SOUTH CENTRAL REGIONAL MEDICAL CENTER

Finding 2023‐001: Significant Deficiency, Internal Control Over Compliance Federal Agency: U.S. Department of Health and Human Services Assistance Listing Number: 93.498 – COVID‐19 Provider Relief Fund (PRF) and American Rescue Plan (ARP) Rural Distribution Award Year: 2021 Federal Award Identification: PRF 20210001 Pass‐Through Entity: N/A Criteria: Per 2 CFR 200.303 and 2 CFR 200.430(i), a non‐federal entity must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non‐Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and terms and conditions of the Federal award and establishes the standard for documentation of personnel expenses. Condition: Payroll expenses are an allowed expense according to the guidance and FAQs generated by HRSA. The Medical Center should have controls in place whereby all expenses are reviewed prior to submission to ensure the expense is for the proper purpose. Cause: There was no policy implemented to require the documented approval of a corrected time card. Effect: For one of twenty‐five payroll expenses selected, there was no approval of a corrected time card prior to the payroll being submitted. Questioned Costs: $‐0‐ Perspective: The payroll expense was an allowable costs under the guidance issue by HHS. This finding does not generate any questioned costs or unallowable costs being used in the PRF submission. Recommendation: We recommend the Medical Center implement a process whereby all timesheets (original and corrected) have to be approved by a supervisor prior to payroll being generated and that approval is documented and maintained. Views of Responsible Officials and Planned Corrective Action: Management concurs with auditors’ finding and recommendation. Management’s Response: See attached corrective action plan.

SECTION II: FINANCIAL STATEMENT FINDINGS No matters were reported. SECTION Ill: FEDERAL AWARD FINDINGS Finding 2021-001: Allowable Activities and Eligibility for HRSA Uninsured Program Significant Deficiency, Internal Control Over Compliance Assistance Listing Number: 93.401- HRSA COVID-19 Uninsured Program Federal Agency: Department of Health and Human Services Award Year: 2020 Federal Award Identification: UTI 20200001 Pass-Through Entity: N/ A Criteria: The Health Resources and Services Administration (HRSA) administers the COVID-19 Claims Reimbursement to Health Care Providers and Facilities for Testing, Treatment, and Vaccine Administration for the Uninsured Program (HRSA Uninsured Program). The terms and conditions of the HRSA Uninsured Program is to provide claims reimbursement to eligible health care providers for conducting COVID-19 testing for the uninsured, treating uninsured individuals with a COVID-19 diagnosis, and administering FDA-authorized or licensed COVID-19 vaccines to uninsured individuals. Condition: The Medical Center submitted two claims for reimbursement which did not meet the terms and conditions of the HRSA Uninsured Program. The first claim was a $100 claim. The Medical Center filed and received reimbursement for a COVID-19 test that was performed on a patient for a third party and therefore did not go through the Medical Center's insurance verification process; the patient had coverage under the Medicaid program and therefore did not meet the uninsured eligibility requirement. The second claim was a $166 claim reimbursement that the Medical Center filed and received reimbursement for a clinic visit that was not related to COVID-19 testing, treatment, or vaccine administration and therefore did not meet the allowable activity requirement. Cause: The Medical Center's internal control system was not properly designed to ensure that the claims filed for reimbursement meet the terms and conditions. The Medical Center has a process for insurance verification for admission and emergency visit and put in place a specific review of all HRSA Uninsured Program claims prior to submission to HRSA; however, the Medical Center did not have insurance verification for lab tests performed for a third party and as a result a claim filed for a patient who had insurance. The second claim was an oversight in the specific review of HRSA Uninsured Program where all claims were verifying insurance but not necessarily reviewing the related charge for reasonableness because at the time of the charge. The Medical Center charge for COVID-19 testing was $100 and the claim was for $166. Effect: The Medical Center's internal control process related to the HRSA Uninsured Program was not effectively implemented in all instances and resulted in the Medical Center submitting two claims for reimbursement which did not meet the terms and conditions of the HRSA Uninsured Program. Questioned Costs: The amount of questioned costs related to outpatient services for COVID-19 tests for which the Medical Center did not verify insurance was a total of fourteen claims for a total cost of $1,400. The amount of questioned costs related to clinic visits that received COVID-19 testing irrespective of diagnosis was a total of nineteen claims for a total cost of $3,165. Total questioned costs was $4,565. Perspective: The Medical Center submitted 6004 claims for reimbursement to the HRSA Uninsured Program. 2 claims out of the 60 tested did not meet the terms and conditions of the HRSA Uninsured Program. The sample was not a statistically valid sample. Identification As A Repeat Finding: N/ A Recommendations: We recommend updating the internal control process for the second review of the claims prior to submission to review the claims for reasonableness or complete a review the claims submitted to HRSA to ensure claims meet the allowable and eligibility requirements. Views Of Responsible Officials and Planned Corrective Action: Management concurs with auditors' finding and recommendation. SECTION IV: SUMMARY OF PRIOR YEAR AUDIT FINDINGS No matters were reported.

Finding 2021 ? 002: Reporting, Significant Deficiency, Internal Control Over Compliance Assistance Listing Number: 93.498 ? COVID-19 Provider Relief Fund Federal Agency: Department of Health and Human Services Award Year: 2020 Federal Award Identification: PRF 20200001 Pass-Through Entity: N/A Criteria: Per 2 CFR 200.303, non-federal entity must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and terms and conditions of the Federal award. Condition: Lost revenues reported in the first reporting period were not in accordance with HRSA lost revenue reporting guidelines. In accordance with option one, the Medical Center calculated lost revenue based on actual patient care revenues using calendar year 2019 as base year information. In accordance with the ?Lost Revenue Guide? published in August 2021, actual patient care revenues should be calculated net of bad debts; however, the Medical Center?s calculation did not include the provision for bad debts. Additionally, the Medical Center lost revenue calculation included estimated patient care revenues contrary to the guidelines whereby actual patient care revenues should be used. Cause: The Department of Health and Human Services (DHHS?) issued guidance in the form of various post-payment notices and frequently asked questions (?FAQs?) which were frequently updated and replaced. As a result, healthcare providers struggled to understand the prevailing guidance, while simultaneously using the allotted funds to address the enormous ongoing costs of the pandemic. As FAQs were updated, previous versions were deleted. The FAQs continued to be updated with an updated version being issued one month prior to the due date of the reporting requirements. As a result, some of this latest guidance was not incorporated into the Medical Center?s lost revenue calculation. In addition, the Medical Center erroneously included an estimate in their lost revenue calculation contrary to the guidelines. Effect: Lost revenues were overstated for the Medical Center in the first reporting period by $1,042,000. Questioned Costs: The Medical Center reported lost revenues of $10,957,000 in the first reporting period, of which $3,921,578 was eligible for lost revenue reimbursements; therefore, $7,035,422 was carried forward to the second reporting period. Since the Medical Center?s lost revenue carryforward exceeds the amount of the reported error in the amount of $1,042,000, there are no questioned costs. Perspective: All key inputs into the lost revenue calculation were reconciled to the audited financial statements for each year, except for the period that included an estimate. Based on revised calculation of lost revenues, the Medical Center is reporting lost revenues in excess of PRF federal awards received to date. Identification As A Repeat Finding: N/A South Central Regional Medical Center (Component Unit of Jones County) Schedule of Findings and Questioned Costs - 10 - SECTION III: FEDERAL AWARD FINDINGS (Continued) Finding 2021 ? 002: Reporting, Significant Deficiency, Internal Control Over Compliance (continued) Recommendations: We recommend the Medical Center contact HRSA regarding how to correct this error in future report submissions. We also recommend that Medical Center personnel improve policies and procedures to ensure proper reporting in accordance with the terms and conditions of the federal award. Views Of Responsible Officials and Planned Corrective Action: Management concurs with auditors? finding and recommendation