Finding Text
2022-005 Computational errors in calculation of lost revenues
Identification: 93.498 United States Department of Health and Human Services, Provider Relief Fund; Noncompliance Finding/Material Weakness; Reporting Compliance Requirement
Criteria: The Provider Relief Fund (PRF) was established under the Coronavirus, Aid, Relief, and Economic Security Act (Pub. L. No. 116‐136, 134 Stat. 563) and the Coronavirus Relief and Response Supplemental Appropriations Act (Pub. L. No. 116‐260). Eligible health care providers received PRF appropriations for health care related expenses or lost revenues attributable to coronavirus. Recipients who received one or more payments exceeding $10,000 are required to report in each applicable reporting period.
Condition: The Medical Center had multiple errors in calculating lost revenues for the Period 4 reporting submission. The Medical Center used the alternative reasonable method for calculating lost revenue. The alternative methodology selected was 2019 actual revenues by department versus 2020, 2021, and 2022 actual revenues by department computed on a monthly basis and then accumulated by quarter. The Medical Center then applied an overall contractual adjustment and bad debt percentage to arrive at net lost revenues for the quarter. The first error noted was the data utilized by the client for each year
did not agree to the total revenues by month per the general ledger and to the total revenues per the financial statements. The 2019 revenues were understated by $1,161,485, the 2020 revenues were understated by $825,079, the 2021 revenues were understated by $934,522, and the 2022 revenues were understated by $1,391,572. The second error noted was in the calculation of the lost revenues for June 2022. Data was input into the spreadsheet inaccurately resulting in the calculation of lost revenues by department to be incorrect. The last error, was the overall contractual adjustment and bad debt percentage for 2022 was not updated and the percentage for 2021 was utilized. The three errors resulted in lost revenues for the period January 1, 2020 to December 31, 2022, to be overstated by $1,965,836.
Cause: The spreadsheet used by the Medical Center to calculate lost revenues did not agree to total revenues per the financial statements, contained input errors, and utilized an incorrect contractual adjustment and bad debt percentage for 2022.
Effect: The Medical Center understated the lost revenues for the Period 1 reporting period (January 1, 2020 to June 30, 2021) by $452,595 and overstated their lost revenues for the Period 4 by $2,418,431.
Questioned Costs: None. The Medical Center's lost revenues after including the overstatement of $2,418,831 resulted in unused lost revenues of $1,954,004 for Period 4. The understatement of $452,595 for Period 1 is reflected below in Finding 2022-006.
Perspective Information: We tested the Period 4 report submitted during the reporting period to supporting documentation to determine if the report was completed accurately.
Repeat Finding: Yes; prior year finding 2021-005.
Recommendations: We recommend policies and procedures over federal grant reporting be strengthened to ensure required reports are completed accurately and use correct financial information. These procedures should include a review of supporting documentation of calculations made to ensure mathematical accuracy.
Views of Responsible Officials: The Medical Center experienced turnover in key accounting personnel during the month leading up to the deadline for the Period 4 reporting submission. It was not the intent of management to change Period 1 reporting methodology, however, we encountered difficulties in transitioning the PRF accounting from the prior CFO to the interim CFO. Prior to completing future submissions, we will implement a procedure to double check the computations and review revised lost revenue calculations for prior reporting periods.