This fraudulent business with Tech Solutions LLC and Insurance World took place over the course of six years.
The findings came about from a six month long auditing process, partly led by assistant legislative auditor, Allen Brown.
"I can tell you, this is one of the biggest messes we have run into," he said.
What started the investigation were alarming numbers on how much the hospital was paying for life insurance, around one million dollars a year.
"The numbers just didn't make sense, for a rural hospital, why would they be paying this kind of money for what appeared to be life insurance. And that's what prompted us to go up there and find out."
But that's not all that was found.
Dozens of violations include personal use of credit cards by Alford and his commissioners totaling $75,000, personal use of hospital vehicles and equipment, improper donation of public funds, and Alford collecting excess wages totaling thousands.
Ethics violations include free landscaping to employees, and employees receiving payments from vendors.
Audit officials say 96 percent of the Board of Commissioners meetings conducted hospital business in executive session -- a violation of the open meeting law. These findings are going to the Louisiana Ethics Board.
"If you look at the minutes, very little business was being conducted in public session, so it would appear that they were operating in secret and that's not the way public boards should operate," said Brown.
David Richardson, a former hospital auditor, told NBC 10 News over the phone that he thought the spending habits by the administration was irresponsible.
He says despite making recommendations to hospital administration, he was ignored.
He says he went to the board with his concerns and then withdrew from auditing for the hospital, contacting the police jury who oversees the hospital board.
That's when the legislative auditor contacted him and he told them why he left.
"I hate the situation that the hospital is in that it doesn't need to be put in," Richardson said.
After Richardson says he spoke out, the police jury acted and replaced the hospital board with new members.
Thomas Williams, the new hospital board chairman, says they've brought in a compliance firm to move forward.
"We're working hand in hand with the legislative auditors office to let them know that we do take this seriously and we do have these things under control," he said. "We're working to fill voids that were previously there."
Current hospital administrator Scott Barrilleaux says health care services are running as normal, and says they are making sure this will never happen again in the hospital business.
"We at Madison Parish Hospital were disappointed to discover the financial misconduct of the former administration and others," he said in a statement. "With new management and board of trustees, we are committed to correcting all of the issues highlighted in the investigative audit report and we are doing everything needed to comply with the Louisiana legislative auditor, board of ethics and all authorities governing service district hospitals....We will do what is required to improve our hospital and make it even better for our patients and community."
State auditor officials say the report is in the hand of the district attorney and U.S. Attorney, who will plan the next steps in the investigation.