Finding Text
Federal agency: U.S. Department of Health and Human Services
Federal program title: American Rescue Plan (ARP) and Provider Relief Fund (PRF)
Assistance Listing Number: 93.498
Award Period: Reporting Period 4 for funds received from July 1, 2021 to December 31, 2021, used
through December 31, 2022
Type of Finding:
Significant Deficiency in Internal Control over Compliance
Criteria or specific requirement: 2 CFR 200.303(a) states 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. The Hospital did not have documented formal controls and procedures over compliance with federal awards.
Condition: The Hospital did not have documented formal review processes over the use of the federal awards, or required reporting for the federal awards. Eligible uses of federal awards were tracked in detail and reviewed, but there was not a formal documented review process over whether expenditures were eligible under the federal award in all cases. Required reporting under the federal award was completed, but there was not a formal review or approval process in place.
Context: The Hospital maintained detailed records of eligible uses of federal funds for tracking and required reporting purposes. The Hospital's CFO maintained this schedule as eligible uses of funds were identified throughout the organization, reviewed activity, and reconciled the schedule to the general ledger. There was not, however, documentation of a formal review or approval, outside of the schedule being maintained and reconciled. Similarly, the Hospital CFO completed the required reporting under the federal award based on the schedule discussed above, a lost revenue calculation, and other supporting documentation, but there was no formal review or approval process for that report. Management did also make regular reports to governance in monthly financial reports, including the use of COVID relief funds. These reports only covered more significant uses of funds and overall status updates on remaining funding, not a comprehensive report of all uses. The Hospital does have in place
review processes and controls over all expenditures (AP, Payroll), they are just not designed specifically to consider compliance with federal program.
Cause: Prior to the Provider Relief Fund (PRF) and ARP rural funding, the Hospital had not previously received federal awards in an amount sufficient to require an audit under Uniform Guidance. Therefore, more formal controls and procedures around the use of federal awards had not been in place. The American Rescue Plan, Provider Relief Fund, and certain other federal funds received in response to the COVID-19 pandemic were an unexpected occurrence. As the relief funds were distributed to the Hospital, the focus of Hospital management and governance was on responding to the pandemic, and tracking use of related relief funds, and not necessarily on incorporating formal policies and procedures due to the time sensitive nature of the pandemic.
Effect: Without formal control and review processes in place over use of federal funds or required reporting under those awards, there is a greater risk of improper use of funds or misstatement in required reporting.
Repeat finding: No
Recommendation: We recommend that management implement more formal control process surrounding the use of federal awards where there is segregation between individuals identifying or proposing expenditures/uses of funds and an individual reviewing and approving that expenditure/use. We also recommend for any formal reporting required under federal awards that there be a formal review process where an individual is reviewing and approving the report who did not prepare the report. Documentation of review and approval should be retained in both cases.
Views of responsible officials: There is no disagreement with the audit finding.