FAC Explorer

Audit 319532

FY End
2023-12-31
Total Expended
$98.55M
Findings
4
Programs
13
Organization: Fairview Health Services (MN)
Year: 2023 Accepted: 2024-09-13
Auditor: Ernst & Young US LLP

Organization Exclusion Status:

Findings

ID Ref Severity Repeat Requirement
496764 2023-001 Material Weakness - AB
496765 2023-002 Material Weakness - AB
1073206 2023-001 Material Weakness - AB
1073207 2023-002 Material Weakness - AB

Programs

ALN Program Spent Major Findings
97.036 Disaster Grants - Public Assistance (presidentially Declared Disasters) $49.82M Yes 2
93.498 Covid-19 Provider Relief Fund and American Rescue Plan (arp) Rural Distribution $47.64M Yes 0
93.817 Hospital Preparedness Program (hpp) Ebola Preparedness and Response Activities $527,962 - 0
93.493 Congressional Directives $85,416 - 0
16.838 Comprehensive Opioid, Stimulant, and Other Substances Use Program $84,248 - 0
93.155 Rural Health Research Centers $44,198 - 0
93.110 Maternal and Child Health Federal Consolidated Programs $35,183 - 0
93.184 Disabilities Prevention $25,937 - 0
93.173 Research Related to Deafness and Communication Disorders $16,796 - 0
93.837 Cardiovascular Diseases Research $10,923 - 0
93.435 The Innovative Cardiovascular Health Program $9,086 - 0
93.912 Rural Health Care Services Outreach, Rural Health Network Development and Small Health Care Provider Quality Improvement $4,536 - 0
10.331 Gus Schumacher Nutrition Incentive Program $3,659 - 0

Contacts

Name Title Type
EA4PYMYAGJU3 Dawn Ksepka Auditee
6126724986 Maureen Wood Auditor
No contacts on file

Notes to SEFA

Title: Basis of Presentation Accounting Policies: Expenditures reported on the Schedule are reported as incurred using the accrual method of accounting and the applicable cost accounting principles. Such expenditures are recognized following the cost principles contained in the Uniform Guidance, wherein certain types of expendiures are not allowable or are limited as to reimbursement. Any negative amounts shown on the Schedule represent adjustments or credits made in the normal course of business to amounts reported as expenditures in prior years. De Minimis Rate Used: Both Rate Explanation: DHHS Approved rate used unless the agreement limited auditee to the de minimis cost rate. The accompanying schedule of expenditures of federal awards (the "Schedule") includes federal award activities of the Company for the year ended December 31, 2023. The Schedule includes all federal assistance entered into directly between the Company and the federal government and subawards from non-federal organizations made under federally-sponsored agreements. The information in the Schedule is presented in accordance with the requirements of 2 CFR Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Therefore, the Schedule presents only a selected portion of the operations of the Company. It is not intended to and does present the financial position, changes in net assets, or cash flows of the Company.
Title: Summary of Significant Accounting Policies Accounting Policies: Expenditures reported on the Schedule are reported as incurred using the accrual method of accounting and the applicable cost accounting principles. Such expenditures are recognized following the cost principles contained in the Uniform Guidance, wherein certain types of expendiures are not allowable or are limited as to reimbursement. Any negative amounts shown on the Schedule represent adjustments or credits made in the normal course of business to amounts reported as expenditures in prior years. De Minimis Rate Used: Both Rate Explanation: DHHS Approved rate used unless the agreement limited auditee to the de minimis cost rate. Expenditures reported on the Schedule are reported as incurred using the accrual method of accounting and the applicable cost accounting principles. Such expenditures are recognized following the cost principles contained in the Uniform Guidance, wherein certain types of expendiures are not allowable or are limited as to reimbursement. Any negative amounts shown on the Schedule represent adjustments or credits made in the normal course of business to amounts reported as expenditures in prior years.
Title: Indirect Cost Rate Accounting Policies: Expenditures reported on the Schedule are reported as incurred using the accrual method of accounting and the applicable cost accounting principles. Such expenditures are recognized following the cost principles contained in the Uniform Guidance, wherein certain types of expendiures are not allowable or are limited as to reimbursement. Any negative amounts shown on the Schedule represent adjustments or credits made in the normal course of business to amounts reported as expenditures in prior years. De Minimis Rate Used: Both Rate Explanation: DHHS Approved rate used unless the agreement limited auditee to the de minimis cost rate. the Company did not use the 10% de minimis indirect cost rate allowed under the Uniform Guidance. The de minimus was only used if the award agreement specifically limited indirect costs to the de minimus rate.
Title: Disaster Grants – Public Assistance (Presidentially Declared Disasters) Accounting Policies: Expenditures reported on the Schedule are reported as incurred using the accrual method of accounting and the applicable cost accounting principles. Such expenditures are recognized following the cost principles contained in the Uniform Guidance, wherein certain types of expendiures are not allowable or are limited as to reimbursement. Any negative amounts shown on the Schedule represent adjustments or credits made in the normal course of business to amounts reported as expenditures in prior years. De Minimis Rate Used: Both Rate Explanation: DHHS Approved rate used unless the agreement limited auditee to the de minimis cost rate. The Company incurred eligible disaster expenditures related to the COVID-19 pandemic. After a presidentially declared disaster, the Federal Emergency Management Agency (FEMA) provides Disaster Grants – Public Assistance (Presidentially Declared Disasters) (Assistance Listing Number 97.036) to reimburse eligible costs. In fiscal year 2023, FEMA approved $49,821,059 of eligible expenditures that were incurred in prior fiscal years. This amount has been included in the Schedule.
Title: COVID-19 Provider Relief Fund and American Rescue Plan (ARP) Rural Distribution (Assistance Listing No 93.498) (PRF) Accounting Policies: Expenditures reported on the Schedule are reported as incurred using the accrual method of accounting and the applicable cost accounting principles. Such expenditures are recognized following the cost principles contained in the Uniform Guidance, wherein certain types of expendiures are not allowable or are limited as to reimbursement. Any negative amounts shown on the Schedule represent adjustments or credits made in the normal course of business to amounts reported as expenditures in prior years. De Minimis Rate Used: Both Rate Explanation: DHHS Approved rate used unless the agreement limited auditee to the de minimis cost rate. The Schedule includes $47,641,425 received from the U.S. Department of Health and Human Services (HHS) between January 1, 2022 and December 31, 2022, under the PRF program Assistance Listing No. 93.498. These amounts are reported as Period 5 and Period 6 in the HHS PRF Reporting Portal. These amounts were recognized as patient service revenue in the Company’s consolidated financial statements on the accompanying consolidated statements of operations and changes in net assets for the year ended December 31, 2022.

Finding Details

Finding 2023-001
Finding 2023-001 Identification of the federal program: Federal Grantor: United States Department of Homeland Security Assistance Listing No.: 97.036, COVID-19 Disaster Grants – Public Assistance (Presidentially Declared Disasters) Pass-Through Grantor: State of Minnesota Pass-Through Award Period: 01/20/2020 – 05/11/2023 Criteria or specific requirement (including statutory, regulatory, or other citation): Section 200.303 of the Uniform Guidance states the following regarding internal control: “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).” The Uniform Guidance 2 CRF Subpart E Section 200.403 states the following: “Costs must meet the following general criteria in order to be allowable under Federal awards: (c) be consistent with policies and procedures that apply uniformly to both federally financed and other activities of the non-Federal entity; and (g) be adequately documented.” Condition: Fairview Health Services (the Company) did not retain sufficient documentation of its review of the allowability lab percentage calculation (which represents the total unreimbursed lab revenue as a percentage of total lab revenue to address duplication of benefits) used in determining lab supplies expense to be charged to FEMA. Cause: The Company did not have internal controls in place to formally document its review of the allowability percentage calculation applied to the lab supplies. Effect or potential effect: Lab supplies expenses may be charged to the federal award that are not consistent with the methodology adopted by the Company. Questioned costs: None. Context: We selected a sample of five of eight allowability percentage calculations for lab supplies and noted that for four of the calculations, there was no supporting documentation of the review and approval performed of the allowability percentage calculation. For Assistance Listing No. 97.036, total lab supplies to which the allowability percentage was applied were $8,432,353, representing 17% of total federal expenditures of $49,821,059 for the year ended December 31, 2023. Identification as a repeat finding, if applicable: The finding is not a repeat finding from the prior year. Recommendation: The Company should retain formal documentation of review and approval controls related to the lab supplies calculation. Views of responsible officials: “Management agrees with the finding. In May 2023, the COVID-19 emergency ended and, therefore, remediation of internal controls specific to allowability of costs for the FEMA program is no longer applicable. However, remediation steps were taken to improve documentation of review of internal controls over all federal expenditures, not limited to the FEMA program.” Fairview revised its internal control processes to improve the retention and documentation of the review and approval of inputs to the calculation of federal expenditures.
Finding 2023-002
Finding 2023-002 Identification of the federal program: Federal Grantor: United States Department of Homeland Security Assistance Listing No.: 97.036, COVID-19 Disaster Grants – Public Assistance (Presidentially Declared Disasters) Pass-Through Grantor: State of Minnesota Pass-Through Award Period: 01/20/2020 – 05/11/2023 Criteria or specific requirement (including statutory, regulatory, or other citation): Section 200.303 of the Uniform Guidance states the following regarding internal control: “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).” The Uniform Guidance 2 CRF Subpart E Section 200.403 states the following: “Costs must meet the following general criteria in order to be allowable under Federal awards: (c) be consistent with policies and procedures that apply uniformly to both federally financed and other activities of the non-Federal entity; and (g) be adequately documented.” Condition: Management did not maintain supporting documentation to demonstrate how it validated the completeness and accuracy of the internal labor data used in the contract labor allowability percentage calculation (which represents the variance between internal labor cost and contract labor cost). In addition, supporting documentation was not retained to demonstrate that the contract labor allowability percentage calculation was reviewed and approved. The methodology used to calculate the labor allowability percentage to be applied to contract labor was based on assessing financial information for one pay period vs. assessing the two years to which the labor allowability percentage was applied. Cause: The Company did not have internal controls in place to formally document its review of the allowability percentage calculation applied to the contract labor. The review of the contract labor allowability percentage performed by management was not precise enough to challenge the appropriateness of the methodology. Effect or potential effect: Contract labor expenses may be charged to the federal award that are greater than the contract labor allowability percentage. Questioned costs: None. Context: For Assistance Listing No. 97.036, total contract labor expenses calculated with the allowability percentage were $17,856,115, representing 36% of total federal expenditures of $49,821,059 for the year ended December 31, 2023. Identification as a repeat finding, if applicable: The finding is not a repeat finding from the prior year. Recommendation: The Company should retain formal documentation of review and approval controls related to the contract labor allowability percentage calculation. The Company should reinforce the importance of applying the adopted methodology consistently related to the contract labor calculation. Views of responsible officials: “Management agrees with the finding. In May 2023, the COVID-19 emergency ended and, therefore, remediation of internal controls specific to allowability of costs for the FEMA program is no longer applicable. However, remediation steps were taken to improve documentation of review of internal controls over all federal expenditures, not limited to the FEMA program.” Fairview revised its internal control processes to improve the retention and documentation of the review and approval of inputs to the calculation of federal expenditures, as well as ensure that the review is precise enough to challenge the appropriateness of the methodology utilized.
Finding 2023-001
Finding 2023-001 Identification of the federal program: Federal Grantor: United States Department of Homeland Security Assistance Listing No.: 97.036, COVID-19 Disaster Grants – Public Assistance (Presidentially Declared Disasters) Pass-Through Grantor: State of Minnesota Pass-Through Award Period: 01/20/2020 – 05/11/2023 Criteria or specific requirement (including statutory, regulatory, or other citation): Section 200.303 of the Uniform Guidance states the following regarding internal control: “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).” The Uniform Guidance 2 CRF Subpart E Section 200.403 states the following: “Costs must meet the following general criteria in order to be allowable under Federal awards: (c) be consistent with policies and procedures that apply uniformly to both federally financed and other activities of the non-Federal entity; and (g) be adequately documented.” Condition: Fairview Health Services (the Company) did not retain sufficient documentation of its review of the allowability lab percentage calculation (which represents the total unreimbursed lab revenue as a percentage of total lab revenue to address duplication of benefits) used in determining lab supplies expense to be charged to FEMA. Cause: The Company did not have internal controls in place to formally document its review of the allowability percentage calculation applied to the lab supplies. Effect or potential effect: Lab supplies expenses may be charged to the federal award that are not consistent with the methodology adopted by the Company. Questioned costs: None. Context: We selected a sample of five of eight allowability percentage calculations for lab supplies and noted that for four of the calculations, there was no supporting documentation of the review and approval performed of the allowability percentage calculation. For Assistance Listing No. 97.036, total lab supplies to which the allowability percentage was applied were $8,432,353, representing 17% of total federal expenditures of $49,821,059 for the year ended December 31, 2023. Identification as a repeat finding, if applicable: The finding is not a repeat finding from the prior year. Recommendation: The Company should retain formal documentation of review and approval controls related to the lab supplies calculation. Views of responsible officials: “Management agrees with the finding. In May 2023, the COVID-19 emergency ended and, therefore, remediation of internal controls specific to allowability of costs for the FEMA program is no longer applicable. However, remediation steps were taken to improve documentation of review of internal controls over all federal expenditures, not limited to the FEMA program.” Fairview revised its internal control processes to improve the retention and documentation of the review and approval of inputs to the calculation of federal expenditures.
Finding 2023-002
Finding 2023-002 Identification of the federal program: Federal Grantor: United States Department of Homeland Security Assistance Listing No.: 97.036, COVID-19 Disaster Grants – Public Assistance (Presidentially Declared Disasters) Pass-Through Grantor: State of Minnesota Pass-Through Award Period: 01/20/2020 – 05/11/2023 Criteria or specific requirement (including statutory, regulatory, or other citation): Section 200.303 of the Uniform Guidance states the following regarding internal control: “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).” The Uniform Guidance 2 CRF Subpart E Section 200.403 states the following: “Costs must meet the following general criteria in order to be allowable under Federal awards: (c) be consistent with policies and procedures that apply uniformly to both federally financed and other activities of the non-Federal entity; and (g) be adequately documented.” Condition: Management did not maintain supporting documentation to demonstrate how it validated the completeness and accuracy of the internal labor data used in the contract labor allowability percentage calculation (which represents the variance between internal labor cost and contract labor cost). In addition, supporting documentation was not retained to demonstrate that the contract labor allowability percentage calculation was reviewed and approved. The methodology used to calculate the labor allowability percentage to be applied to contract labor was based on assessing financial information for one pay period vs. assessing the two years to which the labor allowability percentage was applied. Cause: The Company did not have internal controls in place to formally document its review of the allowability percentage calculation applied to the contract labor. The review of the contract labor allowability percentage performed by management was not precise enough to challenge the appropriateness of the methodology. Effect or potential effect: Contract labor expenses may be charged to the federal award that are greater than the contract labor allowability percentage. Questioned costs: None. Context: For Assistance Listing No. 97.036, total contract labor expenses calculated with the allowability percentage were $17,856,115, representing 36% of total federal expenditures of $49,821,059 for the year ended December 31, 2023. Identification as a repeat finding, if applicable: The finding is not a repeat finding from the prior year. Recommendation: The Company should retain formal documentation of review and approval controls related to the contract labor allowability percentage calculation. The Company should reinforce the importance of applying the adopted methodology consistently related to the contract labor calculation. Views of responsible officials: “Management agrees with the finding. In May 2023, the COVID-19 emergency ended and, therefore, remediation of internal controls specific to allowability of costs for the FEMA program is no longer applicable. However, remediation steps were taken to improve documentation of review of internal controls over all federal expenditures, not limited to the FEMA program.” Fairview revised its internal control processes to improve the retention and documentation of the review and approval of inputs to the calculation of federal expenditures, as well as ensure that the review is precise enough to challenge the appropriateness of the methodology utilized.