ST. VINCENT GENERAL HOSPITAL DISTRICT

Finding: 2025-002 Preparation of the SEFA Program Name Title: Community Facilities Loans and Grants Federal Assistance Listing Number: 10.766 Federal Agency: U.S. Department Agriculture Type of Finding: Noncompliance, Significant deficiency Compliance Requirement: Reporting Repeat Finding: Yes Questioned Cost: None Criteria: Proper controls over financial reporting include the ability to prepare the schedule of expenditures of federal awards (Schedule) and accompanying notes to the Schedule. Condition: The Hospital does not have an internal control system designed to provide for a complete and accurate Schedule being audited. [the auditor] was requested to draft the Schedule. Cause: Auditor assistance with preparation of the Schedule is not unusual, as the Schedule has unique and specialized requirements and preparation is only required when the Hospital meets a specified threshold of federal expenditures. Effect: There is a reasonable possibility that the Hospital would not be able to draft a Schedule that is correct without assistance of the auditors. Recommendation: While we recognize that this condition is not unusual for an organization with limited staffing, we recommend management be aware of the financial reporting requirements relating to the Hospital’s Schedule and internal controls that impact financial reporting. View of Responsible Officials: Management agrees with the finding.

Finding: 2024-001 Debt service reserve fund Program Name Title: Community Facilities Loans and Grants Federal Assistance Listing Number: 10.766 Federal Agency: U.S. Department of Agriculture Type of Finding: Noncompliance, Material weakness Compliance Requirement: Special Tests and Provisions Repeat Finding: Yes Questioned Cost: None 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. Condition: The Hospital did not fully fund a debt reserve fund as required by the federal award agreement. Cause: The Hospital has experienced a financial crisis where all available monies were used to fund payroll and pay down immediate debts, resulting in the use of any amounts previously reserved. Effect: The lack of adequate policies governing the monitoring of the required debt covenants and the establishment and funding of reserves increases the risk that employees may not be able to detect and correct noncompliance in a timely manner. Recommendation: We recommend the Hospital fund the required debt reserve fund as soon as possible and provide funds in accordance with the federal award agreement. We also recommend the Hospital create internal controls to monitor debt covenants. View of Responsible Officials: Management agrees with the finding.

Finding: 2024-002 Preparation of the SEFA Program Name Title: Community Facilities Loans and Grants Federal Assistance Listing Number: 10.766 Federal Agency: U.S. Department Agriculture Type of Finding: Noncompliance, Significant deficiency Compliance Requirement: Reporting Repeat Finding: Yes Questioned Cost: None Criteria: Proper controls over financial reporting include the ability to prepare the schedule of expenditures of federal awards (Schedule) and accompanying notes to the Schedule. Condition: The Hospital does not have an internal control system designed to provide for a complete and accurate Schedule being audited. We were requested to draft the Schedule. Cause: Auditor assistance with preparation of the Schedule is not unusual, as the Schedule has unique and specialized requirements and preparation is only required when the Hospital meets a specified threshold of federal expenditures. Effect: There is a reasonable possibility that the Hospital would not be able to draft a Schedule that is correct without assistance of the auditors. Recommendation: While we recognize that this condition is not unusual for an organization with limited staffing, we recommend management be aware of the financial reporting requirements relating to the Hospital’s Schedule and internal controls that impact financial reporting. View of Responsible Officials: Management agrees with the finding.

Finding: 2023-005 Reporting requirements Program Name Title: Community Facilities Loans and Grants Federal Assistance Listing Number: 10.766 Federal Agency: U.S. Department of Agriculture Type of Finding: Noncompliance, Material weakness Compliance Requirement: Reporting Repeat Finding: Yes Questioned Cost: None

Criteria: Under the terms and conditions of the award, the recipient certifies it will provide quarterly financial information, the annual budget, annual financial statements, annual Medicare cost report, and annual debt service reserve calculation to the USDA and the interim financing lender.

Condition: The Hospital did not send the annual debt service reserve calculation to the USDA.

Cause: The Hospital did not have policies or procedures in place surrounding the required reporting. The Hospital also had turnover in management and has been navigating through a financial crisis.

Effect: The Hospital was out of compliance with the terms and conditions of the award during 2023.

Recommendation: We recommend management implement policies and procedures surrounding the reporting required under the USDA loan program as well as provide the required reports on a timely basis to all respective parties.

View of Responsible Officials: Management agrees with the finding.

Finding: 2023-006 Debt service reserve fund Program Name Title: Community Facilities Loans and Grants Federal Assistance Listing Number: 10.766 Federal Agency: U.S. Department of Agriculture Type of Finding: Noncompliance, Material weakness Compliance Requirement: Special Tests and Provisions Repeat Finding: Yes Questioned Cost: None

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.

Condition: The Hospital did not establish a debt reserve fund as required by the federal award agreement. In addition, the Hospital did not meet its debt covenants.

Cause: The Hospital has experienced a financial crisis where all available monies were used to fund payroll and pay down immediate debts, resulting in the use of any amounts previously reserved.

Effect: The lack of adequate policies governing the monitoring of the required debt covenants and the establishment and funding of reserves increases the risk that employees may not be able to detect and correct noncompliance in a timely manner.

Recommendation: We recommend the Hospital establish the required debt reserve fund as soon as possible and provide funds in accordance with the federal award agreement. We also recommend the Hospital create internal controls to monitor debt covenants.

View of Responsible Officials: Management agrees with the finding.

Finding: 2023-007 Preparation of the SEFA Program Name Title: Community Facilities Loans and Grants Federal Assistance Listing Number: 10.766 Federal Agency: U.S. Department Agriculture Type of Finding: Noncompliance, Significant deficiency Compliance Requirement: Reporting Repeat Finding: Yes Questioned Cost: None

Criteria: Proper controls over financial reporting include the ability to prepare the schedule of expenditures of federal awards (Schedule) and accompanying notes to the Schedule.

Condition: The Hospital does not have an internal control system designed to provide for a complete and accurate Schedule being audited. We were requested to draft the Schedule.

Cause: Auditor assistance with preparation of the Schedule is not unusual, as the Schedule has unique and specialized requirements and preparation is only required when the Hospital meets a specified threshold of federal expenditures.

Effect: There is a reasonable possibility that the Hospital would not be able to draft a Schedule that is correct without assistance of the auditors.

Recommendation: While we recognize that this condition is not unusual for an organization with limited staffing, we recommend management be aware of the financial reporting requirements relating to the Hospital’s Schedule and internal controls that impact financial reporting.

View of Responsible Officials: Management agrees with the finding.