BOZEMAN DEACONESS HEALTH SERVICES

2021-001 ?Department of Health and Human Services Federal Assistance Listing/CFDA #93.498 COVID-19 Provider Relief Fund and American Rescue Plan Rural Distribution Applicable Federal Award Number and Year ? Period 1 TIN #810232121, TIN #474717998, TIN #47418253, TIN #810666871 and TIN #364462300; Period 2 TIN #810232121 Department of Health and Human Services Federal Assistance Listing/CFDA #93.461 HRSA COVID-19 Claims Reimbursement for the Uninsured Program and the COVID-19 Coverage Assistance Fund Auditor Preparation of Schedule of Expenditures of Federal Awards Significant Deficiency in Internal Control Over Compliance ? Other 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 and accompanying notes. Condition ? The Organization 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 Organization meets a specified threshold of federal expenditures. Effect ? There is a reasonable possibility that the Organization would not be able to draft the Schedule and accompanying notes to 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 Organization?s Schedule and the internal controls that impact financial reporting. Views of Responsible Officials ? Management agrees with the finding.

2021-002 ? Department of Health and Human Services Federal Assistance Listing/CFDA #93.498 COVID-19 Provider Relief Fund and American Rescue Plan Rural Distribution Applicable Federal Award Number and Year ? Period 1 TIN #474717998 and TIN #47418253 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, terms and conditions of the federal award. Condition ? The Organization selected option ii to calculate lost revenue, which consists of a comparison of actual results during the period of availability to the approved budget. The Organization did not have a budget for the entire reporting period that was approved prior to March 27, 2020. For the periods that the client did not have an approved budget, $-0 was entered for net patient revenues even though there were patient revenues for this period. Cause ? The Organization did not have an internal control process in place to ensure review and approval of the lost revenue calculation claimed under the federal program and the report submitted to the Department of Health and Human Services (HHS) for Period 1 was documented. The Organization did have an approved budget prior to March 27, 2020 for calendar year 2020, but the approved budget did not cover the entire period of availability for Period 1 reporting through June 30, 2021. Effect ? The reporting to HHS for Period 1 was considered incorrect. The Organization did not have a budget approved prior to March 27, 2020 for the entire period of availability. The Organization reported $-0- net patient revenues quarters 1 and 2 of 2021. This error did not impact the amount of lost revenues claimed in period 1. Questioned Costs ? None. Had the Organization elected to use option iii to calculate lost revenues utilizing a methodology only comparing actual calendar year 2020 activity to the calendar year 2020 budget approved prior to March 27, 2020, the Period 1 report would be no instance of noncompliance with the federal program related to this finding. Context ? Key line items were tested on the Period 1 HHS report. Repeat Finding from Prior Years ? No. Recommendation ? We recommend the Organization implement procedures to ensure the lost revenue calculation claimed meet the requirements of the federal program. In addition, we recommend that the Organization enhance internal control policies to ensure all lost revenue calculations are reviewed and approved to ensure that they are appropriate and in accordance with program requirements. Views of Responsible Officials ? Management agrees with the finding.

2021-003 ? Department of Health and Human Services Federal Assistance Listing/CFDA #93.498 COVID-19 Provider Relief Fund and American Rescue Plan Rural Distribution Applicable Federal Award Number and Year ? Period 2 TIN #810232121 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, terms and conditions of the federal award. Condition ? The Organization reported net patient revenue for both actual and budgeted amounts that did not agree to the supporting documentation for Period 2. Only expenses were claimed in Period 1, as such, no lost revenue was available to be carried forward to Period 2 reporting for TIN #810232121. To claim the Period 2 general distribution amount received of $299,655, the Organization entered actual and budgeted amounts to calculate the desired lost revenue amount equivalent to the Period 2 distributions. Cause ? The Organization did not have an internal control process in place to ensure review and approval of the lost revenue calculation claimed under the federal program and the report submitted to the Department of Health and Human Services (HHS) for Period 2 was documented. Effect ? The reporting to HHS for Period 2 was considered incorrect. The Organization reported net patient revenue for both actual and budgeted amounts that did not agree to the supporting documentation for Period 2. These errors did not impact the amount of lost revenues claimed in period 2. Questioned Costs ? None reported. TIN #810232121 had no Other PRF Remaining for Lost Revenues Reimbursement carrying over from Period 1 reporting. Had the Organization elected to claim the Period 2 distributions under TIN#474717998, to utilize Other PRF Remaining for Lost Revenues Reimbursement from TIN#474717998 carried over from its Period 1 reporting, and under a methodology of applying the remaining lost revenue from consolidated entities applicable to general distributions, there would be no instance of noncompliance. Context ? Key line items were tested on the Period 2 HHS report. Repeat Finding from Prior Years ? No. Recommendation ? We recommend the Organization implement procedures to ensure the lost revenue calculation claimed meet the requirements of the federal program. In addition, we recommend that the Organization enhance internal control policies to ensure all lost revenue calculations are reviewed and approved to ensure that they are appropriate and in accordance with program requirements. Views of Responsible Officials ? Management agrees with the finding.

2021-004 ? Department of Health and Human Services Federal Assistance Listing/CFDA #93.498 COVID-19 Provider Relief Fund and American Rescue Plan Rural Distribution Applicable Federal Award Number and Year ? Period 1 TIN #810666871 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, terms and conditions of the federal award. Condition ? The Organization reported net patient revenue on the cash basis for Period 1. Cause ? The Organization did not have an internal control process in place to ensure review and approval of the lost revenue calculation claimed under the federal program and the report submitted to the Department of Health and Human Services (HHS) for Period 1 was documented. Effect ? The reporting to HHS for Period 1 was considered incorrect. Amounts reported were considered incorrect since net patient revenue was reported on a cash basis. This error did not impact the amount of lost revenues claimed in period 1. Questioned Costs ? None reported. Had the Organization reported lost revenues on the accrual basis of accounting, the lost revenue reported on the TIN #810666871 Period report would have been $695,302, an amount that still exceeds the total of Period 1 general distributions received and claimed of $611,339 on the Period 1 report. Context ? Key line items were tested on the Period 1 HHS report. Repeat Finding from Prior Years: No. Recommendation ? We recommend the Organization implement procedures to ensure the lost revenue calculation claimed meet the requirements of the federal program. In addition, we recommend that the Organization enhance internal control policies to ensure all lost revenue calculations are reviewed and approved to ensure that they are appropriate and in accordance with program requirements. Views of Responsible Officials ? Management agrees with the finding.

2021-005 ? Department of Health and Human Services Federal Assistance Listing/CFDA #93.498 COVID-19 Provider Relief Fund and American Rescue Plan Rural Distribution Applicable Federal Award Number and Year ? Period 1 TIN #364462300 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, terms and conditions of the federal award. Condition ? The Organization excluded bad debt and allowance adjustments from the amounts reported for lost revenue. Cause ? The Organization did not have an internal control process in place to ensure review and approval of the lost revenue calculation claimed under the federal program and the report submitted to the Department of Health and Human Services (HHS) for Period 1 was documented. Effect ? The reporting to HHS for Period 1 was considered incorrect. The Organization reported amounts for Period 1 that were considered incorrect since patient revenue was not reduced by bad debts and allowance adjustments. The impact of the bad debts and allowance adjustments would have been to decrease lost revenues reported on the TIN #364462300 Period 1 report by $487,208 to $1,296,578, an amount that still exceeds the total of Period 1 general distributions received and claimed of $352,608 on the Period 1 report. Questioned Costs ? None. Context ? Key line items were tested on the Period 1 HHS report. Repeat Finding from Prior Years ? No. Recommendation ? We recommend the Organization implement procedures to ensure the lost revenue calculation claimed meet the requirements of the federal program. In addition, we recommend that the Organization enhance internal control policies to ensure all lost revenue calculations are reviewed and approved to ensure that they are appropriate and in accordance with program requirements. Views of Responsible Officials ? Management agrees with the finding.

2021-006 ? Department of Health and Human Services Federal Assistance Listing/CFDA #93.498 COVID-19 Provider Relief Fund and American Rescue Plan Rural Distribution Applicable Federal Award Number and Year ? Period 1 TIN #474718253 Allowable Costs/Cost Principles, and Reporting Significant Deficiency in Internal Control Over Compliance and Noncompliance Not Considered Material 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, terms and conditions of the federal award. Condition ? The Organization claimed expenses that were reimbursed by other funding sources. These expenses were improperly included within the Period 1 report, which caused the report to be inaccurate. Cause ? The Organization submitted expenses that were to be reimbursed by other funding sources (i.e., Medicare) through cost-based reimbursement for TIN#474718253 as a Critical Access Hospital. The Organization did not have an adequate internal control policy in place to ensure review and approval of cash disbursements claimed under the federal programs were documented and to ensure that expenses claimed in the report were complete and accurate. Effect ? The reporting to HHS for Period 1 was considered incorrect, as expenses were not reduced by other funding sources. The Other PRF Expenses of the Period 1 report included expenses that were reimbursed or would be reimbursed by other funding sources. Questioned Costs ? None reported. A total of $2,063,177 other PRF expenses was reported on the Period 1 report by TIN#474718253. The auditor estimates reimbursement of $216,584 by a funding source (i.e., Medicare cost reimbursed percentage estimated used the filed cost report for fiscal year 2020) relating to total expenses reported. Had the Organization elected to claim expenses net of the estimated reimbursement by a funding source, under a methodology of allocating lost revenue from consolidated entities, the amount reported on the Period 1 report as Targeted Distribution payment(s) transferred to/by the parent entity would have changed by $216,584 and there would be no instance of noncompliance. Context ? Key line items were tested on the Period 1 HHS report. Repeat Finding from Prior Years ? No. Recommendation ? We recommend the Organization implement procedures to ensure expenses claimed meet the requirements of the federal program. In addition, we recommend that the Organization enhance internal control policies to ensure expenses claimed are reviewed and approved to ensure that they are appropriate and in accordance with program requirements. Views of Responsible Officials ? Management agrees with the finding.