Finding Text
Department of Health and Human Services
Federal Assistance Listing/CFDA #93.498
Provider Relief Fund and American Rescue Plan (ARP) Rural Distribution
Applicable Federal Award Number and Year – Period 1 TIN #730929722
Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Reporting
Material Weakness in Internal Control Over Compliance and Noncompliance
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.
Condition: The total lost revenues included on the report submitted to the Health Resources and Services Administration (HRSA) for Period 1 (Period 1 Report) utilizing Option 1, as defined by HRSA, contained errors. Accordingly, the exclusion of clinic revenue and the exclusion of the cost report estimate adjustment in the lost revenue calculation spreadsheet were not identified by management.
Cause: The Hospital did not have an internal control process in place to ensure the calculation of lost revenues was reviewed and approved. Accordingly, the errors in the lost revenue calculation spreadsheet were not identified by management. In addition, the Hospital did not have an internal control process in place to ensure a review and approval of the Period 1 Report was performed by someone other than the preparer of the report.
Effect: The lost revenue reported to HRSA for Period 1 was understated.
Questioned Costs: None. The Hospital’s lost revenues for Period 1 were understated.
Context: All 10 line items associated with the Option 1 lost revenue calculation were tested. There were errors noted in all line items tested. The lost revenues included on the Period 1 Report totaled $2,917,668 but should have been $3,377,089 for a difference of $459,421.
Repeat Finding from Prior Years: No
Recommendation: We recommend the Hospital implement a control process which includes a documented secondary review and approval of required reports to be submitted to the federal agency prior to submission. The Hospital’s processes should also be amended to ensure the lost revenue calculation not only agrees with system generated reports but is accurately calculated and has a documented secondary review and approval.
Views of Responsible Officials: Management agrees with the finding