Finding Text
Department of Health and Human Services:
Federal Financial Assistance Listing #93.498
Provider Relief Fund (PRF) and American Rescue Plan (ARP) Rural Distribution
Applicable Federal Award Number and Year - Period 4 TIN #426037759
Activities Allowed or Unallowed and Allowable Costs/Cost Principles and Reporting
Material Weakness in Internal Control Over Compliance
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: Guthrie County Hospital (the Hospital) reported expenses in the Department of Health and Human Services (HHS) special report for Period 4 that were not reduced by reimbursement from other sources or that other sources were obligated to reimburse. Additionally, the Hospital did not report its excess expenses as unreimbursed expenses attributable to Coronavirus in the HHS special report, did not report total interest earned on the ARP Rural Payments and Period 4 General Distribution Payments, and reported gross revenues/net charges from patient care by quarter for 2021 when net revenues should have been reported. In addition, there was no evidence retained that the HHS special report was reviewed by an individual separate from the preparer prior to submission.
Cause: The Hospital did not have an effective internal control process in place to ensure review of the expenses claimed on the report submitted to HHS, the calculation of interest earned on the federal award funds, and the proper reporting of revenues and to ensure that the report submitted for Period 4 was accurate and in accordance with the terms and conditions of the federal award.
Effect: The lack of an effective internal control process to review the Period 4 report to HHS led to a report that was incorrect. Expenses totaling $215,208 that were reimbursed by other sources were included in the Period 4 report. Additionally, expenses totaling $215,843 were not reported as unreimbursed expenses attributable to Coronavirus. The reporting of gross charges from patient care instead of net charges by quarter for 2021 did not lead to the reporting of any incorrect lost revenues.
Questioned Costs: None. Had the correct expenses, net of reimbursement from other sources, been reported, the Hospital would have reported expenses (including unreimbursed expenses attributable to Coronavirus) of $790,503 which exceeds the total funds received for Period 4, including interest earned on such funds. Additionally, the Hospital had lost revenues of $127,522 carried over from Period 1 reporting that could be used through June 30, 2023.
Context: A sample of 40 ($195,825) items was tested from a population of $789,868. Key items were tested on the Period 4 HHS special report.
Repeat Finding from Prior Years: No
Recommendation: We recommend the Hospital enhance internal control policies to ensure that formal documentation of review is obtained and retained, and review is thorough enough to catch mistakes.
Views of Responsible Officials and Planned Corrective Action: Management agrees with the finding. However, had the Hospital reported the correct expenses, net of reimbursement from other sources, the expenses would have exceeded total funds received for Period 4.