Audit 349399

FINDING 2024-004 – Significant Deficiency in Internal Controls over Compliance – Allowable Costs/Cost Principles – Calculation of Project Costs Identification of the Federal Program – This finding relates to the federal program described below: • Federal grantor: U.S. Department of Homeland Security • Pass-through grantor: California Governor’s Office of Emergency Services • Federal assistance listing number: 97.036 • Pass-through entity identifying number: PA-09-CA-4482-PW-03110(2834) Criteria – The Public Assistance Program and Policy Guide specifies that the cost of supplies, including materials, is eligible to be reimbursed by Federal Emergency Management Agency (FEMA) funds if they are purchased and justifiably needed to effectively respond to and/or recover from an incident or are taken from the applicant’s stock and used for the incident. FEMA provides public assistance funding based on the applicant’s established method for pricing inventory. Condition – Palomar Health received funding from the FEMA for the reimbursement of COVID-19 testing performed on its employees that were not reimbursed by other sources. Management calculated the cost of performing these tests by taking the total cost of COVID-19 testing supplies for the period July 1, 2021 through June 30, 2022, and dividing by the number of COVID-19 tests that were performed over the same period to calculate an average cost per COVID-19 test. The average cost per COVID-19 test was then multiplied by the number of unreimbursed COVID-19 tests performed on its employees to calculate an amount to be reimbursed by FEMA. During our testing of the costs associated with this project, we noted that management overstated the number of COVID-19 tests that were performed during the period. Cause – The data used by management to calculate the number of outpatient tests performed included tests performed during the period January 1, 2022 through December 31, 2022. Effect – Inaccurate data was included in the project application and reporting that was submitted to FEMA. The miscalculation resulted in Palomar Health underreporting costs associated with the unreimbursed COVID-19 testing supplies by $929. Questioned Costs – There were no questioned costs. Context – This finding only relates to the portion of the award related to the reimbursement of COVID-19 testing performed on its employees in the amount of $249,654. The remaining amount of reimbursement received under this federal award number was for direct expenses incurred during the months of May and June 2022. Identification of a Repeat Finding – This is not a repeat finding. Recommendation – We recommend that management perform an in-depth review of all project costs, including a review of any data used in its calculation, prior to the submission of project applications to FEMA or other federal agencies. Views of responsible officials – Palomar Health management will put incorporate additional review processes for reporting to external agencies involving project costs and calculations. This will involve secondary review to identify potential errors.

FINDING 2024-004 – Significant Deficiency in Internal Controls over Compliance – Allowable Costs/Cost Principles – Calculation of Project Costs Identification of the Federal Program – This finding relates to the federal program described below: • Federal grantor: U.S. Department of Homeland Security • Pass-through grantor: California Governor’s Office of Emergency Services • Federal assistance listing number: 97.036 • Pass-through entity identifying number: PA-09-CA-4482-PW-03110(2834) Criteria – The Public Assistance Program and Policy Guide specifies that the cost of supplies, including materials, is eligible to be reimbursed by Federal Emergency Management Agency (FEMA) funds if they are purchased and justifiably needed to effectively respond to and/or recover from an incident or are taken from the applicant’s stock and used for the incident. FEMA provides public assistance funding based on the applicant’s established method for pricing inventory. Condition – Palomar Health received funding from the FEMA for the reimbursement of COVID-19 testing performed on its employees that were not reimbursed by other sources. Management calculated the cost of performing these tests by taking the total cost of COVID-19 testing supplies for the period July 1, 2021 through June 30, 2022, and dividing by the number of COVID-19 tests that were performed over the same period to calculate an average cost per COVID-19 test. The average cost per COVID-19 test was then multiplied by the number of unreimbursed COVID-19 tests performed on its employees to calculate an amount to be reimbursed by FEMA. During our testing of the costs associated with this project, we noted that management overstated the number of COVID-19 tests that were performed during the period. Cause – The data used by management to calculate the number of outpatient tests performed included tests performed during the period January 1, 2022 through December 31, 2022. Effect – Inaccurate data was included in the project application and reporting that was submitted to FEMA. The miscalculation resulted in Palomar Health underreporting costs associated with the unreimbursed COVID-19 testing supplies by $929. Questioned Costs – There were no questioned costs. Context – This finding only relates to the portion of the award related to the reimbursement of COVID-19 testing performed on its employees in the amount of $249,654. The remaining amount of reimbursement received under this federal award number was for direct expenses incurred during the months of May and June 2022. Identification of a Repeat Finding – This is not a repeat finding. Recommendation – We recommend that management perform an in-depth review of all project costs, including a review of any data used in its calculation, prior to the submission of project applications to FEMA or other federal agencies. Views of responsible officials – Palomar Health management will put incorporate additional review processes for reporting to external agencies involving project costs and calculations. This will involve secondary review to identify potential errors.