Finding 962889 (2023-002)

Material Weakness
Requirement
AB
Questioned Costs
$1
Year
2023
Accepted
2024-03-27

AI Summary

  • Core Issue: The Hospital improperly spent federal grant funds on a retention bonus not allowed in the budget, leading to a material weakness in compliance.
  • Impacted Requirements: Costs must align with the approved budget and federal regulations; the retention bonus condition violated these requirements.
  • Recommended Follow-Up: Implement stronger procedures to ensure compliance with grant budgets and federal cost principles; engage a CPA for future federal award reviews.

Finding Text

Program Information Federal Organization U.S Department of Health and Human Services Assistance Listing Numbers 93.354 Public Health Emergency Response: Cooperative Agreement for Emergency Response: Public Health Crisis Response Award Numbers HC319700 Criteria [X] Compliance Finding [ ] Significant Deficiency [X ] Material Weakness Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, Subpart F, Compliance Supplement, Part 3, Compliance Requirement A, Activities Allowed or Unallowed, and Compliance Requirement B, Allowable Costs/Cost Principles, requires the cost to be spent on budgeted allowable costs within the grant document. Our testing of the September 30, 2023, costs noted a retention bonus not allowed in grant budget and grant expenditures in amounts different than the approved amounts in the grant documents. Condition The retention bonus was given under the condition that the employee will have to pay back the bonus if the employee decides to part ways with Franklin within the time period stated in the contract. This period was greater than the period of availability for the funds under the grant agreement. This condition is not allowable under federal regulations. Context This finding appears to be isolated. Cause The Hospital’s internal controls over compliance were not adequate to prevent or detect errors in how grant funds were spent and cost charged to the federal award. Effect The federal award funds were spent on non-allowable costs. Questioned Costs Questioned cost for retention bonus is $275,585. Recommendation We recommend the Hospital implement procedures to ensure federal awards are expended based on budgets outlined in the grant documents and the Federal cost principles are followed during the expenditure of federal awards. Views of responsible officials and planned corrective action The Hospital acted only under the express authority and permission of the granting body who pre-approved this activity. The Hospital reasonably took that approval as a signature of a compliant activity. Despite the finding on grounds of activity dates, the activities were none the less aligned to the purposes and aims of the funding opportunity, and no intent to operate outside of compliance was present. For federal grants going forward, the Hospital will utilize a CPA experienced in federal awards to review our proposal activities for ongoing compliance.

Categories

Questioned Costs Allowable Costs / Cost Principles Material Weakness Significant Deficiency

Other Findings in this Audit

  • 386447 2023-002
    Material Weakness
  • 386448 2023-003
    Material Weakness
  • 962890 2023-003
    Material Weakness

Programs in Audit

ALN Program Name Expenditures
10.766 Community Facilities Loans and Grants $9.30M
93.354 Public Health Emergency Response: Cooperative Agreement for Emergency Response: Public Health Crisis Response $760,689
93.323 Epidemiology and Laboratory Capacity for Infectious Diseases (elc) $231,197
93.155 Rural Health Research Centers $2,002