CARESTL HEALTH SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED DECEMBER 31, 2022 34 SECTION - FINANCIAL STATEMENTS FINDINGS (Continued) Recommendation We recommend that management implement a comprehensive remediation plan to strengthen financial reporting processes, including: • Ensuring the trial balance is complete, accurate, and finalized prior to audit • Preparing and maintaining reliable rollforward schedules that agree to the general ledger • Performing timely and accurate reconciliations of all key accounts, particularly cash • Establishing procedures to ensure all financial transactions are supported with adequate documentation • Implementing review and approval controls over financial records and reconciliations • Evaluating staffing and resources to ensure the accounting function can meet reporting requirements Strengthening these areas is critical to improving the accuracy, reliability, and auditability of the organization’s financial statements. Management Response Management respectfully disagrees with the characterization that the financial statements finding reflects a material weakness in CareSTL Health’s internal controls or financial reporting processes. The conditions described in the finding were not the result of inadequate accounting practices or lack of oversight, but rather the direct consequence of an abrupt and unexpected disruption outside the organization’s control. Specifically, CareSTL Health was suddenly and without notice shut out of the audit portal maintained by the previous auditor, which immediately terminated our access to all fieldwork, schedules, reconciliations, and supporting documentation that had been prepared by the external consultant accounting group working with that auditor. This included months of work product, trial balance support, rollforward schedules, reconciliations, and documentation that had already been compiled for audit readiness. When access was revoked, all consultant prepared materials were lost, and the organization was forced to reconstruct audit support from scratch. This loss of access—not a failure of internal controls—resulted in the incomplete or inconsistent schedules observed at the start of the audit. The organization was not given sufficient time to rebuild the documentation that had already existed and had been prepared for the prior audit team. The disruption was compounded by staffing shortages, reimbursement only funding constraints, and overlapping federal deadlines, all of which limited the organization’s ability to rapidly recreate the lost materials. CARESTL HEALTH SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED DECEMBER 31, 2022 35 SECTION - FINANCIAL STATEMENTS FINDINGS (Continued) Despite these challenges, CareSTL Health maintains internal controls, accounting processes, and reconciliation procedures consistent with GAAP and the COSO framework. The organization performs routine reconciliations, maintains supporting documentation, and follows established financial reporting practices. Had the prior auditor not terminated access to the audit portal and consultant workpapers, the financial records would have been complete, accurate, and audit ready at the commencement of fieldwork. Management agrees with the recommendations provided and has already begun implementing enhancements to strengthen financial reporting and audit readiness, including: ▪ Ensuring the trial balance is finalized prior to audit ▪ Maintaining roll forward schedules that reconcile to the general ledger ▪ Performing timely and accurate reconciliations of all key accounts ▪ Strengthening documentation retention and support for all transactions ▪ Implementing review and approval controls over financial records ▪ Evaluating staffing and resources to ensure adequate accounting capacity These improvements, combined with the corrective actions outlined in our HRSA financial management response, will ensure that future audits proceed efficiently and that all required documentation is readily available.
Finding 2022-02 – Inability to Support Allowable Activities Program Number: 93.224, 93.225, 93.493, 93.527 Type of Finding: Internal Control, Compliance and Material Weakness Condition During our audit of compliance with federal requirements, we were unable to perform sufficient testing of allowable activities due to a significant lack of supporting documentation. Management was unable to provide adequate evidence demonstrating that expenditures and program activities were conducted in accordance with the terms and conditions of the federal award. Specifically: ▪ Documentation supporting program activities was not maintained or not provided upon request ▪ Only general ledger entries and limited journal supports were made available ▪ Supporting evidence of programmatic execution (e.g., participant records, activity reports, eligibility documentation, or service delivery evidence) was largely absent ▪ As a result, we could not determine whether expenditures were incurred for authorized program purposes This lack of documentation prevented us from verifying that funds were used for allowable activities under the federal program. Criteria Under 2 CFR 200.303 (Internal Controls) and 2 CFR 200.302 (Financial Management), nonfederal entities must maintain effective internal control over federal awards and provide accurate, current, and complete disclosure of financial results, supported by records that adequately demonstrate compliance. Additionally, program-specific requirements require that expenditures be incurred only for activities that are allowable and aligned with the objectives of the federal award. Cause These deficiencies appear to result from inadequate recordkeeping practices, lack of formal documentation requirements, and insufficient oversight of program-level activities. Management did not implement procedures to ensure that programmatic and financial documentation was retained and accessible for audit purposes. Effect Due to the absence of adequate documentation: ▪ We were unable to determine whether expenditures were used for allowable program activities
Finding 2022-03 – Inability to Support Allowable Costs and Cost Principles Federal Program Information Program Number: 93.224, 93.225, 93.493, 93.527 Type of Finding: Internal Control, Compliance and Material Weakness Condition During our audit, we were unable to perform sufficient testing of allowable costs and allocability due to inadequate and inconsistent supporting documentation. Management primarily provided journal entries and limited supporting invoices, with significant gaps in documentation necessary to support cost allowability, reasonableness, and allocability under federal requirements. Specifically: ▪ Supporting invoices and contracts were missing or incomplete for a significant portion of transactions ▪ Documentation supporting the nature, purpose, and benefit of costs to the federal program was not provided ▪ There was no evidence of cost allocation methodologies for shared or indirect costs ▪ Journal entries were recorded without adequate supporting detail or justification As a result, we were unable to determine whether costs charged to the federal program were allowable, reasonable, or allocable. Criteria Under 2 CFR 200.403 (Factors Affecting Allowability of Costs), costs must be: ▪ Necessary and reasonable ▪ Allocable to the federal award ▪ Adequately documented Further, 2 CFR 200.302(b)(3) requires that financial management systems provide records that identify adequately the source and application of funds, including supporting documentation for expenditures. Cause These deficiencies appear to result from weak internal controls over financial reporting and cost documentation, lack of formal procedures for maintaining supporting documentation, and insufficient understanding of Uniform Guidance cost principles. CARESTL HEALTH SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED DECEMBER 31, 2022 40 SECTION III – FEDERAL AWARD FINDINGS AND QUESTION COSTS (Continued) Effect As a result: ▪ We were unable to verify the allowability and allocability of costs charged to the federal program ▪ There is a significant risk that unallowable or unsupported costs were charged to the award ▪ The organization is exposed to potential disallowance of costs, repayment obligations, and increased regulatory scrutiny The lack of documentation significantly impairs auditability and financial transparency Questioned Costs Likely Questioned Costs: Undeterminable due to insufficient documentation The inability to support costs charged to federal awards with adequate documentation constitutes a material weakness in internal control over compliance and results in noncompliance with Uniform Guidance cost principles. Recommendation We recommend that management: ▪ Implement procedures requiring complete supporting documentation for all costs charged to federal awards ▪ Ensure costs are reviewed for allowability, reasonableness, and allocability prior to recording ▪ Establish and document formal cost allocation methodologies ▪ Require approval and documentation of all journal entries affecting federal programs ▪ Provide training to staff on Uniform Guidance cost principles (2 CFR 200 Subpart E) ▪ Conduct periodic internal reviews to ensure compliance Management Response Management respectfully disagrees with the characterization of a material weakness related to the inability to support allowable costs and cost principles. The four cited conditions do not reflect a lack of documentation or internal controls, but rather the limited time afforded to the health center to compile and submit the requested materials. The HRSA mandated April 30, 2026 deadline, during a period of significant operational strain. As a result, the health center was not provided a reasonable opportunity to gather and produce the full set of supporting documentation. CARESTL HEALTH SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED DECEMBER 31, 2022 41 SECTION III – FEDERAL AWARD FINDINGS AND QUESTION COSTS (Continued) Specifically, we disagree with the following statements: • “Supporting invoices and contracts were missing or incomplete for a significant portion of transactions.” The health center maintains invoices, contracts, and supporting documentation; however, due to the compressed audit timeline and competing federal deadlines, staff were unable to assemble and transmit the full set of documents before the cutoff. • “Documentation supporting the nature, purpose, and benefit of costs to the federal program was not provided.” Documentation exists within our financial management system and program files. The inability to provide it during fieldwork was due to time constraints, not the absence of records. • “There was no evidence of cost allocation methodologies for shared or indirect costs.” Cost allocation methodologies are in place and were included in the financial management response submitted to HRSA. The audit team did not receive these materials because the request coincided with overlapping federal reporting requirements and limited staffing capacity. • “Journal entries were recorded without adequate supporting detail or justification.” Supporting detail for journal entries is maintained internally. The challenge was not lack of documentation but insufficient time to compile and submit the supporting files during the abbreviated fieldwork window. • While we disagree with the stated conditions, we fully agree with all recommendations and view them as aligned with the improvements already underway as part of our financial management corrective actions submitted to HRSA. Management is committed to strengthening documentation practices, enhancing internal controls, and ensuring full compliance with Uniform Guidance. • Accordingly, the health center will: o Implement procedures requiring complete supporting documentation for all costs charged to federal awards o Ensure costs are reviewed for allowability, reasonableness, and allocability prior to recording o Establish and document formal cost allocation methodologies o Require approval and documentation of all journal entries affecting federal programs o Provide staff training on Uniform Guidance cost principles (2 CFR 200 Subpart E) o Conduct periodic internal reviews to ensure compliance These actions are already in progress and will be fully integrated into the organization’s financial management and internal control framework.
Finding 2022-04 – Noncompliance with Cash Management and Prompt Payment Requirements Program Number: 93.224, 93.225, 93.493, 93.527 Type of Finding: Internal Control, Compliance and Material Weakness Condition During our audit of cash management and disbursement practices, we noted that the organization maintains accounts payable balances that remain outstanding for several months after invoice dates, indicating that vendors are not being paid in a timely manner. These delays were observed across multiple transactions and were not isolated in nature. The aging of payables suggests that payments are not processed in accordance with established timelines, and there is no evidence of a formal process to monitor or enforce timely disbursement of obligations. In addition, management was unable to provide documentation demonstrating that payments related to federally funded expenditures were made promptly after costs were incurred and recorded. These conditions raise concerns that the organization is not complying with prompt payment requirements and may not be managing federal funds in accordance with cash management standards, particularly where funds are drawn down but not disbursed timely. Criteria Under 2 CFR 200.305 (Cash Management), non-federal entities must minimize the time elapsing between the drawdown of federal funds and disbursement of those funds. Additionally, federal regulations require compliance with applicable Prompt Payment Act requirements (31 U.S.C. 3901–3907), which mandate that vendors be paid in a timely manner to avoid unnecessary delays, penalties, or inefficiencies. Effective internal control also requires that obligations be paid when due, that liabilities be monitored, and that payment processes ensure compliance with both federal and contractual requirements. Cause These deficiencies appear to result from inadequate cash management practices, lack of monitoring of accounts payable aging, insufficient oversight of disbursement processes, and possible liquidity or operational constraints. Additionally, there is no evidence of formal policies or controls to ensure compliance with prompt payment requirements. Effect These conditions create significant risks, including: ▪ Noncompliance with federal cash management requirements ▪ Potential violation of Prompt Payment Act provisions CARESTL HEALTH SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED DECEMBER 31, 2022 43 SECTION III – FEDERAL AWARD FINDINGS AND QUESTION COSTS (Continued) ▪ Increased risk that federal funds are not disbursed timely after drawdown ▪ Exposure to interest penalties or vendor disputes ▪ Inefficient use of federal resources and potential cash flow mismanagement ▪ Increased likelihood of audit findings, questioned costs, and regulatory scrutiny Questioned Costs Likely Questioned Costs: Undeterminable The failure to process payments timely and monitor accounts payable aging constitutes a material weakness in internal control over compliance and results in noncompliance with federal cash management requirements. Recommendation We recommend that management: ▪ Implement procedures to ensure timely payment of all obligations, particularly those related to federal programs ▪ Establish accounts payable aging monitoring and review processes, with escalation of overdue items ▪ Align disbursement practices with 2 CFR 200.305 to ensure funds are drawn and disbursed promptly ▪ Develop and enforce policies consistent with the Prompt Payment Act, including defined payment timelines ▪ Perform periodic reviews of cash flow and payment cycles to ensure compliance ▪ Assign oversight responsibility to ensure timely processing and documentation of payments Strengthening cash management practices will improve compliance with federal requirements and enhance overall financial control. Management Response Management acknowledges the auditor’s observations regarding delayed vendor payments and agrees that improvements in cash management practices are necessary. While we recognize that certain invoices remained outstanding longer than desired, these delays were not the result of intentional noncompliance or disregard for federal requirements. Rather, they were a direct consequence of the organization’s severe operational constraints during the audit period. CARESTL HEALTH SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED DECEMBER 31, 2022 44 SECTION III – FEDERAL AWARD FINDINGS AND QUESTION COSTS (Continued) As outlined in our financial management response to HRSA, CareSTL Health was simultaneously navigating multiple federally driven demands, including an unexpected and unannounced full operational site visit and the pressures associated with reimbursement only funding. These conditions significantly strained liquidity, staffing capacity, and administrative bandwidth. The reimbursement only structure, in particular, created unavoidable timing gaps between the incurrence of costs and the availability of cash to satisfy vendor obligations. These challenges were further compounded by staffing shortages and the inability to retain personnel dedicated to financial operations due to lack of funding. Management agrees with the recommendations provided and has already begun implementing corrective actions to strengthen cash management and ensure timely disbursement of obligations. These actions include: ▪ Establishing formal accounts payable aging review processes ▪ Implementing structured monitoring and escalation procedures for overdue items ▪ Aligning drawdown and disbursement practices with 2 CFR 200.305 ▪ Developing Prompt Payment Act–aligned policies with defined timelines ▪ Conducting periodic cash flow reviews to ensure compliance ▪ Assigning clear oversight responsibility for payment processing and documentation CareSTL Health is committed to improving the timeliness of payments and enhancing internal controls to ensure full compliance with federal cash management and prompt payment requirements moving forward.
reports or supporting documentation, nor could they demonstrate that reporting requirements were consistently tracked, reviewed, or completed in a timely manner. As a result, we were unable to verify whether required reports were prepared accurately, submitted timely, or submitted at all during the audit period. Criteria Under 2 CFR 200.328 (Financial Reporting) and 2 CFR 200.329 (Monitoring and Reporting Program Performance), non-federal entities are required to submit accurate, complete, and timely financial and performance reports as specified in the terms and conditions of the federal award. Additionally, 2 CFR 200.303 (Internal Controls) requires that organizations maintain effective internal controls to ensure compliance with federal statutes, regulations, and award requirements, including reporting obligations. Cause These deficiencies appear to result from the absence of a formal reporting process, lack of oversight and monitoring of reporting requirements, and insufficient internal controls to ensure that required reports are prepared, reviewed, and submitted in accordance with federal guidelines. Effect The failure to prepare and submit required reports results in: ▪ Noncompliance with federal award requirements ▪ Increased risk that financial and program information reported to the granting agency is incomplete or inaccurate ▪ Potential for funding delays, suspension, or termination ▪ Increased exposure to regulatory scrutiny and audit findings ▪ Impaired ability of the awarding agency to monitor program performance and financial activity Questioned Costs Likely Questioned Costs: Undeterminable CARESTL HEALTH SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED DECEMBER 31, 2022 46 SECTION III – FEDERAL AWARD FINDINGS AND QUESTION COSTS (Continued) The failure to prepare and submit required financial and performance reports constitutes a material weakness in internal control over compliance and results in noncompliance with federal reporting requirements. Recommendation We recommend that management: ▪ Establish a formal reporting calendar outlining all required financial and performance reports, including due dates ▪ Implement procedures to ensure reports are prepared accurately, reviewed, and submitted timely ▪ Maintain documentation of submitted reports, including confirmation of submission and supporting schedules ▪ Assign clear responsibility for reporting compliance and implement supervisory review controls ▪ Provide training to relevant personnel on federal reporting requirements Strengthening reporting processes will improve compliance, enhance transparency, and ensure that the organization meets its obligations under federal awards. Management Response Management respectfully disagrees with the conclusion that CareSTL Health failed to submit required financial and performance reports. All required federal grant reports, financial reports, and performance submissions were uploaded in full to the auditor portal on April 13, 2026. The documentation was downloaded directly from the Electronic Handbook in which the documents were originally submitted to HRSA. The circumstances described in the finding do not reflect a lack of internal controls or noncompliance with 2 CFR 200.328, 200.329, or 200.303. Rather, the perception of non submission appears to have resulted from timing constraints during the audit fieldwork period and the volume of overlapping federal requests occurring simultaneously. As noted in our financial management response to HRSA, the organization was navigating significant operational strain, including: ▪ An unexpected, unannounced full operational site visit that diverted key personnel ▪ Reimbursement only funding constraints that limited staffing capacity ▪ Multiple concurrent federal deadlines that compressed the audit preparation window Despite these challenges, CareSTL Health did submit all required reports, and documentation confirming submission was made available through the auditor portal. CARESTL HEALTH SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED DECEMBER 31, 2022 47 SECTION III – FEDERAL AWARD FINDINGS AND QUESTION COSTS (Continued) Management agrees with the recommendations provided and views them as aligned with improvements already underway. To further strengthen reporting processes, the organization will: ▪ Establish a formal reporting calendar with all required federal due dates ▪ Implement procedures to ensure reports are prepared, reviewed, and submitted timely ▪ Maintain documentation of all submissions, including confirmations and supporting schedules ▪ Assign clear responsibility for reporting compliance and supervisory review ▪ Provide training to relevant personnel on federal reporting requirements These enhancements will reinforce our existing controls and ensure continued compliance, transparency, and timely reporting under all federal awards.