Finding Text
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 4 TIN #411271856
Activities Allowed or Unallowed and Allowable Costs/Costs Principles
Material Weakness in Internal Control Over Compliance
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 Organization selected option iii to calculate lost revenue, which consists of utilizing an alternative reasonable method.
Condition: The Organization selected option iii to calculate lost revenue using budgeted net revenues to actual net revenues. The Organization utilized net revenues for part of the calculation and then utilized gross revenues in later quarters. This inconsistency of net and gross revenues caused a miscalculation of the Organization’s total lost revenue.
Cause: These errors indicate there is a lack of policies governing the review and approval of the lost revenue calculation to its supporting documents.
Effect: The Organization did not follow their methodology for calculating lost revenues, resulting in overstating the amount of lost revenues to be claimed by $282,934. While the Organization had an error in the total amount of lost revenue calculated, the Organization has excess amounts of lost revenues to carryforward of $3,663,347.
Questioned Costs: None reported.
Context: Lost revenue was tested for all twelve quarters that were reported. Controls did not appear to be operating effectively for three of the quarters tested.
Repeat Finding from Prior Years: No
Recommendation: We recommend that the Organization enhance internal control policies to ensure that the lost revenue calculation follows the selected lost revenue methodology per the Organization’s memo.
Views of Responsible Officials: Management agrees with the finding.