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2022-002 ? Insurance payments not fully deducted from FEMA funding Cluster: Not applicable Grantor: U.S. Department of Homeland Security Award Names: COVID-19 Disaster Grants - Public Assistance (Presidentially Declared Disasters) Award Year: January 20, 2020 ? July 1, 2022 Award Number: 4496DR-MA Assistance Listing Numbers: 97.036 Pass-through entity: Massachusetts Emergency Management Agency (?MEMA?) Criteria FEMA guidance indicates that costs incurred as a result of an incident must be reduced by all applicable credits, such as insurance proceeds and salvage values (Stafford Act section 312, 42 USC section 5155 and 2 CFR section 200.406) Condition Through our testing of 60 direct costs associated with the System?s FEMA projects that were obligated in fiscal year 2022, 6 transactions totaling $1.4M were tested related to COVID-19 PCR tests that were purchased by the System from 2 vendors. These tests were administered to patients and System personnel and to the extent eligible, they were billed to the patients? or employees? third-party insurance company. As such, when compiling information for their FEMA application, the System completed an analysis showing total PCR tests purchased and the associated cost and deducted third-party insurance payments received associated with these PCR tests. The System calculated the third-party insurance deduction by developing an average third-party insurance payment rate per test. When performing our review of the average third-party insurance payment calculation, we noted management inappropriately included employee PCR tests not subject to reimbursement in the calculation of the average rate per test. As a result, management used an estimated average rate per test of $79 to calculate the third-party insurance deduction instead of an estimated average rate per test of $84. The impact of the change in average rate per test results in the System understating the third-party insurance payments by approximately $218,000. Cause Management?s review of the calculation did not identify the formula error in the calculation of the average payment rate per reimbursed PCR test. Effect The System?s FEMA application was overstated, resulting in an overpayment by FEMA related to the System?s PCR tests. Questioned Costs $218,000 Recommendation We recommend that management enhance their controls over the review of their third-party insurance payment calculation to ensure the accuracy of the information provided to FEMA. Additionally, we understand management continues to have conversations with MEMA over different aspects of the third-party insurance payment calculation and we recommend through those discussions the System, along with MEMA and FEMA, as applicable, determine whether there are any amounts that should be reimbursed to FEMA. Management?s Views and Corrective Action Plan Management?s Views and Corrective Action Plan are included at the end of this report after the summary schedule of prior audit findings and status.