Finding 588320 (2023-004)

Significant Deficiency
Requirement
P
Questioned Costs
-
Year
2023
Accepted
2024-02-06
Audit: 15754
Auditor: Eide Bailly LLP

AI Summary

  • Core Issue: The Hospital lacks an internal control system for preparing the Schedule of Federal Awards (SEFA), relying on external parties for financial reporting.
  • Impacted Requirements: Management is responsible for ensuring accurate financial reporting and maintaining internal controls, which are currently insufficient.
  • Recommended Follow-Up: Management should assess operational procedures to enhance internal controls and consider drafting the SEFA internally, weighing the risks and costs involved.

Finding Text

Criteria: A properly designed system of internal control over financial reporting includes the preparation of an entity's Schedule of Federal Awards (SEFA) by internal personnel of the entity. Management is responsible for establishing and maintaining internal control over financial reporting and procedures related to the fair presentation of the SEFA. Condition: The Hospital does not have an internal control system designed to provide for the preparation of the SEFA being audited. In conjunction with completion of our single audit, we were requested to draft the financial statements and accompanying notes to the financial statements including the SEFA. Cause: This deficiency is partially due to the limited resources in the financial reporting process. The outsourcing of these services is not unusual in an organization of your size. We realize that obtaining the expertise necessary to prepare the financial statements, including all necessary disclosures like the schedule of federal awards, in accordance with GAAP, can be considered costly and ineffective. Effect: The effect of this condition is that the year‐end financial reporting is prepared by a party outside of the Hospital. The outside party does not have the constant contact with ongoing financial transactions that internal staff have. This control deficiency could result in misstatements to the SEFA. Recommendation: It is the responsibility of the Hospital management and those charged with governance to make the decision whether to accept the degree of risk associated with this condition because of cost or other considerations. We recommend that management continue reviewing operating procedures in order to obtain the maximum internal control over financial reporting possible under the circumstances to enable staff to draft the SEFA internally. Views of Responsible Officials: Management agrees with the finding. However, management feels that committing the resources necessary to remain current on reporting requirements and corresponding footnote disclosures would lack benefit in relation to the cost, but will continue to evaluate on a regular basis.

Categories

Reporting Internal Control / Segregation of Duties

Other Findings in this Audit

  • 11878 2023-004
    Significant Deficiency

Programs in Audit

ALN Program Name Expenditures
10.766 Community Facilities Loans and Grants $799,600
93.301 Small Rural Hospital Improvement Grant Program $137,507
93.889 National Bioterrorism Hospital Preparedness Program $3,563