Saint Luke's Health System Inc

Finding 2023-001 – Special Tests and Provisions – Key Personnel Information of the federal program: Research and Development (R&D) Cluster Federal Grantor: U.S. Department of Health and Human Services Pass-Through Grantor: Oregon Health & Science University Assistance Listing No.: 93.847 Pass-Through Award Number: 1020881_STLUKES Pass-Through Award Period: 09/03/2021-12/31/2023 Pass-Through Grantor: University of Southern California Assistance Listing No.: 93.837 Pass-Through Award Numbers: 117726140/SCON-00003287; 117726140/SCON-00005033 Pass-Through Award Period: 03/22/2019-02/29/2024 Pass-Through Grantor: The Curators of the University of Missouri on Behalf of University of Missouri at Kansas City Assistance Listing No.: 93.103 Pass-Through Award Numbers: 00119058/00079685 Pass-Through Award Period: 09/30/22-09/29/2025 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 CRF Subpart D section 200.308(c) states the following: “For non-construction Federal awards, recipients must request prior approvals from Federal awarding agencies for the following program or budget-related reasons: (2) Change in a key person specified in the application or the Federal award; (3) The disengagement from the project for more than three months, or a 25 percent reduction in time devoted to the project, by the approved project director or principal investigator.” Condition: Saint Luke’s Health System, Inc. (the System) did not obtain or timely obtain prior approval from Federal awarding agencies for changes in effort of key personnel specifically named in the federal award. Cause: Management did not have suitably designed internal controls to monitor changes in effort throughout the year and to ensure the required approval from Federal awarding agencies was obtained on a timely basis. Effect or potential effect: The System is not in compliance with 2 CRF Subpart D section 200.308(c) and the terms and conditions of the federal program regarding key personnel. Questioned costs: $25,045 was calculated as the salaries, benefits, and indirect costs expensed to the federal award for the months where the key personnel’s change in effort was more than 25% for the key personnel in question and not reported to the federal award agency. Assistance Listing No. 93.837 Pass-Through Grantor: University of Southern California Pass-Through Award Numbers: 117726140/SCON-00003287; 117726140/SCON-00005033 Salaries and Benefits – $17,638 Indirect Costs – $7,407 Total – $25,045 Context: The required approval from the Federal awarding agency was not obtained or not obtained timely for a total of six key personnel (17%) out of a population of 35 key personnel specifically named in the federal awards as key personnel for whom a prior approval is required for a significant change in effort. Out of the total of six changes in effort of key personnel that were more than 25% lower than the committed effort per the agreement, there were four (11%) changes where the required approval was not obtained and there were two (6%) changes where the required approval was not obtained timely. Total R&D Cluster program expenditures were $1,482,128 for the year ended December 31, 2023. Identification as a repeat finding, if applicable: The finding is not a repeat finding from the prior year. Recommendation: Saint Luke’s Health System should implement an internal control over the monitoring of changes in effort of key personnel to enable compliance with prior approval requirements of the federal program. Views of responsible officials: Quarterly reviews of key personnel effort were instituted in December 2023 to allow for timely identification and communication of potential changes in key personnel or significant reductions of effort.

Finding 2020-001 ? Activities Allowed or Unallowed and Allowable Costs/Cost Principles Information on the federal program: Research and Development Cluster Federal Grantor: United States Department of Health and Human Services Pass-Through Entities: See table below Assistance Listing Nos.: See table below Federal and Pass-Through Award Nos: See table below Federal and Pass-Through Award Periods of Performance: See table below See Schedule of Findings and Questioned Costs for chart/table. Criteria or specific requirement (including statutory, regulatory or other citation): The Uniform Guidance 2 CFR section 200.303 states, ?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 I. General Standards for Selected Items of Cost, 2.g. Compensation for Personal Services, within Appendix IX to Part 75?Principles for Determining Costs Applicable to Research and Development Under Grants and Contracts with Hospitals (Hospital Cost Principles) states the following: (2) Payroll Distribution ??.supplementary data on time or effort as provided in paragraph (3) below, normally need be required only for individuals whose compensation is properly chargeable to two or more research agreements or to two or more of the following broad functional categories: (i) Patient care; (ii) organized research; (iii) instruction and training; (iv) indirect activities as defined in paragraph E.1.; or (v) other hospital activities as defined in paragraph B.5.? (3) Reporting Time or Effort ?For members of the professional staff, current and reasonable estimates of the percentage distribution of their total effort may be used as support in the absence of actual time records.? ?In order to qualify as reasonable, estimates must be made no later than one month (though not necessarily a calendar month) after the month in which the services were performed.? (4) Preparation of Estimates of Effort ??.estimates of effort spent by a member of the professional staff on each research agreement should be prepared by the individual who performed the services or by a responsible individual such as a department head or supervisor having first-hand knowledge of the services performed on each research agreement. Estimates must show the allocation of effort between organized research and all other hospital activities in terms of the percentage of total effort devoted to each of the broad functional categories referred to in (2) above.? Condition: As part of our testing of the operating effectiveness of internal controls over the activities allowed or unallowed and allowable costs/cost principles compliance requirements, we noted that internal controls in place related to the review and approval of monthly effort reports (MER) and salary transfer journal entries to transfer federal grant-related expenses from an employee?s home cost center to specific federal grant cost centers were not operating effectively. In addition, we noted certain MERs were not consistently completed for each employee, were not accurately completed or the related transfer journal entry did not agree to the MER. Cause: Internal controls over review and approval of monthly effort reports and salary transfer journal entries were not operating effectively. Effect or potential effect: Payroll costs were not supported by effort reports as required by Hospital Cost Principles. Questioned costs: $10,694 (Assistance Listing No. 93.173 ? $(95); Assistance Listing No. 93.350 ? $2,372; Assistance Listing No. 93.837 ? $91; and Assistance Listing No. 93.840 ? $8,326) See Schedule of Findings and Questioned Costs for chart/table. Context: We sampled 43 monthly payroll transactions (totaling $77,397) from a population of 233 monthly payroll transactions (totaling $424,976) processed during the fiscal year. For five of 43 (11.6%) monthly payroll transactions tested (totaling $6,703), we noted control deviations and compliance exceptions resulting in questioned costs of $5,703 as follows: ? For two payroll transactions, a MER was not completed. ? For one payroll transaction, a MER was signed but was incorrect as it was not updated from the prior month?s effort. ? For one payroll transaction, the effort percentage used in the salary transfer did not agree to the effort per the MER. ? For one payroll transaction, the incorrect National Institutes of Health salary cap was used in the salary transfer calculation. Total payroll, fringe benefit, and indirect costs for the fiscal year for the Research and Development Cluster were $424,976, $72,655, and $208,655, respectively, representing 40.1%, 6.9%, and 19.7%, respectively, of total federal expenditures for the Research and Development Cluster of $1,058,514. Identification as a repeat finding, if applicable: This is not a repeat finding. Recommendation: Saint Luke?s Health System should reinforce the importance of adhering to its internal controls over the preparation, review, and approval of time and effort reports. Views of responsible officials: We agree with this finding and will update policies and work procedures to ensure compliance with the allowability requirements of the federal program.

Finding 2020-002 ? Activities Allowed or Unallowed and Allowable Costs/Cost Principles Information on the federal program: Research and Development Cluster Federal Grantor: United States Department of Health and Human Services Pass-Through Entities: See table below Assistance Listing Nos.: See table below Federal and Pass-Through Award Nos: See table below Federal and Pass-Through Award Periods of Performance: See table below See Schedule of Findings and Questioned Costs for chart/table. 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 is no review and approval of the establishment of the annual benefit rates used in the computation of fringe benefit expenditures. Cause: Although a process was in place to compute the annual benefit rates used in federal awards, a review and approval internal control did not exist. Effect or potential effect: The annual benefit rate computations could be inaccurate or incomplete and could result in either an overstatement or understatement of costs charged to the federal program. Questioned costs: None. Context: Fringe benefits totaled $72,655 for the year ended December 31, 2020, representing 6.9% of total federal expenditures for the Research and Development Cluster of $1,058,514. Identification as a repeat finding, if applicable: The finding is not a repeat finding. Recommendation: Evidence of review and approval, including elements of the review process validated by the reviewer, should be maintained. Views of Responsible Officials: We agree with this finding and will update policies and work procedures to ensure annual fringe benefit rates are reviewed and approved.

Finding 2019-001 ? Eligibility Information on the federal program: U.S. Department of Education Office of Federal Student Aid Student Financial Assistance (SFA) Cluster Saint Luke?s College of Health Sciences Criteria or specific requirement (including statutory, regulatory or other citation): 2 CFR 200.303 requires that a 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 and the ?Internal Control Integrated Framework?, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).? Condition: Annual cost of attendance (COA) budgets (by program/by enrollment status) uploaded to Saint Luke?s College of Health Sciences? student information system by the Director of Financial Aid are not reviewed and approved by another individual for accuracy once the upload is complete. Cause: There is currently no internal control in place to perform a secondary review of the data input by the Director of Financial Aid. Effect: COA could be incorrectly uploaded to the student information system which could cause a student?s financial need, and resulting financial aid, to be incorrectly calculated. Questioned costs: None. Context: Total SFA Cluster federal expenditures for Saint Luke?s College of Health Sciences were $7,338,698. Identification as a repeat finding, if applicable: This is not a repeat finding. Recommendation: The annual COA budgets uploaded into the student information system should be reviewed and approved by a secondary individual for accuracy once the upload by the Director of Financial Aid is complete. This review should be documented and signed off by the secondary reviewer. Views of responsible officials: Management agrees with the finding and has developed a plan to correct the finding.

Finding 2019-002 ? Special Tests and Provisions ? N2. Disbursements to or on Behalf of Students Information on the federal program: U.S. Department of Education Office of Federal Student Aid SFA Cluster ? CFDA No. 84.268 Saint Luke?s College of Health Sciences Criteria or specific requirement (including statutory, regulatory or other citation): 2 CFR 200.303 requires that a 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 and the ?Internal Control Integrated Framework?, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).? 34 CFR 685.300(b)(9) requires institutions to ?Provide for the implementation of a quality assurance system, as established by the Secretary and developed in consultation with the school, to ensure that the school is complying with program requirements and meeting program objectives.? Condition: Saint Luke?s College of Health Sciences did not implement a quality assurance system for the direct loan program. Cause: A formal written quality assurance system was not documented, including evidence of periodic monitoring and evaluation. Effect: Saint Luke?s College of Health Sciences is not in compliance with the requirement of its program participation agreement to implement a quality assurance system. Questioned costs: None. Context: Total direct loans for Saint Luke?s College of Health Sciences were $5,999,485, representing 82% of total SFA Cluster expenditures of $7,338,698. Identification as a repeat finding, if applicable: This is not a repeat finding. Recommendation: Saint Luke?s College of Health Sciences should formally document all aspects of its direct loan quality assurance system using the tools provided by the U.S. Department of Education and implement periodic monitoring and evaluation. Views of responsible officials: Management agrees with the finding and has developed a plan to correct the finding.

Finding 2019-003 ? Special Tests and Provisions ? N4. Enrollment Reporting Information on the federal program: U.S. Department of Education Office of Federal Student Aid SFA Cluster ? CFDA Nos. 84.063 and 84.268 Saint Luke?s College of Health Sciences Criteria or specific requirement (including statutory, regulatory or other citation): 2 CFR 200.303 requires that a 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 and the ?Internal Control Integrated Framework?, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).? Condition: The monthly review of the National Student Clearinghouse (NSC) enrollment report for accuracy and completeness and error reports received from the NSC for resolution is not documented by the Registrar. Cause: The enrollment reporting process through the NSC is highly automated. Although a review is performed by the Registrar, there is no formal documentation to evidence the procedures performed, what information was evaluated, the precision of the review, what types of noncompliance are identified, what actions were taken, and results. Effect: A student?s enrollment status determines eligibility for in-school status, deferment, and grace periods, as well as for the payment of interest subsidies to loan holders by the U.S. Department of Education. Enrollment reporting in a timely and accurate manner is critical for the effective management of the programs. Questioned costs: None. Context: Total Pell grants and direct loans for Saint Luke?s College of Health Sciences were $879,110 and $5,999,485, respectively, representing 12% and 82%, respectively, of total SFA Cluster expenditures of $7,338,698. Identification as a repeat finding, if applicable: This is not a repeat finding. Recommendation: The Registrar should formalize the review of the monthly NSC enrollment report and error reports. Specific elements of the review process should be documented (for example, the specific items reviewed, the results obtained and the follow-up actions taken) and signed off by the Register to evidence performance of the monthly review. Views of responsible officials: Management agrees with the finding and has developed a plan to correct the finding.

Finding 2019-004 ? Special Tests and Provisions ? N6. Borrower Data Transmission and Reconciliation (Direct Loan) Information on the federal program: U.S. Department of Education Office of Federal Student Aid SFA Cluster ? CFDA No. 84.268 Saint Luke?s College of Health Sciences Criteria or specific requirement (including statutory, regulatory or other citation): 2 CFR 200.303 requires that a 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 and the ?Internal Control Integrated Framework?, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).? Under 34 CFR 685.300(b)(5), the program participation agreement states that a school must ?on a monthly basis, reconcile institutional records with Direct Loan funds received from the Secretary and Direct Loan disbursement records submitted to and accepted by the Secretary.? Condition: Monthly reconciliations of cumulative direct loan disbursements performed between Saint Luke?s College of Health Sciences? student information system, the U.S. Department of Education?s Common Origination and Disbursement (COD) system, and the U.S. Department of Education?s G5 Grants Management system by the Director of Financial Aid and Director of Bursar Operations were not documented for the period January 2019 ? May 2019. Therefore, we were unable to audit the reconciliation. Cause: A formalized reconciliation and review performed by the Director of Financial Aid and the Director of Bursar Operations was not implemented until June 2019. Effect: Discrepancies between the U.S. Department of Education?s systems and Saint Luke?s College of Health Sciences? internal records may not be timely identified and resolved, reasons for remaining cash balances may not be properly documented, and cash management and disbursement reporting timelines may not be met. Questioned costs: None. Context: Total direct loans for Saint Luke?s College of Health Sciences were $5,999,485, representing 82% of total SFA Cluster expenditures of $7,338,698. Identification as a repeat finding, if applicable: This is not a repeat finding. Recommendation: Saint Luke?s College of Health Sciences should ensure that all monthly direct loan reconciliations are being performed, reviewed and approved, with documentation being retained in the school?s internal records. Views of responsible officials: The formalized control was implemented June 2019.

Finding 2019-005 ? Special Tests and Provisions ? N7. Institutional Eligibility Information on the federal program: U.S. Department of Education Office of Federal Student Aid SFA Cluster Saint Luke?s College of Health Sciences Criteria or specific requirement (including statutory, regulatory or other citation): 2 CFR 200.303 requires that a 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 and the ?Internal Control Integrated Framework?, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).? Condition: The satisfactory academic progress (SAP) review performed each semester by the Director of Financial Aid is not suitably designed to conclude how each specific student identified as potentially not meeting SAP was followed up on and resolved. Cause: Each semester, the Director of Financial Aid generates a grade report from the student information system, which is then downloaded to an Excel spreadsheet. Students that withdrew or failed all courses are identified as students in danger of not meeting SAP. For these students, individual grade reports are downloaded from the student information system and the quantitative measure of the percentage of courses a student successfully completed is recalculated. However, there are no final conclusions documented on the Excel spreadsheet or the individual grade report to document the audit resolution for each student identified to be reviewed for SAP. Effect: Students not meeting SAP may be ineligible for financial aid. Questioned costs: None. Context: Total SFA Cluster federal expenditures for Saint Luke?s College of Health Sciences were $7,338,698. Identification as a repeat finding, if applicable: This is not a repeat finding. Recommendation: The Director of Financial Aid should formalize the SAP review and conclude how each specific student identified as potentially not meeting SAP was followed up on and resolved. Specific elements of the review process should be documented and signed off by the Director of Financial Aid to evidence performance of the periodic review. Views of responsible officials: Management agrees with the finding and has developed a plan to correct the finding.

Finding 2019-006 ? Special Tests and Provisions ? N8. Program Eligibility (Distance Education Program) Information on the federal program: U.S. Department of Education Office of Federal Student Aid SFA Cluster Saint Luke?s College of Health Sciences Criteria or specific requirement (including statutory, regulatory or other citation): 2 CFR 200.303 requires that a 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 and the ?Internal Control Integrated Framework?, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).? Condition: The attendance review performed by the Director of Financial Aid each semester is not designed to conclude how each specific student identified as potentially not meeting attendance requirements was followed up on and resolved. Cause: Each semester, the Director of Financial Aid generates a student attendance summary report from the student information system, which is then reviewed for students who are marked as absent from all courses. However, there are no final conclusions documented on the student attendance summary report to document the audit resolution for each student identified for further review. Effect: Attendance for students awarded Title IV funds enrolled in distance education programs may not be properly recorded, whether students began attendance may not be properly determined, or when students? last date of attendance for Return of Title IV purposes may not be properly determined. Questioned costs: None. Context: Total SFA Cluster federal expenditures for Saint Luke?s College of Health Sciences were $7,338,698. Identification as a repeat finding, if applicable: This is not a repeat finding. Recommendation: The Director of Financial Aid should formalize the attendance review and conclude how each specific student identified as potentially not meeting attendance requirements was followed-up on and resolved. Specific elements of the review process should be documented and signed off by the Director of Financial Aid to evidence performance of the periodic review. Views of responsible officials: Management agrees with the finding and has developed a plan to correct the finding.