Hancock County Health SystemNon-Profit

2021-002 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 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 System did not have documented formal controls and procedures over compliance with federal awards for all expenditures. Condition: The Health System did not have documented formal review processes over the use of the federal awards for all expenditures. Eligible uses of federal awards were tracked in detail and reviewed, with formal approval documented on certain 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 Health System maintained detailed records of eligible uses of federal funds for tracking and required reporting purposes. The Health System's Controller and 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 on all expenditures, outside of the schedule being maintained and reconciled. Similarly, the Health System 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 and board approval for certain uses of funds. These reports generally covered significant uses of funds and overall status updates on remaining funding, not a comprehensive report of all uses. The Health System 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 System 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 System, the focus of Health System'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 all cases. Views of responsible officials: There is no disagreement with the audit finding.

2021-003 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 Health System 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 reporting certain supply expenses where the Health System had received the supplies and was invoiced for them, but ultimately not required to pay the vendor for those invoices. Questioned Costs: $139 Context: As part of our testing 3 of 30 general disbursements tested were determined to be supply expenses the Health System never had to pay for. Total amount with this issue identified in our sample was $139. This related to one specific vendor invoice where certain expenses previously invoiced were ultimately credited and the Health System was not required to pay. These supplies were purchased in March of 2020, but the credit didn't ultimately occur until March of 2022. Cause: When originally reported, the Health System anticipated these were COVID-related supply expenses that would be paid for. The expense credit that occurred didn't happen until March of 2022, well after the Health System had already reported eligible expenses under PRF to HRSA. Effect: These supply expenses that ultimately were not an expense incurred by the Health System 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: While these circumstances would have been difficult to identify and avoid with any control processes in place, we recommend that management implement more formal control processes surrounding the use of federal awards. If there are situations where payment of an invoice is still uncertain, the reporting of those expenses could be delayed until the situation is resolved. Views of responsible officials: There is no disagreement with the audit finding.