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
Applicable Federal Award Number and Year – Period 4 TIN #736060835
Activities Allowed or Unallowed, Allowable Cost/Cost Principles, and Reporting
Material Weakness in Internal Control Over Compliance and Material Noncompliance Related to Reporting
Criteria: 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 Authority 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 Authority claimed expenses attributable to coronavirus but did not reduce such expense by the amounts Medicare reimburses or is obligated to reimburse the Authority. As a result, the Authority's Period 4 report to the Department of Health and Human Services (HHS) contained a material error in one of the key line items.
Cause: The Authority did not have adequate internal controls policy in place to ensure expenses claimed were being reduced by Medicare's reimbursement.
Effect: The Authority claimed and reported expenses that were reimbursed or obligated to be reimbursed by Medicare.
Questioned Costs: None. While expenses were overstated by $179,554, the Authority had adequate other expenditures and lost revenues included on the Period 4 report to HHS to substantiate the amounts received in Period 4.
Context: The Authority claimed expenses attributable to coronavirus totaling $835,781. The Authority's estimate of reimbursement from Medicare for costs incurred was based on the Medicare utilization from the 2022 and 2023 annual cost report. This methodology was applied to all costs incurred in determining the total amount of $179,544 considered to be reimbursed by another source. While sampling was used to test expenditures, it was not used to identify or calculate the error. All key line items on the Period 4 report to HHS were subject to testing for reporting.
Repeat Finding from Prior Years: No
Recommendation: We recommend the Authority 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.