Brodstone Memorial Hospital d/b/a Brodstone Healthcare and Affiliate

Material Weakness: Identification of the Federal Program: Federal Assistance Listing Number 10.766 US Department of Agriculture Community Facilities Loans and Grants Cluster Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Reporting 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, and conditions of the federal award. Condition: The Hospital claimed reimbursement for health-related lost revenue during the COVID-19 pandemic. The Hospital claimed reimbursement for health-related lost revenue based on a comparison of actual monthly revenue for the months of March, April, and May 2020 to the same corresponding months of 2019. Within the calculation, the Hospital excluded certain other operating revenue from the 2020 monthly totals which were included in the 2019 monthly totals. As a result, the compilation of revenue used between the periods was not consistently applied resulting in a higher lost revenue calculation than prescribed by the applicable guidance. Cause: The Hospital did not have an adequate internal control policy in place to ensure that the lost revenue calculation followed applicable guidance. Effect: The Hospital used a methodology of calculating lost revenue that was not consistent between monthly periods. Questioned Costs: Calculating lost revenue on a consistent basis between monthly periods results in question costs of $56,766. The Hospital reported eligible lost revenue of $2,063,648 which was eligible for reimbursement under the grant at 55%, up to a maximum grant award of $1,000,000. Calculating lost revenue utilizing consistent revenue between monthly periods would result in a lost revenue calculation of $1,714,971. Context: There was one lost revenue calculation required under the grant and it was selected for testing. Recommendation: We recommend that management implement procedures to ensure the lost revenue calculation claimed meets the requirement of the federal program. Views of Responsible Officials: Management agrees with the finding.

Material Weakness: 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. The Hospital claimed reimbursement for health-related lost revenue during the COVID-19 pandemic. Condition: The Hospital claimed reimbursement for health-related lost revenue based on a comparison of actual monthly revenue for the months of March, April, and May 2020 to the same corresponding months of 2019. Within the calculation, the Hospital excluded certain other operating revenue from the 2020 monthly totals which were included in the 2019 monthly totals. As a result, the compilation of revenue used between the periods was not consistently applied resulting in a higher lost revenue calculation than prescribed by the applicable guidance. Views of Responsible Officials: Management agrees with the finding. Planned Completion Date: April 30, 2024. Person Responsible: Cyrstal Wyatt, CFO.

Finding No. 2022-004 Material Weakness: Identification of the Federal Program: Federal Assistance Listing Number 93.498 US Department of Health and Human Services COVID-19 Provider Relief Fund and American Rescue Plan (ARP) Rural Distribution Activities Allowed or Unallowed and Allowable Costs/Cost Principles Material Weakness in Internal Control Over Compliance and Noncompliance Reporting 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. The terms and conditions of the CARES Act Provider Relief Fund (PRF) distributions state that funds are to only be used to prevent, prepare for, and respond to coronavirus, and that funds may only be used for healthcare related expenses or lost revenue that is attributable to the coronavirus. The Health Resources and Services Administration (HRSA) provided guidance on how an organization was to report usage of PRF distributions received. Period 1 and Period 2 reporting required an organization to illustrate how PRF funds received were used. An organization was allowed to include eligible expenditures from January 1, 2020 through December 31, 2021 depending on the period reporting. Condition: During the process of identifying expenses that were incurred to prevent, prepare for, or respond to the coronavirus pandemic, management included expenses incurred in January 2020 and February 2020 which were not supported by management in relation to prepare, prevent, or respond to coronavirus as these were incurred prior to when the Hospital began to prepare for coronavirus. Cause: The Hospital?s internal control policy did not ensure that eligible expenses followed applicable reporting guidance. Due to the amount of detailed information that was required to be compiled by management in order to enter data into the PRF reporting portal, management inadvertently included in eligible expenses amounts unrelated to prepare, prevent, and responding to the coronavirus which occurred during the months of January 2020 and February 2020. Effect: Management included amounts in the PRF reporting portal of $337,122 for January 2020 and February 2020 expenditures which were not eligible based on the terms and conditions of the PRF distributions and subsequent HRSA guidance. Questioned Costs: None reported. The total amount reported that should have been excluded was $337,122 related to costs that were incurred from January 2020 and February 2020. This error did not result in any questioned costs as the Hospital incurred and reported additional expenses on the Total Unreimbursed Expenses Attributable to Coronavirus line item, which based on testing, resulted in sufficient expenses incurred attributable to coronavirus. As a result, there were no questioned costs. Context: A nonstatistical sample of 60 expenditures were selected for testing in which there were five errors identified for expenditures prior to when the entity began to prepare for, prevent, and respond to the coronavirus. We then used the client listing to determine the total amount of expenses reported from January 2020 and February 2020 was $337,122. The Hospital then identified the eligible expenses from the Total Unreimbursed Expenses Attributable to Coronavirus line item and additional items were selected for testing from this population. Recommendation: We recommend that management continue to monitor and enhance its internal controls over federal award compliance to ensure that only eligible costs are included in reporting periods defined by HRSA. Views of Responsible Officials: Management agrees with the noted finding. However, the Hospital also incurred and reported unreimbursed expenses attributable to coronavirus of $591,058 which could be used to replace the identified January 2020 and February 2020 costs unrelated to coronavirus. Management will continue to refine its processes to more diligently review expenditures to ensure only those costs incurred during the eligibility period are included in future reporting.

Finding No. 2022-004 Criteria: The terms and conditions of the CARES Act Provider Relief Fund (PRF) distributions state that funds are to only be used to prevent, prepare for, and respond to coronavirus, and that funds may only be used for healthcare related expenses or lost revenue that is attributable to the coronavirus. The Health Resources and Services Administration (HRSA) provided guidance on how an organization was to report usage of PRF distributions received. Period 1 and Period 2 reporting required an organization to illustrate how PRF funds received were used. An organization was allowed to include eligible expenditures from January 1, 2020 through December 31, 2021 depending on the period reporting. Condition: During the process of identifying expenses that were incurred to prevent, prepare for, or respond to the coronavirus pandemic, management included expenses incurred in January 2020 and February 2020 which were not supported by management in relation to prepare, prevent, or respond to coronavirus as these were incurred prior to when the Hospital began to prepare for coronavirus. Planned Corrective Action: Management will continue to refine processes to review reporting requirements and the accumulation of eligible expenditures per the terms and conditions of the PRF and reporting guidance provided by HRSA. However, the Hospital also incurred and reported sufficient unreimbursed expenditures attributable to coronavirus in the PRF reporting portal that if the noted item were not to be reported, the Hospital would have satisfactorily incurred eligible expenses in excess of PRF funds received, including interest earned on such funds. Planned Completion Date: Ongoing Person Responsible: Crystal Wyatt, CFO