COVENANT HEALTHCARE SYSTEM AND SUBSIDIARIESNon-Profit

Assistance Listing Number, Federal Agency, and Program Name - 93.498, U.S. Department of Health and Human Services, COVID-19: Provider Relief Fund and American Rescue Plan Rural Distribution (PRF) Federal Award Identification Number and Year - N/A, 2022 Pass-through Entity - N/A - Direct funded Finding Type - Material weakness and material noncompliance with laws and regulations Repeat Finding - No Criteria - Per the Provider Relief Fund Distributions and American Rescue Plan Rural Distribution Post-Payment Notice of Reporting Requirements dated October 27, 2022, allowable expenses paid with general and targeted PRF distributions may be reported as a use of PRF funds, provided that the expenses have not been reimbursed by another source. Additionally, per the HRSA PRF Reporting Portal User Guide, "the reporting entity must report the use of these payments by indicating the quarterly expenses reimbursed for these payments" once these expenses have been entered, the portal will automatically calculate an unreimbursed expense amount for any PRF expenses entered that exceed PRF funding received. As a result of this calculation, the directions from HRSA explicitly indicate that users are not to input cumulative expenses in each submission, but only new expenses being applied in the current portal submission. Condition - Covenant HealthCare's controls in place for reporting submissions did not identify that guidelines were not followed related to the inclusion of expenses that had previously been reimbursed. Questioned Costs - None Identification of How Questioned Costs Were Computed - N/A - Refer to context below for additional information. Context - The reporting submission for health care expenses did not follow the guidelines published by the U.S. Department of Health and Human Services (HHS). Covenant HealthCare's Period 2 portal submission overstated expenses by $2,777,125. Included within Covenant HealthCare's Period 2 portal submission were expenses of $2,448,139 that were already reimbursed by the PRF within the Period 1 portal submission, and expenses of $328,986 that were duplicated within the Period 2 portal submission. These expenses should not have been included in the Period 2 submission. Because Covenant HealthCare had additional health care expenses and lost revenue it could have used instead of these expenses, Covenant HealthCare still would have qualified to recognize all PRF payments received in Period 2. Cause and Effect - Appropriate review of the expenses reported was not completed to ensure that only eligible expenses were charged to the award. As a result, the report submitted was inaccurate, but the schedule of expenditure of federal awards was not impacted.Recommendation - We recommend Covenant HealthCare implement controls, including levels of review, to ensure reports are completed and submitted in accordance with the guidelines established by HHS. Views of Responsible Officials and Corrective Action Plan - Covenant Healthcare accepts the finding and will implement additional layers of review regarding expense submission to ensure that the reports are submitted within the established guidelines. As stated above, the lost revenue from the COVID-19 pandemic more than offsets this finding and there are no resulting PRF recognition issues.

Assistance Listing Number, Federal Agency, and Program Name - 93.498, U.S. Department of Health and Human Services, COVID-19: Provider Relief Fund and American Rescue Plan Rural Distribution (PRF) Federal Award Identification Number and Year - N/A, 2022 Pass-through Entity - N/A - Direct funded Finding Type - Material weakness and material noncompliance with laws and regulations Repeat Finding - No Criteria - Per the Provider Relief Fund Distributions and American Rescue Plan Rural Distribution Post-Payment Notice of Reporting Requirements dated October 27, 2022, allowable expenses paid with general and targeted PRF distributions may be reported as a use of PRF funds. Allowable expenses must be determined using the PRF recipient's basis of accounting. Condition - Covenant HealthCare's controls in place for reporting submissions did not identify that guidelines were not followed related to the reporting of expenses. Questioned Costs - None Identification of How Questioned Costs Were Computed - N/A - Refer to context below for additional information. Context - The reporting submission for health care expenses did not follow the guidelines published by the U.S. Department of Health and Human Services (HHS). Covenant HealthCare included approximately $1,450,000 of expenses within the PRF portal that were not calculated in accordance with the post-payment notice of reporting and the HRSA PRF Reporting Portal User Guide. Because Covenant HealthCare had additional health care expenses and lost revenue that could have been used instead of these expenses, Covenant HealthCare still would have qualified to recognize all PRF payments received in Period 2. Cause and Effect - Appropriate review of the expenses reported was not completed to ensure that the expenses were properly reported. As a result, the report submitted was inaccurate, but the schedule of expenditure of federal awards was not impacted. Recommendation - We recommend Covenant HealthCare implement controls, including levels of review, to ensure reports are completed and submitted in accordance with the guidelines established by HHS. Views of Responsible Officials and Planned Corrective Actions - Covenant Healthcare accepts the finding and will implement additional layers of review regarding expense submission to ensure that the reports are submitted within the established guidelines. As stated above, the lost revenue from the COVID-19 pandemic more than offsets this finding and there are no resulting PRF recognition issues.