Finding Text
Finding No. 2020-003 – Recordkeeping
Federal Program
Assistance Listing 21.019 – Coronavirus Relief Fund – COVID-19
Name of Federal Agency
U.S. Department of Treasury
Pass-through entity
Puerto Rico Treasury Department
Category
Significant deficiency in internal controls over compliance / Non-compliance
Compliance requirements
Reporting
Criteria
The grant agreement with the pass-through entity establishes in section 2.3, Recordkeeping, the following: “Grantee will maintain its books and records in a manner that will provide Grantor with sufficient detail to review Grantee’s receipts and expenditures relating to the Grant.” Also, the grant agreement establishes in its Exhibit A, Grant Plan, Reporting, the following: “By the 15th day of each month, the Grantee will submit a Use of Funds Grant Report for the prior month’s expenses. The financial report will provide a detailed explanation of how the Grant funds were spent.”
Condition
The federal grant expenditures recorded in the financial statements and reported monthly to the pass-through entity were not duly reconciled to source and other supporting documents, which resulted in performing such reconciliation at the time when the single audit process was conducted. It also resulted in changes to the major program expenditures during the completion of the single audit, to properly provide such supporting documents duly reconciled to the pass-through entity as part of the closeout process. As a result, the monthly reports of Use of Funds required by the grant agreement were amended and re-submitted to the pass-through entity on March 2, 2022.
Cause
In response to the global pandemic of COVID – 19, the government of the United States enacted various laws to provide grants and support to hospitals and other healthcare entities responding to the coronavirus pandemic, among others, some of which have never been subject to a single audit process. Furthermore, the rules and regulations for the management, reporting and allowability of the federal grants were being developed and published at the same time, and even after, the entities were receiving the federal awards. Also, the publishing of the Office of Management and Budget’s Compliance Supplement addendum for single audits was delayed until late December 2020. This caused confusion among all the recipients of the federal awards. The Hospital interpreted the methods allowed for reporting expenses with the information available at the time of the receipt of the federal grants and applied a methodology to report expenditures in line with such interpretation.
Effect
The absence of source documents duly reconciled to expenses reported to the pass-through entity may be considered by the grantor and the pass-through entity as a noncompliance with the above-mentioned criteria and could lead to administrative sanctions. Also, the monthly reports submitted to the pass-through entity had to be amended and resubmitted by the Hospital.
Questioned cost
None
Context
There was an overstatement on the Coronavirus Relief Fund expenses initially reported to the pass-through entity amounting to $433,463 out of a total of allowable expenditures of $5,072,031, or 8.55% of total expenditures that were finally reported for the period from March 1, 2020 through December 31, 2020.
Identification of a repeat finding
This is not a repeat finding.
Recommendation
The Hospital should continue to monitor and review guidelines for federal awards under the CARES Act to ensure it is up to date on the applicable requirements and changes therein. In addition, the Hospital should consider consulting with AAFAF when available guidance may be subject to interpretation or when new awards, if any, are received.
Views of responsible officials and planned corrective actions
The Hospital’s management and responsible officers agree with this finding. Please refer to the corrective action plan section for the Hospital’s response on pages 57 to 59.