Confluence HealthNon-Profit

Department of Health and Human Services Federal Financial Assistance Listing #93.498 COVID-19 Provider Relief Fund and American Rescue Plan (ARP) Rural Distribution Applicable Federal Award Number and Year – Period 5 TIN# 910171250 Reporting Material Weakness in Internal Control over Compliance and Material Noncompliance Criteria: Confluence Health must establish and maintain effective internal control over federal awards that provides reasonable assurance that Confluence Health is managing the federal awards in compliance with federal statutes, regulations and terms and conditions of the federal award. Condition: Confluence Health selected option ii to calculate lost revenue which consists of a comparison of actual results during the period of availability to a budget approved before March 27, 2020, for the entire period of availability. The budget used in the calculation of lost revenue for quarters in 2021, 2022 and 2023 was not approved prior to March 27, 2020. Cause: Confluence Health did have an approved budget prior to March 27, 2020, for calendar year 2020, but the approved budget did not cover the entire period of availability. Effect: The reporting to HHS for Period 5 was considered incorrect. Confluence Health did not have a budget approved prior to March 27, 2020 for the entire period of availability. There was no effect on the amount of lost revenue applied against the funding received, however there were errors in the key line items reported. Questioned Costs: None reported. Context: Key line items were tested on the Period 5 Department of Health and Human Services special report. Repeat Finding from Prior Years: Yes. Recommendation: We recommend that management review award requirements and reporting to ensure proper application of the terms and conditions of the program. Views of Responsible Officials: Management agrees with the finding.

Department of Health and Human Services Federal Financial Assistance Listing #93.498 COVID-19 Provider Relief Fund and American Rescue Plan (ARP) Rural Distribution Applicable Federal Award Number and Year – Period 5 TIN# 910171250 Reporting Material Weakness in Internal Control over Compliance and Material Noncompliance Criteria: Confluence Health must establish and maintain effective internal control over federal awards that provides reasonable assurance that Confluence Health is managing the federal awards in compliance with federal statutes, regulations and terms and conditions of the federal award. Condition: For certain quarters, the amounts reported for net patient revenue were based on gross charges. Additionally, amounts did not agree to the supporting documentation provided. Cause: Confluence Health did not have an internal control process in place to ensure the accuracy of the reporting key line items. Effect: There was no effect on the amount of lost revenue applied against the funding received in the current period, however there were errors in the key line items reported. Lost revenue calculated using net patient revenue would have resulted in $80,271,491 in lost revenues, which exceeds the amount claimed in prior periods of $11,480,727. Questioned Costs: None reported. Context: Key line items were tested on the Period 5 Department of Health and Human Services special report. Repeat Finding from Prior Years: Yes. Recommendation: We recommend that management review the calculation methodology for lost revenues and ensure the amounts used for actual revenues agrees to the amounts presented in the financial statements. Views of Responsible Officials: Management agrees with the finding.

epartment of Health and Human Services Federal Financial Assistance Listing #93.498 COVID-19 Provider Relief Fund and American Rescue Plan (ARP) Rural Distribution Applicable Federal Award Number and Year – Period 5 TIN# 910171250 Activities Allowed or Unallowed, Allowable Cost/Cost Principles Material Weakness in Internal Control over Compliance and Noncompliance Criteria: CFR 200.303(a) establishes that the auditee must establish and maintain effective internal control over the federal award that provides assurance that the entity is managing the federal award in compliance with federal statutes, regulations, and conditions of the federal award. Condition: Confluence Health claimed and reported expenditures that contained errors based upon the underlying documentation. Cause: Confluence Health did not have adequate internal controls policy in place to ensure expenditures claimed were accurate and based upon underlying records. Effect: There is a potential that significant costs may be claimed and reported may not be supported during a subsequent examination. Questioned Costs: $89,582. Context: A nonstatistical sample of 60, supplies, services, and payroll transactions out of a population of approximately 5,215 totaling $5,006,903 were selected for testing. The sample contained errors in two transactions in which the amounts claimed on the Period 5 report were not supported by payroll records. The amounts claimed not supported by payroll records totaled $89,582 out of a total sample value of $2,615,445. Repeat Finding from Prior Years: No. Recommendation: We recommend that management modify internal control policies to ensure amounts claimed for this program agree to underlying documentation. Views of Responsible Officials: Management agrees with the finding.

Department of Health and Human Services Federal Financial Assistance Listing #93.498 COVID-19 Provider Relief Fund and American Rescue Plan (ARP) Rural Distribution Applicable Federal Award Number and Year – Period 4 TIN# 455563741 Reporting Material Weakness in Internal Control over Compliance and Material Noncompliance Criteria: Confluence Health must establish and maintain effective internal control over federal awards that provides reasonable assurance that Confluence Health is managing the federal awards in compliance with federal statutes, regulations and terms and conditions of the federal award. Condition: Confluence Health selected option ii to calculate lost revenue which consists of a comparison of actual results during the period of availability to a budget approved before March 27, 2020, for the entire period of availability. The budget used in the calculation of lost revenue was not approved for the entire period of availability. The budget used to cover quarters in 2021 and 2022 was not approved prior to March 27, 2020. Cause: Confluence Health did have an approved budget prior to March 27, 2020, for calendar year 2020, but the approved budget did not cover the entire period of availability. Effect: The reporting to HHS for Period 4 was considered incorrect. Confluence Health did not have a budget approved prior to March 27, 2020 for the entire period of availability. There was no effect on the amount of lost revenue applied against the funding received, however there were errors in the key line items reported. Questioned Costs: None reported. Context: Key line items were tested on the Period 4 Department of Health and Human Services special report. Repeat Finding from Prior Years: No Recommendation: We recommend that management review the calculation methodology for lost revenues and ensure the amounts used for actual revenues agrees to the amounts presented in the financial statements. Views of Responsible Officials: Management agrees with the finding.

Department of Health and Human Services Federal Financial Assistance Listing #93.498 COVID-19 Provider Relief Fund and American Rescue Plan (ARP) Rural Distribution Applicable Federal Award Number and Year – Period 4 TIN# 455563741 Reporting Material Weakness in Internal Control over Compliance and Material Noncompliance Criteria: Confluence Health must establish and maintain effective internal control over federal awards that provides reasonable assurance that Confluence Health is managing the federal awards in compliance with federal statutes, regulations and terms and conditions of the federal award. For the calculation of lost revenues, Confluence Health used gross charges to calculate lost revenue. Condition: The amounts reported for net patient revenue were based on gross charges and did not agree to the supporting documentation provided. Cause: Confluence Health did not have an internal control process in place to ensure the accuracy of the reporting key line items. Effect: There was no effect on the amount of lost revenue applied against the funding received in the current period, however there were errors in the key line items reported. On a consolidated level, lost revenue calculated using net patient revenue would have resulted in $64,525,051 in lost revenues, which exceeds the amount claimed in prior periods of $11,480,727. Questioned Costs: None reported. Context: Key line items were tested on the Period 4 Department of Health and Human Services special report. Repeat Finding from Prior Years: No Recommendation: We recommend that management review the calculation methodology for lost revenues and ensure the amounts used for actual revenues agrees to the amounts presented in the financial statements. Views of Responsible Officials: Management agrees with the finding.

Finding 2021-001 Preparation of the Schedule Expenditures of Federal Awards – Material Weakness in Internal Control Over Compliance Program: U.S. Department of Health and Human Services HRSA COVID-19 Uninsured Program ALN 93.461 Award year: 2021 Criteria: The Uniform Guidance (2 CFR 200) Section 200.510 requires an auditee to “prepare a schedule of expenditures of Federal awards (SEFA) for the period covered by the auditee’s financial statements [that]….at a minimum shall…list individual Federal programs by Federal agency…[and] provide total Federal awards expended for each individual Federal program and the Assistance Listing Number (ALN) number or other identifying number when the ALN information is not available.” In accordance with Uniform Guidance, Confluence Health (the Health System) is required to maintain a structure of internal control to ensure compliance with applicable reporting requirements. Condition/Cause: The Health System did not have sufficient controls to ensure the SEFA included all expenditures that qualified as an expenditure of a federal award during the period. Effect: The SEFA was revised to include $2,036,330 of expenditures related to ALN #93.461, HRSA COVID-19 Uninsured Program, which resulted in an additional major program and the reissuance of the 2021 reporting package. Additionally, it was determined that the Health System had not properly reported approximately $1.0 million in expenditures related to this same program in its prior year SEFA. Questioned Costs: Not applicable. Context: Factors contributing to the condition included the high volume of activity related to new COVID-19 programs and the lack of understanding that the related payments represented grant expenditures from a Federal source that were required to be reported on the SEFA. Repeat Finding: Not applicable. Recommendation: We recommend the Health System develop and implement a review process through the year to ensure compliance with SEFA reporting requirements as outlined in the Uniform Guidance. Views of Responsible Officials: Processes will be put in place to compile the SEFA, reconcile to support, and perform a related review prior to audit. This will allow all grants from a Federal source to be identified and tracked, ensuring completeness.

Finding 2020-001 Preparation of the Schedule Expenditures of Federal Awards – Material Weakness in Internal Control Over Compliance Program: U.S. Department of Health and Human Services HRSA COVID-19 Uninsured Program ALN 93.461 Award year: 2020 Criteria: The Uniform Guidance (2 CFR 200) Section 200.510 requires an auditee to “prepare a schedule of expenditures of Federal awards (SEFA) for the period covered by the auditee’s financial statements [that]….at a minimum shall…list individual Federal programs by Federal agency…[and] provide total Federal awards expended for each individual Federal program and the Assistance Listing Number (ALN) number or other identifying number when the ALN information is not available.” In accordance with Uniform Guidance, Confluence Health (the Health System) is required to maintain a structure of internal control to ensure compliance with applicable reporting requirements. Condition/Cause: The Health System did not have sufficient controls to ensure the SEFA included all expenditures that qualified as an expenditure of a federal award during the period. Effect: The SEFA was revised to include $1,019,828 of expenditures related to ALN #93.461, HRSA COVID-19 Uninsured Program, which resulted in an additional major program and the reissuance of the 2020 reporting package. Questioned Costs: Not applicable. Context: Factors contributing to the condition included the high volume of activity related to new COVID-19 programs and the lack of understanding that the related payments represented grant expenditures from a Federal source that were required to be reported on the SEFA. Repeat Finding: Not applicable. Recommendation: We recommend the Health System develop and implement a review process through the year to ensure compliance with SEFA reporting requirements as outlined in the Uniform Guidance. Views of Responsible Officials: Processes will be put in place to compile the SEFA, reconcile to support, and perform a related review prior to audit. This will allow all grants from a Federal source to be identified and tracked, ensuring completeness.