Huerfano County Hospital Dist. D/B/A Spanish Peaks Regional Health CenterNon-Profit

Criteria or Specific Requirement – Management is responsible for preparing the financial statements in accordance with generally accepted accounting principles. Condition – Significant adjusting entries were made to accrued expenses, estimated third‐party payer settlements and related employee benefits expenses and patient service revenues. Context – Estimated self‐funded health plan claims liability and settlement activity related to estimated third‐party payer settlements were not properly recorded. Cause – Estimated self‐funded health plan claims liability and prior year third-party payer settlements are not reconciled and reviewed regularly due to limited personnel. Effect or Potential Effect – The District’s internal financial statements were misstated. Recommendation – We recommend the District ensure that reconciliations to the financial statements are performed timely and the internal financial statements be adjusted accordingly. Views of Responsible Officials and Planned Corrective Actions – Management agrees with the finding and will implement the recommendation.

Criteria or Specific Requirement – Segregation of duties is an essential element of the internal control structure. Condition – The District has internal control weaknesses with respect to segregation of duties over cash receipts and disbursements. Context – As a small rural hospital, the District has limited personnel resulting in limitations on their ability to segregate duties. Cause – Due to limited personnel, the District has been unable to achieve adequate segregation of duties. Effect or Potential Effect – The lack of adequate segregation of duties causes the District to be more susceptible to misappropriation of assets. Recommendation – We recommend that the District implement procedures to mitigate its segregation of duty weaknesses as much as possible including review processes by the Chief Executive Officer and/or Chief Financial Officer. Views of Responsible Officials and Planned Corrective Actions – Management agrees with the finding and will consider controls such as review processes that will mitigate its segregation of duty weaknesses.

Criteria or Specific Requirement – Management is required to establish and maintain effective internal control over the federal award that provides reasonable assurance the entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Condition – Evidence of certain payroll expenses transactions under the United States Department of Homeland Security program was not maintained by management. Context – For 4 out of 40 tested transactions, evidence of timecards and approved payrate documentation was not able to be provided. During the review of the payroll costs, we were unable to identify all the time and effort coded to the federal award. Documentation of payroll registers and evidence of payment was properly maintained. Cause – There was a payroll software conversion subsequent to the incurrence of such expenses and the District no longer has access to the prior payroll software. Effect or Potential Effect – The District’s was unable to provide supporting documentation for the payroll expense transactions. Recommendation – We recommend that management review procedures and change as necessary to ensure evidence is maintained to support expense transactions. Views of Responsible Officials and Planned Corrective Actions – Management understands and agrees with this finding. Management noted this was due to the payroll software conversion and the timing of the federal award. Policies are being reviewed and new procedures put in place as needed to ensure documentation of proper compliance.

Criteria or Specific Requirement ? Management is responsible for preparing financial statements in accordance with generally accepted accounting principles. Condition ? Material adjusting entries were made to patient accounts receivable, estimated third-party payor settlements and related net patient service revenues. Context ? The patient accounts receivable balance did not reconcile with the patient accounts receivable detail. Settlement activity related to estimated third-party payor settlements was not properly recorded. Cause ? During the year ended December 31, 2022, the District underwent an accounting system conversion, resulting in delays in reporting and reconciliation processes. Effect or Potential Effect ? The District?s internal financial statements were misstated. Questioned Costs ? There are no questioned costs. Recommendation ? We recommend the District ensure that reconciliations to the financial statements are performed timely and the internal financial statements be adjusted accordingly. Views of Responsible Officials and Planned Corrective Actions ? Management agrees with the finding and will implement the recommendation.

Criteria or Specific Requirement ? Segregation of duties is an essential element of the internal control structure. Condition ? The District has internal control weaknesses with respect to segregation of duties over cash receipts and disbursements. Context ? As a small rural hospital, the District has limited personnel resulting in limitations on their ability to segregate duties. Cause ? Due to limited personnel, the District has been unable to achieve adequate segregation of duties. Effect or Potential Effect ? The lack of adequate segregation of duties causes the District to be more susceptible to misappropriation of assets. Questioned Costs ? There are no questioned costs. Recommendation ? We recommend that the District implement procedures to mitigate its segregation of duty weaknesses as much as possible including review processes by the Chief Executive Officer and/or Chief Financial Officer. Views of Responsible Officials and Planned Corrective Actions ? Management agrees with the finding and will consider controls such as review processes that will mitigate its segregation of duty weaknesses.

Criteria or Specific Requirement ? The District is required to submit filings with The Health Resource and Service Administration (HRSA) under the Provider Relief Fund (PRF) and American Rescue Plan (ARP) Rural Distribution programs. Such filings include reporting COVID-19 costs and lost revenues, as defined. Condition ? The District?s filing with HRSA for Reporting Period 4 contained errors in the amounts reported for lost revenues. Context ? Revenue amounts were used that were prior to audit adjustments and certain net patient service revenues were improperly excluded. Cause ?The District inadvertently used revenue amounts prior to audit adjustments and inadvertently excluded certain net patient service revenues. Effect or Potential Effect ? The lost revenue amounts reported to HRSA for Reporting Period 4 were overstated. The misstatements had no impact on the amount of PRF and ARP funds the District was allowed to retain due to the excess of COVID-19 costs and lost revenues over the amount of PRF and ARP funds received. Questioned Costs ? There are no questioned costs. Recommendation ? We recommend that the District ensure that future filings with HRSA accurately report lost revenues. Views of Responsible Officials and Planned Corrective Actions ? Management agrees with the finding and has taken steps to ensure the accuracy of lost revenues in any future filings.

Criteria or Specific Requirement ? Segregation of duties is an essential element of the internal control structure. Condition ? The District has internal control weaknesses with respect to segregation of duties over cash receipts and disbursements. Context ? As a small rural hospital, the District has limited personnel resulting in limitations on their ability to segregate duties. Cause ? Due to limited personnel, the District has been unable to achieve adequate segregation of duties. Effect or Potential Effect ? The lack of adequate segregation of duties causes the District to be more susceptible to misappropriation of assets. Questioned Costs ? There are no questioned costs. Recommendation ? We recommend that the District implement procedures to mitigate its segregation of duty weaknesses as much as possible including review processes by the Chief Executive Officer and/or Chief Financial Officer. Views of Responsible Officials and Planned Corrective Actions ? Management agrees with the finding and will consider controls such as review processes that will mitigate its segregation of duty weaknesses.

Criteria or Specific Requirement ? The District is required to submit filings with The Health Resource and Service Administration (HRSA) under the Provider Relief Fund. Such filings include reporting COVID-19 costs and lost revenues, as defined. Condition ? The District?s Provider Relief Fund filing with HRSA for Reporting Periods 1 and 2 contained errors in the amounts reported for lost revenues. Context ? Revenue amounts were used that were prior to audit adjustments and the impact of prior year third party settlements was not eliminated. The District also used lost revenues calculation method option ii (difference between budgeted and actual) despite the fact that their 2021 budget was not approved prior to March 27, 2020. The accurate amounts of lost revenues have been calculated and the prior periods will be corrected in the filing with HRSA for Reporting Period 4. Cause ?The District inadvertently used revenue amounts prior to audit adjustments and was not aware of the requirement to eliminate the impact of prior year third party settlements. Effect or Potential Effect ? The lost revenue amounts reported to HRSA for Reporting Periods 1 and 2 were understated. The misstatements had no impact on the amount of Provider Relief Funds the District was allowed to retain due to the excess of COVID-19 costs and lost revenues over the amount of Provider Relief Funds received. Questioned Costs ? There are no questioned costs. Recommendation ? We recommend that the District correct the previously reported lost revenue amounts with their next filing (Reporting Period 4). We also recommend that the District ensure that future filings with HRSA accurately report lost revenues.