SOUTH DAKOTA ASSOCIATION OF HEALTHCARE ORGANIZATIONS

2020-003 Department of Health and Human Services Federal Financial Assistance Listing #93.889 U3REP200648-01, 4/10/2020 ? 4/9/2025 COVID-19: National Bioterrorism Hospital Preparedness Program Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Period of Performance Significant Deficiency in Internal Control over Compliance Criteria: The Association is required to have procedures in place to ensure that federal awards are expended only for allowable costs in accordance with Subpart E ? Cost Principles of the Uniform Guidance. Allowable costs are supported by appropriate documentation and correctly charged as to account, amount, and period. 2 CFR 200.303(a) establishes 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 the terms and conditions of the federal award. 2 CFR 200.430(i) establishes the standards for documentation of personnel expenses including charges to Federal awards for salaries and wages. Charges must be based on records that accurately reflect the work performed with the records meeting the following standards: a) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated. b) Be incorporated into the office records of the non-Federal entity. c) Reasonably reflect the total activity for which the employee is compensated by the non-Federal entity, not exceeding 100% of compensated activities. d) Encompass both federally assisted and all other activities compensated by the non-Federal entity on an integrated basis, but may include the use of subsidiary records as defined in the non-Federal entity?s written policy. e) Comply with the established accounting policies and practices of the non-Federal entity. f) Support the distribution of the employee?s salary or wages among specific activities or cost objectives. g) Budget estimates alone do not qualify as support for charges to Federal awards, but may be used for interim accounting purposes. Condition: In our sample of expenditures selected for testing, we noted the following items: a) No documentation to support a formal review of employee timecards (tested 10 timecards). b) No documentation to support a formal review of the calculated cost per hour rate which is used to allocate payroll expenses to the federal award (2 instances). c) No documentation to support a formal review of the indirect costs calculated and allocated to the federal award (tested 3 indirect cost allocations). d) Timecard did not properly reflect the employees total federal and nonfederal hours being paid during the month (4 instances). Cause: Management had an informal, undocumented review process in place over timecards and the calculated cost per hour rate. In addition, management was unaware of the time and effort requirement under Uniform Guidance. Effect: Costs may be improperly allocated under the federal award if timecards do not properly include total federal and nonfederal hours worked. In addition, without a formal documented review and approval of employee timecards and calculated cost per hour rate, demonstrating that costs comply with laws, regulations, and other compliance requirements is difficult. Questioned Costs: None reported Context: A non-statistical sample of 10 out of 47 payroll transactions were selected for testing, which accounted for $8,147 of $23,260 of federal payroll program expenditures. In addition, a non-statistical sample of 3 out of 15 indirect cost allocations were selected for testing, which accounted for $3,696 of $6,829 of indirect cost expenditures. Repeat Finding from Prior Year: No Recommendation: We recommend management implement formal review processes and controls and implement procedures to support time and effort requirements to comply with the federal requirements noted above. Views of Responsible Officials: Management is in agreement.

2020-004 Department of Health and Human Services Federal Financial Assistance Listing #93.889 U3REP200648-01, 4/10/2020 ? 4/9/2025 COVID-19: National Bioterrorism Hospital Preparedness Program Cash Management Significant Deficiency in Internal Control over Compliance Criteria: 2 CFR 200.303(a) establishes 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 the terms and conditions of the federal award. Condition: During testing of cash draw requests, we identified there to be no documentation to support a formal review and approval of cash draw requests prior to drawing down of funds through the Payment Management System. Cause: Management had an informal, undocumented review process in place over cash draw requests. Effect: Inadequate documentation of controls over this area of compliance could result in a reasonable possibility that funds are drawn down and held by the Association for an extended period of time or drawn at the incorrect amount. Questioned Costs: None reported Context: A non-statistical sample of 3 out of 6 cash draw requests were selected for testing. Repeat Finding from Prior Year: No Recommendation: We recommend management document their internal review processes and controls to demonstrate compliance with the federal requirements noted above. Views of Responsible Officials: Management is in agreement.

2020-005 Department of Health and Human Services Federal Financial Assistance Listing #93.889 U3REP200648-01, 4/10/2020 ? 4/9/2025 COVID-19: National Bioterrorism Hospital Preparedness Program Subrecipient Monitoring Significant Deficiency in Internal Control over Compliance Criteria: Under 2 CFR 200.331 and 2 CFR 200.332, the Association is required to ensure that every subaward is clearly identified as a subaward and includes all the required elements. Under 2 CFR 200.213, the Association is required to have procedures in place to ensure they are not making subawards to parties that are suspended or debarred. In addition, 2 CFR 200.303(a) establishes 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 the terms and conditions of the federal award. Condition: We identified the following: a) The subaward agreements did not include all required elements as noted in the regulations (reviewed 9 subaward agreements). b) Documentation was not retained to support management?s initial review of suspension and debarment for subrecipients; however, review of suspension and debarment was later performed by management and documentation was retained to support subrecipients were not suspended or debarred (7 instances). c) Suspension and debarment was reviewed for subrecipients; however, the DUNS number within the search did not agree to the DUNS number within the subrecipient agreement (2 instances). d) No identified controls over suspension and debarment. Cause: Management was not aware of all the required elements to be included within the subrecipient agreements and management had an informal, undocumented process when subrecipients were reviewed for suspension and debarment. Effect: Inadequate documentation of controls over this area of compliance resulted in a reasonable possibility that the Association would not be able to detect and correct noncompliance in a timely manner. Questioned Costs: None reported Context: A non-statistical sample of 9 out of 50 subrecipients were selected for testing. Repeat Finding from Prior Year: No Recommendation: We recommend that regulations regarding subrecipient monitoring, including review of subrecipients for suspension and debarment, be reviewed to ensure that processes are properly designed, and adequate monitoring controls are implemented. Views of Responsible Officials: Management is in agreement.

2020-006 Department of Health and Human Services Federal Financial Assistance Listing #93.889 U3REP200648-01, 4/10/2020 ? 4/9/2025 COVID-19: National Bioterrorism Hospital Preparedness Program Reporting Material Weakness in Internal Control over Compliance and Noncompliance Criteria: 2 CFR 200.303(a) establishes 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 the terms and conditions of the federal award. 2 CFR Part 170 establishes requirements for recipients? reporting of information on subawards as required by the Federal Funding Accountability and Transparency Act of 2006 (FFATA). Condition: We identified the following: a) No documentation to support a formal review of the federal financial reports and cash transaction reports by an individual other than the preparer prior to submission to the federal agency (tested 2 reports). b) The Association did not complete the required reporting of first-tier subawards under the Federal Funding Accountability and Transparency Act Subaward Reporting System. Cause: Management had an informal, undocumented review process in place over reports and management was unaware of the reporting requirements of subawards under FFATA. Effect: Ineffective controls over this area of compliance could result in a reasonable possibility that reports that are inaccurate or incomplete could be submitted to the federal agency. In addition, with incomplete reporting under FFATA, the Association may be noncompliant with the compliance requirements outlined in the Notice of Award. Questioned Costs: None reported Context: One quarterly federal cash transaction report and one semi-annual federal financial report was reviewed in the Association?s fiscal year. There was a total of five reports filed. Repeat Finding from Prior Years: No Recommendation: We recommend that management document their procedures and control processes to comply with the federal requirements above and complete the required reporting of subawards under FFATA as soon as practical. Views of Responsible Officials: Management is in agreement.