Finding 2023-001
Identification of the federal program:
COVID-19 Disaster Grants – Public Assistance (Presidentially Declared Disasters) (FEMA)
Federal Agency: Department of Homeland Security
Pass-Through Entity: Illinois Emergency Management Agency
Award ID: COVID-19 PA-05-IL-4489-PW-00786
Assistance Listing Number: 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).”
Condition:
Per inquiry of management, Memorial Health has processes and internal controls in place to ensure personnel expenses submitted to FEMA were allowable COVID-19-related expenses. These internal controls include ensuring completeness and accuracy of the expenses to ensure the expenses comply with the terms and conditions of the award. However, management did not retain documentation evidencing the performance of the internal controls.
Cause:
Management did not retain supporting documentation to evidence the performance of internal controls over the allowability of expenses charged to FEMA.
Effect or potential effect:
A lack of internal controls over the review and approval of FEMA expenditures could result in unallowable expenses being charged.
Questioned costs:
None
Context:
There was one project worksheet in 2023 and management did not maintain documentation over the review and approval over the expenses submitted to FEMA.
We tested 40 transactions charged to the FEMA grant ($56,621). Management did not maintain documentation over the review and approval for all the 40 transactions submitted to FEMA.
Total FEMA expenditures reported on the Schedule of Expenditures of Federal Awards for the year ended September 30, 2023 were $4,093,663.
Identification as a repeat finding, if applicable:
The finding is a repeat finding, finding 2022-004.
Recommendation:
Memorial Health should refine its internal control procedures and retain documentation evidencing that management reviewed expenses charged to FEMA to ensure the expenses are allowable.
Views of responsible officials:
Management agrees with the finding. The FEMA submission request was submitted by management in 2021, which occurred prior to management’s implementation of its corrective action plan to address finding 2022-004. Management performed an independent review of the expenditure for FEMA eligibility as part of an iterative review process with its FEMA consultants and FEMA representatives. This review was also documented in management’s representation on the FEMA online portal when the submission was made. However, management’s process did not include internal documentation to evidence an independent review had occurred prior to submission. The process has been corrected for any future FEMA submissions.
Finding 2023-002
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: 5UG1CA189830-09, 5UG1CA189830-10
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).”
2 CFR Section 200.431 of the Uniform Guidance states:
“Compensation—fringe benefits.
(a) Fringe benefits are allowances and services provided by employers to their employees as compensation in addition to regular salaries and wages. Fringe benefits include, but are not limited to, the costs of leave (vacation, family-related, sick or military), employee insurance, pensions, and unemployment benefit plans. Except as provided elsewhere in these principles, the costs of fringe benefits are allowable provided that the benefits are reasonable and are required by law, non-Federal entity-employee agreement, or an established policy of the non-Federal entity.”
Condition:
Management calculated fringe expense charged to the R&D Cluster using the incorrect fringe cost rate.
Cause:
Management’s internal controls over the review and approval of fringe expense charged to the federal awards within the R&D Cluster were not sufficiently precise to identify that the incorrect fringe cost rate was used to calculate benefits charged.
Effect or potential effect:
Fringe expense charged to the R&D Cluster federal awards was overstated.
Questioned costs:
Questioned costs represent the difference between fringe expense calculated at the approved fringe rate versus the fringe rate used by management.
Correct Amount to Be Recorded Original Amount Recorded Questioned Costs
Correct Rate: 30% Incorrect Rate: 33%
Fringe: $303,201 Fringe: $333,521 $ 30,320
AL # 93.399 NIH Award 5UG1CA189830-09: $25,688
AL # 93.399 NIH Award 5UG1CA189830-10: $4,632
Context:
Management calculated and approved a fringe rate for 2023 of 30%; however, the fringe expense calculation used a fringe rate of 33%. We selected 13 fringe transactions to test compliance, and we identified that 100% of our selections were exceptions as the incorrect rate was used to calculate fringe.
The total R&D Cluster expenditures reported on the Schedule of Expenditures of Federal Awards are $3,960,439 for the year ended September 30, 2023, which includes fringe costs of $303,201, which represents 7.7% of total R&D Cluster expenditures.
Identification as a repeat finding, if applicable:
Not a repeat finding.
Recommendation:
Management should design and implement effective internal controls over the review and approval of the monthly fringe calculation.
Views of responsible officials:
Management agrees with the finding. Management calculated and approved an annual fringe benefit rate to be used for its fiscal year 2023, but failed to update the rate on its internal calculation during fiscal year 2023 from the prior year rate. It was ultimately identified by management in early fiscal year 2024. Management has confirmed the $30,320 of questioned cost arising from the overstatement of fringe benefits would easily be replaced by unreimbursed grant-eligible direct labor costs. Therefore, management contends it still earned the grant awarded funds, despite the questioned costs. Additionally, management has provided re-education to grant personnel preparing and reviewing calculations to ensure an adequate understanding of the key calculation elements are identified and validated for the grant year.
Finding 2023-002
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: 5UG1CA189830-09, 5UG1CA189830-10
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).”
2 CFR Section 200.431 of the Uniform Guidance states:
“Compensation—fringe benefits.
(a) Fringe benefits are allowances and services provided by employers to their employees as compensation in addition to regular salaries and wages. Fringe benefits include, but are not limited to, the costs of leave (vacation, family-related, sick or military), employee insurance, pensions, and unemployment benefit plans. Except as provided elsewhere in these principles, the costs of fringe benefits are allowable provided that the benefits are reasonable and are required by law, non-Federal entity-employee agreement, or an established policy of the non-Federal entity.”
Condition:
Management calculated fringe expense charged to the R&D Cluster using the incorrect fringe cost rate.
Cause:
Management’s internal controls over the review and approval of fringe expense charged to the federal awards within the R&D Cluster were not sufficiently precise to identify that the incorrect fringe cost rate was used to calculate benefits charged.
Effect or potential effect:
Fringe expense charged to the R&D Cluster federal awards was overstated.
Questioned costs:
Questioned costs represent the difference between fringe expense calculated at the approved fringe rate versus the fringe rate used by management.
Correct Amount to Be Recorded Original Amount Recorded Questioned Costs
Correct Rate: 30% Incorrect Rate: 33%
Fringe: $303,201 Fringe: $333,521 $ 30,320
AL # 93.399 NIH Award 5UG1CA189830-09: $25,688
AL # 93.399 NIH Award 5UG1CA189830-10: $4,632
Context:
Management calculated and approved a fringe rate for 2023 of 30%; however, the fringe expense calculation used a fringe rate of 33%. We selected 13 fringe transactions to test compliance, and we identified that 100% of our selections were exceptions as the incorrect rate was used to calculate fringe.
The total R&D Cluster expenditures reported on the Schedule of Expenditures of Federal Awards are $3,960,439 for the year ended September 30, 2023, which includes fringe costs of $303,201, which represents 7.7% of total R&D Cluster expenditures.
Identification as a repeat finding, if applicable:
Not a repeat finding.
Recommendation:
Management should design and implement effective internal controls over the review and approval of the monthly fringe calculation.
Views of responsible officials:
Management agrees with the finding. Management calculated and approved an annual fringe benefit rate to be used for its fiscal year 2023, but failed to update the rate on its internal calculation during fiscal year 2023 from the prior year rate. It was ultimately identified by management in early fiscal year 2024. Management has confirmed the $30,320 of questioned cost arising from the overstatement of fringe benefits would easily be replaced by unreimbursed grant-eligible direct labor costs. Therefore, management contends it still earned the grant awarded funds, despite the questioned costs. Additionally, management has provided re-education to grant personnel preparing and reviewing calculations to ensure an adequate understanding of the key calculation elements are identified and validated for the grant year.
Finding 2023-001
Identification of the federal program:
COVID-19 Disaster Grants – Public Assistance (Presidentially Declared Disasters) (FEMA)
Federal Agency: Department of Homeland Security
Pass-Through Entity: Illinois Emergency Management Agency
Award ID: COVID-19 PA-05-IL-4489-PW-00786
Assistance Listing Number: 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).”
Condition:
Per inquiry of management, Memorial Health has processes and internal controls in place to ensure personnel expenses submitted to FEMA were allowable COVID-19-related expenses. These internal controls include ensuring completeness and accuracy of the expenses to ensure the expenses comply with the terms and conditions of the award. However, management did not retain documentation evidencing the performance of the internal controls.
Cause:
Management did not retain supporting documentation to evidence the performance of internal controls over the allowability of expenses charged to FEMA.
Effect or potential effect:
A lack of internal controls over the review and approval of FEMA expenditures could result in unallowable expenses being charged.
Questioned costs:
None
Context:
There was one project worksheet in 2023 and management did not maintain documentation over the review and approval over the expenses submitted to FEMA.
We tested 40 transactions charged to the FEMA grant ($56,621). Management did not maintain documentation over the review and approval for all the 40 transactions submitted to FEMA.
Total FEMA expenditures reported on the Schedule of Expenditures of Federal Awards for the year ended September 30, 2023 were $4,093,663.
Identification as a repeat finding, if applicable:
The finding is a repeat finding, finding 2022-004.
Recommendation:
Memorial Health should refine its internal control procedures and retain documentation evidencing that management reviewed expenses charged to FEMA to ensure the expenses are allowable.
Views of responsible officials:
Management agrees with the finding. The FEMA submission request was submitted by management in 2021, which occurred prior to management’s implementation of its corrective action plan to address finding 2022-004. Management performed an independent review of the expenditure for FEMA eligibility as part of an iterative review process with its FEMA consultants and FEMA representatives. This review was also documented in management’s representation on the FEMA online portal when the submission was made. However, management’s process did not include internal documentation to evidence an independent review had occurred prior to submission. The process has been corrected for any future FEMA submissions.
Finding 2023-002
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: 5UG1CA189830-09, 5UG1CA189830-10
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).”
2 CFR Section 200.431 of the Uniform Guidance states:
“Compensation—fringe benefits.
(a) Fringe benefits are allowances and services provided by employers to their employees as compensation in addition to regular salaries and wages. Fringe benefits include, but are not limited to, the costs of leave (vacation, family-related, sick or military), employee insurance, pensions, and unemployment benefit plans. Except as provided elsewhere in these principles, the costs of fringe benefits are allowable provided that the benefits are reasonable and are required by law, non-Federal entity-employee agreement, or an established policy of the non-Federal entity.”
Condition:
Management calculated fringe expense charged to the R&D Cluster using the incorrect fringe cost rate.
Cause:
Management’s internal controls over the review and approval of fringe expense charged to the federal awards within the R&D Cluster were not sufficiently precise to identify that the incorrect fringe cost rate was used to calculate benefits charged.
Effect or potential effect:
Fringe expense charged to the R&D Cluster federal awards was overstated.
Questioned costs:
Questioned costs represent the difference between fringe expense calculated at the approved fringe rate versus the fringe rate used by management.
Correct Amount to Be Recorded Original Amount Recorded Questioned Costs
Correct Rate: 30% Incorrect Rate: 33%
Fringe: $303,201 Fringe: $333,521 $ 30,320
AL # 93.399 NIH Award 5UG1CA189830-09: $25,688
AL # 93.399 NIH Award 5UG1CA189830-10: $4,632
Context:
Management calculated and approved a fringe rate for 2023 of 30%; however, the fringe expense calculation used a fringe rate of 33%. We selected 13 fringe transactions to test compliance, and we identified that 100% of our selections were exceptions as the incorrect rate was used to calculate fringe.
The total R&D Cluster expenditures reported on the Schedule of Expenditures of Federal Awards are $3,960,439 for the year ended September 30, 2023, which includes fringe costs of $303,201, which represents 7.7% of total R&D Cluster expenditures.
Identification as a repeat finding, if applicable:
Not a repeat finding.
Recommendation:
Management should design and implement effective internal controls over the review and approval of the monthly fringe calculation.
Views of responsible officials:
Management agrees with the finding. Management calculated and approved an annual fringe benefit rate to be used for its fiscal year 2023, but failed to update the rate on its internal calculation during fiscal year 2023 from the prior year rate. It was ultimately identified by management in early fiscal year 2024. Management has confirmed the $30,320 of questioned cost arising from the overstatement of fringe benefits would easily be replaced by unreimbursed grant-eligible direct labor costs. Therefore, management contends it still earned the grant awarded funds, despite the questioned costs. Additionally, management has provided re-education to grant personnel preparing and reviewing calculations to ensure an adequate understanding of the key calculation elements are identified and validated for the grant year.
Finding 2023-002
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: 5UG1CA189830-09, 5UG1CA189830-10
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).”
2 CFR Section 200.431 of the Uniform Guidance states:
“Compensation—fringe benefits.
(a) Fringe benefits are allowances and services provided by employers to their employees as compensation in addition to regular salaries and wages. Fringe benefits include, but are not limited to, the costs of leave (vacation, family-related, sick or military), employee insurance, pensions, and unemployment benefit plans. Except as provided elsewhere in these principles, the costs of fringe benefits are allowable provided that the benefits are reasonable and are required by law, non-Federal entity-employee agreement, or an established policy of the non-Federal entity.”
Condition:
Management calculated fringe expense charged to the R&D Cluster using the incorrect fringe cost rate.
Cause:
Management’s internal controls over the review and approval of fringe expense charged to the federal awards within the R&D Cluster were not sufficiently precise to identify that the incorrect fringe cost rate was used to calculate benefits charged.
Effect or potential effect:
Fringe expense charged to the R&D Cluster federal awards was overstated.
Questioned costs:
Questioned costs represent the difference between fringe expense calculated at the approved fringe rate versus the fringe rate used by management.
Correct Amount to Be Recorded Original Amount Recorded Questioned Costs
Correct Rate: 30% Incorrect Rate: 33%
Fringe: $303,201 Fringe: $333,521 $ 30,320
AL # 93.399 NIH Award 5UG1CA189830-09: $25,688
AL # 93.399 NIH Award 5UG1CA189830-10: $4,632
Context:
Management calculated and approved a fringe rate for 2023 of 30%; however, the fringe expense calculation used a fringe rate of 33%. We selected 13 fringe transactions to test compliance, and we identified that 100% of our selections were exceptions as the incorrect rate was used to calculate fringe.
The total R&D Cluster expenditures reported on the Schedule of Expenditures of Federal Awards are $3,960,439 for the year ended September 30, 2023, which includes fringe costs of $303,201, which represents 7.7% of total R&D Cluster expenditures.
Identification as a repeat finding, if applicable:
Not a repeat finding.
Recommendation:
Management should design and implement effective internal controls over the review and approval of the monthly fringe calculation.
Views of responsible officials:
Management agrees with the finding. Management calculated and approved an annual fringe benefit rate to be used for its fiscal year 2023, but failed to update the rate on its internal calculation during fiscal year 2023 from the prior year rate. It was ultimately identified by management in early fiscal year 2024. Management has confirmed the $30,320 of questioned cost arising from the overstatement of fringe benefits would easily be replaced by unreimbursed grant-eligible direct labor costs. Therefore, management contends it still earned the grant awarded funds, despite the questioned costs. Additionally, management has provided re-education to grant personnel preparing and reviewing calculations to ensure an adequate understanding of the key calculation elements are identified and validated for the grant year.