CHRISTUS HealthNon-Profit

Section III – Federal Award Findings and Questioned Costs Finding 2023-001 – Internal Control Deficiency and Noncompliance over Activities Allowed or Unallowed Identification of the federal program: Federal Grantor: United States Department of Health and Human Services, Health Resources and Services Administration (HRSA) Assistance Listing No.: 93.498 COVID – 19 Provider Relief Funds and American Rescue Plan (ARP) Rural Distribution Award Period of Performance: January 1, 2020 – June 30, 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 terms and conditions of the award states the recipient certifies that the payment will only be used to prevent, prepare for, and respond to coronavirus, and that the payment shall reimburse the recipient only for health care related expenses and lost revenues that are attributable to coronavirus. Condition: CHRISTUS Health did not consistently retain documentation to evidence approval of certain expenses incurred related to COVID-19. Also, certain payroll expenses related to COVID-19 were calculated using current pay rates as opposed to pay rates in effect at the time the payroll expenses were incurred. Finding 2023-001 – Internal Control Deficiency and Noncompliance over Activities Cause: CHRISTUS Health did not have controls in place to ensure amounts recorded as COVID-19 related expenses were reviewed and approved. CHRISTUS Health did not use appropriate pay rates when calculating labor costs to treat COVID-19 patients in the provider relief fund report (the Portal Submission) submitted to Health Resource Services Administration (HRSA). Effect or potential effect: Lack of documentation of controls could lead to noncompliance. Charging expenses to the program using incorrect pay rates could result in overcharging the program. Questioned Costs: $237 Context: CHRISTUS Health reported $65,505,801 of total expenses for the Period 4 and 5 HRSA Portal Submissions relating to Provider Relief Funding (PRF) Phase 4 General Distributions and American Rescue Plan (ARP) Rural Payments. Because a material weakness was issued in the prior year related to lack of documentation of controls surrounding expenses, we did not test and rely on controls for expenses in the current audit as the finding had not been remediated for the entire audit period. We selected 95 disbursements from the $65,505,801 of total expenses reported. Total program related expenditures that were charged specifically to a COVID related Activity Code within the Payroll IT System were $3,166,654. Of the 95 selected disbursements, 10 disbursements related to the COVID Activity Code. For payroll costs charged to the COVID Activity code, the amount charged to the award was calculated using the actual hours incurred multiplied by the pay rate at the time the portal submission was prepared, instead of the pay rate in effect at the time the hours were incurred. The 10 selections totaled $11,759. We recalculated the amount charged to the program using the pay rates in effect at the time the hours were incurred resulting in four overcharges totaling $237, four undercharges totaling $846, and two correct charges in which the current pay rate happened to match the pay rate at the time the hours were incurred. Identification as a repeat finding, if applicable: The finding is a repeat finding of 2021-001 and 2022-001. Recommendation: CHRISTUS Health should refine its process to retain documentation evidencing that each expense charged to the program is reviewed and approved. Only actual expenses should be charged to the program. View of Responsible Officials: Management agrees with the finding and will implement corrective action.

Finding 2022-001 ? Internal Control Deficiency Over Activities Allowed or Unallowed Identification of the federal program: Federal Grantor: United States Department of Health and Human Services, Health Resources and Services Administration (HRSA) Assistance Listing No.: 93.498 COVID-19 Provider Relief Funds and American Rescue Plan (ARP) Rural Distribution Award Period of Performance: January 01, 2020 ? December 31, 2021 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: CHRISTUS Health (CHRISTUS) did not consistently retain documentation to evidence approval of certain expenses incurred related to COVID-19. Cause: CHRISTUS did not have controls in place to ensure amounts recorded as COVID-19 related expenses were reviewed and approved. Effect or potential effect: Lack of documentation of controls, including review and approval of expenses, may lead to ineligible expenses charged to the program. Questioned Costs: None. Context: We issued a material weakness related to internal controls in the prior year. Based upon the implementation date for the corrective action provided by management, the finding related to this internal control had not been remediated for the period under audit. As such, we did not test the operating effectiveness of this control and are issuing a material weakness consistent with the prior year finding. CHRISTUS reported $12,991,294 of total expenses for the Period 2 HRSA Portal Submission. Identification as a repeat finding, if applicable: The finding is a repeat finding ? Finding 2021-001. Recommendation: CHRISTUS should refine its process to retain documentation evidencing that each expense recorded to the COVID accounts is reviewed and approved. View of Responsible Officials: Management agrees that certain expenses to the COVID department were not reviewed and approved at the order entry level in specific cases. Although evidence of review was not retained for every charge to the COVID department, we believe the appropriateness of the charge was reasonable. Additionally, based on monthly review of departmental expenses and full-time equivalent (FTE) analysis at the facility level, we believe that these expenditures are subject to the appropriate level of review to identify unexpected variances. We plan to review our processes related to the retention of expense documentation to improve audit evidence.

Finding 2022-001 – Internal Control Deficiency Over Activities Allowed or Unallowed Identification of the Federal Program: Federal Grantor: United States Department of Health and Human Services, Health Resources and Services Administration (HRSA) Assistance Listing No.: 93.498 COVID-19 Provider Relief Funds and American Rescue Plan (ARP) Rural Distribution Award Period of Performance: January 01, 2020 – December 31, 2021 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: CHRISTUS Health (CHRISTUS) did not consistently retain documentation to evidence approval of certain expenses incurred related to COVID-19. Cause: CHRISTUS did not have controls in place to ensure amounts recorded as COVID-19 related expenses were reviewed and approved. Effect or Potential Effect: Lack of documentation of controls, including review and approval of expenses, may lead to ineligible expenses charged to the program. Questioned Costs: None. Context: We issued a material weakness related to internal controls in the prior year. Based upon the implementation date for the corrective action provided by management, the finding related to this internal control had not been remediated for the period under audit. As such, we did not test the operating effectiveness of this control and are issuing a material weakness consistent with the prior year finding. CHRISTUS reported $12,991,294 of total expenses for the Period 2 HRSA Portal Submission. Identification as a Repeat Finding, if Applicable: The finding is a repeat finding – Finding 2021-001. Recommendation: CHRISTUS should refine its process to retain documentation evidencing that each expense recorded to the COVID accounts is reviewed and approved. View of Responsible Officials: Management agrees that certain expenses to the COVID department were not reviewed and approved at the order entry level in specific cases. Although evidence of review was not retained for every charge to the COVID department, we believe the appropriateness of the charge was reasonable. Additionally, based on monthly review of departmental expenses and full-time equivalent (FTE) analysis at the facility level, we believe that these expenditures are subject to the appropriate level of review to identify unexpected variances. We plan to review our processes related to the retention of expense documentation to improve audit evidence.

Finding 2022-002 – Internal Control Deficiency and Noncompliance over Reporting Identification of the Federal Program: Federal Grantor: United States Department of the Treasury Pass-Through Entity: Smith County, Texas and the City of San Marcos, Texas Assistance Listing No.:21.027, Coronavirus State and Local Fiscal Recovery Funds Pass-Through Award Numbers: Not available Award Periods of Performance: Trinity Mother Frances, Pass-through Smith County, October 1, 2021 – November 30, 2021 Santa Rosa, Pass-through the City of San Marcos, March 03, 2021 through December 31, 2026 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).” The Uniform Guidance 2 CFR section 200.510 states, “(b) Schedule of expenditures of Federal awards. The auditee must also prepare a schedule of expenditures of federal awards (SEFA) for the period covered by the auditee’s financial statements which must include the total Federal awards expended as determined in accordance with §200.502 Basis for determining Federal awards expended.” Condition: CHRISTUS did not originally prepare a complete and accurate listing of all federal awards in the SEFA. Cause: CHRISTUS did not have controls in place to ensure all federal expenditures were captured on the SEFA. Effect or Potential Effect: The SEFA prepared by CHRISTUS was misstated but was subsequently corrected. The misstatement resulted in the omission of a major federal program under the Uniform Guidance report. Questioned Costs: None. Context: Expenditures for Assistance Listing Number 21.027 were originally understated on the SEFA by $2,500,000, or 71% of the program. Identification as a Repeat Finding, if Applicable: This is not a repeat finding. Recommendation: CHRISTUS should review its internal controls over the process of accumulating and reporting expenditures of federal awards. Views of Responsible Officials: CHRISTUS agrees with the finding and has developed internal controls to ensure accurate and complete reporting of federal expenditures.

Finding 2022-003 – Internal Control Deficiency and Noncompliance over Activities Allowed or Unallowed and Period of Performance Identification of the federal program: Federal Grantor: United States Department of the Treasury Assistance Listing No.: 21.027 COVID – 19 Coronavirus State and Local Fiscal Recovery Funds. Pass-Through Award Numbers: Good Shepherd, pass-through Gregg County: SKM_C55822012711390 Trinity Mother Frances, Pass-through Smith County: Not available Santa Rosa, Pass-through the City of San Marcos: Not available Award Period of Performance: Good Shepherd, pass-through Gregg County, September 1, 2021 – November 30, 2021 Trinity Mother Frances, Pass-through Smith County, October 1, 2021 – November 30, 2021 Santa Rosa, Pass-through the City of San Marcos, March 03, 2021 through December 31, 2026 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). Good Shepherd ($1,000,000 award): The agreement states, “The purpose of this Gregg County Medical Personnel Retention Agreement is to incentivize local medical personnel to continue working full-time with their current local medical service provider, and to provide continued excellent patient care to those suffering from COVID-19.” Individuals are considered qualified to receive a retention bonus under the agreement if they meet certain requirements, including, but not limited to the following: • must have been employed on September 1, 2021 • must have remained employed full time from September 1, 2021 through November 30, 2021 (the Retention Period) • must work a minimum of 72 hours each bi-weekly pay period • must not have more than two unscheduled absences during the Retention Period • must sign a commitment letter Trinity Mother Frances ($2,000,000 award): The agreement states, “The purpose of this Smith County Medical Personnel Retention Agreement is to incentivize local medical personnel to continue working full-time with their current local medical service provider, and to provide continued excellent patient care to those suffering from COVID-19.” Individuals are considered qualified to receive a retention bonus under the agreement if they meet certain requirements, including, but not limited to the following: • must have been employed on September 30, 2021 • must remain employed full time from October 1, 2021 through November 30, 2021 (the Retention Period) • must work a minimum of 72 hours each bi-weekly pay period Santa Rosa ($500,000 award): Per the agreement, the funds are to be used to provide continued medical services by retention and hiring of hospital medical staff to provide patient care. Condition: CHRISTUS did not have controls in place that operated effectively to ensure that employees receiving retention bonuses were eligible under the requirements of the agreements for Good Shepherd and Trinity Mother Frances, resulting in ineligible employees being charged to the grant. Controls were not in place to ensure the expenditures reported by Santa Rosa were eligible under the agreement. Certain types of expenditures used in the calculation to support the award were not allowed under the agreement. Cause: Notarized certification was made by executives at Good Shepherd and Trinity Mother Frances indicating compliance with the terms and conditions of the agreements; however, the individuals that certified that the requirements were met had never read the agreements. For Santa Rosa, the preparer of the calculation did not adhere to the technical requirements of the agreement. Effect or potential effect: Lack of controls lead to noncompliance with the terms and conditions of the agreements and submission of ineligible expenses. Questioned Costs: Good Shepherd: $1,000,000, Trinity Mother Frances: $21,480, San Marcos: $139,759 Context: CHRISTUS reported $3,500,000 of total expenses. The awards for Good Shepherd and Trinity Mother Frances totaled $3,000,000. We selected 34 disbursements totaling $61,680, noting that 29 disbursements totaling $52,280 did not meet the eligibility requirements of the grant agreements. Good Shepherd observations: • Although the award for Good Shepherd was $1,000,000, expenditures submitted to support the award totaled $1,379,900, of which $173,600 and $49,686 were incurred in August 2021 and December 2021, respectively, which were outside the period of performance. • No commitment letters were signed by any employees. • We could not determine if unscheduled absences exceeded 2 per employee as this information was not documented and retained. Of the 34 selections, 11 selections were from Good Shepherd totaling $30,800. For these selections, we noted the following: • Eight employees did not sign the commitment letters and did not work the required minimum 72 hours per bi-weekly pay period and thus were also not considered full time and thus were not eligible to participate in the program. Expenditures submitted for reimbursement for these employees totaled $24,000. • Three employees adhered to all of the requirements except signing the required commitment letters. Total expenditures submitted for reimbursement for these three employees totaled $6,800. Trinity Mother Frances observations: Of the 34 selections, 23 selections were from Trinity Mother Frances totaling $30,880. For these selections, 5 employees were in compliance with all requirements and 18 were not in compliance as noted below: • One employee did not work any shifts during the retention period and received bonus payments throughout the entire retention period. Expenditures submitted for reimbursement for this employee totaled $1,600. • One employee was terminated during the retention period and the bonus payments were not eligible to submit under the program. Expenditures submitted for reimbursement for this employee totaled $1,600. • Four employees did not work the required minimum 72 hours per bi-weekly pay period and thus were also not considered full time and thus were not eligible to participate in the program. Expenditures submitted for reimbursement for these employees totaled $3,600. • Ten of the employees received a bonus that was not a retention-related bonus and thus did not qualify under the program. Expenditures submitted for these employees totaled $14,080. • Two employees received a retention bonus whereby the amount submitted was in excess of the retention bonus paid. Excess expenditures submitted for these employees totaled $600. Santa Rosa observations: • The method used to support that expenditures were used to hire and retain hospital medical staff was based upon a rolling 12-month average of labor charges compared to the month of August 2021. The incremental expenses for August compared to the 12-month average were submitted for reimbursement under the program. Although the award was for $500,000, Santa Rosa submitted $624,274 of expenses to support the award. • Contract labor was included in the calculation, which does not meet the requirements of hiring and retaining medical staff. Total incremental contract labor charged to the grant totaled $139,759. • As part of the calculation, all staff at the hospital were used in the calculation to calculate incremental salaries versus just medical staff providing patient care. The costs associated with just the medical staff could not be determined. Total salary related amounts charged to the award for all hospital staff, including non-patient care staff, were $336,216. Identification as a repeat finding, if applicable: The finding is not a repeat finding. Recommendation: Gregg County and Smith County Awards: Should the award continue in the future, CHRISTUS should implement controls and ensure only employees that meet the eligibility requirements are submitted for reimbursement and that the calculations used to support the expenditures submitted for reimbursement adhere to the terms of the award. CHRISTUS should review the employees that received retention bonuses as submitted and certified under the program and ensure the employees were eligible to receive payment. CHRISTUS should reperform the calculation submitted to support the reimbursement and ensure only items in accordance with the agreement are included. CHRISTUS should work with the awarding agencies on how to remediate the noncompliance. City of San Marcos Award: Should the award continue in the future, CHRISTUS should implement controls and ensure calculations used to support reimbursement meet the requirements of the award. View of Responsible Officials: CHRISTUS agrees with the finding and will develop internal controls to ensure compliance with federal expenditures.

Finding 2022-001 ? Internal Control Deficiency Over Activities Allowed or Unallowed Identification of the federal program: Federal Grantor: United States Department of Health and Human Services, Health Resources and Services Administration (HRSA) Assistance Listing No.: 93.498 COVID-19 Provider Relief Funds and American Rescue Plan (ARP) Rural Distribution Award Period of Performance: January 01, 2020 ? December 31, 2021 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: CHRISTUS Health (CHRISTUS) did not consistently retain documentation to evidence approval of certain expenses incurred related to COVID-19. Cause: CHRISTUS did not have controls in place to ensure amounts recorded as COVID-19 related expenses were reviewed and approved. Effect or potential effect: Lack of documentation of controls, including review and approval of expenses, may lead to ineligible expenses charged to the program. Questioned Costs: None. Context: We issued a material weakness related to internal controls in the prior year. Based upon the implementation date for the corrective action provided by management, the finding related to this internal control had not been remediated for the period under audit. As such, we did not test the operating effectiveness of this control and are issuing a material weakness consistent with the prior year finding. CHRISTUS reported $12,991,294 of total expenses for the Period 2 HRSA Portal Submission. Identification as a repeat finding, if applicable: The finding is a repeat finding ? Finding 2021-001. Recommendation: CHRISTUS should refine its process to retain documentation evidencing that each expense recorded to the COVID accounts is reviewed and approved. View of Responsible Officials: Management agrees that certain expenses to the COVID department were not reviewed and approved at the order entry level in specific cases. Although evidence of review was not retained for every charge to the COVID department, we believe the appropriateness of the charge was reasonable. Additionally, based on monthly review of departmental expenses and full-time equivalent (FTE) analysis at the facility level, we believe that these expenditures are subject to the appropriate level of review to identify unexpected variances. We plan to review our processes related to the retention of expense documentation to improve audit evidence.

Finding 2022-001 – Internal Control Deficiency Over Activities Allowed or Unallowed Identification of the Federal Program: Federal Grantor: United States Department of Health and Human Services, Health Resources and Services Administration (HRSA) Assistance Listing No.: 93.498 COVID-19 Provider Relief Funds and American Rescue Plan (ARP) Rural Distribution Award Period of Performance: January 01, 2020 – December 31, 2021 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: CHRISTUS Health (CHRISTUS) did not consistently retain documentation to evidence approval of certain expenses incurred related to COVID-19. Cause: CHRISTUS did not have controls in place to ensure amounts recorded as COVID-19 related expenses were reviewed and approved. Effect or Potential Effect: Lack of documentation of controls, including review and approval of expenses, may lead to ineligible expenses charged to the program. Questioned Costs: None. Context: We issued a material weakness related to internal controls in the prior year. Based upon the implementation date for the corrective action provided by management, the finding related to this internal control had not been remediated for the period under audit. As such, we did not test the operating effectiveness of this control and are issuing a material weakness consistent with the prior year finding. CHRISTUS reported $12,991,294 of total expenses for the Period 2 HRSA Portal Submission. Identification as a Repeat Finding, if Applicable: The finding is a repeat finding – Finding 2021-001. Recommendation: CHRISTUS should refine its process to retain documentation evidencing that each expense recorded to the COVID accounts is reviewed and approved. View of Responsible Officials: Management agrees that certain expenses to the COVID department were not reviewed and approved at the order entry level in specific cases. Although evidence of review was not retained for every charge to the COVID department, we believe the appropriateness of the charge was reasonable. Additionally, based on monthly review of departmental expenses and full-time equivalent (FTE) analysis at the facility level, we believe that these expenditures are subject to the appropriate level of review to identify unexpected variances. We plan to review our processes related to the retention of expense documentation to improve audit evidence.

Finding 2022-002 – Internal Control Deficiency and Noncompliance over Reporting Identification of the Federal Program: Federal Grantor: United States Department of the Treasury Pass-Through Entity: Smith County, Texas and the City of San Marcos, Texas Assistance Listing No.:21.027, Coronavirus State and Local Fiscal Recovery Funds Pass-Through Award Numbers: Not available Award Periods of Performance: Trinity Mother Frances, Pass-through Smith County, October 1, 2021 – November 30, 2021 Santa Rosa, Pass-through the City of San Marcos, March 03, 2021 through December 31, 2026 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).” The Uniform Guidance 2 CFR section 200.510 states, “(b) Schedule of expenditures of Federal awards. The auditee must also prepare a schedule of expenditures of federal awards (SEFA) for the period covered by the auditee’s financial statements which must include the total Federal awards expended as determined in accordance with §200.502 Basis for determining Federal awards expended.” Condition: CHRISTUS did not originally prepare a complete and accurate listing of all federal awards in the SEFA. Cause: CHRISTUS did not have controls in place to ensure all federal expenditures were captured on the SEFA. Effect or Potential Effect: The SEFA prepared by CHRISTUS was misstated but was subsequently corrected. The misstatement resulted in the omission of a major federal program under the Uniform Guidance report. Questioned Costs: None. Context: Expenditures for Assistance Listing Number 21.027 were originally understated on the SEFA by $2,500,000, or 71% of the program. Identification as a Repeat Finding, if Applicable: This is not a repeat finding. Recommendation: CHRISTUS should review its internal controls over the process of accumulating and reporting expenditures of federal awards. Views of Responsible Officials: CHRISTUS agrees with the finding and has developed internal controls to ensure accurate and complete reporting of federal expenditures.

Finding 2022-003 – Internal Control Deficiency and Noncompliance over Activities Allowed or Unallowed and Period of Performance Identification of the federal program: Federal Grantor: United States Department of the Treasury Assistance Listing No.: 21.027 COVID – 19 Coronavirus State and Local Fiscal Recovery Funds. Pass-Through Award Numbers: Good Shepherd, pass-through Gregg County: SKM_C55822012711390 Trinity Mother Frances, Pass-through Smith County: Not available Santa Rosa, Pass-through the City of San Marcos: Not available Award Period of Performance: Good Shepherd, pass-through Gregg County, September 1, 2021 – November 30, 2021 Trinity Mother Frances, Pass-through Smith County, October 1, 2021 – November 30, 2021 Santa Rosa, Pass-through the City of San Marcos, March 03, 2021 through December 31, 2026 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). Good Shepherd ($1,000,000 award): The agreement states, “The purpose of this Gregg County Medical Personnel Retention Agreement is to incentivize local medical personnel to continue working full-time with their current local medical service provider, and to provide continued excellent patient care to those suffering from COVID-19.” Individuals are considered qualified to receive a retention bonus under the agreement if they meet certain requirements, including, but not limited to the following: • must have been employed on September 1, 2021 • must have remained employed full time from September 1, 2021 through November 30, 2021 (the Retention Period) • must work a minimum of 72 hours each bi-weekly pay period • must not have more than two unscheduled absences during the Retention Period • must sign a commitment letter Trinity Mother Frances ($2,000,000 award): The agreement states, “The purpose of this Smith County Medical Personnel Retention Agreement is to incentivize local medical personnel to continue working full-time with their current local medical service provider, and to provide continued excellent patient care to those suffering from COVID-19.” Individuals are considered qualified to receive a retention bonus under the agreement if they meet certain requirements, including, but not limited to the following: • must have been employed on September 30, 2021 • must remain employed full time from October 1, 2021 through November 30, 2021 (the Retention Period) • must work a minimum of 72 hours each bi-weekly pay period Santa Rosa ($500,000 award): Per the agreement, the funds are to be used to provide continued medical services by retention and hiring of hospital medical staff to provide patient care. Condition: CHRISTUS did not have controls in place that operated effectively to ensure that employees receiving retention bonuses were eligible under the requirements of the agreements for Good Shepherd and Trinity Mother Frances, resulting in ineligible employees being charged to the grant. Controls were not in place to ensure the expenditures reported by Santa Rosa were eligible under the agreement. Certain types of expenditures used in the calculation to support the award were not allowed under the agreement. Cause: Notarized certification was made by executives at Good Shepherd and Trinity Mother Frances indicating compliance with the terms and conditions of the agreements; however, the individuals that certified that the requirements were met had never read the agreements. For Santa Rosa, the preparer of the calculation did not adhere to the technical requirements of the agreement. Effect or potential effect: Lack of controls lead to noncompliance with the terms and conditions of the agreements and submission of ineligible expenses. Questioned Costs: Good Shepherd: $1,000,000, Trinity Mother Frances: $21,480, San Marcos: $139,759 Context: CHRISTUS reported $3,500,000 of total expenses. The awards for Good Shepherd and Trinity Mother Frances totaled $3,000,000. We selected 34 disbursements totaling $61,680, noting that 29 disbursements totaling $52,280 did not meet the eligibility requirements of the grant agreements. Good Shepherd observations: • Although the award for Good Shepherd was $1,000,000, expenditures submitted to support the award totaled $1,379,900, of which $173,600 and $49,686 were incurred in August 2021 and December 2021, respectively, which were outside the period of performance. • No commitment letters were signed by any employees. • We could not determine if unscheduled absences exceeded 2 per employee as this information was not documented and retained. Of the 34 selections, 11 selections were from Good Shepherd totaling $30,800. For these selections, we noted the following: • Eight employees did not sign the commitment letters and did not work the required minimum 72 hours per bi-weekly pay period and thus were also not considered full time and thus were not eligible to participate in the program. Expenditures submitted for reimbursement for these employees totaled $24,000. • Three employees adhered to all of the requirements except signing the required commitment letters. Total expenditures submitted for reimbursement for these three employees totaled $6,800. Trinity Mother Frances observations: Of the 34 selections, 23 selections were from Trinity Mother Frances totaling $30,880. For these selections, 5 employees were in compliance with all requirements and 18 were not in compliance as noted below: • One employee did not work any shifts during the retention period and received bonus payments throughout the entire retention period. Expenditures submitted for reimbursement for this employee totaled $1,600. • One employee was terminated during the retention period and the bonus payments were not eligible to submit under the program. Expenditures submitted for reimbursement for this employee totaled $1,600. • Four employees did not work the required minimum 72 hours per bi-weekly pay period and thus were also not considered full time and thus were not eligible to participate in the program. Expenditures submitted for reimbursement for these employees totaled $3,600. • Ten of the employees received a bonus that was not a retention-related bonus and thus did not qualify under the program. Expenditures submitted for these employees totaled $14,080. • Two employees received a retention bonus whereby the amount submitted was in excess of the retention bonus paid. Excess expenditures submitted for these employees totaled $600. Santa Rosa observations: • The method used to support that expenditures were used to hire and retain hospital medical staff was based upon a rolling 12-month average of labor charges compared to the month of August 2021. The incremental expenses for August compared to the 12-month average were submitted for reimbursement under the program. Although the award was for $500,000, Santa Rosa submitted $624,274 of expenses to support the award. • Contract labor was included in the calculation, which does not meet the requirements of hiring and retaining medical staff. Total incremental contract labor charged to the grant totaled $139,759. • As part of the calculation, all staff at the hospital were used in the calculation to calculate incremental salaries versus just medical staff providing patient care. The costs associated with just the medical staff could not be determined. Total salary related amounts charged to the award for all hospital staff, including non-patient care staff, were $336,216. Identification as a repeat finding, if applicable: The finding is not a repeat finding. Recommendation: Gregg County and Smith County Awards: Should the award continue in the future, CHRISTUS should implement controls and ensure only employees that meet the eligibility requirements are submitted for reimbursement and that the calculations used to support the expenditures submitted for reimbursement adhere to the terms of the award. CHRISTUS should review the employees that received retention bonuses as submitted and certified under the program and ensure the employees were eligible to receive payment. CHRISTUS should reperform the calculation submitted to support the reimbursement and ensure only items in accordance with the agreement are included. CHRISTUS should work with the awarding agencies on how to remediate the noncompliance. City of San Marcos Award: Should the award continue in the future, CHRISTUS should implement controls and ensure calculations used to support reimbursement meet the requirements of the award. View of Responsible Officials: CHRISTUS agrees with the finding and will develop internal controls to ensure compliance with federal expenditures.

Finding 2021-001 ? Internal Control Deficiency and Noncompliance over Activities Allowed or Unallowed Identification of the federal program: Federal Grantor: United States Department of Health and Human Services, Health Resources and Services Administration (HRSA) Assistance Listing No.: 93.498 COVID ? 19 Provider Relief Funds and American Rescue Plan (ARP) Rural Distribution Award Period of Performance: January 01, 2020 ? June 30, 2021 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 terms and conditions of the award states the recipient certifies that the payment will only be used to prevent, prepare for, and respond to coronavirus, and that the payment shall reimburse the recipient only for health care related expenses and lost revenues that are attributable to coronavirus. Condition: CHRISTUS Health (CHRISTUS) did not consistently retain documentation to evidence approval of certain expenses incurred related to COVID-19. Also, certain payroll expenses related to COVID-19 were calculated using current pay rates as opposed to pay rates in effect at the time the payroll expenses were incurred. Cause: CHRISTUS did not have controls in place to ensure amounts recorded as COVID-19 related expenses were reviewed and approved. CHRISTUS did not use appropriate pay rates when calculating labor costs to treat COVID 19 patients in the provider relief fund report (the Portal Submission) submitted to Health Resource Services Administration (HRSA). Effect or potential effect: Lack of documentation of controls could lead to noncompliance. Charging expenses to the program using incorrect pay rats could result in overcharging the program. Questioned Costs: $1,148 Context: CHRISTUS reported $166,046,520 of total expenses for the Period 1 HRSA Portal Submissions. Total program related expenditures that were charged specifically to an internal COVID-related account totaled $107,655,062. We selected 40 disbursements totaling $330,314, noting that 28 disbursements totaling $34,166 did not have proper approval. Of the 40 selections, 8 selections were payroll charges in which the actual hours incurred were tracked and multiplied by the current pay rate instead of using the pay rate in effect at the time the hours were incurred. For the 8 selections, we recalculated the amount charged to the program using the payrates in effect at the time the hours were incurred, resulting in 7 overcharges to the award that totaled $1,148 and one was an under charge to the award of $1,858. Identification as a repeat finding, if applicable: The finding is not a repeat finding. Recommendation: CHRISTUS should refine its process to retain documentation evidencing each expense recorded to the COVID accounts are reviewed and approved. Only actual expenses should be charged to the program. View of Responsible Officials: All expenditures included by CHRISTUS Health in its submissions in the HHS portal were verified against HHS guidance to ensure allowability. Management has processes in place to document the review and approval of all costs charged to the COVID department. Specifically for payroll, associate time is reviewed by direct supervisors or departmental timekeepers. During this review, the manager transfers any COVID-related time to the appropriate COVID department based on the managers? knowledge of the work performed by the associate. Managers/Supervisors also received communications from CHRISTUS management regarding the types of activities that were considered allowable costs. We agree with the finding that charges to the COVID department were not reviewed in all cases. Although there was not an additional level of review for charges to the COVID department for all payroll charges made directly by the supervisor, we believed the appropriateness of the charge was best made at the supervisor/manager level rather than at the associate level with manager approval. This award has ended and no further expenditures are expected. Management may reassess its documentation of the review and approval of allowability of payroll expenditures should there be any new or additional funding related to this program. We agree that some payroll charges included in our HHS portal submission were based on actual hours and current pay rates rather than the pay rates that were in effect at the time the hours were incurred. We will perform a detailed calculation of the variance and adjust payroll related COVID expenditures reported in our Period 4 portal reporting as necessary.