Audit 384385

Finding Number: 2025 001 Finding Type: Immaterial noncompliance and significant deficiency in internal controls over compliance related to allowable costs Information on the Federal Program: Program Name: Health Center Program (Community Health Centers, Migrant Health Centers, Health Care for the Homeless, and Public Housing Primary Care) (ALN 93.224) Federal Awards Project Title: Health Center Program Award Period: June 1, 2024 – May 31, 2025 Award Number: H80CS00640 Agency: U.S. Department of Health and Human Services (HHS), Health Resources and Services Administration (HRSA) Criteria: Under 2 CFR §200.430(c)(2), compensation charged to federal awards must comply with the Executive Level II salary limitation established by the Office of Personnel Management (OPM). Salary costs allocated to the Health Center Program may not exceed this cap, and only the allowable portion up to the Executive Level II rate may be charged to the federal award. Condition: During testing of payroll allocated to the federal program, 1 of the 25 employees tested had salary charges which exceeded the Executive Level II compensation cap. Upon further review of the full population, a total of 3 employees were identified whose salary charges to the federal program exceeded the cap. Cause: The Organization relied on an informal, manual process to identify employees at or near the Executive Level II compensation cap. This process was not supported by documented policies, defined thresholds, or supervisory review controls. Effect: Unallowable salary amounts were initially charged to the grant. However, the Organization was able to identify other allowable expenditures sufficient to support the total amount of grant funds drawn. Questioned Costs: None Repeat Finding: No Recommendation: We recommend the Organization implement a formalized internal control process to monitor and enforce compliance with the Executive Level II compensation cap. This should include documented procedures for identifying employees subject to the cap, periodic monitoring of compensation charged to federal programs, and evidence of supervisory review to help ensure amounts in excess of the cap are excluded from allowable costs and appropriately allocated to nonfederal funding sources. Views of a Responsible Official and Corrective Action Plan: Management agrees with the finding. The Organization has implemented procedures to formally identify employees whose compensation is at or near the Executive Level II cap and to monitor compensation charged to federal programs on an ongoing basis. Management will document these procedures, establish defined review thresholds, and require supervisory review of compensation allocations to ensure amounts in excess of the applicable cap are excluded from federal charges. Any unallowable amounts identified will be adjusted in a timely manner. Management expects these controls to be fully implemented for the current fiscal year.