Winslow Memorial Hospital D/B/A Little Colorado Medical Center

Department of Health and Human Services Federal Financial Assistance Listing #93.498 COVID-19 Provider Relief Fund and American Rescue Plan Applicable Federal Award Number and Year – Period 4 TIN #860107344

Reporting Material Weakness in Internal Control Over Compliance and Material 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.

Condition: The Hospital did not consider the impact of the year-end audit adjustments on the quarters applicable to Period 4 when reporting lost revenue.

Cause: The established internal controls did not consider the effect of the year-end audit adjustments by quarter for Period 4 to ensure accurate quarterly reporting of net patient revenue.

Effect: The lack of adequate policies governing report preparation and submission increases the risk that the report could be filed incorrectly.

Questioned Costs: None reported relating to Period 4 as eligible expenditures and lost revenues exceeded Period 4 funds received. However, future amounts eligible for lost revenues is overstated by $63,347 on the Period 4 report.

Context: There are 16 key line items related to lost revenue which were tested on the Period 4 Department of Health and Human Services special report. 4 of the 16 key line items did not actually represent net patient service revenue.

Repeat Finding from Prior Years: Yes, prior year finding 2022-003

Recommendation: We recommend that the Hospital strengthen the control process relating to calculating quarterly lost revenue under the federal program.

Views of Responsible Officials: Management agrees with the finding.

Department of Health and Human Services Federal Financial Assistance Listing #93.498 COVID-19 Provider Relief Fund and American Rescue Plan Applicable Federal Award Number and Year – Period 4 TIN #860107344

Activities Allowed/Allowable Costs Material Weakness in Internal Control Over Compliance

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’s expenditures identified as eligible and claimed under the Provider Relief Fund program did not agree to the underlying detail listing. The current key financial personnel were unable to reconcile the differences between the support and the amounts reported.

Cause: There was turnover in key financial positions. The established internal controls did not ensure the underlying detail supported expenditures identified as eligible and claimed.

Effect: The lack of adequate policies governing report preparation and submission increases the risk that the report could be filed incorrectly.

Questioned Costs: None reported relating to Period 4 as total eligible expenditures on the underlying detail listing exceeded amount of Period 4 funds received.

Context: A total non-statistical sample of 60 transactions were tested which accounted for $2,558,991 of $3,645,080 identified on the detail listing. This exceeded the $2,074,204 of funds received in Period 4.

Repeat Finding from Prior Years: No.

Recommendation: We recommend that the Hospital strengthen the control process for maintaining documentation of the final expenditure listing used to claim the allowable costs under the federal program.

Views of Responsible Officials: Management agrees with the finding.

Department of Health and Human Services Federal Financial Assistance Listing #93.498 COVID-19 Provider Relief Fund and American Rescue Plan Applicable Federal Award Number and Year – Period 4 TIN #860107344

Reporting Material Weakness in Internal Control Over Compliance and Material 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.

Condition: The Hospital’s expenditures reported as eligible and claimed under the Provider Relief Fund program did not agree to the underlying detail listing. The current key financial personnel were unable to reconcile the differences between the support and the amounts reported.

Cause: There was turnover in key financial positions. The established internal controls did not ensure the underlying detail supported expenditures reported for Period 4.

Effect: The lack of adequate policies governing report preparation and submission increases the risk that the report could be filed incorrectly.

Questioned Costs: None reported relating to Period 4 as total eligible expenditures on the underlying detail listing exceeded amount of Period 4 funds received.

Context: The key line item related to total Provider Relief Expenses was tested on the Period 4 Department of Health and Human Services special report.

Repeat Finding from Prior Years: No

Recommendation: We recommend that the Hospital strengthen the control process for maintaining documentation of the final expenditure listing used to report under the federal program.

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 Cluster

Special Tests and Provisions Noncompliance

Criteria: Article IV, Section 6.08 of the Series 2011A bonds Indenture of Trust, requires a debt service coverage ratio of 1.25 to be maintained each fiscal year.

Condition: The Hospital’s operations did not generate sufficient financial results to be meet the 1.25 debt service coverage ratio.

Cause: There was decreased patient volume and corresponding revenue. The Hospital did not qualify for the disproportionate fundings, resulting in a $1,500,000 decrease in federal funding for services provided.

Effect: The decrease in revenue resulted in a negative debt service coverage ratio of .57 which was below the minimum requirement.

Questioned Costs: None reported.

Context: Sampling was not used.

Repeat Finding from Prior Years: No

Recommendation: We recommend that the Hospital comply with the terms of the workout agreement entered on January 24, 2024, to avoid future compliance issues.

Views of Responsible Officials: Management agrees with the finding.