Finding Text
Finding 2022-002 ? Lost Revenue Calculation Methodology Reporting U.S. Department of Health and Human Services Provider Relief Fund and American Rescue Plan (ARP) Rural Distribution (93.498) Federal Award Year 2020-2021 Criteria: Title 2, Subtitle A Chapter II Part 200 Subpart D 200.303 Internal controls. 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). In addition, the terms and conditions of the award requires the recipient to submit reports as the secretary of HHS determines are needed to ensure compliance with conditions that are imposed on the payment, and such reports shall be in such form, with such content, as specified by the secretary of HHS in future program instructions directed to all recipients. Specific criteria have been established by the U.S. Department of Health and Human Services (HHS) in their terms and conditions related to allowable costs and reporting for this program including proper reporting of critical information, such as amounts included in reimbursed expense and lost revenues table. Condition: For the Hospital?s Period 1 reporting in the HRSA portal (Portal), the Hospital inaccurately reported lost revenues and expenses, resulting in an overstatement of lost revenues and an understatement of expenses. Cause: Management did not have effective internal controls in place to ensure reporting of lost revenues and COVID-eligible expenses were adequately reviewed before submission. Effect or potential effect: The calculation of lost revenues did not comply with the Terms and Conditions of the federal program, and total allowable costs reported in the Portal as PRF reimbursed expenses were overstated by $1,337,784. However, the Hospital had identified additional expenses, but did not report them in the Portal as they believed the lost revenues amounts were sufficient. While reporting was inaccurate, there were no questioned costs. Had the Hospital not incurred enough eligible expenses to cover the miscalculation, there could have been questioned costs. Context: The Hospital mistakenly used an incorrect input in their calculation of lost revenues for Q2 2020, resulting in an overstatement of lost revenues. Additionally, the Hospital had identified COVID-related expenses, but did not report them in the Portal as they believed lost revenue alone exceeded the Period 1 PRF distributions received. The total overstatement of lost revenues and expenses is $1,337,784. This error was detected by the auditors and management, but after the PRF information had already been submitted, and the Portal did not allow management to correct a previous submission. However, management had additional expenses which were identified, but not reported related to COVID that would be eligible for PRF, and therefore had the error been corrected, total allowable costs still would have exceeded the amount of PRF payments received in Period 1. Identification as a repeat finding, if applicable: No. Recommendation: We recommend that management develop and implement effective internal controls to ensure accurate reporting in the Portal. This will ensure the calculation of lost revenues and expenses comply with Terms and Conditions of the federal program. Views of responsible officials: Management agrees with the finding and recommendations.