Audit 402591

Department of Health and Human Services Federal Assistance Listing #93.912 Rural Healthcare Services Programs Activities Allowed or Unallowed and Allowable Costs/Cost Principles Significant Deficiency in Internal Control Over Compliance Criteria: 2 CFR 200.303(a) establishes that the auditee must establish and maintain effective internal control over the federal award that provides assurance that the entity is managing the federal award in compliance with federal statutes, regulations, and conditions of the federal award. Condition: For a portion of the year, BHD, LLC calculated their indirect cost rate based on the total grant budget and took an equal amount of that per month instead of calculating the indirect cost rate per direct expenditures for each month. When they started to calculate the indirect cost rate per direct expenditures for each month, they used the wrong cost pool per the budget and award. Cause: BHD, LLC did not have an internal control process in place to ensure the correct amounts of indirect costs were requested based on the direct costs for the same period. Effect: Without an effective internal control process in place, improper costs could be chargedto the program. Questioned Costs: None reported. Context: A nonstatistical sample of 5 out of 10 indirect expenditures were selected for testing. In addition, the indirect expenditures were tested in total for the year. Repeat Finding from Prior Years: Yes Recommendation: We recommend BHD, LLC enhance internal control procedures to ensure the indirect cost rate is applied against the monthly direct costs when requesting program reimbursements. Views of Responsible Officials: Management agrees with the finding.

Department of Health and Human Services Federal Assistance Listing #93.912 Rural Healthcare Services Programs Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Period of Performance Significant Deficiency in Internal Control Over Compliance Criteria: 2 CFR 200.303(a) establishes that the auditee must establish and maintain effective internal control over the federal award that provides assurance that the entity is managing the federal award in compliance with federal statutes, regulations, and conditions of the federal award. Condition: BHD, LLC did not retain documentation of the review and approval of all direct expenditures allocated to the program. Cause: BHD, LLC did not have an adequate internal control process in place to ensure review and approval of all expenditures were documented. Effect: The lack of adequate policies governing the recording of expenditures to the program increases the risk that employees participating in the federal award administration may not be able to detect and correct noncompliance in a timely manner. Questioned Costs: None reported. Context: A nonstatistical sample of 60 direct expenditures were selected for testing. Of these, 6 did not show evidence of proper review and approval prior to being allocated to the federal program. Repeat Finding from Prior Years: No Recommendation: We recommend BHD, LLC enhance internal control procedures to ensure all direct expenditures recorded to the program have documented review and approval. Views of Responsible Officials: Management agrees with the finding.