Finding 960535 (2023-004)

U.S. Department of Agriculture Federal Assistance Listing #10.766 Community Facilities Loans and Grants Cluster Applicable Federal Award Number – Direct Loan and Guaranteed Loan Special Tests and Provisions Significant Deficiency in Internal Control Over Compliance and Noncompliance Not Considered Material 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. Condition: The Medical Center was required to establish reserve accounts with deposits equal to 10% of the annual debt service requirement on the direct loan and guaranteed loan. The Medical Center did not establish these accounts, which were expected to total $48,386, based on three months of required deposits, during 2023. Cause: This deficiency is due to a misunderstanding of establishing reserve accounts as Salina Regional Health Center is the centralized cash management agent for the Medical Center. Effect: The Medical Center was not in compliance with the terms of the loan agreements related to the reserve funds. Questioned Costs: None. Context: Sampling was not used. Repeat Finding from Prior Years: No. Recommendation: We recommend that management create the appropriate reserve accounts, as required under the loan agreements. We recommend management implement a control process to ensure the monthly deposits are made as required, until the accounts are fully funded. Views of Responsible Officials: Management agrees with the finding.