Brookings, City of

2021-002 Department of Health and Human Services Federal Financial Assistance Listing/CFDA #93.498 COVID-19 Provider Relief Fund and American Rescue Plan (ARP) Rural Distribution Applicable Federal Award Number and Year ? Period 1 and Period 2 TIN #466000069 Activities Allowed and Unallowed and Allowable Costs and Cost Principles and 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 federal awards that provides reasonable assurance that the City is managing the federal awards in compliance with federal statutes, regulations and terms and conditions of the federal award. Condition: The special report submitted to the Department of Health and Human Services for Period 1 TIN #466000069 did not reduce expenses included within the special report by a cost-based adjustment factor. No formal documentation of review and approval of the special report submitted to the Department of Health and Human Services for Period 1 TIN #46000069 was retained. In addition, no formal documentation of review and approval of the final expenditures listing identified as eligible and claimed under the Provider Relief Fund and American Rescue Plan (ARP) Rural Distribution program (the program) was retained. Management claimed under the program mortgage and interest in excess of the amounts actually incurred. These excess expenses were included within the special report resubmitted to the Department of Health and Human Services for Period 1. Cause: Management did not consider reducing expenses included within the special report by a cost-based adjustment factor on the initial submission. Management did not retain documentation of the review and approval of the special report and final expenditures listing. During 2021, refinancing of debt occurred and new amortization schedules were not considered when claiming mortgage and interest expenses under the program. Effect: Management resubmitted the special report for Period 1 to the Department of Health and Human Services in December 2021 to reduce expenditures by $39,899 for the cost-based adjustment factor. Without documentation for the review and approval, there is a possibility that ineligible expenditures are claimed under the program and included within the special report. Expenses included within the special report resubmitted to the Department of Health and Human Services for Period 1 TIN #46000069 relating to mortgage and interest were overstated by $136,278. Questioned Costs: Expenses included within the resubmitted special report were overstated by $136,278 which is also the amount of questioned costs claimed under the federal program. The key line item on the resubmitted report was overstated by $136,278. Context: Summary level testing was performed over mortgage, utilities, insurance and personnel costs for nutrition services and housekeeping. Key line items were tested on the resubmitted special report for Period 1 and the special report for Period 2 submitted to the Department of Health and Human Services. Repeat Finding from Prior Years: No Recommendation: We recommend management retain formal documentation of the review and approval process of the final expenditures listing and reports submitted to the federal agency. In addition, we recommend management update any future special reports submitted to the Department of Health and Human Services as deemed appropriate. Views of Responsible Officials: Management agrees with the finding.

Finding: 2021-002 Department of Health and Human Services Federal Financial Assistance Listing/CFDA #93.498 COVID-19 Provider Relief Fund and American Rescue Plan (ARP) Rural Distribution Applicable Federal Award Number and Year ? Period 1 and Period 2 TIN #466000069 Activities Allowed and Unallowed and Allowable Costs and Cost Principles and Reporting Material Weakness in Internal Control over Compliance and Noncompliance Finding Summary: Eide Bailly LLP discovered during the regular year end audit of Brookings Health System that the amounts reported under Period 1 did not get reduced by a cost-based adjustment factor. A special update to the Period 1 report was then submitted to the Department of Health and Human Services to correct this. We also did not maintain a formal documented review and approval process of expenses claimed under the Provider Relief Fund and American Rescue Plan Rural Distribution program or formal documented review and approval of the special report submitted to the Department of Health and Human Services for Period 1. An overstatement of expenses was reported for the category of mortgage and interest of $136,278. Responsible Individuals: Melissa Wagner, Chief Financial Officer of Brookings Health System, and Ashley Rentsch, Deputy Finance Manager for the City of Brookings Corrective Action Plan: Due to the unprecedented nature of these funds and uncertainty surrounding the required reported that was unknown at the time, we did our best to ensure reporting was accurate. While review and approval was completed by management, there was no formal process that was documented. We will ensure that a formal review and approval process is well documented for any future federal funding program. There was an overstatement of mortgage and interest amount due to inaccurate amortization schedules being referenced for the reporting phase. Due to a refinancing, new amortization schedules were being issued and finalized during the time the reporting was due and one of the schedules changed from quarterly payments to semi-yearly which caused the overstatement. In place of this $136,278, we would have reported additional salaries for Nursing Home Nursing Aides in which Q2 2020 alone totaled $345,108. If an updated Phase 1 reporting would be allowed, we would be able to correct this error. For any future federal awards, we will ensure that all expenditures will be accounted in the correct period of actual expense, not just when accrued according to GAAP. Anticipated Completion Date: September 30, 2022