Finding 380906 (2021-007)

Department of Health and Human Services Views of Responsible Officials: Management agrees with the finding. 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 Hospital is a critical access hospital and reimbursed from Medicare based on the expenses incurred to treat Medicare beneficiaries for the majority of operating activities. The Hospital claimed expenses attributable to coronavirus but did not reduce such expense by the amounts Medicare reimburses or is obligated to reimburse the Hospital or amounts reimbursed by other grants. Cause: The Hospital did not have an adequate internal control policy in place to ensure expenses claimed were being reduced by Medicare's reimbursement or claimed on other grants. The Hospital also did not have a control to ensure the reporting was reviewed and approved by someone other than the preparer. Effect: The Center claimed and reported expenses that were reimbursed or obligated to be reimbursed by Medicare or other grants. Questioned Costs: None. While there were $308,355 of expenses considered to be reimbursed by other sources, the Hospital had excess lost revenues of $268,046 and additional underreported lost revenues of $459,421, which covers the error. Context: We sampled 60 of 382 expenditure transactions. Excluding the five transactions noted in Finding 2021-006, errors were identified in all other selections. The Hospital estimated that Medicare reimburses approximately 28.92% of expenses reported on annual cost reports based on its 2021 filed cost report. The reimbursement percentage was then applied to the entire population of allowable expenses. In addition, one transaction was identified that was also reimbursed by another federal grant. Repeat Finding from Prior Years: No Recommendation: We recommend the Hospital modify internal control policies to ensure amounts claimed for this program are reduced by amounts reimbursed or obligated to be reimbursed by another source, including Medicare cost-based reimbursement. Views of Responsible Officials: Management agrees with the finding.