Kossuth Regional Health Center

Criteria or specific requirement: Management is responsible for establishing and maintaining effective internal control over the Schedule of Expenditures of Federal Awards (SEFA) and ensuring completeness of information presented. Condition: The Health Center did not have a process in place to prepare a complete and accurate SEFA, and the SEFA required adjustments or additions to be in conformity with the accounting principles generally accepted in the United States of America (GAAP) and Uniform Guidance. Context: The Health Center has not previously obtained federal awards sufficient to require an audit under Uniform Guidance, and therefore did not have formal procedures in place for preparation of a SEFA. Federal funding received came unexpectedly as a response to the COVID-19 pandemic, and the Health Center's focus was on response to the pandemic. All grant funds received, and related uses were tracked and reconciled to the general ledger, just not in the form of a SEFA with all required elements. Cause: The Health Center did not have formal procedures in place for SEFA preparation as this was the first year receiving federal awards sufficient to require an audit under Uniform Guidance. Effect: Certain corrections or additions to the SEFA were proposed during the audit. Health Center management reviewed and accepted the proposed corrections. Without corrections to the SEFA, the SEFA would have been misstated, which could affect the decision-making process for users of the SEFA. Repeat finding: No Recommendation: We recommend that management implement a process for preparing the SEFA and implement controls to ensure federal awards are not missed in the future, and that SEFA is fully reconciled to the general ledger at year-end. We recommend a thorough review of all grant agreements to capture all federal assistance listing numbers, pass-through awards, pass-through award numbers, and related expenditures that should be reported on the SEFA. Views of responsible officials: There is no disagreement with the audit finding.

Criteria or specific requirement: 2 CFR 200.303(a) states that the auditee must establish and maintain effective internal control over the federal award that provides assurance that the entity is managing the federal award in compliance with federal statutes, regulations, and conditions of the federal award. The Health Center had a formal policy in place around tracking of COVID-19 relief funds like PRF, but there was not necessarily formal documentation of controls and reviews occurring related to compliance with federal awards. Condition: The Health Center did not have documentation of controls or review processes occurring related to the use of federal awards or required reporting for federal awards. Eligible uses of federal awards were tracked in detail and reviewed, with formal approval documented on certain larger expenditures, but there was not a formal documented review process over whether expenditures were eligible under the federal award in all cases. Required reporting under the federal award was completed, but there was not a formal review or approval process in place. Context: The Health Center maintained detailed records of eligible uses of federal funds for tracking and required reporting purposes. The Health Center's CFO maintained this schedule as eligible uses of funds were identified throughout the organization, reviewed activity, and reconciled the schedule to the general ledger. There was not, however, documentation of a formal review or approval, outside of the schedule being maintained and reconciled. Similarly, the Health Center CFO completed the required reporting under the federal award based on the schedule discussed above, a lost revenue calculation, and other supporting documentation, but there was no formal review or approval process for that report. Management did also make regular reports to governance in monthly financial reports, including the use of COVID relief funds. These reports only covered more significant uses of funds and overall status updates on remaining funding, not a comprehensive report of all uses. The Health Center does have in place review processes and controls over all expenditures (AP, Payroll), they are just not designed specifically to consider compliance with federal programs.Cause: The Health Center has not previously received federal awards in an amount sufficient to require an audit under Uniform Guidance. Therefore, more formal controls and procedures around the use of = federal awards had not been in place. The Provider Relief Fund, and certain other federal funds received in response to the COVID-19 pandemic were an unexpected occurrence. As the relief funds were distributed to the Health Center, the focus of Health Center's management and governance was on responding to the pandemic, and tracking use of related relief funds, and not necessarily on incorporating formal policies and procedures due to the time sensitive nature of the pandemic. In addition, detailed guidance surrounding the Provider Relief Fund was not immediately available and changed quite frequently over the period of the aware, making it difficult for organizations to properly incorporate more formal policies and procedures. Effect: Without formal control and review processes in place over use of federal funds or required reporting under those awards, there is a greater risk of improper use of funds or misstatement in required reporting. Repeat finding: No Recommendation: We recommend that management implement more formal control process surrounding the use of federal awards where there is segregation between individuals identifying or proposing expenditures/uses of funds and an individual reviewing and approving that expenditure/use. We also recommend for any formal reporting required under federal awards that there be a formal review process where an individual is reviewing and approving the report who did not prepare the report. Documentation of review and approval should be retained in both cases. Views of responsible officials: There is no disagreement with the audit finding.