Finding Text
Criteria In accordance with the Federal Emergency Management Agency (FEMA) Public Assistance Program and Policy Guide, version 2.1, Chapter 2: V.P., costs are not eligible for reimbursement if an entity received funding from another source (i.e. patient revenue, insurance, etc.) for the same work that FEMA funded. This is referred to by FEMA as ?duplication of benefits?. Additionally, FEMA issued a Memorandum on February 15, 2023, titled ?Hypothetical Reasonable Applicant Methods? that illustrates the basic elements of a method for accounting for (estimating) the amount of duplication of benefits within net patient service revenue. Condition and Context In July 2023, the Hospital received an Applicant Review Memo from the Homeland Security Operational Analysis Center (HSOAC) that it has conducted a review for duplication of benefits and summarizing a recommendation for the reduction of the Hospital?s COVID-19 Public Assistance (PA) equipment expenditures within previously obligated FEMA projects, in the amount of $1.2 million. The amount in question was derived from a calculation provided by the HSOAC, which determined a disallowable threshold percentage of equipment using the Hospital?s most recent pre-pandemic year (2019) and calculating a proportion of equipment expenses to total patient care revenue. This threshold percentage is then multiplied by total patient care revenue for the fiscal years ending December 31, 2020 and 2021, respectively, to determine the potential disallowable costs. The Hospital believes that there has been no duplication of benefits based on the use of an alternative methodology. The Hospital intends to appeal the disallowed costs. Based on the fact that FEMA allows for alternative methods to calculate the potential duplication of benefits amount and the lack of clarity of what constitutes a ?Hypothetical Reasonable Applicant Method? in the FEMA guidance, we are unable to obtain sufficient and appropriate audit evidence as to whether the disallowed costs of $1.2 million are allowable. Questioned costs Cannot be determined. Statistical Sample Not applicable Repeat Finding A similar finding was not reported in the prior year audit. Recommendation We recommend the Hospital work with FEMA to identify an acceptable methodology to calculate (estimate) the amount (if any) of the duplication of benefits. Additionally, we also recommend the Hospital follow the FEMA appeals process to resolve their disagreement of the disallowed (deobligated) costs. View of Responsible Official Management agrees with the auditor?s recommendation and will work with FEMA to identify an acceptable methodology to calculate if any duplication of benefits. The Hospital will also appeal the disallowed costs presented by FEMA.