Hospital Damas IncNon-Profit

Finding No. 2021-001 - Activities Allowed or Unallowed - Hazard Pay Eligibility Federal Program Assistance Listing 21.019 - Coronavirus Relief Fund Name of Federal Agency U.S. Department of Treasury Pass-through entity Puerto Rico Department of Treasury Category Significant deficiency in internal controls over compliance / Non-compliance Compliance requirements Activities Allowed or UnallowedCriteria As stated in the Federal Register, Hazard Pay may be covered using payments from the Coronavirus Relief Fund (the Fund) if it is provided for performing hazardous duty or work involving physical hardship that in each case is related to COVID–19. This means that, whereas payroll and benefits of an employee who is substantially dedicated to mitigating or responding to the COVID–19 public health emergency may generally be covered in full using payments from the Fund. Hazard Pay specifically may only be covered to the extent it is directly related to COVID-19. In addition, as per the Fund’s guidelines, Hazard Pay is allowable only if it is related for duties to directly respond to COVID-19, independent of the category of employee, usually reserved for First Responders. The guidelines recommend the following model for Hazard Pay: a. First Responders: are those employees that, because of the nature of their responsibilities, are continuously exposed to COVID-19 contagion and are employees performing substantial services within the emergency rooms, the COVID-19 intensive care units and within the temporary COVID-19 triage areas that a hospital may have established in response to the pandemic. b. The Hazard Pay program suggests the following apportionment for First Responders and the hospital has the discretion to classify the employees within the risk categories stated below: i. Very High Risk: $1,250 each ii. High Risk: $1,000 each iii. Medium Risk: $900 each iv. Lower Risk: $800 each Condition During our test, we identified certain ineligible employees that were included as part of the Hazard Pay program incentive. Cause The original guidelines issued by the Puerto Rico Fiscal Agency and Financial Advisory Authority (AAFAF) for the Hazard Pay program provided a general definition for qualifying employees and that the eligibility criteria could be determined based on the Occupational Safety and HealthCause – (continued) Administration (OSHA) guidelines. However, such original Hazard Pay program guidelines were subsequently clarified by AAFAF, providing more specific criteria and definitions for qualifying employees. Based on the general guidelines issued by AAFAF, the Hospital included certain employees that did not meet the Hazard Pay program criteria, since the Hospital did not consult with AAFAF about the eligibility of certain Not Substantially Dedicated employees, as defined in the Federal Register. Effect Failure to obtain further guidance from AAFAF resulted in the inclusion of ineligible employees in the payment of the Hazard Pay Program incentive. However, no questioned costs resulted from this instance of noncompliance, since the Hospital revised the Coronavirus Relief Fund Midterm Use of Funds Report submitted to AAFAF for the month of June 2021, to reflect the funds allocated to ineligible employees as additional compensation paid by the Hospital from its own resources, instead of the Hazard Pay program. Questioned cost None, since payments to ineligible employees were recharacterized as additional compensation paid from the Hospital’s own resources, instead of federal awards. Such federal awards remained available for use under other assistance programs provided by the CARES Act through December 2021. Context Out of the 611 employees that received the Hazard Pay incentive, the Hospital identified 216 employees that were not entitled to Hazard Pay incentive, amounting to a disbursement of $169,300, out of total incentives paid of $629,300. However, as mentioned above, payments to ineligible employees were recharacterized as additional compensation paid from the Hospital’s own resources, instead of federal awards and thus, no questioned cost remains. Identification of a repeat finding Yes, this is a repeated finding from the immediate previous audit, finding No. 2020-001.Recommendation The Hospital should continue to monitor and review guidelines for federal awards under the CARES Act to ensure it is up-to-date on the applicable requirements and changes therein. In addition, the Hospital should consider consulting with AAFAF when available guidance may be subject to interpretation or when new awards, if any, are received. Views of responsible officials and planned corrective actions The Hospital’s management and responsible officers agree with this finding. Please refer to the corrective action plan section for the Hospital’s response on pages 55-56.

Finding No. 2021-002 - Reporting Federal Program Assistance Listing 21.019 – Coronavirus Relief Fund – COVID - 19 Name of Federal Agency U.S. Department of Treasury Pass-through entity Puerto Rico Treasury Department Category Significant deficiency in internal controls over compliance / Non-compliance Compliance requirements ReportingCriteria As stated in Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (the Uniform Guidance), § 200.303 Internal controls, “the non-Federal entity must: (a) 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 the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). (b) Comply with the U.S. Constitution, Federal statutes, regulations, and the terms and conditions of the Federal awards.” In addition, the grant agreement establishes in its Exhibit A of the AAFAF guidelines, Grant Plan, Reporting, the following: “By the 15th day of each month, the Grantee will submit a Use of Funds Grant Report for the prior month’s expenses. The financial report will provide a detailed explanation of how the Grant funds were spent.”Condition During our test, we identified that the Use of Funds Grant Reports that were required to be submitted by the 15th day of the following month, were submitted late, as follows:Cause The grantee did not perform effective monitoring for the compliance with the deadlines of submission and also, did not have adequate internal controls for the recordkeeping of submissions. Effect The Hospital did not submit, or did not submit on time, the financial reports that provide a detailed explanation of how the grant funds were spent and the timing of the expenditures. The analysis, evaluations, and decision-making of the grantee could be affected. Questioned cost None.Context As part of the reporting (timing) test, we examined ten (10) submission dates required, which represent the 100% of submissions required for the year for the Coronavirus Relief Fund and observed that ten (10) of the Use of Funds Grant Reports, or 100% of the required reports, were submitted after their respective due dates. Identification of a repeat finding Yes, this is a repeated finding from the immediate previous audit, finding No. 2020-002. Views of responsible officials and planned corrective actions The Hospital’s management and responsible officers agree with this finding. Please refer to the corrective action plan section for the Hospital’s response on pages 55-56.

Finding No. 2021-003– Reporting - Late filing of data collection form and reporting package Federal Programs Assistance Listing 21.019 – Coronavirus Relief Fund – COVID - 19 Assistance Listing 21.027 – Coronavirus State and Local Fiscal Recovery Fund – COVID - 19 Assistance Listing 93.498 – Provider Relief Fund – COVID - 19 Name of Federal Agency U.S. Department of Treasury and U.S. Department of Health and Human Services Pass-through Entity Puerto Rico Treasury Department Category Significant deficiency in internal controls over compliance / Non-complianceCompliance requirements Other Criteria As required by the audit requirements of Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), § 200.512 Report submission (a) (1), “ the audit must be completed and the data collection form described in paragraph (b) of this section and reporting package described in paragraph (c) of this section must be submitted within the earlier of 30 calendar days after receipt of the auditor's report(s), or nine months after the end of the audit period. If the due date falls on a Saturday, Sunday, or Federal holiday, the reporting package is due the next business day”. Condition The Hospital did not file on time the data collection form and reporting package required by CFR § 200.512. Cause In response to the global pandemic of COVID – 19, the government of the United States enacted various laws to provide grants and support to hospitals and other healthcare entities responding to the coronavirus pandemic, among others, some of which have never been subject to a single audit process and thus, the reconciliation and reporting process was delayed. Effect As a result of this condition, the federal grantor or the pass-through entity may issue warnings and/or impose penalties to the Hospital. Also, the federal grantor was prevented from the use of accurate reporting data, which is critical for the effective administration of the federal program and for budgetary policy analysis. Questioned cost None.Context Only one data collection form is required for the year ended December 31, 2021. Identification of a repeat finding This is a repeat finding from the immediate previous audit, finding No. 2020-004. Recommendation The Hospital should continue to monitor and review guidelines for federal awards under the Code of Federal Regulations to ensure it is up to date on the applicable requirements and changes therein. Views of responsible officials and planned corrective actions The Hospital’s management and responsible officers agree with this finding. Please refer to the corrective action plan section for the Hospital’s response on pages 55-56.

Finding No. 2020-001 - Activities Allowed or Unallowed - Hazard Pay Eligibility Federal Program Assistance Listing 21.019 - Coronavirus Relief Fund – COVID-19 Name of Federal Agency U.S. Department of Treasury Pass-through entity Puerto Rico Department of Treasury Category Significant deficiency in internal controls over compliance / Non-compliance Compliance requirements Activities Allowed or Unallowed Criteria As stated in the Federal Register, Hazard Pay may be covered using payments from the Coronavirus Relief Fund (the Fund) if it is provided for performing hazardous duty or work involving physical hardship that in each case is related to COVID–19. This means that, whereas payroll and benefits of an employee who is substantially dedicated to mitigating or responding to the COVID–19 public health emergency may generally be covered in full using payments from the Fund. Hazard Pay specifically may only be covered to the extent it is directly related to COVID-19. In addition as per the Fund’s guidelines, Hazard Pay is allowable only if it is related for duties to directly respond to COVID-19, independent of the category of employee, usually reserved for First Responders. The guidelines recommend the following model for Hazard Pay: a. First Responders: are those employees that, because of the nature of their responsibilities, are continuously exposed to COVID-19 contagion and are employees performing substantial services within the emergency rooms, the COVID-19 intensive care units and within the temporary COVID-19 triage areas that a hospital may have established in response to the pandemic. b. The Hazard Pay program suggests the following apportionment for First Responders and the hospital has the discretion to classify the employees within the risk categories stated below: i. Very High Risk: $1,250 each ii. High Risk: $1,000 each iii. Medium Risk: $900 each iv. Lower Risk: $800 each Condition During our test, we identified certain ineligible employees that were included as part of the Hazard Pay program incentive. Cause The original guidelines issued by the Puerto Rico Fiscal Agency and Financial Advisory Authority (AAFAF) for the Hazard Pay program provided a general definition for qualifying employees and that the eligibility criteria could be determined based on the Occupational Safety and Health Administration (OSHA) guidelines. However, such original Hazard Pay program guidelines were subsequently clarified by AAFAF, providing more specific criteria and definitions for qualifying employees. Based on the general guidelines issued by AAFAF, the Hospital included certain employees that did not meet the Hazard Pay program criteria, since the Hospital did not consult with AAFAF about the eligibility of certain Not Substantially Dedicated employees, as defined in the Federal Register. Effect Failure to obtain further guidance from AAFAF resulted in the inclusion of ineligible employees in the payment of the Hazard Pay Program incentive. However, no questioned costs resulted from this instance of noncompliance, since the Hospital revised the Coronavirus Relief Fund Midterm Use of Funds Report submitted to AAFAF for the month of June 30, 2021 to reflect the funds allocated to ineligible employees as additional compensation paid by the Hospital from its own resources, instead of the Hazard Pay program. Questioned cost None, since payments to ineligible employees were recharacterized as additional compensation paid from the Hospital’s own resources, instead of federal awards. Such federal awards remain available for use under other assistance programs provided by the CARES Act through December 2021. Context Of the 651 employees that received the Hazard Pay incentive, amounting to an original amount of $866,821.50, the Hospital identified 217 employees that were not entitled to Hazard Pay incentive, amounting to a disbursement of $228,750. However, as mentioned above, payments to ineligible employees were recharacterized as additional compensation paid from the Hospital’s own resources, instead of federal awards and thus, no questioned cost remains. Identification of a repeat finding This is not a repeat finding. Recommendation The Hospital should continue to monitor and review guidelines for federal awards under the CARES Act to ensure it is up-to-date on the applicable requirements and changes therein. In addition, the Hospital should consider consulting with AAFAF when available guidance may be subject to interpretation or when new awards, if any, are received. Views of responsible officials and planned corrective actions The Hospital’s management and responsible officers agree with this finding. Please refer to the corrective action plan section for the Hospital’s response on pages 57 to 59.

Finding No. 2020-002 – Reporting Federal Program Assistance Listing 21.019 - Coronavirus Relief Fund – COVID - 19 Name of Federal Agency U.S. Department of Treasury Pass-through entity Puerto Rico Treasury Department Category Significant deficiency in internal controls over compliance / Non-compliance Compliance requirements Reporting Criteria As stated in Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (the Uniform Guidance), § 200.303 Internal controls, “the non-Federal entity must: (a) 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 the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). (b) Comply with the U.S. Constitution, Federal statutes, regulations, and the terms and conditions of the Federal awards.” In addition, the grant agreement establishes in its Exhibit A of the AAFAF guidelines, Grant Plan, Reporting, the following: “By the 15th day of each month, the Grantee will submit a Use of Funds Grant Report for the prior month’s expenses. The financial report will provide a detailed explanation of how the Grant funds were spent.” Condition Our audit procedures revealed instances where reports required to be filed under the grant agreement were either not filed at all or filed after the due date. The Hospital did not provide evidence of the June 2020 and July 2020 filling submission. Also, the expenses reports related to November 2020 and December 2020 were submitted on December 30, 2020 (15 days later) and February 5, 2021 (21 days later, respectively). Cause The Hospital did not perform effective monitoring for the compliance with the deadlines of reports submission and also, did not had adequate internal controls for the recordkeeping of reports submissions. Effect The Hospital did not submit, or did not submit on time, the financial reports that provide a detailed explanation of how the grant funds were spent and the timing of the expenditures. The analysis, evaluations, and decision-making of the grantee could be affected. Questioned cost None. Context As part of the reporting (timing) test, we examined eight (8) submission dates required, which represent the 100% of submissions required for the year for the Coronavirus Relief Fund and observed that two (2) of the Use of Funds Grant Reports were submitted after their respective due dates and evidence of submission for other two (2) Use of Funds Grant Reports could not be obtained. Identification of a repeat finding This is not a repeat finding. Views of responsible officials and planned corrective actions The Hospital’s management and responsible officers agree with this finding. Please refer to the corrective action plan section for the Hospital’s response on pages 57 to 59.

Finding No. 2020-003 – Recordkeeping Federal Program Assistance Listing 21.019 – Coronavirus Relief Fund – COVID-19 Name of Federal Agency U.S. Department of Treasury Pass-through entity Puerto Rico Treasury Department Category Significant deficiency in internal controls over compliance / Non-compliance Compliance requirements Reporting Criteria The grant agreement with the pass-through entity establishes in section 2.3, Recordkeeping, the following: “Grantee will maintain its books and records in a manner that will provide Grantor with sufficient detail to review Grantee’s receipts and expenditures relating to the Grant.” Also, the grant agreement establishes in its Exhibit A, Grant Plan, Reporting, the following: “By the 15th day of each month, the Grantee will submit a Use of Funds Grant Report for the prior month’s expenses. The financial report will provide a detailed explanation of how the Grant funds were spent.” Condition The federal grant expenditures recorded in the financial statements and reported monthly to the pass-through entity were not duly reconciled to source and other supporting documents, which resulted in performing such reconciliation at the time when the single audit process was conducted. It also resulted in changes to the major program expenditures during the completion of the single audit, to properly provide such supporting documents duly reconciled to the pass-through entity as part of the closeout process. As a result, the monthly reports of Use of Funds required by the grant agreement were amended and re-submitted to the pass-through entity on March 2, 2022. Cause In response to the global pandemic of COVID – 19, the government of the United States enacted various laws to provide grants and support to hospitals and other healthcare entities responding to the coronavirus pandemic, among others, some of which have never been subject to a single audit process. Furthermore, the rules and regulations for the management, reporting and allowability of the federal grants were being developed and published at the same time, and even after, the entities were receiving the federal awards. Also, the publishing of the Office of Management and Budget’s Compliance Supplement addendum for single audits was delayed until late December 2020. This caused confusion among all the recipients of the federal awards. The Hospital interpreted the methods allowed for reporting expenses with the information available at the time of the receipt of the federal grants and applied a methodology to report expenditures in line with such interpretation. Effect The absence of source documents duly reconciled to expenses reported to the pass-through entity may be considered by the grantor and the pass-through entity as a noncompliance with the above-mentioned criteria and could lead to administrative sanctions. Also, the monthly reports submitted to the pass-through entity had to be amended and resubmitted by the Hospital. Questioned cost None Context There was an overstatement on the Coronavirus Relief Fund expenses initially reported to the pass-through entity amounting to $433,463 out of a total of allowable expenditures of $5,072,031, or 8.55% of total expenditures that were finally reported for the period from March 1, 2020 through December 31, 2020. Identification of a repeat finding This is not a repeat finding. Recommendation The Hospital should continue to monitor and review guidelines for federal awards under the CARES Act to ensure it is up to date on the applicable requirements and changes therein. In addition, the Hospital should consider consulting with AAFAF when available guidance may be subject to interpretation or when new awards, if any, are received. Views of responsible officials and planned corrective actions The Hospital’s management and responsible officers agree with this finding. Please refer to the corrective action plan section for the Hospital’s response on pages 57 to 59.

Finding No. 2020-004 – Reporting - Late filing of data collection form and reporting package Federal Program Federal Program Assistance Listing 21.019 – Coronavirus Relief Fund – COVID-19 Name of Federal Agency U.S. Department of Treasury Pass-through Entity Puerto Rico Treasury Department Category Significant deficiency in internal controls over compliance / Non-compliance Compliance requirements Other Criteria As required by the audit requirements of Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), § 200.512 Report submission (a) (1), “ the audit must be completed and the data collection form described in paragraph (b) of this section and reporting package described in paragraph (c) of this section must be submitted within the earlier of 30 calendar days after receipt of the auditor's report(s), or nine months after the end of the audit period. If the due date falls on a Saturday, Sunday, or Federal holiday, the reporting package is due the next business day”. Condition The Hospital did not file on time the data collection form and reporting package required by CFR § 200.512. Cause In response to the global pandemic of COVID – 19, the government of the United States enacted various laws to provide grants and support to hospitals and other healthcare entities responding to the coronavirus pandemic, among others, some of which have never been subject to a single audit process and thus, the reconciliation and reporting process was delayed. Effect As a result of this condition, the federal grantor or the passthrough entity may issue warnings and/or impose penalties to the Hospital. Also, the federal grantor was prevented from the use of accurate reporting data, which is critical for the effective administration of the federal program and for budgetary policy analysis. Questioned cost None Context This is the first data collection form that the Hospital is required to submit. Identification of a repeat finding This is not a repeat finding. Recommendation The Hospital should continue to monitor and review guidelines for federal awards under the Code of Federal Regulations to ensure it is up to date on the applicable requirements and changes therein. Views of responsible officials and planned corrective actions The Hospital’s management and responsible officers agree with this finding. Please refer to the corrective action plan section for the Hospital’s response on pages 57 to 59.