Audit 407840

2025-002 Identification of the federal program: 93.241 State Rural Hospital Flexibility Program, 93.268 Immunization Cooperative Agreements, and 93.912 Rural Healthcare Services Programs Criteria: New England Rural Health Association is required to establish and implement accounting policies and procedures, including a procedure to invoice and recognize grant revenue based on actual expenditures and including a procedure to generate timely and accurate financial reports. Condition: We noted that New England Rural Health Association did not have consistent accounting policies and procedures during the year. Most notably there was a lack of financial reports for the entirety of the year. Additionally, at the beginning of the year, budgeted salaries and wages were being invoiced to grants versus actual salaries and wages. After the payroll process was updated, there were certain times the actual allocations were not correct. We also found non-payroll expenditures incorrectly charged to grants, therefore causing errors with grant invoicing and revenue recognition. The difficulties caused related to this condition have added to the multiple reasons causing the 2025 submission with the Federal Audit Clearinghouse to be late. Cause: New England Rural Health Association transitioned to using a third-party accounting service provider during 2025. New England Rural Health Association did not receive any financial reports from the service provider, therefore continued to use old methods for tracking grant expenditures and invoicing grants, which were subject to many human errors. Additionally, payroll allocations used by the service provider were not checked by New England Rural Health Association. Effect: As a result, grants were overbilled by $17,104. Questioned costs: None Context: The condition was noted in all three major programs. The entirety of 2025’s grant revenue was considered, in comparison to the entirety of 2025’s grant expenditures. The sampling was a statistically valid sample. Recommendation: We recommend that New England Rural Health Association evaluate whether its current thirdparty accounting service provider can meet its needs or whether the Association needs to consider moving the accounting function back in-house or transitioning to a new third-party accounting service provider. To aid in the evaluation, we recommend considering accounting policies and procedures that include expensing actual payroll costs to grants and generating timely financial reports. We also recommend correcting the grant revenue that was recognized in excess of actual expenditures by applying the excess amounts to current invoices or returning the amounts. Views of responsible officials: New England Rural Health Association Management have implemented controls under its new Managed Service Agreement with its third-party accounting service provider that include: timely reporting, actual cost invoicing, management review and resolution of overbilled funds.