2025-004 – Equipment and Real Property Management Federal program information: Funding agency: U.S. Department of Health and Human Services Title: Rural Health Outreach and Rural Network Development Program Assistance listing numbers: 93.912 Award year: 7/1/2024 – 6/30/2025 Criteria: According to 2 CFR 200.313, property records must be maintained that include a description of the property, a serial number or other identification number, the source of funding for the property (including the federal award identification number), who holds title, the acquisition date, cost of the property, percentage of federal participation in the project costs for the federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sales price of the property. Additionally, a physical inventory of the property must be taken and the results reconciled with the property records at least once every two years. Condition: During our audit, we noted that a complete listing of property, furniture, and equipment is not maintained in the accounting system. Additionally, SFRC did not perform a physical inventory of its property and equipment during fiscal year 2025 and there is no evidence supporting when the last physical inventory of property and equipment occurred as of June 30, 2025. Context: N/A Questioned Costs: None Cause: When the fixed asset module of the accounting system was implemented, fully depreciated items were not imported into the fixed asset module. Additionally, SFRC’s P&P Manual does not contain formal policies related to property, furniture, and equipment. Effect: The asset listing in the fixed asset module of the accounting system is not complete. Without an entity-wide physical inventory, there is an increased risk that individual items of property and equipment no longer exist, are damaged or impaired, or are being used by another program/location. Auditor’s Recommendation: SFRC should create policies and procedures over property, furniture, and equipment and add this information to its Accounting & Financial Management Policies and Procedures Manual. SFRC should also obtain the detailed asset listing from the audit and import this information into its fixed asset module so that the listing is complete going forward. Lastly, SFRC should perform a physical inventory of its property, furniture, and equipment and reconcile the result of this inventory to its fixed asset module. Management’s Response: Management reviewed existing accounting staffing structure, revised position descriptions, and have advertised to fill two of three open positions; Accounts Payable Specialist and Controller. Management feels with these revised position descriptions, more focus on accounting operations, procedures, and property and equipment management.
2025-005 – Procurement Federal program information: Funding agency: U.S. Department of Health and Human Services Title: All major programs Assistance listing numbers: 93.696, 93.912 Award year: 7/1/2024 – 6/30/2025 Criteria: According to 2 CFR Part 200.318 through 200.327, non-federal entities must use their own documented procurement procedures, which reflect applicable state and local laws and regulations, provided that the procurements conform to applicable federal statutes and the procurement requirements identified in 2 CFR Part 200. SFRC’s P&P Manual requires two written quotes for purchases between $10,000 and $250,000. Purchases over $250,000 require advertisement in the local newspaper, bid opening/evaluation, and the Board of Directors shall approve purchases in excess of $250,000 prior to contract signing. Condition: For one vendor paid in excess of $10,000 during fiscal year 2025, no written quotes were obtained for the services. There was also no purchase order approved with this vendor and there is no evidence that the Board of Directors approved the purchase. The contract signed with this vendor exceeded $250,000, and there is also no evidence that the Board of Directors approved this contract. One additional vendor was also paid in excess of $10,000 during fiscal year 2025, and there were no written quotes were obtained for the goods purchased. Context: One of ten vendors tested under ALN 93.696 and two of ten vendors tested under ALN 93.912. Questioned Costs: None Cause: SFRC has not implemented the requirements of its P&P Manual over procurement. Effect: SFRC is not in compliance with its P&P Manual and SFRC could be paying more for goods and services than if bids/quotes had been obtained. Auditor’s Recommendation: SFRC should enforce internal control procedures to ensure that all purchases are made in a manner consistent with its P&P Manual. Management’s Response: Management reviewed existing accounting staffing structure, revised position descriptions, and have advertised to fill two of three open positions; Accounts Payable Specialist and Controller. Management feels with these revised position descriptions, more focus on accounting operations, procedures, and property and equipment management.
2025-006 – Allowable Costs/Cost Principles Federal program information: Funding agency: U.S. Department of Health and Human Services Title: Rural Health Outreach and Rural Network Development Program Assistance listing numbers: 93.912 Award year: 7/1/2024 – 6/30/2025 Criteria: According to 2 CFR Part 200.403, to be allowable under federal awards, costs must be adequately documented, be necessary and reasonable for the performance of the federal award, and be allocable thereto under the principles in 2 CFR Part 200, Subpart E. Additionally, according to 2 CFR Part 200.430, charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed, be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated, and comply with established accounting policies and practices of the entity. Condition: For the months of May and June 2025, SFRC allocated 100% of the payroll costs of two employees to two separate grants of this program. This resulted in the program being charged twice for the same payroll costs in these months. This error also increased the direct cost base of the program, which also caused indirect costs to be over-charged to the program. Context: Two of ten employees tested in this program. Questioned Costs: Payroll costs of $12,409 and indirect costs of $3,944. Cause: SFRC allocates payroll costs to its federal programs using journal entries. These journal entries are not being independently reviewed and approved prior to posting. Effect: The program was over-charged for payroll costs and indirect costs in fiscal year 2025. Auditor’s Recommendation: SFRC should implement a review and approval process for the journal entries posted to allocate payroll costs to its federal programs. Management’s Response: This was a one-time error when the checks and balances process did not take place because of the timing of notification of an extended grant. The May and June 2025 period was an overlap due to this extension, and normal processes were not followed. Management developed processes accepted by government funders, conducted training to a small group, and began implementation. Accounting staffing was not sufficient to fully train and implement. Contractors have been tasked with training and implementation during fiscal year 2026. Revised accounting staff structure will provide better on-going implementation and monitoring compliance.
2025-007 – Late Audit Report Federal program information: Funding agency: U.S. Department of Health and Human Services Title: Certified Community Behavioral Health Clinics; Rural Health Outreach and Rural Network Development Program Assistance listing numbers: 93.696; 93.912 Award year: 7/1/2024 – 6/30/2025 Criteria: According to 2 CFR Part 200.512, the annual single audit must be completed and the data collection form and reporting package must be submitted within the earlier of 30 calendar days after receipt of the auditor's report or nine months after the end of the audit period (March 31, 2026). Condition: SFRC’s fiscal year 2025 single audit reporting package was not submitted by the due date of March 31, 2026. Context: N/A Questioned Costs: None Cause: There was significant turnover in the accounting department at SFRC during fiscal year 2025. Additionally, the data collection form and reporting package were ready to be submitted by the deadline, but SFRC was unable to submit the information by the deadline. Effect: The data collection form and reporting package was not submitted by the reporting deadline. Auditor’s Recommendation: SFRC should implement the provisions from its Accounting & Financial Management Policies and Procedures Manual so that monthly and annual account reconciliations are performed timely to ensure that the data collection form and reporting package are submitted by the due date. Management’s Response: Management reviewed existing accounting staffing structure, revised position descriptions, and have advertised to fill two of three open positions. Management feels with these revised position descriptions, more focus on accounting operations and procedures.