Finding 5691 (2021-004)

2021-004 Finding: Allowable Costs/Cost Principles and Reporting U.S. Department of Health and Human Services Direct Program: COVID-19 Provider Relief Fund and the American Rescue Plan (ARP) Rural Distribution - 93.498 Criteria or Specific Requirement – Reporting (45 CFR 75.342) and Activities Allowed/Unallowed and Cost Principles (Pub L. No. 116-136, 134 Stat. 563 and Pub L. No. 116-139, 134 Stat. 622 and 623). The Provider Relief Fund (PRF) was established in the Coronavirus Aid, Relief, and Economic Security Act (CARES Act, P.L. 116-136) to reimburse, through grants or other mechanisms, eligible health care providers for increased expenses or lost revenue attributable to Coronavirus Disease (COVID-19). Entities that received more than $10,000 (either one time or in the aggregate) are required to report the uses of their funds, including the lost revenue reimbursement and documentation of how the lost revenue was calculated. In addition, management is responsible for establishing and maintaining effective internal controls over costs directly and indirectly charged to federal awards. Condition – The Hospital is required to prepare and submit period one PRF reporting to the U.S. Department of Health and Human Services. This report is to be prepared using accurate financial information; however, the Hospital incorrectly reported lost revenue for Period 1. Questioned Costs – Unknown Context – We tested the Period 1 PRF report submitted by the Hospital and total lost revenue calculation. The Hospital elected to use lost revenue calculation Option II, Budget to Actual. Option II requires that an approved budget prior to March 27, 2020, which covers the entire period of availability, be utilized to calculate lost revenues. While the budget period relating to calendar year 2020 was approved prior to March 27, 2020, the budget period relating to calendar year 2021 was approved subsequent to March 27, 2020. Thus, the budget approved prior to March 27, 2020 did not cover the entire period of availability and the budget relating to calendar year 2021 was not approved within required time parameters. Effect – The Hospital claimed and reported lost revenues under the PRF program that are not within the framework prescribed with selecting Option II - Budget to Actual. Cause – The Hospital selected Option II - Budget to Actual and should have selected Option III - Alternative Reasonable Method of estimating revenues because the budget period related to calendar year 2021 was not approved by March 27, 2020. Internal controls were not in place to ensure the Hospital correctly applied the guidance. Identification as a Repeat Finding – Not applicable. Recommendation – The Hospital should continue to improve understanding of the guidance related to this type of reporting and implement additional controls over future reporting periods to help ensure guidance is followed. View of Responsible Official and Planned Corrective Actions – The Hospital agrees with this finding. See separate auditee document for planned corrective action.