Finding 42261 (2022-001)

Federal Agency: U.S. Department of Health and Human Services Federal Program: COVID-19 Provider Relief Fund and American Rescue Plan (ARP) Rural Distribution Federal Award Number: 93.498 Federal Award Year: PRF reporting period 4 Compliance Requirement Reporting (L) ? Special Reporting Criteria or Requirement Per Title 2, U.S. Code of Federal Regulations Part 200 (2 CRF 200), Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Award, (Subpart D, Section 200.303), the nonfederal entity must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Under the terms and conditions of the award, Provider Relief Funds (PRF) is subject to 45 CFR section 75.302 (Financial management and standards for financial management systems). The PRF program requires special reporting through the Provider Relief Fund Reporting Portal that contains key line items containing critical information, which includes the Calculation of Lost Revenues Attributable to Coronavirus. The Provider Relief Fund Distributions and American Rescue Plan Rural Distribution Post-Payment Notice of Reporting Requirements states that reporting entities that also received an ARP Rural payment must expend the ARP Rural funds on eligible expenses and/or lost revenues attributable to COVID-19 before PRF payments may be used on remining eligible expenses and/or lost revenues attributable to COVID-19. Condition Found, Including Perspective During our testing over reporting, we observed management did not have effective internal controls in place to ensure lost revenues reported in the Portal were correctly stated. Lost revenue is tracked by management at the system level and is allocated to various programs when reporting requirements require separate portal reporting. Management?s internal lost revenue calculation correctly captured all lost revenues, including reductions for ARP funds separately reported, and that calculation was appropriately attached to the Period 4 Portal submission. The Portal report has a cumulative calculation of available lost revenue, and the cumulative total calculation within the portal was not properly reduced to capture $15,518,774 that was separately claimed in ARP subsidiary Period 4 reports, resulting in an overstatement of the Total Lost Revenues for the Period of Availability and the Total Unused Lost Revenues amounts in the Period 4 general distribution Portal report. Cause and Possible Asserted Effect Controls were not operating effectively to detect and correct duplicate lost revenues shown on the portal reporting between the parent entity and the stand-alone subsidiary reports for ARP funds. Although the lost revenues were calculated correctly and captured within the attached supporting documentation used to determine Portal amounts, controls were not operating effectively to detect and correct an overstatement of the Total Lost Revenues for the Period of Availability and the Total Unused Lost Revenues. Questioned Costs There are no questioned costs associated with this finding. Despite the overstatement in the Portal report, there was still sufficient lost revenues in excess of PRF payments received for Period 4 and therefore the Company has demonstrated it did earn all of the PRF payments received. This matter was isolated to the error in reporting requirements under the Federal grant program. Identification of whether the audit finding is a repeat of a finding in the immediately prior audit and if so, the applicable prior year finding number The audit finding is not a repeat finding. Recommendations We recommend that the Company enhance their internal control process to ensure the data underlying the portal reporting is appropriately reviewed by an individual other than the preparer to ensure that overstated lost revenue information is not reported. Views of Responsible Officials As indicated within the portal filing summary for the general reporting Period 4, the Company?s lost revenues exceeded PRF and ARP Rural payments received to-date. As a result, there were sufficient qualifying lost revenues to receive and earn all PRF and ARP Rural funds received, regardless of the reporting error identified and described in the ?condition found? section above. Therefore, management believes no repayment of PRF or ARP Rural funds received would be required. Management is implementing a process to add additional review steps prior to finalizing future reporting submissions.