Finding Text
Finding 2021-001 - Material Weakness in Internal Control and Material Noncompliance
Assistance Listing No.: 93.498 COVID-19 - Provider Relief Fund and American Rescue Plan (ARP)
Rural Distribution
Federal Agency: U.S. Department of Health and Human Services
Pass-Through Agency: Not Applicable
Award Number/Year: Not applicable/2020
Compliance Requirement: Activities Allowed and Unallowed; Allowable Costs/Cost Principles
Questioned Costs: $156,376 of known questioned costs. Criteria: Non-federal entities in receipt of federal funds must comply with the requirements of 2 CFR 200.303(a), which require an entity to establish and maintain effective internal control over the Federal award to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Provider Relief Funds (PRF) payments must be used for allowable expenses and lost revenue described in the PRF terms and conditions and specified in guidance issued by the U.S. Department of Health and Human Services (HHS). Activities allowed have been defined as expenses used to prevent, prepare for, and respond to coronavirus, domestically or internationally, for necessary expenses to reimburse, through grants or other mechanisms, eligible health care providers for health care related expenses or lost revenues that are attributable to coronavirus.Condition and Context: The Manor included expenses in its Period 1 submission that did not meet the criteria of an allowable expense as defined by the HHS guidance (the Guidance). The Manor included $156,376 in supplies and dining expenses that were not specifically used to prevent, prepare for, and respond to coronavirus. This is not a statistically valid sample.
Effect: The Manor claimed expenses that were not in accordance with the Guidance and therefore deemed unallowable.
Cause: Management misinterpreted the Guidance and claimed unallowable expenses in their reporting of qualified expenses.
Recommendation: We recommend that management implement procedures to ensure that the most recent guidance is reviewed and understood and that information used in accumulated allowable expenses is reviewed, with errors addressed prior to submission. Additionally, we recommend that questioned costs are offset against unused lost revenues in future submissions.
View of Responsible Officials: The Manor agrees with the finding. The Manor reported expenses in its period 1 submission of $798,256 which included all skilled nursing supplies expenses and an allocation of dining supplies which all of which were not necessarily used to prevent, prepare for, and respond to coronavirus. The Manor was able to provide direct costs used to prevent, prepare for, and respond to coronavirus that totaled $908,131 of which $266,251 were reported in period 2, thus $156,376 was over reported in period 1. The Manor agrees with the finding and misinterpreted the guidance but was able to substantiate $641,880 of expenses reported in period 1 as direct costs used to prevent, prepare for and respond to coronavirus. Additionally, the Manor reported $740,727 of lost revenues in the period 1 report that could be applied against the PRF payments. Procedures have been implemented to ensure that all future reporting will only include direct costs used to prevent, prepare for and respond to coronavirus.