Audit 322389

Eligibility Federal Agency: U.S. Department of Agriculture (USDA) Program: WIC Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) (ALN 10.557) Pass-through Entity: State of Minnesota, Department of Health Federal Assistance Identification Number or Pass-Through Number: 202MN004W1003, 192MN004W5003 Federal Award Year: Year ended December 31, 2023 Type of Finding: Significant Deficiency in Internal Control over Compliance Criteria: 2 CFR 200.303(a) requires that each 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 the terms and conditions of the Federal award." The County is responsible for the verification of an applicant’s categorical eligibility, identity, and residency as well as the performance of assessments of an applicant’s nutritional risk. In addition, the County is also responsible for the input of this information as well as income and family size into HuBERT, the State’s WIC Information System. Condition: While we were able to test manual compensating controls over eligibility determination, we were not able to review and test the automated application controls and the related information technology general controls (ITGCs) within the HuBERT system, a state system that is administered by the state and required to be used by the County for eligibility determination, to determine whether controls are adequately designed and implemented and operating effectively. Cause: The State was not able to provide information regarding the design and effectiveness of HuBERT system controls nor were we able to test those controls directly due to complexities of data privacy and resources within the State. Effect: Although not found during our testing, benefits disbursed to participants in the program and issued by the State of Minnesota may have paid for ineligible participants. Context: Applies to the automated application controls over the population of eligible participants within the program. Questioned Costs: None Repeat Finding?: Yes Recommendation: We suggest that the County encourage the State to provide an independent audit of the design and implementation of HuBERT system controls. View of responsible officials of the auditee: Hennepin County has reviewed and agrees with the finding and recommendation.

Matching Federal Agency: U.S. Department of Housing and Urban Development Program: Continuum of Care Program (ALN 14.267) Federal Assistance Identification Number or Pass-Through Numbers: MN0311L5K002007, MN0364L5K002005, MN0372L5K002105 Federal Award Years: Year ended December 31, 2023 Type of Finding: Significant Deficiency in Internal Control over Compliance Criteria: 2 CFR 200.303(a), requires that the 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 the terms and conditions of the Federal award. 24 CFR 578.73(a) requires that the recipient must match all grant funds, except for leasing funds, with no less than 25 percent of funds or in-kind contributions from other sources. For grantees where there is more than one grant agreement, the 25 percent match must be provided on a grant-by-grant basis. Cash match must be used for the costs of activities that are eligible as program costs under 24 CFR 578 Subpart D. 2 CFR 200.306(b)(1) requires that any shared costs or matching funds must be verifiable from the non-Federal entity’s records. Condition: While we were able to test a manual compensating control over matching, we were not able to review and test the automated application controls and related ITGCs within the State’s MAXIS system. The State was not able to provide information regarding the design and implementation of MAXIS system controls, nor were we able to test those controls directly. Cause: The State was not able to provide information regarding the design and effectiveness of MAXIS system controls nor were we able to test those controls directly due to complexities of data privacy and resources within the State. Effect: There is an increased risk of noncompliance with the matching requirement. Context: Applies to the automated application controls over matching. Questioned Costs: None Repeat Finding?: Yes Recommendation: We suggest that the County encourage the State to provide an independent audit of the design and implementation of MAXIS system controls. View of responsible officials of the auditee: Hennepin County has reviewed and agrees with the finding and recommendation.

Eligibility Federal Agency: U.S. Department of Health and Human Services Program: Medical Assistance Program (ALN 93.778) Pass-through Entity: State of Minnesota, Department of Human Services Federal Assistance Identification Number or Pass-Through Numbers: 2005MN5ADM, 2105MN5ADM, 2105MN5MAP, NH23IP922628 Federal Award Years: Year ended December 31, 2023 Type of Finding: Material Weakness in Internal Control over Compliance; Other Matter Compliance Finding Criteria: 2 CFR 200.303(a) requires that each 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 the terms and conditions of the Federal award." Specific criteria are established with respect to eligibility for assistance and the County’s responsibilities related to the intake function:  The Minnesota Health Care Programs Eligibility Policy Manual at 1.3.2.4 requires a County agency to evaluate and pursue resolution of information that is inconsistent with other information.  42 CFR 435.907 requires, as a condition of eligibility, each individual seeking Medicaid must submit a signed application.  42 CFR 435.407 requires, as a condition of eligibility, each individual seeking Medicaid must provide evidence of citizenship. Condition: During our testing, we noted the following 8 instances of noncompliance in the sample of 120 case files tested:  Five MAXIS (eligibility determination system) case files had different bases of eligibility in MAXIS and MMIS (payment system). For three of the five cases, MAXIS indicated the beneficiary was “EX” (age 65 or older) while MMIS indicated the beneficiary was “DX” (disabled). For one of the five cases, MAXIS indicated the beneficiary was “1619(b)” (people who no longer receive an SSI cash benefit and maintain their disability status) while MMIS indicated the beneficiary was “DX” (disabled) and the final case indicated the beneficiary was “DC” (disabled child 18-20) in MAXIS while MMIS indicated the beneficiary was “DT” (disabled child under TEFRA option).  Two MAXIS case files did not have a signed application on file.  One MAXIS case file did not have citizenship verified. In addition, the County does not have a formalized supervisory case file review process in place to ensure accuracy and completeness of inputs into the two eligibility determination systems, MAXIS and METS. Cause: The County relied on the pandemic related continuous eligibility provisions for the Medical Assistance program. Program personnel entering case data into MAXIS or METS did not ensure all required information was input correctly, supported or that all required information was obtained. Effect: Although not found during our testing, benefits paid for participants in the program by the State of Minnesota may have paid for ineligible participants or paid the incorrect amount. Context: The State of Minnesota Department of Human Services (DHS) contracts with county social services departments to perform the “intake function” (meeting with the social services client to determine income and categorical eligibility), while the State maintains the MAXIS and METS systems, which determine eligibility. Participants receive benefit payments from the state. The eligible individuals consist of two populations, and a total of 120 enrolled persons were selected, 60 from the MAXIS system and another 60 from the METS system. The sample sizes were based on guidance from chapter 11 of the AICPA Audit Guide, Government Auditing Standards and Single Audits. Of the 120 selections, errors were noted in seven of the cases (see condition section above for more detail). Questioned Costs: None. The County only receives reimbursement for administrative costs of the program. All benefits paid to participants in the program are paid directly by the State of Minnesota. Repeat Finding?: Yes Recommendation: We recommend the County strengthen internal controls over inputs used to determine eligibility to ensure they are correctly entered and the information required by the contract is retained in the County’s records. View of responsible officials of the auditee: Hennepin County has reviewed and agrees with the finding and recommendation.

Activities Allowed or Unallowed; Allowable Costs/Cost Principles; Eligibility Federal Agency: U.S. Department of Health and Human Services Program: Foster Care Title IV-E (ALN 93.658) Pass-through Entity: State of Minnesota, Department of Human Services Federal Assistance Identification Number or Pass-Through Number: 2101MNFOST Federal Award Year: Year ended December 31, 2023 Type of Finding: Significant Deficiency in Internal Control over Compliance Criteria: 2 CFR 200.303(a) requires that each 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 the terms and conditions of the Federal award.” Expenditures are to be made for allowable foster care activities and must be in accordance with 2 CFR Part 200, Subpart E. Foster care maintenance payments are allowable if the foster child is removed from home per the requirements of Section 406(a) of the Social Security Act and is placed into foster care by means of a judicial determination. Condition: While we were able to test manual compensating controls over activities allowed or unallowed, allowable costs/cost principles and eligibility, we were not able to review and test the automated application controls and the related ITGCs within the MAXIS and SSIS systems that reside within the State of Minnesota, but are utilized by the County, to determine whether the system controls are adequately designed and implemented and operating effectively. Cause: The State was not able to provide information regarding the design and effectiveness of MAXIS and SSIS system controls nor were we able to test those controls directly due to complexities of data privacy and resources within the State. Effect: Although not found during our testing, benefits paid for participants in the program may have paid for ineligible participants. Context: Applies to the automated application controls over the population of expenditures and eligible participants within the program. Questioned Costs: None noted Repeat Finding?: Yes Recommendation: We suggest that the County encourage the State to provide an independent audit of the design and implementation of MAXIS and SSIS system controls. View of responsible officials of the auditee: Hennepin County has reviewed and agrees with the finding and recommendation.

Cash Management Federal Agency: U.S. Department of Health and Human Services Program: Congressional Directives (ALN 93.493) Pass-through Entity: N/A Federal Assistance Identification Number or Pass-Through Number: CE146419 Federal Award Year: Year ended December 31, 2023 Type of Finding: Significant Deficiency in Internal Control over Compliance Criteria: 45 CFR 75.303(a) requires that each 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 the terms and conditions of the Federal award.". Condition: The county hospital could not provide documentation that a review and approval of grant reimbursement requests was conducted prior to the request being submitted for payment. Cause: The county hospital did not retain documentation of its review and approval process. Effect: Although not found during our testing, inaccurate reimbursement requests could be submitted for payment. Context: There were a total of seven reimbursement requests prepared for the year ended December 31, 2023. Of these, two were selected for testing and neither had documentation of the request being reviewed or approved prior to submittal. The sample sizes were based on guidance from chapter 11 of the AICPA Audit Guide, Government Auditing Standards and Single Audits. Questioned Costs: None noted Repeat Finding?: No Recommendation: We recommend the county hospital retain documentation demonstrating the review and approval of grant reimbursement requests. View of responsible officials of the auditee: Hennepin Healthcare System Inc. has reviewed and agrees with the finding and recommendation.

Reporting Federal Agency: U.S. Department of Health and Human Services Program: Congressional Directives (ALN 93.493) Pass-through Entity: N/A Federal Assistance Identification Number or Pass-Through Number: CE146419 Federal Award Year: Year ended December 31, 2023 Type of Finding: Significant Deficiency in Internal Control over Compliance Criteria: 45 CFR 75.303(a) requires that each 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 the terms and conditions of the Federal award.". Condition: The county hospital could not provide documentation that review and approval of the semiannual progress report was conducted prior to the report being submitted. Cause: The county hospital did not retain documentation of its review and approval process. Effect: Although not found during our testing, inaccurate reports could be submitted. Context: There was a total of one semi-annual progress report required to be completed for the year ended December 31, 2023. The client could not provide documentation of that report being reviewed or approved prior to submittal. The sample sizes were based on guidance from chapter 11 of the AICPA Audit Guide, Government Auditing Standards and Single Audits. Questioned Costs: None noted Repeat Finding?: No Recommendation: We recommend the county hospital retain documentation demonstrating the review and approval of progress reports. View of responsible officials of the auditee: Hennepin Healthcare System Inc. has reviewed and agrees with the finding and recommendation.

Suspension and Debarment Federal Agency: U.S. Department of Health and Human Services Program: Congressional Directives (ALN 93.493) Pass-through Entity: N/A Federal Assistance Identification Number or Pass-Through Number: CE146419 Federal Award Year: Year ended December 31, 2023 Type of Finding: Material Weakness in Internal Control over Compliance; Other Matter Compliance Finding Criteria: 45 CFR 75.303(a) requires that each 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 the terms and conditions of the Federal award…”. 45 CFR 75.213 requires that “Non-federal entities are subject to the non-procurement debarment and suspension regulations implementing Executive Orders 12549 and 12689, 2 CFR parts 180 and 376. These regulations restrict awards, subawards and contracts with certain parties that are debarred, suspended or otherwise excluded from or ineligible for participation in Federal assistance programs or activities.” Condition: The county hospital does not have effective internal controls over the suspension and debarment requirement for the Congressional Directives program. In addition, there was no evidence that the county hospital had verified that entities receiving more than $25,000 in federal grant funds were not suspended or debarred prior to providing them with federal funds. Cause: For most specialized medical equipment purchased under this grant, the department identifying the need for the equipment is also responsible for selecting the vendor. These personnel do not appear to receive training in the requirements related to suspension and debarment for federally funded projects. Effect: While not found during our testing, the lack of controls over this requirement increases the possibility that contracts could be awarded to vendors that are ineligible to provide goods and services under federally funded grants. Context: For all of the procurements selected for testing that were covered transactions, documentation was not maintained that could provide evidence that the county hospital had performed the required verifications. Out of 11 covered transactions, 8 were selected for testing. The sample sizes were based on guidance from chapter 11 of the AICPA Audit Guide, Government Auditing Standards and Single Audits. Questioned Costs: None Repeat Finding?: No Recommendation: We recommend that when entering into a contract that relates to a covered transaction that the county hospital either search for the contractor in the list at SAM.gov, or obtain certification from the potential vendor that they are not excluded from participation in federally funded procurements. Additionally, on an annual basis we recommend that the county hospital compares the vendor and employee master file to the excluded parties list at SAM.gov to ensure there are not any on the list that impact the county hospital’s current contracts. The county hospital should retain documentation demonstrating each of these internal control activities was performed timely. View of responsible officials of the auditee: Hennepin Healthcare System Inc. has reviewed and agrees with the finding and recommendation.

Procurement Federal Agency: U.S. Department of Health and Human Services Program: Congressional Directives (ALN 93.493) Pass-through Entity: N/A Federal Assistance Identification Number or Pass-Through Number: CE146419 Federal Award Year: Year ended December 31, 2023 Type of Finding: Material Weakness in Internal Control over Compliance; Material Noncompliance Finding Criteria: 45 CFR 75.303(a) requires that each 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 the terms and conditions of the Federal award…”. 45 CFR 75.327(a) requires that "The non-Federal entity must use its own documented procurement procedures which reflect applicable State, local, and tribal laws and regulations, provided that the procurements conform to applicable Federal law and the standards identified in this part." 45 CFR 75.327(i) requires that "The non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to the following: rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price." 45 CFR 75.328(a) requires that "All procurement transactions must be conducted in a manner providing full and open competition consistent with the standards of this section. In order to ensure objective contractor performance and eliminate unfair competitive advantage, contractors that develop or draft specifications, requirements, statements of work, or invitations for bids or requests for proposals must be excluded from competing for such procurements." 45 CFR 75.328(d) requires that "The non-Federal entity must ensure that all prequalified lists of persons, firms, or products which are used in acquiring goods and services are current and include enough qualified sources to ensure maximum open and free competition. Also, the non-Federal entity must not preclude potential bidders from qualifying during the solicitation period." 45 CFR 75.329(b) requires that "...Small purchase procedures are those relatively simple and informal procurement methods for securing services, supplies, or other property that do not cost more than the Simplified Acquisition Threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources." All procurements for this grant occurred at the county hospital which is specifically exempted from state statutes related to procurement for political subdivisions. For federally funded procurements, decisions greater than the Simplified Acquisition Threshold of $250,000 defined in 48 CFR 2.101 require the use of formal procurement methods, as described below. 45 CFR 75.329(c) requires that "Bids are publicly solicited and a firm fixed price contract (lump sum or unit price) is awarded to the responsible bidder whose bid, conforming with all the material terms and conditions of the invitation for bids, is the lowest in price. The sealed bid method is the preferred method for procuring construction, if the conditions in paragraph (c)(1) of this section apply. (1) In order for sealed bidding to be feasible, the following conditions should be present: (i) A complete, adequate, and realistic specification or purchase description is available; (ii) Two or more responsible bidders are willing and able to compete effectively for the business; and (iii) The procurement lends itself to a firm fixed price contract and the selection of the successful bidder can be made principally on the basis of price. (2) If sealed bids are used, the following requirements apply: (i) Bids must be solicited from an adequate number of known suppliers, providing them sufficient response time prior to the date set for opening the bids, for local, and tribal governments, the invitation for bids must be publicly advertised; (ii) The invitation for bids, which will include any specifications and pertinent attachments, must define the items or services in order for the bidder to properly respond; (iii) All bids will be opened at the time and place prescribed in the invitation for bids, for local, and tribal governments, the bids must be opened publicly; (iv) A firm fixed price contract award will be made in writing to the lowest responsive and responsible bidder. Where specified in bidding documents, factors such as discounts, transportation cost, and life cycle costs must be considered in determining which bid is lowest. Payment discounts will only be used to determine the low bid when prior experience indicates that such discounts are usually taken advantage of; and (v) Any or all bids may be rejected if there is a sound documented reason." 45 CFR 75.329 (d) requires that “Procurement by competitive proposals. The technique of competitive proposals is normally conducted with more than one source submitting an offer, and either a fixed price or cost-reimbursement type contract is awarded. It is generally used when conditions are not appropriate for the use of sealed bids. If this method is used, the following requirements apply: (1) Requests for proposals must be publicized and identify all evaluation factors and their relative importance. Any response to publicized requests for proposals must be considered to the maximum extent practical; (2) Proposals must be solicited from an adequate number of qualified sources; (3) The non-Federal entity must have a written method for conducting technical evaluations of the proposals received and for selecting recipients; (4) Contracts must be awarded to the responsible firm whose proposal is most advantageous to the program, with price and other factors considered; and (5) The non-Federal entity may use competitive proposal procedures for qualifications-based procurement of architectural/engineering (A/E) professional services whereby competitors' qualifications are evaluated and the most qualified competitor is selected, subject to negotiation of fair and reasonable compensation. The method, where price is not used as a selection factor, can only be used in procurement of A/E professional services. It cannot be used to purchase other types of services though A/E firms are a potential source to perform the proposed effort.” 45 CFR 75.329(f) requires that "...Procurement by noncompetitive proposals is procurement through solicitation of a proposal from only one source and may be used only when one or more of the following circumstances apply: (1) The item is available only from a single source; (2) The public exigency or emergency for the requirement will not permit a delay resulting from competitive solicitation; (3) The HHS awarding agency or pass-through entity expressly authorizes noncompetitive proposals in response to a written request from the non-Federal entity; or (4) After solicitation of a number of sources, competition is determined inadequate." The county hospital procurement policy requires that all county hospital purchases must have a purchase order and be processed through Supply Chain Management using Peoplesoft FSCM in order to ensure purchases are compliant with all clinical and safety mandates and done in a cost effective manner. The policy also requires that Supply Chain Management is the only department authorized to contact suppliers for the purpose of placing orders and negotiating pricing. Condition: The county hospital does not have effective internal controls over the procurement requirement of the Congressional Directives program, which resulted in two instances of noncompliance. During our testing we noted: Small Purchases: In our sample of six small purchases we found the following exceptions for five of the selections: ‐ The county hospital purchased lab equipment with a total cost of $118,000 but did not seek more than a single quote when two distributors were available, which resulted in noncompliance with the procurement requirements. The price of the equipment is set by the manufacturer. The county hospital cited sole source as the procurement method but the circumstances cited by the county hospital , an established relationship with the vendor, did not meet one of the allowable criteria under the regulations. The county hospital was unable to provide support that it maintained records documenting the history of the procurement. ‐ The county hospital obtained architectural services with a total cost of $31,259 using noncompetitive negotiation but none of the criteria allowing for noncompetitive procurements were met, which resulted in noncompliance with the procurement requirements. The county hospital was unable to provide support that it maintained records documenting the history of the procurement, including the selection of the architect for this procurement or the initial selection. ‐ The county hospital obtained fluid management equipment with a total cost of $39,756 but did not maintain documentation of the history of the procurement decision, including the decision to use the pricing available through a Group Purchasing Organization. ‐ The county hospital purchased infant care equipment with a total cost of $83,676 but did not maintain documentation of the history of the procurement decision, including the decision to use the pricing available through a Group Purchasing Organization. ‐ The county hospital purchased imaging equipment with a total cost of $170,370 but did not maintain documentation of the history of the procurement decision, including the decision to use the pricing available through a Group Purchasing Organization. Formal Methods: In our sample of two procurements requiring formal methods we found the following exceptions: ‐ The county hospital purchased infant care equipment with a total cost of $345,923 by seeking quotes from two different vendors, but based on the size of the procurement the county hospital should have utilized one of the formal procurement methods such as sealed bids or competitive proposals. The county hospital later decided to use the pricing available through a Group Purchasing Organization but was unable to provide support that it maintained records documenting the history of the procurement. ‐ The county hospital selected ultrasound equipment with a total cost of $600,000 by seeking product demonstrations from three different vendors. The county hospital did not maintain records to demonstrate that the responses were the result of public solicitation. The county hospital was unable to provide documentation to support that it maintained records documenting the history of the procurement, including a cost/price analysis and decision to use a contract through a Group Purchasing Organization. During 2023 the county hospital did not have written procurement policies that conformed to the requirements of the Uniform Guidance, including the requirement to maintain records of the history of the procurement. State law specifically exempts the county hospital from the State's own laws related to local government procurement, but this has not been replaced by local laws or policies and procedures specific to procurement. Cause: For most specialized medical equipment purchased by the grantee, the department identifying the need for the equipment is also responsible for selecting the vendor. Personnel making procurement decisions do not appear to receive training in the requirements related to procurement for federally funded projects, including the limited circumstances where noncompetitive procurements are allowed or the maintenance of required records of the history of procurement. Effect: The county hospital is not complying with the procurement requirements applicable to the program, including properly maintaining records of procurement decisions and processes that ensure fair and open competition between an adequate number of potential vendors. Context: For 2023 we identified four procurements greater than the simplified acquisition threshold and ten procurements less than the simplified acquisition threshold. We selected two procurements and six procurements, respectively, from this population of expenditures that occurred during 2023. We found control deficiencies with both of the selections greater than the simplified acquisition threshold and five control deficiencies and/or exceptions in the selections less than the simplified acquisition threshold. The sample sizes were based on guidance from chapter 11 of the AICPA Audit Guide, Government Auditing Standards and Single Audits. Questioned Costs: $149,259 known Repeat Finding?: No Recommendation: We recommend that the county hospital develop a procurement policy that conforms to federal requirements, including the most stringent between the Uniform Guidance at 2 CFR 200 and the United States Department of Health and Human Services Uniform Administrative Requirements at 45 CFR 75. We recommend that the county hospital develop a document retention policy related to procurement. We further recommend that a standardized procurement process is developed for micropurchases, small purchases less than the simplified acquisition threshold, and formal procedures for all other procurement decisions. Noncompetitive, or “sole source” procurements should also be standardized and when applicable, include documentation to justify the limitation of competition. View of responsible officials of the auditee: Hennepin Healthcare System Inc. has reviewed and acknoledges the finding and recommendation.

Equipment and Real Property Management Federal Agency: U.S. Department of Health and Human Services Program: Congressional Directives (ALN 93.493) Pass-through Entity: N/A Federal Assistance Identification Number or Pass-Through Number: CE146419 Federal Award Year: Year ended December 31, 2023 Type of Finding: Material Weakness in Internal Control over Compliance; Other Matter Compliance Finding Criteria: 45 CFR 75.303(a) requires that each 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 the terms and conditions of the Federal award…”. Per 45 CFR 75.320(d)(1), property records must be maintained that include a description of the property, a serial number or other identification number, the source of funding for the property, who holds title, location, and use and condition of the property, and any ultimate disposition data including the date of disposal and sale price off the property. Condition: The county hospital does not have effective internal controls over the equipment and real property management requirement of the Congressional Directives program. In addition, during our testing we noted that while most items were listed with serial number and location, the other required information was not being consistently included. Cause: County hospital management was not aware of the specific requirements. Effect: Without proper equipment records it is possible that dispositions of federally funded equipment may not be properly identified and managed in conformance with program requirements. Context: None of the 25 items tested contained all of the required information. Questioned Costs: None noted Repeat Finding?: No Recommendation: We recommend county hospital management update records for property acquired with federal funds to include all required information. In addition, we suggest management ensure there are policies and procedures in place to track all equipment acquired with federal funds and that any removal of this equipment is properly coordinated and discussed with the granting agency. View of responsible officials of the auditee: Hennepin Healthcare System Inc. has reviewed and agrees with the finding and recommendation.

Schedule of Expenditures of Federal Awards (SEFA) Federal Agency: U.S. Department of Health and Human Services; U.S. Department of Agriculture (USDA) Program: National Bioterrorism Hospital Preparedness Program (ALN 93.889); Immunization Cooperative Agreements (ALN 93. 268); COVID-19 Epidemiology and Laboratory Capacity for Infectious Diseases (ELC)(ALN 93. 323); Child Support Services (ALN 93. 563); State Administrative Matching Grants for the Supplemental Nutrition Assistance Program (ALN 10.561) Pass-through Entity: Minnesota Department of Health; Minnesota Department of Human Services Federal Assistance Identification Number or Pass-Through Number: U90TP000529; 6NH23P0007370502; NH23P922628; NH23IP922628; NU50CK000508; 2001MNCEST; 2101MNCSES; 212MN127Q7503; 212MN101S2520; 212MN101S2514 Federal Award Year: Year ended December 31, 2023 Type of Finding: Significant Deficiency in Internal Control over Compliance; Other Matter Compliance Finding Criteria: 2 CFR 200.303(a) requires that each 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 the terms and conditions of the Federal award." 2 CFR 200.510(b) requires that “The auditee must prepare a schedule of expenditures of Federal awards awards (the “schedule”) for the period covered by the auditee’s financial statements which must include the total Federal awards expended as determined in accordance with ss 200.502... ...At minimum, the schedule must... ...(3) Provide total Federal awards expended for each individual Federal program and the Assistance Listings Number or other identifying number when the Assistance Listings information is not available…” Condition: While testing the SEFA, we noted that internal controls were not operating effectively over the preparation of the SEFA. In addition, we noted the following errors in the original SEFA we received for the audit: - $1,284,631 of expenditures were improperly included in ALN 93.889 when the amount should have been included in ALN 93.268. - $30,394 of expenditures was improperly included in ALN 93.889 when the amount should have been included in ALN 93.323. - $626,894 of expenditures related to ALN 93.563 was missing from the schedule. - $61,290 of expenditures related to ALN 10.561 was missing from the schedule. Cause: The errors of $1,284,631 and $30,394 related to ALN 93.889 were caused by the county hospital’s system of assigning identifying numbers within the chart of accounts not being applied to awards managed outside of the Hennepin Health Foundation. The errors of $626,894 related to ALN 93.563 and $61,290 related to ALN 10.561 related to the County’s reducing expenditures by a reversal of a prior year receivable transaction when determining the amount of expenditures. Effect: The errors in the preparation of the SEFA indicate noncompliance with the requirements for the Schedule, including ensuring that it is complete and accurate. Context: Approximately $2 million of errors were noted over the SEFA with total expenditures of approximately $360 million. Questioned Costs: None Repeat Finding?: No Recommendation: We recommend that the County strengthen its processes and controls over the preparation of the SEFA. Views of Responsible Officials: Hennepin County has reviewed and agrees with the finding and the recommendation.

Schedule of Expenditures of Federal Awards (SEFA) Federal Agency: U.S. Department of Health and Human Services; U.S. Department of Agriculture (USDA) Program: National Bioterrorism Hospital Preparedness Program (ALN 93.889); Immunization Cooperative Agreements (ALN 93. 268); COVID-19 Epidemiology and Laboratory Capacity for Infectious Diseases (ELC)(ALN 93. 323); Child Support Services (ALN 93. 563); State Administrative Matching Grants for the Supplemental Nutrition Assistance Program (ALN 10.561) Pass-through Entity: Minnesota Department of Health; Minnesota Department of Human Services Federal Assistance Identification Number or Pass-Through Number: U90TP000529; 6NH23P0007370502; NH23P922628; NH23IP922628; NU50CK000508; 2001MNCEST; 2101MNCSES; 212MN127Q7503; 212MN101S2520; 212MN101S2514 Federal Award Year: Year ended December 31, 2023 Type of Finding: Significant Deficiency in Internal Control over Compliance; Other Matter Compliance Finding Criteria: 2 CFR 200.303(a) requires that each 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 the terms and conditions of the Federal award." 2 CFR 200.510(b) requires that “The auditee must prepare a schedule of expenditures of Federal awards awards (the “schedule”) for the period covered by the auditee’s financial statements which must include the total Federal awards expended as determined in accordance with ss 200.502... ...At minimum, the schedule must... ...(3) Provide total Federal awards expended for each individual Federal program and the Assistance Listings Number or other identifying number when the Assistance Listings information is not available…” Condition: While testing the SEFA, we noted that internal controls were not operating effectively over the preparation of the SEFA. In addition, we noted the following errors in the original SEFA we received for the audit: - $1,284,631 of expenditures were improperly included in ALN 93.889 when the amount should have been included in ALN 93.268. - $30,394 of expenditures was improperly included in ALN 93.889 when the amount should have been included in ALN 93.323. - $626,894 of expenditures related to ALN 93.563 was missing from the schedule. - $61,290 of expenditures related to ALN 10.561 was missing from the schedule. Cause: The errors of $1,284,631 and $30,394 related to ALN 93.889 were caused by the county hospital’s system of assigning identifying numbers within the chart of accounts not being applied to awards managed outside of the Hennepin Health Foundation. The errors of $626,894 related to ALN 93.563 and $61,290 related to ALN 10.561 related to the County’s reducing expenditures by a reversal of a prior year receivable transaction when determining the amount of expenditures. Effect: The errors in the preparation of the SEFA indicate noncompliance with the requirements for the Schedule, including ensuring that it is complete and accurate. Context: Approximately $2 million of errors were noted over the SEFA with total expenditures of approximately $360 million. Questioned Costs: None Repeat Finding?: No Recommendation: We recommend that the County strengthen its processes and controls over the preparation of the SEFA. Views of Responsible Officials: Hennepin County has reviewed and agrees with the finding and the recommendation.

Schedule of Expenditures of Federal Awards (SEFA) Federal Agency: U.S. Department of Health and Human Services; U.S. Department of Agriculture (USDA) Program: National Bioterrorism Hospital Preparedness Program (ALN 93.889); Immunization Cooperative Agreements (ALN 93. 268); COVID-19 Epidemiology and Laboratory Capacity for Infectious Diseases (ELC)(ALN 93. 323); Child Support Services (ALN 93. 563); State Administrative Matching Grants for the Supplemental Nutrition Assistance Program (ALN 10.561) Pass-through Entity: Minnesota Department of Health; Minnesota Department of Human Services Federal Assistance Identification Number or Pass-Through Number: U90TP000529; 6NH23P0007370502; NH23P922628; NH23IP922628; NU50CK000508; 2001MNCEST; 2101MNCSES; 212MN127Q7503; 212MN101S2520; 212MN101S2514 Federal Award Year: Year ended December 31, 2023 Type of Finding: Significant Deficiency in Internal Control over Compliance; Other Matter Compliance Finding Criteria: 2 CFR 200.303(a) requires that each 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 the terms and conditions of the Federal award." 2 CFR 200.510(b) requires that “The auditee must prepare a schedule of expenditures of Federal awards awards (the “schedule”) for the period covered by the auditee’s financial statements which must include the total Federal awards expended as determined in accordance with ss 200.502... ...At minimum, the schedule must... ...(3) Provide total Federal awards expended for each individual Federal program and the Assistance Listings Number or other identifying number when the Assistance Listings information is not available…” Condition: While testing the SEFA, we noted that internal controls were not operating effectively over the preparation of the SEFA. In addition, we noted the following errors in the original SEFA we received for the audit: - $1,284,631 of expenditures were improperly included in ALN 93.889 when the amount should have been included in ALN 93.268. - $30,394 of expenditures was improperly included in ALN 93.889 when the amount should have been included in ALN 93.323. - $626,894 of expenditures related to ALN 93.563 was missing from the schedule. - $61,290 of expenditures related to ALN 10.561 was missing from the schedule. Cause: The errors of $1,284,631 and $30,394 related to ALN 93.889 were caused by the county hospital’s system of assigning identifying numbers within the chart of accounts not being applied to awards managed outside of the Hennepin Health Foundation. The errors of $626,894 related to ALN 93.563 and $61,290 related to ALN 10.561 related to the County’s reducing expenditures by a reversal of a prior year receivable transaction when determining the amount of expenditures. Effect: The errors in the preparation of the SEFA indicate noncompliance with the requirements for the Schedule, including ensuring that it is complete and accurate. Context: Approximately $2 million of errors were noted over the SEFA with total expenditures of approximately $360 million. Questioned Costs: None Repeat Finding?: No Recommendation: We recommend that the County strengthen its processes and controls over the preparation of the SEFA. Views of Responsible Officials: Hennepin County has reviewed and agrees with the finding and the recommendation.

Schedule of Expenditures of Federal Awards (SEFA) Federal Agency: U.S. Department of Health and Human Services; U.S. Department of Agriculture (USDA) Program: National Bioterrorism Hospital Preparedness Program (ALN 93.889); Immunization Cooperative Agreements (ALN 93. 268); COVID-19 Epidemiology and Laboratory Capacity for Infectious Diseases (ELC)(ALN 93. 323); Child Support Services (ALN 93. 563); State Administrative Matching Grants for the Supplemental Nutrition Assistance Program (ALN 10.561) Pass-through Entity: Minnesota Department of Health; Minnesota Department of Human Services Federal Assistance Identification Number or Pass-Through Number: U90TP000529; 6NH23P0007370502; NH23P922628; NH23IP922628; NU50CK000508; 2001MNCEST; 2101MNCSES; 212MN127Q7503; 212MN101S2520; 212MN101S2514 Federal Award Year: Year ended December 31, 2023 Type of Finding: Significant Deficiency in Internal Control over Compliance; Other Matter Compliance Finding Criteria: 2 CFR 200.303(a) requires that each 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 the terms and conditions of the Federal award." 2 CFR 200.510(b) requires that “The auditee must prepare a schedule of expenditures of Federal awards awards (the “schedule”) for the period covered by the auditee’s financial statements which must include the total Federal awards expended as determined in accordance with ss 200.502... ...At minimum, the schedule must... ...(3) Provide total Federal awards expended for each individual Federal program and the Assistance Listings Number or other identifying number when the Assistance Listings information is not available…” Condition: While testing the SEFA, we noted that internal controls were not operating effectively over the preparation of the SEFA. In addition, we noted the following errors in the original SEFA we received for the audit: - $1,284,631 of expenditures were improperly included in ALN 93.889 when the amount should have been included in ALN 93.268. - $30,394 of expenditures was improperly included in ALN 93.889 when the amount should have been included in ALN 93.323. - $626,894 of expenditures related to ALN 93.563 was missing from the schedule. - $61,290 of expenditures related to ALN 10.561 was missing from the schedule. Cause: The errors of $1,284,631 and $30,394 related to ALN 93.889 were caused by the county hospital’s system of assigning identifying numbers within the chart of accounts not being applied to awards managed outside of the Hennepin Health Foundation. The errors of $626,894 related to ALN 93.563 and $61,290 related to ALN 10.561 related to the County’s reducing expenditures by a reversal of a prior year receivable transaction when determining the amount of expenditures. Effect: The errors in the preparation of the SEFA indicate noncompliance with the requirements for the Schedule, including ensuring that it is complete and accurate. Context: Approximately $2 million of errors were noted over the SEFA with total expenditures of approximately $360 million. Questioned Costs: None Repeat Finding?: No Recommendation: We recommend that the County strengthen its processes and controls over the preparation of the SEFA. Views of Responsible Officials: Hennepin County has reviewed and agrees with the finding and the recommendation.

Schedule of Expenditures of Federal Awards (SEFA) Federal Agency: U.S. Department of Health and Human Services; U.S. Department of Agriculture (USDA) Program: National Bioterrorism Hospital Preparedness Program (ALN 93.889); Immunization Cooperative Agreements (ALN 93. 268); COVID-19 Epidemiology and Laboratory Capacity for Infectious Diseases (ELC)(ALN 93. 323); Child Support Services (ALN 93. 563); State Administrative Matching Grants for the Supplemental Nutrition Assistance Program (ALN 10.561) Pass-through Entity: Minnesota Department of Health; Minnesota Department of Human Services Federal Assistance Identification Number or Pass-Through Number: U90TP000529; 6NH23P0007370502; NH23P922628; NH23IP922628; NU50CK000508; 2001MNCEST; 2101MNCSES; 212MN127Q7503; 212MN101S2520; 212MN101S2514 Federal Award Year: Year ended December 31, 2023 Type of Finding: Significant Deficiency in Internal Control over Compliance; Other Matter Compliance Finding Criteria: 2 CFR 200.303(a) requires that each 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 the terms and conditions of the Federal award." 2 CFR 200.510(b) requires that “The auditee must prepare a schedule of expenditures of Federal awards awards (the “schedule”) for the period covered by the auditee’s financial statements which must include the total Federal awards expended as determined in accordance with ss 200.502... ...At minimum, the schedule must... ...(3) Provide total Federal awards expended for each individual Federal program and the Assistance Listings Number or other identifying number when the Assistance Listings information is not available…” Condition: While testing the SEFA, we noted that internal controls were not operating effectively over the preparation of the SEFA. In addition, we noted the following errors in the original SEFA we received for the audit: - $1,284,631 of expenditures were improperly included in ALN 93.889 when the amount should have been included in ALN 93.268. - $30,394 of expenditures was improperly included in ALN 93.889 when the amount should have been included in ALN 93.323. - $626,894 of expenditures related to ALN 93.563 was missing from the schedule. - $61,290 of expenditures related to ALN 10.561 was missing from the schedule. Cause: The errors of $1,284,631 and $30,394 related to ALN 93.889 were caused by the county hospital’s system of assigning identifying numbers within the chart of accounts not being applied to awards managed outside of the Hennepin Health Foundation. The errors of $626,894 related to ALN 93.563 and $61,290 related to ALN 10.561 related to the County’s reducing expenditures by a reversal of a prior year receivable transaction when determining the amount of expenditures. Effect: The errors in the preparation of the SEFA indicate noncompliance with the requirements for the Schedule, including ensuring that it is complete and accurate. Context: Approximately $2 million of errors were noted over the SEFA with total expenditures of approximately $360 million. Questioned Costs: None Repeat Finding?: No Recommendation: We recommend that the County strengthen its processes and controls over the preparation of the SEFA. Views of Responsible Officials: Hennepin County has reviewed and agrees with the finding and the recommendation.

Eligibility Federal Agency: U.S. Department of Agriculture (USDA) Program: WIC Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) (ALN 10.557) Pass-through Entity: State of Minnesota, Department of Health Federal Assistance Identification Number or Pass-Through Number: 202MN004W1003, 192MN004W5003 Federal Award Year: Year ended December 31, 2023 Type of Finding: Significant Deficiency in Internal Control over Compliance Criteria: 2 CFR 200.303(a) requires that each 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 the terms and conditions of the Federal award." The County is responsible for the verification of an applicant’s categorical eligibility, identity, and residency as well as the performance of assessments of an applicant’s nutritional risk. In addition, the County is also responsible for the input of this information as well as income and family size into HuBERT, the State’s WIC Information System. Condition: While we were able to test manual compensating controls over eligibility determination, we were not able to review and test the automated application controls and the related information technology general controls (ITGCs) within the HuBERT system, a state system that is administered by the state and required to be used by the County for eligibility determination, to determine whether controls are adequately designed and implemented and operating effectively. Cause: The State was not able to provide information regarding the design and effectiveness of HuBERT system controls nor were we able to test those controls directly due to complexities of data privacy and resources within the State. Effect: Although not found during our testing, benefits disbursed to participants in the program and issued by the State of Minnesota may have paid for ineligible participants. Context: Applies to the automated application controls over the population of eligible participants within the program. Questioned Costs: None Repeat Finding?: Yes Recommendation: We suggest that the County encourage the State to provide an independent audit of the design and implementation of HuBERT system controls. View of responsible officials of the auditee: Hennepin County has reviewed and agrees with the finding and recommendation.

Matching Federal Agency: U.S. Department of Housing and Urban Development Program: Continuum of Care Program (ALN 14.267) Federal Assistance Identification Number or Pass-Through Numbers: MN0311L5K002007, MN0364L5K002005, MN0372L5K002105 Federal Award Years: Year ended December 31, 2023 Type of Finding: Significant Deficiency in Internal Control over Compliance Criteria: 2 CFR 200.303(a), requires that the 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 the terms and conditions of the Federal award. 24 CFR 578.73(a) requires that the recipient must match all grant funds, except for leasing funds, with no less than 25 percent of funds or in-kind contributions from other sources. For grantees where there is more than one grant agreement, the 25 percent match must be provided on a grant-by-grant basis. Cash match must be used for the costs of activities that are eligible as program costs under 24 CFR 578 Subpart D. 2 CFR 200.306(b)(1) requires that any shared costs or matching funds must be verifiable from the non-Federal entity’s records. Condition: While we were able to test a manual compensating control over matching, we were not able to review and test the automated application controls and related ITGCs within the State’s MAXIS system. The State was not able to provide information regarding the design and implementation of MAXIS system controls, nor were we able to test those controls directly. Cause: The State was not able to provide information regarding the design and effectiveness of MAXIS system controls nor were we able to test those controls directly due to complexities of data privacy and resources within the State. Effect: There is an increased risk of noncompliance with the matching requirement. Context: Applies to the automated application controls over matching. Questioned Costs: None Repeat Finding?: Yes Recommendation: We suggest that the County encourage the State to provide an independent audit of the design and implementation of MAXIS system controls. View of responsible officials of the auditee: Hennepin County has reviewed and agrees with the finding and recommendation.

Eligibility Federal Agency: U.S. Department of Health and Human Services Program: Medical Assistance Program (ALN 93.778) Pass-through Entity: State of Minnesota, Department of Human Services Federal Assistance Identification Number or Pass-Through Numbers: 2005MN5ADM, 2105MN5ADM, 2105MN5MAP, NH23IP922628 Federal Award Years: Year ended December 31, 2023 Type of Finding: Material Weakness in Internal Control over Compliance; Other Matter Compliance Finding Criteria: 2 CFR 200.303(a) requires that each 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 the terms and conditions of the Federal award." Specific criteria are established with respect to eligibility for assistance and the County’s responsibilities related to the intake function:  The Minnesota Health Care Programs Eligibility Policy Manual at 1.3.2.4 requires a County agency to evaluate and pursue resolution of information that is inconsistent with other information.  42 CFR 435.907 requires, as a condition of eligibility, each individual seeking Medicaid must submit a signed application.  42 CFR 435.407 requires, as a condition of eligibility, each individual seeking Medicaid must provide evidence of citizenship. Condition: During our testing, we noted the following 8 instances of noncompliance in the sample of 120 case files tested:  Five MAXIS (eligibility determination system) case files had different bases of eligibility in MAXIS and MMIS (payment system). For three of the five cases, MAXIS indicated the beneficiary was “EX” (age 65 or older) while MMIS indicated the beneficiary was “DX” (disabled). For one of the five cases, MAXIS indicated the beneficiary was “1619(b)” (people who no longer receive an SSI cash benefit and maintain their disability status) while MMIS indicated the beneficiary was “DX” (disabled) and the final case indicated the beneficiary was “DC” (disabled child 18-20) in MAXIS while MMIS indicated the beneficiary was “DT” (disabled child under TEFRA option).  Two MAXIS case files did not have a signed application on file.  One MAXIS case file did not have citizenship verified. In addition, the County does not have a formalized supervisory case file review process in place to ensure accuracy and completeness of inputs into the two eligibility determination systems, MAXIS and METS. Cause: The County relied on the pandemic related continuous eligibility provisions for the Medical Assistance program. Program personnel entering case data into MAXIS or METS did not ensure all required information was input correctly, supported or that all required information was obtained. Effect: Although not found during our testing, benefits paid for participants in the program by the State of Minnesota may have paid for ineligible participants or paid the incorrect amount. Context: The State of Minnesota Department of Human Services (DHS) contracts with county social services departments to perform the “intake function” (meeting with the social services client to determine income and categorical eligibility), while the State maintains the MAXIS and METS systems, which determine eligibility. Participants receive benefit payments from the state. The eligible individuals consist of two populations, and a total of 120 enrolled persons were selected, 60 from the MAXIS system and another 60 from the METS system. The sample sizes were based on guidance from chapter 11 of the AICPA Audit Guide, Government Auditing Standards and Single Audits. Of the 120 selections, errors were noted in seven of the cases (see condition section above for more detail). Questioned Costs: None. The County only receives reimbursement for administrative costs of the program. All benefits paid to participants in the program are paid directly by the State of Minnesota. Repeat Finding?: Yes Recommendation: We recommend the County strengthen internal controls over inputs used to determine eligibility to ensure they are correctly entered and the information required by the contract is retained in the County’s records. View of responsible officials of the auditee: Hennepin County has reviewed and agrees with the finding and recommendation.

Activities Allowed or Unallowed; Allowable Costs/Cost Principles; Eligibility Federal Agency: U.S. Department of Health and Human Services Program: Foster Care Title IV-E (ALN 93.658) Pass-through Entity: State of Minnesota, Department of Human Services Federal Assistance Identification Number or Pass-Through Number: 2101MNFOST Federal Award Year: Year ended December 31, 2023 Type of Finding: Significant Deficiency in Internal Control over Compliance Criteria: 2 CFR 200.303(a) requires that each 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 the terms and conditions of the Federal award.” Expenditures are to be made for allowable foster care activities and must be in accordance with 2 CFR Part 200, Subpart E. Foster care maintenance payments are allowable if the foster child is removed from home per the requirements of Section 406(a) of the Social Security Act and is placed into foster care by means of a judicial determination. Condition: While we were able to test manual compensating controls over activities allowed or unallowed, allowable costs/cost principles and eligibility, we were not able to review and test the automated application controls and the related ITGCs within the MAXIS and SSIS systems that reside within the State of Minnesota, but are utilized by the County, to determine whether the system controls are adequately designed and implemented and operating effectively. Cause: The State was not able to provide information regarding the design and effectiveness of MAXIS and SSIS system controls nor were we able to test those controls directly due to complexities of data privacy and resources within the State. Effect: Although not found during our testing, benefits paid for participants in the program may have paid for ineligible participants. Context: Applies to the automated application controls over the population of expenditures and eligible participants within the program. Questioned Costs: None noted Repeat Finding?: Yes Recommendation: We suggest that the County encourage the State to provide an independent audit of the design and implementation of MAXIS and SSIS system controls. View of responsible officials of the auditee: Hennepin County has reviewed and agrees with the finding and recommendation.

Cash Management Federal Agency: U.S. Department of Health and Human Services Program: Congressional Directives (ALN 93.493) Pass-through Entity: N/A Federal Assistance Identification Number or Pass-Through Number: CE146419 Federal Award Year: Year ended December 31, 2023 Type of Finding: Significant Deficiency in Internal Control over Compliance Criteria: 45 CFR 75.303(a) requires that each 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 the terms and conditions of the Federal award.". Condition: The county hospital could not provide documentation that a review and approval of grant reimbursement requests was conducted prior to the request being submitted for payment. Cause: The county hospital did not retain documentation of its review and approval process. Effect: Although not found during our testing, inaccurate reimbursement requests could be submitted for payment. Context: There were a total of seven reimbursement requests prepared for the year ended December 31, 2023. Of these, two were selected for testing and neither had documentation of the request being reviewed or approved prior to submittal. The sample sizes were based on guidance from chapter 11 of the AICPA Audit Guide, Government Auditing Standards and Single Audits. Questioned Costs: None noted Repeat Finding?: No Recommendation: We recommend the county hospital retain documentation demonstrating the review and approval of grant reimbursement requests. View of responsible officials of the auditee: Hennepin Healthcare System Inc. has reviewed and agrees with the finding and recommendation.

Reporting Federal Agency: U.S. Department of Health and Human Services Program: Congressional Directives (ALN 93.493) Pass-through Entity: N/A Federal Assistance Identification Number or Pass-Through Number: CE146419 Federal Award Year: Year ended December 31, 2023 Type of Finding: Significant Deficiency in Internal Control over Compliance Criteria: 45 CFR 75.303(a) requires that each 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 the terms and conditions of the Federal award.". Condition: The county hospital could not provide documentation that review and approval of the semiannual progress report was conducted prior to the report being submitted. Cause: The county hospital did not retain documentation of its review and approval process. Effect: Although not found during our testing, inaccurate reports could be submitted. Context: There was a total of one semi-annual progress report required to be completed for the year ended December 31, 2023. The client could not provide documentation of that report being reviewed or approved prior to submittal. The sample sizes were based on guidance from chapter 11 of the AICPA Audit Guide, Government Auditing Standards and Single Audits. Questioned Costs: None noted Repeat Finding?: No Recommendation: We recommend the county hospital retain documentation demonstrating the review and approval of progress reports. View of responsible officials of the auditee: Hennepin Healthcare System Inc. has reviewed and agrees with the finding and recommendation.

Suspension and Debarment Federal Agency: U.S. Department of Health and Human Services Program: Congressional Directives (ALN 93.493) Pass-through Entity: N/A Federal Assistance Identification Number or Pass-Through Number: CE146419 Federal Award Year: Year ended December 31, 2023 Type of Finding: Material Weakness in Internal Control over Compliance; Other Matter Compliance Finding Criteria: 45 CFR 75.303(a) requires that each 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 the terms and conditions of the Federal award…”. 45 CFR 75.213 requires that “Non-federal entities are subject to the non-procurement debarment and suspension regulations implementing Executive Orders 12549 and 12689, 2 CFR parts 180 and 376. These regulations restrict awards, subawards and contracts with certain parties that are debarred, suspended or otherwise excluded from or ineligible for participation in Federal assistance programs or activities.” Condition: The county hospital does not have effective internal controls over the suspension and debarment requirement for the Congressional Directives program. In addition, there was no evidence that the county hospital had verified that entities receiving more than $25,000 in federal grant funds were not suspended or debarred prior to providing them with federal funds. Cause: For most specialized medical equipment purchased under this grant, the department identifying the need for the equipment is also responsible for selecting the vendor. These personnel do not appear to receive training in the requirements related to suspension and debarment for federally funded projects. Effect: While not found during our testing, the lack of controls over this requirement increases the possibility that contracts could be awarded to vendors that are ineligible to provide goods and services under federally funded grants. Context: For all of the procurements selected for testing that were covered transactions, documentation was not maintained that could provide evidence that the county hospital had performed the required verifications. Out of 11 covered transactions, 8 were selected for testing. The sample sizes were based on guidance from chapter 11 of the AICPA Audit Guide, Government Auditing Standards and Single Audits. Questioned Costs: None Repeat Finding?: No Recommendation: We recommend that when entering into a contract that relates to a covered transaction that the county hospital either search for the contractor in the list at SAM.gov, or obtain certification from the potential vendor that they are not excluded from participation in federally funded procurements. Additionally, on an annual basis we recommend that the county hospital compares the vendor and employee master file to the excluded parties list at SAM.gov to ensure there are not any on the list that impact the county hospital’s current contracts. The county hospital should retain documentation demonstrating each of these internal control activities was performed timely. View of responsible officials of the auditee: Hennepin Healthcare System Inc. has reviewed and agrees with the finding and recommendation.

Procurement Federal Agency: U.S. Department of Health and Human Services Program: Congressional Directives (ALN 93.493) Pass-through Entity: N/A Federal Assistance Identification Number or Pass-Through Number: CE146419 Federal Award Year: Year ended December 31, 2023 Type of Finding: Material Weakness in Internal Control over Compliance; Material Noncompliance Finding Criteria: 45 CFR 75.303(a) requires that each 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 the terms and conditions of the Federal award…”. 45 CFR 75.327(a) requires that "The non-Federal entity must use its own documented procurement procedures which reflect applicable State, local, and tribal laws and regulations, provided that the procurements conform to applicable Federal law and the standards identified in this part." 45 CFR 75.327(i) requires that "The non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to the following: rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price." 45 CFR 75.328(a) requires that "All procurement transactions must be conducted in a manner providing full and open competition consistent with the standards of this section. In order to ensure objective contractor performance and eliminate unfair competitive advantage, contractors that develop or draft specifications, requirements, statements of work, or invitations for bids or requests for proposals must be excluded from competing for such procurements." 45 CFR 75.328(d) requires that "The non-Federal entity must ensure that all prequalified lists of persons, firms, or products which are used in acquiring goods and services are current and include enough qualified sources to ensure maximum open and free competition. Also, the non-Federal entity must not preclude potential bidders from qualifying during the solicitation period." 45 CFR 75.329(b) requires that "...Small purchase procedures are those relatively simple and informal procurement methods for securing services, supplies, or other property that do not cost more than the Simplified Acquisition Threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources." All procurements for this grant occurred at the county hospital which is specifically exempted from state statutes related to procurement for political subdivisions. For federally funded procurements, decisions greater than the Simplified Acquisition Threshold of $250,000 defined in 48 CFR 2.101 require the use of formal procurement methods, as described below. 45 CFR 75.329(c) requires that "Bids are publicly solicited and a firm fixed price contract (lump sum or unit price) is awarded to the responsible bidder whose bid, conforming with all the material terms and conditions of the invitation for bids, is the lowest in price. The sealed bid method is the preferred method for procuring construction, if the conditions in paragraph (c)(1) of this section apply. (1) In order for sealed bidding to be feasible, the following conditions should be present: (i) A complete, adequate, and realistic specification or purchase description is available; (ii) Two or more responsible bidders are willing and able to compete effectively for the business; and (iii) The procurement lends itself to a firm fixed price contract and the selection of the successful bidder can be made principally on the basis of price. (2) If sealed bids are used, the following requirements apply: (i) Bids must be solicited from an adequate number of known suppliers, providing them sufficient response time prior to the date set for opening the bids, for local, and tribal governments, the invitation for bids must be publicly advertised; (ii) The invitation for bids, which will include any specifications and pertinent attachments, must define the items or services in order for the bidder to properly respond; (iii) All bids will be opened at the time and place prescribed in the invitation for bids, for local, and tribal governments, the bids must be opened publicly; (iv) A firm fixed price contract award will be made in writing to the lowest responsive and responsible bidder. Where specified in bidding documents, factors such as discounts, transportation cost, and life cycle costs must be considered in determining which bid is lowest. Payment discounts will only be used to determine the low bid when prior experience indicates that such discounts are usually taken advantage of; and (v) Any or all bids may be rejected if there is a sound documented reason." 45 CFR 75.329 (d) requires that “Procurement by competitive proposals. The technique of competitive proposals is normally conducted with more than one source submitting an offer, and either a fixed price or cost-reimbursement type contract is awarded. It is generally used when conditions are not appropriate for the use of sealed bids. If this method is used, the following requirements apply: (1) Requests for proposals must be publicized and identify all evaluation factors and their relative importance. Any response to publicized requests for proposals must be considered to the maximum extent practical; (2) Proposals must be solicited from an adequate number of qualified sources; (3) The non-Federal entity must have a written method for conducting technical evaluations of the proposals received and for selecting recipients; (4) Contracts must be awarded to the responsible firm whose proposal is most advantageous to the program, with price and other factors considered; and (5) The non-Federal entity may use competitive proposal procedures for qualifications-based procurement of architectural/engineering (A/E) professional services whereby competitors' qualifications are evaluated and the most qualified competitor is selected, subject to negotiation of fair and reasonable compensation. The method, where price is not used as a selection factor, can only be used in procurement of A/E professional services. It cannot be used to purchase other types of services though A/E firms are a potential source to perform the proposed effort.” 45 CFR 75.329(f) requires that "...Procurement by noncompetitive proposals is procurement through solicitation of a proposal from only one source and may be used only when one or more of the following circumstances apply: (1) The item is available only from a single source; (2) The public exigency or emergency for the requirement will not permit a delay resulting from competitive solicitation; (3) The HHS awarding agency or pass-through entity expressly authorizes noncompetitive proposals in response to a written request from the non-Federal entity; or (4) After solicitation of a number of sources, competition is determined inadequate." The county hospital procurement policy requires that all county hospital purchases must have a purchase order and be processed through Supply Chain Management using Peoplesoft FSCM in order to ensure purchases are compliant with all clinical and safety mandates and done in a cost effective manner. The policy also requires that Supply Chain Management is the only department authorized to contact suppliers for the purpose of placing orders and negotiating pricing. Condition: The county hospital does not have effective internal controls over the procurement requirement of the Congressional Directives program, which resulted in two instances of noncompliance. During our testing we noted: Small Purchases: In our sample of six small purchases we found the following exceptions for five of the selections: ‐ The county hospital purchased lab equipment with a total cost of $118,000 but did not seek more than a single quote when two distributors were available, which resulted in noncompliance with the procurement requirements. The price of the equipment is set by the manufacturer. The county hospital cited sole source as the procurement method but the circumstances cited by the county hospital , an established relationship with the vendor, did not meet one of the allowable criteria under the regulations. The county hospital was unable to provide support that it maintained records documenting the history of the procurement. ‐ The county hospital obtained architectural services with a total cost of $31,259 using noncompetitive negotiation but none of the criteria allowing for noncompetitive procurements were met, which resulted in noncompliance with the procurement requirements. The county hospital was unable to provide support that it maintained records documenting the history of the procurement, including the selection of the architect for this procurement or the initial selection. ‐ The county hospital obtained fluid management equipment with a total cost of $39,756 but did not maintain documentation of the history of the procurement decision, including the decision to use the pricing available through a Group Purchasing Organization. ‐ The county hospital purchased infant care equipment with a total cost of $83,676 but did not maintain documentation of the history of the procurement decision, including the decision to use the pricing available through a Group Purchasing Organization. ‐ The county hospital purchased imaging equipment with a total cost of $170,370 but did not maintain documentation of the history of the procurement decision, including the decision to use the pricing available through a Group Purchasing Organization. Formal Methods: In our sample of two procurements requiring formal methods we found the following exceptions: ‐ The county hospital purchased infant care equipment with a total cost of $345,923 by seeking quotes from two different vendors, but based on the size of the procurement the county hospital should have utilized one of the formal procurement methods such as sealed bids or competitive proposals. The county hospital later decided to use the pricing available through a Group Purchasing Organization but was unable to provide support that it maintained records documenting the history of the procurement. ‐ The county hospital selected ultrasound equipment with a total cost of $600,000 by seeking product demonstrations from three different vendors. The county hospital did not maintain records to demonstrate that the responses were the result of public solicitation. The county hospital was unable to provide documentation to support that it maintained records documenting the history of the procurement, including a cost/price analysis and decision to use a contract through a Group Purchasing Organization. During 2023 the county hospital did not have written procurement policies that conformed to the requirements of the Uniform Guidance, including the requirement to maintain records of the history of the procurement. State law specifically exempts the county hospital from the State's own laws related to local government procurement, but this has not been replaced by local laws or policies and procedures specific to procurement. Cause: For most specialized medical equipment purchased by the grantee, the department identifying the need for the equipment is also responsible for selecting the vendor. Personnel making procurement decisions do not appear to receive training in the requirements related to procurement for federally funded projects, including the limited circumstances where noncompetitive procurements are allowed or the maintenance of required records of the history of procurement. Effect: The county hospital is not complying with the procurement requirements applicable to the program, including properly maintaining records of procurement decisions and processes that ensure fair and open competition between an adequate number of potential vendors. Context: For 2023 we identified four procurements greater than the simplified acquisition threshold and ten procurements less than the simplified acquisition threshold. We selected two procurements and six procurements, respectively, from this population of expenditures that occurred during 2023. We found control deficiencies with both of the selections greater than the simplified acquisition threshold and five control deficiencies and/or exceptions in the selections less than the simplified acquisition threshold. The sample sizes were based on guidance from chapter 11 of the AICPA Audit Guide, Government Auditing Standards and Single Audits. Questioned Costs: $149,259 known Repeat Finding?: No Recommendation: We recommend that the county hospital develop a procurement policy that conforms to federal requirements, including the most stringent between the Uniform Guidance at 2 CFR 200 and the United States Department of Health and Human Services Uniform Administrative Requirements at 45 CFR 75. We recommend that the county hospital develop a document retention policy related to procurement. We further recommend that a standardized procurement process is developed for micropurchases, small purchases less than the simplified acquisition threshold, and formal procedures for all other procurement decisions. Noncompetitive, or “sole source” procurements should also be standardized and when applicable, include documentation to justify the limitation of competition. View of responsible officials of the auditee: Hennepin Healthcare System Inc. has reviewed and acknoledges the finding and recommendation.

Equipment and Real Property Management Federal Agency: U.S. Department of Health and Human Services Program: Congressional Directives (ALN 93.493) Pass-through Entity: N/A Federal Assistance Identification Number or Pass-Through Number: CE146419 Federal Award Year: Year ended December 31, 2023 Type of Finding: Material Weakness in Internal Control over Compliance; Other Matter Compliance Finding Criteria: 45 CFR 75.303(a) requires that each 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 the terms and conditions of the Federal award…”. Per 45 CFR 75.320(d)(1), property records must be maintained that include a description of the property, a serial number or other identification number, the source of funding for the property, who holds title, location, and use and condition of the property, and any ultimate disposition data including the date of disposal and sale price off the property. Condition: The county hospital does not have effective internal controls over the equipment and real property management requirement of the Congressional Directives program. In addition, during our testing we noted that while most items were listed with serial number and location, the other required information was not being consistently included. Cause: County hospital management was not aware of the specific requirements. Effect: Without proper equipment records it is possible that dispositions of federally funded equipment may not be properly identified and managed in conformance with program requirements. Context: None of the 25 items tested contained all of the required information. Questioned Costs: None noted Repeat Finding?: No Recommendation: We recommend county hospital management update records for property acquired with federal funds to include all required information. In addition, we suggest management ensure there are policies and procedures in place to track all equipment acquired with federal funds and that any removal of this equipment is properly coordinated and discussed with the granting agency. View of responsible officials of the auditee: Hennepin Healthcare System Inc. has reviewed and agrees with the finding and recommendation.

Schedule of Expenditures of Federal Awards (SEFA) Federal Agency: U.S. Department of Health and Human Services; U.S. Department of Agriculture (USDA) Program: National Bioterrorism Hospital Preparedness Program (ALN 93.889); Immunization Cooperative Agreements (ALN 93. 268); COVID-19 Epidemiology and Laboratory Capacity for Infectious Diseases (ELC)(ALN 93. 323); Child Support Services (ALN 93. 563); State Administrative Matching Grants for the Supplemental Nutrition Assistance Program (ALN 10.561) Pass-through Entity: Minnesota Department of Health; Minnesota Department of Human Services Federal Assistance Identification Number or Pass-Through Number: U90TP000529; 6NH23P0007370502; NH23P922628; NH23IP922628; NU50CK000508; 2001MNCEST; 2101MNCSES; 212MN127Q7503; 212MN101S2520; 212MN101S2514 Federal Award Year: Year ended December 31, 2023 Type of Finding: Significant Deficiency in Internal Control over Compliance; Other Matter Compliance Finding Criteria: 2 CFR 200.303(a) requires that each 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 the terms and conditions of the Federal award." 2 CFR 200.510(b) requires that “The auditee must prepare a schedule of expenditures of Federal awards awards (the “schedule”) for the period covered by the auditee’s financial statements which must include the total Federal awards expended as determined in accordance with ss 200.502... ...At minimum, the schedule must... ...(3) Provide total Federal awards expended for each individual Federal program and the Assistance Listings Number or other identifying number when the Assistance Listings information is not available…” Condition: While testing the SEFA, we noted that internal controls were not operating effectively over the preparation of the SEFA. In addition, we noted the following errors in the original SEFA we received for the audit: - $1,284,631 of expenditures were improperly included in ALN 93.889 when the amount should have been included in ALN 93.268. - $30,394 of expenditures was improperly included in ALN 93.889 when the amount should have been included in ALN 93.323. - $626,894 of expenditures related to ALN 93.563 was missing from the schedule. - $61,290 of expenditures related to ALN 10.561 was missing from the schedule. Cause: The errors of $1,284,631 and $30,394 related to ALN 93.889 were caused by the county hospital’s system of assigning identifying numbers within the chart of accounts not being applied to awards managed outside of the Hennepin Health Foundation. The errors of $626,894 related to ALN 93.563 and $61,290 related to ALN 10.561 related to the County’s reducing expenditures by a reversal of a prior year receivable transaction when determining the amount of expenditures. Effect: The errors in the preparation of the SEFA indicate noncompliance with the requirements for the Schedule, including ensuring that it is complete and accurate. Context: Approximately $2 million of errors were noted over the SEFA with total expenditures of approximately $360 million. Questioned Costs: None Repeat Finding?: No Recommendation: We recommend that the County strengthen its processes and controls over the preparation of the SEFA. Views of Responsible Officials: Hennepin County has reviewed and agrees with the finding and the recommendation.

Schedule of Expenditures of Federal Awards (SEFA) Federal Agency: U.S. Department of Health and Human Services; U.S. Department of Agriculture (USDA) Program: National Bioterrorism Hospital Preparedness Program (ALN 93.889); Immunization Cooperative Agreements (ALN 93. 268); COVID-19 Epidemiology and Laboratory Capacity for Infectious Diseases (ELC)(ALN 93. 323); Child Support Services (ALN 93. 563); State Administrative Matching Grants for the Supplemental Nutrition Assistance Program (ALN 10.561) Pass-through Entity: Minnesota Department of Health; Minnesota Department of Human Services Federal Assistance Identification Number or Pass-Through Number: U90TP000529; 6NH23P0007370502; NH23P922628; NH23IP922628; NU50CK000508; 2001MNCEST; 2101MNCSES; 212MN127Q7503; 212MN101S2520; 212MN101S2514 Federal Award Year: Year ended December 31, 2023 Type of Finding: Significant Deficiency in Internal Control over Compliance; Other Matter Compliance Finding Criteria: 2 CFR 200.303(a) requires that each 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 the terms and conditions of the Federal award." 2 CFR 200.510(b) requires that “The auditee must prepare a schedule of expenditures of Federal awards awards (the “schedule”) for the period covered by the auditee’s financial statements which must include the total Federal awards expended as determined in accordance with ss 200.502... ...At minimum, the schedule must... ...(3) Provide total Federal awards expended for each individual Federal program and the Assistance Listings Number or other identifying number when the Assistance Listings information is not available…” Condition: While testing the SEFA, we noted that internal controls were not operating effectively over the preparation of the SEFA. In addition, we noted the following errors in the original SEFA we received for the audit: - $1,284,631 of expenditures were improperly included in ALN 93.889 when the amount should have been included in ALN 93.268. - $30,394 of expenditures was improperly included in ALN 93.889 when the amount should have been included in ALN 93.323. - $626,894 of expenditures related to ALN 93.563 was missing from the schedule. - $61,290 of expenditures related to ALN 10.561 was missing from the schedule. Cause: The errors of $1,284,631 and $30,394 related to ALN 93.889 were caused by the county hospital’s system of assigning identifying numbers within the chart of accounts not being applied to awards managed outside of the Hennepin Health Foundation. The errors of $626,894 related to ALN 93.563 and $61,290 related to ALN 10.561 related to the County’s reducing expenditures by a reversal of a prior year receivable transaction when determining the amount of expenditures. Effect: The errors in the preparation of the SEFA indicate noncompliance with the requirements for the Schedule, including ensuring that it is complete and accurate. Context: Approximately $2 million of errors were noted over the SEFA with total expenditures of approximately $360 million. Questioned Costs: None Repeat Finding?: No Recommendation: We recommend that the County strengthen its processes and controls over the preparation of the SEFA. Views of Responsible Officials: Hennepin County has reviewed and agrees with the finding and the recommendation.

Schedule of Expenditures of Federal Awards (SEFA) Federal Agency: U.S. Department of Health and Human Services; U.S. Department of Agriculture (USDA) Program: National Bioterrorism Hospital Preparedness Program (ALN 93.889); Immunization Cooperative Agreements (ALN 93. 268); COVID-19 Epidemiology and Laboratory Capacity for Infectious Diseases (ELC)(ALN 93. 323); Child Support Services (ALN 93. 563); State Administrative Matching Grants for the Supplemental Nutrition Assistance Program (ALN 10.561) Pass-through Entity: Minnesota Department of Health; Minnesota Department of Human Services Federal Assistance Identification Number or Pass-Through Number: U90TP000529; 6NH23P0007370502; NH23P922628; NH23IP922628; NU50CK000508; 2001MNCEST; 2101MNCSES; 212MN127Q7503; 212MN101S2520; 212MN101S2514 Federal Award Year: Year ended December 31, 2023 Type of Finding: Significant Deficiency in Internal Control over Compliance; Other Matter Compliance Finding Criteria: 2 CFR 200.303(a) requires that each 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 the terms and conditions of the Federal award." 2 CFR 200.510(b) requires that “The auditee must prepare a schedule of expenditures of Federal awards awards (the “schedule”) for the period covered by the auditee’s financial statements which must include the total Federal awards expended as determined in accordance with ss 200.502... ...At minimum, the schedule must... ...(3) Provide total Federal awards expended for each individual Federal program and the Assistance Listings Number or other identifying number when the Assistance Listings information is not available…” Condition: While testing the SEFA, we noted that internal controls were not operating effectively over the preparation of the SEFA. In addition, we noted the following errors in the original SEFA we received for the audit: - $1,284,631 of expenditures were improperly included in ALN 93.889 when the amount should have been included in ALN 93.268. - $30,394 of expenditures was improperly included in ALN 93.889 when the amount should have been included in ALN 93.323. - $626,894 of expenditures related to ALN 93.563 was missing from the schedule. - $61,290 of expenditures related to ALN 10.561 was missing from the schedule. Cause: The errors of $1,284,631 and $30,394 related to ALN 93.889 were caused by the county hospital’s system of assigning identifying numbers within the chart of accounts not being applied to awards managed outside of the Hennepin Health Foundation. The errors of $626,894 related to ALN 93.563 and $61,290 related to ALN 10.561 related to the County’s reducing expenditures by a reversal of a prior year receivable transaction when determining the amount of expenditures. Effect: The errors in the preparation of the SEFA indicate noncompliance with the requirements for the Schedule, including ensuring that it is complete and accurate. Context: Approximately $2 million of errors were noted over the SEFA with total expenditures of approximately $360 million. Questioned Costs: None Repeat Finding?: No Recommendation: We recommend that the County strengthen its processes and controls over the preparation of the SEFA. Views of Responsible Officials: Hennepin County has reviewed and agrees with the finding and the recommendation.

Schedule of Expenditures of Federal Awards (SEFA) Federal Agency: U.S. Department of Health and Human Services; U.S. Department of Agriculture (USDA) Program: National Bioterrorism Hospital Preparedness Program (ALN 93.889); Immunization Cooperative Agreements (ALN 93. 268); COVID-19 Epidemiology and Laboratory Capacity for Infectious Diseases (ELC)(ALN 93. 323); Child Support Services (ALN 93. 563); State Administrative Matching Grants for the Supplemental Nutrition Assistance Program (ALN 10.561) Pass-through Entity: Minnesota Department of Health; Minnesota Department of Human Services Federal Assistance Identification Number or Pass-Through Number: U90TP000529; 6NH23P0007370502; NH23P922628; NH23IP922628; NU50CK000508; 2001MNCEST; 2101MNCSES; 212MN127Q7503; 212MN101S2520; 212MN101S2514 Federal Award Year: Year ended December 31, 2023 Type of Finding: Significant Deficiency in Internal Control over Compliance; Other Matter Compliance Finding Criteria: 2 CFR 200.303(a) requires that each 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 the terms and conditions of the Federal award." 2 CFR 200.510(b) requires that “The auditee must prepare a schedule of expenditures of Federal awards awards (the “schedule”) for the period covered by the auditee’s financial statements which must include the total Federal awards expended as determined in accordance with ss 200.502... ...At minimum, the schedule must... ...(3) Provide total Federal awards expended for each individual Federal program and the Assistance Listings Number or other identifying number when the Assistance Listings information is not available…” Condition: While testing the SEFA, we noted that internal controls were not operating effectively over the preparation of the SEFA. In addition, we noted the following errors in the original SEFA we received for the audit: - $1,284,631 of expenditures were improperly included in ALN 93.889 when the amount should have been included in ALN 93.268. - $30,394 of expenditures was improperly included in ALN 93.889 when the amount should have been included in ALN 93.323. - $626,894 of expenditures related to ALN 93.563 was missing from the schedule. - $61,290 of expenditures related to ALN 10.561 was missing from the schedule. Cause: The errors of $1,284,631 and $30,394 related to ALN 93.889 were caused by the county hospital’s system of assigning identifying numbers within the chart of accounts not being applied to awards managed outside of the Hennepin Health Foundation. The errors of $626,894 related to ALN 93.563 and $61,290 related to ALN 10.561 related to the County’s reducing expenditures by a reversal of a prior year receivable transaction when determining the amount of expenditures. Effect: The errors in the preparation of the SEFA indicate noncompliance with the requirements for the Schedule, including ensuring that it is complete and accurate. Context: Approximately $2 million of errors were noted over the SEFA with total expenditures of approximately $360 million. Questioned Costs: None Repeat Finding?: No Recommendation: We recommend that the County strengthen its processes and controls over the preparation of the SEFA. Views of Responsible Officials: Hennepin County has reviewed and agrees with the finding and the recommendation.

Schedule of Expenditures of Federal Awards (SEFA) Federal Agency: U.S. Department of Health and Human Services; U.S. Department of Agriculture (USDA) Program: National Bioterrorism Hospital Preparedness Program (ALN 93.889); Immunization Cooperative Agreements (ALN 93. 268); COVID-19 Epidemiology and Laboratory Capacity for Infectious Diseases (ELC)(ALN 93. 323); Child Support Services (ALN 93. 563); State Administrative Matching Grants for the Supplemental Nutrition Assistance Program (ALN 10.561) Pass-through Entity: Minnesota Department of Health; Minnesota Department of Human Services Federal Assistance Identification Number or Pass-Through Number: U90TP000529; 6NH23P0007370502; NH23P922628; NH23IP922628; NU50CK000508; 2001MNCEST; 2101MNCSES; 212MN127Q7503; 212MN101S2520; 212MN101S2514 Federal Award Year: Year ended December 31, 2023 Type of Finding: Significant Deficiency in Internal Control over Compliance; Other Matter Compliance Finding Criteria: 2 CFR 200.303(a) requires that each 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 the terms and conditions of the Federal award." 2 CFR 200.510(b) requires that “The auditee must prepare a schedule of expenditures of Federal awards awards (the “schedule”) for the period covered by the auditee’s financial statements which must include the total Federal awards expended as determined in accordance with ss 200.502... ...At minimum, the schedule must... ...(3) Provide total Federal awards expended for each individual Federal program and the Assistance Listings Number or other identifying number when the Assistance Listings information is not available…” Condition: While testing the SEFA, we noted that internal controls were not operating effectively over the preparation of the SEFA. In addition, we noted the following errors in the original SEFA we received for the audit: - $1,284,631 of expenditures were improperly included in ALN 93.889 when the amount should have been included in ALN 93.268. - $30,394 of expenditures was improperly included in ALN 93.889 when the amount should have been included in ALN 93.323. - $626,894 of expenditures related to ALN 93.563 was missing from the schedule. - $61,290 of expenditures related to ALN 10.561 was missing from the schedule. Cause: The errors of $1,284,631 and $30,394 related to ALN 93.889 were caused by the county hospital’s system of assigning identifying numbers within the chart of accounts not being applied to awards managed outside of the Hennepin Health Foundation. The errors of $626,894 related to ALN 93.563 and $61,290 related to ALN 10.561 related to the County’s reducing expenditures by a reversal of a prior year receivable transaction when determining the amount of expenditures. Effect: The errors in the preparation of the SEFA indicate noncompliance with the requirements for the Schedule, including ensuring that it is complete and accurate. Context: Approximately $2 million of errors were noted over the SEFA with total expenditures of approximately $360 million. Questioned Costs: None Repeat Finding?: No Recommendation: We recommend that the County strengthen its processes and controls over the preparation of the SEFA. Views of Responsible Officials: Hennepin County has reviewed and agrees with the finding and the recommendation.