Material Weakness Finding No. 2025-002: Subrecipient Monitoring U.S. Department of Health and Human Services Substance Abuse and Mental Health Services Federal Assistance Listing Number 93.243. U.S. Department of Health and Human Services Health Care for Native Hawaiians Federal Assistance Listing Number 93.932. Criteria Pursuant to Title 2, Subtitle A Chapter II, Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (the Uniform Guidance), “a non-Federal entity may concurrently receive Federal awards as a recipient, subrecipient, and a contractor, depending on the substance of its agreements with the Federal awarding agencies and pass-through entities. Therefore, a pass-through entity must make case-by-case determinations whether each agreement it makes for the disbursement of Federal program funds casts the party receiving the funds in the role of a subrecipient or a contractor.”Condition We noted that the Organization did not make case-by-case determinations of each agreement with parties to which the Organization passed through Federal program funds to determine whether they were deemed to be either subrecipients or contractors. Cause Management had not updated its policies and procedures to incorporate the relevant Uniform Guidance subrecipient monitoring and management policies. Effect The lack of subrecipient monitoring and management policies of the Uniform Guidance could result in noncompliance by the Organization with the stipulated requirements for pass-through entities, as well as noncompliance of subrecipient requirements by the entities receiving the pass-through funds from the Organization. Identification of Repeat Finding This finding was reported as a federal award finding in the immediate previous audit as Finding No. 2024-002. Recommendation We again recommend that the Organization incorporate the subrecipient monitoring and management provisions of 2 CFR §200.331 and 2 CFR §200.332 of the Uniform Guidance to their policies and procedures manual to ensure compliance with Federal standards.Views of Responsible Officials and Planned Corrective Action The Organization acknowledges 2 CFR§ 200.331 and 2 CFR §200.332 of the Uniform Guidance, and its subrecipient monitoring and management provisions emphasizing accountability and compliance in managing federal funds and subrecipients. The Organization concurs with the prior year (2024-002) and current year renumbered recommendation (2025-002) and highlights its ongoing progressive and corrective implementation of policy and process actions.For context, the Organization’s progressive and corrective actions as of the fiscal year ended (FYE) June 30, 2024 report included the following: A. Subrecipient Monitoring and Management. Implemented internal process changes, effective November 1, 2024, specifically, prospectively, and consistently the: 1. Use of a checklist, to comprehensively assess risk of determining subrecipient or contractor classification, before entering into any subrecipient agreement; 2. Provision of identification details such as CFDA number, amount of federal funds obligated, and the award period for determined subrecipient awards; 3. Submission of programmatic and financial reports as specified in the subrecipient agreement; 4. Review of a single audit in accordance with 2 CFR Part 200, Subpart F for subrecipients that expend $750,000 or more in federal funds during a fiscal year, if applicable; and 5. Review of their audit report(s) and addressing any finding(s) related to their federal award(s), including the related appropriate corrective actions, when applicable. B. Retroactive Subrecipient Portfolio Risk Assessment and Correction(s). Performed a risk assessment of the existing subrecipient portfolio to identify risks, for the audit periods July 1, 2022 – June 30, 2023, and July 1, 2023 – June 30, 2024. The objective of this risk assessment was to identify, evaluate, and prioritize risks that could adversely impact the Organization’s ability to achieve its strategic, operational, compliance and quality assurance goals. The completion of the Organization’s portfolio risk assessment resulted in correction of identified non-compliant subrecipient agreement(s). C. Subrecipient Policies and Procedures. Updated, by December 31, 2024, the implemented financial policies and procedures aligned to the subrecipient monitoring and management provision of 2 CFR §200.331 and 2 CFR §200.332 of the Uniform Guidance, including checklists, flowcharts, samples, data sheets, data sharing agreements, etc. For the year ended June 30, 2025, to the period of the audit report date, the Organization continued the prospective implementation of the above policies and processes, including the following reflective contract review work: A. Reviewed all contracts executed between July 1, 2024 to June 30, 2025. B. Discussed with respective program director(s), the implementation of initiation, consideration, decision, documentation and monitoring phased activities. C. Worked with respective program director(s) to document in memorandum(s) to file (MTF), the basis for decision and documentation on a contract-by-contract basis. D. Initiated work with respective program contract monitors to implement and document consistent Organization wide contract monitoring processes and activities (e.g., contract, term, billing, deliverables, eligible expenditures, data input, frequency).Although as of June 30, 2025 the implementation of the resolution was not completed, the implementation continues and is expected to be fully implemented by the next audit report date.
Material Weakness Finding No. 2025-003: Procurement Policies U.S. Department of Health and Human Services Substance Abuse and Mental Health Services Federal Assistance Listing Number 93.243. U.S. Department of Health and Human Services Health Care for Native Hawaiians Federal Assistance Listing Number 93.932. Criteria The Uniform Guidance 2 CFR §200.320 sets forth the methods of procurement to be followed in the acquisition of property or services required under a Federal award or subaward, which includes formal purchase methods such as proposal or bids when the value of the property or services under a Federal financial assistance award exceeds a certain threshold, as defined. Furthermore, 2 CFR §200.320(c) provides specific circumstances in which noncompetitive procurement can be used. Condition During our audit, we noted that the Organization made subawards to entities which were subject to a formal purchase method, for which competitive processes for selection were not performed, nor was documentation of the specific criteria of 2 CFR §200.320(c) met to support noncompetitive procurements maintained. Cause Management had not updated its policies and procedures to incorporate certain pertinent sections of the procurement standards of the Uniform Guidance.Effect The lack of procurement standards in accordance with the Uniform Guidance may result in allowable cost issues. Identification of a Repeat Finding This finding was reported as a federal award finding in the immediately previous audit as Finding No. 2024-003. Recommendation We again recommend that the Organization incorporate the procurement standards of the Uniform Guidance to its policies and procedures manual to ensure compliance with Federal standards, including 2 CFR §200.318(h) which stipulates that sufficient detail of the history of the procurement must be maintained, including the selection of the contractor. Views of Responsible Officials and Corrective Action The Organization acknowledges incorporation of the procurement standards of the Uniform Guidance to its policies and procedures to ensure compliance with Federal standards, including 2 CFR §200.318(h). The Organization concurs with the prior year (2024-003) and current year renumbered recommendation (2025-003), and highlights its ongoing progressive and corrective implementation of policy and process actions. For context, the Organization’s progressive and corrective actions as of the fiscal year ended (FYE) June 30, 2024 report included the following:A. Financial Policies – May 2025. Completed financial policies related to: implementation of significant accounting policies, internal control environment, cash and banking, cash disbursements and check issuance, payroll processes, procure to pay and revenue recognition policies, processes and procedures. In addition, when applicable, documenting procurement circumstances, processes, decisions and CEO approval was implemented via memo(s) to the procurement file (MTPF). B. Procurement Related Processes – May 2025. Initiated use of MTPF, and process implementation of Request(s) for Professional Services Qualifications, Request(s) for Professional Services, Request(s) for Proposal. C. HRSA Policies – July 2025. Developed HRSA related policies re: implementation of HRSA policies; executive performance evaluation, non-executive performance evaluation, executive compensation, non-executive compensation, timesheets, suspension & debarment procedure, financial management system, legislative mandates, legislative mandates process & procedure and cash management for federal draws and return of funds.D. Board Policy Provision & Awareness – August 2025. Informed the Board about the progress of the Organization’s policy framework, including the above policies. For the year ended June 30, 2025, to the period of the audit report date, the Organization continued the prospective implementation of the above policies and processes, including the following reflective contract review work by the Organization: A. Reviewed all contracts executed between July 1, 2024 to June 30, 2025. B. Discussed with respective program director(s), the application of initiation, consideration, decision, documentation and monitoring phased activities. C. Worked with respective program director(s) to document in memorandum(s) to file (MTF), the basis for decision and documentation on a contract-by-contract basis. D. Initiated work with respective program contract monitors to implement and document consistent Organization wide contract monitoring processes and activities (e.g., contract, term, billing, deliverables, eligible expenditures, data input, frequency). E. Updated procurement processes for emergency disaster recovery and support of community needs, including MTF documentation. Although as of June 30, 2025 the implementation of the resolution was not completed, the implementation continues and is expected to be fully implemented by the next audit report date.
Significant Deficiency Finding No. 2025-004: Reporting U.S. Department of Health and Human Services Substance Abuse and Mental Health Services Federal Assistance Listing Number 93.243. U.S. Department of Health and Human Services Health Care for Native Hawaiians Federal Assistance Listing Number 93.932.Criteria A non-Federal entity that expends $750,000 or more in Federal awards during the year must have a single audit conducted in accordance with 2 CFR §200.514. Pursuant to 2 CFR §200.512, the audit must be completed and Form SF-SAC: Data Collection Form and reporting package must be submitted within the earlier of 30 calendar days after receipt of the auditors’ report(s), or nine months after year end of the audit period. Condition Due to the unexpected resignation of its independent auditor, we noted that the Organization has not submitted the single audit reports required by the Uniform Guidance, including the Data Collection Form to the Federal Audit Clearinghouse for the year ended June 30, 2025, within the stipulated nine months after the end of the audit period. Cause The Organization has not adhered to established Uniform Guidance terms and conditions regarding the submission dates of the single audit reports and Data Collection Form for the year ended June 30, 2025. Effect The Organization is not in compliance with the Uniform Guidance terms and conditions regarding the submission dates of the single audit report and Data Collection Form for the year ended June 30, 2025. Identification of a Repeat Finding This finding was reported as a federal award finding in the immediately previous audit as Finding No. 2024-004.Recommendation We again recommend that the Organization incorporate internal controls to ensure compliance with the Uniform Guidance with respect to the submission deadline of single audit reports and the Data Collection Form. Views of Responsible Officials and Planned Corrective Action The Organization concurred with the prior year (2024-004) and current year renumbered recommendation (2025-004), acknowledging that the unexpected resignation of the former independent auditor (January 2023), and the domino effect of a delay in securing a new independent auditor (April 2023) and completion of single audits continued to challenge the Organization through the fiscal year ended June 30, 2025. The Organization notes the following: A. Status and Progress of Single Audits 1. Single Audit as of fiscal year ended (FYE) June 30, 2022, filed in the Federal Audit Clearinghouse (FAC) on February 20, 2025. 2. Single Audit as of FYE June 30, 2023, filed in the FAC on March 9, 2026. 3. Single Audit as of FYE June 30, 2024, filed in the FAC on June 20, 2026. 4. Single Audit as of FYE June 30, 2025, projected for filing in the FAC no later than September 30, 2026. Note: Once the FYE June 30, 2025, single audit is filed, the Organization will no longer be delinquent in filing its single audit in the FAC. 5. Single Audit as of FYE June 30, 2026, engagement letter signed with scheduled field work to commence after the June 30, 2025, FAC filing (e.g., October 2026); with a projected on-time FAC filing no later than March 31, 2027, in compliance with 2 CFR §200.514 – Standards and scope of audit; and 2 CFR §200.512 – Report submission via Form SF-SAC: Data Collection Form, nine months after year end of the audit period. B. Policy, Process and Communications re: Single Audits, the Organization implemented the following policy, process and communications practices: 1. Financial Policies: Internal Control Environment Policy, Implementation of Significant Accounting Policies. 2. Process: Review and Approve Audit Report, including Financial Statements. 3. Communication of the status of the single audit(s) via Memo to the Board occurred in February, March, May, June and August 2026; and as a continuing practice will be completed for each Board meeting.
Material Weakness Finding No. 2025-005: Document Retention U.S. Department of Health and Human Services Substance Abuse and Mental Health Services Federal Assistance Listing Number 93.243. U.S. Department of Health and Human Services Health Care for Native Hawaiians Federal Assistance Listing Number 93.932. Criteria Pursuant to Title 2, Subtitle A Chapter II, Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (the Uniform Guidance), §200.334, “Financial records, supporting documents, statistical records, and all other non-Federal records must be retained for a period of three years from the date of submission of the final expenditure report…” Condition We noted that the Organization did not consistently retain documentation substantiating contractor performance of services was in accordance with the terms and conditions of the contract. However we noted that the Organization made efforts subsequent to the fiscal year to obtain documentation substantiating contractor performance. Cause The Organization’s policies and procedures do not include specific requirements to ensure that pertinent supporting documents are obtained and retained to evidence contractor performance of services pursuant to Federal requirements. Effect The lack of supporting documents for contractor expenditures as stipulated by Uniform Guidance could result in noncompliance of Federal record retention policies by the Organization.Recommendation We again recommend that the Organization incorporate policies and procedures to ensure the maintenance of adequate documentation to support contractor performance of services pursuant to contract terms. Views of Responsible Officials and Planned Corrective Action The Organization understands the criteria cited re: Title 2, Subtitle A Chapter II, Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (the Uniform Guidance), §200.334, requiring “Financial records, supporting documents, statistical records, and all other non-Federal records must be retained for a period of three years from the date of submission of the final expenditure report…”, and recommendation made. The Organization further refers to the corrective action plan of Finding No. 2025-002: Subrecipient Monitoring, which describes the Organization’s implemented changes re: Subrecipient Monitoring and Management, Retroactive Subrecipient Portfolio Risk Assessment and Correction(s), and Subrecipient Policies and Procedures. For the year ended June 30, 2025, to the period of the audit report date, the Organization continued the prospective implementation of the above policies and processes, including the following reflective contract review work by the Organization: A. Contractor Performance Collection and Substantiation – November 2024 Incorporated specific review procedures to ensure the timely collection and substantiation of contractor performance deliverables (e.g., products, goods, services, activities, reports), consistent with the terms and conditions of the contract. B. Reviewed all contracts executed between July 1, 2024 to June 30, 2025. C. Discussed with respective program director(s), the implementation of initiation, consideration, decision, documentation and monitoring phased activities. D. Worked with respective program director(s) to document in memorandum(s) to file (MTF), the basis for decision and documentation on a contract-by-contract basis. E. Initiated work with respective program contract monitors to implement and document consistent Organization wide contract monitoring processes and activities (e.g., contract, term, billing, deliverables, eligible expenditures, data input, frequency). Although as of June 30, 2025 the implementation of the resolution was not completed, the implementation continues and is expected to be fully implemented by the next audit report date.
Material Weakness Finding No. 2025-006: Cash Management U.S. Department of Health and Human Services Health Care for Native Hawaiians Federal Assistance Listing Number 93.932. Criteria Pursuant to 2 CFR §200.305, the payment methods for Federal payments to recipients must minimize the time elapsing between the transfer of funds from the Federal agency to the recipient and the disbursement of funds by the recipient. Condition We noted that the Organization’s director of administrative operations has implemented a methodology designed to minimize the time that advance payment requests are expended; however there are no internal controls in place over this process. Cause The Organization’s policies and procedures do not require an internal review of the payment requests and the subsequent disbursements of the Federal funds to ensure compliance with 2 CFR §200.305. Effect The lack of internal controls could result in noncompliance with 2 CFR §200.305. Recommendation We again recommend that the Organization incorporate internal controls over cash management to ensure compliance with 2 CFR §200.305. Views of Responsible Officials and Planned Corrective Action The Organization acknowledges the importance of compliance with 2 CFR §200.305, rules for federal payments; and understood and concurred with the prior year finding (2024-006) and current year renumbered recommendation (2025-006). A. U.S. Department of Health and Human Services (HHS) Substance Abuse and Mental Health Services Federal Assistance Listing Number 93.243. The Organization received this award from the HHS, Substance Abuse and Mental Health Services Administration (SAMHSA), via the State of Hawaii, Department of Health (DOH). In other words, SAMHSA awarded federal dollars to the DOH, who then sub-awarded federal dollars to the Organization. The Organization further sub-awarded to eligible community-based organizations (CBOs), for the purpose of SAMHSA emergency response grants (SERG), as a result of the impacts of the Lahaina wildfires in August 2023. Payments from the DOH, is based on the Organization’s meeting the billing parameters as established by the DOH at the time of contracting. Actual billing by the Organization to the DOH, includes the aggregation of eligible expenditures incurred by sub-recipient CBOs, that are subject to reimbursement from the Organization via the DOH reimbursement. Sub-recipient CBO invoices are reviewed and validated by the Organization’s program staff prior to submission for the Organization’s aggregation and invoicing to DOH. 1. The Organization notes the following process in place as of the June 30, 2025 fiscal year end: Process & Review Controls – Finance Committee & Full Board. The Organization’s monthly Board process and review controls includes the review of the Organization’s: Statement of Financial Position, Statement of Revenues and Expenditures, Statement of Revenues and Expenditures – Net Income/(Loss) by Fund, Fund Details – Additional Information and Statistics, Active Subcontract Summary, Active Subcontract Listing Related to Funds. This monthly process and review controls functioned to mitigate any internal control non-compliance. 2. The Organization also notes the following processes implemented after the June 30, 2025 fiscal year end: Internal Control Environment Policy – July 2025, Updated August 2026. Established and updated the following policies: Internal Control Environment; Implementation of Significant Accounting Policies; Revenue Recognition Policy, Including Federal Draws; and Implementation of Health Resources & Services Administration (HRSA) Related Policies, including cash management processes and procedures. Effective September 2026, the Organization will implement an internal control review of the federal funds to ensure compliance with 2 CFR §200.305 for Federal Assistance Listing Number 93.243.B. U.S. Department of Health and Human Services (HHS) Health Care for Native Hawaiians Federal Assistance Listing Number 93.932. This federal award is referred to as either Public Health Services (PHS) or the Native Hawaiian Healthcare Improvement Act (Act) federal dollars. For context, the Organization’s progressive and corrective actions as of the fiscal year ended (FYE) June 30, 2024 report included the following: 1. System, Process & Review Controls In Practice. a. System Controls. Continued to operate in an environment in which system, process & review controls of the United States Department of Health and Human Services (HHS) are practiced in processing cash (draw) transactions in both the Electronic Handbook (EHB) and Payment Management System (PMS) systems, operated by HHS. Only the director of administrative operations and the CEO have system access to the EHB and PMS systems. b. Process & Review Controls – Finance Committee & Full Board. The Organization’s monthly Board process and review controls includes the review of the Organization’s: Statement of Financial Position, Statement of Revenues and Expenditures, Statement of Revenues and Expenditures – Net Income/(Loss) by Fund, Fund Details – Additional Information and Statistics, Active Subcontract Summary, Active Subcontract Listing Related to Funds, and Native Hawaiian Health Program (Fund 007V), and Native Hawaiian Health Scholarship Program (Fund 017V). This monthly process and review controls functioned to mitigate any internal control non-compliance. c. HHS Drawdown Restriction - The Organization remained on HHS imposed drawdown restriction as of June 30, 2024 and June 30, 2025. The restriction was removed by HHS in July 2026. 2. The Organization also notes the following processes implemented after the June 30, 2025 fiscal year end: a. Internal Control Environment Policy – July 2025, Updated August 2026. Implemented and updated the following policies: Internal Control Environment; Implementation of Significant Accounting Policies; Revenue Recognition Policy, Including Federal Draws; and Implementation of Health Resources & Services. Administration (HRSA) Related Policies, including cash management processes and procedures. b. Additional Process & Review Controls – EHB & PMS. Effective March 1, 2026, the Organization implemented, federal draws, process and review of internal controls implemented, via the chief of staff’s review of the director of administrative operations cash management analyses, federal grant receivable composition, reconciliation and related federal grant revenue computations, prior to any director of administrative operations and chief executive officer action in EHB and PMS, respectively.