Catahoula Parish Hospital Service District No. 2 · Catahoula Parish Hospital Service District No. 2 September 19, 2008 In accordance with Government Auditing Standards, we have also

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CATAHOULA PARISH HOSPITALSERVICE DISTRICT NO. 2

ANNUAL FINANCIAL REPORT

FOR THE YEAR ENDED DECEMBER 31,2007

Under provisions of state law, this report is a publicdocument. Acopy of the report has been submitted tothe entity and other appropriate public officials. Thereport is available for public inspection at the BatonRouge office of the Legislative Auditor and, whereappropriate, at the office of the parish clerk of court.

Release Date /f/W

TABLE OF CONTENTS

Independent Auditors'Report 1-2

Required Supplemental InformationManagement's Discussion and Analysis 3-5

Governmental FundsBalance Sheet 6Statement of Revenues, Expenditures, and Changes in Net Assets 7Statement of Cash Flows 8

Notes to Financial Statements , 9-14

Independent Auditors' Report on Internal Control over Financial Reportingand Other Matters Based on An Audit of Financial Statements Performedin Accordance with Government Auditing Standards 15-16

Independent Auditors' Report on Compliance with Requirements Applicable toEach Major Program and Internal Control over Compliance in AccordanceWith OMB Circular A-l 33 17-18

Schedule of Findings and Questioned Costs 19-20

Management's Corrective Action Plan 21-22Summary of Prior Year Findings and Questioned Costs 23

Other Supplemental InformationSchedule of Expenditure of Federal Financial Awards 24

ROZIER, HARRINGTON & MCKAYCERTIFIED PUBLIC ACCOUNTANTS1407 PETERMAN DRIVE • ALEXANDRIA, LOUISIANA 71301

MAILING ADDRESS

JOHN S. ROZIER, IV, CPA POST OFFICE BOX 12178MARKS. MCKAY, CPA ALEXANDRIA, LOUISIANA 71315-2178

LEE W. WILLIS, CPA TELEPHONE (31Q) 442-1608

STEVEN E. K/MBALL, CPA TELECOPIER (318) 487-2027

RHONDA L. RACHAL, CPA

M. DALE HARRINGTON, CPA

RETIRED- 2005

September 19,2008

INDEPENDENT AUDITORS' REPORT

Board of CommissionersCatahoula Parish Hospital Service District No. 2

We have audited the accompanying financial statements of the business-type activities of CatahoulaParish Hospital Service District No. 2, as of and for the year ended December 31, 2007, whichcollectively comprise the District's basic financial statements as listed in the table of contents. Thesefinancial statements are the responsibility of the Catahoula Parish Hospital Service District'smanagement. Our responsibility is to express an opinion on these financial statements based on ouraudit.

We conducted our audit in accordance with auditing standards generally accepted in the United Statesof America and the standards applicable to financial audits contained in Government AuditingStandards, issued by the Comptroller General of the United States. Those standards require that weplan and perform the audit to obtain reasonable assurance about whether the basic financial statementsare free of material misstatement An audit includes examining, on a test basis, evidence supportingthe amounts and disclosures in the financial statements. An audit also includes assessing theaccounting principles used and significant estimates made by management, as well as evaluating theoverall financial statement presentation. We believe that our audit provides a reasonable basis for ouropinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, therespective financial position of the business-type activities of Catahoula Parish Hospital ServiceDistrict No 2., as of December 31, 2007, and the respective changes in financial position and cashflows, where applicable, thereof for the year then ended in conformity with accounting principlesgenerally accepted in the United States of America.

The management's discussion and analysis listed in the accompanying table of contents are not arequired part of the financial statements but are supplementary information required by accountingprinciples generally accepted in the United States of America. We have applied certain limitedprocedures, which consisted principally of inquires of management regarding the methods ofmeasurement and presentation of the required supplemental information. However, we did not auditthe information and express no opinion on it.

-Members-American Institute of Certified Public Accountants • Society of Louisiana, CPAs

Catahoula Parish Hospital Service District No. 2September 19, 2008

In accordance with Government Auditing Standards, we have also issued a report dated September19, 2008, on our consideration of Catahoula Parish Hospital Service District's internal control overfinancial reporting and our tests of its compliance with certain provisions of laws, regulations,contracts, grants, and other matters. That report is an integral part of an audit performed inaccordance with Government Auditing Standards and should be read in conjunction with this reportin considering the results of our audit.

Our audit was conducted for the purpose of forming opinions on the financial statements thatcollectively comprise the basic financial statements of the Catahoula Parish Hospital Service DistrictNo. 2. The accompanying schedule of expenditures of federal awards is presented for purposes ofadditional analysis as required by OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, and is also not a required part of the primary government financial statements ofthe Catahoula Parish Hospital Service District No. 2. The schedule of expenditures of federal awardshave been subjected to the auditing procedures applied in the audit of the basic financial statements and,in our opinion, are fairly stated in all material respect in relation to the basic financial statements takenas a whole.

ROZffiR, HARRINGTON, & McKAYCertified Public Accountants

Catahoula Parish Hospital Service District No. 2

MANAGEMENTS DISCUSSION AND ANAL YSISDecember 31, 2OO7

This section of the annual financial report presents our discussion and analysis of the District'sfinancial performance during the fiscal year ended December 31, 2007,

OVERVIEW OF FINANCIAL STATEMENTS

The basic financial statements report information about the District as a whole using accountingmethods similar to those used by private-sector companies. These financial statements report allrevenues and expenses regardless of when cash is received or paid. Furthermore, the basic financialstatements include all of the District's assets and all of the District's liabilities (including long-termdebt).

FINANCIAL ANALYSIS OF THE DISTRICT

This portion of management's discussion and analysis provides a comparative financial analysis.

Balance Sheet

A condensed version of the District's Balance Sheet is presented as follows:

December 31, December 31,2007 2006

Assets:Current and Other AssetsCapital AssetsTotal Assets

Liabilities:Current and Other LiabilitiesLong-term LiabilitiesTotal Liabilities

Net Assets:Invested in Capital Assets (Net)RestrictedUnrestrictedTotal Net Assets

$ 1,418,5511,129,4082,547,959

325,646188,090513,736

918,844104,168

1,011,211$ 2,034,223 3

$ 1,321,3261,189,7092,511,035

217,525219,506437,031

1,189,709134,973749,322

5 2,074,004

IAs the presentation appearing above demonstrates, the significant portion of the net assets areinvested in capital assets. Capital assets are used by the District to provide medical needs for theirpatients.

A small portion of net assets is restricted for debt service. These assets are limited to cash that isencumbered by revenue bond agreements.

The remaining balance of unrestricted assets may be used to meet the District's ongoing obligationsto citizens and creditors.

Catahoula Parish Hospital Service District No, 2

MANAGEMENT'S DISCUSSION AND ANAL YSISDecember 31, 2O07

Changes in Net Assets

A condensed version of the Statement of Revenues, Expenses, and Changes in Net Assets ispresented as follows:

For the Year EndedDecember 31,

2007December 31,

2006

Revenues:Operating RevenuesOperating ExpensesOperating Income (Loss)

Nonorjeratine Revenues (Expenses^Grant proceedsFEMA ReimbursementInterest RevenueSettlement proceedsAd Valorem TaxesOtherInterest ExpenseTotal Nonoperating Revenues (Expenses)

Change in Net AssetsNet Assets BeginningNet Assets Ending

$ 1,893,844 $3,638,054

(1,744,210)

1,606,65168,55229,511

5,2914,672

(10,248)1,704,429

(39,781)2,074,004

$ 2,034,223 $

1,410,5522,874,418(1,463,866)

1,511,308

14,27567,5005,435

(11,378)1,587,140

123,2741,950,7302,074,004

The District's net assets decrease by $39,781. This decrease in net assets is due to collectionproblems that resulted in a substantial expense for bad debts.

CAPITAL ASSET ADMINISTRATION

Capital asset activity for the year ended December 31, 2007, is summarized as follows:

Additions:Office Equipment _Medical and Dental Equipment

20,9427,012

Total AdditionsDepreciation

27,954(88,255)

Net Increase / DecreaseBeginning Capital Asset (Net)

(60,301)1,189,709

Ending Capital Asset (Net) $ 1,129,408

Catahoula Parish Hospital Service District No, 2

MANAGEMENTS DISCUSSION AND ANALYSISDecember 3i, 2007

Highlights of the District's capital asset administration are provided as follows;

• The office equipment purchased include office furniture and equipment for new staff hired.• The medical and dental equipment purchased include a film processor for the x-ray

machines.

DEBT ADMINISTRATION

The District did not incur any new debt during the year ended December 31, 2007. Existing debt inthe business-type activities includes revenue bonds that were issued to acquire, construct, andimprove health care facilities. At year end revenue bonds payable totaled $210,564. Principalpayments totaled $21,709.

FACTORS EXPECTED TO EFFECT FUTURE OPERATIONS

In January, the District was awarded $861,000 from the State of Louisiana to expand the ConcordiaCommunity Health Center.

CATAHOULA PARISH HOSPITAL DISTRICT NO 2.

Balance SheetDecember 31, 20O7

Business-Type ActivitiesEnterprise Fund

ASSETSCurrent Assets;

Cash and cash equivalents $ 776,821Receivables (net) 448,106Prepaid expenses 33,151Inventory 56,305Assets restricted by bond indenture:

Cash and cash equivalents 104,168Total current assets 1,418,551

Non Current Assets:Land 31,077Depreciable capital assets, net 1,098,331

Total assets 2,547.959

LIABILITIESCurrent Liabilities:

Accounts and other payables 186,575Accrued Expenses 73,432Compensated Absences 43,165Liabilities payable from restricted assets

Current portion of long term debt 22,474Total Current Liabilities 325,646

Long-term debt due in more than one year 188,090

Total liabilities 513,736

NET ASSETSInvested in Capital Assets (Net) 918,844Restricted for debt service 104,168Unrestricted 1,011,211

Total net assets (deficit) 2,034.223

Total Liabilities and Net Assets $ 2,547,959

Sec accompanying notes iind uccounlnnts' report

-6-


Statement of Revenues, Expenses and Changes in Fund Net AssetsProprietary FundsYear Ended December 31, 2O07

Operating Revenues:Net patient revenues pledged as security

Total Operating Revenues

Operating Expenses:SalariesPayroll taxes and related benefitsInsuranceMedical suppliesContract laborUtilities and telephoneBad debtsDepreciationRepairs and maintenanceRent and lease expenseOther expenses

Total Operating Expenses

Operating Income (Loss)

Nonoperating Revenues (Expenses):Grant proceedsFEMA reimbursementInterest revenueAd Valorem taxesOther revenuesInterest expense

Business-Type ActivitiesEnterprise Fund

$ 1,893,8441,893,844

1,984,745340,565

64,502161,708347,725120,445272,295

88,25586,84257,055

113,917

3,638,054

(1,744,210)

1,606,65168,55229,511

5,2914,672

(10,248)

Change in Net Assets

Net AssetsAs Originally ReportedPrior Period Adjustment

As Restated

Total net assets - ending

(39,781)

1,925,344148,660

2,074,004

2,034,223

Sec accompanying notes and accountants' report

-7-


Statement of Cash FlowsProprietary FundsYear Ended December 31, 2OO7

Business-Tvne ActivitiesEnterprise Fund

Cash flow from operating activities^Cash reccivEd from patients $ 1.791,321Cash payments to suppliers of goads and services (1,450,601)Cash payments to employees for services (1.966,665)

Net cash provided (used) by operating activities ft.625,945)

Cash flows from non-capital financing activities:Operating grants received 1,676,272Ad Valorem taxes received 5,291

Net cnsh provided (used) by non-capital financing activities 1,681,563

Cosh flows from cnnitnl nnd related financing activities:

Acquisition of capital assets (27,954)Principal paid on revenue bonds (21,709)Interest paid on debt instruments (10,248)

Net cash provided (used) by ciipitul and related financingactivities (59,911)

Cnsh flows fromjnvcstino activities:

Interest and other income 29,510Net cash provided (used) by investing activities ___ 29,510

Net increase (decrease) in cash 25,217Beginning cash balance 855,772Ending cash balance 880,989Restricted cash 104,168

Cosh and cnsh equivalents _$ 776,821

Reconciliation of operating income floss) to net cashOperating income (loss) 5 (1,744,210)Adjustments to reconcile operating income to net cash

provided by operating activities:Depreciation 88,255(Increase) decrease in accounts receivable (93,784)(Increase) decrease in prepaid expenses 8,239(Increase) decrease in inventory 13,537(Decrease) increase in operating accounts payable 92,677(Decrease) increase in accrued expenses 17,152(Decrease) increase in compensated absences 928(Decrease) increase in due to fiscal intermediaries (8,739)Net cash provided (used) by operating activities $ (1.625,945)

Supplemental Disclosure of Cosh How Information:During the year ended December 31, 2007, there were no investing, capital, or financing activities that did not result in

cosh receipts or payments.

Set HctamjianjLng noted nnd utcoimlnnU' trjiorl

Catahoula Parish Hospital Service District NO* 2

Notes to Financial StatementsDecember 31, 20O7

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Basis of Presentation

The Catahoula Parish Hospital Service District No. 2 (the District) is a political subdivision of theCatahoula Parish Police Jury. The District was organized pursuant to an ordinance adopted by theCatahoula Parish Police Jury on April 5, 1976. The hospital district has a service area that includesCatahoula Parish, Concordia Parish, and parts of Franklin and Tensas Parishes. The District has threemedical clinics and a dental clinic. The District is governed by a board of commissioners appointedfor terms of various years by the Catahoula Parish Police Jury.

The following is a summary of the more significant accounting policies.

Financial Reporting EntityGovernmental Accounting Standards Board (GASB) Statement No. 14 established criteria fordetermining which component units should be considered part of a financial reporting entity. Thebasic criterion for including a potential component unit within the reporting entity is financialaccountability. The GASB has set forth criteria to be considered in determining financialaccountability. This criteria includes:

1. Appointing a voting majority of an organization's governing body, and

a. The ability of the reporting entity to impose its will on mat organization and/or

b. The potential for the organization to provide specific financial benefits to or imposespecific financial burdens on the reporting entity.

2. Organizations for which the reporting entity does not appoint a voting majority but arefiscally dependent on the reporting entity.

3. Organizations for which the reporting entity financial statements would be misleading ifdata of the organization is not included because of the nature or significance of therelationship,

Based on the previous criteria, the District is a component unit of the Catahoula Parish Police Jury.The accompanying component unit financial statements present information only on the fundmaintained by the District and do not present information on the police jury, the general governmentservice provided by that governmental unit, or other governmental units that comprise the financialreporting entity.


Notes to Financial Statements

December 31, 2007 __ ______

Basis of PresentationThe District uses an enterprise fund for financial reporting purposes. Enterprise funds areproprietary funds used to account for business-like activities. These activities are financed primarilyby user charges and the measurement of financial activity focuses on net income measurementsimilar to the private sector. Due to these similarities, proprietary funds are allowed to followcertain pronouncements that are developed by the Financial Accounting Standards Board (FASB) forbusiness enterprises. However, the District only applies those FASB pronouncements that wereissued on or before November 30,1989.

Measurement Focus and Basis of AccountingMeasurement focus is a term used to describe which transactions are recorded within the variousfinancial statements. Basis of accounting relates to the timing of the measurements made, regardless ofthe measurement focus applied.

The District's enterprise fund utilizes an economic resources measurement focus. The accountingobjectives of this measurement focus are the determination of operating income, changes in net assets,financial position, and cash flows. All assets and liabilities associated with their activities are reported.Proprietary fund equity is classified as net assets.

In addition, the District's enterprise fund utilizes the accrual basis of accounting. Under the accrual basisof accounting and the economic resources measurement focus, revenues are recorded when earned andexpenses are recorded when a liability is incurred.

The District distinguishes operating revenues and expenses from nonoperating items. Operatingrevenues and expenses generally result from providing services in connection with the District'sprincipal ongoing operations.

Use of EstimatesThe preparation of financial statement in conformity with generally accepted accounting principlesrequires management to make estimates and assumptions that affect certain reported amounts anddisclosures. Accordingly, actual results could differ from those estimates.

Cash and Cash EquivalentsAmounts reported as cash and cash equivalents (restricted and unrestricted) include all cash on hand,cash in bank accounts, certificates of deposit, and highly liquid investments. Credit risk associatedwith bank deposits is limited by requiring fiscal agent banks to pledge securities as required by StateLaw. Furthermore, interest rate risk associated with certificates of deposits is typically mitigated bypurchasing instruments that mature in one year or less.

Statement Of Cash FlowsFor the purpose of reporting cash flows, cash and cash equivalents includes all cash on hand, cash inbanks, and certificates of deposit.

10

Catahoula Parish Hospital Service District NO. 2

Notes to Financial StatementsDecember 31, 2O07

Restricted Assets

Any amounts reported as restricted assets, represent resources that must be expended in a specificmanner. Restrictions of this nature can be imposed by tax propositions and various contractualobligations including grant agreements and bond covenants. Whenever restricted assets can be usedto satisfy an obligation, the restricted assets are typically consumed before utilizing any unrestrictedresources.

Compensated Absences

Accumulated unpaid vacation and compensatory pay have been accrued when incurred.

Capital Assets

Capital assets, which include all property and equipment, are reported as assets in the financialstatements.

All capital assets are valued at historical cost or estimated historical cost if actual historical cost isnot available. Donated assets are valued at their fair market value when received by the District.

Capital assets are depreciated using the straight-line method and estimated useful lives ranging from4 to 50 years. Useful lives are selected depending on the expected durability of the particular asset.

Inventory

The District maintains an inventory list that is stated at the lower of cost or market value. Materialsand supplies purchased during the year are charged to expense. Inventory is adjusted to actual atyear end.

NOTE 2-CASH AND CASH EQUIVALENTS

At December 31, 2007, cash and cash equivalents were $880,989, which includes restricted cash of$104,167.

Deposits are stated at cost, which approximates market value. Under state law, these deposits must besecured by federal deposit insurance or the pledge of securities owned by the fiscal agent bank. Themarket value of the pledged securities plus the federal deposit insurance must at all times equal theamount on deposit with the fiscal agent. These securities are held in the name of the pledging fiscalagent bank in a holding or custodial bank that is mutually acceptable to both parties.

At December 31, 2007, the District has $958,600 in deposits (collected bank balance). These depositsare secured from risk by $214,855 of federal deposit insurance and $791,340 of pledged securities heldby the custodial bank in the name of the fiscal agent bank.

Even though the pledged securities are considered uncollateralized under the provisions of GASBStatement No. 3, State law imposes a statutory requirement on the custodial bank to advertise and sell

11

Catahoula Parish Hospital Service District NO. 2

Notes to Financial StatementsDecember 31, 2OO7

the pledged securities within 10 days of being notified that the fiscal agent has failed to pay depositedfunds upon demand,

NOTE 3 - AD VALOREM TAXES

Ad Valorem taxes attach as an enforceable lien on property as of January I of each year. Taxes arelevied by the Catahoula Parish Sheriffs Office and remitted to the District the month subsequent tocollection.

Billed taxes become delinquent on January I of the following year. Revenues from ad Valorem taxesare budgeted in the year billed.

For the year ended December 31, 2007, taxes of 1 mill totaling $5,291 were levied and collected onproperty. The mill may be used for general corporate purposes.

NOTE 4 - RECEIVABLES

The receivables at December 31,2007, are as follows:

Accounts ReceivableMedicare $ 419,619Medicaid 279,706Other 94,807Total accounts receivable 794,132

Due From Other Governmental UnitsAd Valorem Taxes 3,521Grant 28,000Total due From Other Governments 31,521

Total Receivables 825,653Allowance for doubtful accounts (377,547)Total Receivables $ 448,106

The District has recorded a significant allowance for doubtful accounts for the current year. Thisallowance is due to the District experiencing collection problems on the District's largestreceivables. The Allowance for doubtful accounts results in a bad debt of $272,295.

NOTE 5 - CAPITAL ASSETS

Changes in governmental and business-type capital assets are presented as follows:

12


Notes to Financial Statements

December 31, 20O7

Non Depreciable Capital AssetsLand

Total

Depreciable Capital AssetsBuildings and ImprovementsMedical EquipmentOffice EquipmentVehiclesAccumulated Depreciation

Total Depreciable Capital Assets

Total Capital Assets

BeginningBalance

$ 31,077 $31,077

1,292,432567,440387,71779,432

(1,168,389)1,158,632

$ 1,189,709 $

EndingAdditions Disposals Balance

j

—

—7,012

20,942

—(88,255)(60,301)

(60,301) S

— $ 31,077— 31,077

— 1,292,432574,452

— 408,65979,432

(1,256,644)— 1,098,331

— $ 1,129,408

Depreciation expense for the year ended December 31, 2007, is $88,255.

NOTE 6 - LONG-TERM LIABILITIES

Changes in the District's long-term debt for the year ended December 3 3, 2007, are presented asfollows:

Beginning EndingBalance Additions Reductions Balance

Revenue BondsCompensated Absences

Total Long-term Debts

$ 232,273 $42,237

$ 274,510 $

Catahoula Parish Hospital Service District NO, 2

Notes to Financial StatementsDecember 31, 2OO7

Revenue Bonds

Year Ended December 3lsl

200820092010201 120122013-2015Total Governmental

Principal$ 22,474

23,48524,54225,64626,80087,617

$ 210,564

Interest

$

$

9,4848,4737,4166,3125,1588,056

44,899

NOTE 7- RISK MANAGEMENT

The District is exposed to various risk of loss related to torts; theft, damage or destruction of assets;errors and omissions; injuries to employees; and natural disasters. Settled claims resulting fromthese risk have not exceeded insurance coverage in any of the past three fiscal years.

NOTE 8- RETIREMENT PLAN

The District participates in a retirement plan for its employees. This plan is has allows for electivedeferrals for participants with an employer match.

NOTE 9- PRIOR PERIOD ADJUSTMENT

Accounts payable reported for the previous year were overstated. Accordingly, a prior periodadjustment was required as follows:

Balance as of December 31, 2006(as previously stated) $ 1,925,344Prior period adjustment 148,660

Balance as of December 31, 2006(as restated) $ 2,074,004

NOTE 10- GRANT CONTINGENCIES

Grant funds received from the grantor agencies are subject to audit and adjustment by grantoragencies, principally the federal government Any disallowed expenditures, including amountsalready collected, may constitute a liability. The amount, if any, of expenditures which may bedisallowed by the grantor cannot be determined at this time.

14

ROZIER, HARRINGTON & MCKAYCERTIFIED PUBLIC ACCOUNTANTS1407 PETERMAN DRIVE • ALEXANDRIA, LOUISIANA 71301

MAILING ADDRESS

JOHNS. ROZIER, IV, CPA POST OFFICE BOX 12178MARKS. MCKAY, CPA ALEXANDRIA, LOUISIANA 71315-2178

LEE W. WILLIS, CPA TELEPHONE (318) 442-1508

STEVEN E. KIMBALL, CPA TELECOPIER (318} 487-2027RHONDA L. RACHAL, CPA

M. DALE HARRINGTON, CPARETIRED-ZOOS

September 19, 2008

REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTINGAND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT

OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCEWITH GOVERNMENT AUDITING STANDARDS


We have audited the financial statements of the business-type activity of the Catahoula Parish HospitalService District No. 2 as of and for the year ended December 31, 2007, which collectively comprisethe basic financial statements and have issued our report thereon dated September 19, 2008. Weconducted our audit in accordance with auditing standards generally accepted in the United Statesand the standards applicable to financial audits contained in Government Auditing Standards, issuedby the Comptroller General of the United States.

COMPLIANCE AND OTHER MATTERS

As part of obtaining reasonable assurance about whether the Catahoula Parish Hospital ServiceDistrict's financial statements are free of material misstatement, we performed tests of its compliancewith certain provisions of laws, regulations, contracts, and grants, noncompliance with which couldhave a direct and material effect on the determination of financial statement amounts. However,providing an opinion on compliance with those provisions was not an objective of our audit, andaccordingly, we do not express such an opinion. The results of our tests disclosed one instance ofnoncompliance that is required to be reported under Government Auditing Standards and which isdescribed in the accompanying schedule of findings and questioned costs as item 2007-1.

INTERNAL CONTROL OVER FINANCIAL REPORTING

hi planning and performing our audit, we considered the Catahoula Parish Hospital Service District'sinternal control over financial reporting as a basis for designing our auditing procedures for thepurpose of expressing our opinion on the financial statements but not for the purpose of expressing anopinion on the effectiveness of the Catahoula Parish Hospital Service District's internal control overfinancial reporting. Accordingly, we do not express an opinion on the effectiveness of the CatahoulaParish Hospital Service District's internal control over financial reporting.

Our consideration of internal control over financial reporting was for the limited purpose described inthe preceding paragraph and would not necessarily identify all deficiencies in internal control over

15

Catahoula Parish Hospital Service District NO, 2

September 19, 2008

financial reporting that might be significant deficiencies or material weaknesses. However, asdiscussed below, we identified certain deficiencies in Internal control over financial reporting that weconsider to be significant deficiencies.

A control deficiency exists when the design or operation of a control does not allow management oremployees, in the normal course of performing their assigned functions, to prevent or detectmisstatements on a timely basis. A significant deficiency is a contra] deficiency, or combination ofcontrol deficiencies, that adversely affects the Catahoula Parish Hospital Service District's ability toinitiate, authorize, record, process, or report financial data reliably in accordance with generallyaccepted accounting principles such that there is more than a remote likelihood that a misstatement ofthe District's financial statements that is more than inconsequential will not be prevented or detectedby the District's internal control. We consider the deficiencies described in the accompanying scheduleof findings and questioned costs (2007-2, 2007-3, and 2007-4) to be significant deficiencies in internalcontrol over financial reporting.

A material weakness is a significant deficiency, or combination of significant deficiencies, that resultsin more than a remote likelihood that a material misstatement of the financial statements will not beprevented or detected by the Catahoula Parish Hospital Service District's internal control.

Our consideration of the internal control over financial reporting was for the limited purpose describedin the first paragraph of this section and would not necessarily disclose all matters in the internalcontrol that might be significant deficiencies and, accordingly, would not necessarily disclose allsignificant deficiencies that are also considered to be material weaknesses. We believe that thesignificant deficiencies (2007-2,2007-3, and 2007-4) described above are material weaknesses.

This report is intended for the information of management. However, this report is a matter ofpublic record and its distribution is not limited.

ROZIER, HARRINGTON & McKAYCertified Public Accountants

16

1407 PETERMAN DRIVE • ALEXANDRIA, LOUISIANA 71301MA fl_ ING A DDRESS

JOHNS. ROZIER, IV, CPA POST OFFICE BOX1217B

MARKS. MCKAY, CPA ALEXANDRIA, LOUISIANA 71315-217BLEE W. WILLIS, CPA TELEPHONE (318) 442-160S

STEVEN £. KIMBALL, CPA TELECOPIER (318) 487-2027RHONDA L. RACHAL, CPA

Af. DALE HARRINGTON, CPARETIRED-2005

June 9, 2008

INDEPENDENT AUDITORS' REPORT ONCOMPLIANCE WITH REQUIREMENTS APPLICABLE

TO EACH MAJOR PROGRAM AND INTERNAL CONTROLOVER COMPLIANCE IN ACCORDANCE WITH OMB CIRCULAR A-133


COMPLIANCE

We have audited the compliance of the Catahoula Parish Hospital Service District No. 2with the types of compliance requirements described in the U. S. Office of Management and Budget(OMB) Circular A-133 Compliance Supplement that are applicable to each of its major federalprograms for the year ended December 313 2007. The Catahoula Parish Hospital Service District'smajor federal programs are identified in the summary of auditor's results section of theaccompanying schedule of findings and questioned costs. Compliance with the requirements oflaws, regulations, contracts, and grants applicable to each of its major federal programs is theresponsibility of the Catahoula Parish Hospital Service District's management. Our responsibility is toexpress an opinion on the Catahoula Parish Hospital Service District's compliance based on our audit.

We conducted our audit of compliance in accordance with auditing standards generally accepted inthe United States of America; the standards applicable to financial audits contained in GovernmentAuditing Standards, issued by the Comptroller General of the United States; and OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards andOMB Circular A-133 require that we plan and perform the audit to obtain reasonable assuranceabout whether noncompliance with the types of compliance requirements referred to above thatcould have a direct and material effect on a major federal program occurred. An audit includesexamining, on a test basis, evidence about the Catahoula Parish Hospital Service District'scompliance with those requirements and performing such other procedures as we considerednecessary in the circumstances. We believe that our audit provides a reasonable basis for ouropinion. Our audit does not provide a legal determination on the Catahoula Parish Hospital ServiceDistrict's compliance with those requirements.

In our opinion, the Catahoula Parish Hospital Service District complied, in all material respects, withthe requirements referred to above that are applicable to each of its major federal programs for theyear ended December 31, 2007.

17

Catahoula Parish Hospital Service District MO* 2

September 19, 2008

INTERNAL CONTROL OVER COMPLIANCEThe management of the Catahoula Parish Hospital Service District is responsible for establishing andmaintaining effective internal control over compliance with requirements of laws, regulations,contracts, and grants applicable to federal programs. In planning and performing our audit, weconsidered the Catahoula Parish Hospital Service District's internal control over compliance withrequirements that could have a direct and material effect on a major federal program in order todetermine our auditing procedures for the purpose of expressing our opinion on compliance, but notfor the purpose of expressing an opinion on the effectiveness of internal control over compliance.Accordingly, we do not express an opinion on the effectiveness of the Catahoula Parish HospitalService District's internal control over compliance.

A control deficiency in an entity's internal control over compliance exists when the design oroperation of a control does not allow management or employees, in the normal course of performingtheir assigned functions, to prevent or detect noncompliance with a type of compliance requirementof a federal program on a timely basis. A significant deficiency is a control deficiency, orcombination of control deficiencies, that adversely affects the entity's ability to administer a federalprogram such that there is more than a remote likelihood that noncompliance with a type ofcompliance requirement of a federal program that is more than inconsequential will not be preventedor detected by the entity's internal control. We consider the deficiencies described in theaccompanying schedule of findings and questioned costs (2007-2, 2007-3, and 2007-4) to besignificant deficiencies in internal control over compliance.

A material weakness is a significant deficiency, or combination of significant deficiencies, thatresults in more than a remote likelihood that material noncompliance with a type of compliancerequirement of a federal program will not be prevented or detected by the entity's internal control.

Our consideration of internal control over compliance was for the limited purpose described in thefirst paragraph of this section and would not necessarily identify all deficiencies in internal controlthat might be significant deficiencies or material weaknesses. We identified deficiencies in internalcontrol over compliance (2007-2, 2007-3, and 2007-4) that we consider to be material weaknesses,as defined above.

This report is intended for the information of management. However, this report is a matter ofpublic record and its distribution if not limited.

ROZIER, HARRINGTON & McKA YCertified Public Accountants

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Catahoula Parish Hospital Service District No. 2Schedule of Findings and Questioned CostsFor the Year Ended December 31, 20O7

PART I - SUMMARY OF AUDITORS' RESULTS:

• The Independent Auditor's Report on the financial statements for the Catahoula Parish HospitalService District No. 2 as of December 31, 2007, and for the year then ended expressed an unqualifiedopinion.

• The report on internal control included two reportable conditions.• The results of the audit disclosed one instance of noncompliance that is considered to be material to

the financial statements of the Catahoula Parish Hospital Service District No. 2.• Major programs for the year ended December 31,2007 are presented as follows:

UNITED STATES DEPARTMENT OF HEALTH AND HUMAN SERVICESCFDA No. 93.224 - Community Health Centers

• A threshold of $300,000 was used for distinguishing between Type A and Type B programs for purposesof identifying major programs,

• The Catahoula Parish Hospital Service District No. 2 was not considered to be a low risk auditee asdefined by OMB Circular A-133.

PART II - FINDINGS RELATING TO THE FINANCIAL STATEMENTS WHICH AREREQUIRED TO BE REPORTED IN ACCORDANCE WITH GENERALLY ACCEPTEDGOVERNMENTAL AUDITING STANDARDS:

• 2Q07-1 - Late filing of auditThe revised statutes require that an entitites audited financial statements be submitted no later than sixmonths after year end.

• 2007-2 - Bank ReconciliationsFor the year ended 2007, management of the District did not reconcile the bank accounts to thegeneral ledger. As a result, errors in the general ledger were not detected in a timely manner. At yearend, management recorded two significant adjusting journal entries to adjust cash, accountsreceivable, and revenue to the clinics' records.

• 2007-3 - Payroll TaxesDuring audit procedures, it was determined that the District was behind in remitting both federal andstate payroll taxes. We recommend that management, remit all payroll taxes immediately after thecurrent payroll has been cut. In addition we recommend that management hire someone to reviewpayroll taxes quarterly.

• 2007-4 - Billings to Third PartiesFt has been determined that, at year end, the District was several months behind in billings to andcollections from third parties. Also, the District was unable to produce records to indicate whetherproper billings were made, rebills were necessary or if amounts were subsequently collected. Webelieve management should hire a consultant to help with third party billings. This consultant shouldalso help the District file an appeal with any and all third parties in order to recoup any outstandingfunds.

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Catahoula Parish Hospital Service District No. 2Schedule of Findings and Questioned CostsFor the Year Ended December 31, 20O7

PART III -FINDINGS AND QUESTIONED COSTS FOR FEDERAL AWARDS WHICHSHALL INCLUDE AUDIT FINDINGS AS DEFINED BY OMB CIRCULAR A-133:

• See 2007-2 - Bank Reconciliations• See 2007-3 - Payroll Taxes• See 2007-4 - Billings to Third Parties

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Catahoula Parish Hospital Service District No. 2Managements Corrective Action PlanFor the Year Ended December 31, 2O07

SECTION I - INTERNAL CONTROL AND COMPLIANCE MATERIAL TOTHE FINANCIAL STATEMENTS

2007-1 - Late filing of auditThe revised statutes require that an entitites auditedfinancial statements be submitted no later than sixmonths after year end.

2007-2 - Bank ReconciliationsFor the year ended 2007, management of the Districtdid not reconcile the bank accounts to the generalledger. As a result, errors in the general ledger werenot detected in a timely manner. At year end,management recorded two significant adjusting journalentries to adjust cash, accounts receivable, and revenueto the clinics' records.

2007-3-Payroll TaxesDuring audit procedures, it was determined that theDistrict was behind in remitting both federal and statepayroll taxes. We recommend that management, remitall payroll taxes immediately after the current payrollhas been cut. In addition we recommend thatmanagement hire someone to review payroll taxesquarterly.

2QQ7-4 - Billings to Third PartiesIt has been determined that, at year end, the Districtwas several months behind in billings to andcollections from third parties. Also, the District wasunable to produce records to indicate whether properbillings were made, rebills were necessary or ifamounts were subsequently collected. We believemanagement should hire a consultant to help with thirdparty billings. This consultant should also help theDistrict file an appeal with any and all third parties inorder to recoup any outstanding funds.

ResponseThe Chief Executive Officer of the District hasbeen extremely ill during the last year. Inaddition, the CEO had bypass surgery at thebeginning of 2008 which required anotherextended period of leave. We have workedthroughout the subsequent period to ensure thatour records will be ready for audit early in 2009and that the financial statements will be issuedon a timely basis.

ResponseThe year ended 2007, was an exceptionally busyyear for the medical clinics. In addition, theDistrict's Chief Executive Officer was out agreat deal of time due to illnesses. We will behiring a local certified public accountant to assistwith bank reconciliations. In addition, this CPAwill be able to assist with recording anynecessary journal entries in order that accountsreceivable and revenue per the general ledgeragree with the clinics' records.

ResponseSome payroll taxes were not remitted on a timelybasis. However, all payroll taxes are current.We have changed our policy and now remitpayroll taxes as soon as we run payroll. We alsoplan to hire a local certified public accountant toreview our payroll tax reports.

ResponseOur billings got behind during the current yearprimarily due to a software issue for electronicsubmission. We have been working with oursoftware vendors to correct the problem. Inaddition, we have contacted a consultant to helpus with our billing issues. We also hope that thisconsultant can help us to file an appeal to recoupold receipts we have lost due to the softwareproblems. In addition, we plan to implementnew procedures in order to ensure that all

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Catahoula Parish Hospital Service District No* 2Managements Corrective Action PlanFor the Year Ended December 31,2007

patients are being billed to the correct third partyin a timely manner and that any patients that aredenied are timely rebilled.

SECTION H - INTERNAL CONTROL AND COMPLIANCETO FEDERAL AWARDSSee 2007-2 - Bank Reconciliations

See 2007-3 - Payroll Taxes

See 2007-4 - Billings to Third Parties

MATERIAL

Response: See above

Response: See above

Response: See above

SECTION HI - MANAGEMENT LETTER

No findings were reported in the schedule of findingsand questioned costs.

Response — N/A.

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Catahoula Parish Hospital Service District No, 2Schedule of Prior Year Findings and Questioned CostsFor the Year Ended December 31, 2007

SECTION I - INTERNAL CONTROL AND COMPLIANCE MATERIAL TOTHE FINANCIAL STATEMENTS

No findings were reported in the schedule of findingsand questioned costs,

Response -N/A.

SECTION H - INTERNAL CONTROL AND COMPLIANCE MATERIALTO FEDERAL AWARDS


Response - N/A.

SECTION III - MANAGEMENT LETTER


Response - N/A.

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CA TAHOULA PARISH HOSPITAL

SERVICE DISTRICT NO. 2

Schedule of Expenditure of Federal Financial AwardsFor the year ended December 31, 2007

FEDERAL GRANTOR / Pass-through Grantor / Program Title

FederalCFDA Federal

Number Expenditures

UNITED STATES DEPARTMENT OF HEALTH AND HUMAN SERVICES

Direct Program - Community Health Center

UNITED STATES DEPARTMENT OF HOMELAND SECURITY

Direct Program - Public Assistance Grants

Total Expenditure of Federal Awards

93.224 1,584,711

97.036 68,552

S 1,653,263

NoteThe schedule of expenditures of federal awards was prepared in conformity with generallyaccepted accounting principles for Governmental Units. See notes to the accompanyingfinancial statements for further details.

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Documents

Catahoula Parish Hospital Service District No. 2 · Catahoula Parish Hospital Service District No. 2 September 19, 2008 In accordance with Government Auditing Standards, we have also