Finding Text
2022-003 Department of Health and Human ServicesFederal Financial Assistance Listing/CFDA #93.498COVID-19 Provider Relief Fund and American Rescue Plan (ARP) Rural DistributionApplicable Federal Award Number and Year ? Period 1 and Period 2 TIN#460242831Activities Allowed or Unallowed and Allowable Costs/Costs PrinciplesMaterial Weakness in Internal Control Over Compliance and NoncomplianceReportingMaterial Weakness in Internal Control Over Compliance and Material NoncomplianceCriteria: 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 statues, regulations, and conditions of the federal award. The Center selected option 1 to calculate lost revenue which consists of a comparison of 2019 actual resident care-related revenue to 2020 and 2021 actual resident care-related revenue by quarter. Resident care-related revenues should be reported net of adjustments for all third-party payors and any other discounts or adjustments, as applicable when reporting resident care-related revenue sources.Condition: The Center?s special report submitted to the Department of Health and Human Services for Period 1 and Period 2 TIN# 460242831 had no formal documentation of a secondary review or approval. The Center?s Period 1 lost revenue calculation was based upon actual revenue billed and reported within the Center?s billing system which had immaterial unexplained variances from the resident care-related revenue recorded on the general ledger. In addition, the Center did not consider the impact of a retroactive Medicaid reimbursement adjustment applicable to quarter 3 and quarter 4 of 2021 on the Period 2 report.Cause: The internal controls did not consider the effect of the retroactive Medicaid reimbursement adjustment or a reconciliation process to the internally generated resident care-related revenue on the general ledger to ensure accurate quarterly reporting of resident care-related revenue. In addition, the internal control process did not include a formally documented review and approval process of the report submitted to the Department of Health and Human Services for Period 1 and Period 2.Effect: Resident care-related revenue by quarter for fiscal year 2019, 2020, and 2021 on the Period 1 and Period 2 report was not accurate. The lack of adequate procedures governing program report preparation and submission increases the risk that the lost revenue incurred by quarter was not accurate and the related report could be filed incorrectly.Questioned Costs: None reported for the activities allowed or unallowed and allowable costs/cost principles. The amount of eligible lost revenue for Period 1 and Period 2 was overstated after taking into consideration the retroactive Medicaid reimbursement adjustment and comparing to internally generated resident care-related revenue on the general ledger. However, only $95,856 and $0 of lost revenue was utilized in Period 1 and Period 2, respectively, so the calculation difference decreased the excess lost revenue by $454,317.Context: All key line items related to lost revenue subject to testing on the Period 1 and Period 2 Department of Health and Human Services special report had differences. The net unexplained insignificant differences resulted in $9,919 of differences in key line items reported on the Period 1 report. The Period 2 report contained $386,707 of differences in the key line items tested due to the retroactive Medicaid reimbursement adjustment impacting quarter 3 and quarter 4 of 2021.Repeat Finding from Prior Years: NoRecommendation: We recommend that the Center enhance internal control policies to ensure special reports submitted to HHS include all necessary review and approval. In addition, we recommend the Center ensure HHS special reports include any retroactive Medicaid reimbursements.Views of Responsible Officials: Management agrees with the finding.