Hegg Memorial Hospital d/b/a Hegg Health CenterNon-Profit

Department of Agriculture Federal Financial Assistance Listing #10.766 Community Facilities Loans and Grants Special Tests and Provisions 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 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 agreement dated December 1, 2016 states the Center must set aside a reserve amount each month until the specified account balance is reached. Condition: The Center’s reserve account is fully funded per the requirements of the loan resolution security agreement. However, there is no documented secondary monitoring of the reserve balance as compared to the required minimum reserve balance. Cause: The reserve balance is maintained within a separate certificate of deposit account with a bank; therefore, there are no monthly reconciliations, and the reserve balance and reserve requirement are not communicated with the board of directors. Effect: The lack of formal review or approval increases the risk of employees participating in the federal award administration not detecting and correcting noncompliance in a timely manner. Questioned Costs: None reported. Context/Sampling: Sampling was not used. Repeat Finding from Prior Year: No Recommendation: We recommend management implement procedures to ensure individuals in management review and approve the reserve balance when the certificate of deposit is renewed or present the reserve balance and the reserve requirement to the board during board meetings. Views of Responsible Officials: Management agrees with the finding.

2022-002 Department of Agriculture Federal Financial Assistance Listing/CFDA #10.766 Communities Facilities Loans and Grants Cluster Preparation of the Schedule of Expenditures of Federal Awards Material Weakness in Internal Control over Compliance - Other Criteria: Proper controls over financial reporting include a system designed to prepare the schedule of expenditures of federal awards and the accompanying notes to the schedule of expenditures of federal awards. Condition: The Center does not have an internal control system designed to provide for the preparation of the schedule of expenditures of federal awards. As auditors, we were requested to assist with the preparation of the schedule of expenditures of federal awards. Cause: Auditor assistance with preparation of the schedule of expenditures of federal awards is not unusual in an organization the size of the Center. Effect: There is a reasonable possibility that the Center would not be able to draft a complete and accurate schedule of expenditures of federal awards. Questioned Costs: None reported. Context: Sampling was not used. Repeat Finding from Prior Years: Yes, 2021-002 Recommendation: While we recognize that this condition is not unusual for an organization with limited staffing, it is important that the Center is aware of this condition for financial reporting requirements relating to the Center?s schedule of expenditures of federal awards and the internal controls that impact financial reporting. Views of Responsible Officials: Management agrees with the finding.

2022-003 Department of Agriculture Federal Financial Assistance Listing/CFDA 10.766 Communities Facilities Loans and Grants Cluster Reporting 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 federal awards that provides reasonable assurance that the Center is managing the federal awards in compliance with federal statutes, regulations and terms and conditions of the federal award. Section VI ? Conditions Required After Loan Closing in the Letter of Conditions dated May 4, 2016 for the USDA loan states that the audited financial statements must be provided to USDA within 150 days of year-end. In addition, the operating budget must be submitted to USDA within 30 days prior to the fiscal year-end. Condition: The Center?s fiscal year 2023 operating budget was not submitted during the period under audit and prior year audited financial statements were not submitted to USDA until USDA requested them, which was subsequent to the submission timeframe. Cause: The Center has been providing reported as requested by USDA rather than as outlined in the Letter of Conditions. Effect: The required reports are either not submitted or submitted outside of the time frame in the Letter of Conditions. Questioned Costs: None reported Context/Sampling: Sampling was not used Repeat Finding from Prior Year: No Recommendation: Management should implement processes and controls relating to the reporting requirements to comply with the Letter of Conditions Response: Management agrees with the finding.

Finding 2021-002 Department of Health and Human Services Federal Financial Assistance Listing/CFDA #93.498 COVID-19 Provider Relief Fund and American Rescue Plan (ARP) Rural Distribution Applicable Federal Award Number and Year ? Period 1 TIN #420932564 Preparation of the Schedule of Expenditures of Federal Awards Material Weakness in Internal Control over Compliance - Other Criteria: Proper controls over financial reporting include a system designed to prepare the schedule of expenditures of federal awards and the accompanying notes to the schedule of expenditures of federal awards. Condition: The Center does not have an internal control system designed to provide for the preparation of the schedule of expenditures of federal awards. As auditors, we were requested to assist with the preparation of the schedule of expenditures of federal awards. Cause: Auditor assistance with preparation of the schedule of expenditures of federal awards is not unusual in an organization the size of the Center. Effect: There is a reasonable possibility that the Center would not be able to draft a complete and accurate schedule of expenditures of federal awards. Recommendation: While we recognize that this condition is not unusual for an organization with limited staffing, it is important that the Center is aware of this condition for financial reporting requirements relating to the Center?s schedule of expenditures of federal awards and the internal controls that impact financial reporting. Views of Responsible Officials: Management agrees with the finding.

Finding 2021-003 Department of Health and Human Services Federal Financial Assistance Listing/CFDA #93.498 COVID-19 Provider Relief Fund and American Rescue Plan (ARP) Rural Distribution Applicable Federal Award Number and Year ? Period 1 TIN #420932564 Reporting 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 federal awards that provides reasonable assurance that the Center is managing the federal awards in compliance with federal statutes, regulations and terms and conditions of the federal award. Condition: The Center?s special report submitted to the Department of Health and Human Services for Period 1 Tin #420932564 improperly excluded reporting of general and administrative expenses and healthcare related expenses. In addition, the revenue recorded under quarter 3 and 4 of 2020 and quarter 1 and 2 of 2021 did not agree to the final revenue reported within the audited financial statements for the year ended June 30, 2021. The Center?s special report submitted to the Department of Health and Human Services for Period 1 TIN #420932564 was not reviewed and approved by a separate individual outside of the preparer. Cause: The 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, the special report submitted was not accurately completed. Questioned Costs: The Department of Health and Human Services reopened the reporting portal system for the Center?s Period 1 report which allowed the Center to resubmit the special report to properly include the identification of general and administrative expenses and healthcare related expenses. The lost revenue calculation was not impacted by the revenue recorded under quarter 3 and 4 of 2020 and quarter 1 and 2 of 2021. Context/Sampling: 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 Center implement a control process which includes a secondary review and approval of required reports to be submitted to the federal agency. Views of Responsible Officials: Management agrees with the finding.

Finding 2021-004 Department of Health and Human Services Federal Financial Assistance Listing/CFDA #93.498 COVID-19 Provider Relief Fund and American Rescue Plan (ARP) Rural Distribution Applicable Federal Award Number and Year ? Period 1 TIN #420932564 Activities Allowed or Unallowed and Allowable Costs and Cost Principles 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 Center is managing the federal awards in compliance with federal statutes, regulations and terms and conditions of the federal award. Condition: The Center was unable to provide documentation to support review and approval of the Center?s lost revenue calculation by an individual other than the preparer. Cause: The Center had not implemented a documented review process for lost revenue for Period 1. Effect: Without a secondary review and approval, there is a possibility that the lost revenue calculation and amount claimed under the program may not be calculated properly. Questioned Costs: None reported. The revenue recorded under quarter 3 and 4 of 2020 and quarter 1 and 2 of 2021 did not agree to the final revenue reported within the audited financial statements for the year ended June 30, 2021, however, the quarters impacted did not qualify for lost revenue. Context/Sampling: The lost revenue calculation for all applicable quarters was tested and reviewed. Repeat Finding from Prior Years: No Recommendation: We recommend the Center implement a control process which includes a secondary review and approval of the lost revenue calculation. Views of Responsible Officials: Management agrees with the finding.

Criteria: 2 CFR 200.303(a) establishes that the auditee must establish and maintain effective internal control over the federal awards that provides assurance that the entity is managing the federal award in compliance with federal statutes, regulations, and conditions of the federal award. 2 CFR 200.327 and 2 CFR 200.328 require the auditee to collection financial information and monitor its activities under federal awards to assure compliance with applicable federal requirements and performance expectations are being achieved and report these items in accordance with program requirements. Financial reports must be submitted to the awarding agency quarterly to comply with award requirements. An annual projected statement of cash flows and annual budget must be submitted 30 days prior to the beginning of the fiscal year. Condition: The Center did not retain documentation to support the submission of the annual budget and projected cash flow 30 days prior to the beginning of the fiscal year; the Center did not retain documentation to support the review of one monthly financial report submitted to the awarding agency prior to submission; and one quarterly financial report did not include the required quarterly balance sheet. Cause: The Center was aware of the requirements to submit quarterly financial reports but did not submit the required quarterly balance sheet for the December 31, 2018 quarterly report. There was turnover in the key financial position during the year, as well as a change in USDA representative. The new chief financial officer did not submit the fiscal year 2020 annual budget and projected cash flow statement 30 days prior to the start of the 2020 fiscal year. Quarterly financial reports were not submitted as the new chief financial officer believed that the submission of monthly financial reports was sufficient. The missing budget and projected cash flow were submitted when requested by USDA in August 2019. Effect: Inadequate controls over these areas of compliance resulted in the Center not submitting the annual budget and projected cash flow in accordance with the reporting requirement and resulted in a quarterly financial report being submitted without the balance sheet. Questioned Costs: None reported. Context: Reports selected for testing were 1 out of 1 quarterly report; 3 of 7 monthly reports; and 1 of 1 annual report. Repeat Finding from Prior Years: Yes Recommendation: We recommend management implement procedures to ensure compliance with the USDA reporting requirements. Views of Responsible Officials: Management agrees with the finding.

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