Finding 2023-004 - Activities Allowed / Unallowed, Allowable Costs - Provider Relief Funds
U.S. Department of Health and Human Services - Provider Relief Funds - AL #93.498
Grant Number: N/A
Grant Period: None provided - but this finding relates to Period 4 for payments received between July 1, 2021 and December 31, 2021, with a deadline to use the funds of December 31, 2022.
Questioned Costs: $779,720
How the questioned costs were computed: None of the federal expenditures as reported on the Schedule of Expenditures of Federal Awards for the year ended September 30, 2023, were supported by adequate documentation regarding the allowability of the costs in preventing, preparing for, or responding to coronavirus.
Condition
Great Lakes Recovery Centers, Inc. was not able to provide sufficient documentation to support that the payroll and personnel costs reported to the Department of Health and Human Services on its Phase 4 portal report were allowable in accordance with the terms and conditions of the award, specifically, that the payments will only be used to prevent, prepare for, and respond to coronavirus. Great Lakes Recovery Centers, Inc. is taking the position that because they were considered an essential business by the State of Michigan, that any and all activities performed by its personnel were allowable and were to prevent, prepare for, and respond to coronavirus without further substantiation necessary. However, generally accepted auditing standards requires auditors to obtain sufficient appropriate audit evidence as to the allowability of costs in accordance with program requirements and Wipfli LLP was unable to do so based on: (1) there was no identification of which personnel were included in the reported expenses figures and (2) there was no mechanism for Great Lakes Recovery Centers, Inc. to gather information regarding what those personnel may have been doing that met the criteria to prevent, prepare for, or respond to coronavirus.
Criteria
Great Lakes Recovery Centers, Inc. accepted and utilized funding from the Department of Health and Human Services, through the Health Resources and Services Administration.
According to www.hrsa.gov, If a recipient receives payment from funds appropriated for the Relief Fund, and retains that payment for at lest 90 days without contacting HHS regarding remittance of those funds, the Recipient is deemed to have accepted the Terms and Conditions. One of the terms and conditions is that payments will only be used to prevent, prepare for, and respond to coronavirus, and that the payment shall reimburse the grant recipient only for health care related expenses (or lost revenues) that are attributable to coronavirus.
Great Lakes Recovery Centers, Inc. reported on its Period 4 portal report that 100% of the costs reported were related to payroll and other personnel costs and it did not elect the lost revenue option. Under program guidance for Period 4, allowable G&A expense examples included, but were not limited to personnel such as direct employee expenses for staff such as nurses, contractor payroll administrators, or support personnel and related fringe benefits.
Cause
Great Lakes Recovery Centers, Inc. was not sufficiently aware of the terms and conditions of the funding to be able to comply with the requirements as laid out in the Criteria section. As such, Great Lakes Recovery Centers, Inc. was not able to design and implement internal controls over compliance, or to comply with the terms and conditions of the award.
Effect
Because there was not sufficient, appropriate audit evidence to support the allowability of costs in accordance with the terms and conditions of the Provider Relief Funding, Great Lakes Recovery Centers, Inc. was not in compliance with those terms and conditions and all of the costs reported in 2023 are questioned.
Recommendation
Going forward, Great Lakes Recovery Centers, Inc. will not be reporting any federal expenditures under the Provider Relief Funds as it has not received any more payments. However, Wipfli recommends that Great Lakes Recovery Centers, Inc. ensure that any federal, state, or local funding that includes terms and conditions is evaluated carefully and that a system of internal controls over compliance with those terms and conditions is designed, implemented, and monitored appropriately.
View of Responsible Officials
Great Lakes Recovery Centers, Inc. agrees with the finding and is committed to a corrective action.
As further clarification regarding finding 2023-004, Great Lakes Recovery Centers, Inc. applied for Health Resources and Services Administration (HRSA) relief funding and was awarded by HRSA funding based on the loss of revenue during various reporting periods. Great Lakes Recovery Centers, Inc. did not ask for a specific amount of funding as HRSA determined the amount eligible for the organization based on the changes in revenue of certain time periods. The category that GLRC indicated they would utilize the funds for surrounded employee/personnel expenses responding to the pandemic. Great Lakes Recovery Centers, Inc. had more than enough eligible personnel expenses that exceeded the amount of the HRSA award. Great Lakes Recovery Centers, Inc. throughout the pandemic time period fell under the Michigan Operational Mandate as an essential service and was required to continue operations, in which Great Lakes Recovery Centers, Inc. did. The supplemental accounting memo on how to record and reconcile HRSA funding from the Federal Government was not issued until well after the HRSA COVID funding was received. Great Lakes Recovery Centers, Inc. was not aware of the supplemental accounting memo stipulating the tieback to exact personnel for retrospective coding, therefore, there is only lump sum personnel expenditures for review. The retrospective application of HRSA relief funding accounting requirements is not unusual for many awardees from that time period, which makes it more difficult to reconcile the audit requirements to that time period.