Choctaw County – City of Hugo Hospital AuthorityLocal Government

Department of Health and Human Services Federal Assistance Listing #93.498 COVID-19 Provider Relief Fund and American Rescue Plan (ARP) Rural Distribution Applicable Federal Award Number and Year - Period 4 TIN #736060815 Reporting Material Weakness in Internal Control Over Compliance and Material Noncompliance Criteria: 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 Authority selected Option 1, as defined by HRSA, to calculate lost revenue. This option consists of reporting actual revenues from relevant quarters in the period of availability with the system calculating the lost revenues because of declines. The fiscal year 2021 single audit identified unallowable expenses totaling $263,861. The Company utilized excess lost revenues at the time to cover this difference. To capture the use of these lost revenues from Period 1, the Authority should have used Option 3, as defined by HRSA, to calculate and report lost revenues. Within that calculation, lost revenues could then be reduced by the $263,861. Cause: The Authority's Period 4 report to HRSA was filed prior to the completion of the 2021 single audit and identification of these unallowable expenses Effect: The reporting to HRSA for Period 4 was considered incorrect. The Authority did not reduce lost revenues by amounts used in the prior period on unallowable expenses. While the effects of the report errors did not result in unallowable lost revenues during Period 4, errors to amounts reported for lost revenues could result in unallowable costs. Questioned Costs: None reported. Context/Sampling: All key line items on the Period 4 report to HRSA were tested. Repeat Finding from Prior Years: Yes, finding 2022-02. Recommendation: We recommend the Authority report on lost revenues for any future reporting to HRSA utilizing Option 3 in order to show the use of the unallowable expenses from Period 1, however, no future reporting is expected. Views of Responsible Officials: Management agrees with the finding.

Department of Health and Human Services Federal Assistance Listing #93.498 COVID-19 Provider Relief Fund and American Rescue Plan (ARP) Rural Distribution Applicable Federal Award Number and Year -Period 4 TIN #736060815 Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Reporting Material Weakness in Internal Control Over Compliance Criteria: 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 of review and approval of the expenditure listing, lost revenue calculation, or the Department of Health and Human Services (HHS) Period 4 report prior to submission of the HHS Period 4 report. Cause: The Authority did not have an adequate internal control policy in place to ensure review and approval of expenditures and lost revenue claimed under the federal program, as well as the HHS Period 4 report prior to submission. Effect: Without a secondary review and approval, there is a possibility that ineligible expenditures or lost revenue may be claimed under the program and the HHS Period 4 report may not be accurately completed. Questioned Costs: None. Context: There was one lost revenue calculation, one expenditure detail and one HHS Period 4 report and all were tested. Repeat Finding from Prior Years: Yes, finding number 2021-001. Recommendation: We recommend management implement policies and procedures to ensure a complete review of supporting documentation and any reporting to a federal agency prior to submission by an individual separate from the preparer. Views of Responsible Officials: Management agrees with the finding.

Department of Health and Human Services Federal Assistance Listing #93.498 COVID-19 Provider Relief Fund and American Rescue Plan (ARP) Rural Distribution Applicable Federal Award Number and Year - Period 2 TIN #736060815 Reporting Material Weakness in Internal Control Over Compliance and Material Noncompliance Criteria: 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 Authority selected Option 1, as defined by HRSA, to calculate lost revenue. This option consists of reporting actual revenues from relevant quarters in the period of availability with the system calculating the lost revenues because of declines. The fiscal year 2021 single audit identified unallowable expenses totaling $263,861. The Company utilized excess lost revenues at the time to cover this difference. To capture the use of these lost revenues from Period 1, the Authority should have used Option 3, as defined by HRSA, to calculate and report lost revenues. Within that calculation, lost revenues could then be reduced by the $263,861. Cause: The Authority's Period 2 report to HRSA was filed prior to the completion of the 2021 single audit and identification of these unallowable expenses. Effect: The reporting to HRSA for Period 2 was considered incorrect. The Authority did not reduce lost revenues by amounts used in the prior period on unallowable expenses. While the effects of the report errors did not result in unallowable lost revenues during Period 2, errors to amounts reported for lost revenues could result in unallowable costs. Questioned Costs: None reported. Context/Sampling: All key line items on the Period 2 report to HRSA were tested. Repeat Finding from Prior Years: No. Recommendation: We recommend the Authority report on lost revenues for any future reporting to HRSA utilizing Option 3 in order to show the use of the unallowable expenses from Period 1. Views of Responsible Officials: Management agrees with the finding.

Department of Health and Human Services Federal Assistance Listing #93.498 COVID-19 Provider Relief Fund and American Rescue Plan (ARP) Rural Distribution Applicable Federal Award Number and Year -Period 2 TIN #736060815 Reporting Material Weakness in Internal Control Over Compliance and Noncompliance Deemed Not Material Criteria: 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 Authority tracked patient care revenues internally within a spreadsheet. The calculations of revenue by payor within the spreadsheet and included on the Period 2 report to HRSA, which were utilized to calculate lost revenues, contained errors. Cause: The Authority’s internal controls in place to review the lost revenue calculation prior to finalization of the HRSA Period 2 submission did not identify errors in the calculation. Additionally, the review and approval of the report submitted to the Health Resources and Services Administration (HRSA) for Period 2 was not performed by someone other than the preparer, resulting in the errors in patient revenue by payor not being detected. Effect: The reporting to HRSA for Period 2 contained errors in patient care revenue by payor, which are considered key line items in that report. While the result of the errors did not impact lost revenues calculated, there is a potential for similar errors to impact the lost revenue calculation. In addition, the lack of review of the report increases the possibility that ineligible expenditures may be claimed under the program and the report may not be accurately completed. Questioned Costs: None. While there were errors in patient care revenues by payors for certain key line items, the errors did not impact the calculation of lost revenues. Context: All key line items related to the calculation of lost revenues based on an Option 1 calculation, as defined by HRSA, were tested. Errors were identified in 8 key line items specifically related to patient care revenues by payor for two separate quarters. The errors did not impact the total revenue reported for any quarter. Repeat Finding from Prior Years: No Recommendation: We recommend management implement policies and procedures to ensure a complete revenue of supporting documentation and any reporting to a federal agency prior to submission by an individual separate from the preparer. Views of Responsible Officials: Management agrees with the finding.

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 #576000003 Activities Allowed or Unallowed, Allowable Costs/Cost Principles and Reporting Material Weakness in Internal Control Over Compliance and Material Noncompliance Criteria: 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 Authority claimed expenses that contained errors based upon the underlying documentation or did not comply with the program?s terms and conditions. This resulted in errors to a key line item on the report submitted to the Health Resources and Services Administration (HRSA) for Period 1. Cause: The Authority?s internal controls in place to review the expense listing before did not identify ineligible expenses. Additionally, the review and approval of the report submitted to the Health Resources and Services Administration (HRSA) for Period 1 was not performed by someone other than the preparer, resulting in ineligible expenditures not being detected. Effect: Expenses were reported and claimed that were considered ineligible. There is a possibility that additional ineligible expenditures may be claimed under the program and the report may not be accurately completed. Questioned Costs: None. While there were errors in the expenses reported to HRSA totaling $263,861, the Authority has adequate unused lost revenues during the period of availability. Context: While reconciling amounts reported on the Period 1 report to HRSA to an expense detail, differences totaling $146,760 resulted from salaries and payroll taxes. Non-payroll expenditures were sampled. A nonstatistical sample of 18 items ($533,864) from a population of 92 ($1,992,037) were selected and tested. Errors were noted in 4 of the 18 items tested related to expenditures in a period prior to COVID impacts. The total error from the entire population was determined to be $104,967. Errors were noted in an additional 4 of the 18 items tested resulting in an error of $12,134. Finally, the key line item associated with Total Other Provider Relief Fund Expenses on the Period 1 report to HRSA was also tested. Repeat Finding from Prior Years: No Recommendation: We recommend the Authority compare expenditures claimed against the terms and conditions of the federal program. Views of Responsible Officials: Management agrees with the finding.

Department of Health and Human Services Federal Assistance Listing/CFDA #93.301 COVID-19 Small Rural Health Improvement Grant Program Department of Health and Human Services Federal Assistance Listing/CFDA #93.889 COVID-19 National Bioterrorism Hospital Preparedness Program Preparation of Schedule of Expenditures of Federal Awards Material Weakness in Internal Control Over Compliance 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 Authority does not have an internal control system designed to provide for a complete and accurate schedule being audited. As auditors, 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 Authority meets a specified threshold of federal expenditures. Effect: There is a reasonable possibility that the Authority 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 Authority?s schedule of expenditures of federal awards and the internal controls that impact financial reporting. Views of Responsible Officials: Management agrees with the finding.