Ellsworth Municipal HospitalLocal Government

Federal agency: U.S. Department of Health and Human Services Federal program title: American Rescue Plan, Provider Relief Fund Assistance Listing Number: 93.498 Award Period: Reporting Period 4 for funds received prior to December 31, 2021, used through December 31, 2022 Type of Finding: • Significant Deficiency in Internal Control over Compliance 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 Hospital did not have documented formal controls and procedures over compliance with federal awards. Condition: The Hospital did not have documented formal review processes over the use of the federal awards or required reporting for the 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. Questioned Costs: None Context: The Hospital maintained detailed records of eligible uses of federal funds for tracking and required reporting purposes. The Hospital'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 Hospital 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 Hospital 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: Prior to the Provider Relief Fund (PRF) and ARP rural funding, the Hospital had 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 PRF, ARP, 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 Hospital, the focus of Hospital'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 award, 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.

Federal agency: U.S. Department of Health and Human Services Federal program title: Provider Relief Fund Assistance Listing Number: 93.498 Award Period: Reporting Period 1 for funds received prior to June 30, 2020, used through June 30, 2021 Type of Finding: ? Material Weakness in Internal Control over Compliance 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 Hospital 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. Questioned Costs: None Context: The Hospital 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 Hospital'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 Hospital 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. Hospital management reviewed and accepted the proposed corrections. Without corrections to the SEFA, the SEFA would have been materially 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.

Federal agency: U.S. Department of Health and Human Services Federal program title: Provider Relief Fund Assistance Listing Number: 93.498 Award Period: Reporting Period 1 for funds received prior to June 30, 2020, used through June 30, 2021 Type of Finding: ? Material Weakness in Internal Control over Compliance 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 Hospital did not have documented formal controls and procedures over compliance with federal awards. Condition: The Hospital did not have documented formal review processes over the use of the federal awards or required reporting for the 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. Various errors were identified in schedules utilized to track eligible expenses and calculate lost revenue prior to reporting to HRSA that were corrected, but these were identified through discussion with external auditors, not through internal control processes. Questioned Costs: None Context: The Hospital maintained detailed records of eligible uses of federal funds for tracking and required reporting purposes. The Hospital's Interim 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 Hospital Interim 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. A number of issues were identified in these schedules used to track the use of funds that were corrected prior to reporting, but they were not caught by the Hospital's internal control processes. 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 Hospital 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 Hospital 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 Hospital, the focus of Hospital'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.

Federal agency: U.S. Department of Health and Human Services Federal program title: Provider Relief Fund Assistance Listing Number: 93.498 Award Period: Reporting Period 1 for funds received prior to June 30, 2020, used through June 30, 2021 Type of Finding: ? Significant Deficiency in Internal Control over Compliance and Other Matters 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 Hospital did not have documented formal controls and procedures over compliance with federal awards and errors were identified in the reporting and eligible expenses submitted to HRSA. Condition: During our testing it was noted that eligible expenses reported to HRSA under PRF were overstated as a result of counting the same equipment purchase twice in the total reported. There were also errors in calculation of the estimated Medicare cost reimbursement to offset the total equipment purchases reported. Questioned Costs: $65,536 Context: There were formula errors in the spreadsheet used to accumulate eligible expenses for PRF for reporting purposes. These formula errors led to the same purchase of equipment being included in the total twice. The total purchase before applying any other sources of reimbursement was $66,457 and $65,536 after application of Medicare cost reimbursement estimate. There were also various formular errors in the calculation of the cost reimbursement applied against the capital purchases. Recalculating the estimated cost reimbursement results in $2,210 less that would have been offset against the capital purchases. Cause: The errors were the result of manual error. A more formal review or control process over compliance with the program may also have identified the error prior to reporting to HRSA. Effect: The errors resulted in overstatement of eligible expenses in the reporting submitted to HRSA, and therefore more PRF funds were retained than would have been if the error was corrected. 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. For schedules used to track eligible uses of grant funds, we would also recommend implementing check formulas where possible, to avoid issues stemming from formula errors. Views of responsible officials: There is no disagreement with the audit finding.

Federal agency: U.S. Department of Health and Human Services Federal program title: Provider Relief Fund Assistance Listing Number: 93.498 Award Period: Reporting Period 1 for funds received prior to June 30, 2020, used through June 30, 2021 Type of Finding: ? Significant Deficiency in Internal Control over Compliance and Other Matters 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 Hospital did not have documentation available to fully support calculations used in certain expenses. Condition: During our testing, we were not able to obtain supporting documentation matching the wage rates used in certain payroll calculations. Expenses were recalculated using supported average wage rates, resulting in differences to the amount reported to HRSA. Questioned Costs: $385 Context: For certain eligible payroll expenses utilized under PRF, there were calculations done utilizing average wage rates for personnel. In our testing this included hospital greeters, lab workers, and maintenance personnel. Sufficient information to support the average wages utilized in the calculation was not able to be obtained in our testing. Expenses were recalculated utilizing wage rate support provided, resulting in small differences in the estimated payroll expenses of $1,167. For other wage-related costs average wage rates or more recent wage rates were used in calculating eligible expense, rather than the wage rate in effect at the time of the expenditure. Recalculated expense resulted in a difference of $385 for our testing sample. Cause: The Hospital did not maintain sufficient documentation to support all calculations used for eligible PRF expenses, or the incorrect wage rate was utilized for calculating eligible payroll expense. The Interim CFO who prepared calculations is no longer with the Hospital. Effect: Without sufficient documentation retained to support all uses of eligible funds, issues can arise in external or regulator audits and there is a greater risk of noncompliance. Also, based on recalculation of eligible payroll expenses tested utilizing support provided by the Hospital, there is likely a small overstatement of eligible expenses reported to HRSA for PRF. Repeat finding: No Recommendation: We recommend for all uses of grant funds that the Hospital maintains sufficient documentation and/or explanation where an individual such as an auditor or regulator could recreate the calculation used or get comfort with the utilization of grant funds. Audits or requests for information from regulators can often come well after the date of the expenditure, and especially in the case of turnover, it can be difficult to recreate or track down supporting documentation after the fact. Views of responsible officials: There is no disagreement with the audit finding.