AUDUBON COUNTY MEMORIAL HOSPITALLocal Government

Criteria: A properly designed system of internal control over financial reporting includes the preparation of an entity's Schedule of Federal Awards (SEFA) by internal personnel of the entity. Management is responsible for establishing and maintaining internal control over financial reporting and procedures related to the fair presentation of the SEFA. Condition: The Hospital does not have an internal control system designed to provide for the preparation of the SEFA being audited. In conjunction with completion of our single audit, we were requested to draft the financial statements and accompanying notes to the financial statements including the SEFA. Cause: This deficiency is partially due to the limited resources in the financial reporting process. The outsourcing of these services is not unusual in an organization of your size. We realize that obtaining the expertise necessary to prepare the financial statements, including all necessary disclosures like the schedule of federal awards, in accordance with GAAP, can be considered costly and ineffective. Effect: The effect of this condition is that the year‐end financial reporting is prepared by a party outside of the Hospital. The outside party does not have the constant contact with ongoing financial transactions that internal staff have. This control deficiency could result in misstatements to the SEFA. Recommendation: It is the responsibility of the Hospital management and those charged with governance to make the decision whether to accept the degree of risk associated with this condition because of cost or other considerations. We recommend that management continue reviewing operating procedures in order to obtain the maximum internal control over financial reporting possible under the circumstances to enable staff to draft the SEFA internally. Views of Responsible Officials: Management agrees with the finding. However, management feels that committing the resources necessary to remain current on reporting requirements and corresponding footnote disclosures would lack benefit in relation to the cost, but will continue to evaluate on a regular basis.

U.S. Department of Health and Human Services (HHS) Direct Program: COVID-19 Provider Relief Fund - 93.498 Criteria or Specific Requirement ? Reporting (45 CFR 75.342) and Activities Allowed/Unallowed and Cost Principles (Pub L. No. 116-136, 134 Stat. 563 and Pub L. No. 116-139, 134 Stat. 622 and 623). The Provider Relief Fund (PRF) was established in the Coronavirus Aid, Relief, and Economic Security Act (CARES Act, P.L. 116-136) to reimburse, through grants or other mechanisms, eligible health care providers for increased expenses or lost revenue attributable to Coronavirus Disease (COVID-19). Entities that received more than $10,000 (either one time or in the aggregate) are required to report the uses of their funds, including the lost revenue reimbursement and documentation of how the lost revenue was calculated. In addition, management is responsible for establishing and maintaining effective internal control over costs directly and indirectly charged to federal awards. Condition ? The Hospital claimed and reported COVID-19-related capital expenditures within the HHS Provider Relief Fund portal that were eligible to be reimbursed via other sources and also claimed and reported a COVID-19 related capital expenditure for an ongoing renovation project which was not complete by the end of the period of availability. Questioned Costs ? $859,970 of capital expenses were charged and reported under the COVID-19 Provider Relief Program (ALN 93.498) which were available to be reimbursed by other sources or related to unfinished capital projects.This was calculated by taking the amount of the construction in progress item and adding this to the total amount of remaining COVID-19 capital expenditures multiplied by the Hospital's internally-calculated Medicare reimbursement rate. Context ? Upon testing the compliance requirements of this program, it was determined certain capital expenditure items were being claimed and reported incorrectly as they were not "Medicate-affected" to reduce the portion of expense to be reimbursed by another source or were improperly charged as the project was not complete by the end of the period of availability as is consistent with existing guidance provided by HHS. Effect ? The Hospital submitted and reported expenses under the PRF program which did not adhere to the terms and conditions of the award. Cause ? The guidance provided by HHS to providers across the country as to how to report their COVID-19-related expenses and lost revenues is, at times, difficult to comprehend and apply. The Hospital incorrectly applied guidance. Identification as a Repeat Finding ? Not applicable. Recommendation ? The Hospital should continue to try to improve their understanding of the nuances within the guidance as it relates to charging and reporting direct expenses. Additionally, the Hospital should implement additional controls over future reporting periods to help ensure guidance is followed. View of Responsible Official and Planned Corrective Actions ? The Hospital is going to continue and improve its understanding of the guidance related to this type of reporting and work with their external advisors to ensure future portal submissions are compliant with said guidance.

U.S. Department of Health and Human Services (HHS) Direct Program: COVID-19 Provider Relief Fund - 93.498 Criteria or Specific Requirement ? Reporting (45 CFR 75.342) and Activities Allowed/Unallowed and Cost Principles (Pub L. No. 116-136, 134 Stat. 563 and Pub L. No. 116-139, 134 Stat. 622 and 623). The Provider Relief Fund (PRF) was established in the Coronavirus Aid, Relief, and Economic Security Act (CARES Act, P.L. 116-136) to reimburse, through grants or other mechanisms, eligible health care providers for increased expenses or lost revenue attributable to Coronavirus Disease (COVID-19). Entities that received more than $10,000 (either one time or in the aggregate) are required to report the uses of their funds, including the lost revenue reimbursement and documentation of how the lost revenue was calculated. In addition, management is responsible for establishing and maintaining effective internal control over costs directly and indirectly charged to federal awards. Condition - The Hospital is required to prepare and submit period one Provider Relief Fund reporting to HHS. This report is to be prepared using accurate financial information; however, the Hospital incorrectly calculated their COVID-19-related lost revenues. Questioned Costs ? None Context ? Upon testing the period one Provider Relief Fund report and total lost revenue calculation, it was determined that the lost revenues were being reported incorrectly and not consistent with existing guidance provided by HHS. The Hospital did not properly include 340(b) revenues or account for third party settlements/adjustments within the lost revenue calculations resulting in a material error for the quarters reported. This included the use of inaccurate revenue reports that did not agree with the accrual basis net patient service revenue resulting in under-stated lost revenue for period one reporting. Effect ? Lost revenue was not accurately calculated or reported. Cause ? The guidance provided by HHS to providers across the country as to how to report their COVID-19-related expenses and lost revenues is, at times, difficult to comprehend and apply. The Hospital incorrectly applied guidance. Identification as a Repeat Finding ? Not applicable. Recommendation ? The Hospital should continue to improve its understanding of the guidance related to this type of reporting. Policies and procedures over federal grant reports should be modified to ensure reports are prepared using complete and accurate information. View of Responsible Official and Planned Corrective Actions ? The Hospital is going to continue and improve its understanding of the guidance related to this type of reporting and work with their external advisors to ensure future portal submissions are compliant with said guidance.