Audit 319296

Finding 2023-003 - Significant Deficiency in Internal Control Over Major Program - Provider Relief Fund and American Rescue Plan (ARP) Rural Distribution Program Assistance Listing No.: 93.498 Provider Relief Fund (PRF) and American Rescue Plan (ARP) Rural Distribution Federal Agency: U.S. Department of Health and Human Services Passed-Through Agency: N/A Award Number: N/A Award Year: Period 4 reporting period Compliance Requirements: Activities Allowed or Unallowed Criteria: As outlined in Pub. L. No. 116-136, 134 Stat. 563 and Pub. L. No. 116-139, 134 Stat. 622 and 623, funds are appropriated to prevent, prepare for, and respond to coronavirus, domestically or internationally, for necessary expenses to reimburse, through grants or other mechanisms, eligible health care providers for health care related expenses or lost revenues that are attributable to coronavirus. That funds appropriated under this paragraph in this Act shall be available for building or construction of temporary structures, leasing of properties, medical supplies and equipment, including personal protective equipment and testing supplies, increased workforce and trainings, emergency operation centers, retrofitting facilities and surge capacity. Uniform Guidance requires that charges to federal awards must be based on records that are supported by a system of internal controls that provide reasonable assurance about the accuracy, allowability and proper allocation of the charges. Support should be maintained for the distribution of an employee’s salary and wages among specific activities or cost objective if the employee works on multiple activities. Condition and Context: During our testing, we noted that 2 expenditure samples out of 11 tested for non-salary expenses had invoices that were for allowable expenses, but the total invoices exceeded the amount submitted for the PRF grant but there was no support for the proper allocation of the charges between grant expenditures and non-grant expenditures. There was also one employee that had her salary per the payroll register that exceeded the amount reported for salaries in the PRF reporting for each pay, but there was no documentation maintained for the distribution of the employee’s salary and wages among specific activities or cost. (30 samples were tested and 6 were noted as not supported as the allocation which all related to the one employee). This was not a statistically valid sample. Effect: Although the underlying expenses are allowable expenditures under the Grant, the documentation was not maintained to document the methodology to allocate these specific items as required by Uniform Guidance, therefore this is considered a significant deficiency in internal controls. Questioned Cost: None Cause: With turnover at the Center, management was not able to locate the documentation to support the allocations for the items listed above in Condition and Context. Esperanza Health Center, Inc. and Controlled Entity Schedule of Findings and Questioned Costs Year Ended June 30, 2023 37 Recommendation: We recommend that management review the procedures for allocating cost to grants and ensure proper documentation be maintained for allowability and proper allocation of the charges to grants. This includes that support should be maintained for the distribution of an employee’s salary and wages among specific activities or cost objective if the employee works on multiple activities. We also recommend that an independent reviewer signs and dates for evidence of the review of the cost worksheets used for reporting federal grants. View of Responsible Officials: Based on the perspectives provided by management and officials, the finance department has initiated specific corrective measures to ensure strict adherence to reporting PRF and centralization of documentation. As our organization expands, we will evaluate our documentation processes to create clear standard operating procedures (SOPs). We have employed a grants analyst who will define distinct responsibilities for grants reporting, establish a central repository, and reconcile both FTE and non-FTE expenditures and receipts, including cash receipts, drawdowns and invoice allocation. Project codes will be crucial in driving this process within our financial system, Blackbaud. Management will report on progress of these actions to the Finance Committee of the Board of Directors at its monthly meetings.

Finding 2023-003 - Significant Deficiency in Internal Control Over Major Program - Provider Relief Fund and American Rescue Plan (ARP) Rural Distribution Program Assistance Listing No.: 93.498 Provider Relief Fund (PRF) and American Rescue Plan (ARP) Rural Distribution Federal Agency: U.S. Department of Health and Human Services Passed-Through Agency: N/A Award Number: N/A Award Year: Period 4 reporting period Compliance Requirements: Activities Allowed or Unallowed Criteria: As outlined in Pub. L. No. 116-136, 134 Stat. 563 and Pub. L. No. 116-139, 134 Stat. 622 and 623, funds are appropriated to prevent, prepare for, and respond to coronavirus, domestically or internationally, for necessary expenses to reimburse, through grants or other mechanisms, eligible health care providers for health care related expenses or lost revenues that are attributable to coronavirus. That funds appropriated under this paragraph in this Act shall be available for building or construction of temporary structures, leasing of properties, medical supplies and equipment, including personal protective equipment and testing supplies, increased workforce and trainings, emergency operation centers, retrofitting facilities and surge capacity. Uniform Guidance requires that charges to federal awards must be based on records that are supported by a system of internal controls that provide reasonable assurance about the accuracy, allowability and proper allocation of the charges. Support should be maintained for the distribution of an employee’s salary and wages among specific activities or cost objective if the employee works on multiple activities. Condition and Context: During our testing, we noted that 2 expenditure samples out of 11 tested for non-salary expenses had invoices that were for allowable expenses, but the total invoices exceeded the amount submitted for the PRF grant but there was no support for the proper allocation of the charges between grant expenditures and non-grant expenditures. There was also one employee that had her salary per the payroll register that exceeded the amount reported for salaries in the PRF reporting for each pay, but there was no documentation maintained for the distribution of the employee’s salary and wages among specific activities or cost. (30 samples were tested and 6 were noted as not supported as the allocation which all related to the one employee). This was not a statistically valid sample. Effect: Although the underlying expenses are allowable expenditures under the Grant, the documentation was not maintained to document the methodology to allocate these specific items as required by Uniform Guidance, therefore this is considered a significant deficiency in internal controls. Questioned Cost: None Cause: With turnover at the Center, management was not able to locate the documentation to support the allocations for the items listed above in Condition and Context. Esperanza Health Center, Inc. and Controlled Entity Schedule of Findings and Questioned Costs Year Ended June 30, 2023 37 Recommendation: We recommend that management review the procedures for allocating cost to grants and ensure proper documentation be maintained for allowability and proper allocation of the charges to grants. This includes that support should be maintained for the distribution of an employee’s salary and wages among specific activities or cost objective if the employee works on multiple activities. We also recommend that an independent reviewer signs and dates for evidence of the review of the cost worksheets used for reporting federal grants. View of Responsible Officials: Based on the perspectives provided by management and officials, the finance department has initiated specific corrective measures to ensure strict adherence to reporting PRF and centralization of documentation. As our organization expands, we will evaluate our documentation processes to create clear standard operating procedures (SOPs). We have employed a grants analyst who will define distinct responsibilities for grants reporting, establish a central repository, and reconcile both FTE and non-FTE expenditures and receipts, including cash receipts, drawdowns and invoice allocation. Project codes will be crucial in driving this process within our financial system, Blackbaud. Management will report on progress of these actions to the Finance Committee of the Board of Directors at its monthly meetings.