MOUNT NITTANY HEALTH SYSTEM AND AFFILIATES D/B/A MOUNT NITTANY HEALTH

Finding 2022-001 - Material Weakness in Internal Control - Activities Allowed or Unallowed and Allowable Costs/Cost Principles; Material Noncompliance Assistance Listing Number.: 93.498 COVID-19: Provider Relief Fund and American Rescue Plan (ARP) Rural Distribution Federal Agency: U.S. Department of Health and Human Services Pass-through Agency: Not applicable Award Number: Not applicable Award Year: 2021 Questioned Costs: $3,073,785 Criteria: Non-federal entities in receipt of federal funds must comply with the requirements of 2 CFR 200.303(a), which require an entity to establish and maintain effective internal control over the Federal award to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Provider Relief Fund and American Rescue Plan (ARP) Rural Distribution (PRF) payments must be used for allowable expenses and lost revenue described in the PRF terms and conditions and specified in guidance issued by the U.S. Department of Health and Human Services. Activities allowed have been defined as expense used to prevent, prepare for, and respond to coronavirus, domestically or internationally, for necessary expenses to reimburse, through grants or other mechanisms, eligible health care providers for health care related expenses or lost revenues that are attributable to coronavirus. Condition/Context: The Corporation included expenses in their Period 3 submission for Mount Nittany Medical Center, TIN 24-0795682, (the Center) that were previously allocated to the federal program and reported in the Period 1 submission, which resulted in $3,073,785 of questioned costs. Effect: As a result of the error, $3,073,785 of unallowable expenses were allocated to the federal program. Total unused lost revenues for the period of availability which ended June 30, 2022 for the Center were $41,054,091. Cause: An oversight by personnel during the accumulation of expenses for the allocation to the federal program during Period 3 improperly identified the amounts as quarter 1 and quarter 2 of 2022 when the expenses related to quarter 1 and quarter 2 of 2021 and as a result it was not identified that these had previously been reported in Period 1. In addition, the error was not identified during the review process by management. Recommendation: We recommend that management review their procedures for the accumulation of allowable costs to ensure that information is accurate and errors are identified and addressed, prior to reporting. In addition, we recommend that management correct the errors by off-setting against unused lost revenues in their Period 4 submission. Views of Responsible Officials: The Corporation agrees with the finding. As the Center has a significant amount of available lost revenues, management has adjusted the previously reported lost revenues to adjust for the questioned costs in the reporting period 4 filing. In addition, they have added steps to their PRF reporting policy to include preparation of a waterfall file which shows the total amount of COVID eligible expenses and the period in which they were allocated for PRF reporting to ensure they do not have a duplication of costs in the future. Beginning with the reporting period 4, they also utilized the portal worksheets provided by HRSA to assist with preparing the filing. Finally, the preparation of the PRF filing for reporting period 4 (and future periods, if needed) has transitioned to the Assistant Controller to include an additional level of review by the Controller.

Finding 2022-001 Condition/Context The Corporation included expenses in their Period 3 submission for Mount Nittany Medical Center, TIN .24-0795682, (the Center) that were previously allocated to the federal program and reported in the Period 1 submission, which resulted in $3,073,785 of questioned costs. Corrective Action Plan Corrective Action Planned: As Mount Nittany Medical Center has a significant amount of available lost revenues, Management has adjusted the previously reported lost revenues to adjust for the questioned costs in the reporting period 4 filing. In addition, we have added steps to our PRF reporting policy to include preparation of a waterfall file which shows the total amount of COVID eligible expenses and the period in which they were allocated for PRF reporting to ensure we do not have a duplication of costs in the future. Beginning with reporting period 4, we also utilized the portal worksheets provided by HRSA to assist with preparing the filing. Finally, the preparation of the PRF filing for reporting period 4 (and future periods, if needed) has transitioned to the Assistant Controller to include an additional level of review by the Controller. Name(s) of Contact Person(s) Responsible for Corrective Action: Karen Keys, Assistant Controller Scott Kaufman, Director, System Controller Anticipated Completion Date: The corrective action plan described above was implemented and completed as of March 24, 2023, which is the date the period 4 filing was submitted.