Finding 406034 (2020-001)

Finding No. 2020-001 - Activities Allowed or Unallowed - Hazard Pay Eligibility Federal Program Assistance Listing 21.019 - Coronavirus Relief Fund – COVID-19 Name of Federal Agency U.S. Department of Treasury Pass-through entity Puerto Rico Department of Treasury Category Significant deficiency in internal controls over compliance / Non-compliance Compliance requirements Activities Allowed or Unallowed Criteria As stated in the Federal Register, Hazard Pay may be covered using payments from the Coronavirus Relief Fund (the Fund) if it is provided for performing hazardous duty or work involving physical hardship that in each case is related to COVID–19. This means that, whereas payroll and benefits of an employee who is substantially dedicated to mitigating or responding to the COVID–19 public health emergency may generally be covered in full using payments from the Fund. Hazard Pay specifically may only be covered to the extent it is directly related to COVID-19. In addition as per the Fund’s guidelines, Hazard Pay is allowable only if it is related for duties to directly respond to COVID-19, independent of the category of employee, usually reserved for First Responders. The guidelines recommend the following model for Hazard Pay: a. First Responders: are those employees that, because of the nature of their responsibilities, are continuously exposed to COVID-19 contagion and are employees performing substantial services within the emergency rooms, the COVID-19 intensive care units and within the temporary COVID-19 triage areas that a hospital may have established in response to the pandemic. b. The Hazard Pay program suggests the following apportionment for First Responders and the hospital has the discretion to classify the employees within the risk categories stated below: i. Very High Risk: $1,250 each ii. High Risk: $1,000 each iii. Medium Risk: $900 each iv. Lower Risk: $800 each Condition During our test, we identified certain ineligible employees that were included as part of the Hazard Pay program incentive. Cause The original guidelines issued by the Puerto Rico Fiscal Agency and Financial Advisory Authority (AAFAF) for the Hazard Pay program provided a general definition for qualifying employees and that the eligibility criteria could be determined based on the Occupational Safety and Health Administration (OSHA) guidelines. However, such original Hazard Pay program guidelines were subsequently clarified by AAFAF, providing more specific criteria and definitions for qualifying employees. Based on the general guidelines issued by AAFAF, the Hospital included certain employees that did not meet the Hazard Pay program criteria, since the Hospital did not consult with AAFAF about the eligibility of certain Not Substantially Dedicated employees, as defined in the Federal Register. Effect Failure to obtain further guidance from AAFAF resulted in the inclusion of ineligible employees in the payment of the Hazard Pay Program incentive. However, no questioned costs resulted from this instance of noncompliance, since the Hospital revised the Coronavirus Relief Fund Midterm Use of Funds Report submitted to AAFAF for the month of June 30, 2021 to reflect the funds allocated to ineligible employees as additional compensation paid by the Hospital from its own resources, instead of the Hazard Pay program. Questioned cost None, since payments to ineligible employees were recharacterized as additional compensation paid from the Hospital’s own resources, instead of federal awards. Such federal awards remain available for use under other assistance programs provided by the CARES Act through December 2021. Context Of the 651 employees that received the Hazard Pay incentive, amounting to an original amount of $866,821.50, the Hospital identified 217 employees that were not entitled to Hazard Pay incentive, amounting to a disbursement of $228,750. However, as mentioned above, payments to ineligible employees were recharacterized as additional compensation paid from the Hospital’s own resources, instead of federal awards and thus, no questioned cost remains. Identification of a repeat finding This is not a repeat finding. Recommendation The Hospital should continue to monitor and review guidelines for federal awards under the CARES Act to ensure it is up-to-date on the applicable requirements and changes therein. In addition, the Hospital should consider consulting with AAFAF when available guidance may be subject to interpretation or when new awards, if any, are received. Views of responsible officials and planned corrective actions The Hospital’s management and responsible officers agree with this finding. Please refer to the corrective action plan section for the Hospital’s response on pages 57 to 59.