Finding Text
2022-003 Department of Agriculture Federal Financial Assistance Listing/CFDA #10.766 Communities Facilities and Loans 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 award. The commitment letter for the term load with the bank requires debt service coverage ratio and working capital calculations to be calculated yearly using audited financial statements Condition: Management does not have controls in place to ensure compliance with the requirements as they have not been calculating or monitoring the required ratios internally. Cause: The Health Center was relying on the annual calculations performed by the audit team. Effect: The Health Center could be in violation of the debt coverage requirements if management is not monitoring compliance. Questioned Costs: None reported Context/Sampling: Sampling was not used Repeat Finding from Prior Year: No Recommendation: We recommend management implement process and controls in place to monitor the debt service coverage ratio and working capital calculations as a part of their year-end close process to ensure all covenants of the loan are met. Response: Management agrees with the finding.