Section III ? Federal Award Findings and Questioned Costs Finding 2022-001 Internal control deficiency and noncompliance over the allowable activities, allowable costs/cost principles, and reporting compliance requirements Identification of the Federal Program: Assistance Listing Number 93.498 ? COVID-19 ? Provider Relief Fund and American Rescue Plan (ARP) Rural Distribution ? U.S. Department of Health and Human Services ? Federal award identification number ? Not Applicable ? Federal award year: ? Period 3 ? January 1, 2020 to June 30, 2022 ? Period 4 ? January 1, 2020 to December 31, 2022 Criteria or specific requirement (including statutory, regulatory or other citation): Title 2, Subtitle A Chapter II Part 200 Subpart D 200.303 Internal controls. 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 following: ? The recipient certified that the payment will only be used to prevent, prepare for, and respond to coronavirus, and that the payment shall reimburse the recipient only for health care related expenses or lost revenues that are attributable to coronavirus. ? Funds may only be used to reimburse the provider(s) associated with the applicable subsidiary or billing TIN and cannot be transferred or allocated to another entity not associated with the subsidiary or billing TIN. Control and use of the Payment must be delegated to the Recipient that was eligible for and received the Payment. ? The recipient shall submit reports as the secretary of Health and Human Services (HHS) determines are needed to ensure compliance with conditions that are imposed on the payment, and such reports shall be in such form, with such content, as specified by the secretary of HHS in future program instructions directed to all recipients. June 11 Notice of Reporting Requirements allows for the following General and Administrative Expenses Attributable to Coronavirus: ? Mortgage/Rent: Payments related to mortgage or rent for a facility ? Insurance: Premiums paid for property, malpractice, business insurance, or other insurance relevant to operations ? Personnel: Workforce-related actual expenses paid to prevent, prepare for, or respond to coronavirus during the reporting period, such as workforce training, staffing, temporary employee or contractor payroll, overhead employees, or security personnel. ? Lease Payments: New equipment or software leases, such as fleet cars and medical equipment that is not purchased and will be returned to the owner ? Utilities/Operations: Lighting, cooling/ventilation, cleaning, or additional third-party vendor services not included in the ?Personnel? sub-category. ? Other General and Administrative Expenses: Expenses not captured above that are generally considered part of general and administrative expenses. PRB Reporting and Auditing FAQ further clarification on General and Administrative Expenses: ?Health care related operating expenses are limited to costs incurred to prevent, prepare for, and respond to coronavirus. The amount of mortgage or rent eligible for Provider Relief Fund or ARP Rural reimbursement is limited to that which was incurred to prevent, prepare for, and respond to coronavirus or COVID-19. Providers are required to maintain documents to substantiate that these funds were used for health care-related expenses attributable to coronavirus, and that those expenses or losses were not reimbursed from other sources and other sources were not obligated to reimburse them. The burden of proof is on the provider to ensure that documentation is maintained to show that expenses are to prevent, prepare for, and respond to coronavirus.? Condition: During our testing over Activities Allowed or Unallowed, Allowable Costs/Cost Principles and Reporting, we observed that management did not have effective internal controls in place. As a result, we noted that there were expenditures that did not have documentation to support that expenditures were used to prevent, prepare for, and respond to coronavirus. In addition, we noted that for one Period 3 report, duplicate revenue was reported on the parent entity PRF report and one subsidiary?s PRF report. Cause: Management did not have effective internal controls in place to ensure that expenses were adequately documented, tracked, and reported. Effect or potential effect: We are unable to determine to what extent the expenditures in allowable categories were used to prevent, prepare for, and respond to coronavirus. Duplicate lost revenue was reported for one Adventist Health subsidiary. Questioned Costs: Questioned costs related to the $108 million expenditure pool noted below cannot be determined, as there is no documentation to support the percentage of this expenditure pool that was used to prevent, prepare for, and respond to coronavirus. Also, despite the duplicated lost revenues, there was still sufficient lost revenues in excess of PRF payments received for periods 3. Context: We did not test internal controls over the A. Activities Allowed or Unallowed, B. Allowable Costs/Cost Principles, and L. Reporting compliance requirements, as internal controls were deemed ineffective due to internal control exceptions noted in the prior year (refer to Identification as a repeat finding section below) that would not be resolved for the full period under audit for the year-ended December 31, 2022. Of the $176 million of PRF expenditures on the SEFA $110 million related to expenditures and $66 million related to lost revenues. Of the $110 million related to expenditures, Adventist Health provided expenditures information totaling $166 million (i.e., the expenditure pool exceeded the amount of expenditures reported under the PRF program). We were able to subject $58 million of the $166 million to allowability testing based on expenditure detail provided. The remaining $108 million of expenditures related to various accounts within the trial balance. When evaluating the $108 million trial balance expenditure pool, we determined that the categories of expenditures (i.e., mortgages, utilities, and insurance costs) that make up the $108 million appear to be for allowable activities. However, Adventist Health did not maintain adequate documentation to support what percentage of the trial balance categories were attributable to preventing, preparing for, and responding to coronavirus. Therefore we are unable to test or determine how much of the $108 million is for allowable costs to prevent, prepare for, and respond to coronavirus. During our testing over reporting and allowability we observed that $13,536,236 in lost revenues attributable to Coronavirus were reported in both the parent entity?s Period 3 PRF report and in one of the subsidiary entity?s Period 3 PRF report (i.e., reported lost revenues were duplicated). This overstatement of lost revenues reported in the Portal was corrected for the subsidiary in the Period 4 PRF report submission. Identification as a repeat finding, if applicable: Finding 2021-002 Recommendation: We recommend that management develop and implement effective internal controls to ensure accurate calculation, aggregation, and reporting of expenditures and lost revenues, including supporting that expenditures were used to prevent, prepare for, and respond to coronavirus. This will ensure the expenses and lost revenue reported in the Portal are complete and accurate. Views of Responsible Officials: Adventist Health had several phone conversations with HRSA over reporting and allowability of expenditures in relation to the American Rescue Plan (ARP) program. Adventist Health had been using the lost revenue method for prior period reporting. Adventist Health asked specifically what can be used and not used. Adventist Health indicated that they were informed by HRSA to take the values (in whole) to utilize as expenses. Adventist Health were following the guidance they received by the HRSA employees. The information they received in determining the allowability of COVID-19 related expenditures confirmed their methodology for allowable expenses by two different employees. Conclusion: Despite the views of responsible officials above, we have concluded that our finding is necessary and appropriate for reporting items not complying with the criteria stated within this finding.
Finding 2022-002 Internal control deficiency and noncompliance over calculation of indirect costs Identification of the Federal Program: Assistance Listing Number 93.697: ? COVID-19 ? COVID-19 Testing and Mitigation for Rural Health Clinics ? U.S. Department of Health and Human Services ? Federal award identification number ? Not Applicable ? Federal award year ? January 27, 2020, to December 31, 2022 Criteria or specific requirement (including statutory, regulatory or other citation): Title 2, Subtitle A Chapter II Part 200 Subpart D 200.303 Internal controls. 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). Title 2, Subtitle A, Chapter II Part 200 Subpart E 200.414 Direct and Indirect Costs. In addition to the procedures outlined in the appendices in paragraph (e) of this section, any non-Federal entity that does not have a current negotiated (including provisional) rate, except for those non-Federal entities described in appendix VII to this part, paragraph D.1.b, may elect to charge a de minimis rate of 10% of modified total direct costs (MTDC) which may be used indefinitely. No documentation is required to justify the 10% de minimis indirect cost rate. As described in ?200.403, costs must be consistently charged as either indirect or direct costs but may not be double charged or inconsistently charged as both. If chosen, this methodology once elected must be used consistently for all Federal awards until such time as a non-Federal entity chooses to negotiate for a rate, which the non-Federal entity may apply to do at any time. Per Title 2, Subtitle A, Chapter II Part 200 Subpart A 200.1 Definitions: ?Modified Total Direct Cost (MTDC) means all direct salaries and wages, applicable fringe benefits, materials and supplies, services, travel, and up to the first $25,000 of each subaward (regardless of the period of performance of the subawards under the award). MTDC excludes equipment, capital expenditures, charges for patient care, rental costs, tuition remission, scholarships and fellowships, participant support costs and the portion of each subaward in excess of $25,000. Other items may only be excluded when necessary to avoid a serious inequity in the distribution of indirect costs, and with the approval of the cognizant agency for indirect costs.? Condition: During our testing over indirect costs, we observed that the entity used a cost base of Total Grant Expenditures to which they applied the de minimis cost rate. In addition, items that should be excluded from the calculation, per the MTDC definition above, were inappropriately included in the cost base. This led to indirect costs in excess of that allowable per Title 2, Subtitle A, Chapter II Part 200 Subpart E 200.414 Direct and Indirect Costs. Cause: Management did not have effective internal controls in place to ensure that indirect costs were calculated accurately. Effect or potential effect Total indirect costs charged to the program were in excess of the amount allowable using the correct cost base and the 10% de minimis rate. Questioned costs: Questioned costs amount to $149,545 for 93.697, which is calculated as the amount of indirect costs in excess of 10% of MTDC. Context: During our testing over indirect costs, we noted that the entity used total grant funds available (as opposed to total direct costs) as a cost base to which they applied the de minimis 10% rate to calculate indirect costs. In addition, a portion of the overstatement of indirect costs resulted from the existence of equipment and other costs charged to the grant that are not considered part of MTDC as defined above Identification as a repeat finding, if applicable: No. Recommendation: We recommend that management develop and implement effective internal controls to ensure that the de minimis cost rate is applied to the appropriate cost base (MTDC) across all markets and programs. Views of responsible officials: Adventist Health grants management team will be trained on the correct indirect cost calculation and requirements. Review of the indirect calculation will be included in the Fund Transfer Request (FTR) review meetings. This will allow for proper application and reporting of the de minimis indirect cost rate.
Finding 2022-003 Internal control deficiency and noncompliance over procurement Identification of the Federal Program: Assistance Listing Number 93.697: ? COVID-19 ? COVID-19 Testing and Mitigation for Rural Health Clinics ? U.S. Department of Health and Human Services ? Federal award identification number ? Not Applicable ? Federal award year ? January 27, 2020 to December 31, 2022 Assistance Listing Number 93.912: ? COVID-19 ? Rural Health Care Services Outreach, Rural Health Network Development and Small Health Care Provider Quality Improvement ? U.S. Department of Health and Human Services ? Federal award identification number ? Not Applicable ? Federal award year ? January 27, 2020 to December 31, 2022 Criteria or specific requirement (including statutory, regulatory or other citation): Title 2, Subtitle A Chapter II Part 200 Subpart D 200.303 Internal controls. 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). Title 2, Subtitle A Chapter II Part 200 Subpart D 200.318 Procurement standards. The non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to, the following: Rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. Title 2, Subtitle A Chapter II Part 200 Subpart D 200.319 Procurement Standards. All procurement transactions for the acquisition of property or services required under a Federal award must be conducted in a manner providing full and open competition consistent with the standards of this section and ?200.320. The non-Federal entity must have written procedures for procurement transactions. These procedures must ensure that all solicitations: (1) Incorporate a clear and accurate description of the technical requirements for the material, product, or service to be procured. Such description must not, in competitive procurements, contain features which unduly restrict competition. The description may include a statement of the qualitative nature of the material, product or service to be procured and, when necessary, must set forth those minimum essential characteristics and standards to which it must conform if it is to satisfy its intended use?Noncompetitive procurements can only be awarded in accordance with ?200.320(c). Title 2, Subtitle A Chapter II Part 200 Subpart D 200.320 Procurement Standards. There are specific circumstances in which noncompetitive procurement can be used. Noncompetitive procurement can only be awarded if one or more of the following circumstances apply: 1. The acquisition of property or services, the aggregate dollar amount of which does not exceed the micro-purchase threshold (see paragraph (a)(1) of this section); 2. The item is available only from a single source; 3. The public exigency or emergency for the requirement will not permit a delay resulting from publicizing a competitive solicitation; 4. The Federal awarding agency or pass-through entity expressly authorizes a noncompetitive procurement in response to a written request from the non-Federal entity; or 5. After solicitation of a number of sources, competition is determined inadequate. Adventist Health Standard Policy No. 10345: Accounting and Reporting of Grant Funds Section F. Reporting. Facilities will maintain appropriate procurement records and files. Purchases that are less than $10,000 are considered micro-purchases and have no purchasing requirements outside of the items use is intended for the grants project. Small purchase threshold $10,000-$250,000 must include documentation to support contractor selection with a minimum of two (2) bids, or a justification for lack of competition (i.e., Sole Source) when competitive bids or offers are not obtained, and basis for award cost or price. Anything purchased greater than $250,000 must be done by sealed bids or competitive proposals. Condition: During our testing over procurement, we determined that the entity did not clearly document the rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. In addition, for noncompetitive procurements, there was no documentation to support which of the five criteria was met to allow for the noncompetitive procurement. Cause: Management did not have effective internal controls in place to ensure that procurement requirements were adequately documented and retained. Effect or potential effect: Procurement records were insufficient to meet the requirements noted in the Criteria section above, as well as Adventist Health Policy No. 10345. Questioned Costs: No. Context: For the 93.697 major program, we selected 9 items ($1,579,396) out of a population of 54 items ($3,343,564) for testing. We noted that 9 of the 9 items did not document the rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. In addition, 8 ($1,567,804) out of the 9 items ($1,579,396) tested were for noncompetitive procurements and did not maintain documentation of which of the five criteria were met to allow for the noncompetitive procurement. For the 93.912 major program, we selected 5 items ($172,495) out of a population of 23 items ($607,469) for testing. We noted that 5 of the 5 items did not document the rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. In addition, 5 ($607,469) out of the 5 items ($607,469) tested were for noncompetitive procurements and did not maintain documentation of which of the five criteria were met to allow for the noncompetitive procurement. Identification as a repeat finding, if applicable: No. Recommendation: We recommend that Adventist Health retain sufficient procurement documentation to meet the requirements noted in the Criteria section above. Views of Responsible Officials: The grants management team will be trained on procurement documentations. The documentation will be kept on a shared repository folder and be part of the Fund Transfer Request (FTR) review meetings.
Finding 2022-003 Internal control deficiency and noncompliance over procurement Identification of the Federal Program: Assistance Listing Number 93.697: ? COVID-19 ? COVID-19 Testing and Mitigation for Rural Health Clinics ? U.S. Department of Health and Human Services ? Federal award identification number ? Not Applicable ? Federal award year ? January 27, 2020 to December 31, 2022 Assistance Listing Number 93.912: ? COVID-19 ? Rural Health Care Services Outreach, Rural Health Network Development and Small Health Care Provider Quality Improvement ? U.S. Department of Health and Human Services ? Federal award identification number ? Not Applicable ? Federal award year ? January 27, 2020 to December 31, 2022 Criteria or specific requirement (including statutory, regulatory or other citation): Title 2, Subtitle A Chapter II Part 200 Subpart D 200.303 Internal controls. 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). Title 2, Subtitle A Chapter II Part 200 Subpart D 200.318 Procurement standards. The non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to, the following: Rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. Title 2, Subtitle A Chapter II Part 200 Subpart D 200.319 Procurement Standards. All procurement transactions for the acquisition of property or services required under a Federal award must be conducted in a manner providing full and open competition consistent with the standards of this section and ?200.320. The non-Federal entity must have written procedures for procurement transactions. These procedures must ensure that all solicitations: (1) Incorporate a clear and accurate description of the technical requirements for the material, product, or service to be procured. Such description must not, in competitive procurements, contain features which unduly restrict competition. The description may include a statement of the qualitative nature of the material, product or service to be procured and, when necessary, must set forth those minimum essential characteristics and standards to which it must conform if it is to satisfy its intended use?Noncompetitive procurements can only be awarded in accordance with ?200.320(c). Title 2, Subtitle A Chapter II Part 200 Subpart D 200.320 Procurement Standards. There are specific circumstances in which noncompetitive procurement can be used. Noncompetitive procurement can only be awarded if one or more of the following circumstances apply: 1. The acquisition of property or services, the aggregate dollar amount of which does not exceed the micro-purchase threshold (see paragraph (a)(1) of this section); 2. The item is available only from a single source; 3. The public exigency or emergency for the requirement will not permit a delay resulting from publicizing a competitive solicitation; 4. The Federal awarding agency or pass-through entity expressly authorizes a noncompetitive procurement in response to a written request from the non-Federal entity; or 5. After solicitation of a number of sources, competition is determined inadequate. Adventist Health Standard Policy No. 10345: Accounting and Reporting of Grant Funds Section F. Reporting. Facilities will maintain appropriate procurement records and files. Purchases that are less than $10,000 are considered micro-purchases and have no purchasing requirements outside of the items use is intended for the grants project. Small purchase threshold $10,000-$250,000 must include documentation to support contractor selection with a minimum of two (2) bids, or a justification for lack of competition (i.e., Sole Source) when competitive bids or offers are not obtained, and basis for award cost or price. Anything purchased greater than $250,000 must be done by sealed bids or competitive proposals. Condition: During our testing over procurement, we determined that the entity did not clearly document the rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. In addition, for noncompetitive procurements, there was no documentation to support which of the five criteria was met to allow for the noncompetitive procurement. Cause: Management did not have effective internal controls in place to ensure that procurement requirements were adequately documented and retained. Effect or potential effect: Procurement records were insufficient to meet the requirements noted in the Criteria section above, as well as Adventist Health Policy No. 10345. Questioned Costs: No. Context: For the 93.697 major program, we selected 9 items ($1,579,396) out of a population of 54 items ($3,343,564) for testing. We noted that 9 of the 9 items did not document the rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. In addition, 8 ($1,567,804) out of the 9 items ($1,579,396) tested were for noncompetitive procurements and did not maintain documentation of which of the five criteria were met to allow for the noncompetitive procurement. For the 93.912 major program, we selected 5 items ($172,495) out of a population of 23 items ($607,469) for testing. We noted that 5 of the 5 items did not document the rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. In addition, 5 ($607,469) out of the 5 items ($607,469) tested were for noncompetitive procurements and did not maintain documentation of which of the five criteria were met to allow for the noncompetitive procurement. Identification as a repeat finding, if applicable: No. Recommendation: We recommend that Adventist Health retain sufficient procurement documentation to meet the requirements noted in the Criteria section above. Views of Responsible Officials: The grants management team will be trained on procurement documentations. The documentation will be kept on a shared repository folder and be part of the Fund Transfer Request (FTR) review meetings.
Section III ? Federal Award Findings and Questioned Costs Finding 2022-001 Internal control deficiency and noncompliance over the allowable activities, allowable costs/cost principles, and reporting compliance requirements Identification of the Federal Program: Assistance Listing Number 93.498 ? COVID-19 ? Provider Relief Fund and American Rescue Plan (ARP) Rural Distribution ? U.S. Department of Health and Human Services ? Federal award identification number ? Not Applicable ? Federal award year: ? Period 3 ? January 1, 2020 to June 30, 2022 ? Period 4 ? January 1, 2020 to December 31, 2022 Criteria or specific requirement (including statutory, regulatory or other citation): Title 2, Subtitle A Chapter II Part 200 Subpart D 200.303 Internal controls. 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 following: ? The recipient certified that the payment will only be used to prevent, prepare for, and respond to coronavirus, and that the payment shall reimburse the recipient only for health care related expenses or lost revenues that are attributable to coronavirus. ? Funds may only be used to reimburse the provider(s) associated with the applicable subsidiary or billing TIN and cannot be transferred or allocated to another entity not associated with the subsidiary or billing TIN. Control and use of the Payment must be delegated to the Recipient that was eligible for and received the Payment. ? The recipient shall submit reports as the secretary of Health and Human Services (HHS) determines are needed to ensure compliance with conditions that are imposed on the payment, and such reports shall be in such form, with such content, as specified by the secretary of HHS in future program instructions directed to all recipients. June 11 Notice of Reporting Requirements allows for the following General and Administrative Expenses Attributable to Coronavirus: ? Mortgage/Rent: Payments related to mortgage or rent for a facility ? Insurance: Premiums paid for property, malpractice, business insurance, or other insurance relevant to operations ? Personnel: Workforce-related actual expenses paid to prevent, prepare for, or respond to coronavirus during the reporting period, such as workforce training, staffing, temporary employee or contractor payroll, overhead employees, or security personnel. ? Lease Payments: New equipment or software leases, such as fleet cars and medical equipment that is not purchased and will be returned to the owner ? Utilities/Operations: Lighting, cooling/ventilation, cleaning, or additional third-party vendor services not included in the ?Personnel? sub-category. ? Other General and Administrative Expenses: Expenses not captured above that are generally considered part of general and administrative expenses. PRB Reporting and Auditing FAQ further clarification on General and Administrative Expenses: ?Health care related operating expenses are limited to costs incurred to prevent, prepare for, and respond to coronavirus. The amount of mortgage or rent eligible for Provider Relief Fund or ARP Rural reimbursement is limited to that which was incurred to prevent, prepare for, and respond to coronavirus or COVID-19. Providers are required to maintain documents to substantiate that these funds were used for health care-related expenses attributable to coronavirus, and that those expenses or losses were not reimbursed from other sources and other sources were not obligated to reimburse them. The burden of proof is on the provider to ensure that documentation is maintained to show that expenses are to prevent, prepare for, and respond to coronavirus.? Condition: During our testing over Activities Allowed or Unallowed, Allowable Costs/Cost Principles and Reporting, we observed that management did not have effective internal controls in place. As a result, we noted that there were expenditures that did not have documentation to support that expenditures were used to prevent, prepare for, and respond to coronavirus. In addition, we noted that for one Period 3 report, duplicate revenue was reported on the parent entity PRF report and one subsidiary?s PRF report. Cause: Management did not have effective internal controls in place to ensure that expenses were adequately documented, tracked, and reported. Effect or potential effect: We are unable to determine to what extent the expenditures in allowable categories were used to prevent, prepare for, and respond to coronavirus. Duplicate lost revenue was reported for one Adventist Health subsidiary. Questioned Costs: Questioned costs related to the $108 million expenditure pool noted below cannot be determined, as there is no documentation to support the percentage of this expenditure pool that was used to prevent, prepare for, and respond to coronavirus. Also, despite the duplicated lost revenues, there was still sufficient lost revenues in excess of PRF payments received for periods 3. Context: We did not test internal controls over the A. Activities Allowed or Unallowed, B. Allowable Costs/Cost Principles, and L. Reporting compliance requirements, as internal controls were deemed ineffective due to internal control exceptions noted in the prior year (refer to Identification as a repeat finding section below) that would not be resolved for the full period under audit for the year-ended December 31, 2022. Of the $176 million of PRF expenditures on the SEFA $110 million related to expenditures and $66 million related to lost revenues. Of the $110 million related to expenditures, Adventist Health provided expenditures information totaling $166 million (i.e., the expenditure pool exceeded the amount of expenditures reported under the PRF program). We were able to subject $58 million of the $166 million to allowability testing based on expenditure detail provided. The remaining $108 million of expenditures related to various accounts within the trial balance. When evaluating the $108 million trial balance expenditure pool, we determined that the categories of expenditures (i.e., mortgages, utilities, and insurance costs) that make up the $108 million appear to be for allowable activities. However, Adventist Health did not maintain adequate documentation to support what percentage of the trial balance categories were attributable to preventing, preparing for, and responding to coronavirus. Therefore we are unable to test or determine how much of the $108 million is for allowable costs to prevent, prepare for, and respond to coronavirus. During our testing over reporting and allowability we observed that $13,536,236 in lost revenues attributable to Coronavirus were reported in both the parent entity?s Period 3 PRF report and in one of the subsidiary entity?s Period 3 PRF report (i.e., reported lost revenues were duplicated). This overstatement of lost revenues reported in the Portal was corrected for the subsidiary in the Period 4 PRF report submission. Identification as a repeat finding, if applicable: Finding 2021-002 Recommendation: We recommend that management develop and implement effective internal controls to ensure accurate calculation, aggregation, and reporting of expenditures and lost revenues, including supporting that expenditures were used to prevent, prepare for, and respond to coronavirus. This will ensure the expenses and lost revenue reported in the Portal are complete and accurate. Views of Responsible Officials: Adventist Health had several phone conversations with HRSA over reporting and allowability of expenditures in relation to the American Rescue Plan (ARP) program. Adventist Health had been using the lost revenue method for prior period reporting. Adventist Health asked specifically what can be used and not used. Adventist Health indicated that they were informed by HRSA to take the values (in whole) to utilize as expenses. Adventist Health were following the guidance they received by the HRSA employees. The information they received in determining the allowability of COVID-19 related expenditures confirmed their methodology for allowable expenses by two different employees. Conclusion: Despite the views of responsible officials above, we have concluded that our finding is necessary and appropriate for reporting items not complying with the criteria stated within this finding.
Finding 2022-002 Internal control deficiency and noncompliance over calculation of indirect costs Identification of the Federal Program: Assistance Listing Number 93.697: ? COVID-19 ? COVID-19 Testing and Mitigation for Rural Health Clinics ? U.S. Department of Health and Human Services ? Federal award identification number ? Not Applicable ? Federal award year ? January 27, 2020, to December 31, 2022 Criteria or specific requirement (including statutory, regulatory or other citation): Title 2, Subtitle A Chapter II Part 200 Subpart D 200.303 Internal controls. 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). Title 2, Subtitle A, Chapter II Part 200 Subpart E 200.414 Direct and Indirect Costs. In addition to the procedures outlined in the appendices in paragraph (e) of this section, any non-Federal entity that does not have a current negotiated (including provisional) rate, except for those non-Federal entities described in appendix VII to this part, paragraph D.1.b, may elect to charge a de minimis rate of 10% of modified total direct costs (MTDC) which may be used indefinitely. No documentation is required to justify the 10% de minimis indirect cost rate. As described in ?200.403, costs must be consistently charged as either indirect or direct costs but may not be double charged or inconsistently charged as both. If chosen, this methodology once elected must be used consistently for all Federal awards until such time as a non-Federal entity chooses to negotiate for a rate, which the non-Federal entity may apply to do at any time. Per Title 2, Subtitle A, Chapter II Part 200 Subpart A 200.1 Definitions: ?Modified Total Direct Cost (MTDC) means all direct salaries and wages, applicable fringe benefits, materials and supplies, services, travel, and up to the first $25,000 of each subaward (regardless of the period of performance of the subawards under the award). MTDC excludes equipment, capital expenditures, charges for patient care, rental costs, tuition remission, scholarships and fellowships, participant support costs and the portion of each subaward in excess of $25,000. Other items may only be excluded when necessary to avoid a serious inequity in the distribution of indirect costs, and with the approval of the cognizant agency for indirect costs.? Condition: During our testing over indirect costs, we observed that the entity used a cost base of Total Grant Expenditures to which they applied the de minimis cost rate. In addition, items that should be excluded from the calculation, per the MTDC definition above, were inappropriately included in the cost base. This led to indirect costs in excess of that allowable per Title 2, Subtitle A, Chapter II Part 200 Subpart E 200.414 Direct and Indirect Costs. Cause: Management did not have effective internal controls in place to ensure that indirect costs were calculated accurately. Effect or potential effect Total indirect costs charged to the program were in excess of the amount allowable using the correct cost base and the 10% de minimis rate. Questioned costs: Questioned costs amount to $149,545 for 93.697, which is calculated as the amount of indirect costs in excess of 10% of MTDC. Context: During our testing over indirect costs, we noted that the entity used total grant funds available (as opposed to total direct costs) as a cost base to which they applied the de minimis 10% rate to calculate indirect costs. In addition, a portion of the overstatement of indirect costs resulted from the existence of equipment and other costs charged to the grant that are not considered part of MTDC as defined above Identification as a repeat finding, if applicable: No. Recommendation: We recommend that management develop and implement effective internal controls to ensure that the de minimis cost rate is applied to the appropriate cost base (MTDC) across all markets and programs. Views of responsible officials: Adventist Health grants management team will be trained on the correct indirect cost calculation and requirements. Review of the indirect calculation will be included in the Fund Transfer Request (FTR) review meetings. This will allow for proper application and reporting of the de minimis indirect cost rate.
Finding 2022-003 Internal control deficiency and noncompliance over procurement Identification of the Federal Program: Assistance Listing Number 93.697: ? COVID-19 ? COVID-19 Testing and Mitigation for Rural Health Clinics ? U.S. Department of Health and Human Services ? Federal award identification number ? Not Applicable ? Federal award year ? January 27, 2020 to December 31, 2022 Assistance Listing Number 93.912: ? COVID-19 ? Rural Health Care Services Outreach, Rural Health Network Development and Small Health Care Provider Quality Improvement ? U.S. Department of Health and Human Services ? Federal award identification number ? Not Applicable ? Federal award year ? January 27, 2020 to December 31, 2022 Criteria or specific requirement (including statutory, regulatory or other citation): Title 2, Subtitle A Chapter II Part 200 Subpart D 200.303 Internal controls. 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). Title 2, Subtitle A Chapter II Part 200 Subpart D 200.318 Procurement standards. The non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to, the following: Rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. Title 2, Subtitle A Chapter II Part 200 Subpart D 200.319 Procurement Standards. All procurement transactions for the acquisition of property or services required under a Federal award must be conducted in a manner providing full and open competition consistent with the standards of this section and ?200.320. The non-Federal entity must have written procedures for procurement transactions. These procedures must ensure that all solicitations: (1) Incorporate a clear and accurate description of the technical requirements for the material, product, or service to be procured. Such description must not, in competitive procurements, contain features which unduly restrict competition. The description may include a statement of the qualitative nature of the material, product or service to be procured and, when necessary, must set forth those minimum essential characteristics and standards to which it must conform if it is to satisfy its intended use?Noncompetitive procurements can only be awarded in accordance with ?200.320(c). Title 2, Subtitle A Chapter II Part 200 Subpart D 200.320 Procurement Standards. There are specific circumstances in which noncompetitive procurement can be used. Noncompetitive procurement can only be awarded if one or more of the following circumstances apply: 1. The acquisition of property or services, the aggregate dollar amount of which does not exceed the micro-purchase threshold (see paragraph (a)(1) of this section); 2. The item is available only from a single source; 3. The public exigency or emergency for the requirement will not permit a delay resulting from publicizing a competitive solicitation; 4. The Federal awarding agency or pass-through entity expressly authorizes a noncompetitive procurement in response to a written request from the non-Federal entity; or 5. After solicitation of a number of sources, competition is determined inadequate. Adventist Health Standard Policy No. 10345: Accounting and Reporting of Grant Funds Section F. Reporting. Facilities will maintain appropriate procurement records and files. Purchases that are less than $10,000 are considered micro-purchases and have no purchasing requirements outside of the items use is intended for the grants project. Small purchase threshold $10,000-$250,000 must include documentation to support contractor selection with a minimum of two (2) bids, or a justification for lack of competition (i.e., Sole Source) when competitive bids or offers are not obtained, and basis for award cost or price. Anything purchased greater than $250,000 must be done by sealed bids or competitive proposals. Condition: During our testing over procurement, we determined that the entity did not clearly document the rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. In addition, for noncompetitive procurements, there was no documentation to support which of the five criteria was met to allow for the noncompetitive procurement. Cause: Management did not have effective internal controls in place to ensure that procurement requirements were adequately documented and retained. Effect or potential effect: Procurement records were insufficient to meet the requirements noted in the Criteria section above, as well as Adventist Health Policy No. 10345. Questioned Costs: No. Context: For the 93.697 major program, we selected 9 items ($1,579,396) out of a population of 54 items ($3,343,564) for testing. We noted that 9 of the 9 items did not document the rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. In addition, 8 ($1,567,804) out of the 9 items ($1,579,396) tested were for noncompetitive procurements and did not maintain documentation of which of the five criteria were met to allow for the noncompetitive procurement. For the 93.912 major program, we selected 5 items ($172,495) out of a population of 23 items ($607,469) for testing. We noted that 5 of the 5 items did not document the rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. In addition, 5 ($607,469) out of the 5 items ($607,469) tested were for noncompetitive procurements and did not maintain documentation of which of the five criteria were met to allow for the noncompetitive procurement. Identification as a repeat finding, if applicable: No. Recommendation: We recommend that Adventist Health retain sufficient procurement documentation to meet the requirements noted in the Criteria section above. Views of Responsible Officials: The grants management team will be trained on procurement documentations. The documentation will be kept on a shared repository folder and be part of the Fund Transfer Request (FTR) review meetings.
Finding 2022-003 Internal control deficiency and noncompliance over procurement Identification of the Federal Program: Assistance Listing Number 93.697: ? COVID-19 ? COVID-19 Testing and Mitigation for Rural Health Clinics ? U.S. Department of Health and Human Services ? Federal award identification number ? Not Applicable ? Federal award year ? January 27, 2020 to December 31, 2022 Assistance Listing Number 93.912: ? COVID-19 ? Rural Health Care Services Outreach, Rural Health Network Development and Small Health Care Provider Quality Improvement ? U.S. Department of Health and Human Services ? Federal award identification number ? Not Applicable ? Federal award year ? January 27, 2020 to December 31, 2022 Criteria or specific requirement (including statutory, regulatory or other citation): Title 2, Subtitle A Chapter II Part 200 Subpart D 200.303 Internal controls. 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). Title 2, Subtitle A Chapter II Part 200 Subpart D 200.318 Procurement standards. The non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to, the following: Rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. Title 2, Subtitle A Chapter II Part 200 Subpart D 200.319 Procurement Standards. All procurement transactions for the acquisition of property or services required under a Federal award must be conducted in a manner providing full and open competition consistent with the standards of this section and ?200.320. The non-Federal entity must have written procedures for procurement transactions. These procedures must ensure that all solicitations: (1) Incorporate a clear and accurate description of the technical requirements for the material, product, or service to be procured. Such description must not, in competitive procurements, contain features which unduly restrict competition. The description may include a statement of the qualitative nature of the material, product or service to be procured and, when necessary, must set forth those minimum essential characteristics and standards to which it must conform if it is to satisfy its intended use?Noncompetitive procurements can only be awarded in accordance with ?200.320(c). Title 2, Subtitle A Chapter II Part 200 Subpart D 200.320 Procurement Standards. There are specific circumstances in which noncompetitive procurement can be used. Noncompetitive procurement can only be awarded if one or more of the following circumstances apply: 1. The acquisition of property or services, the aggregate dollar amount of which does not exceed the micro-purchase threshold (see paragraph (a)(1) of this section); 2. The item is available only from a single source; 3. The public exigency or emergency for the requirement will not permit a delay resulting from publicizing a competitive solicitation; 4. The Federal awarding agency or pass-through entity expressly authorizes a noncompetitive procurement in response to a written request from the non-Federal entity; or 5. After solicitation of a number of sources, competition is determined inadequate. Adventist Health Standard Policy No. 10345: Accounting and Reporting of Grant Funds Section F. Reporting. Facilities will maintain appropriate procurement records and files. Purchases that are less than $10,000 are considered micro-purchases and have no purchasing requirements outside of the items use is intended for the grants project. Small purchase threshold $10,000-$250,000 must include documentation to support contractor selection with a minimum of two (2) bids, or a justification for lack of competition (i.e., Sole Source) when competitive bids or offers are not obtained, and basis for award cost or price. Anything purchased greater than $250,000 must be done by sealed bids or competitive proposals. Condition: During our testing over procurement, we determined that the entity did not clearly document the rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. In addition, for noncompetitive procurements, there was no documentation to support which of the five criteria was met to allow for the noncompetitive procurement. Cause: Management did not have effective internal controls in place to ensure that procurement requirements were adequately documented and retained. Effect or potential effect: Procurement records were insufficient to meet the requirements noted in the Criteria section above, as well as Adventist Health Policy No. 10345. Questioned Costs: No. Context: For the 93.697 major program, we selected 9 items ($1,579,396) out of a population of 54 items ($3,343,564) for testing. We noted that 9 of the 9 items did not document the rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. In addition, 8 ($1,567,804) out of the 9 items ($1,579,396) tested were for noncompetitive procurements and did not maintain documentation of which of the five criteria were met to allow for the noncompetitive procurement. For the 93.912 major program, we selected 5 items ($172,495) out of a population of 23 items ($607,469) for testing. We noted that 5 of the 5 items did not document the rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. In addition, 5 ($607,469) out of the 5 items ($607,469) tested were for noncompetitive procurements and did not maintain documentation of which of the five criteria were met to allow for the noncompetitive procurement. Identification as a repeat finding, if applicable: No. Recommendation: We recommend that Adventist Health retain sufficient procurement documentation to meet the requirements noted in the Criteria section above. Views of Responsible Officials: The grants management team will be trained on procurement documentations. The documentation will be kept on a shared repository folder and be part of the Fund Transfer Request (FTR) review meetings.