Finding 973045 (2023-004)

Material Weakness
Requirement
N
Questioned Costs
-
Year
2023
Accepted
2024-05-14
Audit: 306230
Auditor: Eide Bailly LLP

AI Summary

  • Core Issue: The Hospital lacks a proper internal control process to maintain a segregated reserve account for federal award compliance.
  • Impacted Requirements: Failure to comply with 2 CFR 200.303(a) and Loan Resolution Security Agreements regarding reserve fund management.
  • Recommended Follow-Up: Management should transfer the required reserve funds to a separate account and implement documented controls to ensure ongoing compliance.

Finding Text

Special Tests and Provisions Material Weakness in Internal Control Over Compliance and Material Noncompliance 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, terms and conditions of the federal award. Section 4 of the Loan Resolution Security Agreements dated April 24, 2001, November 26, 2002 and June 1, 2004, state that the Hospital must establish a segregated reserve account or a bookkeeping account. The funds in this account can only be used with USDA Rural Development concurrence. Condition – The Hospital did not fund reserves in a federally insured bank for debt service payments. The Hospital had cash balances on hand exceeding the required reserve amount; as well as board designated investment balances for debt repayment, however, the reserve funds were not segregated in a separate bank account or bookkeeping account in the trial balance. Cause – The Hospital did not have an internal control process in place to ensure that the required debt service reserve fund was established and maintained. Effect – The Hospital could be in violation of the reserve amount requirements if management is not monitoring compliance. Questioned Costs – None reported. Context/Sampling – Sampling was not used. Repeat Finding from Prior Years: No. Recommendation – We recommend management transfer the required reserve amount to a separate bank account or establish a bookkeeping account in the trial balance. Controls should be established and documented to monitor compliance with the reserve fund provisions. Views of Responsible Officials – Management agrees with the finding.

Categories

Special Tests & Provisions Subrecipient Monitoring Material Weakness Matching / Level of Effort / Earmarking Internal Control / Segregation of Duties

Other Findings in this Audit

  • 396603 2023-004
    Material Weakness
  • 396604 2023-005
    Material Weakness
  • 973046 2023-005
    Material Weakness

Programs in Audit

ALN Program Name Expenditures
10.766 Community Facilities Loans and Grants $780,248
93.498 Provider Relief Fund $506,454
93.697 Covid-19 Testing for Rural Health Clinics $100,000
93.301 Small Rural Hospital Improvement Grant Program $11,100