Finding Text
2023-006 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 – Period 4 TIN #460255944
Activities Allowed or Unallowed and Allowable Costs/Cost Principles
Material Weakness in Internal Control over Compliance and Noncompliance
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 selected option 1 to calculate lost revenue which consists of a comparison of 2019 actual results to 2020, 2021, and 2022 actual results by quarter. Patient care-related revenue should be reported net of adjustments for all third-party payers, charity care adjustments, bad debt, and any other discounts or adjustments, as applicable when reporting patient carerelated revenue sources.
Condition: The Hospital’s lost revenue calculation was not reviewed and approved by a separate individual outside of the preparer. The Hospital’s lost revenue calculation was based upon actual revenue billed and reported within the Hospital’s electronic medical records (EMR) system which does not consider monthly or quarterly adjustments. The Hospital’s special report submitted to the Department of Health and Human Services for Period 4 TIN#460255944 was not reviewed and approved by a separate individual outside of the individual who inputted and submitted the report.
Cause: The Hospital did not have an internal control process in place to ensure a secondary review and approval of the lost revenue calculation. The Hospital used the EMR system to calculate lost revenue due to the categories required to be input into the Hospital’s special report as the categories could not be identified within the general ledger system. The Hospital did not have an internal control process in place to ensure review and approval of the report submitted to the Department of Health and Human Services for Period 4 was performed and documented.
Effect: The lost revenue reported within the special report submitted to the Department of Health and Human Services for Period 4 was $204,862 for 2020 and $57,757 for 2021. Had the Hospital considered monthly or quarterly adjustments in the lost revenue calculation during the period of availability, the lost revenue would have been $248,664 in 2020 and $86,392 in 2021. No lost revenue was utilized during Period 4.
Questioned Costs: Lost revenue reported would increase after consideration of monthly or quarterly adjustments. As a result, there are no questioned costs for activities allowed or unallowed and allowable costs/cost principles.
Context/Sampling: Key line items were tested on the Period 4 Department of Health and Human Services special report.
Repeat Finding from Prior Years: No
Recommendation: We recommend the Hospital implement a control process which verifies that lost revenue is calculated correctly and includes a secondary review and approval of the calculation. We recommend Hospital implement a control process to ensure the special report is reviewed and approved prior to submission.
Views of Responsible Officials: Management agrees with the finding.