Audit 405128

United States Department of Agriculture Federal Financial Assistance Listing #10.766 Community Facilities Loans and Grants Preparation of the Schedule of Expenditures of Federal Awards Material Weakness in Internal Control over Compliance Criteria: Proper controls over financial reporting include a system designed to prepare the schedule of expenditures of federal awards (the schedule) and the accompanying notes to the schedule. Condition: The Hospital does not have an internal control system designed to provide for a complete and accurate schedule of expenditures of federal awards being audited. As auditors, we were requested to assist with the preparation of the schedule. Cause: The Hospital has limited staff and auditor assistance with the preparation of the schedule is not unusual in an organization the size of the Hospital. Management has elected to have the schedule and notes to the schedule prepared by the external audit firm as part of the audit. Effect: There is a reasonable possibility that the Hospital would not be able to draft a complete and accurate schedule without the assistance of the auditors. Questioned Costs: None reported. Context: Sampling was not used. Repeat Finding from Prior Year: Yes, prior year finding 2024-003. Recommendation: While we recognize that this condition is not unusual for an organization with limited staffing, it is important that the Hospital is aware of this condition for financial reporting requirements relating to the Hospital’s schedule and the internal controls that impact financial reporting. Views of Responsible Officials: Management agrees with the finding.

United States Department of Agriculture Federal Financial Assistance Listing #10.766 Community Facilities Loans and Grants USDA Rural Development Building Loan 97-07 & 97-08 Special Tests and Provisions Material Weakness in Internal Control over Compliance and 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. Section 4 of the loan resolution security agreements dated March 28, 2012 states the Hospital must set aside a reserve amount which may be established as a bookkeeping account or as a separate bank account. Funds may be deposited in institutions insured by state and federal government or invested in marketable securities backed by the full faith and credit of the United States and should be deposited each month until the minimum amount is accumulated within the account. Condition: As a part of the audit process, a reclassification entry was made to move an additional 12 months of reserve funds from the cash sweep general fund to a separate bookkeeping account. The Hospital had excess cash available to cover the required reserve amount for the fiscal year. Cause: The Hospital did not monitor the funds throughout the year to ensure the required monthly deposits were properly made or identified as it relates to the required reserve. Effect: The Hospital could be in violation of the reserve amount requirements if management is not monitoring compliance. Questioned Costs: None reported. Context/Sampling: Sampling was not used. Repeat Finding from Prior Years: Yes, prior year finding 2024-004. Recommendation: We recommend the Hospital transfer the required reserve amount to a separate bookkeeping account in the trial balance and ensure the funds are deposited monthly in institutions insured by state and federal governments or invested in marketable securities backed by the full faith and credit of the United States. Controls should be established and documented to monitor compliance with the reserve fund provision. Views of Responsible Officials: Management agrees with the finding.