RUSSELLVILLE HOSPITAL, INC.Non-Profit

FINDING 2022-003 – Reporting, Non-compliance (Material Weakness) Federal Program: U.S. Department of Health and Human Services – ALN 93.498, COVID-19 Provider Relief Fund (PRF), U.S. Department of Agriculture – ALN 10.766, USDA Community Facilities Loans and Grants Cluster Criteria: 2 CFR Part 200.303(a) states that the auditee must establish and maintain effective internal control over the federal award that provides reasonable assurance that the auditee is managing the federal award in compliance with federal statutes, regulations, and terms and conditions of the federal award. Specific criteria are established by the U.S. Department of Health and Human Services (HHS) with respect to allowable cost and reporting requirements for this program, including: Section 7 of the Data Elements of the Provider Relief Fund Distributions and American Rescue Plan Rural Distribution Reporting Requirements states that “The reporting entity must enter other assistance received by quarter during the period of availability. If the reporting entity is reporting on behalf of subsidiaries, the assistance received for each category must be aggregated across each of the subsidiaries included in the report.” Section 200.512 of the Uniform Guidance states that the audit, the data collection form, and the reporting package must be submitted within 30 calendar days after the auditee receives the auditors’ report or nine months after the end of the audit period (whichever is earlier). Condition and Context: Internal controls surrounding the review process performed were not effective in detecting and correcting the proper reporting prior to submission. In the Hospital's Health Resources and Services Administration (HRSA) Period 4 reporting in the PRF reporting portal, the Hospital erroneously entered $100,000 as other assistance for Federal Emergency Management Agency (FEMA) programs. The $100,000 related to Rural Health Clinic COVID-19 Testing and Mitigation funds received and was also properly entered as such resulting in a duplication error of $100,000. Additionally, The Hospital did not complete and submit its audit report prior to the required deadline. Cause and Effect: Management review was not effective in detecting and correcting the omission of reporting for other assistance received by the Hospital or the incorrect reporting of funds. The Hospital was not in compliance with the audit filing requirement. Questioned Costs: None Repeat Finding: Yes, See 2021-003. Recommendation: We recommend that the Hospital strengthen internal controls to prevent errors in reporting. We recommend the Hospital ensure future audits are completed and submitted in a timely manner. Views of Responsible Officials of the Auditee: Management agrees with the finding and the auditors’ recommendation. See Management’s full response in the Corrective Action Plan at the end of this report.

FINDING 2022-004 – Reporting, Non-compliance (Material Weakness) Federal Program: U.S. Department of Agriculture – ALN 10.766, USDA Community Facilities Loans and Grants Cluster Criteria: 7 CFR Part 1942, Subpart A – Community Facility Loans, which governs loan servicing and post‑closing requirements for Community Facilities Loans, including borrower financial viability and compliance with loan covenants. USDA Rural Development Community Facilities Loan Agreement / Letter of Conditions, which requires: Establishment of a Debt Service Reserve Fund equal to at least one annual loan installment that accumulates at the rate of 10% of one annual payment per year for ten years or until the balance is equal to one annual loan payment; and Maintenance of a minimum Debt Service Coverage Ratio (DSCR) of at least 1.0 beginning with fiscal year ending December 31, 2016, demonstrating sufficient net operating revenues to meet annual debt service obligations; and Furnishing the USDA with audit reports annually. Condition: The Hospital failed to establish and maintain the required Debt Service Reserve Fund in accordance with the USDA Loan Agreement. The Hospital did not maintain a Debt Service Coverage Ratio of at least 1.0, as required by the loan covenants, based on audited financial results for the year ended December 31, 2022. The Hospital did not furnish the USDA with audit reports annually. Context: The USDA Loan Letter of Conditions details eight continuing compliance requirements that were tested. Noncompliance with the ongoing compliance requirements was noted for three of the eight requirements. Cause and Effect: The Hospital inherited the USDA loan from the previous owner of the Hospital and did not receive any correspondence from the USDA; therefore, the Hospital was unaware of the required ongoing compliance requirements necessary in addition to the required loan payments. As a result, some USDA loan compliance requirements were not met. Questioned Costs: None Repeat Finding: No Recommendation: We recommend that the Hospital strengthen its internal controls related to USDA compliance and establish regular contact with USDA representatives to ensure future compliance requirements are met. Views of Responsible Officials of the Auditee: Management agrees with the finding and the auditors’ recommendation. See Management’s full response in the Corrective Action Plan at the end of this report.

FINDING 2021-003 – Reporting, Non-compliance (Material Weakness) Federal Program: U.S. Department of Health and Human Services – ALN 93.498, COVID-19 Provider Relief Fund (PRF) Criteria: 2 CFR Part 200.303(a) states that the auditee must establish and maintain effective internal control over the federal award that provides reasonable assurance that the auditee is managing the federal award in compliance with federal statutes, regulations, and terms and conditions of the federal award. Specific criteria are established by the U.S. Department of Health and Human Services (HHS) with respect to allowable cost and reporting requirements for this program, including: Funds shall reimburse the recipient only for health care related expenses or lost revenues that are attributable to coronavirus. Entities may elect to calculate, and report lost revenue using one of three options. Entities electing to calculate lost revenue using Option i report net revenue from patient care for each quarter and each year 2019, 2020, and 2021. For entities electing to report lost revenues using Option ii, the difference between budgeted and actual patient care revenues, budgets must be approved before March 27, 2020 and cover each quarter during the period of availability. Entities electing to calculate lost revenues using another reasonable method should report using option iii. Section 200.512 of the Uniform Guidance states that the audit, the data collection form, and the reporting package must be submitted within 30 calendar days after the auditee receives the auditor’s report or nine months after the end of the audit period (whichever is earlier). Condition and Context: Internal controls surrounding the review process performed were not effective in detecting and correcting the proper reporting prior to submission. In the Hospital’s Period 1 reporting in the PRF reporting portal, the Hospital entered Total Unreimbursed Expenses Attributable to Coronavirus of $6,308,940 instead of the Hospital’s actual Unreimbursed Expenses total of $1,724,167. The Hospital did not report a total of $120,930 in the Other Assistance Received section of the HRSA PRF Phase 1 Submission. Internal controls surrounding the review process performed were not effective in detecting and correcting the proper reporting prior to submission. Additionally, the Hospital improperly reported $177,904 in grant receipts that were included in the Other Assistance Received section of the HRSA Phase 1 Report as $49,461 in Q2 2020 Local, State, and Tribal Government Assistance, $118,443 in Q2 2020 FEMA Program Assistance and $10,000 in Q3 2020 Small Business Administration Assistance. Additionally, The Hospital did not complete and submit its audit report prior to the required deadline. Cause and Effect: Management review was not effective in detecting and correcting the omission of reporting for other assistance received by the Hospital or the incorrect reporting of funds. The Hospital was not in compliance with the audit filing requirement. Questioned Costs: None Repeat Finding: No Recommendation: We recommend that the Hospital strengthen internal controls to prevent omission of or improper inclusion in other assistance received by quarter during the period of availability and incorrect reporting of unreimbursed expenses on the PRF report. We recommend the Hospital ensure future audits are completed and submitted in a timely manner. Views of Responsible Officials of The Auditee: Management agrees with the finding. See accompanying corrective action plan.