Audit 400320

2025-001 – Internal Control over Financial, United States Department of Health and Human Services, Native Hawaiian Health Care System 93.932 Criteria: Auditees are responsible for accurate recording and reporting on financial statements. Auditees are also responsible for major program compliance to Uniform Guidance Part 200 requirements. To ensure accuracy and compliance of financials and major program compliance, management is responsible to design sufficient internal control over financials recording and reporting. Condition: As a result of the auditing procedures over the financial statements, 16 adjusting journal entries were required that resulted in a material change to the financial statements. Cause: Due to the continuing personnel turnover in operation and accounting departments, there was a lack of oversight to ensure accurate accounting procedures were performed during the fiscal year. Potential Effect: Lack of sufficient internal controls and monitoring processes increases the likelihood of misstatement and/or fraud. Questioned Costs: None. Recommendation: It is management’s responsibility to review financial statements for accuracy and ensure proper accounting is being performed. The accounting personnel and third party hired by the management to account for and prepare the financial statements should have adequate technical knowledge of Generally Accepted Accounting Standards and how to apply them to the internal procedures for preparing financial statements. Repeat Finding: Yes. See Summary Schedule of Prior Audit Findings, Finding 2024-001. Views of Responsible Officials of the Auditee: The Accounting Department has taken better control and accountability in handling accounting and financial internal control processes and month-end journal entries that have allowed more insights and understanding of financial data. The Organization concurs with the finding and recommendation. See Management Responses and Corrective Action Plans.

2025-002 - Inaccurate and Incomplete Schedule of Expenditures of Federal Awards (SEFA), United States Department of Health and Human Services, Native Hawaiian Health Care Systems 93.932 Criteria: Auditees are responsible for accurate recording and reporting on financial statements. Auditees are also responsible for major program compliance to Uniform Guidance Part 200 requirements, as well as proper reporting of SEFA report. To ensure accuracy and compliance of financials and major program compliance, management is responsible to design sufficient internal control over financials recording and reporting. Condition: During our testing of Federal Expenditure for the Uniform Guidance on internal controls over major program compliance, it was noted that client did not report accurate and complete Schedule of Expenditures of Federal Awards. Cause: As part of key personnel change and lack of documentation to support whether it is a federal expenditure and what amount should or should not be included in SEFA schedule, the SEFA was not accurately calculated. Potential Effect: Lack of supporting documentation and missing entries can lead to inaccurate SEFA preparation. Questioned Costs: None. Recommendation: We recommend the Organization obtain all Federal grant documentation to support the determination to include or to exclude federal expenditures from the SEFA. Repeat Finding: Yes. See Summary Schedule of Prior Audit Findings, Finding 2024-002. Views of Responsible Officials of the Auditee: The Accounting Department has taken better control and accountability in handling accounting and major program internal control processes and month-end journal entries that have allowed more insights and understanding of financial data. The Organization concurs with the finding and recommendation. See Management Responses and Corrective Action Plans.

2025-003 – Cash Management, United States Department of Health and Human Services, Native Hawaiian Health Care Systems 93.932 Criteria: Under federal regulation (Uniform Guidance, 2 CFR §200.305), grantees are required to minimize the time between the drawdown of federal funds and the disbursement of those funds. To ensure proper cash management, recipients may draw funds up to three (3) business days in advance of incurring expenses. The timing of drawdowns must be as close as administratively feasible to immediate cash requirements. Funds held longer than three business days are generally considered excessive. Additionally, interest earned in excess of $500 annually on advanced funds must be remitted to the HRSA Payment Management System. Condition: During testing of federal expenditures for Uniform Guidance compliance on major programs, it was noted that the Organization withdrew over $1,300,000 in February 2025 to cover estimated expenses for the remainder of the fiscal year. The funds were fully expended on allowable program costs by fiscal year-end. Cause: Due to concerns regarding potential disruptions to access the Federal Payment Management System (e.g., government shutdown or policy changes), the Organization drew down a significant amount of funds in advance to ensure sufficient operating resources for the remainder of the fiscal year. Potential Effect: Drawing funds significantly in advance of allowable expenditures may result in excess cash on hand, which could negatively impact cash management practices and increase the risk of noncompliance with federal regulations, including potential misuse of federal funds. Questioned Costs: None. Recommendation: We recommend that the Organization strengthen its cash management practices by limiting federal fund drawdowns to amounts needed within three (3) business days of allowable expenditures, in accordance with federal requirements. Repeat Finding: No. Views of Responsible Officials of the Auditee: The Accounting Department has taken better control and accountability in handling drawdowns on federal funds based on timely allowable expenses incurred. The Organization concurs with the finding and recommendation. See Management Responses and Corrective Action Plans.