Finding Text
2023-004 United States Department of Agriculture
Federal Financial Assistance Listing #10.766
Communities Facilities Loans and Grants Cluster
Special Tests and Provisions
Material Weakness in Internal Control over Compliance and 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, and conditions of the federal award. Section 4 of the loan resolution security agreements dated March 28, 2012 states the Hospital must set aside a reserve amount which may be established as a bookkeeping account or as a separate bank account. Funds may be deposited in institutions insured by state and federal government or invested in marketable securities backed by the full faith and credit of the United States.
Condition: Management maintained the reserve amount in the cash sweep general fund account which was not established as a separate bookkeeping account or as a separate bank account. The Hospital had excess cash available to cover the required reserve amount.
Cause: The Hospital was unaware the funds were required to be maintained in a separate bookkeeping account or as a separate bank account.
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: Yes, prior year finding 2022-004
Recommendation: We recommend the Hospital transfer the required reserve amount to a separate bookkeeping account in the trial balance or establish a separate bank account and ensure the funds are deposited in institutions insured by state and federal governments or invested in marketable securities backed by the full faith and credit of the United States. Controls should be established and documented to monitor compliance with the reserve fund provision.
Views of Responsible Officials: Management agrees with the finding.