Audit 5310

Material Weakness: Identification of the Federal Program: Federal Assistance Listing Number 10.766 US Department of Agriculture Community Facilities Loans and Grants Cluster Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and 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. Condition: The Hospital claimed reimbursement for health-related lost revenue during the COVID-19 pandemic. The Hospital claimed reimbursement for health-related lost revenue based on a comparison of actual monthly revenue for the months of March, April, and May 2020 to the same corresponding months of 2019. Within the calculation, the Hospital excluded certain other operating revenue from the 2020 monthly totals which were included in the 2019 monthly totals. As a result, the compilation of revenue used between the periods was not consistently applied resulting in a higher lost revenue calculation than prescribed by the applicable guidance. Cause: The Hospital did not have an adequate internal control policy in place to ensure that the lost revenue calculation followed applicable guidance. Effect: The Hospital used a methodology of calculating lost revenue that was not consistent between monthly periods. Questioned Costs: Calculating lost revenue on a consistent basis between monthly periods results in question costs of $56,766. The Hospital reported eligible lost revenue of $2,063,648 which was eligible for reimbursement under the grant at 55%, up to a maximum grant award of $1,000,000. Calculating lost revenue utilizing consistent revenue between monthly periods would result in a lost revenue calculation of $1,714,971. Context: There was one lost revenue calculation required under the grant and it was selected for testing. Recommendation: We recommend that management implement procedures to ensure the lost revenue calculation claimed meets the requirement of the federal program. Views of Responsible Officials: Management agrees with the finding.

Material Weakness: Identification of the Federal Program: Federal Assistance Listing Number 10.766 US Department of Agriculture Community Facilities Loans and Grants Cluster Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and 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. Condition: The Hospital claimed reimbursement for health-related lost revenue during the COVID-19 pandemic. The Hospital claimed reimbursement for health-related lost revenue based on a comparison of actual monthly revenue for the months of March, April, and May 2020 to the same corresponding months of 2019. Within the calculation, the Hospital excluded certain other operating revenue from the 2020 monthly totals which were included in the 2019 monthly totals. As a result, the compilation of revenue used between the periods was not consistently applied resulting in a higher lost revenue calculation than prescribed by the applicable guidance. Cause: The Hospital did not have an adequate internal control policy in place to ensure that the lost revenue calculation followed applicable guidance. Effect: The Hospital used a methodology of calculating lost revenue that was not consistent between monthly periods. Questioned Costs: Calculating lost revenue on a consistent basis between monthly periods results in question costs of $56,766. The Hospital reported eligible lost revenue of $2,063,648 which was eligible for reimbursement under the grant at 55%, up to a maximum grant award of $1,000,000. Calculating lost revenue utilizing consistent revenue between monthly periods would result in a lost revenue calculation of $1,714,971. Context: There was one lost revenue calculation required under the grant and it was selected for testing. Recommendation: We recommend that management implement procedures to ensure the lost revenue calculation claimed meets the requirement of the federal program. Views of Responsible Officials: Management agrees with the finding.