Section III ? Federal Award Findings and Questioned Costs Finding 2022-001 Internal control deficiency and noncompliance over the allowable activities, allowable costs/cost principles, and reporting compliance requirements Identification of the Federal Program: Assistance Listing Number 93.498 ? COVID-19 ? Provider Relief Fund and American Rescue Plan (ARP) Rural Distribution ? U.S. Department of Health and Human Services ? Federal award identification number ? Not Applicable ? Federal award year: ? Period 3 ? January 1, 2020 to June 30, 2022 ? Period 4 ? January 1, 2020 to December 31, 2022 Criteria or specific requirement (including statutory, regulatory or other citation): Title 2, Subtitle A Chapter II Part 200 Subpart D 200.303 Internal controls. 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). The terms and conditions of the award require the following: ? The recipient certified that the payment will only be used to prevent, prepare for, and respond to coronavirus, and that the payment shall reimburse the recipient only for health care related expenses or lost revenues that are attributable to coronavirus. ? Funds may only be used to reimburse the provider(s) associated with the applicable subsidiary or billing TIN and cannot be transferred or allocated to another entity not associated with the subsidiary or billing TIN. Control and use of the Payment must be delegated to the Recipient that was eligible for and received the Payment. ? The recipient shall submit reports as the secretary of Health and Human Services (HHS) determines are needed to ensure compliance with conditions that are imposed on the payment, and such reports shall be in such form, with such content, as specified by the secretary of HHS in future program instructions directed to all recipients. June 11 Notice of Reporting Requirements allows for the following General and Administrative Expenses Attributable to Coronavirus: ? Mortgage/Rent: Payments related to mortgage or rent for a facility ? Insurance: Premiums paid for property, malpractice, business insurance, or other insurance relevant to operations ? Personnel: Workforce-related actual expenses paid to prevent, prepare for, or respond to coronavirus during the reporting period, such as workforce training, staffing, temporary employee or contractor payroll, overhead employees, or security personnel. ? Lease Payments: New equipment or software leases, such as fleet cars and medical equipment that is not purchased and will be returned to the owner ? Utilities/Operations: Lighting, cooling/ventilation, cleaning, or additional third-party vendor services not included in the ?Personnel? sub-category. ? Other General and Administrative Expenses: Expenses not captured above that are generally considered part of general and administrative expenses. PRB Reporting and Auditing FAQ further clarification on General and Administrative Expenses: ?Health care related operating expenses are limited to costs incurred to prevent, prepare for, and respond to coronavirus. The amount of mortgage or rent eligible for Provider Relief Fund or ARP Rural reimbursement is limited to that which was incurred to prevent, prepare for, and respond to coronavirus or COVID-19. Providers are required to maintain documents to substantiate that these funds were used for health care-related expenses attributable to coronavirus, and that those expenses or losses were not reimbursed from other sources and other sources were not obligated to reimburse them. The burden of proof is on the provider to ensure that documentation is maintained to show that expenses are to prevent, prepare for, and respond to coronavirus.? Condition: During our testing over Activities Allowed or Unallowed, Allowable Costs/Cost Principles and Reporting, we observed that management did not have effective internal controls in place. As a result, we noted that there were expenditures that did not have documentation to support that expenditures were used to prevent, prepare for, and respond to coronavirus. In addition, we noted that for one Period 3 report, duplicate revenue was reported on the parent entity PRF report and one subsidiary?s PRF report. Cause: Management did not have effective internal controls in place to ensure that expenses were adequately documented, tracked, and reported. Effect or potential effect: We are unable to determine to what extent the expenditures in allowable categories were used to prevent, prepare for, and respond to coronavirus. Duplicate lost revenue was reported for one Adventist Health subsidiary. Questioned Costs: Questioned costs related to the $108 million expenditure pool noted below cannot be determined, as there is no documentation to support the percentage of this expenditure pool that was used to prevent, prepare for, and respond to coronavirus. Also, despite the duplicated lost revenues, there was still sufficient lost revenues in excess of PRF payments received for periods 3. Context: We did not test internal controls over the A. Activities Allowed or Unallowed, B. Allowable Costs/Cost Principles, and L. Reporting compliance requirements, as internal controls were deemed ineffective due to internal control exceptions noted in the prior year (refer to Identification as a repeat finding section below) that would not be resolved for the full period under audit for the year-ended December 31, 2022. Of the $176 million of PRF expenditures on the SEFA $110 million related to expenditures and $66 million related to lost revenues. Of the $110 million related to expenditures, Adventist Health provided expenditures information totaling $166 million (i.e., the expenditure pool exceeded the amount of expenditures reported under the PRF program). We were able to subject $58 million of the $166 million to allowability testing based on expenditure detail provided. The remaining $108 million of expenditures related to various accounts within the trial balance. When evaluating the $108 million trial balance expenditure pool, we determined that the categories of expenditures (i.e., mortgages, utilities, and insurance costs) that make up the $108 million appear to be for allowable activities. However, Adventist Health did not maintain adequate documentation to support what percentage of the trial balance categories were attributable to preventing, preparing for, and responding to coronavirus. Therefore we are unable to test or determine how much of the $108 million is for allowable costs to prevent, prepare for, and respond to coronavirus. During our testing over reporting and allowability we observed that $13,536,236 in lost revenues attributable to Coronavirus were reported in both the parent entity?s Period 3 PRF report and in one of the subsidiary entity?s Period 3 PRF report (i.e., reported lost revenues were duplicated). This overstatement of lost revenues reported in the Portal was corrected for the subsidiary in the Period 4 PRF report submission. Identification as a repeat finding, if applicable: Finding 2021-002 Recommendation: We recommend that management develop and implement effective internal controls to ensure accurate calculation, aggregation, and reporting of expenditures and lost revenues, including supporting that expenditures were used to prevent, prepare for, and respond to coronavirus. This will ensure the expenses and lost revenue reported in the Portal are complete and accurate. Views of Responsible Officials: Adventist Health had several phone conversations with HRSA over reporting and allowability of expenditures in relation to the American Rescue Plan (ARP) program. Adventist Health had been using the lost revenue method for prior period reporting. Adventist Health asked specifically what can be used and not used. Adventist Health indicated that they were informed by HRSA to take the values (in whole) to utilize as expenses. Adventist Health were following the guidance they received by the HRSA employees. The information they received in determining the allowability of COVID-19 related expenditures confirmed their methodology for allowable expenses by two different employees. Conclusion: Despite the views of responsible officials above, we have concluded that our finding is necessary and appropriate for reporting items not complying with the criteria stated within this finding.