Finding Text
Finding 2022-004 Identification of the federal program: Department of Homeland Security COVID-19 Disaster Grants ? Public Assistance (Presidentially Declared Disasters) (FEMA) Pass-Through Entity: Illinois Emergency Management Agency Award ID: COVID-19 PA-05-IL-4489-PW-00950; COVID-19 PA-05-IL-4489-PW-00914 Assistance Listing 97.036 Criteria or specific requirement (including statutory, regulatory or other citation): 2 CFR Section 200.303 of the Uniform Guidance states the following regarding internal control: ?The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in ?Standards for Internal Control in the Federal Government? issued by the Comptroller General of the United States or the ?Internal Control Integrated Framework?, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).? Per project worksheet PA-05-IL-4489-PW-00950, Memorial Health entered into an agreement to provide services in response to the COVID-19 health emergency. Condition: Management did not have sufficient internal controls over the review and approval of FEMA expenditures submitted to the FEMA Portal. Related to the contract labor project (PW-00950), Management did not retain support over certain inputs to the deduction component of their FEMA expenditures. Management did not have sufficiently designed internal controls over the review and approval of the quarterly reports. Cause: Management represented they reviewed and approved the FEMA expenditures; however, supporting documentation to evidence the review and approval was not maintained. Management did not maintain sufficient documentation on the development of certain inputs to the deductions calculation used to reduce their total FEMA expenses. Management represented they reviewed and approved the FEMA reports; however, supporting documentation to evidence the review and approval was not maintained. Effect or potential effect: A lack of internal controls over the review and approval of FEMA expenditures could result in unallowable expenses being charged to the federal program. Questioned costs: Not applicable. Context: There were two project worksheets in 2022 and Management did not maintain documentation over the review and approval over the expenses submitted to the FEMA project. We tested 40 transactions charged to the FEMA projects ($261,579). During our testing we noted one instance ($8,256) where the pay rate utilized in the calculation of the contract labor pay do not agree to the approved pay rate. FEMA expenses were $5,084,596 for PW-00950, which was for contract labor. Management deducted $1,285,199 from the total FEMA expenses ($5,084,596) to represent an estimate for reimbursement received or expected to be received from insurers that would cover regular costs of providing health care services, including salary. The portion of the contracted labor costs covered by medical payments was calculated as the variance between internal pay rates and contractor pay rates times the increased utilization divided by 100. Management did not retain supporting documentation for the utilization rate. The utilization rate was based on Management?s knowledge of the staffing needs for COVID-19 units versus non-COVID-19 units; however, there was no observable evidence available to support the utilization rate used. We tested two quarterly reports submitted. Management did not maintain documentation over the review and approval of the quarterly reports prior to submission. For one of the quarterly reports, management reported $3,470,834 in total amount expended. Management should have reported $5,084,596. Total FEMA expenses reported on the SEFA for the year ended September 30, 2022, are $5,947,018. Identification as a repeat finding: Not applicable Recommendation: Management should design and implement internal controls over the review and approval of FEMA expenditures and quarterly reports. In addition, Management should maintain support for all components of their FEMA calculations. Views of responsible officials: Management agrees with the finding. Management will enhance its documentation to provide evidence of review and approval of FEMA expenditures for future submissions for its fiscal year 2023.