LeFlore County Hospital Authority dba EOMC

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 #736060835 Activities Allowed or Unallowed, Allowable Cost/Cost Principles, and Reporting Material Weakness in Internal Control Over Compliance and Material Noncompliance Related to Reporting 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 is a critical access hospital and reimbursed from Medicare based on the expenses incurred to treat Medicare beneficiaries for the majority of operating activities. The Authority claimed expenses attributable to coronavirus but did not reduce such expense by the amounts Medicare reimburses or is obligated to reimburse the Authority. As a result, the Authority's Period 4 report to the Department of Health and Human Services (HHS) contained a material error in one of the key line items. Cause: The Authority did not have adequate internal controls policy in place to ensure expenses claimed were being reduced by Medicare's reimbursement. Effect: The Authority claimed and reported expenses that were reimbursed or obligated to be reimbursed by Medicare. Questioned Costs: None. While expenses were overstated by $179,554, the Authority had adequate other expenditures and lost revenues included on the Period 4 report to HHS to substantiate the amounts received in Period 4. Context: The Authority claimed expenses attributable to coronavirus totaling $835,781. The Authority's estimate of reimbursement from Medicare for costs incurred was based on the Medicare utilization from the 2022 and 2023 annual cost report. This methodology was applied to all costs incurred in determining the total amount of $179,544 considered to be reimbursed by another source. While sampling was used to test expenditures, it was not used to identify or calculate the error. All key line items on the Period 4 report to HHS were subject to testing for reporting. Repeat Finding from Prior Years: No Recommendation: We recommend the Authority modify internal control policies to ensure amounts claimed for this program are reduced by amounts reimbursed or obligated to be reimbursed by another source, including Medicare cost-based reimbursement. 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 #736060835 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 Authority selected Option 3, as defined by HHS, to calculate lost revenue. The calculation of lost revenues contained errors on the Period 4 report to HHS, of which two key line items were considered to have material errors. In total, the impact was a reduction in total lost revenue claimed by $34,975. Cause: The Authority did not have adequate internal controls policy in place to ensure lost revenues included accurate calculations by quarter, as required by HHS. Effect: The lost revenues section on the Period 4 report to HHS was considered incorrect. There is a possibility that ineligible lost revenues may be claimed under the program and the report may not be accurately completed. Questioned Costs: None. After consideration of all errors on the Period 4 report to HHS, the Authority still had $12,142,106 of unused lost revenues. Context: All key line items were tested on the Period 4 report to HHS. Repeat Finding from Prior Years: No Recommendation: The Authority’s processes should be amended to ensure the lost revenue calculation not only agrees with system generated reports, but also includes all required patient care revenue. Views of Responsible Officials: Management agrees with the finding

U.S. Department of Agriculture Federal Financial Assistance Listing #10.766 Community Facilities Loans and Grants Cluster Community Facilities Loans and Grants Special Tests and Provisions Significant Deficiency in Internal Control Over Compliance and Noncompliance Not Considered Material Criteria: Article IV of the Authority's Supplemental Bond Indenture agreement dated June 1, 2006, requires the Authority to establish a reserve fund. As approved by the USDA Community Programs Director, the Authority was required to make monthly deposits of $1,350 into the reserve fund beginning in April 2021, until the fund reaches $162,000. Condition: While deposits were made during the year to the debt reserve fund, certain payments were not considered to be made timely. In addition, as of June 30, 2023, the debt reserve fund was required to have a balance of $36,450, however, the balance was $36,041. Cause: The Authority did not have an internal control in place to ensure timely deposits were made to the debt reserve fund, as required. Effect: The Authority's reserve account was not in compliance with the Supplemental Bond Indenture and program requirements as a result of missing or late payments which continue to result in noncompliance with the program. Questioned Costs: None reported. Context: We sampled 4 monthly bank statements and identified there were two monthly deposits during the months of October and June. Repeat Finding from Prior Years: Yes Recommendation: The Authority needs to establish a monthly process to ensure the reserve deposit is made and posted by the bank on a timely basis. Additionally, the Authority should monitor to ensure the reserve fund has an adequate balance based on the requirements. Views of Responsible Officials: Management agrees with the finding.

U.S. Department of Agriculture Federal Financial Assistance Listing #10.766 Community Facilities Loans and Grants Cluster Special Tests and Provisions Material Weakness in Internal Control Over Compliance and Noncompliance Not Considered Material Criteria: Article IV of the Authority's Supplemental Bond Indenture agreement dated June 1, 2006, requires the Authority to establish a reserve fund. As approved by the USDA Community Programs Director, the Authority was required to make monthly deposits of $1,350 into the reserve fund beginning in April 2021, until the fund reaches $162,000. Condition: The Authority did not deposit the required funds into the debt service fund until October 2021. In addition, the Authority?s June 2022 payment was not received by the bank until July 11, 2022. Cause: In May 2020, the Authority received approval from the United States Department Agriculture (USDA) to use debt reserve funds in response to the COVID Pandemic. The new management team was not aware of the arrangement with USDA and that deposits to the debt reserve funds were to commence in April 2021. In addition, the June 2022 reserve deposit was not submitted to the bank until July 2022 due to lack of management oversight. Effect: The Authority's reserve account was not in compliance with the Supplemental Bond Indenture and program requirements until October 2021. Additionally, missing or late payments continued to result in noncompliance with program. Questioned Costs: None reported. Context: Sampling was not used. Repeat Finding from Prior Years: No Recommendation: The Authority needs to establish a monthly process to ensure the reserve deposit is made and posted by the bank on a timely basis. Additionally, the Authority should monitor to ensure the reserve fund has an adequate balance based on the requirements. Views of Responsible Officials: Management agrees with the finding.

U.S. Department of Agriculture Federal Financial Assistance Listing #10.766 Community Facilities Loans and Grants Cluster Reporting Significant Deficiency in Internal Control Over Compliance and Noncompliance Not Considered Material Criteria: Section 14 of the Letter of Conditions associated with the program requires the Authority to submit the annual audit within 150 days after year end of the fiscal year and the proposed operating budget and rate schedule for the upcoming fiscal year, 30 days prior to the end of the fiscal year. Condition: The Authority did not file the annual financial audit within 150 days after the end of the fiscal year. Also, the Authority did not submit an operating budget and rate schedule 30 days prior to the beginning of the new fiscal year. Cause: The Authority did not have any controls in place to ensure timely reporting with the USDA. Effect: This resulted in the Authority being out of compliance with the Letter of Conditions. Questioned Costs: None reported Repeat Finding from Prior Years: No Context: No sampling was performed. Recommendation: It is recommended that the Authority establish controls to ensure timely reporting with the USDA based on the requirements outlined in the Letter of Conditions. Views of Responsible Officials: We agree with the auditor?s recommendation.

Department of Health and Human Services Federal Assistance Listing/CFDA #93.498 Provider Relief Fund (PRF) and American Rescue Plan (ARP) Rural Distribution Applicable Federal Award Number and Year ? Period 1 TIN #736060835 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 of expenditures of federal awards being audited. 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.

Department of Health and Human Services Federal Assistance Listing/CFDA #93.498 Provider Relief Fund (PRF) and American Rescue Plan (ARP) Rural Distribution Applicable Federal Award Number and Year ? Period 1 TIN #736060835 Activities Allowed or Unallowed and Allowable Costs/Cost Principles 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 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?s eligible expenses and lost revenue claimed and reported under the Provider Relief Fund program was not reviewed and approved by a separate individual outside of the preparer. The Authority?s expenses and lost revenues claimed contained errors. Cause: There was turnover of key financial personnel during 2020. The Authority did not have an adequate internal control policy in place to ensure expenses claimed were eligible and/or lost revenues were accurate. Effect: There were expenses and lost revenues claimed on the Period 1 Report that were incorrect. Without a secondary review and approval, there is a possibility that additional ineligible expenditures or lost revenues may be claimed under the program and the report may not be accurately completed. Questioned Costs: None. While expenses were overstated by $90,456 and lost revenues were overstated by $1,114,844 (due to year-end audit adjustments), the Authority had adequate other expenditures and lost revenues included on the Period 1 Report to substantiate the amounts received in Period 1. Context: A sample of 60 expenditures out of a population of 821 were tested. There were errors in 4 items tested related to expenditures prior to a period impacted by coronavirus. All items from the period prior to coronavirus impacts were totaled to determine the known error of $90,456. For lost revenues, all key line items on the Period 1 Report were tested. Four of the key line items contained errors in the reporting of patient care revenue, reducing the total lost revenue calculation from $11,682,185 to $10,567,341. Repeat Finding from Prior Years: No Recommendation: We recommend the Authority implement a control process which includes a documented secondary review and approval of required reports to be submitted to the federal agency. Views of Responsible Officials: Management agrees with the finding. Also, management has implemented a monthly cost reporting model to enhance accuracy of monthly and year-to- date financial statement to ensure year-end audit entries are limited.

Department of Health and Human Services Federal Assistance Listing/CFDA #93.498 Provider Relief Fund (PRF) and American Rescue Plan (ARP) Rural Distribution Applicable Federal Award Number and Year ? Period 1 TIN #736060835 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 Authority selected Option I, as defined by the Health Resources and Services Administration (HRSA), to calculate lost revenue, which consists of a comparison of actual results during the period of availability to actual results from 2019 by quarter. While the amounts reported by the Authority were supported by system-generated reports, they did not include year-end audit adjustments. In addition, the Authority claimed expenses attributable to coronavirus, but included expenses before COVID impacted the Authority. Therefore, errors were identified in key line items tested on the Period 1 Report. Cause: There was turnover of key financial personnel during 2020. The Authority did not have an adequate internal control policy in place to ensure expenses claimed were attributed to COVID and lost revenues were accurate. The Authority also did not have a control to ensure the reporting was reviewed and approved by someone other than the preparer (see finding 2021-007). Effect: The reporting to HHS for Period 1 related to lost revenues was considered incorrect. There is a possibility that ineligible lost revenues may be claimed under the program and the report may not be accurately completed. In addition, the Authority claimed and reported expenses that were not attributed to COVID. Questioned Costs: None. While there were errors in the Period 1 report to HHS, after adjusting for the items discussed above, the Hospital would have had approximately $10,567,000 in lost revenues and expenses of approximately $1,233,000 during the period of availability, which exceeded the amounts received during the period. Context: All key line items were tested on the Period 1 HHS report. Repeat Finding from Prior Years: No Recommendation: We recommend the Authority implement a control process which includes a documented secondary review and approval of supporting information related to lost revenues and expenses, as well as the required reports to be submitted to HHS. The Authority?s processes should also be amended to ensure the lost revenue calculation not only agrees with system generated reports, but also includes all required patient activity and considers transactions that may impact periods and cause a perceived lost revenue, which would not be attributable to coronavirus. Views of Responsible Officials: Management agrees with the finding.