Audit 41796

Title: Contingencies Accounting Policies: Expenditures reported in the SEFA are reported on the accrual basis of accounting. Such expenditures are recognized following the cost principles contained in Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement. Lost revenues are reported based on the HRSA Option 1 reporting of lost revenues by comparing actual revenues by quarter during the period of availability to actual revenues for similar quarters during 2019 prior to the COVID-19 pandemic.Expenditures for PRF are based upon the PRF report for the year ended June 30, 2022. The System has elected not to use the 10-percent de minimis indirect cost rate as allowed under the Uniform Guidance.The System did not pass through any funding to subrecipients. De Minimis Rate Used: N Rate Explanation: The auditee did not use the de minimis cost rate. The grant programs are subject to financial and compliance audits by the grantors or their representatives. Such audits could lead to requests for reimbursement to the grantor agencies for expenditures disallowed under terms of the grants. Management believes disallowances, if any, will not be material.

Title: Categorization of Expenditures Accounting Policies: Expenditures reported in the SEFA are reported on the accrual basis of accounting. Such expenditures are recognized following the cost principles contained in Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement. Lost revenues are reported based on the HRSA Option 1 reporting of lost revenues by comparing actual revenues by quarter during the period of availability to actual revenues for similar quarters during 2019 prior to the COVID-19 pandemic.Expenditures for PRF are based upon the PRF report for the year ended June 30, 2022. The System has elected not to use the 10-percent de minimis indirect cost rate as allowed under the Uniform Guidance.The System did not pass through any funding to subrecipients. De Minimis Rate Used: N Rate Explanation: The auditee did not use the de minimis cost rate. The categorization of expenditures by program included in the SEFA is based upon the grant documents. Changes in the categorization of expenditures occur based upon revisions to the Assistance Listing. The SEFA for the year ended June 30, 2022 reflects Assistance Listing changes through April 2022.

Title: Basis of Presentation Accounting Policies: Expenditures reported in the SEFA are reported on the accrual basis of accounting. Such expenditures are recognized following the cost principles contained in Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement. Lost revenues are reported based on the HRSA Option 1 reporting of lost revenues by comparing actual revenues by quarter during the period of availability to actual revenues for similar quarters during 2019 prior to the COVID-19 pandemic.Expenditures for PRF are based upon the PRF report for the year ended June 30, 2022. The System has elected not to use the 10-percent de minimis indirect cost rate as allowed under the Uniform Guidance.The System did not pass through any funding to subrecipients. De Minimis Rate Used: N Rate Explanation: The auditee did not use the de minimis cost rate. The accompanying consolidated schedule of expenditures of federal awards (SEFA) includes the federal award activity of Mercy Health Services, Inc. and Subsidiaries (the System) under the programs of the federal government for the year ended June 30, 2022, except the SEFA does not include federal funds received and expended by Cardinal Sheehan Center, Incorporated (CSC), an organization included in the reporting entity under the criteria of generally accepted accounting principles. CSC has elected to have their own single audit. As such, their expenditures of federal awards are excluded from the accompanying SEFA. CSC is required to submit their own single audit report to the federal audit clearinghouse. The information in this SEFA is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administration Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). All federal awards received directly and indirectly from federal agencies are included in this SEFA. Because the SEFA presents only a selected portion of the operations of the System, it is not intended to and does not present the financial position, changes in net assets or cash flows of the System. As outlined in the April 2022 OMB Compliance Supplement, the amounts reported in the accompanying SEFA related to the Provider Relief Fund (PRF) and American Rescue Plan (ARP) Rural Distribution, Assistance Listing No. 93.498, are reported based upon the PRF reporting portal submission guidelines established by the U.S. Department of Health and Human Services, Health Resource and Service Administration (HRSA). Separate reporting periods were established by HRSA based on the dates of receipt of PRF payments. Each reporting period has a specific period of availability which begins on January 1, 2020 and extends through specified deadlines, as indicated below:The accompanying SEFA includes those qualifying expenditures and lost revenues that were reported in the HRSA PRF portal for Periods 2 and 3. The System recognized the Period 2 and 3 funding in their consolidated statement of operations and changes in net assets during the fiscal year ended June 30, 2021.