EDGERTON HOSPITAL AND HEALTH SERVICES, INC.Non-Profit

Condition – It was noted that due to changes in personnel, in particular the replacing of the Organization’s Chief Financial Officer, among other items such as working through the change in affiliation, clinic integration, and other significant initiatives, the Organization failed to file its annual audited financial statements within the required 120 days following the end of its fiscal year end. Criteria – There is a requirement within the mortgage agreement that the Organization will make every effort to complete and file its annual audited financial statements within 120 days of year end. Effect – Reporting of financial information may not occur in a timely manner if reports are filed late. Recommendation – As the Organization continues to improve in processes and as time allows, completion of the annual audit and required work earlier in the year to allow for more timely reporting will assist in relieving this compliance finding. Management’s Response – The Organization will work to establish policies and procedure, and management took steps in 2026 to change personnel within the finance functions and hired a new Chief Financial Officer in 2026 with extensive hospital finance and accounting experience. The Chief Financial Officer’s duties will include additional reviews and assistance with account reconciliations as well as training of current staff and process improvements in this area, with a goal of removing this deficiency in the future.

Department of Housing and Urban Development Federal Assistance Listing #14.128 Section 242 – Mortgage Insurance ‐ Hospitals Reporting Material Weakness in Internal Control Over Compliance and Material Noncompliance Criteria: 2 CFR 200.303(a) states that the auditee must establish and maintain effective internal control over federal awards that provides reasonable assurance that the Organization is managing the federal awards in compliance with federal statutes, regulations and terms and conditions of the federal award. Condition: The Department of Housing and Urban Development (HUD) requires a quarterly reporting of financial and statistical data. Amounts reported under “All Non‐Operating Revenue” and “Other Changes in Fund Balance” in the Organization’s third quarter report submitted to HUD were not reconciled to and did not agree with the underlying financial data. The internal financial statements do not present all of the information that is required in the HUD quarterly reports and the differing information was all put to one line on the HUD quarterly report when the differences should have been evaluated and documented. Cause: The Organization does not have a control process in place to ensure the report submitted to HUD agrees to its internal financial statements and that the internal financial statements contain all information needed to properly complete the report. Effect: The Organization reported amounts under “All Non‐Operating Revenue” and “Other Changes in Fund Balance” in a quarterly report that may be inaccurate. Per discussion with the client and observation of the other quarterly reports, it was determined that the other quarterly reports would contain the same error. Therefore, the sample size was not increased. Questioned Costs: None reported. Context: There were a total of eight reports required to be submitted to HUD during the year ended December 31, 2023. Three reports were selected for testing. Of the three reports selected, it was noted that one report contained potential errors. Repeat Finding from Prior Years: Yes, Finding 2022‐004. Recommendation: We recommend the Organization implement a control process which includes a secondary review and approval of the required reports submitted to the federal agency after they have been entered into HUD’s format by an individual who understands the financial statements and the HUD reporting requirements. Views of Responsible Officials: Management agrees with the finding.

Department of Housing and Urban Development Federal Assistance Listing #14.128 Section 242 – Mortgage Insurance ‐ Hospitals Special Tests and Provisions Significant Deficiency in Internal Control Over Compliance Criteria: 2 CFR 200.303(a) states that the auditee must establish and maintain effective internal control over federal awards that provides reasonable assurance that the Organization is managing the federal awards in compliance with federal statutes, regulations and terms and conditions of the federal award. Condition: There was no documentation of review and approval of certain invoices or Purchase Orders. Cause: The Organization did not have an adequate internal control policy in place to ensure review and approval of cash disbursements was properly documented. Effect: The lack of adequate policies governing cash disbursement increases the risk that employees participating in the federal award administration may not be able to detect and correct noncompliance in a timely manner. Questioned Costs: None reported. Context: A nonstatistical sample of 60 expenditures were selected for testing. Of these 60 expenditures ($213,780), three ($14,477) did not show evidence of proper review and approval prior to payment. Repeat Finding from Prior Years: No Recommendation: We recommend the Organization enhance internal control policies to ensure all cash disbursements are reviewed and approval is documented prior to payment to ensure that all payments are necessary and correct. Views of Responsible Officials: Management agrees with the finding.

Department of Housing and Urban Development Federal Assistance Listing #14.128 Section 242 – Mortgage Insurance ‐ Hospitals Special Tests and Provisions Significant Deficiency in Internal Control Over Compliance Criteria: A good system on internal controls over compliance includes processes to ensure all provisions within the agreements are fully followed as well as following generally accepted accounting principles. Condition: The Organization did not request prior approval from HUD before entering into a finance lease agreement. A finance lease is identified in the Mortgage Note Insured by HUD as the incurrence of additional indebtedness which, by terms of the agreement, should be approved by HUD in advance of entering into such agreements. Cause: The finance lease agreement replaced an expiring lease which was recognized as an operating lease under prior accounting standards. As a result, management did not consider a request for approval of the new lease agreement. The new lease was determined to be a finance lease under current accounting standards during the financial statement audit process. Effect: The Organization violated a covenant within the Mortgage Note Insured by HUD agreement. Questioned Costs: None reported. Context: There were three new finance leases entered into during the fiscal year and it was noted that the two of the three leases had proper HUD approval. Repeat Finding from Prior Years: No Recommendation: We recommend that management evaluate all lease agreements to determine whether the lease should be accounted for as an operating or finance lease at the time the lease is entered into. The evaluation process should be documented, and the lease recognized in the financial statements based on the conclusion. If the lease is concluded to be a finance lease, HUD should be notified, and the Organization should request and receive approval from HUD prior to entering into the lease agreement. Views of Responsible Officials: Management agrees with the finding.

Department of Housing and Urban Development Federal Assistance Listing/CFDA #14.128 Section 242 ? Mortgage Insurance - Hospitals Reporting Significant Deficiency in Internal Control Over Compliance Criteria: 2 CFR 200.303(a) establishes that the auditee must establish and maintain effective internal control over federal awards that provides reasonable assurance that the Organization is managing the federal awards in compliance with federal statutes, regulations and terms and conditions of the federal award. Condition: The Organization?s third quarter report submitted to the Department of Housing and Urban Development (HUD) under reported Other Operating Revenue. Cause: The Organization did not have a control process in place to ensure the report submitted to HUD agreed to their internal financial statement. Effect: The Organization understated Other Operating Revenue in a quarterly report making the report inaccurate. Questioned Costs: None reported. Context: There were a total of eight reports required to be submitted for the year ended December 31, 2022. Three were selected for testing. Of the three selected, one had errors. Through review of a subsequent quarterly report, it was noted that the incorrect line item had been corrected during the year. Repeat Finding from Prior Years: No Recommendation: We recommend the Organization implement a control process which includes a secondary review and approval of the required reports to be submitted to the federal agency be completed after they have been entered into HUD?s format. Views of Responsible Officials: Management agrees with the finding. We will follow our policy of ?Review of Reports Filed with Federal Agencies? as a control over reporting and compliance.

Department of Health and Human Services Federal Assistance Listing/CFDA #93.498 COVID-19 Provider Relief Fund and American Rescue Plan Applicable Federal Award Number and Year ? Period 4 TIN #390819992 Activities Allowed or Unallowed and Allowable Costs/Cost Principles and Reporting Noncompliance Criteria: 2 CFR 200.303(a) establishes that the auditee must establish and maintain effective internal control over federal awards that provides reasonable assurance that the Organization is managing the federal awards in compliance with federal statutes, regulations and terms and conditions of the federal award. Condition: The Organization?s special report required to be submitted to the Department of Health and Human Services for Period 4 TIN #390819992 was not filed by the required due date of March 31, 2023. Cause: The Organization did not have an internal control process in place to ensure the report was submitted to the Department of Health and Human Services for Period 4 timely. Effect: The Organization is not in compliance with the programs reporting requirements. Questioned Costs: $95,395. Context: The Period 4 Department of Health and Human Services special report was not filed. Repeat Finding from Prior Years: No Recommendation: We recommend the Organization implement a control process which includes a secondary review and approval of the required reports to be submitted to the federal agency be documented. Views of Responsible Officials: Management agrees with the finding. We will follow our policy of ?Review of Reports Filed with Federal Agencies? as a control over reporting and compliance. While we attempted to file our report prior to the deadline multiple times, we first identified internal communication problems and then IT connectivity problems each time we attempted our submission and were unable to resolve by the deadline. Following the deadline, we were successful in submitting our Request to Report Late (RRL) Form on April 25th prior to its deadline of April 28, 2023.

2021-003 Department of Housing and Urban Development Federal Assistance Listing/CFDA #14.128 Section 242 ? Mortgage Insurance - Hospitals Department of Health and Human Services Federal Assistance Listing/CFDA #93.498 COVID-19 Provider Relief Fund and American Rescue Plan Rural Distribution Applicable Federal Award Number and Year ? Period 1 TIN #390819992 Preparation of Schedule of Expenditures of Federal Awards Material Weakness in Internal Control Over Compliance - Other Criteria: Proper controls over financial reporting include the ability to prepare the Schedule of Expenditures of Federal Awards (Schedule) and accompanying notes to the Schedule. Condition: The Hospital does not have an internal control system designed to provide for a complete and accurate Schedule of Expenditures of Federal Awards being audited. We were requested to draft the Schedule. Cause: Auditor assistance with preparation of the Schedule is not unusual as the Schedule has unique and specialized requirements and preparation is only required when the Hospital meets a specified threshold of federal expenditures. Effect: There is a reasonable possibility that the Hospital would not be able to draft the Schedule that is correct without the assistance of the auditors. Questioned Costs: None reported. Context: Sampling was not used. Repeat Finding from Prior Years: No Recommendation: While we recognize that this condition is not unusual for an organization with limited staffing, we recommend management be aware of the financial reporting requirements relating to the Hospital?s Schedule of Expenditures of Federal Awards and the internal controls that impact financial reporting. Views of Responsible Officials: Management agrees with the finding.

2021-004 Department of Health and Human Services Federal Assistance Listing/CFDA #93.498 COVID-19 Provider Relief Fund and American Rescue Plan Applicable Federal Award Number and Year ? Period 1 TIN #390819992 Activities Allowed or Unallowed and Allowable Costs/Cost Principles and Reporting Significant Deficiency in Internal Control Over Compliance Criteria: 2 CFR 200.303(a) establishes that the auditee must establish and maintain effective internal control over federal awards that provides reasonable assurance that the Hospital is managing the federal awards in compliance with federal statutes, regulations and terms and conditions of the federal award. Condition: The Hospital?s special report submitted to the Department of Health and Human Services for Period 1 TIN #390819992 was not reviewed and approved by a separate individual outside of the preparer. Cause: The Hospital did not have an internal control process in place to ensure a secondary review and approval of the report submitted to the Department of Health and Human Services for Period 1 was not performed by someone other than the preparer of the report. Effect: Without a secondary review and approval, there is a possibility that the special report might not be accurately completed. Questioned Costs: None reported. Context: Key line items were tested on the Period 1 Department of Health and Human Services special report. Repeat Finding from Prior Years: No Recommendation: We recommend the Hospital implement a control process which includes a secondary review and approval of the required reports to be submitted to the federal agency be documented. Views of Responsible Officials: Management agrees with the finding.

020-003 U. S. Department of Housing and Urban Development (HUD) Federal Financial Assistance #14.128, Section 242 ? Mortgage Insurance for Hospitals Special Tests and Provisions Material Weakness in Internal Control Over Compliance Criteria: A good system on internal controls over compliance includes processes to ensure all provisions within the agreements are fully followed as well as following generally accepted accounting principles. Condition: The Organization entered into a lease agreement which was not properly identified as a capital lease. In addition, a capital lease is identified in the Mortgage Note Insured by HUD as the incurrence of additional indebtedness which, by terms of the agreement, should be approved by HUD in advance of entering into the capital lease agreement. Cause: During the course of our engagement, we noted that management did not properly evaluate the lease to determine it was a capital lease, nor was approval received from HUD in advance of entering into the agreement. Effect: The Organization violated a covenant within the Mortgage Note Insured by HUD agreement. Question Costs: None reported. Context/Sampling: None as there was only one lease agreement entered into during the year that was a capital lease. Repeat Finding from Prior Year: No Recommendation: We recommend that management evaluate all lease agreements to determine whether the lease should be accounted for as an operating or capital lease. That evaluation should be documented and if the conclusion is that the lease is a capital lease, HUD should be notified, and the Organization should request and receive approval from HUD prior to entering into the lease agreement. Views of Responsible Officials: Management agrees with the finding.