FAC Explorer

Audit 363912

FY End
2024-12-31
Total Expended
$538.52M
Findings
2
Programs
21
Organization: Banner Health (AZ)
Year: 2024 Accepted: 2025-08-07
Auditor: Ernst & Young LLP

Organization Exclusion Status:

Findings

ID Ref Severity Repeat Requirement
573036 2024-001 Material Weakness - AB
1149478 2024-001 Material Weakness - AB

Programs

ALN Program Spent Major Findings
21.027 Covid-19 - Coronavirus State and Local Fiscal Recovery Funds $368,000 - 0
93.253 Poison Center Support and Enhancement Grant $311,916 - 0
93.368 21st Century Cures Act - Precision Medicine Initiative $242,374 - 0
97.036 Covid-19 - Disaster Grants - Public Assistance (presidentially Declared Disasters) $165,755 Yes 0
93.391 Covid-19 - Activities to Support State, Tribal, Local and Territorial (stlt) Health Department Response to Public Health Or Healthcare Crises $130,440 - 0
17.289 Community Project Funding/congressionally Directed Spending $105,787 - 0
93.912 Rural Health Care Services Outreach, Rural Health Network Development and Small Health Care Provider Quality Improvement $98,731 - 0
93.838 Covid-19 - Lung Diseases Research $76,994 - 0
93.395 Cancer Treatment Research $75,125 - 0
93.866 Aging Research $59,367 - 0
93.048 Covid-19 - Special Programs for the Aging, Title Iv, and Title Ii, Discretionary Projects $48,247 - 0
93.969 Pphf Geriatric Education Centers $45,408 - 0
93.470 Alzheimer’s Disease Program Initiative (adpi) $40,000 - 0
93.310 Trans-Nih Research Support $30,000 - 0
93.307 Minority Health and Health Disparities Research $28,699 - 0
93.286 Discovery and Applied Research for Technological Innovations to Improve Human Health $26,466 - 0
93.393 Cancer Cause and Prevention Research $24,582 - 0
93.838 Lung Diseases Research $20,356 - 0
93.855 Allergy and Infectious Diseases Research $19,665 - 0
93.301 Small Rural Hospital Improvement Grant Program $8,555 - 0
93.853 Extramural Research Programs in the Neurosciences and Neurological Disorders $3,393 - 0

Contacts

Name Title Type
SB35ENJFKK14 John Shaw Auditee
6028392223 Scott Enos Auditor
No contacts on file

Notes to SEFA

Title: 1. Organization Accounting Policies: The accompanying schedule of expenditures of federal awards (SEFA) includes the federal grant activity of Banner and is presented on the accrual basis of accounting. The information in the SEFA is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (the Uniform Guidance). Therefore, some amounts presented in the SEFA may differ from amounts presented in, or used in the preparation of, the consolidated financial statements of Banner. For purposes of the SEFA, federal awards include any assistance provided by a federal agency directly or indirectly in the form of grants, contracts, cooperative agreements, loan and loan guarantees, or other non-cash assistance. The SEFA does not include payments received under the traditional Medicare and Medicaid reimbursement programs, as these programs are outside the scope of the Uniform Guidance. De Minimis Rate Used: N Rate Explanation: Banner Health and Subsidiaries utilizes the Department of Health and Human Services negotiated indirect cost rate or the rate in the grant agreement. Banner Health and Subsidiaries (Banner) is a nonprofit corporation exempt from income taxes under Internal Revenue Code Section 501(c)(3) and applicable state income tax codes. Banner own, control, or lease hospitals, clinics, nursing homes, clinical laboratories, ambulatory surgery centers, urgent care centers, free-standing imaging centers, home health agencies, a captive insurance company, a foundation, an insurance division offering insurance products to Medicare, Medicaid, and commercial subscriber populations, and other health care-related organizations in six western states. Banner also holds controlling interests in several health care-related business ventures and non-controlling interests in several other entities that are accounted for under the equity method of accounting.
Title: 2. Summary of Significant Accounting Policies Accounting Policies: The accompanying schedule of expenditures of federal awards (SEFA) includes the federal grant activity of Banner and is presented on the accrual basis of accounting. The information in the SEFA is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (the Uniform Guidance). Therefore, some amounts presented in the SEFA may differ from amounts presented in, or used in the preparation of, the consolidated financial statements of Banner. For purposes of the SEFA, federal awards include any assistance provided by a federal agency directly or indirectly in the form of grants, contracts, cooperative agreements, loan and loan guarantees, or other non-cash assistance. The SEFA does not include payments received under the traditional Medicare and Medicaid reimbursement programs, as these programs are outside the scope of the Uniform Guidance. De Minimis Rate Used: N Rate Explanation: Banner Health and Subsidiaries utilizes the Department of Health and Human Services negotiated indirect cost rate or the rate in the grant agreement. Basis of Accounting: The accompanying schedule of expenditures of federal awards (SEFA) includes the federal grant activity of Banner and is presented on the accrual basis of accounting. The information in the SEFA is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (the Uniform Guidance). Therefore, some amounts presented in the SEFA may differ from amounts presented in, or used in the preparation of, the consolidated financial statements of Banner. For purposes of the SEFA, federal awards include any assistance provided by a federal agency directly or indirectly in the form of grants, contracts, cooperative agreements, loan and loan guarantees, or other non-cash assistance. The SEFA does not include payments received under the traditional Medicare and Medicaid reimbursement programs, as these programs are outside the scope of the Uniform Guidance.
Title: 3. Indirect Costs Accounting Policies: The accompanying schedule of expenditures of federal awards (SEFA) includes the federal grant activity of Banner and is presented on the accrual basis of accounting. The information in the SEFA is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (the Uniform Guidance). Therefore, some amounts presented in the SEFA may differ from amounts presented in, or used in the preparation of, the consolidated financial statements of Banner. For purposes of the SEFA, federal awards include any assistance provided by a federal agency directly or indirectly in the form of grants, contracts, cooperative agreements, loan and loan guarantees, or other non-cash assistance. The SEFA does not include payments received under the traditional Medicare and Medicaid reimbursement programs, as these programs are outside the scope of the Uniform Guidance. De Minimis Rate Used: N Rate Explanation: Banner Health and Subsidiaries utilizes the Department of Health and Human Services negotiated indirect cost rate or the rate in the grant agreement. The Uniform Guidance provides for a 10% de minimis indirect cost rate election; however, Banner did not make this election and uses a negotiated indirect cost rate.
Title: 4. Donated Personal Protective Equipment (Unaudited) Accounting Policies: The accompanying schedule of expenditures of federal awards (SEFA) includes the federal grant activity of Banner and is presented on the accrual basis of accounting. The information in the SEFA is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (the Uniform Guidance). Therefore, some amounts presented in the SEFA may differ from amounts presented in, or used in the preparation of, the consolidated financial statements of Banner. For purposes of the SEFA, federal awards include any assistance provided by a federal agency directly or indirectly in the form of grants, contracts, cooperative agreements, loan and loan guarantees, or other non-cash assistance. The SEFA does not include payments received under the traditional Medicare and Medicaid reimbursement programs, as these programs are outside the scope of the Uniform Guidance. De Minimis Rate Used: N Rate Explanation: Banner Health and Subsidiaries utilizes the Department of Health and Human Services negotiated indirect cost rate or the rate in the grant agreement. For the year ended December 31, 2024, Banner did not receive any donated goods or personal protective equipment received from federal sources that required recognition or disclosure in the notes to the SEFA.
Title: 5. Disaster Grants - Public Assistance (Presidentially Declared Disasters) Accounting Policies: The accompanying schedule of expenditures of federal awards (SEFA) includes the federal grant activity of Banner and is presented on the accrual basis of accounting. The information in the SEFA is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (the Uniform Guidance). Therefore, some amounts presented in the SEFA may differ from amounts presented in, or used in the preparation of, the consolidated financial statements of Banner. For purposes of the SEFA, federal awards include any assistance provided by a federal agency directly or indirectly in the form of grants, contracts, cooperative agreements, loan and loan guarantees, or other non-cash assistance. The SEFA does not include payments received under the traditional Medicare and Medicaid reimbursement programs, as these programs are outside the scope of the Uniform Guidance. De Minimis Rate Used: N Rate Explanation: Banner Health and Subsidiaries utilizes the Department of Health and Human Services negotiated indirect cost rate or the rate in the grant agreement. In fiscal year 2024, Banner received approval from the Federal Emergency Management Agency for 12 projects related to the reimbursement of eligible expenditures of $510,129,610 incurred in previous fiscal years. These previous years’ expenditures are included in the SEFA in the current year in accordance with guidance provided by the U.S. Department of Homeland Security.

Finding Details

Finding 2024-001
Internal control deficiency over activities allowed or unallowed and allowable costs/cost principles related to review of contract labor expenditures. Identification of the federal program: Assistance Listing Number 97.036: • COVID-19 – Disaster Grants – Public Assistance (Presidentially Declared Disasters) • U.S. Department of Homeland Security • Federal award identification number: o Project number 690197 – Emergency Contract Labor Costs o Project number 696280 – Emergency Contract Labor Costs o Project Number 696319 – Emergency Contract Labor Costs o Project Number 696366 – Emergency Contract Labor Invoice Costs o Project Number 696392 – Emergency Contract Labor Invoice Costs o Project Number 696409 – Emergency Contract Labor Invoice Costs o Project Number 696847 – Emergency Contract Labor Invoice Costs o Project Number 698491 – Contract Labor Services • Federal award year – January 20, 2020 to May 11, 2023 • Pass-through entity – Arizona Department of Homeland Security Criteria or specific requirement (including statutory, regulatory or other citation): Title 2, Subtitle A, Chapter II, Part 200, Subpart D, Section 200.303 Internal controls. The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition: During our testing over contract labor expenditures, we observed management did not have effective internal controls in place to ensure certain contract labor expenditures were reviewed. There were 16 out of 40 selections where the contract labor expenditures were not reviewed. Cause: Management did not have effective internal controls in place over the compliance requirements as stated in the criteria or specific requirement section above. Effect or potential effect: Contract labor expenditures were not supported by effective internal controls. Without sufficient internal controls, compliance matters could occur in the future. Questioned costs: None. Context: During our internal control testing over activities allowed or unallowed and allowable costs/cost principles, we obtained a listing of 1,523,838 contract labor expenditures and selected a sample of 40 to test for the review of the expenditure. The total value of the 40 contract labor expenditures selected was $13,266 out of the total contract labor expenditures of $505,370,491. There were 16 ($7,591) out of 40 ($13,266) selections where the contract labor expenditures were not reviewed. The 16 selections were for allowable activities under this program and therefore, no noncompliance was noted in our testing. The sampling was a statistically valid sample. Identification as a repeat finding, if applicable: No. Recommendation: Management should develop and implement effective internal controls to ensure contract labor expenditures are reviewed. Views of responsible officials: Banner requires control labor resources to utilize the same time keeping system used by Banner employees to track worked time. Banner creates ‘reverse invoices’ using the time tracked in Banner’s timekeeping system by contract labor resources and presents those hours/dollars to contract labor agencies for approval prior to remitting payment to those agencies. These invoices are reviewed by Banner’s staffing services team for reasonableness prior to being presented to the agencies for approval. There is an expectation that managers review and formally approve the timecards of contract labor resources in the timekeeping system, however, the reverse invoicing process moves forward even in the absence of a documented formal approval. Banner will implement a periodic monitoring process that provides a report of ‘forced sign offs’ (timecards without documented manager approval) to senior leadership in an effort to increase compliance with the timecard approval policy.
Finding 2024-001
Internal control deficiency over activities allowed or unallowed and allowable costs/cost principles related to review of contract labor expenditures. Identification of the federal program: Assistance Listing Number 97.036: • COVID-19 – Disaster Grants – Public Assistance (Presidentially Declared Disasters) • U.S. Department of Homeland Security • Federal award identification number: o Project number 690197 – Emergency Contract Labor Costs o Project number 696280 – Emergency Contract Labor Costs o Project Number 696319 – Emergency Contract Labor Costs o Project Number 696366 – Emergency Contract Labor Invoice Costs o Project Number 696392 – Emergency Contract Labor Invoice Costs o Project Number 696409 – Emergency Contract Labor Invoice Costs o Project Number 696847 – Emergency Contract Labor Invoice Costs o Project Number 698491 – Contract Labor Services • Federal award year – January 20, 2020 to May 11, 2023 • Pass-through entity – Arizona Department of Homeland Security Criteria or specific requirement (including statutory, regulatory or other citation): Title 2, Subtitle A, Chapter II, Part 200, Subpart D, Section 200.303 Internal controls. The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition: During our testing over contract labor expenditures, we observed management did not have effective internal controls in place to ensure certain contract labor expenditures were reviewed. There were 16 out of 40 selections where the contract labor expenditures were not reviewed. Cause: Management did not have effective internal controls in place over the compliance requirements as stated in the criteria or specific requirement section above. Effect or potential effect: Contract labor expenditures were not supported by effective internal controls. Without sufficient internal controls, compliance matters could occur in the future. Questioned costs: None. Context: During our internal control testing over activities allowed or unallowed and allowable costs/cost principles, we obtained a listing of 1,523,838 contract labor expenditures and selected a sample of 40 to test for the review of the expenditure. The total value of the 40 contract labor expenditures selected was $13,266 out of the total contract labor expenditures of $505,370,491. There were 16 ($7,591) out of 40 ($13,266) selections where the contract labor expenditures were not reviewed. The 16 selections were for allowable activities under this program and therefore, no noncompliance was noted in our testing. The sampling was a statistically valid sample. Identification as a repeat finding, if applicable: No. Recommendation: Management should develop and implement effective internal controls to ensure contract labor expenditures are reviewed. Views of responsible officials: Banner requires control labor resources to utilize the same time keeping system used by Banner employees to track worked time. Banner creates ‘reverse invoices’ using the time tracked in Banner’s timekeeping system by contract labor resources and presents those hours/dollars to contract labor agencies for approval prior to remitting payment to those agencies. These invoices are reviewed by Banner’s staffing services team for reasonableness prior to being presented to the agencies for approval. There is an expectation that managers review and formally approve the timecards of contract labor resources in the timekeeping system, however, the reverse invoicing process moves forward even in the absence of a documented formal approval. Banner will implement a periodic monitoring process that provides a report of ‘forced sign offs’ (timecards without documented manager approval) to senior leadership in an effort to increase compliance with the timecard approval policy.