The Cooper Health SystemNon-Profit

Finding 2021-001 Allowable Costs/Cost Principles Identification of the federal program: Federal Agency: U.S. Department of Health and Human Services (HHS), Health Resources and Services Administration (HRSA) Assistance Listing No.: 93.498 COVID-19 Provider Relief Fund and American Rescue Plan (ARP) Rural Distribution Award Period of Performance: January 1, 2020 ? December 31, 2021 Criteria or Specific Requirement (including statutory, regulatory or other citation): 2 CFR Section 200.303 of the Uniform Guidance states the following regarding internal control: ?The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in ?Standards for Internal Control in the Federal Government? issued by the Comptroller General of the United States or the ?Internal Control Integrated Framework?, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).? The terms and conditions of the award require the recipient to submit reports to the secretary of HHS for each reporting period to ensure compliance with conditions that are imposed on the payment, and such report shall be in such form, with such content, as specified by the secretary of HHS in program instructions directed to all recipients. Condition: Management did not have sufficiently designed internal controls to review the supporting documentation underlying the expenditure data submitted in the HHS portal for the Provider Relief Fund (PRF). Due to a calculation error which was not detected, the amount of fringe benefits expenses reported to HRSA in the HHS portal did not agree to the amounts recorded in the general ledger. Cause: Management entered incorrect information into the HHS portal as the formula used to calculate fringe benefits expense was incorrect. The calculation was intended to be 23% of payroll expense and instead was calculating 123% of payroll expense. Management?s internal control over the review and approval of the HHS portal data did not prevent or detect this calculation error. Effect or potential effect: A deficiency in internal control over the review of the expenditure data submitted in the HHS portal could result in a misstatement of the amounts reported in the HHS portal. Expenses in the HHS portal were overstated as compared to the amount recorded in the general ledger. Questioned Costs: $5,743,328, representing the incorrectly calculated portion of fringe benefits expense reported in the HHS portal (prior to consideration of other eligible PRF activity for Assistance Listing No. 93.498). Context: During our testing of PRF expenditures as reported in the HHS portal, we identified that the formula used by management to calculate fringe benefits expense was incorrect. The calculation was intended to be 23% of payroll expense and instead was calculating 123% of payroll expense, resulting in $5,743,328 of incorrectly determined fringe benefits expense. Total PRF activity reported in the HHS portal during the period of availability for Reporting Period 1 (January 1, 2020 through June 30, 2021) and PRF Reporting Period 2 (January 1, 2020 through December 31, 2021) for Assistance Listing No. 93.498 included lost revenues of approximately $116.5 million and expenses of approximately $27.2 million. PRF general and targeted distributions received from April 10, 2020 through December 31, 2020 for PRF Reporting Periods 1 and 2 totaled approximately $74.9 million. The PRF-eligible expenses and lost revenues incurred during the period of availability are in excess of the general and targeted distributions received and, therefore, the amount presented in the accompanying schedule of expenditures of federal awards is limited to the amount of such distributions. Lost revenues incurred during the period of availability exceeded the PRF general and targeted distributions received by approximately $41.6 million, which is in excess of the incorrectly calculated fringe benefits expense. Identification as a repeat finding, if applicable: The finding is not a repeat finding. Recommendation: Management should correct the fringe benefits expense calculation error in the next PRF reporting period. In addition, management should enhance internal control over the review and approval of the data used to calculate PRF-eligible expenses and the report submission for the HHS portal. View of Responsible Officials: Management agrees with the finding. Management will correct the expense reporting error in the next HHS portal reporting submission period. Management has also enhanced its formal review and approval process over the data used to calculate expenses.