Finding 2025-002 Identification of the federal program: Federal Agency: U.S. Department of Health and Human Services Assistance Listing No: 93.069, Public Health Emergency Preparedness Criteria or specific requirement (including statutory, regulatory or other citation): 2 CFR 200.510 requires that the “auditee must also prepare a Schedule of Expenditures of Federal Awards for the period covered by the auditee’s financial statements. The schedule must include the total Federal awards expended as determined in accordance with Section 200.502.” Condition: The preliminary Schedule included $2,662,417 in expenditures that were not federal grant awards. The final Schedule was corrected. Cause: The Corporation’s internal controls over the preparation of the Schedule were not sufficient to properly accumulate and accurately report all expenditures of federal awards. Effect or potential effect: Inaccurate or improper reporting of expenditures results in a misstated Schedule and can also potentially result in insufficient testing of the major programs or improper identification of major programs for audit purposes. Questioned costs: None. Part III – Federal Award Findings and Questioned Costs (continued) Context: Total expenditures included on the preliminary Schedule were $5,119,949 for the year ended December 31, 2025. Total federal expenditures on the final Schedule were $2,639,518. The preliminary schedule included $1,393,244 in expenditures related to state-based grant awards to support the Corporation’s poison control program. In addition, $1,269,173 in expenditures related to various state-based grant awards for other programs determined not to be federal awards and no longer reported on the Schedule. Identification as a repeat finding, if applicable: Not applicable. Recommendation: Management should design and implement internal controls to review new and existing awards and agreements to ensure federal awards are identified and expenditures of federal awards are accumulated for reporting on the Schedule. Views of responsible officials: Management agrees with the finding and will enhance internal controls over the grant management process to review and monitor grants awards and other agreements. Management will design and implement internal controls over the completeness and accuracy of the Schedule.
Finding 2025-001 Identification of the federal program: Research and Development Cluster Federal Agency: U.S. Department of Health and Human Services Assistance Listing No: 93.273, Alcohol Research Programs Pass-Through Grantors: University of Louisville Research Foundation; Vanderbilt University Medical Center; Brown University Federal Agency: U.S. Department of Health and Human Services Assistance Listing No: 93.399, Cancer Control Pass-Through Grantor: NRG Oncology Federal Agency: U.S. Department of Health and Human Services Assistance Listing No: 93.846, Arthritis, Musculoskeletal, and Skin Diseases Research Pass-Through Grantor: Regents of the University of Michigan Federal Agency: U.S. Department of Health and Human Services Assistance Listing No: 93.853, Extramural Research Programs in the Neurosciences and Neurological Disorders Pass-Through Grantor: Regents of the University of Michigan Part III – Federal Award Findings and Questioned Costs (continued) Federal Agency: U.S. Department of Agriculture Assistance Listing No: 10.557, WIC Special Supplemental Nutrition Program for Women, Infants, and Children Pass-Through Grantor: Kentucky Cabinet for Health and Family Services – Department of Public Health Division of Adult & Child Health Criteria or specific requirement (including statutory, regulatory or other citation): Section 200.303 of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) states the following regarding internal control: The recipient and subrecipient must: "Establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the 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: Norton Healthcare, Inc. and Affiliates (the Corporation) did not retain documentation to sufficiently support the design and operation of internal controls over the applicable compliance requirements for the listed federal programs. Furthermore, internal controls over management’s accumulation and review of such expenses for allowability were not suitably designed as it pertained to final approval of expenses incurred. Cause: While the Corporation has procedures in place to process and record transactions, internal controls were not designed or implemented around the accumulation of expenditures and review of such expenditures for allowability under the programs. Furthermore, the Corporation’s payroll department did not retain documentation to evidence the review of unapproved timesheets. Part III – Federal Award Findings and Questioned Costs (continued) Effect or potential effect: Lack of formalized policies and procedures and retention of documentation to support the operation of internal controls, including review of federal expenditures and required reporting, could have resulted in unallowable expenses being charged to and reimbursed by the federal agencies. Questioned costs: None. Context: Total federal expenditures on the Schedule of Expenditures of Federal Awards (the Schedule) for the Research and Development Cluster were $985,803. Total federal expenditures on the Schedule for Assistance Listing No. 10.557, WIC Special Supplemental Nutrition Program for Women, Infants, and Children, were $638,946. Identification as a repeat finding, if applicable: Not applicable. Recommendation: Management should ensure all control policies related to the applicable compliance processes are implemented and that evidence of each control is maintained. Views of responsible officials: Management agrees with this finding and will update policies and procedures to ensure that a comprehensive review, approval, and document retention process is applied consistently in the preparation of future federal awards. Additionally, the Corporation has updated policies and procedures to formalize payroll department review of unapproved timesheets.