Finding Text
Department of Health and Human Services
Federal Assistance Listing #93.498
COVID‐19 Provider Relief Fund and American Rescue Plan (ARP) Rural Distribution
Reporting
Material Weakness in Internal Control Over Compliance and Material 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. The Hospital claimed lost revenues based on a method other than the method reported.
Condition: The Hospital selected the Actual Revenue Option (i.e., Option 1) in the HHS Special Report. Option 1 is based on actual quarterly net revenues by payor which are included in the HHS Special Report ‐Period 4 for years 2019 through 2022. However,
management calculated the net revenues using various allocations due to reporting limitations within the accounting and billing system and did not use the actual quarterly financial statements to complete the HHS Special Report. The calculation used by
management would be considered an Alternative Reasonable Methodology (i.e., Option 3). The selection of Option 1 was improperly reported within the HHS Special Report – Period 4 which caused the report to be inaccurate.
In addition, for Quarter 3 and Quarter 4 of 2021, the amounts reported on the HHS Special Report do not agree to the related client support by $168,838 and $157,009, respectively. In both cases, the support indicated a higher amount of revenue. It should
be noted that no lost revenue was reported for Quarter 3 and Quarter 4 in 2021, so there was no impact to the lost revenue calculation. In addition, lost revenue was not used to support the provider relief fund amounts claimed by the Hospital in the HHS
Special Report – Period 4 as the Hospital had eligible expenditures to support the amount of provider relief funds claimed.
Cause: The Hospital did not have an adequate internal control policy in place to the ensure the appropriate method of reporting lost revenue on the HHS Special Report under the federal programs was selected. In addition, there was not an adequate internal control policy in place to ensure the amount reported on the HHS Special Report – Period 4 agreed to the supporting documentation.
Effect: The lack of adequate policies governing lost revenue calculations and HHS Special Report preparation and submission increases the risk that employees participating in the federal award administration may not be able to detect and correct noncompliance
in a timely manner. The Hospital selected the incorrect method of reporting lost revenues based on the calculation used. In addition, the support for two quarters does not agree to the amounts reported. The total difference is $325,847.
Questioned Costs: None reported.
Context: The lost revenue calculation for all applicable quarters was tested. All key line items were tested on the HHS Special Report submitted to the Department of Health and Human Services for Period 4.
Repeat Finding from Prior Years: No.
Recommendation: We recommend that the Hospital review the lost revenue calculation methodology utilized to ensure that the methodology utilized matches the methods reported. In this case, the reporting to HHS should be under the Alternative Reasonable Methodology (i.e., Option 3) which also requires management to document why this method is appropriate.
Views of Responsible Officials: Management agrees with the finding.