Finding 2025-002: Reporting – Material Weakness and Scope Limitation Federal Program: Health Center Program (Assistance Listing 93.224) Criteria: Pursuant to 2 CFR 200.303, the Organization is required to establish and maintain effective internal control over federal awards to provide reasonable assurance that the award is managed in compliance with federal statutes, regulations, and the terms and conditions of the award. In addition, the Uniform Data System (UDS) submitted to the Health Resources and Services Administration (HRSA) should be supported by underlying records and documentation sufficient to demonstrate the accuracy and completeness of the information reported. Condition: During testing of the UDS Universal Report, the auditors selected key data elements for testing to determine whether the reported amounts were supported by underlying documentation. The Organization was able to provide support for Table 9E, Line 1g and Table 9E, Line 1q. However, sufficient supporting documentation, reconciliations, reports, or other evidence was not available to support the remaining key data elements selected for testing. As a result, the auditors were unable to determine whether the reported information was complete and accurate. Cause: The Organization did not maintain adequate documentation and reconciliation procedures to support all data reported within the UDS Universal Report. Effect: The lack of supporting documentation increases the risk that errors, omissions, or inaccurate information submitted to HRSA may not be detected and corrected in a timely manner. Additionally, the auditors were unable to obtain sufficient appropriate audit evidence to determine whether certain reported UDS data elements were accurate and in compliance with reporting requirements. Questioned Costs: None. Context: Of the key data elements selected for testing, only two line items, Table 9E, Line 1g and Table 9E, Line 1q, were successfully reconciled to supporting documentation. The remaining key data elements could not be verified due to insufficient supporting documentation. Repeat Finding: This is not a repeat finding. Recommendation: Management should establish and implement procedures to ensure that all information reported within the UDS Universal Report is supported by detailed documentation and reconciled to underlying source records prior to submission. Supporting documentation and reconciliations should be retained and readily available for review. Management Response: Management concurs with the finding. The Organization recognizes that documentation and reconciliation procedures supporting the Uniform Data System (UDS) submission were not sufficient to demonstrate the accuracy and completeness of all reported data elements. During 2026, management will implement formal procedures requiring each UDS reporting element to be supported by documented source data, reconciled to underlying records, and independently reviewed prior to submission. These procedures will include a pre-submission review checklist and internal timeline so that all reconciliations and supporting documentation are completed and reviewed in advance of the UDS reporting deadline. Responsibility for preparation, review, and approval of UDS reporting will be formally assigned and documented. To strengthen this review, management plans to hire additional senior management personnel, including an Accounting Manager, to support the Accounting Department and oversee reconciliation of the UDS financial tables (Tables 8A, 9D, and 9E) to the general ledger and audited financial statements. In addition, management plans to hire a Director of Risk and Compliance, who will be responsible for overseeing the Organization's compliance with HRSA Health Center Program requirements, including the UDS reporting process. The Director of Risk and Compliance will perform an independent review of the completed UDS submission prior to certification, verifying that each reported data element is supported by documented source data and reconciliations, and will periodically monitor adherence to the procedures described in this response, with results reported to the Chief Executive Officer (CEO) and the Board of Directors. Any discrepancies identified before or after submission will be documented, investigated, and corrected in a timely manner, including through the HRSA UDS review and revision process where applicable. Management will also provide additional training to all staff involved in collecting, preparing, and reviewing UDS data, covering HRSA UDS reporting requirements, data definitions, and documentation standards. In addition, management will establish document retention procedures to ensure all supporting schedules, reconciliations, and reports are maintained in a centralized location and readily available for future review. New policies requiring timely account reconciliations and the retention of supporting records will be monitored and reviewed regularly by the Chief Financial Officer (CFO) to ensure they are consistently followed.
Finding 2025-003: Cash Management – Material Noncompliance and Material Weakness in Internal Control over Compliance Federal Program: Health Center Program (Assistance Listing 93.224) and Grants to Provide Outpatient Early Intervention Services with Respect to HIV Disease (Assistance Listing 93.918) Criteria: In accordance with 2 CFR 200.305(b), payment methods must minimize the time elapsing between the transfer of federal funds and the disbursement of those funds by the recipient. Further, federal cash drawdowns must be limited to the minimum amounts needed and timed as closely as administratively feasible to the organization’s actual and immediate cash requirements. Uniform Guidance also requires recipients to maintain effective internal control over federal awards and to adequately support costs charged to federal programs. Controls over reimbursement requests should provide reasonable assurance that amounts requested are based on actual allowable, allocable, and properly documented expenditures incurred under the federal award. Condition: The CFO prepares the reimbursement amount and provides the CEO with an email summarizing the expenditures included in the draw request. The CEO then submits the reimbursement request through PMS. During testing, we noted that reimbursement amounts were not consistently supported by a reconciliation to actual payroll records, invoices, or other accounting records. Management indicated that because program expenditures routinely exceed the reimbursement amounts requested, draw amounts are sometimes based on estimated or rounded amounts rather than actual expenditures recorded in the accounting records. Additionally, the CEO's review is limited to the expenditure summary provided by the CFO and does not include review of the underlying supporting documentation. Cause: Management has not established a formal review process requiring reimbursement requests to be reconciled to supporting payroll records, invoices, and accounting records prior to submission. The CEO’s review is performed using summary information prepared by the CFO rather than independently reviewing supporting documentation. Effect: Because reimbursement requests are not consistently supported by actual expenditure documentation and are not subject to an effective independent review, federal funds were received before expenditures were incurred, resulting in federal cash being drawn in excess of the Organization's immediate cash requirements. This constitutes noncompliance with federal cash management requirements and increases the risk of improper use and monitoring of federal funds. Questioned Costs: $437,575 for the Health Center Program and $190,918 for Grants to Provide Early Intervention Services with Respect to HIV Disease. Context: During our testing of reimbursement requests, we noted that reimbursement amounts were prepared based on summarized expenditure information and were not consistently reconciled to underlying payroll records, invoices, or other accounting records prior to submission. In addition, the review performed by the CEO was limited to summary information prepared by the CFO and did not include examination of supporting documentation. These conditions affected the reimbursement request process for both federal programs and indicate a systemic deficiency in controls over the preparation, support, and review of federal draw requests. Repeat Finding: This is a repeat finding. Recommendation: Management should implement procedures requiring all reimbursement requests to be supported by actual expenditures incurred prior to submission. Reimbursement requests should be reconciled to supporting invoices, payroll records, and accounting records, and evidence of supervisory review should be retained. Federal funds should not be requested until the related expenditures have been incurred and are supported by appropriate documentation. Management Response: Management concurs with the finding. The Organization acknowledges that reimbursement requests were not consistently supported by reconciliations to actual expenditures and that existing review procedures did not provide sufficient assurance that draw requests complied with federal cash management requirements. Management is implementing revised procedures requiring all draw requests to be supported by detailed expenditure reconciliations, payroll reports, invoices, and other supporting documentation prior to submission. In addition, management has formally instituted a policy requiring all reimbursement requests to be submitted on an official Request for Reimbursement form, accompanied by a written statement describing the purpose of the reimbursement and the related expenditures, and supported by appropriate source documentation. The Organization will also establish an enhanced review process requiring independent verification of supporting documentation before reimbursement requests are submitted. Each completed Request for Reimbursement form, together with the related expenditure reconciliation and supporting documentation, must be reviewed and approved by the Chief Executive Officer (CEO) before any drawdown or reimbursement request is submitted. Evidence of the CEO’s review and approval will be retained with each request to demonstrate compliance with federal cash management requirements under the Uniform Guidance (2 CFR 200.305). Management is committed to ensuring future draw-down requests (including those already submitted during the subsequent year) are based solely on actual allowable expenditures incurred and are submitted in compliance with federal cash management requirements.
Finding 2025-004: Procurement Material Noncompliance and Material Weakness in Internal Control over Compliance Federal Program: Health Center Program (Assistance Listing 93.224) Criteria: Federal procurement standards require non-Federal entities to maintain procurement records sufficient to detail the history of the procurement, including the rationale for the method of procurement, contractor selection, and the basis for contract price. Micro-purchases may be awarded without soliciting competitive quotations only if the non-Federal entity considers the price to be reasonable. Small purchase procedures require price or rate quotations from an adequate number of qualified sources. Noncompetitive (sole-source) procurements may be used only in limited circumstances and must be supported by documentation demonstrating the applicable justification. Additionally, management is responsible for establishing and maintaining effective internal controls to provide reasonable assurance that procurement transactions comply with applicable federal requirements. Condition: Management represented that the procurement method is identified and documented for purchases charged to federal programs. However, the Organization does not have a formal review and approval process to verify that the procurement method selected is appropriate, adequately supported, and documented in accordance with federal procurement requirements. During testing of 68 procurement transactions charged to the Health Center Program, we noted the following exceptions: Thirteen procurements were identified as sole-source procurements; however, no documentation was maintained to support the use of the noncompetitive procurement method or demonstrate that one of the allowable sole-source criteria was met. Sixteen procurements were identified as micro-purchases; however, no documentation was maintained to support price reasonableness or demonstrate that the aggregate procurement transaction qualified for micro-purchase treatment. Thirty-six procurements were identified as micro-purchases; however, based on the aggregate value of purchases with the vendor, the procurements exceeded the micro-purchase threshold and should have been procured using, at a minimum, small purchase procedures requiring price or rate quotations from an adequate number of qualified sources. Cause: Management has not established a formal review and approval process to verify the accuracy of procurement method determinations or ensure procurement documentation is maintained in accordance with federal requirements. As a result, purchases are not consistently evaluated for aggregation, price reasonableness, competitive procurement requirements, or sole-source justification prior to being charged to the federal program. Effect: Because procurement methods are not subject to an effective review and approval process, there is an increased risk that purchases may not be procured using the method required under federal regulations or may lack sufficient supporting documentation. Consequently, the Organization cannot demonstrate compliance with federal procurement requirements, including requirements related to competition, price reasonableness, and sole-source procurements. Questioned Costs: Undeterminable. Although the purchases were supported by invoices and were recorded as program expenditures, management did not maintain sufficient documentation to support the procurement method utilized or compliance with applicable procurement requirements. As a result, we could not determine the amount of federal expenditures, if any, that would have been different had the procurements been conducted in accordance with federal procurement standards. Context: During our testing of 68 procurement transactions charged to the Health Center Program, 65 transactions were identified with procurement documentation deficiencies. Exceptions included unsupported sole-source procurements, micro-purchases lacking documentation of price reasonableness, and purchases classified as micro-purchases that exceeded the applicable threshold when evaluated in the aggregate and should have been subject to more stringent procurement procedures. These exceptions indicate a systemic deficiency in controls over procurement method determinations, documentation, review, and approval. Repeat Finding: This is not a repeat finding. Recommendation: We recommend management implement formal procedures requiring review and approval of procurement method determinations before purchases are charged to federal programs. Procedures should include documenting aggregate purchase evaluations, retaining evidence supporting price reasonableness for micro-purchases, obtaining and retaining required quotations for small purchases, documenting any sole-source justification, and maintaining procurement records sufficient to support compliance with federal procurement requirements. Management should also implement an independent review process to verify that procurement documentation is complete and the procurement method selected is appropriate and compliant with federal regulations. Management Response: Management concurs with the finding. The Organization recognizes that procurement procedures and related documentation requirements were not consistently followed and that adequate controls were not in place to ensure compliance with federal procurement standards. Management will conduct a comprehensive review of procurement policies and procedures and will implement formal review requirements for procurement method determinations. To support these efforts, management is hiring a Purchasing Coordinator who will be responsible for all aspects of the Organization’s procurement function and for ensuring that all purchases are conducted in accordance with the Organization’s written procurement policies and the procurement standards of the Office of Management and Budget (OMB) Uniform Guidance (2 CFR 200.317 through 200.327). Additional procedures will require documentation of price reasonableness, competitive quotations, sole-source justifications, and aggregate vendor purchase evaluations, as applicable. The Purchasing Coordinator will determine and document the appropriate procurement method for each purchase, obtain and retain required quotations, and maintain complete procurement files for all purchases charged to federal awards. Personnel involved in purchasing activities will receive additional training on Uniform Guidance procurement requirements, and management will implement monitoring procedures to verify compliance on an ongoing basis. To maintain appropriate segregation of duties, the Accounting Department will independently review procurement files before payment to verify that documentation is complete and that the selected procurement method is appropriate and compliant with federal requirements.
Finding 2025-005: Sliding Fee Discount Applications Not Updated Annually – Significant Deficiency and Instance of Noncompliance Federal Program: Health Center Program (Assistance Listing 93.224) Criteria: Health centers are required to establish and implement a board-approved sliding fee discount program. Consistent with the organization's policy, patients seeking a sliding fee discount are required to complete and update their sliding fee discount application annually to support continued eligibility for discounted services. Condition: During testing of four patient selections receiving services under the sliding fee discount program, we noted that 2 of 40 selections did not have a sliding fee discount application completed within one year of the date of service. As a result, the organization did not maintain current eligibility documentation supporting the discounts provided to these patients in accordance with its board-approved policy. Cause: Controls were not operating effectively to ensure sliding fee discount applications were renewed annually and updated documentation was obtained prior to providing discounted services. Effect: Failure to obtain updated sliding fee discount applications increases the risk that discounts may be provided to individuals without current eligibility documentation and that the sliding fee discount program may not be administered in accordance with the organization's board-approved policy. Questioned Costs: None. Context: We tested 40 patient selections receiving sliding fee discounts under the Health Center Program. Of the 40 selections tested, 2 did not have a sliding fee discount application completed within one year of the applicable date of service. These exceptions indicate that controls designed to monitor the timely renewal of sliding fee discount applications were not operating effectively. Repeat Finding: This is not a repeat finding. Recommendation: We recommend management strengthen controls over the sliding fee discount program by implementing procedures to track application expiration dates and ensure updated applications are obtained prior to providing discounted services. Management should also perform periodic monitoring of patient records to verify compliance with the annual renewal requirement established in its board-approved policy. Management Response: Management concurs with the finding. The Organization acknowledges that controls intended to ensure annual renewal of sliding fee discount applications were not consistently operating as intended. Management is strengthening monitoring procedures by implementing tracking mechanisms to identify expiring applications and requiring verification of eligibility documentation prior to continued application of discounts, consistent with the requirement under Section 330(k)(3)(G) of the Public Health Service Act (42 U.S.C. 254b(k)(3)(G)) that health centers establish systems for sliding fee eligibility determination. In addition, management will provide additional training to all billing and front-desk staff on the sliding fee discount program, including eligibility determination, income and household-size documentation requirements, application renewal procedures, and the proper application of discounts in the practice management system. Periodic supervisory reviews will be performed to ensure compliance with the Board-approved sliding fee discount policy, consistent with the internal control requirements of the Uniform Guidance (2 CFR 200.303). Management will also review the sliding fee discount schedule on a regular basis, no less than annually, and will update it in a timely manner whenever necessary, including upon publication of the annual Federal Poverty Guidelines, so that discounts continue to be adjusted on the basis of each patient’s ability to pay as required by 42 CFR 51c.303(f), with all updates presented to the Board of Directors for approval and communicated promptly to billing staff. Documentation of staff training, schedule reviews, and Board approvals will be retained to demonstrate compliance with HRSA Health Center Program requirements, including Chapter 9 (Sliding Fee Discount Program) of the HRSA Health Center Program Compliance Manual.
Finding 2025-006: Inadequate Controls Over Allowable Costs and Supporting Documentation – Significant Deficiency and Instance of Noncompliance Federal Program: Health Center Program (Assistance Listing 93.224) Criteria: Uniform Guidance requires non-Federal entities to maintain effective internal control over federal awards and maintain records sufficient to support that costs charged to a federal award are allowable, adequately documented, and properly charged to the federal program. Expenditures included in reimbursement requests must be supported by source documentation, including invoices, payroll records, contracts, or other documentation demonstrating the nature and amount of the expenditure. Condition: Management represented that expenditures included in federal reimbursement requests are supported by invoices and other source documentation and are reviewed prior to submission for reimbursement. During the testing of expenditures charged to the Health Center Program, we identified the following exceptions: • Three transactions charged to the federal program did not have supporting invoice documentation available for examination. • One expenditure included in a reimbursement request was based on an invoice totaling $8,221.92. However, a revised invoice was subsequently issued, reducing the amount due to $7,284.96. The reimbursement request was not adjusted to reflect the revised invoice amount, resulting in questioned costs of $936.96. These exceptions indicate expenditures were included in reimbursement requests without adequate supporting documentation or without ensuring the amounts requested agreed to the final supporting documentation. Cause: As noted in Finding 2025-00X, management has not established an effective review and approval process over federal reimbursement requests and the underlying supporting documentation. Reimbursement requests are prepared and reviewed using summarized expenditure information, and supporting documentation is not consistently reviewed to verify that expenditures are adequately supported and accurately reflected in reimbursement requests prior to submission. Effect: Because expenditures are not consistently supported by adequate documentation and reimbursement requests are not subject to an effective review of underlying support, there is an increased risk that unsupported, inaccurate, or unallowable costs may be charged to the federal program and included in reimbursement requests. Questioned Costs: $1,180.06. Context: During testing of expenditures charged to the Health Center Program, we identified three transactions for which supporting invoice documentation could not be provided. In addition, one reimbursement request included an expenditure amount that exceeded the amount supported by the final vendor invoice. These exceptions indicate deficiencies in controls over the retention, review, and verification of supporting documentation for costs charged to the federal program and are consistent with the control deficiencies identified in Finding 2025-00X related to the review and approval of reimbursement requests. Repeat Finding: This is not a repeat finding. Recommendation: We recommend management implement procedures to ensure all expenditures charged to federal programs are supported by adequate source documentation and that reimbursement requests are reconciled to final invoices, payroll records, and other accounting records prior to submission. Management should also implement an independent review process requiring examination of supporting documentation to verify that expenditures are allowable, adequately supported, and accurately included in reimbursement requests. Management Response: Management concurs with the finding. The Organization recognizes that documentation supporting certain expenditures charged to federal programs was not adequately maintained and that review procedures over reimbursement requests were not sufficient to ensure expenditures were fully supported and accurately reflected. Management is implementing enhanced procedures requiring all expenditures included in reimbursement requests to be supported by source documentation and reconciled to accounting records prior to submission. The Accounting Department will collect original invoices, receipts, payroll registers, and other source documents when costs are incurred, and will prepare reconciliations using final invoices rather than estimates, quotes, or purchase orders. In limited circumstances where an estimate must be used for anticipated expenses, the basis for the estimate will be documented and approved prior to submission, and the estimated amount will be reconciled to actual expenditures in a timely manner, no later than the subsequent reimbursement request, with any differences promptly adjusted and supporting documentation retained. In addition, independent review procedures will be performed to verify allowability, accuracy, and completeness before federal reimbursement requests are submitted. Each reimbursement request will then be reviewed and approved by the Chief Financial Officer (CFO) or the Chief Executive Officer (CEO) before submission, consistent with the approval process described in the response to Finding 2025-003. The Organization will organize supporting documentation by grant and reimbursement period and retain it in accordance with the record retention requirements of the Uniform Guidance (2 CFR 200.334). Additionally, the Chief Financial Officer (CFO) will perform periodic sample-based reviews of expenditures charged to federal awards to verify that documentation standards are consistently followed, and any exceptions identified will be promptly corrected, including adjustment of amounts previously requested where necessary.
Finding 2025-007: Inadequate Controls Over Payroll Allocations and Allowable Costs – Significant Deficiency and Instance of Noncompliance Federal Program: Health Center Program (Assistance Listing 93.224) Criteria: Uniform Guidance requires non-Federal entities to maintain records that accurately reflect the work performed and support the distribution of salary and wages charged to federal awards. Internal controls should provide reasonable assurance that payroll costs charged to federal programs are based on records that accurately reflect the employee's actual work performed and that compensation costs are properly allocated among funding sources. Condition: Management represented that employee compensation costs are allocated to federal programs based on time worked and that employee time records are maintained and approved by employees and supervisors. However, the Organization does not have adequate controls to ensure payroll allocations charged to federal programs agree to approved time records or that overtime compensation is allocated in accordance with the employee's actual distribution of work performed. During testing of 40 payroll selections comprising 83 payroll allocation instances, we identified the following exceptions: • Ten payroll allocation instances were noted where the hours charged to the Health Center Program did not agree to the hours reflected on the employee's approved timecard. Management indicated that, for salaried employees, timecards are maintained for internal reporting purposes only and are not used as the basis for allocating payroll costs to grant programs. As a result, payroll costs allocated to the program were manually adjusted and did not consistently agree with the employees' approved time records. • Seven payroll allocation instances were noted where overtime compensation was allocated based on the distribution of regular hours charged to the program rather than the actual hours worked during the overtime period. As a result, overtime costs were not allocated in a manner consistent with the work performed. Cause: The Organization has not implemented effective controls to ensure payroll allocations are based on approved time records and that employees and supervisors are adequately trained regarding timekeeping and program coding requirements. In addition, management has not established procedures to review payroll allocations for consistency with approved time records or to verify that overtime compensation is allocated based on actual work performed. Effect: Because payroll allocations are not consistently supported by approved time records and overtime costs are not allocated based on actual work performed, there is an increased risk that compensation costs charged to federal programs may be inaccurate, unsupported, or improperly allocated. This may result in federal programs being charged for costs that do not reflect the actual services performed for the program. Questioned Costs: $3,447.45, consisting of $3,440.89 related to payroll allocations that did not agree to approved time records and $6.56 related to improper allocation of overtime compensation. Context: During testing of 40 payroll selections and 83 payroll allocation instances, we identified 17 instances where compensation costs were not allocated in accordance with approved time records or actual work performed. The exceptions resulted from manual adjustments to program allocations that differed from employee-approved time records and from the use of allocation methodologies for overtime compensation that did not reflect actual overtime hours worked on the program. The exceptions indicate a systemic deficiency in controls over payroll allocations and compensation cost documentation. Repeat Finding: This is not a repeat finding. Recommendation: We recommend management strengthen controls over payroll allocations by requiring compensation costs charged to federal programs to be supported by employee and supervisor-approved time records that accurately reflect actual work performed. Employees and supervisors should receive training regarding program coding requirements, and management should implement a documented review process to verify that payroll allocations, including overtime compensation, are consistent with approved time records before costs are charged to federal programs. Management Response: Management concurs with the finding. The Organization acknowledges deficiencies in controls over payroll allocation processes and recognizes the importance of ensuring compensation costs charged to federal programs are supported by records reflecting actual work performed. Management is implementing revised payroll allocation procedures requiring allocations to be supported by approved time records and documented review processes. Specifically, compensation charged to each federal award will be based on timesheets or other time and effort records that reflect the actual hours worked on each program, are signed by the employee, and are approved by the employee’s direct supervisor, in accordance with the standards for documentation of personnel expenses under the Uniform Guidance (2 CFR 200.430(g)). Overtime will require advance supervisory approval and will be charged only to the program on which the overtime hours were worked. Additional training will be provided to employees and supervisors regarding timekeeping and grant coding requirements, and management will periodically review payroll allocations to verify compliance with federal requirements. Each pay period, the Accounting Department will reconcile payroll allocations recorded in the payroll system to approved time records before posting related costs to the general ledger and charging them to federal programs, and will investigate and correct any discrepancies before including the costs in a reimbursement request form. Where budgeted allocations are used for interim purposes, they will be compared to actual effort at least quarterly and adjusted as necessary so that final amounts charged to federal awards reflect actual work performed. The Chief Financial Officer (CFO) will review the results of these reconciliations, and all time records, approvals, and reconciliations will be retained in accordance with the record retention requirements of the Uniform Guidance (2 CFR 200.334).
Finding 2025-008: Activities Allowed/Unallowed and Allowable Costs – Significant Deficiency Federal Program: Health Center Program (Assistance Listing 93.224) and Grants to Provide Outpatient Early Intervention Services with Respect to HIV Disease (Assistance Listing 93.918) Criteria: Pursuant to 2 CFR 200.303, the Organization is required to establish and maintain effective internal control over federal awards to provide reasonable assurance that the award is managed in compliance with federal statutes, regulations, and the terms and conditions of the award. In addition, 2 CFR 200.403(g) requires costs charged to a federal award to be adequately documented. Effective controls should include documented review and approval of expenditures and reimbursement requests to ensure costs charged to the federal award are allowable, allocable, reasonable, and adequately supported. Condition: The Organization represented that expenditures charged to Federal Programs were reviewed and approved by the Chief Executive Officer prior to reimbursement requests being submitted. During testing, the auditors noted no evidence of review or approval by the Chief Executive Officer for expenditures selected for testing. In addition, reimbursement requests prepared by the Chief Financial Officer were not supported by documentation demonstrating that the amounts requested were reconciled to specific expenditures incurred under the grant at the time the requests were prepared. Cause: Management did not maintain documented procedures requiring retention of evidence of review and approval over expenditures charged to the grant. In addition, reimbursement requests were prepared and submitted without a formal reconciliation package demonstrating that the requested amounts were supported by documented expenditures. Effect: The lack of documented review and approval increases the risk that expenditures charged to the federal award may not be allowable, allocable, reasonable, or adequately documented and that errors or noncompliance may not be detected in a timely manner. Questioned Costs: None. Context: Of the items tested, the auditors noted the review control described by management was not operating as designed. Specifically, documentation evidencing Chief Executive Officer review and approval of expenditures was not maintained and support for reimbursement requests was not consistently retained. Repeat Finding: This is not a repeat finding. Recommendation: Management should establish and document a formal review process over expenditures charged to Federal Programs. Documentation supporting reimbursement requests should be maintained and should include a reconciliation of amounts requested to actual allowable expenditures incurred under the grant. Evidence of reviewer approval should be retained. Management Response: Management concurs with the finding. The Organization acknowledges that evidence of review and approval was not consistently retained and that documentation supporting reimbursement requests was not maintained at a level sufficient to demonstrate compliance with federal requirements. To address this deficiency, management is implementing formal documentation standards requiring each reimbursement request to be supported by a reconciliation of amounts requested to actual allowable expenditures recorded in the general ledger, together with documented evidence of reviewer approval. Each reconciliation will be prepared by grant and budget category and will compare cumulative expenditures recorded in the general ledger to cumulative amounts previously drawn through the Payment Management System, with any differences investigated and resolved before the request is submitted. The Chief Financial Officer (CFO) or the Chief Executive Officer (CEO) will then review and approve each Request for Reimbursement form and related reconciliation before submission, consistent with the approval process described in the responses to Findings 2025-003 and 2025-006. Evidence of this review will include the approver’s handwritten or electronic signature and the approval date on both the Request for Reimbursement form and the supporting reconciliation. In addition, all expenditures will require documented preapproval by the respective department director or other designated personnel before costs are incurred. Original receipts, invoices, and other supporting documentation will be submitted to the Accounting Department, which will review each expenditure to verify that it is properly authorized, adequately supported, accurately coded, and incurred for a legitimate business purpose of the Organization. Prior to the submission of any reimbursement request, expenditures charged to federal awards will be reviewed for allowability, allocability, reasonableness, and adequate documentation in accordance with the cost principles of the Uniform Guidance (2 CFR Part 200, Subpart E). All reconciliations, approvals, and supporting documentation will be retained in accordance with federal record retention requirements and made readily available for review. Supporting documentation will be maintained in a centralized location, organized by grant and reimbursement period, and retained in accordance with the Uniform Guidance record retention requirements (2 CFR 200.334). The Organization will incorporate these review and approval procedures into its written financial policies and procedures, and finance staff involved in preparing reimbursement requests will receive training on them. In addition, management will periodically perform a secondary review of a sample of completed reimbursement requests to verify that reconciliations, approvals, and supporting documentation are complete, and any exceptions identified will be promptly corrected and documented.
Finding 2025-009: Activities Allowed/Unallowed and Allowable Costs – Significant Deficiency Federal Program: Health Center Program (Assistance Listing 93.224) and Grants to Provide Outpatient Early Intervention Services with Respect to HIV Disease (Assistance Listing 93.918) Criteria: Management should establish and maintain appropriate internal controls to ensure employee compensation is reviewed and approved by authorized personnel independent of payroll processing and accounting functions. Segregation of duties helps reduce the risk of unauthorized or inappropriate compensation changes. Condition: The organization's control documentation indicates that the Chief Executive Officer (CEO) is responsible for reviewing and approving employee pay rates. During testing, we noted that employee pay rate approvals were instead being performed by the CFO, who is also responsible for various accounting and payroll-related functions. Cause: The control was not operating as designed, as responsibility for pay rate approvals had been delegated to the accountant rather than the CEO. Effect: The lack of independent approval over employee pay rates increases the risk that unauthorized or inaccurate compensation changes could occur and remain undetected. No instances of unallowable payroll costs or noncompliance were identified during our testing. Questioned Costs: None. Context: This is a systemic problem. The deficiency relates to the organization's control over the review and approval of employee compensation rates charged to federal programs. Although management's documented control assigns responsibility for pay rate approval to the CEO, the control was not operating as designed because approvals were being performed by the CFO, who also has payroll and accounting responsibilities. Repeat Finding: This is not a repeat finding. Recommendation: Management should ensure that employee pay rates and subsequent compensation changes are reviewed and approved by an appropriate member of management, such as the CEO or another designated individual independent of payroll processing and accounting functions. Documentation of such approvals should be maintained. Management Response: Management concurs with the finding. The Organization acknowledges that employee compensation approvals were not consistently performed in accordance with documented procedures. To strengthen segregation of duties and oversight, responsibility for review and approval of employee compensation changes will be reassigned to appropriate executive leadership personnel independent of payroll processing responsibilities, consistent with the requirement under the Uniform Guidance (2 CFR 200.303) that the Organization establish and maintain effective internal control over federal awards. All pay raises will be initiated upon the recommendation of the respective department directors and must be approved by the Chief Executive Officer (CEO) or Chief Financial Officer (CFO) prior to processing. All compensation changes will be made in accordance with the Organization's Board-approved written compensation policies and will be reasonable and consistent with compensation paid for similar work, as required by the compensation standards for personal services under the Uniform Guidance (2 CFR 200.430). Human Resources will be responsible for ensuring that all pay raise documentation, including department director recommendations and CEO/CFO approvals, is properly completed and filed in the employee’s personnel record. Documentation of all compensation approvals will be maintained in accordance with the record retention requirements of the Uniform Guidance (2 CFR 200.334) and periodically reviewed to ensure compliance with established policies and procedures.