Finding 2022-001 Identification of the federal program: Research and Development (R&D) Cluster Federal Agency: U.S. Department of Health and Human Services Assistance Listing: 93.399 Award numbers: 5UG1CA189830-08, 5UG1CA189830-09 Criteria or specific requirement (including statutory, regulatory or other citation): 2 CFR Section 200.303 of the Uniform Guidance states the following regarding internal control: ?The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in ?Standards for Internal Control in the Federal Government? issued by the Comptroller General of the United States or the ?Internal Control Integrated Framework?, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).? Per Memorial Health?s (MH) Hospital Rate Agreement dated October 12, 2021, the indirect cost rate is 26.9% effective October 1, 2021. In addition, the base for indirect costs is defined as: ?Total direct costs excluding capital expenditures (buildings, individual items of equipment; alterations and renovation), the portion of each subaward in excess of $25,000 and flow-through funds.? Condition: Management did not calculate indirect costs related to the R&D Cluster using the indirect cost rate per the Hospital Rate Agreement dated October 21, 2021. In addition, the base upon which the indirect costs were calculated was incorrect for subawards as Management applied the indirect cost rate to the portion of subawards in excess of $25,000. Cause: Management?s internal controls over the calculation and application of indirect costs to the R&D Cluster grants were ineffective due to the incorrect indirect cost rate being used. In addition, Management did not have an understanding of the terms and conditions of the Hospital Rate Agreement. Effect or potential effect: Indirect costs were not calculated in accordance with the federal Hospital Rate Agreement and the incorrect amount was charged to the federal program. Questioned costs: Total: $39,589 ? AL # 93.399 NIH Award 5UG1CA189830-08: $38,261 ? AL # 93.399 NIH Award 5UG1CA189830-09: $1,328 Context: In obtaining an understanding of the indirect costs charged to the R&D grants, we identified that Management did not have effectively designed and operating internal controls in place during the year over the calculation of indirect costs and that the incorrect rate and base was used in the indirect calculations. As such, we did not select a sample of transactions for further testing. We performed an analysis over indirect costs in order to determine the questioned costs. We identified that Management used the incorrect rate (29.6%) for the first 10 months of the fiscal year. Additionally, the indirect cost base was calculated incorrectly as Management included subrecipient direct expenses greater than $25,000 per contract year, which caused an overstatement of the indirect costs charged to the R&D federal grants. Management should have charged $323,128. Management charged $362,718. This resulted in questioned costs charged to the grants equal to $39,589. The total R&D Cluster expenditures reported on the Schedule of Expenditures of Federal Awards (SEFA) are $3,578,529 for the year ended September 30, 2022, including indirect costs of $362,718, which represents 10.1% of total R&D Cluster expenditures. Identification as a repeat finding: Repeat of Finding 2021-002 Recommendation: MH should calculate the indirect costs monthly in accordance with the terms and conditions outlined in the Hospital Rate Agreement. In addition, Management should design and implement effective internal controls over the review and approval of the indirect cost calculation. Views of responsible officials: Management agrees with the finding. Management will update its processes to ensure all calculations are made in accordance with the terms and conditions outlined in the Hospital Rate Agreement and such calculations are reviewed and approved as a means of effective internal control. These updates will be implemented to cover MH?s fiscal year 2023.
Finding 2022-002 Identification of the federal program: R&D Cluster Federal Agency: U.S. Department of Health and Human Services Assistance Listing: 93.399 Award numbers: 5UG1CA189830-08, 5UG1CA189830-09 Criteria or specific requirement (including statutory, regulatory or other citation): 2 CFR Section 200.303 of the Uniform Guidance states the following regarding internal control: ?The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in ?Standards for Internal Control in the Federal Government? issued by the Comptroller General of the United States or the ?Internal Control Integrated Framework?, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).? 45 CFR Appendix-IX-to-Part-75 I.2 (4) states: ?Preparation of Estimates of Effort: Where required under paragraph (3) above, estimates of effort spent by a member of the professional staff on each research agreement should be prepared by the individual who performed the services or by a responsible individual such as a department head or supervisor having first hand knowledge of the services performed on each research agreement. Estimates must show the allocation of effort between organized research and all other hospital activities in terms of the percentage of total effort devoted to each of the broad functional categories referred to in (2) above. The estimate of effort spent on a research agreement may include a reasonable amount of time spent in activities contributing and intimately related to work under the agreement, such as preparing and delivering special lectures about specific aspects of the ongoing research, writing research reports and articles, participating in appropriate research seminars, consulting with colleagues with respect to related research, and attending appropriate scientific meetings and conferences. The term ?all other hospital activities? would include departmental research, administration, committee work, and public services undertaken on behalf of the hospital.? Condition: Management did not have policies and procedures for the entire fiscal year to certify 100% of employee effort. Management did not consistently record salary expenses to R&D federal grants based on the effort that had been certified to the grant. Cause: Management does not have a sufficient understanding of the effort reporting requirements in 45 CFR Appendix-IX to Part-75 I.2. Management?s policy over effort reporting was not designed sufficiently to require 100% of an employee?s effort to be certified. Management?s review and approval of effort report was not precise enough to identify and correct errors in effort charged to the R&D federal grants. Effect or potential effect: If 100% of effort is not certified, effort charged to a federal grant may be inaccurate. The lack of precision of the review and approval of effort certification resulted in inaccurate payroll being recorded to the R&D federal grants. Questioned costs: $6,064; $4,422 related to payroll expense, $1,460 related to fringe benefits and $182 related to indirect costs. Context: In obtaining an understanding of Management?s process for charging payroll expense, we noted certain selections where the calculation for salary expense did not use the appropriate effort percentage or the base salary was incorrect. We tested 40 payroll transactions ($110,463) and identified seven exceptions. For the following transactions, the employees? salaries and related fringe and indirect costs were charged incorrectly to the grant. See Schedule of Findings and Questioned Costs for table. The total R&D Cluster expenditures reported on the SEFA are $3,578,529 for the year ended September 30, 2022, including payroll costs of $1,134,569, which represents 31.7% of total R&D Cluster expenditures. Identification as a repeat finding, if applicable: Partial repeat of finding 2021-006 Recommendation: Management should update its policies to require effort certifications to include 100% of each employee?s effort. In addition, Management should assess their effort calculations to ensure that the appropriate effort percentages are applied to total payroll expense. Management should design and implement more precise controls over the review of the payroll expense workbook used to determine salary expense. Views of responsible officials: On or before September 30, 2023, Management will review all time & effort reporting covering its fiscal year 2023 and implement updates to its certification reporting to ensure calculations are accurately derived and verified through independent review for 100% of each employee?s time and effort and ensure amounts charged to the grant in fiscal year 2023 are supported by these certified records.
Finding 2022-003 Identification of the federal program: R&D Cluster Federal Agency: U.S. Department of Health and Human Services Assistance Listing: 93.399 Award numbers: 5UG1CA189830-08, 5UG1CA189830-09 Criteria or specific requirement (including statutory, regulatory or other citation): 2 CFR Section 200.303 of the Uniform Guidance states the following regarding internal control: ?The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in ?Standards for Internal Control in the Federal Government? issued by the Comptroller General of the United States or the ?Internal Control Integrated Framework?, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).? MH?s Federal Awards ? Subrecipients Monitoring policy includes the following: 5.1.3 Low risk subrecipients will be audited on-site every other year. Medium risk subrecipients will be audited on-site annually. High risk subrecipients will be audited on-site biannually. 6.1.1 Review performance reports in a timely manner by the Principal Investigator. Report any unusual or unforeseen items, investigate and document those findings, and retain records for officials and sponsors. Condition: Management was not following its subrecipient monitoring policy. Management did not perform the appropriate monitoring based on the subrecipient risk rating. In addition, during the year ended September 30, 2022, Management did not have effective internal controls in place to review and approve the subrecipient monitoring forms timely until the third quarter of fiscal 2022. Cause: MH?s internal controls over subrecipient monitoring are not robust enough to identify whether the appropriate level of monitoring is occurring. In addition, the revised subrecipient monitoring policy requiring sign-off by the reviewer on the quarterly subrecipient monitoring checklist was not implemented until the third quarter of fiscal 2022. Effect or potential effect: Subrecipient monitoring was not performed sufficiently or timely. Issues identified during the subrecipient monitoring might not be addressed timely. Questioned costs: Not applicable Context: Based on the timing of the prior year corrective action plan, Management did not have internal controls over the timely review of subrecipients for the first six months of fiscal 2022. We tested four subrecipients and identified one medium risk subrecipient ($764,435), which required an annual on-site visit. Per our inspection of the subrecipient monitoring form, there was no on-site visit conducted during fiscal 2022 for this subrecipient. The total R&D Cluster expenditures reported on the SEFA are $3,578,529 for the year ended September 30, 2022. Subrecipient costs total $1,911,935, which represent 53.4% of total R&D Cluster expenditures. Identification as a repeat finding: Repeat of finding 2021-003 Recommendation: We recommend that Management continue to perform the quarterly review of the subrecipient monitoring forms implemented in the third quarter of fiscal 2022 to monitor subrecipients and ensure they are following their monitoring policy requirements. Views of responsible officials: Management agrees with the finding. Management will review its policy and ensure it fully complies for its fiscal year 2023.
Finding 2022-001 Identification of the federal program: Research and Development (R&D) Cluster Federal Agency: U.S. Department of Health and Human Services Assistance Listing: 93.399 Award numbers: 5UG1CA189830-08, 5UG1CA189830-09 Criteria or specific requirement (including statutory, regulatory or other citation): 2 CFR Section 200.303 of the Uniform Guidance states the following regarding internal control: ?The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in ?Standards for Internal Control in the Federal Government? issued by the Comptroller General of the United States or the ?Internal Control Integrated Framework?, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).? Per Memorial Health?s (MH) Hospital Rate Agreement dated October 12, 2021, the indirect cost rate is 26.9% effective October 1, 2021. In addition, the base for indirect costs is defined as: ?Total direct costs excluding capital expenditures (buildings, individual items of equipment; alterations and renovation), the portion of each subaward in excess of $25,000 and flow-through funds.? Condition: Management did not calculate indirect costs related to the R&D Cluster using the indirect cost rate per the Hospital Rate Agreement dated October 21, 2021. In addition, the base upon which the indirect costs were calculated was incorrect for subawards as Management applied the indirect cost rate to the portion of subawards in excess of $25,000. Cause: Management?s internal controls over the calculation and application of indirect costs to the R&D Cluster grants were ineffective due to the incorrect indirect cost rate being used. In addition, Management did not have an understanding of the terms and conditions of the Hospital Rate Agreement. Effect or potential effect: Indirect costs were not calculated in accordance with the federal Hospital Rate Agreement and the incorrect amount was charged to the federal program. Questioned costs: Total: $39,589 ? AL # 93.399 NIH Award 5UG1CA189830-08: $38,261 ? AL # 93.399 NIH Award 5UG1CA189830-09: $1,328 Context: In obtaining an understanding of the indirect costs charged to the R&D grants, we identified that Management did not have effectively designed and operating internal controls in place during the year over the calculation of indirect costs and that the incorrect rate and base was used in the indirect calculations. As such, we did not select a sample of transactions for further testing. We performed an analysis over indirect costs in order to determine the questioned costs. We identified that Management used the incorrect rate (29.6%) for the first 10 months of the fiscal year. Additionally, the indirect cost base was calculated incorrectly as Management included subrecipient direct expenses greater than $25,000 per contract year, which caused an overstatement of the indirect costs charged to the R&D federal grants. Management should have charged $323,128. Management charged $362,718. This resulted in questioned costs charged to the grants equal to $39,589. The total R&D Cluster expenditures reported on the Schedule of Expenditures of Federal Awards (SEFA) are $3,578,529 for the year ended September 30, 2022, including indirect costs of $362,718, which represents 10.1% of total R&D Cluster expenditures. Identification as a repeat finding: Repeat of Finding 2021-002 Recommendation: MH should calculate the indirect costs monthly in accordance with the terms and conditions outlined in the Hospital Rate Agreement. In addition, Management should design and implement effective internal controls over the review and approval of the indirect cost calculation. Views of responsible officials: Management agrees with the finding. Management will update its processes to ensure all calculations are made in accordance with the terms and conditions outlined in the Hospital Rate Agreement and such calculations are reviewed and approved as a means of effective internal control. These updates will be implemented to cover MH?s fiscal year 2023.
Finding 2022-002 Identification of the federal program: R&D Cluster Federal Agency: U.S. Department of Health and Human Services Assistance Listing: 93.399 Award numbers: 5UG1CA189830-08, 5UG1CA189830-09 Criteria or specific requirement (including statutory, regulatory or other citation): 2 CFR Section 200.303 of the Uniform Guidance states the following regarding internal control: ?The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in ?Standards for Internal Control in the Federal Government? issued by the Comptroller General of the United States or the ?Internal Control Integrated Framework?, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).? 45 CFR Appendix-IX-to-Part-75 I.2 (4) states: ?Preparation of Estimates of Effort: Where required under paragraph (3) above, estimates of effort spent by a member of the professional staff on each research agreement should be prepared by the individual who performed the services or by a responsible individual such as a department head or supervisor having first hand knowledge of the services performed on each research agreement. Estimates must show the allocation of effort between organized research and all other hospital activities in terms of the percentage of total effort devoted to each of the broad functional categories referred to in (2) above. The estimate of effort spent on a research agreement may include a reasonable amount of time spent in activities contributing and intimately related to work under the agreement, such as preparing and delivering special lectures about specific aspects of the ongoing research, writing research reports and articles, participating in appropriate research seminars, consulting with colleagues with respect to related research, and attending appropriate scientific meetings and conferences. The term ?all other hospital activities? would include departmental research, administration, committee work, and public services undertaken on behalf of the hospital.? Condition: Management did not have policies and procedures for the entire fiscal year to certify 100% of employee effort. Management did not consistently record salary expenses to R&D federal grants based on the effort that had been certified to the grant. Cause: Management does not have a sufficient understanding of the effort reporting requirements in 45 CFR Appendix-IX to Part-75 I.2. Management?s policy over effort reporting was not designed sufficiently to require 100% of an employee?s effort to be certified. Management?s review and approval of effort report was not precise enough to identify and correct errors in effort charged to the R&D federal grants. Effect or potential effect: If 100% of effort is not certified, effort charged to a federal grant may be inaccurate. The lack of precision of the review and approval of effort certification resulted in inaccurate payroll being recorded to the R&D federal grants. Questioned costs: $6,064; $4,422 related to payroll expense, $1,460 related to fringe benefits and $182 related to indirect costs. Context: In obtaining an understanding of Management?s process for charging payroll expense, we noted certain selections where the calculation for salary expense did not use the appropriate effort percentage or the base salary was incorrect. We tested 40 payroll transactions ($110,463) and identified seven exceptions. For the following transactions, the employees? salaries and related fringe and indirect costs were charged incorrectly to the grant. See Schedule of Findings and Questioned Costs for table. The total R&D Cluster expenditures reported on the SEFA are $3,578,529 for the year ended September 30, 2022, including payroll costs of $1,134,569, which represents 31.7% of total R&D Cluster expenditures. Identification as a repeat finding, if applicable: Partial repeat of finding 2021-006 Recommendation: Management should update its policies to require effort certifications to include 100% of each employee?s effort. In addition, Management should assess their effort calculations to ensure that the appropriate effort percentages are applied to total payroll expense. Management should design and implement more precise controls over the review of the payroll expense workbook used to determine salary expense. Views of responsible officials: On or before September 30, 2023, Management will review all time & effort reporting covering its fiscal year 2023 and implement updates to its certification reporting to ensure calculations are accurately derived and verified through independent review for 100% of each employee?s time and effort and ensure amounts charged to the grant in fiscal year 2023 are supported by these certified records.
Finding 2022-003 Identification of the federal program: R&D Cluster Federal Agency: U.S. Department of Health and Human Services Assistance Listing: 93.399 Award numbers: 5UG1CA189830-08, 5UG1CA189830-09 Criteria or specific requirement (including statutory, regulatory or other citation): 2 CFR Section 200.303 of the Uniform Guidance states the following regarding internal control: ?The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in ?Standards for Internal Control in the Federal Government? issued by the Comptroller General of the United States or the ?Internal Control Integrated Framework?, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).? MH?s Federal Awards ? Subrecipients Monitoring policy includes the following: 5.1.3 Low risk subrecipients will be audited on-site every other year. Medium risk subrecipients will be audited on-site annually. High risk subrecipients will be audited on-site biannually. 6.1.1 Review performance reports in a timely manner by the Principal Investigator. Report any unusual or unforeseen items, investigate and document those findings, and retain records for officials and sponsors. Condition: Management was not following its subrecipient monitoring policy. Management did not perform the appropriate monitoring based on the subrecipient risk rating. In addition, during the year ended September 30, 2022, Management did not have effective internal controls in place to review and approve the subrecipient monitoring forms timely until the third quarter of fiscal 2022. Cause: MH?s internal controls over subrecipient monitoring are not robust enough to identify whether the appropriate level of monitoring is occurring. In addition, the revised subrecipient monitoring policy requiring sign-off by the reviewer on the quarterly subrecipient monitoring checklist was not implemented until the third quarter of fiscal 2022. Effect or potential effect: Subrecipient monitoring was not performed sufficiently or timely. Issues identified during the subrecipient monitoring might not be addressed timely. Questioned costs: Not applicable Context: Based on the timing of the prior year corrective action plan, Management did not have internal controls over the timely review of subrecipients for the first six months of fiscal 2022. We tested four subrecipients and identified one medium risk subrecipient ($764,435), which required an annual on-site visit. Per our inspection of the subrecipient monitoring form, there was no on-site visit conducted during fiscal 2022 for this subrecipient. The total R&D Cluster expenditures reported on the SEFA are $3,578,529 for the year ended September 30, 2022. Subrecipient costs total $1,911,935, which represent 53.4% of total R&D Cluster expenditures. Identification as a repeat finding: Repeat of finding 2021-003 Recommendation: We recommend that Management continue to perform the quarterly review of the subrecipient monitoring forms implemented in the third quarter of fiscal 2022 to monitor subrecipients and ensure they are following their monitoring policy requirements. Views of responsible officials: Management agrees with the finding. Management will review its policy and ensure it fully complies for its fiscal year 2023.
Finding 2022-005 Identification of the federal program: Federal Agency: U.S. Department of Health and Human Services (HHS) Health Resources and Services Administration (HRSA) Assistance Listing: 93.498 COVID-19 Provider Relief Fund and American Rescue Plan (ARP) Rural Distribution Criteria or specific requirement (including statutory, regulatory or other citation): 2 CFR Section 200.303 of the Uniform Guidance states the following regarding internal control: ?The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in ?Standards for Internal Control in the Federal Government? issued by the Comptroller General of the United States or the ?Internal Control Integrated Framework?, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).? The terms and conditions of the award require the recipient to submit reports to the secretary of HHS for each reporting period to ensure compliance with conditions that are imposed on the payment, and such report shall be in such form, with such content, as specified by the sectary of HHS in program instructions directed to all recipients. Condition: Management did not have sufficiently designed internal controls over the review and approval of PRF reports submitted in the HRSA PRF portal. Management did not retain the supporting documentation for each payer amount reported for net patient service revenue (NPSR) by payer for Q3 (2021), Q4 (2021), Q1 (2022) and Q2 (2022). However, support was maintained over the total NPSR by quarter. Cause: Management represented they performed a review and approved HRSA PRF portal submission prior to submitting; however, supporting documentation to evidence that the internal controls were sufficiently designed and operating effectively was not maintained. Management represented they tied out NPSR by payer by quarter to the underlying patient billing systems. However, Management only retained screen prints of the underlying data and was unable to obtain the underlying detail to support the reports used in Management?s tie out. Effect or potential effect: A lack of internal controls over the review of the data submitted in the HRSA PRF portal could result in a misstatement of the amounts reported in the HRSA PRF portal. NPSR by payer could be incorrectly reported. Questioned costs: Not applicable Context: There was a total of three HRSA PRF portal submissions for the year ended September 30, 2022, and seven underlying entity lost revenue calculations. Management did not maintain sufficient documentation over the review and approval of PRF reports submitted to the HRSA PRF portal. We tested five of seven entities? lost revenue calculations that were included in the three HRSA PRF portal submissions. For the five entities, we obtained Management?s supporting documentation of Total Revenue/Net Charges from Patient Care (NPSR) in the HRSA PRF portal submission. We reperformed Management?s tie out of NPSR by payer to Management?s support. However, we were unable to corroborate Management?s support by agreeing NPSR to Management?s underlying patient billing systems. We were able to corroborate Total Revenue/Net Charges from Patient Care. There was no impact to lost revenue reported for Q3 (2021), Q4 (2021), Q1 (2022) and Q2 (2022). Total PRF expenses reported on the SEFA for the year ended September 30, 2022, are $17,594,918. Identification as a repeat finding: Partial repeat of finding 2021-004 Recommendation: Management should implement internal controls over the review and approval of the HRSA PRF report of lost revenue on the HRSA PRF portal. Management should maintain sufficient documentation over their lost revenue calculations by NPSR by payer. Views of responsible officials: Management agrees with the finding. Management will enhance its maintained documentation over lost revenue calculations to the required level of detail and also include evidence of internal controls over review and approval of amounts reported on the HRSA PRF portal.
Finding 2022-004 Identification of the federal program: Department of Homeland Security COVID-19 Disaster Grants ? Public Assistance (Presidentially Declared Disasters) (FEMA) Pass-Through Entity: Illinois Emergency Management Agency Award ID: COVID-19 PA-05-IL-4489-PW-00950; COVID-19 PA-05-IL-4489-PW-00914 Assistance Listing 97.036 Criteria or specific requirement (including statutory, regulatory or other citation): 2 CFR Section 200.303 of the Uniform Guidance states the following regarding internal control: ?The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in ?Standards for Internal Control in the Federal Government? issued by the Comptroller General of the United States or the ?Internal Control Integrated Framework?, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).? Per project worksheet PA-05-IL-4489-PW-00950, Memorial Health entered into an agreement to provide services in response to the COVID-19 health emergency. Condition: Management did not have sufficient internal controls over the review and approval of FEMA expenditures submitted to the FEMA Portal. Related to the contract labor project (PW-00950), Management did not retain support over certain inputs to the deduction component of their FEMA expenditures. Management did not have sufficiently designed internal controls over the review and approval of the quarterly reports. Cause: Management represented they reviewed and approved the FEMA expenditures; however, supporting documentation to evidence the review and approval was not maintained. Management did not maintain sufficient documentation on the development of certain inputs to the deductions calculation used to reduce their total FEMA expenses. Management represented they reviewed and approved the FEMA reports; however, supporting documentation to evidence the review and approval was not maintained. Effect or potential effect: A lack of internal controls over the review and approval of FEMA expenditures could result in unallowable expenses being charged to the federal program. Questioned costs: Not applicable. Context: There were two project worksheets in 2022 and Management did not maintain documentation over the review and approval over the expenses submitted to the FEMA project. We tested 40 transactions charged to the FEMA projects ($261,579). During our testing we noted one instance ($8,256) where the pay rate utilized in the calculation of the contract labor pay do not agree to the approved pay rate. FEMA expenses were $5,084,596 for PW-00950, which was for contract labor. Management deducted $1,285,199 from the total FEMA expenses ($5,084,596) to represent an estimate for reimbursement received or expected to be received from insurers that would cover regular costs of providing health care services, including salary. The portion of the contracted labor costs covered by medical payments was calculated as the variance between internal pay rates and contractor pay rates times the increased utilization divided by 100. Management did not retain supporting documentation for the utilization rate. The utilization rate was based on Management?s knowledge of the staffing needs for COVID-19 units versus non-COVID-19 units; however, there was no observable evidence available to support the utilization rate used. We tested two quarterly reports submitted. Management did not maintain documentation over the review and approval of the quarterly reports prior to submission. For one of the quarterly reports, management reported $3,470,834 in total amount expended. Management should have reported $5,084,596. Total FEMA expenses reported on the SEFA for the year ended September 30, 2022, are $5,947,018. Identification as a repeat finding: Not applicable Recommendation: Management should design and implement internal controls over the review and approval of FEMA expenditures and quarterly reports. In addition, Management should maintain support for all components of their FEMA calculations. Views of responsible officials: Management agrees with the finding. Management will enhance its documentation to provide evidence of review and approval of FEMA expenditures for future submissions for its fiscal year 2023.
Finding 2022-001 Identification of the federal program: Research and Development (R&D) Cluster Federal Agency: U.S. Department of Health and Human Services Assistance Listing: 93.399 Award numbers: 5UG1CA189830-08, 5UG1CA189830-09 Criteria or specific requirement (including statutory, regulatory or other citation): 2 CFR Section 200.303 of the Uniform Guidance states the following regarding internal control: ?The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in ?Standards for Internal Control in the Federal Government? issued by the Comptroller General of the United States or the ?Internal Control Integrated Framework?, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).? Per Memorial Health?s (MH) Hospital Rate Agreement dated October 12, 2021, the indirect cost rate is 26.9% effective October 1, 2021. In addition, the base for indirect costs is defined as: ?Total direct costs excluding capital expenditures (buildings, individual items of equipment; alterations and renovation), the portion of each subaward in excess of $25,000 and flow-through funds.? Condition: Management did not calculate indirect costs related to the R&D Cluster using the indirect cost rate per the Hospital Rate Agreement dated October 21, 2021. In addition, the base upon which the indirect costs were calculated was incorrect for subawards as Management applied the indirect cost rate to the portion of subawards in excess of $25,000. Cause: Management?s internal controls over the calculation and application of indirect costs to the R&D Cluster grants were ineffective due to the incorrect indirect cost rate being used. In addition, Management did not have an understanding of the terms and conditions of the Hospital Rate Agreement. Effect or potential effect: Indirect costs were not calculated in accordance with the federal Hospital Rate Agreement and the incorrect amount was charged to the federal program. Questioned costs: Total: $39,589 ? AL # 93.399 NIH Award 5UG1CA189830-08: $38,261 ? AL # 93.399 NIH Award 5UG1CA189830-09: $1,328 Context: In obtaining an understanding of the indirect costs charged to the R&D grants, we identified that Management did not have effectively designed and operating internal controls in place during the year over the calculation of indirect costs and that the incorrect rate and base was used in the indirect calculations. As such, we did not select a sample of transactions for further testing. We performed an analysis over indirect costs in order to determine the questioned costs. We identified that Management used the incorrect rate (29.6%) for the first 10 months of the fiscal year. Additionally, the indirect cost base was calculated incorrectly as Management included subrecipient direct expenses greater than $25,000 per contract year, which caused an overstatement of the indirect costs charged to the R&D federal grants. Management should have charged $323,128. Management charged $362,718. This resulted in questioned costs charged to the grants equal to $39,589. The total R&D Cluster expenditures reported on the Schedule of Expenditures of Federal Awards (SEFA) are $3,578,529 for the year ended September 30, 2022, including indirect costs of $362,718, which represents 10.1% of total R&D Cluster expenditures. Identification as a repeat finding: Repeat of Finding 2021-002 Recommendation: MH should calculate the indirect costs monthly in accordance with the terms and conditions outlined in the Hospital Rate Agreement. In addition, Management should design and implement effective internal controls over the review and approval of the indirect cost calculation. Views of responsible officials: Management agrees with the finding. Management will update its processes to ensure all calculations are made in accordance with the terms and conditions outlined in the Hospital Rate Agreement and such calculations are reviewed and approved as a means of effective internal control. These updates will be implemented to cover MH?s fiscal year 2023.
Finding 2022-002 Identification of the federal program: R&D Cluster Federal Agency: U.S. Department of Health and Human Services Assistance Listing: 93.399 Award numbers: 5UG1CA189830-08, 5UG1CA189830-09 Criteria or specific requirement (including statutory, regulatory or other citation): 2 CFR Section 200.303 of the Uniform Guidance states the following regarding internal control: ?The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in ?Standards for Internal Control in the Federal Government? issued by the Comptroller General of the United States or the ?Internal Control Integrated Framework?, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).? 45 CFR Appendix-IX-to-Part-75 I.2 (4) states: ?Preparation of Estimates of Effort: Where required under paragraph (3) above, estimates of effort spent by a member of the professional staff on each research agreement should be prepared by the individual who performed the services or by a responsible individual such as a department head or supervisor having first hand knowledge of the services performed on each research agreement. Estimates must show the allocation of effort between organized research and all other hospital activities in terms of the percentage of total effort devoted to each of the broad functional categories referred to in (2) above. The estimate of effort spent on a research agreement may include a reasonable amount of time spent in activities contributing and intimately related to work under the agreement, such as preparing and delivering special lectures about specific aspects of the ongoing research, writing research reports and articles, participating in appropriate research seminars, consulting with colleagues with respect to related research, and attending appropriate scientific meetings and conferences. The term ?all other hospital activities? would include departmental research, administration, committee work, and public services undertaken on behalf of the hospital.? Condition: Management did not have policies and procedures for the entire fiscal year to certify 100% of employee effort. Management did not consistently record salary expenses to R&D federal grants based on the effort that had been certified to the grant. Cause: Management does not have a sufficient understanding of the effort reporting requirements in 45 CFR Appendix-IX to Part-75 I.2. Management?s policy over effort reporting was not designed sufficiently to require 100% of an employee?s effort to be certified. Management?s review and approval of effort report was not precise enough to identify and correct errors in effort charged to the R&D federal grants. Effect or potential effect: If 100% of effort is not certified, effort charged to a federal grant may be inaccurate. The lack of precision of the review and approval of effort certification resulted in inaccurate payroll being recorded to the R&D federal grants. Questioned costs: $6,064; $4,422 related to payroll expense, $1,460 related to fringe benefits and $182 related to indirect costs. Context: In obtaining an understanding of Management?s process for charging payroll expense, we noted certain selections where the calculation for salary expense did not use the appropriate effort percentage or the base salary was incorrect. We tested 40 payroll transactions ($110,463) and identified seven exceptions. For the following transactions, the employees? salaries and related fringe and indirect costs were charged incorrectly to the grant. See Schedule of Findings and Questioned Costs for table. The total R&D Cluster expenditures reported on the SEFA are $3,578,529 for the year ended September 30, 2022, including payroll costs of $1,134,569, which represents 31.7% of total R&D Cluster expenditures. Identification as a repeat finding, if applicable: Partial repeat of finding 2021-006 Recommendation: Management should update its policies to require effort certifications to include 100% of each employee?s effort. In addition, Management should assess their effort calculations to ensure that the appropriate effort percentages are applied to total payroll expense. Management should design and implement more precise controls over the review of the payroll expense workbook used to determine salary expense. Views of responsible officials: On or before September 30, 2023, Management will review all time & effort reporting covering its fiscal year 2023 and implement updates to its certification reporting to ensure calculations are accurately derived and verified through independent review for 100% of each employee?s time and effort and ensure amounts charged to the grant in fiscal year 2023 are supported by these certified records.
Finding 2022-003 Identification of the federal program: R&D Cluster Federal Agency: U.S. Department of Health and Human Services Assistance Listing: 93.399 Award numbers: 5UG1CA189830-08, 5UG1CA189830-09 Criteria or specific requirement (including statutory, regulatory or other citation): 2 CFR Section 200.303 of the Uniform Guidance states the following regarding internal control: ?The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in ?Standards for Internal Control in the Federal Government? issued by the Comptroller General of the United States or the ?Internal Control Integrated Framework?, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).? MH?s Federal Awards ? Subrecipients Monitoring policy includes the following: 5.1.3 Low risk subrecipients will be audited on-site every other year. Medium risk subrecipients will be audited on-site annually. High risk subrecipients will be audited on-site biannually. 6.1.1 Review performance reports in a timely manner by the Principal Investigator. Report any unusual or unforeseen items, investigate and document those findings, and retain records for officials and sponsors. Condition: Management was not following its subrecipient monitoring policy. Management did not perform the appropriate monitoring based on the subrecipient risk rating. In addition, during the year ended September 30, 2022, Management did not have effective internal controls in place to review and approve the subrecipient monitoring forms timely until the third quarter of fiscal 2022. Cause: MH?s internal controls over subrecipient monitoring are not robust enough to identify whether the appropriate level of monitoring is occurring. In addition, the revised subrecipient monitoring policy requiring sign-off by the reviewer on the quarterly subrecipient monitoring checklist was not implemented until the third quarter of fiscal 2022. Effect or potential effect: Subrecipient monitoring was not performed sufficiently or timely. Issues identified during the subrecipient monitoring might not be addressed timely. Questioned costs: Not applicable Context: Based on the timing of the prior year corrective action plan, Management did not have internal controls over the timely review of subrecipients for the first six months of fiscal 2022. We tested four subrecipients and identified one medium risk subrecipient ($764,435), which required an annual on-site visit. Per our inspection of the subrecipient monitoring form, there was no on-site visit conducted during fiscal 2022 for this subrecipient. The total R&D Cluster expenditures reported on the SEFA are $3,578,529 for the year ended September 30, 2022. Subrecipient costs total $1,911,935, which represent 53.4% of total R&D Cluster expenditures. Identification as a repeat finding: Repeat of finding 2021-003 Recommendation: We recommend that Management continue to perform the quarterly review of the subrecipient monitoring forms implemented in the third quarter of fiscal 2022 to monitor subrecipients and ensure they are following their monitoring policy requirements. Views of responsible officials: Management agrees with the finding. Management will review its policy and ensure it fully complies for its fiscal year 2023.
Finding 2022-001 Identification of the federal program: Research and Development (R&D) Cluster Federal Agency: U.S. Department of Health and Human Services Assistance Listing: 93.399 Award numbers: 5UG1CA189830-08, 5UG1CA189830-09 Criteria or specific requirement (including statutory, regulatory or other citation): 2 CFR Section 200.303 of the Uniform Guidance states the following regarding internal control: ?The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in ?Standards for Internal Control in the Federal Government? issued by the Comptroller General of the United States or the ?Internal Control Integrated Framework?, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).? Per Memorial Health?s (MH) Hospital Rate Agreement dated October 12, 2021, the indirect cost rate is 26.9% effective October 1, 2021. In addition, the base for indirect costs is defined as: ?Total direct costs excluding capital expenditures (buildings, individual items of equipment; alterations and renovation), the portion of each subaward in excess of $25,000 and flow-through funds.? Condition: Management did not calculate indirect costs related to the R&D Cluster using the indirect cost rate per the Hospital Rate Agreement dated October 21, 2021. In addition, the base upon which the indirect costs were calculated was incorrect for subawards as Management applied the indirect cost rate to the portion of subawards in excess of $25,000. Cause: Management?s internal controls over the calculation and application of indirect costs to the R&D Cluster grants were ineffective due to the incorrect indirect cost rate being used. In addition, Management did not have an understanding of the terms and conditions of the Hospital Rate Agreement. Effect or potential effect: Indirect costs were not calculated in accordance with the federal Hospital Rate Agreement and the incorrect amount was charged to the federal program. Questioned costs: Total: $39,589 ? AL # 93.399 NIH Award 5UG1CA189830-08: $38,261 ? AL # 93.399 NIH Award 5UG1CA189830-09: $1,328 Context: In obtaining an understanding of the indirect costs charged to the R&D grants, we identified that Management did not have effectively designed and operating internal controls in place during the year over the calculation of indirect costs and that the incorrect rate and base was used in the indirect calculations. As such, we did not select a sample of transactions for further testing. We performed an analysis over indirect costs in order to determine the questioned costs. We identified that Management used the incorrect rate (29.6%) for the first 10 months of the fiscal year. Additionally, the indirect cost base was calculated incorrectly as Management included subrecipient direct expenses greater than $25,000 per contract year, which caused an overstatement of the indirect costs charged to the R&D federal grants. Management should have charged $323,128. Management charged $362,718. This resulted in questioned costs charged to the grants equal to $39,589. The total R&D Cluster expenditures reported on the Schedule of Expenditures of Federal Awards (SEFA) are $3,578,529 for the year ended September 30, 2022, including indirect costs of $362,718, which represents 10.1% of total R&D Cluster expenditures. Identification as a repeat finding: Repeat of Finding 2021-002 Recommendation: MH should calculate the indirect costs monthly in accordance with the terms and conditions outlined in the Hospital Rate Agreement. In addition, Management should design and implement effective internal controls over the review and approval of the indirect cost calculation. Views of responsible officials: Management agrees with the finding. Management will update its processes to ensure all calculations are made in accordance with the terms and conditions outlined in the Hospital Rate Agreement and such calculations are reviewed and approved as a means of effective internal control. These updates will be implemented to cover MH?s fiscal year 2023.
Finding 2022-002 Identification of the federal program: R&D Cluster Federal Agency: U.S. Department of Health and Human Services Assistance Listing: 93.399 Award numbers: 5UG1CA189830-08, 5UG1CA189830-09 Criteria or specific requirement (including statutory, regulatory or other citation): 2 CFR Section 200.303 of the Uniform Guidance states the following regarding internal control: ?The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in ?Standards for Internal Control in the Federal Government? issued by the Comptroller General of the United States or the ?Internal Control Integrated Framework?, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).? 45 CFR Appendix-IX-to-Part-75 I.2 (4) states: ?Preparation of Estimates of Effort: Where required under paragraph (3) above, estimates of effort spent by a member of the professional staff on each research agreement should be prepared by the individual who performed the services or by a responsible individual such as a department head or supervisor having first hand knowledge of the services performed on each research agreement. Estimates must show the allocation of effort between organized research and all other hospital activities in terms of the percentage of total effort devoted to each of the broad functional categories referred to in (2) above. The estimate of effort spent on a research agreement may include a reasonable amount of time spent in activities contributing and intimately related to work under the agreement, such as preparing and delivering special lectures about specific aspects of the ongoing research, writing research reports and articles, participating in appropriate research seminars, consulting with colleagues with respect to related research, and attending appropriate scientific meetings and conferences. The term ?all other hospital activities? would include departmental research, administration, committee work, and public services undertaken on behalf of the hospital.? Condition: Management did not have policies and procedures for the entire fiscal year to certify 100% of employee effort. Management did not consistently record salary expenses to R&D federal grants based on the effort that had been certified to the grant. Cause: Management does not have a sufficient understanding of the effort reporting requirements in 45 CFR Appendix-IX to Part-75 I.2. Management?s policy over effort reporting was not designed sufficiently to require 100% of an employee?s effort to be certified. Management?s review and approval of effort report was not precise enough to identify and correct errors in effort charged to the R&D federal grants. Effect or potential effect: If 100% of effort is not certified, effort charged to a federal grant may be inaccurate. The lack of precision of the review and approval of effort certification resulted in inaccurate payroll being recorded to the R&D federal grants. Questioned costs: $6,064; $4,422 related to payroll expense, $1,460 related to fringe benefits and $182 related to indirect costs. Context: In obtaining an understanding of Management?s process for charging payroll expense, we noted certain selections where the calculation for salary expense did not use the appropriate effort percentage or the base salary was incorrect. We tested 40 payroll transactions ($110,463) and identified seven exceptions. For the following transactions, the employees? salaries and related fringe and indirect costs were charged incorrectly to the grant. See Schedule of Findings and Questioned Costs for table. The total R&D Cluster expenditures reported on the SEFA are $3,578,529 for the year ended September 30, 2022, including payroll costs of $1,134,569, which represents 31.7% of total R&D Cluster expenditures. Identification as a repeat finding, if applicable: Partial repeat of finding 2021-006 Recommendation: Management should update its policies to require effort certifications to include 100% of each employee?s effort. In addition, Management should assess their effort calculations to ensure that the appropriate effort percentages are applied to total payroll expense. Management should design and implement more precise controls over the review of the payroll expense workbook used to determine salary expense. Views of responsible officials: On or before September 30, 2023, Management will review all time & effort reporting covering its fiscal year 2023 and implement updates to its certification reporting to ensure calculations are accurately derived and verified through independent review for 100% of each employee?s time and effort and ensure amounts charged to the grant in fiscal year 2023 are supported by these certified records.
Finding 2022-003 Identification of the federal program: R&D Cluster Federal Agency: U.S. Department of Health and Human Services Assistance Listing: 93.399 Award numbers: 5UG1CA189830-08, 5UG1CA189830-09 Criteria or specific requirement (including statutory, regulatory or other citation): 2 CFR Section 200.303 of the Uniform Guidance states the following regarding internal control: ?The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in ?Standards for Internal Control in the Federal Government? issued by the Comptroller General of the United States or the ?Internal Control Integrated Framework?, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).? MH?s Federal Awards ? Subrecipients Monitoring policy includes the following: 5.1.3 Low risk subrecipients will be audited on-site every other year. Medium risk subrecipients will be audited on-site annually. High risk subrecipients will be audited on-site biannually. 6.1.1 Review performance reports in a timely manner by the Principal Investigator. Report any unusual or unforeseen items, investigate and document those findings, and retain records for officials and sponsors. Condition: Management was not following its subrecipient monitoring policy. Management did not perform the appropriate monitoring based on the subrecipient risk rating. In addition, during the year ended September 30, 2022, Management did not have effective internal controls in place to review and approve the subrecipient monitoring forms timely until the third quarter of fiscal 2022. Cause: MH?s internal controls over subrecipient monitoring are not robust enough to identify whether the appropriate level of monitoring is occurring. In addition, the revised subrecipient monitoring policy requiring sign-off by the reviewer on the quarterly subrecipient monitoring checklist was not implemented until the third quarter of fiscal 2022. Effect or potential effect: Subrecipient monitoring was not performed sufficiently or timely. Issues identified during the subrecipient monitoring might not be addressed timely. Questioned costs: Not applicable Context: Based on the timing of the prior year corrective action plan, Management did not have internal controls over the timely review of subrecipients for the first six months of fiscal 2022. We tested four subrecipients and identified one medium risk subrecipient ($764,435), which required an annual on-site visit. Per our inspection of the subrecipient monitoring form, there was no on-site visit conducted during fiscal 2022 for this subrecipient. The total R&D Cluster expenditures reported on the SEFA are $3,578,529 for the year ended September 30, 2022. Subrecipient costs total $1,911,935, which represent 53.4% of total R&D Cluster expenditures. Identification as a repeat finding: Repeat of finding 2021-003 Recommendation: We recommend that Management continue to perform the quarterly review of the subrecipient monitoring forms implemented in the third quarter of fiscal 2022 to monitor subrecipients and ensure they are following their monitoring policy requirements. Views of responsible officials: Management agrees with the finding. Management will review its policy and ensure it fully complies for its fiscal year 2023.
Finding 2022-005 Identification of the federal program: Federal Agency: U.S. Department of Health and Human Services (HHS) Health Resources and Services Administration (HRSA) Assistance Listing: 93.498 COVID-19 Provider Relief Fund and American Rescue Plan (ARP) Rural Distribution Criteria or specific requirement (including statutory, regulatory or other citation): 2 CFR Section 200.303 of the Uniform Guidance states the following regarding internal control: ?The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in ?Standards for Internal Control in the Federal Government? issued by the Comptroller General of the United States or the ?Internal Control Integrated Framework?, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).? The terms and conditions of the award require the recipient to submit reports to the secretary of HHS for each reporting period to ensure compliance with conditions that are imposed on the payment, and such report shall be in such form, with such content, as specified by the sectary of HHS in program instructions directed to all recipients. Condition: Management did not have sufficiently designed internal controls over the review and approval of PRF reports submitted in the HRSA PRF portal. Management did not retain the supporting documentation for each payer amount reported for net patient service revenue (NPSR) by payer for Q3 (2021), Q4 (2021), Q1 (2022) and Q2 (2022). However, support was maintained over the total NPSR by quarter. Cause: Management represented they performed a review and approved HRSA PRF portal submission prior to submitting; however, supporting documentation to evidence that the internal controls were sufficiently designed and operating effectively was not maintained. Management represented they tied out NPSR by payer by quarter to the underlying patient billing systems. However, Management only retained screen prints of the underlying data and was unable to obtain the underlying detail to support the reports used in Management?s tie out. Effect or potential effect: A lack of internal controls over the review of the data submitted in the HRSA PRF portal could result in a misstatement of the amounts reported in the HRSA PRF portal. NPSR by payer could be incorrectly reported. Questioned costs: Not applicable Context: There was a total of three HRSA PRF portal submissions for the year ended September 30, 2022, and seven underlying entity lost revenue calculations. Management did not maintain sufficient documentation over the review and approval of PRF reports submitted to the HRSA PRF portal. We tested five of seven entities? lost revenue calculations that were included in the three HRSA PRF portal submissions. For the five entities, we obtained Management?s supporting documentation of Total Revenue/Net Charges from Patient Care (NPSR) in the HRSA PRF portal submission. We reperformed Management?s tie out of NPSR by payer to Management?s support. However, we were unable to corroborate Management?s support by agreeing NPSR to Management?s underlying patient billing systems. We were able to corroborate Total Revenue/Net Charges from Patient Care. There was no impact to lost revenue reported for Q3 (2021), Q4 (2021), Q1 (2022) and Q2 (2022). Total PRF expenses reported on the SEFA for the year ended September 30, 2022, are $17,594,918. Identification as a repeat finding: Partial repeat of finding 2021-004 Recommendation: Management should implement internal controls over the review and approval of the HRSA PRF report of lost revenue on the HRSA PRF portal. Management should maintain sufficient documentation over their lost revenue calculations by NPSR by payer. Views of responsible officials: Management agrees with the finding. Management will enhance its maintained documentation over lost revenue calculations to the required level of detail and also include evidence of internal controls over review and approval of amounts reported on the HRSA PRF portal.
Finding 2022-004 Identification of the federal program: Department of Homeland Security COVID-19 Disaster Grants ? Public Assistance (Presidentially Declared Disasters) (FEMA) Pass-Through Entity: Illinois Emergency Management Agency Award ID: COVID-19 PA-05-IL-4489-PW-00950; COVID-19 PA-05-IL-4489-PW-00914 Assistance Listing 97.036 Criteria or specific requirement (including statutory, regulatory or other citation): 2 CFR Section 200.303 of the Uniform Guidance states the following regarding internal control: ?The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in ?Standards for Internal Control in the Federal Government? issued by the Comptroller General of the United States or the ?Internal Control Integrated Framework?, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).? Per project worksheet PA-05-IL-4489-PW-00950, Memorial Health entered into an agreement to provide services in response to the COVID-19 health emergency. Condition: Management did not have sufficient internal controls over the review and approval of FEMA expenditures submitted to the FEMA Portal. Related to the contract labor project (PW-00950), Management did not retain support over certain inputs to the deduction component of their FEMA expenditures. Management did not have sufficiently designed internal controls over the review and approval of the quarterly reports. Cause: Management represented they reviewed and approved the FEMA expenditures; however, supporting documentation to evidence the review and approval was not maintained. Management did not maintain sufficient documentation on the development of certain inputs to the deductions calculation used to reduce their total FEMA expenses. Management represented they reviewed and approved the FEMA reports; however, supporting documentation to evidence the review and approval was not maintained. Effect or potential effect: A lack of internal controls over the review and approval of FEMA expenditures could result in unallowable expenses being charged to the federal program. Questioned costs: Not applicable. Context: There were two project worksheets in 2022 and Management did not maintain documentation over the review and approval over the expenses submitted to the FEMA project. We tested 40 transactions charged to the FEMA projects ($261,579). During our testing we noted one instance ($8,256) where the pay rate utilized in the calculation of the contract labor pay do not agree to the approved pay rate. FEMA expenses were $5,084,596 for PW-00950, which was for contract labor. Management deducted $1,285,199 from the total FEMA expenses ($5,084,596) to represent an estimate for reimbursement received or expected to be received from insurers that would cover regular costs of providing health care services, including salary. The portion of the contracted labor costs covered by medical payments was calculated as the variance between internal pay rates and contractor pay rates times the increased utilization divided by 100. Management did not retain supporting documentation for the utilization rate. The utilization rate was based on Management?s knowledge of the staffing needs for COVID-19 units versus non-COVID-19 units; however, there was no observable evidence available to support the utilization rate used. We tested two quarterly reports submitted. Management did not maintain documentation over the review and approval of the quarterly reports prior to submission. For one of the quarterly reports, management reported $3,470,834 in total amount expended. Management should have reported $5,084,596. Total FEMA expenses reported on the SEFA for the year ended September 30, 2022, are $5,947,018. Identification as a repeat finding: Not applicable Recommendation: Management should design and implement internal controls over the review and approval of FEMA expenditures and quarterly reports. In addition, Management should maintain support for all components of their FEMA calculations. Views of responsible officials: Management agrees with the finding. Management will enhance its documentation to provide evidence of review and approval of FEMA expenditures for future submissions for its fiscal year 2023.