CHILDREN'S HOSPITAL MEDICAL CENTER OF AKRONNon-Profit

Identification of the federal program: Federal Agencies: U.S. Department of Health and Human Services Pass-Through Entities: Ohio Department of Health Assistance Listing No: 93.354 Public Health Emergency Response: Cooperative Agreement for Emergency Response: Public Health Crisis Response, 93.493 Congressional Directives, and 21.027 COVID-19 Coronavirus State and Local Recovery Funds Award Period: 2023 Criteria or specific requirement (including statutory, regulatory or other citation): Section 200.303 of the Uniform Guidance states the following regarding internal control: “The non-Federal entity must: a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).” Section 200.318(i) of the Uniform Guidance states the following regarding general procurement standards: “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.” Section 200.320(a)(1)(iii) of the Uniform Guidance states the following regarding formal procurement methods to be followed: “The non-Federal entity is responsible for determining and documenting an appropriate micro-purchase threshold based on internal controls, an evaluation of risk, and its documented procurement procedures.” Section 200.320(a)(2)(i) refers to small purchases as: “The acquisition of property or services, the aggregate dollar amount of which is higher than the micro-purchase threshold but does not exceed the simplified acquisition threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources as determined appropriate by the non-Federal entity.” Condition: For most of 2023, Akron Children’s Procurement Policy for Federal Grant Agreements and Contracts did not align with the Uniform Guidance requirements within Section 200.320 in that the requirements for price or rate quotations from an adequate number of sources for small purchases between the micro purchase and simplified acquisition thresholds are not defined. Akron Children’s updated the procurement policy to align with the Uniform Guidance requirements in November 2023. Cause: The small purchase procurement threshold within Akron Children’s Procurement Policy for Federal Grant Agreements and Contracts did not align with the procurement thresholds established under Uniform Guidance Section 200.320, until the policy was updated in November 2023. Effect or potential effect: Akron Children’s procurement policies were not designed in accordance with Section 2.00.320(a). As such, Akron Children’s purchases may not have been in accordance with the Uniform Guidance procurement standards. Questioned costs: None Context: Akron Children’s updated its procurement policy in November 2023. Procurements prior to this date may not have followed the required Uniform Guidance. Total Federal expenditures for the programs were $10,888,195 for the year ended December 31, 2023. Identification as a repeat finding, if applicable: The finding is a repeat finding from the prior year – 2022-001, as it relates to 93.354 Public Health Emergency Response: Cooperative Agreement for Emergency Response: Public Health Crisis Response. Recommendation: Akron Children’s should review and update its federal procurement policies to align with the procurement standards. Views of responsible officials: Akron Children's remediated this finding in November 2023 with the update and issuance of a modified Procurement Policy for Federal Grant Agreements and Contracts that aligns with the standards of Uniform Guidance.

Identification of the federal program: Federal Agencies: U.S. Department of Health and Human Services Pass-Through Entities: Ohio Department of Health Assistance Listing No: 93.354 Public Health Emergency Response: Cooperative Agreement for Emergency Response: Public Health Crisis Response, 93.493 Congressional Directives, and 21.027 COVID-19 Coronavirus State and Local Recovery Funds Award Period: 2023 Criteria or specific requirement (including statutory, regulatory or other citation): Section 200.303 of the Uniform Guidance states the following regarding internal control: “The non-Federal entity must: a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).” The Uniform Guidance 2 CFR Section 200.213 states, “Non-federal entities are subject to the non-procurement debarment and suspension regulations implementing Executive Orders 12549 and 12689, 2 CFR Part 180. 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: We identified the following matters during our testing of suspension and debarment control processes: a) A third-party vendor performed the suspension and debarment validation process for Akron Children’s. The third-party vendor does not have a SOC 1 (System and Organization Controls) Report. For most of 2023, Akron Children’s relied on the suspension and debarment checks performed by the third-party vendor for results concluding no match without completing a validation control to ensure the results provided by the third party were accurate. b) Akron Children’s did not retain the supporting documentation of the reconciliation of the vendor list that is received from the third-party vendor that is used to perform the suspension and debarment checks after the suspension and debarment checks are performed to ensure the listing is complete and agrees to the vendor list provided by Akron Children’s to the third-party vendor. Cause: Akron Children’s did not have policies and procedures that require a validation of the third-party’s controls be performed to ensure that the suspension and debarment checks performed by the third-party vendor aligned with the governmental suspension and debarment database when the search resulted in no match. In addition, Akron Children’s did not have policies and procedures in place to require that documentation is retained to support the reconciliations performed between the vendor list sent to the third-party vendor and the results provided by the third-party vendor. Effect or potential effect: Akron Children’s screening for suspension and debarment through the third-party vendor results may not be accurate. By failing to retain the documentation of the reconciliation of vendor files to the third-party vendor search results, sufficient evidence was not retained to prove that the reconciliation took place. As a result, there was not sufficient evidence to validate the appropriate internal controls took place to prevent Akron Children’s from transacting with a vendor that was suspended or debarred, which was ultimately charged to a federal program. Questioned costs: None. Context: The federal portion of expenditures subject to suspension and debarment represents approximately 84% of total federal expenditures for the programs of $10,888,195 for the year ended December 31, 2023. Identification as a repeat finding, if applicable: The finding is a repeat finding from the prior year – 2022-002, as it relates to 93.354 Public Health Emergency Response: Cooperative Agreement for Emergency Response: Public Health Crisis Response. Recommendation: Management should add controls to validate the accuracy of the suspension and debarment search results performed by the third-party vendor when the search results in no match. Views of responsible officials: Akron Children's remediated these findings in the fourth quarter of 2023 by: 1) Implementing a periodic independent review of a sample of vendors sent to the third-party vendor to ensure that the processes employed by third-party vendor are accurate. 2) Developing a retention process for all vendor searches and file submissions to evidence compliance with the Federal regulations, including an independent review of the accuracy of file submissions. Further, a contract management system was installed in 2023 that holds the validation of new vendors as acceptable for federal procurements.

Identification of the federal program: Federal Agencies: U.S. Department of Health and Human Services Pass-Through Entities: Ohio Department of Health Assistance Listing No: 93.354, Public Health Emergency Response: Cooperative Agreement for Emergency Response: Public Health Crisis Response Award Periods: 2023 Criteria or specific requirement (including statutory, regulatory or other citation): Section 200.303 of the Uniform Guidance states the following regarding internal control: “The non-Federal entity must: a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).” Condition: There was a lack of sufficient internal controls documentation evidencing management’s review and approval of the amounts submitted on the monthly financial and quarterly performance reports required by the Ohio Department of Health (ODH). Cause: Internal controls over the review of the reports were not documented sufficiently to evidence there were no errors in the reporting of the data. Effect or potential effect: Reports submitted to ODH may contain errors and not be supported by the books and records of Akron Children’s. Questioned costs: None Context: Akron Children’s submitted twelve monthly financial reports and four quarterly reports to the ODH in 2023. Management did not retain sufficient evidence supporting the review and approval of the financial reports prior to submission to ODH. Identification as a repeat finding, if applicable: The finding is a repeat finding from the prior year, 2022-003. Recommendation: When executing the established controls over the review and approval of the reports, management should document and retain evidence of the control procedures performed for all reports submitted. Views of responsible officials: Akron Children’s implemented a review checklist and sign-off process to document controls for the review of the monthly financial reports submitted to the granting agency in 2023. This checklist and sign-off process will be extended to all federal grants with periodic performance reporting in 2024.

Identification of the federal program: Federal Agencies: Department of Health, Health Resources and Services Administration (HRSA) Pass-Through Entities: None Assistance Listing No: 93.493 Congressional Directives Award Periods: 2023 Criteria or specific requirement (including statutory, regulatory or other citation): 2 CFR Section 200.303 of the Uniform Guidance states the following regarding internal control: “The non-Federal entity must: a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).” Condition: Management did not have a formal, documented internal control in place to review the allowability of the expenses to be allocated to the grant. Cause: Management did not have in place a formal, documented internal control to review the allowability of expenses to be charged to the grant. Effect or potential effect: A lack of internal controls over the review and approval of expenditures could result in unallowable expenses being charged to the federal award. Questioned costs: None. Context: We obtained email communication among Akron Children’s personnel discussing the types of costs to be submitted (construction costs) and that the general contractor expenses could be used. However, once these costs had been identified to be charged to the grant, management did not document a review of the allowability of these transactions. Total expenditures reported on the Schedule of Expenditures of Federal Awards for the year ended December 31, 2023 were $2,000,000. Identification as a repeat finding, if applicable: The finding is not a repeat finding from the prior year. Recommendation: Akron Children’s should put in place internal control procedures and retain evidence of review of expenditures charged to the grant to ensure the expenses are allowable. Views of responsible officials: Akron Children's will implement a more detailed review and documentation process for allowable expenses prior to determining expenses that are eligible for federal grant reimbursement.

Identification of the federal program: Federal Agencies: Department of Health, Health Resources and Services Administration (HRSA) Pass-Through Entities: None Assistance Listing No: 93.493 Congressional Directives Award Periods: 2023 Criteria or specific requirement (including statutory, regulatory or other citation): Section 200.303 of the Uniform Guidance states the following regarding internal control: “The non-Federal entity must: a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).” Condition: There was a lack of internal controls over management’s review and approval of documents submitted to the HRSA portal prior to submission. Cause: Akron Children’s did not have internal controls over the review of the documents submitted to HRSA to ensure the documentation uploaded was complete and accurate. Effect or potential effect: Reports submitted to HRSA may contain errors and not be supported by the books and records of Akron Children’s. Questioned costs: None Context: Akron Children’s submitted five reports to HRSA in 2023. Management did not retain sufficient evidence supporting the review and approval of the reports prior to submission to HRSA. Identification as a repeat finding, if applicable: The finding is not a repeat finding from the prior year. Recommendation: When executing the established controls over the review and approval of the reports, management should document and retain evidence of the control procedures performed for all reports submitted. Views of responsible officials: Akron Children's will implement a review and sign-off process for all documentation to be submitted for federal grant requirements.

Finding 2022-001 ? Procurement and Suspension and Debarment Identification of the federal program:Federal Agencies: U.S. Department of Health and Human Services Pass-Through Entities: Ohio Department of Health Assistance Listing No: 93.354 Public Health Emergency Response: Cooperative Agreement for Emergency Response: Public Health Crisis Response Award Period: 2022 Criteria or specific requirement (including statutory, regulatory or other citation): Section 200.303 of the Uniform Guidance states the following regarding internal control: ?The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in ?Standards for Internal Control in the Federal Government? issued by the Comptroller General of the United States or the ?Internal Control Integrated Framework?, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).? Section 200.318(i) of the Uniform Guidance states the following regarding general procurement standards: ?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.? Section 200.320(a)(1)(iii) of the Uniform Guidance states the following regarding formal procurement methods to be followed: ?The non-Federal entity is responsible for determining and documenting an appropriate micro-purchase threshold based on internal controls, an evaluation of risk, and its documented procurement procedures.?Section 200.320(a)(2)(i) refers to small purchases as: ?The acquisition of property or services, the aggregate dollar amount of which is higher than the micro-purchase threshold but does not exceed the simplified acquisition threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources as determined appropriate by the non-Federal entity.? Condition: Three federal procurements made in fiscal year 2022 exceeded the small purchase threshold of $10,000. Akron Children?s did not document the history of the procurement, including the rationale for the method of procurement and rationale for selection of the contractor prior to the purchase date of the federal procurements. In addition, Akron Children?s Procurement Policy for Federal Grant Agreements and Contracts does not align with the Uniform Guidance requirements within Section 200.320 in that the requirements for price or rate quotations from an adequate number of sources for small purchases between the micro purchase and simplified acquisition thresholds are not defined. Cause: Akron Children?s did not document the history and rationale for the method of procurement prior to the federal procurements. In addition, the small purchase procurement threshold within Akron Children?s Procurement Policy for Federal Grant Agreements and Contracts does not align with the procurement thresholds established under Uniform Guidance Section 200.320. Effect or potential effect: At the time the procurements were made, Akron Children?s did not sufficiently document that the purchases aligned with the federal procurement guidelines. Akron Children?s procurement policies are not designed in accordance with Section 2.00.320(a). Questioned costs: NoneContext: We sampled 3 federal procurements over the small purchase threshold of $10,000 totaling $148,383, which represented the entire population of small purchase procurements. Procurement-related expenditures represent approximately 16% of total Federal expenditures for the program of $1,085,801 for the year ended December 31, 2022. Identification as a repeat finding, if applicable: The finding is not a repeat finding from the prior year. Recommendation: Akron Children?s should ensure that all awards that require procurement of goods and services follow established policies, procedures, and internal controls in order to comply with the Uniform Guidance procurement standards, including that sufficient documentation is prepared and retained at the time of the federal procurement. Akron Children?s should review and update its federal procurement policies to align with the procurement standards. Views of responsible officials: Akron Children?s concluded that the vendors utilized for these federal procurements were appropriate. Akron Children?s had performed an assessment of the IT and software vendors prior to the procurements but had not documented, specific to the federal procurements for this grant, that the selected contractors were reasonable based on management?s analysis of price or rate quotations from an adequate number of qualified sources. Akron Children?s subsequently provided documentation of multiple bids for federal procurements that were obtained prior to the federal procurements. Akron Children?s will modify the Procurement Policy for Federal Grant Agreements and Contracts to align with the standards of the Uniform Guidance.

Finding 2022-002 ? Procurement and Suspension and Debarment Identification of the federal program: Federal Agencies: U.S. Department of Health and Human Services Pass-Through Entities: Ohio Department of Health Assistance Listing No: 93.354 Public Health Emergency Response: Cooperative Agreement for Emergency Response: Public Health Crisis Response Award Period: 2022 Criteria or specific requirement (including statutory, regulatory or other citation): Section 200.303 of the Uniform Guidance states the following regarding internal control: ?The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in ?Standards for Internal Control in the Federal Government? issued by the Comptroller General of the United States or the ?Internal Control Integrated Framework?, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).? The Uniform Guidance 2 CFR Section 200.213 states, ?Non-federal entities are subject to the non- procurement debarment and suspension regulations implementing Executive Orders 12549 and 12689, 2 CFR Part 180. 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: We identified the following matters during our testing of suspension and debarment control processes: (a) A third-party vendor performed the suspension and debarment validation process for Akron Children?s. The third-party vendor does not have a SOC 1 (System and Organization Controls) Report. Akron Children?s relied on the suspension and debarment checks performed by the third-party vendor for results concluding no match without completing a validation control to ensure the results provided by the third party were accurate. (b) Akron Children?s conducts preventive controls in its vendor setup and monitoring process to ensure new vendors and active vendors are not suspended or debarred. A consistent vendor setup process is followed for each new vendor that Akron Children?s transacts with, regardless of whether the vendor transactions are funded through federal grant funding or through other sources. To prevent a suspended or debarred vendor from being added as a new vendor, the vendor is checked against the suspension and debarment database electronically before completion of the vendor setup. Akron Children?s does not retain the supporting documentation that the vendor setup check resulted in no match in the suspension and debarment database indicating the vendor is not suspended or debarred (c) Akron Children?s did not retain the supporting documentation of the reconciliation of the vendor list that is received from the third-party vendor that is used to perform the suspension and debarment checks after the suspension and debarment checks are performed to ensure the listing is complete and agrees to the vendor list provided by Akron Children?s to the third-party vendor. Cause: Akron Children?s does not have policies and procedures that require a validation of the third party?s controls be performed to ensure that the suspension and debarment checks performed by the third-party vendor aligned with the governmental suspension and debarment database when the search resulted in no match. Akron Children?s did not have policies and procedures in place to require that documentation is retained of its suspension and debarment checks performed when a new vendor is set up in the procurement system. In addition, Akron Children?s did not have policies and procedures in place to require that documentation is retained to support the reconciliations performed between the vendor list sent to the third-party vendor and the results provided by the third-party vendor. Effect or potential effect: Akron Children?s screening for suspension and debarment through the third-party vendor results may not be accurate. By failing to retain the documentation of the reconciliation of vendor files to the third-party vendor search results, sufficient evidence was not retained to prove that the reconciliation took place. As a result, there was not sufficient evidence to validate the appropriate internal controls took place to prevent Akron Children?s from transacting with a vendor that was suspended or debarred, which was ultimately charged to a federal program. Questioned costs: None. Context: The federal portion of expenditures subject to suspension and debarment represents approximately 16% of total federal expenditures for the program of $1,085,801 for the year ended December 31, 2022. Identification as a repeat finding, if applicable: The finding is not a repeat finding from the prior year. Recommendation: Management should add controls to validate the accuracy of the suspension and debarment search results performed by the third-party vendor when the search results in no match. Management should implement documentation retention processes to provide evidence over the suspension and debarment search for ?new? vendors. In addition, management should implement documentation retention processes over the reconciliation between the vendor list sent to the third-party vendor to document completeness of the suspension and debarment check. Views of responsible officials: The third-party vendor used for this service does not have a system and organizational controls report available that would have been relevant to this requirement. Therefore, Akron Children?s will implement a periodic independent review of a sample of vendors sent to the third-party vendor to ensure that the processes employed by third-party vendor are accurate. Akron Children?s will also develop a retention process for all vendor searches and file submissions to evidence compliance with the Federal regulations. Further, a contract management system has been installed in 2023 that holds the validation of new vendors as acceptable for federal procurements.

Finding 2022-003 ? Reporting Identification of the federal program: Federal Agencies: U.S. Department of Health and Human Services Pass-Through Entities: Ohio Department of Health Assistance Listing No: 93.354, Public Health Emergency Response: Cooperative Agreement for Emergency Response: Public Health Crisis Response Award Periods: 2022 Criteria or specific requirement (including statutory, regulatory or other citation): Section 200.303 of the Uniform Guidance states the following regarding internal control: ?The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in ?Standards for Internal Control in the Federal Government? issued by the Comptroller General of the United States or the ?Internal Control Integrated Framework?, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).? Condition: Lack of sufficient internal controls documentation evidencing management?s review and approval of the amounts submitted on the monthly financial report required by the Ohio Department of Health (ODH). Cause: Internal controls over the review of the monthly financial report were not documented sufficiently to evidence there were no errors in the reporting of financial data. Effect or potential effect: Reports submitted to ODH may contain errors and not be supported by the books and records of Akron Children?s. Questioned costs: None. Context: Akron Children?s submitted seven monthly financial reports to the ODH in 2022. Management did not retain sufficient evidence supporting the review and approval of the financial reports prior to submission to ODH. Identification as a repeat finding, if applicable: The finding is not a repeat finding from the prior year. Recommendation: When executing the established controls over the review and approval of the monthly financial reports, management should document and retain evidence of the control procedures performed for all reports submitted. Views of responsible officials: Akron Children?s will implement a review checklist and sign-off process to document controls for the review of the monthly financial reports submitted to the granting agency.