Audit 359059

Department of Health and Human Services Federal Assistance Listing #93.912 Rural Health Care Services Outreach, Rural Health Network Development and Small Health Care Provider Quality Improvement Cash Management Material Weakness in Internal Control over Compliance and Material Noncompliance Criteria: 2 CFR 200.303 (a) establishes that the auditee must establish and maintain effective internal control over federal awards that provides reasonable assurance that the entity is managing the federal award in compliance with federal statutes, regulations and conditions of the federal award. Condition: During our testing, it was noted that the cash draw requests were done on a prospective basis despite the program requiring that cash draw requests must be for expenditures already incurred or that would be paid within three days. Cause: The Clinic did not have an internal control system designed to ensure that expenditures had been incurred or would be paid within three days of requesting a cash draw on this program. In addition, the Clinic did not have an adequate internal control policy to require the documentation of the cash draw requests’ review and approval. Effect: The lack of adequate policies governing review and approval over the cash draw requests increases the risk that employees participating in the federal award administration may not be able to detect and correct noncompliance in a timely manner. Questioned Costs: None reported Context: Four out of four cash draws totaling $625,000 were tested. Repeat Finding from Prior Years: No Recommendation: We recommend the Clinic enhance internal control policies to cash draw requests are reviewed and approved by someone who is familiar with the program requirements and all of that information is retained to ensure that all cash draw requests are correct, meet the requirements of the federal program, and are properly recorded. View of Responsible Officials: Management agrees with the finding.

Department of Health and Human Services Federal Assistance Listing #93.912 Rural Health Care Services Outreach, Rural Health Network Development and Small Health Care Provider Quality Improvement Activities Allowed or Unallowed and Allowable Costs/Costs Principles and Period of Performance Material Weakness in Internal Control Over Compliance Criteria: 2 CFR 200.303 (a) establishes that the auditee must establish and maintain effective internal control over federal awards that provides reasonable assurance that the entity is managing the federal award in compliance with federal statutes, regulations and conditions of the federal award. Condition: During our testing, it was noted that some expenditures were not fully supported by underlying documentation. In addition, some of the expenditures tested did not have documentation of the review and approval of the allocation of the expenditure to the federal program. The Clinic also calculated their indirect cost rate based on the total grant budget and claimed an equal amount of indirect costs per month instead of calculating the indirect cost rate per direct expenditures for each month. Cause: The Clinic did not have an internal control policy in place to ensure the review and approval of expenditures and the allocation of expenditures to the federal program was documented. In addition, the Clinic did not have an internal control process in place to ensure the correct amounts of indirect costs were requested based on the direct costs for the same period. Effect: The lack of adequate policies governing review and approval over expenditures and the allocation of expenditures to the federal program increases the risk that employees participating in the federal award administration may not be able to detect and correct noncompliance in a timely manner. Questioned Costs: None reported. Context/Sampling: A nonstatistical sample of 15 expenditures were selected for testing, which accounted for $199,720 of $613,623 direct program expenditures. Eight of the expenditures did not contain evidence of a secondary review to verify that expenditures met the terms and conditions of the program and was properly allocated to the program. A nonstatistical sample of 3 expenditures were selected for testing, which accounted for $11,153 of $22,307 indirect program expenditures. None of the expenditures were calculated based off of actual direct costs or contained evidence of a secondary review to verify that expenditures met the terms and conditions of the program. Repeat Finding from Prior Years: No Recommendation: We recommend the Clinic enhance internal control policies to ensure expenditures and the allocation of expenditures to the federal program are reviewed and approved and all of that information is retained to ensure that all payments are necessary, correct, and meet the requirements of the federal program. View of Responsible Officials: Management agrees with the finding.

Department of Health and Human Services Federal Assistance Listing #93.912 Rural Health Care Services Outreach, Rural Health Network Development and Small Health Care Provider Quality Improvement Cash Management Material Weakness in Internal Control over Compliance and Material Noncompliance Criteria: 2 CFR 200.303 (a) establishes that the auditee must establish and maintain effective internal control over federal awards that provides reasonable assurance that the entity is managing the federal award in compliance with federal statutes, regulations and conditions of the federal award. Condition: During our testing, it was noted that the cash draw requests were done on a prospective basis despite the program requiring that cash draw requests must be for expenditures already incurred or that would be paid within three days. Cause: The Clinic did not have an internal control system designed to ensure that expenditures had been incurred or would be paid within three days of requesting a cash draw on this program. In addition, the Clinic did not have an adequate internal control policy to require the documentation of the cash draw requests’ review and approval. Effect: The lack of adequate policies governing review and approval over the cash draw requests increases the risk that employees participating in the federal award administration may not be able to detect and correct noncompliance in a timely manner. Questioned Costs: None reported Context: Four out of four cash draws totaling $625,000 were tested. Repeat Finding from Prior Years: No Recommendation: We recommend the Clinic enhance internal control policies to cash draw requests are reviewed and approved by someone who is familiar with the program requirements and all of that information is retained to ensure that all cash draw requests are correct, meet the requirements of the federal program, and are properly recorded. View of Responsible Officials: Management agrees with the finding.

Department of Health and Human Services Federal Assistance Listing #93.912 Rural Health Care Services Outreach, Rural Health Network Development and Small Health Care Provider Quality Improvement Activities Allowed or Unallowed and Allowable Costs/Costs Principles and Period of Performance Material Weakness in Internal Control Over Compliance Criteria: 2 CFR 200.303 (a) establishes that the auditee must establish and maintain effective internal control over federal awards that provides reasonable assurance that the entity is managing the federal award in compliance with federal statutes, regulations and conditions of the federal award. Condition: During our testing, it was noted that some expenditures were not fully supported by underlying documentation. In addition, some of the expenditures tested did not have documentation of the review and approval of the allocation of the expenditure to the federal program. The Clinic also calculated their indirect cost rate based on the total grant budget and claimed an equal amount of indirect costs per month instead of calculating the indirect cost rate per direct expenditures for each month. Cause: The Clinic did not have an internal control policy in place to ensure the review and approval of expenditures and the allocation of expenditures to the federal program was documented. In addition, the Clinic did not have an internal control process in place to ensure the correct amounts of indirect costs were requested based on the direct costs for the same period. Effect: The lack of adequate policies governing review and approval over expenditures and the allocation of expenditures to the federal program increases the risk that employees participating in the federal award administration may not be able to detect and correct noncompliance in a timely manner. Questioned Costs: None reported. Context/Sampling: A nonstatistical sample of 15 expenditures were selected for testing, which accounted for $199,720 of $613,623 direct program expenditures. Eight of the expenditures did not contain evidence of a secondary review to verify that expenditures met the terms and conditions of the program and was properly allocated to the program. A nonstatistical sample of 3 expenditures were selected for testing, which accounted for $11,153 of $22,307 indirect program expenditures. None of the expenditures were calculated based off of actual direct costs or contained evidence of a secondary review to verify that expenditures met the terms and conditions of the program. Repeat Finding from Prior Years: No Recommendation: We recommend the Clinic enhance internal control policies to ensure expenditures and the allocation of expenditures to the federal program are reviewed and approved and all of that information is retained to ensure that all payments are necessary, correct, and meet the requirements of the federal program. View of Responsible Officials: Management agrees with the finding.