Finding Text
2022-004 Department of Health and Human Services Federal Assistance Listing #93.498 COVID-19 Provider Relief Fund and American Rescue Plan Applicable Federal Award Number and Year ? Period 2 TIN #420953968 Reporting Material Weakness in Internal Control Over Compliance and Material Noncompliance Criteria ?2 CFR 200.303(a) establishes 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. Condition ? The Organization selected option ii to calculate lost revenue, which consists of a comparison of actual results during the period of availability to the approved budget. The Organization did not have a budget for the entire reporting period that was approved prior to March 27, 2020. For the periods that the Organization did not have an approved budget, the Organization calculated lost revenues using a budget approved by their board after March 27, 2020. The Organization also did not adjust patient revenue for adjusting entries identified as part of the financial statement audit, which should have been included to calculate net patient revenue. In addition, the Organization, did not back out lost revenues that had been claimed by other funds. When the Organization tried to reopen their report during the single audit, the Organization was informed that amendments were not allowed. Finally, the Organization?s lost revenue claimed under the program as an allowable cost was not reviewed and approved by a separate individual outside of the preparer. Cause ? The Organization did not have an internal control process in place to ensure review and approval was documented related to the calculation of the lost revenue claimed under the federal program and the report submitted to the Department of Health and Human Services (HHS) for Period 2. The Organization also did not have an internal control process in place to verify that all audit entries had been made to net patient service revenue prior to calculating lost revenues and allocated to the funds claiming lost revenue. The Organization did have an approved budget prior to March 27, 2020 for fiscal year 2020, but the approved budget did not cover the entire period of availability. Effect ? The reporting to HHS for Period 2 was considered incorrect. The Organization did not have a budget approved prior to March 27, 2020 for the entire period of availability. In addition, amounts reported were considered incorrect since patient revenue was not adjusted for audit entries or other sources claiming lost revenue. The impact of the audit entries would have been to decrease lost revenues by $814,217. Questioned Costs ? None. Had the Organization elected to use option iii to calculate lost revenues utilizing a methodology of comparing actual fiscal year 2020 activity to the fiscal year 2020 budget approved prior to March 27, 2020, and had patient revenues been adjusted for audit entries, lost revenues would have been $1,207,878 versus the $2,022,095 reported. However, only $81,000 of the reported lost revenues were used to claim PRF funds and the Organization still would have had sufficient lost revenue in excess of the amount claimed. Context ? Key line items were tested on the Period 2 HHS report. Repeat Finding from Prior Years ? No Recommendation ? We recommend the Organization implement procedures to ensure the lost revenue calculation claimed meet the requirements of the federal program. In addition, we recommend that the Organization enhance internal control policies to ensure that the report is reviewed and approved. Views of Responsible Officials ? Management agrees with the finding.