Finding 381124 (2023-003)

Department of Health and Human Services Federal Financial Assistance Listing #93.498 COVID‐19 Provider Relief Fund and American Rescue Plan (ARP) Rural Distribution Applicable Federal Award Number and Year – Periods 4 & 5 TIN #420733472 Activities Allowed or Unallowed and Allowable Costs/Cost Principles and Reporting Significant Deficiency in Internal Control Over Compliance and Noncompliance that is not Material for Reporting 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 did not have evidence of formal review and approval over tracking of expenditures and lost revenue calculation that were claimed for the program. The Hospital’s lost revenue calculation for Period 4 was also reported under Option II when it should have been reported under Option III. In addition, there was no evidence retained that the Hospital’s special report submitted to the Department of Health and Human Services for Period 4 TIN #420733472 was reviewed or approved by an individual separate from the preparer prior to submission. These errors were not noted during testing of the Phase 5 report. Cause: The Hospital did not have an internal control process in place to ensure documentation of review and approval of the expenditures claimed, lost revenues calculated under the federal program, and the report submitted to the Department of Health and Human Services for Period 4 were retained. Effect: The lack of adequate policies governing review and approval increases the risk that employees participating in the federal awards administration may not be able to detect and correct noncompliance in a timely manner. Questioned Costs: None reported. Context: A nonstatistical sample of 65 items ($200,769) from a total population exceeding 250 items ($904,350) were tested for activities allowed or unallowed and allowable costs/cost principles. All lost revenue calculations were tested. Key line items were tested on the Periods 4 and 5 Department of Health and Human Services special reports. Repeat Finding from Prior Years: No Recommendation: We recommend the Hospital enhance internal control policies to ensure that formal documentation of review and approval is obtained and retained. Views of Responsible Officials: Management agrees with the finding.