TEXAS CHILDREN'S

U.S. Department of Health and Human Services COVID-19 Provider Relief Fund (ALN 93.498) Federal Awards Identifying No. PRF20200001 Finding No. 2021 ? 001: Type of Finding: Non-compliance with Reporting Compliance Requirements and Significant Deficiency in Internal Control over Reporting Compliance Criteria ? July 2021 OMB Compliance Supplement identified reporting of total loss revenue for the Provider Relief Fund (PRF) program as a critical item included within the PRF reporting to Health Resources and Services Administration and, as a recipient of PRF payments, Texas Children?s is required to comply with the terms and conditions of the PRF program. Condition ? Texas Children?s reported loss revenues for Texas Children?s Hospital (TCH) and Texas Children?s Physician Group (TCPG) in the PRF reporting submitted for Period 1 (ended June 30, 2020) and used actual net patient revenue for 2019 as the base year for determining loss revenue (Option 1) as allowed under the PRF program guidelines. To verify reported loss revenue in the PRF report, we selected the 2nd Quarter of 2020 and 2021 (for both TCH and TCPG) to ensure proper accumulation and reporting of loss revenues. Additionally, we selected the 2nd Quarter of 2019 (for both TCH and TCPG) to ensure proper accumulation and reporting of loss revenues for the base year. However, during our testing, a clerical error was identified in the computation of net patient revenue for the 1st and 2nd Quarter of 2019 for TCH, resulting in the overstatement of reported net patient revenue by $17M in the 1st Quarter and understatement by $17M in the 2nd Quarter of 2019 in the PRF Period 1 Report. Lost revenue calculation for the quarters of 2020 was corrected due to the understatement and overstatement netting to the net impact of zero. However, 1st Quarter of 2021 reported an overstatement of lost revenue by $17M, which was not offset by 2nd Quarter of 2021, which did not have any lost revenue. This overstatement was included in the total loss revenue reported in the PRF Period 1 report for TCH. This overstatement did not impact the amount reimbursed by PRF Period 1 payment. Cause ? A clerical error occurred while computing net patient revenue for the 2nd Quarter of 2019. Effect ? The amount reported for loss revenue under line description ?YoY Changes in Patient Care Revenues 2021? in the PRF report for Period 1 for TCH was overstated by $17M. Questioned Costs ? None noted. Identification of Repeat Finding ? This is not a repeat finding. Recommendation ?We recommend that management consider correcting the error identified above in a subsequent PRF reporting. Additionally, there is a need to strengthen multiple levels of supervisory reviews for PRF reporting to avoid such clerical errors in the future. Views of Responsible Officials and Planned Corrective Actions ? Management in in agreement with the finding. See management?s corrective action plan on page 15.

FINDING NO. 2021-001: NON-COMPLIANCE WITH REPORTING COMPLIANCE REQUIREMENTS AND SIGNIFICANT DEFICIENCY IN INTERNAL CONTROL OVER REPORTING COMPLIANCE Planned Corrective Action- Texas Children?s will correct the error identified in the period three reporting period that is due by September 30, 2022. Additional commentary will be added in the report to explain the correction to HRSA. We will also include additional supervisory reviews prior to submitting reports. Anticipated Completion Date ? September 30, 2022 Contact Person Responsible for Corrective Action ? Tanu Ganatra, Assistant Director, Accounting