Finding Text
(1) Summary of Auditors? Results a. Type of report issued on whether the financial statements were prepared in accordance with generally accepted accounting principles: Unmodified b. Internal control deficiencies over financial reporting disclosed by the audit of the financial statements: ? Material weaknesses: No ? Significant deficiencies: None Reported c. Noncompliance material to the financial statements: No d. Internal control deficiencies over major programs disclosed by the audit: ? Material weaknesses: Yes ? Finding No. 2022-001 ? Significant deficiencies: None reported e. Type of report issued on compliance for major programs: Unmodified ? COVID-19 Testing for the Uninsured ? ALN 93.461 Qualified ? Disaster Grants ? Public Assistance (Presidentially Declared Disasters) ? ALN 97.036 f. Audit findings that are required to be reported in accordance with 2 CFR 200.516(a): Yes ? Finding No. 2022-001 g. Major programs: ? Disaster Grants ? Public Assistance (Presidentially Declared Disasters) ? ALN 97.036 ? COVID-19 Testing for the Uninsured ? ALN 93.461 h. Dollar threshold used to distinguish between Type A and Type B programs: $750,000 i. Auditee qualified as a low-risk auditee: No (2) Findings Relating to the Financial Statements Reported in Accordance with Government Auditing Standards None (3) Findings and Questioned Costs Relating to Federal Awards Finding 2022-001 Federal Agency: Department of Homeland Security Program Name: Disaster Grants ? Public Assistance (Presidentially Declared Disasters) Assistance Listing Number: 97.036 Federal Award Year: 7/1/2021 ? 6/30/2022 Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs, Special Tests and Provisions Criteria The terms and conditions for recipients of Disaster Grants ? Public Assistance (Presidentially Declared Disasters include the following: ? The Funds are utilized to perform emergency work, which is defined as ?Work that must be done immediately to save lives, protect improved property, protect public health and safety, or avert or lessen the threat of a major disaster? ? FEMA defines the eligibility of costs based on the following factors: ? Directly tied to the performance of eligible work ? Adequately documented (2 CFR section 200.403(g)) ? Reduced by all applicable credits, such as insurance proceeds and salvage values (Stafford Act section 312, 42 USC section 5155, and 2 CFR section 200.406) ? Authorized and not prohibited under federal, state, territorial, tribal, or local government laws or regulations ? Consistent with applicant?s internal policies, regulations, and procedures that apply uniformly to both federal awards and other activities of the applicant ? Necessary and reasonable to accomplish the work properly and efficient (2 CFR Section 200.403) ? For large projects, the subrecipient must make an accounting to the state. In submitting the accounting the entity is required to certify that reported costs were incurred in performance of eligible work, that the approved work was completed, that the project is in compliance with the provisions of the EMA-State Agreement. 2 CFR Section 200.406 states: Applicable credits refer to those receipts or reduction-of-expenditure-type transactions that offset or reduce expense items allocable to the Federal award as direct or indirect (F&A) costs. Examples of such transactions are: purchase discounts, rebates or allowances, recoveries or indemnities on losses, insurance refunds or rebates, and adjustments of overpayments or erroneous charges. To the extent that such credits accruing to or received by the non-Federal entity relate to allowable costs, they must be credited to the Federal award either as a cost reduction or cash refund, as appropriate. Condition, Including Perspective Meritus Medical Center, Inc. received Disaster Grant ? Public Assistance (Presidentially Declared Disasters) (referred to hereafter as the ?Program?) funds for the purpose of continuing to be able to adequately staff nurses as a result of the COVID-19 pandemic. Meritus Medical Center, Inc. originally reported approximately $3.8 million of funds received from the Program related to nursing costs directly related to COVID-19. Meritus Medical Center, Inc. identified that the report the Company used to identify contract nursing costs for nurses that had treated COVID-19 patients was incorrectly including certain costs that were not related to COVID-19. As a result, management updated the report parameters, which resulted in the identification of $572,189 of expenses originally submitted for reimbursement and received by the Company that were not allowable costs. Meritus Medical Center, Inc. is responsible for establishing controls to ensure the accuracy of eligible expenses reported to the award agency. There was a material weakness in internal controls related to identifying eligible nurses, which caused a material amount of unallowable expenses to be requested for reimbursement and received. Cause and Effect Management did not properly review the report parameters used to ensure accurate reporting of the eligible nurses for reimbursements. As such, this caused the Company to request and receive reimbursement for unallowable expenses. Questioned Costs The questioned costs are $572,189. Statistical Sample The sample was not intended to be, and was not, a statistically valid sample. Repeat Finding This was not a repeat finding in the prior year. Recommendation We recommend that the Company establish controls to ensure that the expenses reported to the awarding agency only include allowable amounts. View of Responsible Officials Management agrees with the findings and has established controls to review report parameters and perform additional test work to ensure that only eligible expenses are reported to the awarding agency.