Audit 14852

Finding 2021-001 - Material Weakness in Internal Control and Material Noncompliance Assistance Listing No.: 93.498 COVID-19 - Provider Relief Fund and American Rescue Plan (ARP) Rural Distribution Federal Agency: U.S. Department of Health and Human Services Pass-Through Agency: Not Applicable Award Number/Year: Not applicable/2020 Compliance Requirement: Activities Allowed and Unallowed; Allowable Costs/Cost Principles Questioned Costs: $156,376 of known questioned costs. Criteria: Non-federal entities in receipt of federal funds must comply with the requirements of 2 CFR 200.303(a), which require an entity to establish and maintain effective internal control over the Federal award to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Provider Relief Funds (PRF) payments must be used for allowable expenses and lost revenue described in the PRF terms and conditions and specified in guidance issued by the U.S. Department of Health and Human Services (HHS). Activities allowed have been defined as expenses used to prevent, prepare for, and respond to coronavirus, domestically or internationally, for necessary expenses to reimburse, through grants or other mechanisms, eligible health care providers for health care related expenses or lost revenues that are attributable to coronavirus.Condition and Context: The Manor included expenses in its Period 1 submission that did not meet the criteria of an allowable expense as defined by the HHS guidance (the Guidance). The Manor included $156,376 in supplies and dining expenses that were not specifically used to prevent, prepare for, and respond to coronavirus. This is not a statistically valid sample. Effect: The Manor claimed expenses that were not in accordance with the Guidance and therefore deemed unallowable. Cause: Management misinterpreted the Guidance and claimed unallowable expenses in their reporting of qualified expenses. Recommendation: We recommend that management implement procedures to ensure that the most recent guidance is reviewed and understood and that information used in accumulated allowable expenses is reviewed, with errors addressed prior to submission. Additionally, we recommend that questioned costs are offset against unused lost revenues in future submissions. View of Responsible Officials: The Manor agrees with the finding. The Manor reported expenses in its period 1 submission of $798,256 which included all skilled nursing supplies expenses and an allocation of dining supplies which all of which were not necessarily used to prevent, prepare for, and respond to coronavirus. The Manor was able to provide direct costs used to prevent, prepare for, and respond to coronavirus that totaled $908,131 of which $266,251 were reported in period 2, thus $156,376 was over reported in period 1. The Manor agrees with the finding and misinterpreted the guidance but was able to substantiate $641,880 of expenses reported in period 1 as direct costs used to prevent, prepare for and respond to coronavirus. Additionally, the Manor reported $740,727 of lost revenues in the period 1 report that could be applied against the PRF payments. Procedures have been implemented to ensure that all future reporting will only include direct costs used to prevent, prepare for and respond to coronavirus.

Finding 2021-002 - Significant Deficiency in Internal Control Assistance Listing No.: 93.498 COVID-19 Provider Relief Fund and American Rescue Plan (ARP) Rural Distribution Federal Agency: U.S. Department of Health and Human Services Pass-through Agency: Not Applicable Award Number/Year: Not applicable/2020 Compliance Requirement: Reporting Questioned Costs: Not determinable. Criteria: Provider Relief Funds and American Rescue Plan (ARP) Rural Distribution (PRF) payment amounts must be used for allowable expenses and lost revenue described in the PRF terms and conditions and specified in guidance issued by the U.S. Department of Health and Human Services (HHS). Activities allowed have been defined as expenses used to prevent, prepare for, and respond to coronavirus, domestically or internationally, for necessary expenses to reimburse, through grants or other mechanisms, eligible health care providers for health care related expenses or lost revenues that are attributable to coronavirus. Recipients may choose to apply PRF payments toward lost revenues using one of three options: Option i: of the difference between actual patient care revenues; Option ii: of the difference between budgeted and actual patient care revenues or Option iii: calculated by any reasonable method of estimating revenues. Condition and Context: In the Manor’s Period 1 and 2 submissions, the Manor incorrectly reported lost revenues under Option i. rather than Option iii. Option i. would not be appropriate as the Manor only included actual resident revenues from skilled nursing and excluded from actual resident revenue amounts attributable to personal care and independent living services. Therefore, the Manor should have selected Option iii. This is not a statistically valid sample. Effect: The amounts reported to Health Resources & Services Administration (HRSA) were not in accordance with established U.S. Department of Health and Human Services reporting guidance (the Guidance). Cause: Management misinterpreted the Guidance and erroneously reported expenses in their Period 1 submission and reported lost revenue under the wrong option in their Period 1 and 2 submissions. Recommendation: We recommend that management review their process and procedures to ensure that lost revenues are calculated in accordance with U.S. Department of Health and Human Services reporting guidance. In addition, the Manor should correct future reporting submissions to report lost revenues under the proper option to align with their methodology. View of Responsible Officials: The Manor agrees with the finding and misinterpreted the guidance. The Manor agrees that they should have selected option iii as independent living revenues were not affected and personal care was undergoing renovations and thus the comparison of actual personal care revenues was not appropriate. Management will correct the error in future filings.

Finding 2021-001 - Material Weakness in Internal Control and Material Noncompliance Assistance Listing No.: 93.498 COVID-19 - Provider Relief Fund and American Rescue Plan (ARP) Rural Distribution Federal Agency: U.S. Department of Health and Human Services Pass-Through Agency: Not Applicable Award Number/Year: Not applicable/2020 Compliance Requirement: Activities Allowed and Unallowed; Allowable Costs/Cost Principles Questioned Costs: $156,376 of known questioned costs. Criteria: Non-federal entities in receipt of federal funds must comply with the requirements of 2 CFR 200.303(a), which require an entity to establish and maintain effective internal control over the Federal award to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Provider Relief Funds (PRF) payments must be used for allowable expenses and lost revenue described in the PRF terms and conditions and specified in guidance issued by the U.S. Department of Health and Human Services (HHS). Activities allowed have been defined as expenses used to prevent, prepare for, and respond to coronavirus, domestically or internationally, for necessary expenses to reimburse, through grants or other mechanisms, eligible health care providers for health care related expenses or lost revenues that are attributable to coronavirus.Condition and Context: The Manor included expenses in its Period 1 submission that did not meet the criteria of an allowable expense as defined by the HHS guidance (the Guidance). The Manor included $156,376 in supplies and dining expenses that were not specifically used to prevent, prepare for, and respond to coronavirus. This is not a statistically valid sample. Effect: The Manor claimed expenses that were not in accordance with the Guidance and therefore deemed unallowable. Cause: Management misinterpreted the Guidance and claimed unallowable expenses in their reporting of qualified expenses. Recommendation: We recommend that management implement procedures to ensure that the most recent guidance is reviewed and understood and that information used in accumulated allowable expenses is reviewed, with errors addressed prior to submission. Additionally, we recommend that questioned costs are offset against unused lost revenues in future submissions. View of Responsible Officials: The Manor agrees with the finding. The Manor reported expenses in its period 1 submission of $798,256 which included all skilled nursing supplies expenses and an allocation of dining supplies which all of which were not necessarily used to prevent, prepare for, and respond to coronavirus. The Manor was able to provide direct costs used to prevent, prepare for, and respond to coronavirus that totaled $908,131 of which $266,251 were reported in period 2, thus $156,376 was over reported in period 1. The Manor agrees with the finding and misinterpreted the guidance but was able to substantiate $641,880 of expenses reported in period 1 as direct costs used to prevent, prepare for and respond to coronavirus. Additionally, the Manor reported $740,727 of lost revenues in the period 1 report that could be applied against the PRF payments. Procedures have been implemented to ensure that all future reporting will only include direct costs used to prevent, prepare for and respond to coronavirus.

Finding 2021-002 - Significant Deficiency in Internal Control Assistance Listing No.: 93.498 COVID-19 Provider Relief Fund and American Rescue Plan (ARP) Rural Distribution Federal Agency: U.S. Department of Health and Human Services Pass-through Agency: Not Applicable Award Number/Year: Not applicable/2020 Compliance Requirement: Reporting Questioned Costs: Not determinable. Criteria: Provider Relief Funds and American Rescue Plan (ARP) Rural Distribution (PRF) payment amounts must be used for allowable expenses and lost revenue described in the PRF terms and conditions and specified in guidance issued by the U.S. Department of Health and Human Services (HHS). Activities allowed have been defined as expenses used to prevent, prepare for, and respond to coronavirus, domestically or internationally, for necessary expenses to reimburse, through grants or other mechanisms, eligible health care providers for health care related expenses or lost revenues that are attributable to coronavirus. Recipients may choose to apply PRF payments toward lost revenues using one of three options: Option i: of the difference between actual patient care revenues; Option ii: of the difference between budgeted and actual patient care revenues or Option iii: calculated by any reasonable method of estimating revenues. Condition and Context: In the Manor’s Period 1 and 2 submissions, the Manor incorrectly reported lost revenues under Option i. rather than Option iii. Option i. would not be appropriate as the Manor only included actual resident revenues from skilled nursing and excluded from actual resident revenue amounts attributable to personal care and independent living services. Therefore, the Manor should have selected Option iii. This is not a statistically valid sample. Effect: The amounts reported to Health Resources & Services Administration (HRSA) were not in accordance with established U.S. Department of Health and Human Services reporting guidance (the Guidance). Cause: Management misinterpreted the Guidance and erroneously reported expenses in their Period 1 submission and reported lost revenue under the wrong option in their Period 1 and 2 submissions. Recommendation: We recommend that management review their process and procedures to ensure that lost revenues are calculated in accordance with U.S. Department of Health and Human Services reporting guidance. In addition, the Manor should correct future reporting submissions to report lost revenues under the proper option to align with their methodology. View of Responsible Officials: The Manor agrees with the finding and misinterpreted the guidance. The Manor agrees that they should have selected option iii as independent living revenues were not affected and personal care was undergoing renovations and thus the comparison of actual personal care revenues was not appropriate. Management will correct the error in future filings.