EAST PHILLIPS CO HOSPITAL DIST DBA MELISSA MEMORIAL HOSOPITAL

2024-002 Inadequate Policies and Procedures Federal Agency U.S. Department of the Treasury Federal Assistance Listing Numbers 21.027 – Coronavirus State and Local Fiscal Recovery Funds Criteria [ X ] Compliance Finding [ ] Significant Deficiency [ X ] Material Weakness Uniform Guidance (§200.302, §200.303) requires entities to maintain written policies and procedures to ensure proper tracking and compliance with federal award requirements. Condition The District lacks comprehensive, documented policies and procedures governing the administration of federal awards and the tracking of related expenditures. Specifically, there is no formalized guidance to ensure compliance with federal requirements related to allowable costs, procurement, financial reporting, or other Uniform Guidance compliance areas. This finding appears to be a systemic problem. Cause The District has not developed or implemented a standardized set of policies and procedures addressing all aspects of federal award compliance. Additionally, staff responsible for managing federal funds have not received regular training on Uniform Guidance requirements. Effect Inadequate oversight and tracking of federal expenditures increases the risk of misreporting federal expenditures, failing to comply with grant terms and conditions, and potentially having to return federal funds due to noncompliance. Recommendation Management should develop, implement and disseminate comprehensive written policies and procedures that confirm with Uniform Guidance requirements. There should be clear protocols for all relevant compliance requirements and all personnel involved in federal awards administration need to be trained. Views of responsible officials and planned corrective actions Department managers and others involved in grants will be educated on the importance of understanding the types of grants they are requesting or receiving including any reporting requirements. Accounting staff will assist with the matching of grant revenues and expenses to verify that they are appropriate and in the correct accounting period. A procedure will be implemented to ensure that at year-end, all grant revenues and expenses are double-checked to verify they are posted in the correct period.

2024-002 Procurement Federal Agency U.S. Department of the Treasury Federal Assistance Listing Numbers 21.027 – Coronavirus State and Local Fiscal Recovery Funds Criteria [ X ] Compliance Finding [ ] Significant Deficiency [ X ] Material Weakness Entities receiving federal awards must have and follow documented procurement policies. Title 2 CFR 200.320 outlines acceptable methods of procurement and establishes applicable threshold requirements. Condition During our review of federally funded purchases, we noted several instances where procurement transactions were not conducted in accordance with these federal guidelines. For purchases falling between the micro-purchase threshold and the simplified acquisition threshold, the District did not retain documentation to demonstrate that price quotations were obtained from an adequate number of qualified sources. Additionally, for purchases exceeding the simplified acquisition threshold, the District was unable to provide documentation showing that the required number of bids were solicited. In one instance, a sole source acquisition was made without sufficient written justification, as required by 2 CFR 200.320(c), which permits noncompetitive procurement only under specific and well-documented circumstances. Furthermore, the District could not provide documentation verifying that vendors were screened against the federal System for Award Management (SAM.gov) to confirm that they were not suspended or debarred from participating in federal programs. Lastly, the District could not demonstrate that it performed conflict of interest checks to ensure that employees or officers participated in the selection, award or administration of a contract where conflicts of interest exist. This finding appears to be a systemic problem. Cause The District’s procurement policy was not compared with the federal regulations when it was developed. Management did not follow its established procurement policy and documentation was not maintained evidencing its compliance with the policy. Effect Noncompliance with federal procurement requirements increases the risk of unallowable costs, noncompetitive vendor selection, and potential questioned costs. This could result in financial penalties or the need to return federal funds. The absence of conflict of interest checks also exposes the District to the risk of biased procurement decisions and compromised integrity. Recommendation The District should update and enforce procurement policies and procedures to fully comply with 2 CFR 200.318–200.327. These procedures must include documented competitive procurement processes, appropriate documentation retention, sole source justification protocols, and mandatory screening of vendors through SAM.gov. Written standards of conduct should be maintained and enforced to prevent conflicts of interest. Additionally, all staff involved in procurement should receive comprehensive training on federal procurement requirements and internal control responsibilities. The District should also implement a monitoring process to ensure ongoing compliance with these requirements. Views of responsible officials and planned corrective actions Two new policies will be implemented; a board policy to cover board approvals for the bidding of large projects and an internal policy and procedure which spells out additional requirements, like requiring three written bids for large purchases. In addition, all members of the Board of Directors and senior leadership team will sign Conflict of Interest statements on an annual basis to confirm that they do not have any potential conflicts that could impact purchasing decisions.

2023-002 Policies and Procedures for Federal Awards Federal Agency U.S. Department of Housing and Urban Development Federal Assistance Listing Numbers 14.128 – Mortgage Insurance - Hospitals Criteria [ ] Compliance Finding [ X ] Significant Deficiency [ ] Material Weakness Recipients of federal awards should maintain written policies and procedures for the tracking and usage of federal awards that provide assurance that the entity is managing the federal award in compliance with federal statues, regulations, and conditions of the federal award. Condition The District did not have written policies and procedures to identify federal award requirements and ensure that the District was in compliance with these requirements. Context This finding appears to be a systemic problem. Cause The District did not have an internal control process in place to ensure continued compliance with the federal award. Effect The lack of policies increases the risk that noncompliance may not be corrected in a timely manner. Recommendation We recommend the District implement policies and procedures for the tracking and usage of federal awards that conform to federal regulations and compliance requirements. Views of responsible officials and planned corrective actions Management is in agreement with the finding.