Audit 400278

Federal Award Identification: Multiple Notice of Awards were issued during fiscal year ended June 30, 2025 Federal program: Health Center Program Cluster Assistance listing number: 93.224, 93.527 Federal agency: U.S. Department of Health and Human Services Pass-through Entity: Not applicable - direct award Award year: Fiscal year ended June 30, 2025 Criteria: Under the Uniform Guidance and the Health Center Program Cluster requirements, costs charged to federal awards must be allowable, reasonable, and allocable to the program. Payroll costs charged to the Health Center Program Cluster must be based on actual compensation earned for time worked and must be supported by effective internal controls to ensure payroll amounts are accurately calculated and recorded in accordance with applicable cost principles. Condition: During our audit, we identified instances in which payroll for salaried employees hired mid pay period was processed for the full pay period rather than prorated based on the actual hire date. As a result, payroll costs charged to the Health Center Program Cluster did not fully reflect the period worked for those employees. Testing identified two instances during the fiscal year in which this condition occurred. Context: The deficiency was identified during dual purpose testing of payroll disbursements for the Health Center Program Cluster and further evaluated through expanded procedures over the population of salaried employees hired during the fiscal year ended June 30, 2025. Cause: The condition resulted from internal control procedures related to payroll proration for salaried employees hired mid pay period not being consistently applied or documented during the audit period. Contributing factors included staffing changes and competing operational priorities, which affected the consistent execution of payroll review controls. Effect: As a result of this deficiency, there is an increased risk that payroll costs charged to the Health Center Program Cluster may include amounts that are not fully allowable or allocable to the program. Expanded procedures identified two isolated instances from the population tested, which did not result in material noncompliance with program requirements; however, the deficiency increases the risk that unallowable payroll costs could be charged to the program if not detected and corrected timely. Known questioned costs: None. Repeat finding status: This is a new finding for the year ended June 30, 2025. Recommendation: Wallace should implement controls to ensure payroll for salaried employees hired mid pay period is appropriately prorated based on hire date prior to charging payroll costs to the Health Center Program Cluster. Management should also establish a documented review process to identify and correct payroll adjustments before payroll costs are charged to federal awards. Views of responsible officials: Management agrees with the finding. While payroll processing was completed accurately overall, management acknowledges that certain payroll review and documentation procedures were not consistently documented and/or performed during the audit period. Staffing changes and competing operational priorities contributed to these inconsistencies. Management has begun enhancing payroll review and documentation practices to promote consistent application of established procedures and to reduce the risk of similar issues occurring in the future. Management remains committed to maintaining effective internal controls over compliance to ensure payroll costs charged to federal awards are allowable and appropriately supported.

Federal Award Identification: Multiple Notice Of Awards were issued during fiscal year ended June 30, 2025 Federal program: Health Center Program Cluster Assistance listing number: 93.224, 93.527 Federal agency: U.S. Department of Health and Human Services Pass-through Entity: Not applicable - direct award Award year: Fiscal year ended June 30, 2025 Criteria: Under Section 330 of the Public Health Service Act, health centers must prepare, approve, and consistently apply a sliding fee discount schedule (SFDS), supported by documented income verification, to ensure patient charges are adjusted based on the patient’s ability to pay. Condition: During our audit, testing of 40 patient encounters identified 9 instances in which the sliding fee discount schedule was not applied in accordance with established requirements. These instances included incorrect application of the sliding fee scale, failure to apply the discount when required, billing and coding errors resulting in write offs, and missing income verification documentation. As a result, certain patients were undercharged or overcharged for services received. Context: The deficiency was identified during audit testing of patient encounters subject to sliding fee discount requirements for the Health Center Program Cluster. Cause: Wallace did not consistently execute, or document control procedures designed to ensure proper application of the sliding fee discount schedule. Control activities relied on manual processes without sufficient system validation or supervisory review to detect and correct errors prior to billing. Effect: As a result, patient charges were not consistently calculated in accordance with sliding fee discount requirements. While the instances identified did not result in questioned costs, the deficiency increases the risk of noncompliance with the Special Tests and Provisions requirements, if not corrected timely. Known questioned costs: None. Repeat finding status: This is a new finding for the year ended June 30, 2025. Recommendation: Wallace should strengthen controls over the sliding fee discount process by implementing system validations to support accurate SFDS application, requiring documented income verification prior to billing, and performing periodic supervisory reviews to ensure consistent compliance with Section 330 requirements. Views of responsible officials: Management agrees with the finding. Management acknowledges that certain sliding fee schedule-related controls and documentation were not consistently performed in accordance with established policies during the audit period. While the issue was procedural in nature and did not result in questioned costs, management views this finding as an opportunity to formalize and update policies and procedures and enhance monitoring to promote consistent compliance with Section 330 requirements going forward.