Section 4 of the loan resolution security
agreements dated September 2, 2008 and March 10, 2010 states the Hospital must set aside a reserve amount
each month until the specified account balance is reached.
Condition: The Hospital’s reserve account is fully funded per the requirements in the loan resolution agreement.
However, there is no documented secondary monitoring of the account balance as compared to the required
minimum balance.
Cause: The Hospital did not have a formal review or approval process in place. The balance is disclosed to the
board within the financial information provided to the board members, however, there is no comparison of the
reserve fund account balance compared to the required minimum balance.
Effect: The lack of formal review or approval increases the risk of employees participating in the federal award
administration not detecting and correcting noncompliance in a timely manner.
Questioned Costs: None reported.
Context: Sampling was not used.
Repeat Finding from Prior Year: Yes, prior year finding 2022-004.
Recommendation: We recommend that management implement procedures to include monitoring over special
test and provisions related to federal expenditures including a secondary review of the reserve bank account
which may include a comparison of the required balance to the actual balance or documenting the requirement
in the monthly financial information which are provided to the board.
Views of Responsible Officials: Management agrees with the finding.