University HospitalNon-Profit

2022-001 Activities Allowed or Unallowed and Allowable Costs/Cost Principles / Types of Services Allowed or Disallowed, Cash Management, and Reporting U.S. Department of Health and Human Services: Passed through State of New Jersey, Department of Health: COVID-19 Epidemiology and Laboratory Capacity for Infectious Diseases (SARS-COV-2 Hospital Testing) Federal Grant Number and Years: PHLP21CHT017 (7/1/2021 ? 6/30/2022) Statistically Valid Sample: The sample was not intended to be, and was not, a statistically valid sample. Prior Year Findings: None Criteria: Activities Allowed or Unallowed and Allowable Costs/Cost Principles / Types of Services Allowed or Disallowed - Except where otherwise authorized by statute, costs must be adequately documented in order to be allowable under Federal awards (2 CFR Section 200.404). Cash Management - Except where otherwise authorized by statute, when non-federal entities are funded under the reimbursement method, costs must be adequately documented as paid prior to the date of the reimbursement request (2 CFR section 200.305(b)(3)) Reporting - In accordance with the grant agreement and the reporting requirements for State of New Jersey Department of Health (NJDOH), direct grants and pass-through funds are fulfilled utilizing a Report of Expenditures (ROE). ROEs are prepared and submitted quarterly in order to allow for relevant and reliable information to be provided to the Federal government or State of New Jersey for reimbursement and tracking purposes. The ROEs are the source documents for the grantee to prepare a schedule of expenditures of Federal awards (SEFA) for the period covered by the grantee?s financial statements in accordance with 2 CFR 200.502, Basis for determining Federal awards expended, for the SEFA. Additionally, in accordance with Federal requirements, a non-Federal entity shall maintain internal controls over Federal programs designed to provide reasonable assurance that transactions are executed in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award that could have a direct and material effect on a Federal program. Condition and Context: On a quarterly basis, University Hospital (the Hospital) prepares and reports to New Jersey Department of Health the program expenditures for Federal funding amounts on the ROE, which are then used to prepare the annual SEFA at the end of the fiscal year. The Hospital?s expenditures per the ROE were greater than the expenditures that were supported by the general ledger and accounting records, therefore, the Hospital submitted the ROE and claim towards the grant for reimbursement above the amount allowed by $405,971, due to a double counting of previously reimbursed costs. Further, the Hospital?s indirect costs charged were greater than the allowable amount by $3,514. The original amount reported on the SEFA by the Hospital and charged to the State was $3,142,428. The Hospital has adjusted the SEFA to account for allowable costs, which is $2,732,943. The Hospital?s policies and procedures to ensure compliance with the above compliance requirements did not include certain internal controls that were designed properly and operating effectively to ensure that the Hospital has adequate supporting accounting records for allowable costs claimed and reported on the ROE and SEFA. Cause: Management's review of the ROE did not identify the double counting of previously reimbursed costs, therefore, the review was not performed at the appropriate level of precision in accordance with its design. Effect: The Hospital overcharged the grant by $409,485. Questioned Costs: $409,485 Recommendation: We recommend that the Hospital strengthen its procedures to ensure that the quarterly ROEs include the correct amount of allowable expenditures based upon the general ledger and accounting records and reflected on the SEFA and that the review of the ROE is properly performed prior to submission for reimbursement.

While the Hospital has a process in place and internal control designed to ensure the completeness and accuracy of the SEFA and related disclosures, the review of the SEFA to identify grants with loan programs and related disclosures as part of that process was not operating effectively. The Hospital did not include the grant portion of the Hurricane Sandy Community Development Block Grant Disaster Recovery Grant (CDBG DR) ? Energy Resilience Bank (CFDA:14.269) on the SEFA and did not include the loan portion of the grant in the notes to the SEFA for the year ended June 30, 2020. This program and related disclosures were added to the SEFA upon identification from the auditor, and based on procedures performed, the SEFA was complete and accurate after these adjustments.

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