Finding Text
Finding 2022-001 ? Calculation and Reporting of Lost Revenues Identification of the federal program: Federal Grantor: United States Department of Health and Human Services, Health Resources and Services Administration (HRSA) Assistance Listing No.: 93.498 COVID-19 Provider Relief Funds and American Rescue Plan (ARP) Rural Distribution Award Period of Performance: January 1, 2020 ? December 31, 2021Criteria or Specific Requirement (including statutory, regulatory or other citation): Section 200.303 of the Uniform Guidance states the following regarding internal control: ?The non-Federal entity must: (a) 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. These internal controls should be in compliance with guidance in ?Standards for Internal Control in the Federal Government? issued by the Comptroller General of the United States or the ?Internal Control Integrated Framework.? Issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).? Condition: The Hospital?s methodology for calculating lost revenues was not consistent between reporting Period 1 and Period 2. The revenue calculation for the baseline year was not recalculated to consider changes. Further, contractual adjustments were included for clinic operations, but gross charges for the clinics were removed. Cause: The Hospital did not have controls in place to identify and correct errors before reporting was completed. Further, the Hospital incorrectly interpreted the reporting instructions as it relates to the calculation of lost revenue. Effect or potential effect: The amounts reported to HRSA were not in accordance with established HHS reporting guidance. Questioned Costs: None. Context: For Period 1 reporting, the Hospital?s methodology for reporting lost revenues was Option 1, which used actual patient care revenues for the entire facility. This calculation was determined to be reasonable and consistently applied to patient care revenues for calendar year 2019, calendar year 2020 and the first two quarters of 2021. This calculation resulted in lost revenues of approximately $4.02 million. Unreimbursed lost revenues from Period 1 were approximately $1.01 million. These unreimbursed lost revenues are sufficient to cover the lost revenues of approximately $330,000 claimed in Period 2. During Period 2 reporting, the lost revenue calculation methodology changed to remove rural health clinic activity. The intent was to avoid offsetting lost revenues with profits. The Hospital did not elect Option 3 or recalculate the base year to be consistent. The Hospital also failed to remove rural health clinic contractual adjustments, which inflated lost revenues. When lost revenues are recalculated for calendar year 2019, 2020 and 2021 following methodology similar to Period 2, lost revenues for Period 1 are approximately $3.50 million and $1.44 million for Period 2. These lost revenues are sufficient to reimburse lost revenues claimed during Period 1 and Period 2. Recommendation: We recommend management implement procedures to ensure that the most recent guidance is reviewed and understood, and that information used in preparing the reports is reviewed for errors prior to reporting. View of Responsible Officials: Management agrees that the lost revenue methodology changed from Period 1 to Period 2 in response to changing guidance. Due to the evolving nature of the pandemic environment, it has been common for federal agencies to update, change, or delete their specific guidance over time.