FAC Explorer

Audit 365407

FY End
2021-06-30
Total Expended
$5.75M
Findings
6
Programs
4
Organization: McKenzie County Healthcare Systems, Inc. and Subsidiary (ND)
Year: 2021 Accepted: 2025-09-02
Auditor: Eide Bailly LLP

Organization Exclusion Status:

Findings

ID Ref Severity Repeat Requirement
575368 2021-004 Material Weakness - P
575369 2021-004 Material Weakness - P
575370 2021-005 Material Weakness - L
1151810 2021-004 Material Weakness - P
1151811 2021-004 Material Weakness - P
1151812 2021-005 Material Weakness - L

Programs

ALN Program Spent Major Findings
93.498 Covid-19: Provider Relief Fund and American Rescue Plan (arp) Rural Distribution $4.10M Yes 2
97.036 Covid-19: Disaster Grants - Public Assistance (presidentially Declared Disasters) $1.13M Yes 1
93.461 Covid-19: Hrsa Covid-19 Claims Reimbursement for the Uninsured Program and the Covid-19 Coverage Assistance Fund $369,228 - 0
93.697 Covid-19: Testing and Mitigation for Rural Health Clinics $149,461 - 0

Contacts

Name Title Type
VCGKJLE35UP7 William Merkle Auditee
9525483400 Renee Gravalin Auditor
No contacts on file

Notes to SEFA

Title: Provider Relief Funds and American Rescue Plan (ARP) Rural Distribution Accounting Policies: The accompanying schedule of expenditures of federal awards (Schedule) includes the federal award activity of Lutheran Charity Association, d/b/a McKenzie County Healthcare Systems, Inc. (Health System) under programs of the federal government for the year ended June 30, 2021. The information is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Because the Schedule presents only a selected portion of the operations of the Health System, it is not intended to and does not present the financial position, changes in net assets, or cash flows of the Health System. Expenditures reported on the schedule are reported on the accrual basis of accounting, with the exception for the COVID-19 Testing for the Uninsured program, which are recorded on the cash basis. The COVID-19 Testing for the Uninsured program expenditures are based on receipt of monies from the federal agency. When applicable, such expenditures are recognized following the cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement. No federal financial assistance has been provided to a subrecipient. De Minimis Rate Used: N Rate Explanation: The Health System has not elected to use the 10% de minimis cost rate. The Health System received amounts from the U.S. Department of Health and Human Services (HHS) through the Provider Relief Fund and American Rescue Plan (ARP) Rural Distribution (PRF) program (Federal Financial Assistance Listing #93.498) during the year ended June 30, 2020 totaling $4,104,431, which was recorded as a refundable advance. During the year ended June 30, 2021, the Health System incurred eligible expenditures and, therefore, recognized revenues totaling $4,104,431 for the year ended June 30, 2021 on the consolidated financial statements. In accordance with the 2021 Compliance Supplement, the PRF expenditures recognized on the Schedule are based on the reporting to HHS for Period 1, defined as payments received during April 10, 2020 to June 30, 2020, of $4,104,431.

Finding Details

Finding 2021-004
Department of Health and Human Services Federal Assistance Listing #93.498 COVID-19: Provider Relief Fund and American Rescue Plan (ARP) Rural Distribution Applicable Federal Award Number and Year – Period 1 TIN #770637498 Department of Homeland Security Federal Assistance Listing #97.036 COVID 19: Disaster Grants – Public Assistance (Presidentially Declared Disasters)(FEMA) Preparation of Schedule of Expenditures of Federal Awards Material Weakness in Internal Control Over Compliance - Other Criteria: Proper controls over financial reporting include the ability to prepare the Schedule of Expenditures of Federal Awards (Schedule) and accompanying notes to the Schedule. Condition: The Health System does not have an internal control system designed to provide for a complete and accurate schedule of expenditures of federal awards being audited. We were requested to draft the Schedule. Cause: Auditor assistance with preparation of the Schedule is not unusual, as the Schedule has unique and specialized requirements and preparation is only required when the Health System meets a specified threshold of federal expenditures. Effect: There is a reasonable possibility that the Health System would not be able to draft a Schedule that is correct without assistance of the auditors Questioned Costs: None reported. Context: Sampling was not used. Repeat Finding from Prior Years: No Recommendation: While we recognize that this condition is not unusual for an organization with limited staffing, we recommend management be aware of the financial reporting requirements relating to the Health System’s Schedule of Expenditures of Federal Awards and internal controls that impact financial reporting. Views of Responsible Officials: Management agrees with the finding.
Finding 2021-004
Department of Health and Human Services Federal Assistance Listing #93.498 COVID-19: Provider Relief Fund and American Rescue Plan (ARP) Rural Distribution Applicable Federal Award Number and Year – Period 1 TIN #770637498 Department of Homeland Security Federal Assistance Listing #97.036 COVID 19: Disaster Grants – Public Assistance (Presidentially Declared Disasters)(FEMA) Preparation of Schedule of Expenditures of Federal Awards Material Weakness in Internal Control Over Compliance - Other Criteria: Proper controls over financial reporting include the ability to prepare the Schedule of Expenditures of Federal Awards (Schedule) and accompanying notes to the Schedule. Condition: The Health System does not have an internal control system designed to provide for a complete and accurate schedule of expenditures of federal awards being audited. We were requested to draft the Schedule. Cause: Auditor assistance with preparation of the Schedule is not unusual, as the Schedule has unique and specialized requirements and preparation is only required when the Health System meets a specified threshold of federal expenditures. Effect: There is a reasonable possibility that the Health System would not be able to draft a Schedule that is correct without assistance of the auditors Questioned Costs: None reported. Context: Sampling was not used. Repeat Finding from Prior Years: No Recommendation: While we recognize that this condition is not unusual for an organization with limited staffing, we recommend management be aware of the financial reporting requirements relating to the Health System’s Schedule of Expenditures of Federal Awards and internal controls that impact financial reporting. Views of Responsible Officials: Management agrees with the finding.
Finding 2021-005
Department of Health and Human Services Federal Assistance Listing #93.498 COVID-19: Provider Relief Fund and American Rescue Plan (ARP) Rural Distribution Applicable Federal Award Number and Year – Period 1 TIN #770637498 Reporting Material Weakness in Internal Control Over Compliance and Material Noncompliance Criteria: 2 CFR 200.303(a) establishes that the auditee must establish and maintain effective internal control over the federal award that provides assurance that the entity is managing the federal award in compliance with federal statutes, regulations, and conditions of the federal award. The Health System reported expenses based on specifically identified COVID related expenses. Condition: The Health System failed to provide an expense listing that supported the expenses included within the HHS Special Report – Period 1 (Report). In addition, the Health System’s lost revenue report did not reconcile to the Report and there was no evidence of review by someone other than the preparer. Cause: Internal controls in place did not ensure that all federal awards were supported and tracked appropriately. Effect: The lack of adequate policies governing review of the terms and conditions of the program, and lack of review over Report preparation and submission increases the risk that employees participating in the federal award administration may not be able to detect and correct noncompliance in a timely manner. The Health System submitted the Report without an accurate schedule to support the amount of expenses claimed. Questioned Costs: None reported. Context: Sampling was not used. Repeat Finding from Prior Years: No Recommendation: We recommend that the Health System enhance internal control policies to ensure all amounts reported and submitted to the federal agency are adequately documented and supported We also recommend that the Health System enhance internal control policies to ensure that the required reports are properly reviewed prior to submission to ensure all key line items are necessary, correct, meet the requirements of the federal program, and are properly recorded in the reports required to be submitted to the federal agency. Views of Responsible Officials: Management agrees with the finding.
Finding 2021-004
Department of Health and Human Services Federal Assistance Listing #93.498 COVID-19: Provider Relief Fund and American Rescue Plan (ARP) Rural Distribution Applicable Federal Award Number and Year – Period 1 TIN #770637498 Department of Homeland Security Federal Assistance Listing #97.036 COVID 19: Disaster Grants – Public Assistance (Presidentially Declared Disasters)(FEMA) Preparation of Schedule of Expenditures of Federal Awards Material Weakness in Internal Control Over Compliance - Other Criteria: Proper controls over financial reporting include the ability to prepare the Schedule of Expenditures of Federal Awards (Schedule) and accompanying notes to the Schedule. Condition: The Health System does not have an internal control system designed to provide for a complete and accurate schedule of expenditures of federal awards being audited. We were requested to draft the Schedule. Cause: Auditor assistance with preparation of the Schedule is not unusual, as the Schedule has unique and specialized requirements and preparation is only required when the Health System meets a specified threshold of federal expenditures. Effect: There is a reasonable possibility that the Health System would not be able to draft a Schedule that is correct without assistance of the auditors Questioned Costs: None reported. Context: Sampling was not used. Repeat Finding from Prior Years: No Recommendation: While we recognize that this condition is not unusual for an organization with limited staffing, we recommend management be aware of the financial reporting requirements relating to the Health System’s Schedule of Expenditures of Federal Awards and internal controls that impact financial reporting. Views of Responsible Officials: Management agrees with the finding.
Finding 2021-004
Department of Health and Human Services Federal Assistance Listing #93.498 COVID-19: Provider Relief Fund and American Rescue Plan (ARP) Rural Distribution Applicable Federal Award Number and Year – Period 1 TIN #770637498 Department of Homeland Security Federal Assistance Listing #97.036 COVID 19: Disaster Grants – Public Assistance (Presidentially Declared Disasters)(FEMA) Preparation of Schedule of Expenditures of Federal Awards Material Weakness in Internal Control Over Compliance - Other Criteria: Proper controls over financial reporting include the ability to prepare the Schedule of Expenditures of Federal Awards (Schedule) and accompanying notes to the Schedule. Condition: The Health System does not have an internal control system designed to provide for a complete and accurate schedule of expenditures of federal awards being audited. We were requested to draft the Schedule. Cause: Auditor assistance with preparation of the Schedule is not unusual, as the Schedule has unique and specialized requirements and preparation is only required when the Health System meets a specified threshold of federal expenditures. Effect: There is a reasonable possibility that the Health System would not be able to draft a Schedule that is correct without assistance of the auditors Questioned Costs: None reported. Context: Sampling was not used. Repeat Finding from Prior Years: No Recommendation: While we recognize that this condition is not unusual for an organization with limited staffing, we recommend management be aware of the financial reporting requirements relating to the Health System’s Schedule of Expenditures of Federal Awards and internal controls that impact financial reporting. Views of Responsible Officials: Management agrees with the finding.
Finding 2021-005
Department of Health and Human Services Federal Assistance Listing #93.498 COVID-19: Provider Relief Fund and American Rescue Plan (ARP) Rural Distribution Applicable Federal Award Number and Year – Period 1 TIN #770637498 Reporting Material Weakness in Internal Control Over Compliance and Material Noncompliance Criteria: 2 CFR 200.303(a) establishes that the auditee must establish and maintain effective internal control over the federal award that provides assurance that the entity is managing the federal award in compliance with federal statutes, regulations, and conditions of the federal award. The Health System reported expenses based on specifically identified COVID related expenses. Condition: The Health System failed to provide an expense listing that supported the expenses included within the HHS Special Report – Period 1 (Report). In addition, the Health System’s lost revenue report did not reconcile to the Report and there was no evidence of review by someone other than the preparer. Cause: Internal controls in place did not ensure that all federal awards were supported and tracked appropriately. Effect: The lack of adequate policies governing review of the terms and conditions of the program, and lack of review over Report preparation and submission increases the risk that employees participating in the federal award administration may not be able to detect and correct noncompliance in a timely manner. The Health System submitted the Report without an accurate schedule to support the amount of expenses claimed. Questioned Costs: None reported. Context: Sampling was not used. Repeat Finding from Prior Years: No Recommendation: We recommend that the Health System enhance internal control policies to ensure all amounts reported and submitted to the federal agency are adequately documented and supported We also recommend that the Health System enhance internal control policies to ensure that the required reports are properly reviewed prior to submission to ensure all key line items are necessary, correct, meet the requirements of the federal program, and are properly recorded in the reports required to be submitted to the federal agency. Views of Responsible Officials: Management agrees with the finding.