Finding Text
Finding 2022-003 Program Name: COVID-19 Provider Relief Fund and American Rescue Plan (ARP) Rural Distribution Federal Assistance Listing Number: 93.498 Federal Agency: U.S. Department of Health and Human Services Type of Finding: Internal Control, Significant Deficiency Compliance Requirement: Allowable Costs Questioned Cost: $0 Condition: In Provider Relief Fund reporting period 2, Moore Center Services, Inc., reported expenditures of $210,729 for insurance policy premium payments for the policy period of July 1, 2021 to June 30, 2022. Under GAAP accrual accounting, the insurance policy premiums would be amortized over the policy period of July 1, 2021 to June 30, 2022, resulting in 6 months of ineligible expense outside the period of availability ending December 31, 2021. Criteria: The Provider Relief Funds were provided under the Coronavirus Aid, Relief, and Economic Security Act (Pub. L. No. 116-136, 134 Stat. 563) and are to be used to prevent, prepare for, and respond to coronavirus and that the funds shall reimburse the recipient only for health care related expenses or lost revenues that are attributable to coronavirus. The Provider Relief Fund Frequently Asked Questions (FAQs) state: ?Providers must follow their basis of accounting (e.g., cash, accrual, or modified accrual) to determine expenses.? Cause: The Provider Relief Fund Post-Payment Notice of Reporting Requirements states that premiums paid for property, malpractice, business insurance, or other insurance relevant to operations are an allowable expense. Therefore, the Agency applied the insurance premiums paid prior to the end of the period of availability of December 31, 2021 to the funding. However, the Agency, did not take into account the accrual basis of accounting for the expenditures of these insurance premiums. Effect: The Agency reported expenditures of $210,729 for insurance in reporting period 2, for which a portion would have been expensed under accrual accounting after the period of availability, resulting in a reportable finding. Based on accrual accounting, the Agency could have reported $275,042 of insurance expense during the period of availability from January 1, 2020 to December 31, 2021. This is based on the prior year?s policy that would have been amortized during the period of availability under accrual accounting. This resulted in insurance expense of $64,313 not claimed as an allowable cost. Recommendation: Management should implement procedures to ensure grant funds are expended as needed for allowable costs during the applicable periods of availability based on accrual accounting. View of Responsible Officials: Management will review all invoices to determine allowability under the specific grant?s rules and regulations and ensure grant funds are expended during the period of availability. Management felt that the insurance expenditures for the policy period July 1, 2020 to June 30, 2021, which were expensed during the period of availability, were comparable to those of the new policy year, which were paid, therefore the payment of the 2022 insurance was claimed on the reporting rather than completing an analysis of GAAP expenses.