Huerfano County Hospital Dist. D/B/A Spanish Peaks Regional Health Center

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.