Finding Text
Finding 2021-003 – Allowable Costs/Cost Principles – Material Weakness in Internal Control Over
Compliance and Instance of Material Noncompliance. See finding 2021-002 for the included table. Criteria: 2021 Compliance Supplement and 2 CFR 200.403(h) stated that a non-federal entity may charge
only allowable costs incurred during the approved budget period of a federal award’s period of
performance. In addition, the PRF terms and conditions noted that to be considered an allowable
expense under PRF, the expense must be used to prevent, prepare for, and respond to COVID-19 and
that those expenses were not reimbursed from other sources and other sources were not obligated to
reimburse them.
Condition/Context: The Organization decided that it was critical to keep Astria Toppenish Hospital
(Toppenish) operating during the COVID-19 pandemic despite Toppenish experiencing losses. As a
result, the Organization determined that all expenses of the Organization not explicitly unallowable per
the related guidance and not reimbursed or obligated to be reimbursed by other sources qualified as
allowable expenses that prevented, prepared for, and responded to COVID-19 during the period of
availability that they were experiencing losses for Toppenish. Internal unaudited financial statements had
losses in excess of the PRF funds used for expenses. Support was audited for expenses selected;
however, because there were no financial statement audits performed from 2018 – 2020, we were unable
to audit the Toppenish losses calculated by management.
Repeat Findings from Prior Year(s): This is not a repeat finding. Cause/Effect: In addition to the challenges encountered while operating a health system during the
COVID-19 pandemic, leading up to the audit period, the Organization was significantly impacted by
bankruptcy and turnover of leadership. As a result, no financial statement audits were performed from
2018 – 2020. A financial statement audit was performed in 2021; however, the related Toppenish
expenses were incurred prior to December 31, 2020. We were unable to obtain audit evidence supporting
Toppenish’s losses for the year ended December 31, 2020. As a result of these matters, we were unable
to determine whether the Organization complied with the allowable costs/cost principles requirements
applicable to the major program.
Questioned costs: Could not be determined.
Recommendation: We recommend management implement policies and procedures to ensure that the
Organization understands the terms and conditions of the Federal award and can meet the related
compliance requirements.
Views of Responsible Officials and Planned Corrective Action: Management agrees with the finding. The
Organization will review and modify policies and procedures over the program to ensure management
implements policies and procedures to ensure there is understanding of the terms and conditions of
Federal awards.