Finding Text
2022-002 Department of Health and Human ServicesFederal Financial Assistance Listing #93.498COVID-19 Provider Relief Fund and American Rescue Plan (ARP) Rural DistributionApplicable Federal Award Number and Year ? Period 2 TIN #460233030 and TIN #237072116Activities Allowed or Unallowed and Allowable Costs/Cost PrinciplesMaterial Weakness in Internal Control over Compliance and NoncomplianceReportingMaterial Weakness in Internal Control over Compliance and Material NoncomplianceCriteria: 2 CRF 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: During testing we identified the following:- Expenses were claimed under the program which were incurred prior to the Organization preparing, preventing, and responding to COVID. Actual costs of $51,160.- Payroll expenses claimed under the program were calculated for three employees with the current hourly wage rate rather than the hourly wage rate effective during the period of time COVID hours were claimed under the program. Actual costs of $3,360 with projected costs of $9,751.- One employee?s specific COVID related hours were claimed twice under the program. Actual costs of $24,096.- FICA payroll expenses were claimed twice under the program. Actual costs of $3,685.- Additional COVID payroll expenses were identified by management; however, due to a clerical error, these payroll expenses were not included in the special report submitted to HHS for Period 2 TIN #460233030 totaling $135,096.The Organization included these expenses in the special reports submitted to the Department of Health and Human Services (HHS) for Period 2 TIN #460233030 and TIN #237072116 which caused the reports to be inaccurate. The Organization?s special reports submitted to HHS had no formal documentation of a secondary review or approval.Cause: Management used the hourly wage rate for employees which was in place when the expenditure tracking spreadsheet was being prepared. There was a formula error within the expenditure tracking spreadsheet which caused one employee?s COVID related hours and FICA payroll expenses to be claimed twice under the program. Expenses were incurred and coded to a specific location prior to COVID and this same location was later used for COVID specific expenses. There was a clerical error when the expenses were entered from the tracking spreadsheet to the special report as a result of the incorrect TIN #?s data being used. In addition, the internal control process did not include a formally documented review and approval process of the special reports submitted to HHS for Period 2.Effect: Without documentation for the review and approval, there is a possibility that ineligible expenditures are claimed under the program and included within the special reports. Expenses included within the special report submitted to HHS for Period 2 TIN #237072116 were overstated by known costs of $52,239 relating to healthcare related expenses and personnel expenses. Expenses included within the special report submitted to HHS for Period 2 TIN #460233030 resulted in a net understatement of known additional unreimbursed costs of $105,035 relating to personnel expenses.Questioned Costs: $52,239 of healthcare related expenses and personnel expenses were incorrectly included in the special report submitted to HHS for Period 2 TIN #237072116. The special report for Period 2 included unreimbursed personnel expenses relating to quarter 3 and 4 of 2020 in excess of $52,239. A portion of these unreimbursed expenses were tested to offset the healthcare related expenses and personnel expenses referred to above. No questioned costs relating to the special report submitted to HHS for Period 2 TIN #460233030. As a result, there are no questioned costs for activities allowed or unallowed and allowable costs/cost principles.Context: A nonstatistical sample of 60 ($112,713) out of a population greater than 250 transactions relating to general and administrative and healthcare related expenses, including personnel, fringe benefits, supplies and equipment ($620,182) were tested. A nonstatistical sample of salaries for 9 employees ($248,034) out of a population of 41 employees ($616,303 total expenses which includes a portion of unreimbursed expenses identified within the special report) were tested. Key line items were tested on the Period 2 Department of Health and Human Services special reports.Repeat Finding from Prior Years: NoRecommendation: We recommend the Organization enhance internal control policies to ensure special reports submitted to HHS include all necessary review and approval and documentation is retained. In addition, we recommend management update any future special reports submitted to the Department of Health and Human Services as deemed appropriate.Views of Responsible Officials: Management agrees with the finding.