City of RedfieldLocal Government

Major Federal Program: The major federal program affected is Water and Waste Disposal Systems for Rural Communities - #10.760. Criteria: Internal control can help a City achieve its performance targets and prevent loss of resources. It can help ensure reliable financial reporting, and it can help ensure that the City complies with laws and regulations. Condition Found: A material weakness was reported for a lack of internal control for reporting for federal compliance. Cause: The City only has 3 employees in the finance department, so reports are not verified by anyone other than the individual preparing the report. Effect: Due to the lack of internal controls, reports could potentially have inaccuracies due to a lack of oversight. Questioned Costs: There were no questioned costs. Repeat Finding: This is the second audit this finding has been reported. Recommendation: We recommend the City implement compensating controls wherever and whenever possible and practical to prevent future reporting issues.

Major Federal Program: The major federal program affected is Water and Waste Disposal Systems for Rural Communities - #10.760. Criteria: Internal control can help a City achieve its performance targets and prevent loss of resources. It can help ensure reliable financial reporting, and it can help ensure that the City complies with laws and regulations. Condition Found: A material weakness was reported for a lack of internal control for reporting for federal compliance. Cause: The City only has 3 employees in the finance department, so proper internal controls have not been achieved. Effect: Due to the lack of internal controls, reports that were required to be filed with Rural Development were not filed in a timely manner. Questioned Costs: There were no questioned costs. Repeat Finding: This finding has not previously been reported. Recommendation: We recommend the City implement compensating controls wherever and whenever possible and practical to prevent future reporting issues.

Major Federal Program: The major federal program affected is Water and Waste Disposal Systems for Rural Communities - #10.760. Criteria: Rural Development required the City to file Form RD 442-2, Statement of Budget, Income and Equity, and Form RD 442-3, Balance Sheet by the required due dates. Condition Found: The Form RD 442-2 for 2024 was required to be filed on December 1, 2023 and Form RD 442-3 for 2023 was required to be filed on April 1, 2024, but both were not submitted until July 2024. Cause: The City did not prepare the required forms in a timely manner. Effect: The required forms were not submitted to Rural Development by the required due date. Questioned Costs: There were no questioned costs. Repeat Finding: This finding has not previously been reported. Recommendation: We recommend that required forms be submitted in a timely manner.

2022-003 Department of Health and Human ServicesFederal Financial Assistance Listing #93.498COVID-19 Provider Relief Fund and American Rescue Plan (ARP) Rural Distribution Applicable Federal Award Number and Year ? Period 4 TIN #466000400Preparation of the Schedule of Expenditures of Federal AwardsMaterial Weakness in Internal Control Over Compliance - OtherCriteria: 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 the preparation of the schedule. As auditors, we were requested to assist with the preparation of 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 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: YesRecommendation: 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 and the internal controls that impact financial reporting.Views of Responsible Officials: Management agrees with the finding.

2022-004 Department of Health and Human ServicesFederal Financial Assistance Listing #93.498COVID-19 Provider Relief Fund and American Rescue Plan (ARP) Rural Distribution Applicable Federal Award Number and Year ? Period 4 TIN#466000400Activities Allowed or Unallowed and Allowable Costs/Cost PrinciplesSignificant Deficiency in Internal Control over Compliance and NoncomplianceReportingSignificant Deficiency in Internal Control over Compliance and NoncomplianceCriteria: 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: Insurance expense for the Hospital was claimed for all of 2021 under reporting period 1, and was also partially claimed under reporting period 4, resulting in duplicate expenses claimed in period 4.Cause: The Hospital?s review process over the period 4 expenses did not identify the duplicated insurance costs.Effect: Expenses included within the special report submitted to the Department of Health and Human Services for Period 4 TIN#466000400 relating to the duplicate insurance expenses were overstated by $26,616.Questioned Costs: No questioned costs reported. The Hospital reported significant unreimbursed expenses in the period 4 submission to cover the duplicated insurance costs. Key line items on the Period 4 report overstated Provider Relief Fund expenses by $26,616.Context/Sampling: Summary level testing was performed over mortgage, insurance, personnel costs for certain departments, and fringe benefits. Unreimbursed expenses were included in the summary level testing.Repeat Finding from Prior Years: YesRecommendation: We recommend management ensure any future expenditures submitted have not been previously claimed and are in accordance with the terms and conditions of the award.Views of Responsible Officials: Management agrees with the finding.

2022-003 Department of Health and Human ServicesFederal Financial Assistance Listing #93.498COVID-19 Provider Relief Fund and American Rescue Plan (ARP) Rural Distribution Applicable Federal Award Number and Year ? Period 4 TIN #466000400Preparation of the Schedule of Expenditures of Federal AwardsMaterial Weakness in Internal Control Over Compliance - OtherCriteria: 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 the preparation of the schedule. As auditors, we were requested to assist with the preparation of 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 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: YesRecommendation: 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 and the internal controls that impact financial reporting.Views of Responsible Officials: Management agrees with the finding.

2022-004 Department of Health and Human ServicesFederal Financial Assistance Listing #93.498COVID-19 Provider Relief Fund and American Rescue Plan (ARP) Rural Distribution Applicable Federal Award Number and Year ? Period 4 TIN#466000400Activities Allowed or Unallowed and Allowable Costs/Cost PrinciplesSignificant Deficiency in Internal Control over Compliance and NoncomplianceReportingSignificant Deficiency in Internal Control over Compliance and NoncomplianceCriteria: 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: Insurance expense for the Hospital was claimed for all of 2021 under reporting period 1, and was also partially claimed under reporting period 4, resulting in duplicate expenses claimed in period 4.Cause: The Hospital?s review process over the period 4 expenses did not identify the duplicated insurance costs.Effect: Expenses included within the special report submitted to the Department of Health and Human Services for Period 4 TIN#466000400 relating to the duplicate insurance expenses were overstated by $26,616.Questioned Costs: No questioned costs reported. The Hospital reported significant unreimbursed expenses in the period 4 submission to cover the duplicated insurance costs. Key line items on the Period 4 report overstated Provider Relief Fund expenses by $26,616.Context/Sampling: Summary level testing was performed over mortgage, insurance, personnel costs for certain departments, and fringe benefits. Unreimbursed expenses were included in the summary level testing.Repeat Finding from Prior Years: YesRecommendation: We recommend management ensure any future expenditures submitted have not been previously claimed and are in accordance with the terms and conditions of the award.Views of Responsible Officials: Management agrees with the finding.

2021-003 Department of Health and Human ServicesCFDA #93.498COVID-19 Provider Relief Fund and American Rescue Plan (ARP) Rural DistributionApplicable Federal Award Number and Year ? Period 1 TIN #466000400Preparation of the Schedule of Expenditures of Federal AwardsMaterial Weakness in Internal Control Over Compliance - OtherCriteria: 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 the preparation of the schedule. As auditors, we were requested to assist with the preparation of 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 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: NoRecommendation: 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 ServicesCFDA #93.498COVID-19 Provider Relief Fund and American Rescue Plan (ARP) Rural DistributionApplicable Federal Award Number and Year ? Period 1 TIN #466000400Activities Allowed or Unallowed and Allowable Costs/Cost Principles and ReportingMaterial Weakness in Internal Control Over ComplianceCriteria: 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 Hospital?s final expenditure listing identified as eligible and claimed under the Provider Relief Fund program were not reviewed and approved by a separate individual outside of the preparer. In addition, the Hospital?s special report submitted to the Department of Health and Human Services for Period 1 TIN #466000400 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 eligible expenditures that were summarized from the underlying supporting spreadsheets to the final expenditure listing was documented. The summary spreadsheet was used to claim allowable costs under the federal program. In addition, 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, there is a possibility that ineligible expenditures may be claimed under the program and the report may not be accurately completed.Questioned Costs: None reported.Context: Summary level testing was performed over general and administrative expenses and healthcare related expenses, including mortgage, insurance, information technology, utilities, personnel costs for certain departments, and fringe benefits for activities allowed and unallowed and allowable costs/cost principles. In addition, a nonstatistical sample of 60 transactions totaling $52,292 out of $203,636 were detail tested for activities allowed or unallowed and allowable costs/cost principles. Key line items were tested on the Period 1 Department of Health and Human Services special report.Repeat Finding from Prior Years: NoRecommendation: We recommend the Hospital implement a control process which includes a secondary review and approval of the summarized final expenditure listing used to claim the allowable costs under the federal program and secondary review and approval of required reports to be submitted to the federal agency.Views of Responsible Officials: Management agrees with the finding.

2021-005 Department of Health and Human ServicesFederal Financial Assistance Listing/CFDA #93.498COVID-19 Provider Relief Fund and American Rescue Plan (ARP) Rural DistributionApplicable Federal Award Number and Year ? Period 1 TIN#466000400Activities Allowed or Unallowed and Allowable Costs/Cost PrinciplesMaterial Weakness in Internal Control over Compliance and NoncomplianceReportingMaterial Weakness in Internal Control over Compliance and Material NoncomplianceCriteria: 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. The Hospital selected option 1 to calculate lost revenue which consists of a comparison of 2019 actual results to 2020 and 2021 actual results by quarter. Patient care-related revenue should be reported net of adjustments for all third-party payers, charity care adjustments, bad debt, and any other discounts or adjustments, as applicable when reporting patient care-related revenue sources.Condition: The Hospital?s lost revenue calculation was not reviewed and approved by a separate individual outside of the preparer. The Hospital?s lost revenue calculation did not take into consideration all audit adjustments for fiscal years 2019 and 2020 on quarterly net patient service revenue.Cause: The Hospital did not have an internal control process in place to ensure a secondary review and approval of the lost revenue calculation. The Hospital did not consider agreeing the net patient revenue for each quarter to the audited financial statements.Effect: The lost revenue reported within the special report submitted to the Department of Health and Human Services for Period 1 was $529,010. If the Hospital considered all audit adjustments for fiscal years 2019 and 2020 in the lost revenue calculation during the period of availability, the lost revenue would have been $392,494. Lost revenue plus eligible expenses exceeded Period 1 funds received even after the consideration of audit adjustments to quarterly net patient revenue.Questioned Costs: None required to be reported. Lost revenue reported would decrease after consideration of quarterly adjustments to net patient revenue, however, the Hospital did not utilize the full amount of lost revenue. Key line items on the Period 1 report overstated lost revenue by $136,516Context/Sampling: 8 of the 10 key line items were tested on the Period 1 Department of Health and Human Services special report relating to lost revenue had differences.Repeat Finding from Prior Years: NoRecommendation: We recommend the Hospital implement a control process which verifies that lost revenue is reconciled with the audited financial statements, includes consideration of available audit adjustments by quarter, and includes a secondary review and approval of the calculation.Views of Responsible Officials: Management agrees with the finding.

2021-006 Department of Health and Human ServicesFederal Financial Assistance Listing/CFDA #93.498COVID-19 Provider Relief Fund and American Rescue Plan (ARP) Rural DistributionApplicable Federal Award Number and Year ? Period 1 TIN#466000400Activities Allowed or Unallowed and Allowable Costs/Cost PrinciplesMaterial Weakness in Internal Control over Compliance and NoncomplianceReportingMaterial Weakness in Internal Control over Compliance and Material NoncomplianceCriteria: 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: There was no documentation relating to salaries, utilities, information technology and phone expenses from January 2020 that supported the costs were necessary to prevent, prepare for, or respond to the coronavirus.Cause: The guidance relating to allowable costs was unclear relating to general and administrative expenses incurred in quarter 1 of 2020 prior to the start of when the Hospital first started preparing for coronavirusEffect: There is a possibility that ineligible expenditures are claimed under the program and included within the special report. Expenses included within the special report submitted to the Department of Health and Human Services for Period 1 TIN#466000400 relating to the January 2020 expenses were overstated by $334,984, however, the Hospital reported significant unreimbursed expenses and had excess lost revenue in the period 1 submission which would be eligible expenditures.Questioned Costs: No questioned costs reported given the Hospital had additional unreimbursed expenses under the program that were deemed to be eligible. Key line items on the Period 1 report overstated Provider Relief Fund expenses by $334,984.Context/Sampling: Summary level testing was performed over mortgage, insurance, information technology, utilities, personnel costs for certain departments, and fringe benefits. In addition, a nonstatistical sample of 60 transactions totaling $52,292 out of $203,636 were detail tested relating to supplies, personnel and benefits and equipment were tested.Repeat Finding from Prior Years: NoRecommendation: We recommend management document their consideration of allowability of future expenditures to ensure they are in accordance with the terms and conditions of the award.Views of Responsible Officials: Management agrees with the finding.

2021-003 Department of Health and Human ServicesCFDA #93.498COVID-19 Provider Relief Fund and American Rescue Plan (ARP) Rural DistributionApplicable Federal Award Number and Year ? Period 1 TIN #466000400Preparation of the Schedule of Expenditures of Federal AwardsMaterial Weakness in Internal Control Over Compliance - OtherCriteria: 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 the preparation of the schedule. As auditors, we were requested to assist with the preparation of 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 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: NoRecommendation: 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 ServicesCFDA #93.498COVID-19 Provider Relief Fund and American Rescue Plan (ARP) Rural DistributionApplicable Federal Award Number and Year ? Period 1 TIN #466000400Activities Allowed or Unallowed and Allowable Costs/Cost Principles and ReportingMaterial Weakness in Internal Control Over ComplianceCriteria: 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 Hospital?s final expenditure listing identified as eligible and claimed under the Provider Relief Fund program were not reviewed and approved by a separate individual outside of the preparer. In addition, the Hospital?s special report submitted to the Department of Health and Human Services for Period 1 TIN #466000400 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 eligible expenditures that were summarized from the underlying supporting spreadsheets to the final expenditure listing was documented. The summary spreadsheet was used to claim allowable costs under the federal program. In addition, 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, there is a possibility that ineligible expenditures may be claimed under the program and the report may not be accurately completed.Questioned Costs: None reported.Context: Summary level testing was performed over general and administrative expenses and healthcare related expenses, including mortgage, insurance, information technology, utilities, personnel costs for certain departments, and fringe benefits for activities allowed and unallowed and allowable costs/cost principles. In addition, a nonstatistical sample of 60 transactions totaling $52,292 out of $203,636 were detail tested for activities allowed or unallowed and allowable costs/cost principles. Key line items were tested on the Period 1 Department of Health and Human Services special report.Repeat Finding from Prior Years: NoRecommendation: We recommend the Hospital implement a control process which includes a secondary review and approval of the summarized final expenditure listing used to claim the allowable costs under the federal program and secondary review and approval of required reports to be submitted to the federal agency.Views of Responsible Officials: Management agrees with the finding.

2021-005 Department of Health and Human ServicesFederal Financial Assistance Listing/CFDA #93.498COVID-19 Provider Relief Fund and American Rescue Plan (ARP) Rural DistributionApplicable Federal Award Number and Year ? Period 1 TIN#466000400Activities Allowed or Unallowed and Allowable Costs/Cost PrinciplesMaterial Weakness in Internal Control over Compliance and NoncomplianceReportingMaterial Weakness in Internal Control over Compliance and Material NoncomplianceCriteria: 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. The Hospital selected option 1 to calculate lost revenue which consists of a comparison of 2019 actual results to 2020 and 2021 actual results by quarter. Patient care-related revenue should be reported net of adjustments for all third-party payers, charity care adjustments, bad debt, and any other discounts or adjustments, as applicable when reporting patient care-related revenue sources.Condition: The Hospital?s lost revenue calculation was not reviewed and approved by a separate individual outside of the preparer. The Hospital?s lost revenue calculation did not take into consideration all audit adjustments for fiscal years 2019 and 2020 on quarterly net patient service revenue.Cause: The Hospital did not have an internal control process in place to ensure a secondary review and approval of the lost revenue calculation. The Hospital did not consider agreeing the net patient revenue for each quarter to the audited financial statements.Effect: The lost revenue reported within the special report submitted to the Department of Health and Human Services for Period 1 was $529,010. If the Hospital considered all audit adjustments for fiscal years 2019 and 2020 in the lost revenue calculation during the period of availability, the lost revenue would have been $392,494. Lost revenue plus eligible expenses exceeded Period 1 funds received even after the consideration of audit adjustments to quarterly net patient revenue.Questioned Costs: None required to be reported. Lost revenue reported would decrease after consideration of quarterly adjustments to net patient revenue, however, the Hospital did not utilize the full amount of lost revenue. Key line items on the Period 1 report overstated lost revenue by $136,516Context/Sampling: 8 of the 10 key line items were tested on the Period 1 Department of Health and Human Services special report relating to lost revenue had differences.Repeat Finding from Prior Years: NoRecommendation: We recommend the Hospital implement a control process which verifies that lost revenue is reconciled with the audited financial statements, includes consideration of available audit adjustments by quarter, and includes a secondary review and approval of the calculation.Views of Responsible Officials: Management agrees with the finding.

2021-006 Department of Health and Human ServicesFederal Financial Assistance Listing/CFDA #93.498COVID-19 Provider Relief Fund and American Rescue Plan (ARP) Rural DistributionApplicable Federal Award Number and Year ? Period 1 TIN#466000400Activities Allowed or Unallowed and Allowable Costs/Cost PrinciplesMaterial Weakness in Internal Control over Compliance and NoncomplianceReportingMaterial Weakness in Internal Control over Compliance and Material NoncomplianceCriteria: 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: There was no documentation relating to salaries, utilities, information technology and phone expenses from January 2020 that supported the costs were necessary to prevent, prepare for, or respond to the coronavirus.Cause: The guidance relating to allowable costs was unclear relating to general and administrative expenses incurred in quarter 1 of 2020 prior to the start of when the Hospital first started preparing for coronavirusEffect: There is a possibility that ineligible expenditures are claimed under the program and included within the special report. Expenses included within the special report submitted to the Department of Health and Human Services for Period 1 TIN#466000400 relating to the January 2020 expenses were overstated by $334,984, however, the Hospital reported significant unreimbursed expenses and had excess lost revenue in the period 1 submission which would be eligible expenditures.Questioned Costs: No questioned costs reported given the Hospital had additional unreimbursed expenses under the program that were deemed to be eligible. Key line items on the Period 1 report overstated Provider Relief Fund expenses by $334,984.Context/Sampling: Summary level testing was performed over mortgage, insurance, information technology, utilities, personnel costs for certain departments, and fringe benefits. In addition, a nonstatistical sample of 60 transactions totaling $52,292 out of $203,636 were detail tested relating to supplies, personnel and benefits and equipment were tested.Repeat Finding from Prior Years: NoRecommendation: We recommend management document their consideration of allowability of future expenditures to ensure they are in accordance with the terms and conditions of the award.Views of Responsible Officials: Management agrees with the finding.