Finding Text
Federal Program – COVID-19 – Provider Relief Fund, ALN 93.498, Award Year 2021
Criteria or Specific Requirement – Activities Allowed/Allowable Costs and Reporting – Pub. L. No. 116-136, 134 Stat. 563.
Condition – Expenditures reported to Health Resources & Services Administrator (HRSA) were not in accordance with Pub L. No. 116-136, 134 Stat. 563.
Questioned Costs – $1,367,491 was the total amount of expenses determined to be over-reported for the federal program. This was calculated by multiplying the Authority’s estimated Medicare cost reimbursement rate (68.99%) by total expenses reported.
Context – The Authority included expenditures that were reimbursed or should be reimbursed based on recaptured depreciation reimbursed by Medicare under a cost-reimbursement methodology. HRSA frequently asked questions (FAQs) state that “if the full cost were reimbursed based upon” such a method, “there is nothing eligible to report as a Provider Relief Fund (PRF) or ARP Rural expense attributable to coronavirus because the expense was fully reimbursed by another source.” While this specific FAQ was not added until October 2021, it was a clarifying FAQ and guidance had previously been provided that cost-reimbursed expenses would not also be eligible for PRF reimbursement.
Effect – Expenditures reported to HRSA were overstated.
Cause – Changes to FAQs and guidance from HRSA and management’s inexperience with the program reporting requirements resulted in a material error of expenditures under the program.
Identification as a Repeat Finding, if Applicable – N/A
Recommendation – Management should implement documented internal control processes specific to understanding and reporting of program expenditures, including review and oversight of data uploads prior to submission.
Views of Responsible Officials and Planned Corrective Actions – Management disagrees with the above finding and believes that all expenditures reported to HRSA were fully allowable. The criteria for use of the PRF changed subsequent to the receipt and expenditure by the Hospital. Management utilized the best information available at the time, during the early days of the public health emergency, in its use of the funds. Management consistently reviews the FAQs for PRF distributions maintained by HRSA for guidance on changes and clarification to the rules surrounding the program. In October 2021—long after most critical access hospitals (CAH), including the Hospital, had expended their initial PRF distributions—HRSA added an FAQ addressing cost-based reimbursement, specifically, “How does cost-based reimbursement relate to my Provider Relief Fund payment?” HRSA subsequently has made minor modifications to the language of this FAQ—most recently on October 27, 2022—but the substantive guidance has remained the same. Unlike electronic health record capital equipment, for which specific cost report guidance was provided, no such guidance was provided for assets purchased to prevent, prepare for, and respond to COVID-19. Neither Prospective Payment System (PPS) nor CAH facilities were required to offset the full amount of funds received because they were considered grants, consistent with the treatment of PRF distributions.
Auditor’s Response – The Authority included expenditures that were reimbursed or should be reimbursed based on recaptured depreciation reimbursed by Medicare under a cost reimbursement methodology. HRSA FAQs state that “if the full cost were reimbursed based upon” such a method, “there is nothing eligible to report as a Provider Relief Fund or ARP Rural expense attributable to coronavirus because the expense was fully reimbursed by another source.” While this specific FAQ was not added until October 2021, it was a clarifying FAQ and guidance had previously been provided that cost-reimbursed expenses would not also be eligible for PRF reimbursement.