Audit 404217

2024-003: U.S. Department of Health and Human Services Health Center Program Cluster- Health Center Program, Assistance Listing No. 93.224 Compliance Requirements: Cash Management Type of Finding - Material Noncompliance and Material Weakness in Internal Control over Compliance Condition – During our testing of grant drawdowns, we noted that the payroll expenditure support provided for individual drawdowns did not consistently agree to the amounts requested. Specifically, on a sample-by-sample basis, certain drawdowns were either overstated or understated when compared to the underlying payroll expenditures incurred for the respective period. While the aggregate payroll expenditures tested did reconcile to the total drawdown activity, the lack of alignment at the individual draw level indicates that draw requests were not consistently calculated based on contemporaneous, actual expenditures incurred at the time of each request. Criteria - In accordance with 2 CFR §200.305 (Payment), non-federal entities must minimize the time elapsing between the transfer of funds from the federal government and disbursement for program purposes. Additionally, entities are required to establish and maintain effective internal controls over compliance to ensure that drawdowns are based on actual, allowable expenditures and reflect immediate cash needs. Federal guidance further requires that amounts reported through drawdown systems agree to underlying accounting records. Cause – The Center does not have adequate internal controls in place to ensure that individual drawdown requests are supported by detailed, contemporaneous expenditure data. Specifically: there is no formal reconciliation process performed at the individual draw level between payroll expenditures and requested amounts prior to submission. Drawdowns appear to be based on cumulative or estimated balances, rather than actual expenditures incurred for the specific draw period. Review controls over the preparation and approval of draw requests are not sufficiently granular to detect discrepancies at the transaction level. Effect – Federal funds may not have been drawn in alignment with immediate cash needs at the time of each request. There is an increased risk of: temporary overdraws, which could result in excess federal cash on hand and potential interest liability. Underdraws, which could impact cash flow and program operations. Although total drawdowns reconciled in the aggregate, the lack of precision at the individual draw level indicates a systemic control deficiency that could lead to material noncompliance if not corrected. Questioned Costs – None Recommendation - We recommend that management strengthen internal controls over cash management by: Implementing a formal reconciliation process at the time of each drawdown, comparing: Actual payroll expenditures incurred for the draw period; the specific amount requested; requiring all draw requests to be supported by detailed, contemporaneous payroll reports; enhancing supervisory review procedures to ensure that each draw is individually supported and accurate, rather than relying on aggregate reconciliation; establishing documented procedures to ensure compliance with 2 CFR §200.305 requirements for timing and accuracy of federal cash draws Management Response to Findings – Management concurs with the finding.

2024-004: U.S. Department of Health and Human Services Health Center Program Cluster- Health Center Program, Assistance Listing No. 93.224 Compliance Requirements: Special Tests and Provisions Type of Finding - Material Noncompliance and Material Weakness in Internal Control over Compliance (Repeat Finding) Condition - Proper backup of sliding fee applications and supporting income level documents were not maintained or stored. Criteria - Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) requires that a non-federal entity prepare and apply a sliding fee discount schedule (SFDS) so that the amounts owed for health center services by eligible patients are adjusted (discounted) based on the patient’s ability to pay. Cause - The Center did not have internal controls to reasonably ensure compliance. Effect: Patients were potentially incorrectly given or not given proper sliding fee discounts. Context - A non statistical sample of 45 from a population of over 250 encounters was selected for testing. The proper supporting documents were not maintained for 12 encounters tested. The sample was not intended to be, and was not a statistically valid sample. Repeat Finding - Repeat of finding of 2023-005. Recommendation - We recommend the Center implement internal controls to reasonably ensure its compliance with the requirements identified in Uniform Guidance. Management Response to Findings – Management concurs with the finding.

2024-005: U.S. Department of Health and Human Services Health Center Program Cluster- Health Center Program, Assistance Listing No. 93.224 Compliance Requirements: Reporting Type of Finding - Significant Deficiency in Internal Control over Compliance Condition - Federal Financial Reports (SF-425) were submitted after the required 90 day reporting deadline, indicating that controls over the timely submission of required federal reports were not operating effectively. Criteria - Title 2 CFR §200.328 requires non-Federal entities to submit required financial reports no later than 90 calendar days after the end of the reporting period, unless otherwise specified in the terms and conditions of the federal award. Cause - Controls and procedures designed to ensure timely preparation, review, and submission of required federal financial reports were not consistently followed, resulting in delayed submission of SF-425 reports. Effect - Failure to submit SF-425 reports timely increases the risk of noncompliance with federal reporting requirements and may result in delayed monitoring, enforcement actions, or other adverse consequences by the awarding agency. Context - In our sample of the yearly report needing to be filed, the submission was submitted 41 days late. Recommendation - We recommend that the Center strengthen internal controls over federal financial reporting by implementing procedures to monitor reporting deadlines, including maintaining a formal tracking mechanism or compliance calendar for SF-425 due dates, assigning clear responsibility for report preparation and submission, and performing supervisory review to ensure SF-425 reports are submitted in accordance with federal requirements. Management Response to Findings - Management concurs with the finding.