Findings Citing § 200.430

Federal Agency: U.S. Department of Health and Human Services Federal Program Name: Head Start Cluster Assistance Listing Number: 93.600 Pass‐through Agency: N/A Contract numbers: 10CH01029405C3 10CH01029406 10CH01204401 10HE00135801C5 10HE00135801C6 Contract periods: 01/2020‐06/2021 01/2021‐06/2021 07/2021‐12/2021 07/2021‐06/2023 07/2021‐06/2023 Type of Finding: Significant Deficiency in Internal Control Over Compliance ‐ Allowable Costs and Cost Principles Criteria: The Association’s procedures for processing expenditures, and primarily allocating expenditures to programs, should include controls that ensure expenditures are properly charged to program and allocated in accordance with the federal grant requirements. The objective of the Assistance Listing 93.600 Head Start program (including Early Head Start and Early Head Start Partnerships) is to promote school readiness of low‐income children (including American Indians, Alaska Natives and migrant and seasonal farm workers) by enhancing children’s cognitive, social and emotional development. During the fiscal year ending December 31, 2021, the Association expended $4,720,185 in federal funding. Federal regulations require award recipients to establish and follow internal controls that ensure compliance with program requirements. These controls include understanding program requirements and monitoring the effectiveness of established controls. Federal regulations require the Association to have adequate time‐and‐effort documentation to support all payroll costs charged to the Head Start awards. 2 CFR 200.430, Compensation – personal services, states, in part: “(i) Standards for Documentation of Personnel Expenses (1) Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (ii) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated…” Depending on the number and types of activities employees perform, time and effort documentation can be in the form of semi‐annual certification or monthly personnel activity reports, such as a timesheet. Condition: The Association’s controls were not effective to ensure it maintained adequate time and effort documentation, as required by federal regulations and the grantor. During review of payroll costs for the year ended December 31, 2021, the following was noted: • Payroll costs were charged according to budgeted time rather than reconciling to actual hours worked. • Two payroll disbursements were not allocated in compliance with the Associations approved cost allocation plan. This internal control deficiency is considered to be a significant deficiency. Questioned Costs: None. Context: Procedures included examining payroll charges for 40 randomly selected employees for January through December 2021. Cause: The Association changed the software used for payroll processing from QuickBooks to MIP in July 2020. They then changed their fiscal accounting software from QuickBooks to MIP in January 2021. The new software implementation was fraught with many challenges, one of which being implementing electronic processes that met the time and effort requirements outlined in the Association’s policy manual. Effect: By not keeping proper time‐and‐effort records, the Association cannot demonstrate compliance with grantor’s requirements that require support for payroll costs charged to the federal program. The Association provided alternate documentation that demonstrated the payroll costs charged to the program were allowable. Therefore, we are not questioning costs. Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendation: The Association follow its own documented controls to ensure it prepares adequate time‐ and‐effort documentation to support payroll costs charged to the federal grant. View of Responsible Officials: There is no disagreement with this audit finding.

Federal Agency: U.S. Department of Health and Human Services Federal Program Name: Head Start Cluster Assistance Listing Number: 93.600 Pass‐through Agency: N/A Contract numbers: 10CH01029405C3 10CH01029406 10CH01204401 10HE00135801C5 10HE00135801C6 Contract periods: 01/2020‐06/2021 01/2021‐06/2021 07/2021‐12/2021 07/2021‐06/2023 07/2021‐06/2023 Type of Finding: Significant Deficiency in Internal Control Over Compliance ‐ Allowable Costs and Cost Principles Criteria: The Association’s procedures for processing expenditures, and primarily allocating expenditures to programs, should include controls that ensure expenditures are properly charged to program and allocated in accordance with the federal grant requirements. The objective of the Assistance Listing 93.600 Head Start program (including Early Head Start and Early Head Start Partnerships) is to promote school readiness of low‐income children (including American Indians, Alaska Natives and migrant and seasonal farm workers) by enhancing children’s cognitive, social and emotional development. During the fiscal year ending December 31, 2021, the Association expended $4,720,185 in federal funding. Federal regulations require award recipients to establish and follow internal controls that ensure compliance with program requirements. These controls include understanding program requirements and monitoring the effectiveness of established controls. Federal regulations require the Association to have adequate time‐and‐effort documentation to support all payroll costs charged to the Head Start awards. 2 CFR 200.430, Compensation – personal services, states, in part: “(i) Standards for Documentation of Personnel Expenses (1) Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (ii) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated…” Depending on the number and types of activities employees perform, time and effort documentation can be in the form of semi‐annual certification or monthly personnel activity reports, such as a timesheet. Condition: The Association’s controls were not effective to ensure it maintained adequate time and effort documentation, as required by federal regulations and the grantor. During review of payroll costs for the year ended December 31, 2021, the following was noted: • Payroll costs were charged according to budgeted time rather than reconciling to actual hours worked. • Two payroll disbursements were not allocated in compliance with the Associations approved cost allocation plan. This internal control deficiency is considered to be a significant deficiency. Questioned Costs: None. Context: Procedures included examining payroll charges for 40 randomly selected employees for January through December 2021. Cause: The Association changed the software used for payroll processing from QuickBooks to MIP in July 2020. They then changed their fiscal accounting software from QuickBooks to MIP in January 2021. The new software implementation was fraught with many challenges, one of which being implementing electronic processes that met the time and effort requirements outlined in the Association’s policy manual. Effect: By not keeping proper time‐and‐effort records, the Association cannot demonstrate compliance with grantor’s requirements that require support for payroll costs charged to the federal program. The Association provided alternate documentation that demonstrated the payroll costs charged to the program were allowable. Therefore, we are not questioning costs. Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendation: The Association follow its own documented controls to ensure it prepares adequate time‐ and‐effort documentation to support payroll costs charged to the federal grant. View of Responsible Officials: There is no disagreement with this audit finding.

Federal Agency: U.S. Department of Health and Human Services Federal Program Name: Head Start Cluster Assistance Listing Number: 93.600 Pass‐through Agency: N/A Contract numbers: 10CH01029405C3 10CH01029406 10CH01204401 10HE00135801C5 10HE00135801C6 Contract periods: 01/2020‐06/2021 01/2021‐06/2021 07/2021‐12/2021 07/2021‐06/2023 07/2021‐06/2023 Type of Finding: Significant Deficiency in Internal Control Over Compliance ‐ Allowable Costs and Cost Principles Criteria: The Association’s procedures for processing expenditures, and primarily allocating expenditures to programs, should include controls that ensure expenditures are properly charged to program and allocated in accordance with the federal grant requirements. The objective of the Assistance Listing 93.600 Head Start program (including Early Head Start and Early Head Start Partnerships) is to promote school readiness of low‐income children (including American Indians, Alaska Natives and migrant and seasonal farm workers) by enhancing children’s cognitive, social and emotional development. During the fiscal year ending December 31, 2021, the Association expended $4,720,185 in federal funding. Federal regulations require award recipients to establish and follow internal controls that ensure compliance with program requirements. These controls include understanding program requirements and monitoring the effectiveness of established controls. Federal regulations require the Association to have adequate time‐and‐effort documentation to support all payroll costs charged to the Head Start awards. 2 CFR 200.430, Compensation – personal services, states, in part: “(i) Standards for Documentation of Personnel Expenses (1) Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (ii) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated…” Depending on the number and types of activities employees perform, time and effort documentation can be in the form of semi‐annual certification or monthly personnel activity reports, such as a timesheet. Condition: The Association’s controls were not effective to ensure it maintained adequate time and effort documentation, as required by federal regulations and the grantor. During review of payroll costs for the year ended December 31, 2021, the following was noted: • Payroll costs were charged according to budgeted time rather than reconciling to actual hours worked. • Two payroll disbursements were not allocated in compliance with the Associations approved cost allocation plan. This internal control deficiency is considered to be a significant deficiency. Questioned Costs: None. Context: Procedures included examining payroll charges for 40 randomly selected employees for January through December 2021. Cause: The Association changed the software used for payroll processing from QuickBooks to MIP in July 2020. They then changed their fiscal accounting software from QuickBooks to MIP in January 2021. The new software implementation was fraught with many challenges, one of which being implementing electronic processes that met the time and effort requirements outlined in the Association’s policy manual. Effect: By not keeping proper time‐and‐effort records, the Association cannot demonstrate compliance with grantor’s requirements that require support for payroll costs charged to the federal program. The Association provided alternate documentation that demonstrated the payroll costs charged to the program were allowable. Therefore, we are not questioning costs. Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendation: The Association follow its own documented controls to ensure it prepares adequate time‐ and‐effort documentation to support payroll costs charged to the federal grant. View of Responsible Officials: There is no disagreement with this audit finding.

Federal Agency: U.S. Department of Health and Human Services Federal Program Name: Head Start Cluster Assistance Listing Number: 93.600 Pass‐through Agency: N/A Contract numbers: 10CH01029405C3 10CH01029406 10CH01204401 10HE00135801C5 10HE00135801C6 Contract periods: 01/2020‐06/2021 01/2021‐06/2021 07/2021‐12/2021 07/2021‐06/2023 07/2021‐06/2023 Type of Finding: Significant Deficiency in Internal Control Over Compliance ‐ Allowable Costs and Cost Principles Criteria: The Association’s procedures for processing expenditures, and primarily allocating expenditures to programs, should include controls that ensure expenditures are properly charged to program and allocated in accordance with the federal grant requirements. The objective of the Assistance Listing 93.600 Head Start program (including Early Head Start and Early Head Start Partnerships) is to promote school readiness of low‐income children (including American Indians, Alaska Natives and migrant and seasonal farm workers) by enhancing children’s cognitive, social and emotional development. During the fiscal year ending December 31, 2021, the Association expended $4,720,185 in federal funding. Federal regulations require award recipients to establish and follow internal controls that ensure compliance with program requirements. These controls include understanding program requirements and monitoring the effectiveness of established controls. Federal regulations require the Association to have adequate time‐and‐effort documentation to support all payroll costs charged to the Head Start awards. 2 CFR 200.430, Compensation – personal services, states, in part: “(i) Standards for Documentation of Personnel Expenses (1) Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (ii) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated…” Depending on the number and types of activities employees perform, time and effort documentation can be in the form of semi‐annual certification or monthly personnel activity reports, such as a timesheet. Condition: The Association’s controls were not effective to ensure it maintained adequate time and effort documentation, as required by federal regulations and the grantor. During review of payroll costs for the year ended December 31, 2021, the following was noted: • Payroll costs were charged according to budgeted time rather than reconciling to actual hours worked. • Two payroll disbursements were not allocated in compliance with the Associations approved cost allocation plan. This internal control deficiency is considered to be a significant deficiency. Questioned Costs: None. Context: Procedures included examining payroll charges for 40 randomly selected employees for January through December 2021. Cause: The Association changed the software used for payroll processing from QuickBooks to MIP in July 2020. They then changed their fiscal accounting software from QuickBooks to MIP in January 2021. The new software implementation was fraught with many challenges, one of which being implementing electronic processes that met the time and effort requirements outlined in the Association’s policy manual. Effect: By not keeping proper time‐and‐effort records, the Association cannot demonstrate compliance with grantor’s requirements that require support for payroll costs charged to the federal program. The Association provided alternate documentation that demonstrated the payroll costs charged to the program were allowable. Therefore, we are not questioning costs. Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendation: The Association follow its own documented controls to ensure it prepares adequate time‐ and‐effort documentation to support payroll costs charged to the federal grant. View of Responsible Officials: There is no disagreement with this audit finding.

Questioned Cost: None Criteria: The cost principles in 2 CFR Part 200, subpart E (Cost Principles) prescribe requirements for allowable costs relative to compensation and substantiation requirements specifically, 2 CFR Part 200.430(i) states “Cost must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated.” Condition: Employee change of status forms are not consistently maintained in accordance with applicable requirements. Context: 13 Employee files were selected for verification disclosed 10 instances where forms were not available for review. Cause: Employee change of status forms or offer letters were not maintained on file or available for review. Effect: Inability to review employee change of status forms or offer letters limits the ability to verify costs allowability as required. As a result of the missing forms, it is not possible to fully ascertain compliance with allowable costs as required by 2 CFR 200.430. Recommendation: Offer letters or employee change of status forms should be maintained on file. Views of Responsible Official: Personnel files were not maintained while CRA was without a Director and human resources professional for 2020 and 2021. We have since hired a Human Resources Director, Beth Anne Falco, who is in the process of bringing all employee files current. As part of the updated files, CRA intends to issue new employee forms in the beginning of FY25, which will include updated job descriptions, salary information, payroll, and benefits.

2021‐001 – Internal Controls over Activities Allowed and Allowable Costs – Significant Deficiency in Internal Controls over Compliance Federal Program Information: Funding Agency: U.S. Department of Health and Human Services Title: Provider Relief Fund CFDA Number: 93.498 Federal Award Identification number Award Year: 2020‐21 Condition: There were 2 samples that the Entity could not provide supporting documentation and 21 samples that the employee was not paid the approved pay rate. Criteria: Per 2 CFR section 200.303(a) the entity must ‐ Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non‐Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Per 2 CFR section 200.403(g) – in order to be allowable under Federal awards, costs must be adequately documented and Per 2 CFR section 200.430(i) – Compensation – personal services – Standards for Documentation of Personnel Expenses, Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated. Questioned costs: Employee paid a rate other than the approved pay rate. Total dollar amount of $874 was divided by the total payroll population tested to get a 7% error and then multiplied by the total payroll expenditures of the program to get a questioned costs of $6,848. Effect: The Entity paid employees time at a rate not approved. In addition the Entity did not retain supporting documentation. Cause: The Entity did not retain supporting documentation for expenditures paid with federal funding and did not have approved pay rate documentation to support the pay rate employee was paid. Auditors’ Recommendation: The Auditor recommends that the Entity implement controls for documenting and retaining information on expenditures charged to federal awards to follow the requirements over 2 CFR Section 200.430(g)(i) and in addition the Entity is properly paying employees at the approved pay rate. Views of Responsible Officials and Planned Corrective Action: See Corrective Action Plan.

2021‐001 – Internal Controls over Activities Allowed and Allowable Costs – Significant Deficiency in Internal Controls over Compliance Federal Program Information: Funding Agency: U.S. Department of Health and Human Services Title: Provider Relief Fund CFDA Number: 93.498 Federal Award Identification number Award Year: 2020‐21 Condition: There were 2 samples that the Entity could not provide supporting documentation and 21 samples that the employee was not paid the approved pay rate. Criteria: Per 2 CFR section 200.303(a) the entity must ‐ Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non‐Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Per 2 CFR section 200.403(g) – in order to be allowable under Federal awards, costs must be adequately documented and Per 2 CFR section 200.430(i) – Compensation – personal services – Standards for Documentation of Personnel Expenses, Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated. Questioned costs: Employee paid a rate other than the approved pay rate. Total dollar amount of $874 was divided by the total payroll population tested to get a 7% error and then multiplied by the total payroll expenditures of the program to get a questioned costs of $6,848. Effect: The Entity paid employees time at a rate not approved. In addition the Entity did not retain supporting documentation. Cause: The Entity did not retain supporting documentation for expenditures paid with federal funding and did not have approved pay rate documentation to support the pay rate employee was paid. Auditors’ Recommendation: The Auditor recommends that the Entity implement controls for documenting and retaining information on expenditures charged to federal awards to follow the requirements over 2 CFR Section 200.430(g)(i) and in addition the Entity is properly paying employees at the approved pay rate. Views of Responsible Officials and Planned Corrective Action: See Corrective Action Plan.

Criteria: The requirements for allowable costs related to wages and salaries are contained in 2 CFR Section 200.430. This states that salaries and wages charged to federal awards must be based on records that accurately reflect the work performed. These records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated. Condition: During the year under audit, PAX did not have a time and effort reporting system that met the requirements of the federal cost principles. Citation: 2 CFR 200.430 Cause: PAX did not have an effective internal control system in place for monitoring and documenting wages and salaries charged to the federal awards. Effect: PAX did not maintain adequate documentation to support salaries charged to the federal awards throughout the year. However, they provided attestations and other support to demonstrate that the salaries and wages were accurate, allowable, and properly allocated after year-end as part of the audit process. Questioned Costs: PAX charged $1,135,897 of wages and salaries to the major program. Context: This sample was not intended to be, and was not, a statistically valid sample. Repeat Finding: Yes Recommendation: We recommend that management establish internal control process, such as a time sheet reporting system, to capture which grant each employee spends time on. View of Responsible Officials: See Corrective Action Plan attached.

Finding Number: 2021-SA3 Material Weakness – Activities Allowed or Unallowed and Allowable Costs/Cost Principles and Period of Performance Compliance and Control Finding Federal Award: No. 64.024 VA Homeless Providers Grant and Per Diem Program Federal Agency: U.S. Veterans Administration Pass-Through Entity: Not applicable Criteria or Specific Requirement: CFR section 200.403, Factors affecting allowability of costs, states costs must: conform to limitations or exclusions, be accorded consistent treatment, a cost may not be assigned to a Federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the Federal award as an indirect cost and be adequately documented. 2 CFR section 200.405, Allowable costs, states this standard is met if the cost is incurred specifically for the Federal award. 2 CFR section 200.430(i) Standards for Documentation of Personnel Expenses state charges to Federal awards for salaries must be based on records that accurately reflect the work performed and these records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated, support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award a Federal award and non-Federal award and charges for the salaries and wages of nonexempt employees… must be supported by records indicating the total number of hours worked each day. Condition: The Organization did not maintain an effective control environment to ensure costs incurred for expenditures charged to the program were in accordance with contract requirements and applicable cost principles. Records do not provide reasonable assurance that the charges are accurate, allowable, and properly allocated. Records do not appear to support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award or a Federal award and non-federal activity. Charges for non-exempt employees are not supported by records indicating the total number of hours worked each day. Expenditure details included costs that were allocated to the Federal award but may not have been incurred specifically for the Federal award. These costs included unsupported journal entries and uncategorized expenditures. Additionally, due to lack of budgets for the fiscal year, it was not determinable if costs conformed to limitations or exclusions set forth in the Federal award. Costs were not adequately documented, and it is unknown if costs were accorded consistent treatment. Cause: Factors beyond the control of current management, including poor recordkeeping, have caused financial records to be inadequate for audit purposes, as key members of the accounting department left the Organization before appropriately transferring knowledge and records related to the Federal awards. Effect or Potential Effect: Potential for unallowable activities, unallowable costs, and costs outside of the period of performance and additional questioned costs. Questioned Costs: Related questioned costs related to payroll expenditures are unknown. Questioned costs related to non-payroll expenditures are unknown. Context: During the year under audit, the issues represent a systemic problem, beyond the control of current management. Recommendation: Policies and procedures should be designed and implemented to ensure expenditures are reviewed for allowability before being charged to federal awards. Policies and procedures should be designed and implemented to ensure costs are reviewed for allowability before being charged to federal awards. Management should perform budget to actual analysis on a periodic basis to ensure that costs are not exceeding limitations. View of Responsible Officials: In response to finding number 2021-SA3, management agrees with the finding and will design, implement, and maintain policies and procedures that ensure expenditures are reviewed for allowability before being charged to Federal awards. Management will also design, implement, and maintain policies and procedures that ensure costs are reviewed for allowability before being charged to Federal awards. Further, management will perform budget-to-actual analysis on a periodic basis to ensure costs do not exceed limitations.

Finding Number: 2021-SA3 Material Weakness – Activities Allowed or Unallowed and Allowable Costs/Cost Principles and Period of Performance Compliance and Control Finding Federal Award: No. 64.024 VA Homeless Providers Grant and Per Diem Program Federal Agency: U.S. Veterans Administration Pass-Through Entity: Not applicable Criteria or Specific Requirement: CFR section 200.403, Factors affecting allowability of costs, states costs must: conform to limitations or exclusions, be accorded consistent treatment, a cost may not be assigned to a Federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the Federal award as an indirect cost and be adequately documented. 2 CFR section 200.405, Allowable costs, states this standard is met if the cost is incurred specifically for the Federal award. 2 CFR section 200.430(i) Standards for Documentation of Personnel Expenses state charges to Federal awards for salaries must be based on records that accurately reflect the work performed and these records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated, support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award a Federal award and non-Federal award and charges for the salaries and wages of nonexempt employees… must be supported by records indicating the total number of hours worked each day. Condition: The Organization did not maintain an effective control environment to ensure costs incurred for expenditures charged to the program were in accordance with contract requirements and applicable cost principles. Records do not provide reasonable assurance that the charges are accurate, allowable, and properly allocated. Records do not appear to support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award or a Federal award and non-federal activity. Charges for non-exempt employees are not supported by records indicating the total number of hours worked each day. Expenditure details included costs that were allocated to the Federal award but may not have been incurred specifically for the Federal award. These costs included unsupported journal entries and uncategorized expenditures. Additionally, due to lack of budgets for the fiscal year, it was not determinable if costs conformed to limitations or exclusions set forth in the Federal award. Costs were not adequately documented, and it is unknown if costs were accorded consistent treatment. Cause: Factors beyond the control of current management, including poor recordkeeping, have caused financial records to be inadequate for audit purposes, as key members of the accounting department left the Organization before appropriately transferring knowledge and records related to the Federal awards. Effect or Potential Effect: Potential for unallowable activities, unallowable costs, and costs outside of the period of performance and additional questioned costs. Questioned Costs: Related questioned costs related to payroll expenditures are unknown. Questioned costs related to non-payroll expenditures are unknown. Context: During the year under audit, the issues represent a systemic problem, beyond the control of current management. Recommendation: Policies and procedures should be designed and implemented to ensure expenditures are reviewed for allowability before being charged to federal awards. Policies and procedures should be designed and implemented to ensure costs are reviewed for allowability before being charged to federal awards. Management should perform budget to actual analysis on a periodic basis to ensure that costs are not exceeding limitations. View of Responsible Officials: In response to finding number 2021-SA3, management agrees with the finding and will design, implement, and maintain policies and procedures that ensure expenditures are reviewed for allowability before being charged to Federal awards. Management will also design, implement, and maintain policies and procedures that ensure costs are reviewed for allowability before being charged to Federal awards. Further, management will perform budget-to-actual analysis on a periodic basis to ensure costs do not exceed limitations.

Finding Number: 2021-SA3 Material Weakness – Activities Allowed or Unallowed and Allowable Costs/Cost Principles and Period of Performance Compliance and Control Finding Federal Award: No. 64.024 VA Homeless Providers Grant and Per Diem Program Federal Agency: U.S. Veterans Administration Pass-Through Entity: Not applicable Criteria or Specific Requirement: CFR section 200.403, Factors affecting allowability of costs, states costs must: conform to limitations or exclusions, be accorded consistent treatment, a cost may not be assigned to a Federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the Federal award as an indirect cost and be adequately documented. 2 CFR section 200.405, Allowable costs, states this standard is met if the cost is incurred specifically for the Federal award. 2 CFR section 200.430(i) Standards for Documentation of Personnel Expenses state charges to Federal awards for salaries must be based on records that accurately reflect the work performed and these records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated, support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award a Federal award and non-Federal award and charges for the salaries and wages of nonexempt employees… must be supported by records indicating the total number of hours worked each day. Condition: The Organization did not maintain an effective control environment to ensure costs incurred for expenditures charged to the program were in accordance with contract requirements and applicable cost principles. Records do not provide reasonable assurance that the charges are accurate, allowable, and properly allocated. Records do not appear to support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award or a Federal award and non-federal activity. Charges for non-exempt employees are not supported by records indicating the total number of hours worked each day. Expenditure details included costs that were allocated to the Federal award but may not have been incurred specifically for the Federal award. These costs included unsupported journal entries and uncategorized expenditures. Additionally, due to lack of budgets for the fiscal year, it was not determinable if costs conformed to limitations or exclusions set forth in the Federal award. Costs were not adequately documented, and it is unknown if costs were accorded consistent treatment. Cause: Factors beyond the control of current management, including poor recordkeeping, have caused financial records to be inadequate for audit purposes, as key members of the accounting department left the Organization before appropriately transferring knowledge and records related to the Federal awards. Effect or Potential Effect: Potential for unallowable activities, unallowable costs, and costs outside of the period of performance and additional questioned costs. Questioned Costs: Related questioned costs related to payroll expenditures are unknown. Questioned costs related to non-payroll expenditures are unknown. Context: During the year under audit, the issues represent a systemic problem, beyond the control of current management. Recommendation: Policies and procedures should be designed and implemented to ensure expenditures are reviewed for allowability before being charged to federal awards. Policies and procedures should be designed and implemented to ensure costs are reviewed for allowability before being charged to federal awards. Management should perform budget to actual analysis on a periodic basis to ensure that costs are not exceeding limitations. View of Responsible Officials: In response to finding number 2021-SA3, management agrees with the finding and will design, implement, and maintain policies and procedures that ensure expenditures are reviewed for allowability before being charged to Federal awards. Management will also design, implement, and maintain policies and procedures that ensure costs are reviewed for allowability before being charged to Federal awards. Further, management will perform budget-to-actual analysis on a periodic basis to ensure costs do not exceed limitations.

Finding Number: 2021-SA3 Material Weakness – Activities Allowed or Unallowed and Allowable Costs/Cost Principles and Period of Performance Compliance and Control Finding Federal Award: No. 64.024 VA Homeless Providers Grant and Per Diem Program Federal Agency: U.S. Veterans Administration Pass-Through Entity: Not applicable Criteria or Specific Requirement: CFR section 200.403, Factors affecting allowability of costs, states costs must: conform to limitations or exclusions, be accorded consistent treatment, a cost may not be assigned to a Federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the Federal award as an indirect cost and be adequately documented. 2 CFR section 200.405, Allowable costs, states this standard is met if the cost is incurred specifically for the Federal award. 2 CFR section 200.430(i) Standards for Documentation of Personnel Expenses state charges to Federal awards for salaries must be based on records that accurately reflect the work performed and these records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated, support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award a Federal award and non-Federal award and charges for the salaries and wages of nonexempt employees… must be supported by records indicating the total number of hours worked each day. Condition: The Organization did not maintain an effective control environment to ensure costs incurred for expenditures charged to the program were in accordance with contract requirements and applicable cost principles. Records do not provide reasonable assurance that the charges are accurate, allowable, and properly allocated. Records do not appear to support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award or a Federal award and non-federal activity. Charges for non-exempt employees are not supported by records indicating the total number of hours worked each day. Expenditure details included costs that were allocated to the Federal award but may not have been incurred specifically for the Federal award. These costs included unsupported journal entries and uncategorized expenditures. Additionally, due to lack of budgets for the fiscal year, it was not determinable if costs conformed to limitations or exclusions set forth in the Federal award. Costs were not adequately documented, and it is unknown if costs were accorded consistent treatment. Cause: Factors beyond the control of current management, including poor recordkeeping, have caused financial records to be inadequate for audit purposes, as key members of the accounting department left the Organization before appropriately transferring knowledge and records related to the Federal awards. Effect or Potential Effect: Potential for unallowable activities, unallowable costs, and costs outside of the period of performance and additional questioned costs. Questioned Costs: Related questioned costs related to payroll expenditures are unknown. Questioned costs related to non-payroll expenditures are unknown. Context: During the year under audit, the issues represent a systemic problem, beyond the control of current management. Recommendation: Policies and procedures should be designed and implemented to ensure expenditures are reviewed for allowability before being charged to federal awards. Policies and procedures should be designed and implemented to ensure costs are reviewed for allowability before being charged to federal awards. Management should perform budget to actual analysis on a periodic basis to ensure that costs are not exceeding limitations. View of Responsible Officials: In response to finding number 2021-SA3, management agrees with the finding and will design, implement, and maintain policies and procedures that ensure expenditures are reviewed for allowability before being charged to Federal awards. Management will also design, implement, and maintain policies and procedures that ensure costs are reviewed for allowability before being charged to Federal awards. Further, management will perform budget-to-actual analysis on a periodic basis to ensure costs do not exceed limitations.

Finding Number: 2021-SA3 Material Weakness – Activities Allowed or Unallowed and Allowable Costs/Cost Principles and Period of Performance Compliance and Control Finding Federal Award: No. 64.024 VA Homeless Providers Grant and Per Diem Program Federal Agency: U.S. Veterans Administration Pass-Through Entity: Not applicable Criteria or Specific Requirement: CFR section 200.403, Factors affecting allowability of costs, states costs must: conform to limitations or exclusions, be accorded consistent treatment, a cost may not be assigned to a Federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the Federal award as an indirect cost and be adequately documented. 2 CFR section 200.405, Allowable costs, states this standard is met if the cost is incurred specifically for the Federal award. 2 CFR section 200.430(i) Standards for Documentation of Personnel Expenses state charges to Federal awards for salaries must be based on records that accurately reflect the work performed and these records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated, support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award a Federal award and non-Federal award and charges for the salaries and wages of nonexempt employees… must be supported by records indicating the total number of hours worked each day. Condition: The Organization did not maintain an effective control environment to ensure costs incurred for expenditures charged to the program were in accordance with contract requirements and applicable cost principles. Records do not provide reasonable assurance that the charges are accurate, allowable, and properly allocated. Records do not appear to support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award or a Federal award and non-federal activity. Charges for non-exempt employees are not supported by records indicating the total number of hours worked each day. Expenditure details included costs that were allocated to the Federal award but may not have been incurred specifically for the Federal award. These costs included unsupported journal entries and uncategorized expenditures. Additionally, due to lack of budgets for the fiscal year, it was not determinable if costs conformed to limitations or exclusions set forth in the Federal award. Costs were not adequately documented, and it is unknown if costs were accorded consistent treatment. Cause: Factors beyond the control of current management, including poor recordkeeping, have caused financial records to be inadequate for audit purposes, as key members of the accounting department left the Organization before appropriately transferring knowledge and records related to the Federal awards. Effect or Potential Effect: Potential for unallowable activities, unallowable costs, and costs outside of the period of performance and additional questioned costs. Questioned Costs: Related questioned costs related to payroll expenditures are unknown. Questioned costs related to non-payroll expenditures are unknown. Context: During the year under audit, the issues represent a systemic problem, beyond the control of current management. Recommendation: Policies and procedures should be designed and implemented to ensure expenditures are reviewed for allowability before being charged to federal awards. Policies and procedures should be designed and implemented to ensure costs are reviewed for allowability before being charged to federal awards. Management should perform budget to actual analysis on a periodic basis to ensure that costs are not exceeding limitations. View of Responsible Officials: In response to finding number 2021-SA3, management agrees with the finding and will design, implement, and maintain policies and procedures that ensure expenditures are reviewed for allowability before being charged to Federal awards. Management will also design, implement, and maintain policies and procedures that ensure costs are reviewed for allowability before being charged to Federal awards. Further, management will perform budget-to-actual analysis on a periodic basis to ensure costs do not exceed limitations.

Finding Number: 2021-SA3 Material Weakness – Activities Allowed or Unallowed and Allowable Costs/Cost Principles and Period of Performance Compliance and Control Finding Federal Award: No. 64.024 VA Homeless Providers Grant and Per Diem Program Federal Agency: U.S. Veterans Administration Pass-Through Entity: Not applicable Criteria or Specific Requirement: CFR section 200.403, Factors affecting allowability of costs, states costs must: conform to limitations or exclusions, be accorded consistent treatment, a cost may not be assigned to a Federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the Federal award as an indirect cost and be adequately documented. 2 CFR section 200.405, Allowable costs, states this standard is met if the cost is incurred specifically for the Federal award. 2 CFR section 200.430(i) Standards for Documentation of Personnel Expenses state charges to Federal awards for salaries must be based on records that accurately reflect the work performed and these records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated, support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award a Federal award and non-Federal award and charges for the salaries and wages of nonexempt employees… must be supported by records indicating the total number of hours worked each day. Condition: The Organization did not maintain an effective control environment to ensure costs incurred for expenditures charged to the program were in accordance with contract requirements and applicable cost principles. Records do not provide reasonable assurance that the charges are accurate, allowable, and properly allocated. Records do not appear to support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award or a Federal award and non-federal activity. Charges for non-exempt employees are not supported by records indicating the total number of hours worked each day. Expenditure details included costs that were allocated to the Federal award but may not have been incurred specifically for the Federal award. These costs included unsupported journal entries and uncategorized expenditures. Additionally, due to lack of budgets for the fiscal year, it was not determinable if costs conformed to limitations or exclusions set forth in the Federal award. Costs were not adequately documented, and it is unknown if costs were accorded consistent treatment. Cause: Factors beyond the control of current management, including poor recordkeeping, have caused financial records to be inadequate for audit purposes, as key members of the accounting department left the Organization before appropriately transferring knowledge and records related to the Federal awards. Effect or Potential Effect: Potential for unallowable activities, unallowable costs, and costs outside of the period of performance and additional questioned costs. Questioned Costs: Related questioned costs related to payroll expenditures are unknown. Questioned costs related to non-payroll expenditures are unknown. Context: During the year under audit, the issues represent a systemic problem, beyond the control of current management. Recommendation: Policies and procedures should be designed and implemented to ensure expenditures are reviewed for allowability before being charged to federal awards. Policies and procedures should be designed and implemented to ensure costs are reviewed for allowability before being charged to federal awards. Management should perform budget to actual analysis on a periodic basis to ensure that costs are not exceeding limitations. View of Responsible Officials: In response to finding number 2021-SA3, management agrees with the finding and will design, implement, and maintain policies and procedures that ensure expenditures are reviewed for allowability before being charged to Federal awards. Management will also design, implement, and maintain policies and procedures that ensure costs are reviewed for allowability before being charged to Federal awards. Further, management will perform budget-to-actual analysis on a periodic basis to ensure costs do not exceed limitations.

Finding 2021-006 Payroll Documentation - Activities Allowed and Unallowed, Allowable Costs/Cost Principles – Noncompliance and Material Weakness in Internal Control over Compliance Agency Department of the Treasury ALN 21.019 Program COVID-19 - Coronavirus Relief Fund Award Year FY 2021 Pass-Through Agency State of Alaska Department of Commerce, Community, and Economic Development Pass-Through Entity Identifying Number 20-CRF-024 Criteria 2 CFR 200.303 requires that non-federal entities receiving federal awards establish and maintain internal control designed to reasonably ensure compliance with federal statutes, regulations, and terms and conditions of the federal award. 2 CFR 200.430 requires that charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. Per 2 CFR 200.430, these records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated and be incorporated into the official records of the non-Federal entity. Condition During our testing of payroll disbursements, we noted the following exceptions: - 20 out of the 60 expenditures sampled did not have properly maintained personnel action forms signed by the employee. - one out of the 60 expenditures sampled had an employee whose pay rate had decreased; however, no adjustment was made in the payroll system to reflect this decrease. Cause Internal controls were not in place throughout the entire fiscal year to ensure that all personnel action forms were reviewed and signed by the designated individuals and the payroll system is updated to reflect changes in pay rates. Effect or potential effect Federal funds could be expended for unallowed activities and unallowed costs. Questioned costs Below the reporting threshold. Context We tested a sample of 60 payroll transactions totaling to $148,729 from a population of 454 payroll transactions. The total amount of payroll expenditures charged to the program in fiscal year 2021 were $1,220,281. We noted 21 exceptions as noted in the condition. This is a condition identified per review of City's compliance with the specified requirements not using a statistically valid sample. Identification as a repeat finding This is a repeat finding from prior year. This was reported as finding 2020- 005 in the 2020 report. Recommendation Management should ensure the most current personnel action forms are reviewed and signed by the designated personnel. Views of responsible officials Management concurs with the finding. Management will review current employee pay rates within the payroll module and ensure the rates agree to the most current pay rate as specified in the employee’s current personnel action form.

2021-007 Lack of Documentation to Support Distribution of Wages (Significant Deficiency) Federal Agency: Department of Education Pass-through Agency: New Hampshire Department of Education Cluster/Program: Education Stabilization Fund Assistance Listing Numbers: 84.425D Passed-through Identification: #20204815 Compliance Requirement: Activities Allowed or Unallowed and Allowable Costs/Cost Principles Type of Finding: Internal Control over Compliance – Significant Deficiency Criteria or Specific Requirement: Federal regulations 2 CFR 200.303 states, the district, as a recipient of Federal funds, must establish and maintain effective internal controls over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In addition, under 2 CFR 200.430, it states that charges to federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must (1) be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated, (2) be incorporated into the official records of the non-Federal entity, (3) reasonably reflect the total activity for which the employee is compensated by the non-Federal entity, not exceeding 100% of compensated activities, and (4) support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award or a federal award and non-Federal award. Condition: During our review of payroll charged to the grant, we noted one employee who did not have documentation to support the distribution of the employee’s time spent on grant activities. Cause: Administrative oversight. Effect: The District did not have adequate documentation to support the distribution of the employee’s wages paid using grant funds. Questioned Costs: $3,136 Repeat Finding: No Recommendation: We recommend that documentation be retained to support the distribution of salaries and wages for all employees paid using grant funds. Views of Responsible Officials: Management’s views and corrective action plan is included at the end of this report.

Finding #SA2021-002: Support for Payroll Costs Charged to Grant Assistance Listing Number: 20.507 Assistance Listing Title: Federal Transit – Formula Grants (Urbanized Area Formula Program) Name of Federal Agency: Department of Transportation - Federal Transportation Administration Federal Award Identification Number: CA-2021-009-01, CA-2020-005-01, CA-2020-005-02 Criteria: 2 CFR Part 200.430(i), “Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards” requires that grantees adhere to the following, “Payroll systems must be based on records that accurately reflect the work performed” and “be supported by a system of internal controls that provides reasonable assurances that charges are accurate, allowable, and properly allocated...” The payroll records must be a part of the official record, reflect the employee’s total activity and show if the specific activity of the person is being paid by more than one federal award. Section 200.430(i)(viii) indicates that budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards, but may be used for interim accounting purposes, provided that the system for establishing the estimates produces reasonable approximations of the activity actually performed, among other requirements. Condition: We noted that the payroll costs for one employee were charged to the program based on a flat rate of 25% of the payroll costs, rather than based on the actual hours worked. Payroll costs, including salary and benefits, charged to the program during fiscal year 2021 totaled $8,997. Questioned Costs: We question costs of $8,997, which consists of the payroll and fringe benefits charged to the grant for the employee based on the flat percentage of pay and benefits for the full fiscal year. Effect: The City is not in compliance with the payroll documentation requirements set forth in 2 CFR Part 200.430(i). Cause: We understand that grant program staff were not aware of the payroll documentation requirement and due to staff turnover, Finance staff cannot determine whether any such documentation exists. Identification as a repeat finding: Yes, since 2019 Recommendation: The City should establish procedures to ensure that payroll costs charged to the program are documented in accordance with 2 CFR Part 200.430 for the Federal Transit-Formula Grants program and all federal grant programs. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.

Finding #SA2021-003: Pro-Rating Annual Payroll Costs Charged to Grant Assistance Listing Number: 21.019 Assistance Listing Title: COVID-19 - Coronavirus Relief Fund Name of Federal Agency: Department of Treasury Pass Through Entity: California Department of Finance Federal Award Identification Number: 390 Criteria: 2 CFR Part 200.430(i), “Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards” requires that grantees adhere to the following, “Payroll systems must be based on records that accurately reflect the work performed” and “be supported by a system of internal controls that provides reasonable assurances that charges are accurate, allowable, and properly allocated...” The payroll records must be a part of the official record, reflect the employee’s total activity and show if the specific activity of the person is being paid by more than one federal award. Condition: The City charged a portion of three months of police and fire salaries to the Coronavirus Relief Fund program, and we noted one employee’s pay during that time included an annual stipend of $12,333, of which 33% was charged to the federal award, or $4,070. Although the pay was related to the employee’s gross pay under the applicable memorandum of understanding for the period, since it was an annual amount paid during the time charged to the grant, it should have been pro-rated to charge only 25% of the stipend to the federal award. Therefore, only 33% of that 25%, or $1,017 should have been charged to the federal award. After the issue was discovered, we reviewed the other payroll charges for amounts that did not appear to be in line with regular salaries and noted the payroll charges included annual stipends for three employees totaling $35,905 of which 67% was charged to the federal award, or $24,061. Those amounts should have been prorated as noted above, therefore only 67% of 25%, or $6,015 should have been charged to the federal award. And, one employee’s vacation buy back, compensatory time off buy back, furlough used and administrative leave pay totaling $50,679 was charged to the grant, which does not appear to be related to the three-month period of salaries charged to the grant. Questioned Costs: We question costs in the amounts of $3,053, $18,046 and $50,679, for total questioned costs of $68,724. Effect: The City is not in compliance with the payroll documentation requirements set forth in 2 CFR Part 200.430(i). Cause: We understand that City staff compiled the report of eligible public safety payroll costs to be charged to the federal award and did not analyze to see if it included annual pay amounts that should be pro-rated for the time period of salaries charged. Recommendation: The City should establish procedures to ensure that payroll costs charged to the program are pro-rated when the costs cover a time period that is longer than that covered by or being charged to the grant award, to ensure that costs are allocated equitably between federal and non-federal funding sources. In addition, the City should work with the grantor to determine if other eligible public safety payroll costs are allowed to replace the ineligible costs, or if the questioned costs need to be returned to the grantor. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.

Finding 2021-003: Activities Allowed or Unallowed - Material Weakness Grantor: U.S. Department of Health and Human Services Federal Program Names: Health Center Program Cluster: Health Center Program (Community Health Centers, Migrant Health Centers, Health Care for the Homeless, and Public Housing Primary Care) COVID-19 Health Center Program (Community Health Centers, Migrant Health Centers, Health Care for the Homeless, and Public Housing Primary Care) Grants for New and Expanded Services under the Health Center Program Federal Assistance Listing Numbers: 93.224 and 93.527 Federal Award Identification Number and Year: H80CS26638 - 2020 and 2021, H8DCS35487 - 2020, H8CCS34364 - 2020, H8ECS38373 - 2020, and H8F40829 - 2021 Criteria In accordance with 2 CFR, Part 200.430(i)(1), charges to Federal awards for salaries and wages must be based on records that accurately reflect the actual work performed, which must, among other things: (i) be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) be incorporated into the official records of the non-Federal entity; (iii) and reasonably reflect the total activity for which the employee is compensated by the non-Federal entity. Additionally, costs must be adequately documented, as per 2 CFR 200.40.3(g). Condition Charges to Federal Awards for salaries and wages were not supported by properly approved payrates, and timesheets did not agree to payroll registers. Additionally, nonpayroll expenditures were not supported by proper approval. Cause The Center's internal controls over payroll were not consistently followed to ensure payrates were approved and timesheets agreed to payroll registers. Additionally, the Center's internal controls over nonpayroll expenditures were not consistently followed to ensure that expenditures were approved. Effect Failure to ensure accurate wage and allocation of employee's time across programs could result in non-compliance with the grant requirements or unallowable costs being charged. Additionally, failure to ensure accurate nonpayroll expenditures could result in non-compliance with the grant requirements or unallowable costs being charged. Questioned Costs None. Context We selected 25 payroll transactions charged to the federal program for testing. Out of the 25 transactions tested, we noted 21 instances where there was no formal approval of payrates and where they were not appropriately reflected in the payroll registers, 15 instances where timecards were not appropriately reflected in the payroll registers, and all 25 labor reports showed no formal approval documented. Additionally, for nonpayroll allowable costs, out of five transactions tested, we noted five instances where there was no formal approval showing review that the cost was allowable under the program. Identification of Repeat Finding Yes, see finding 2020-003. Recommendation We recommend that the Center consistently enforce its internal controls over payroll to ensure that the timesheet and payrates are reviewed and approved by the appropriate supervisor. Additionally, we recommend that the Center consistently reinforces its internal controls over nonpayroll expenditures to ensure all expenditures were approved by the appropriate supervisor. Views of Responsible Officials Management and the Board of Directors agree with the finding and will implement additional controls to ensure all expenditures have evidence of formal approval of review.

Finding 2021-003: Activities Allowed or Unallowed - Material Weakness Grantor: U.S. Department of Health and Human Services Federal Program Names: Health Center Program Cluster: Health Center Program (Community Health Centers, Migrant Health Centers, Health Care for the Homeless, and Public Housing Primary Care) COVID-19 Health Center Program (Community Health Centers, Migrant Health Centers, Health Care for the Homeless, and Public Housing Primary Care) Grants for New and Expanded Services under the Health Center Program Federal Assistance Listing Numbers: 93.224 and 93.527 Federal Award Identification Number and Year: H80CS26638 - 2020 and 2021, H8DCS35487 - 2020, H8CCS34364 - 2020, H8ECS38373 - 2020, and H8F40829 - 2021 Criteria In accordance with 2 CFR, Part 200.430(i)(1), charges to Federal awards for salaries and wages must be based on records that accurately reflect the actual work performed, which must, among other things: (i) be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) be incorporated into the official records of the non-Federal entity; (iii) and reasonably reflect the total activity for which the employee is compensated by the non-Federal entity. Additionally, costs must be adequately documented, as per 2 CFR 200.40.3(g). Condition Charges to Federal Awards for salaries and wages were not supported by properly approved payrates, and timesheets did not agree to payroll registers. Additionally, nonpayroll expenditures were not supported by proper approval. Cause The Center's internal controls over payroll were not consistently followed to ensure payrates were approved and timesheets agreed to payroll registers. Additionally, the Center's internal controls over nonpayroll expenditures were not consistently followed to ensure that expenditures were approved. Effect Failure to ensure accurate wage and allocation of employee's time across programs could result in non-compliance with the grant requirements or unallowable costs being charged. Additionally, failure to ensure accurate nonpayroll expenditures could result in non-compliance with the grant requirements or unallowable costs being charged. Questioned Costs None. Context We selected 25 payroll transactions charged to the federal program for testing. Out of the 25 transactions tested, we noted 21 instances where there was no formal approval of payrates and where they were not appropriately reflected in the payroll registers, 15 instances where timecards were not appropriately reflected in the payroll registers, and all 25 labor reports showed no formal approval documented. Additionally, for nonpayroll allowable costs, out of five transactions tested, we noted five instances where there was no formal approval showing review that the cost was allowable under the program. Identification of Repeat Finding Yes, see finding 2020-003. Recommendation We recommend that the Center consistently enforce its internal controls over payroll to ensure that the timesheet and payrates are reviewed and approved by the appropriate supervisor. Additionally, we recommend that the Center consistently reinforces its internal controls over nonpayroll expenditures to ensure all expenditures were approved by the appropriate supervisor. Views of Responsible Officials Management and the Board of Directors agree with the finding and will implement additional controls to ensure all expenditures have evidence of formal approval of review.

Finding 2021-003: Activities Allowed or Unallowed - Material Weakness Grantor: U.S. Department of Health and Human Services Federal Program Names: Health Center Program Cluster: Health Center Program (Community Health Centers, Migrant Health Centers, Health Care for the Homeless, and Public Housing Primary Care) COVID-19 Health Center Program (Community Health Centers, Migrant Health Centers, Health Care for the Homeless, and Public Housing Primary Care) Grants for New and Expanded Services under the Health Center Program Federal Assistance Listing Numbers: 93.224 and 93.527 Federal Award Identification Number and Year: H80CS26638 - 2020 and 2021, H8DCS35487 - 2020, H8CCS34364 - 2020, H8ECS38373 - 2020, and H8F40829 - 2021 Criteria In accordance with 2 CFR, Part 200.430(i)(1), charges to Federal awards for salaries and wages must be based on records that accurately reflect the actual work performed, which must, among other things: (i) be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) be incorporated into the official records of the non-Federal entity; (iii) and reasonably reflect the total activity for which the employee is compensated by the non-Federal entity. Additionally, costs must be adequately documented, as per 2 CFR 200.40.3(g). Condition Charges to Federal Awards for salaries and wages were not supported by properly approved payrates, and timesheets did not agree to payroll registers. Additionally, nonpayroll expenditures were not supported by proper approval. Cause The Center's internal controls over payroll were not consistently followed to ensure payrates were approved and timesheets agreed to payroll registers. Additionally, the Center's internal controls over nonpayroll expenditures were not consistently followed to ensure that expenditures were approved. Effect Failure to ensure accurate wage and allocation of employee's time across programs could result in non-compliance with the grant requirements or unallowable costs being charged. Additionally, failure to ensure accurate nonpayroll expenditures could result in non-compliance with the grant requirements or unallowable costs being charged. Questioned Costs None. Context We selected 25 payroll transactions charged to the federal program for testing. Out of the 25 transactions tested, we noted 21 instances where there was no formal approval of payrates and where they were not appropriately reflected in the payroll registers, 15 instances where timecards were not appropriately reflected in the payroll registers, and all 25 labor reports showed no formal approval documented. Additionally, for nonpayroll allowable costs, out of five transactions tested, we noted five instances where there was no formal approval showing review that the cost was allowable under the program. Identification of Repeat Finding Yes, see finding 2020-003. Recommendation We recommend that the Center consistently enforce its internal controls over payroll to ensure that the timesheet and payrates are reviewed and approved by the appropriate supervisor. Additionally, we recommend that the Center consistently reinforces its internal controls over nonpayroll expenditures to ensure all expenditures were approved by the appropriate supervisor. Views of Responsible Officials Management and the Board of Directors agree with the finding and will implement additional controls to ensure all expenditures have evidence of formal approval of review.

Finding 2021-003: Activities Allowed or Unallowed - Material Weakness Grantor: U.S. Department of Health and Human Services Federal Program Names: Health Center Program Cluster: Health Center Program (Community Health Centers, Migrant Health Centers, Health Care for the Homeless, and Public Housing Primary Care) COVID-19 Health Center Program (Community Health Centers, Migrant Health Centers, Health Care for the Homeless, and Public Housing Primary Care) Grants for New and Expanded Services under the Health Center Program Federal Assistance Listing Numbers: 93.224 and 93.527 Federal Award Identification Number and Year: H80CS26638 - 2020 and 2021, H8DCS35487 - 2020, H8CCS34364 - 2020, H8ECS38373 - 2020, and H8F40829 - 2021 Criteria In accordance with 2 CFR, Part 200.430(i)(1), charges to Federal awards for salaries and wages must be based on records that accurately reflect the actual work performed, which must, among other things: (i) be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) be incorporated into the official records of the non-Federal entity; (iii) and reasonably reflect the total activity for which the employee is compensated by the non-Federal entity. Additionally, costs must be adequately documented, as per 2 CFR 200.40.3(g). Condition Charges to Federal Awards for salaries and wages were not supported by properly approved payrates, and timesheets did not agree to payroll registers. Additionally, nonpayroll expenditures were not supported by proper approval. Cause The Center's internal controls over payroll were not consistently followed to ensure payrates were approved and timesheets agreed to payroll registers. Additionally, the Center's internal controls over nonpayroll expenditures were not consistently followed to ensure that expenditures were approved. Effect Failure to ensure accurate wage and allocation of employee's time across programs could result in non-compliance with the grant requirements or unallowable costs being charged. Additionally, failure to ensure accurate nonpayroll expenditures could result in non-compliance with the grant requirements or unallowable costs being charged. Questioned Costs None. Context We selected 25 payroll transactions charged to the federal program for testing. Out of the 25 transactions tested, we noted 21 instances where there was no formal approval of payrates and where they were not appropriately reflected in the payroll registers, 15 instances where timecards were not appropriately reflected in the payroll registers, and all 25 labor reports showed no formal approval documented. Additionally, for nonpayroll allowable costs, out of five transactions tested, we noted five instances where there was no formal approval showing review that the cost was allowable under the program. Identification of Repeat Finding Yes, see finding 2020-003. Recommendation We recommend that the Center consistently enforce its internal controls over payroll to ensure that the timesheet and payrates are reviewed and approved by the appropriate supervisor. Additionally, we recommend that the Center consistently reinforces its internal controls over nonpayroll expenditures to ensure all expenditures were approved by the appropriate supervisor. Views of Responsible Officials Management and the Board of Directors agree with the finding and will implement additional controls to ensure all expenditures have evidence of formal approval of review.

Finding 2021-003: Activities Allowed or Unallowed - Material Weakness Grantor: U.S. Department of Health and Human Services Federal Program Names: Health Center Program Cluster: Health Center Program (Community Health Centers, Migrant Health Centers, Health Care for the Homeless, and Public Housing Primary Care) COVID-19 Health Center Program (Community Health Centers, Migrant Health Centers, Health Care for the Homeless, and Public Housing Primary Care) Grants for New and Expanded Services under the Health Center Program Federal Assistance Listing Numbers: 93.224 and 93.527 Federal Award Identification Number and Year: H80CS26638 - 2020 and 2021, H8DCS35487 - 2020, H8CCS34364 - 2020, H8ECS38373 - 2020, and H8F40829 - 2021 Criteria In accordance with 2 CFR, Part 200.430(i)(1), charges to Federal awards for salaries and wages must be based on records that accurately reflect the actual work performed, which must, among other things: (i) be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) be incorporated into the official records of the non-Federal entity; (iii) and reasonably reflect the total activity for which the employee is compensated by the non-Federal entity. Additionally, costs must be adequately documented, as per 2 CFR 200.40.3(g). Condition Charges to Federal Awards for salaries and wages were not supported by properly approved payrates, and timesheets did not agree to payroll registers. Additionally, nonpayroll expenditures were not supported by proper approval. Cause The Center's internal controls over payroll were not consistently followed to ensure payrates were approved and timesheets agreed to payroll registers. Additionally, the Center's internal controls over nonpayroll expenditures were not consistently followed to ensure that expenditures were approved. Effect Failure to ensure accurate wage and allocation of employee's time across programs could result in non-compliance with the grant requirements or unallowable costs being charged. Additionally, failure to ensure accurate nonpayroll expenditures could result in non-compliance with the grant requirements or unallowable costs being charged. Questioned Costs None. Context We selected 25 payroll transactions charged to the federal program for testing. Out of the 25 transactions tested, we noted 21 instances where there was no formal approval of payrates and where they were not appropriately reflected in the payroll registers, 15 instances where timecards were not appropriately reflected in the payroll registers, and all 25 labor reports showed no formal approval documented. Additionally, for nonpayroll allowable costs, out of five transactions tested, we noted five instances where there was no formal approval showing review that the cost was allowable under the program. Identification of Repeat Finding Yes, see finding 2020-003. Recommendation We recommend that the Center consistently enforce its internal controls over payroll to ensure that the timesheet and payrates are reviewed and approved by the appropriate supervisor. Additionally, we recommend that the Center consistently reinforces its internal controls over nonpayroll expenditures to ensure all expenditures were approved by the appropriate supervisor. Views of Responsible Officials Management and the Board of Directors agree with the finding and will implement additional controls to ensure all expenditures have evidence of formal approval of review.

Finding 2021-003: Activities Allowed or Unallowed - Material Weakness Grantor: U.S. Department of Health and Human Services Federal Program Names: Health Center Program Cluster: Health Center Program (Community Health Centers, Migrant Health Centers, Health Care for the Homeless, and Public Housing Primary Care) COVID-19 Health Center Program (Community Health Centers, Migrant Health Centers, Health Care for the Homeless, and Public Housing Primary Care) Grants for New and Expanded Services under the Health Center Program Federal Assistance Listing Numbers: 93.224 and 93.527 Federal Award Identification Number and Year: H80CS26638 - 2020 and 2021, H8DCS35487 - 2020, H8CCS34364 - 2020, H8ECS38373 - 2020, and H8F40829 - 2021 Criteria In accordance with 2 CFR, Part 200.430(i)(1), charges to Federal awards for salaries and wages must be based on records that accurately reflect the actual work performed, which must, among other things: (i) be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) be incorporated into the official records of the non-Federal entity; (iii) and reasonably reflect the total activity for which the employee is compensated by the non-Federal entity. Additionally, costs must be adequately documented, as per 2 CFR 200.40.3(g). Condition Charges to Federal Awards for salaries and wages were not supported by properly approved payrates, and timesheets did not agree to payroll registers. Additionally, nonpayroll expenditures were not supported by proper approval. Cause The Center's internal controls over payroll were not consistently followed to ensure payrates were approved and timesheets agreed to payroll registers. Additionally, the Center's internal controls over nonpayroll expenditures were not consistently followed to ensure that expenditures were approved. Effect Failure to ensure accurate wage and allocation of employee's time across programs could result in non-compliance with the grant requirements or unallowable costs being charged. Additionally, failure to ensure accurate nonpayroll expenditures could result in non-compliance with the grant requirements or unallowable costs being charged. Questioned Costs None. Context We selected 25 payroll transactions charged to the federal program for testing. Out of the 25 transactions tested, we noted 21 instances where there was no formal approval of payrates and where they were not appropriately reflected in the payroll registers, 15 instances where timecards were not appropriately reflected in the payroll registers, and all 25 labor reports showed no formal approval documented. Additionally, for nonpayroll allowable costs, out of five transactions tested, we noted five instances where there was no formal approval showing review that the cost was allowable under the program. Identification of Repeat Finding Yes, see finding 2020-003. Recommendation We recommend that the Center consistently enforce its internal controls over payroll to ensure that the timesheet and payrates are reviewed and approved by the appropriate supervisor. Additionally, we recommend that the Center consistently reinforces its internal controls over nonpayroll expenditures to ensure all expenditures were approved by the appropriate supervisor. Views of Responsible Officials Management and the Board of Directors agree with the finding and will implement additional controls to ensure all expenditures have evidence of formal approval of review.

Finding Number: 2021-SA3 Material Weakness – Activities Allowed or Unallowed and Allowable Costs/Cost Principles and Period of Performance Compliance and Control Finding Federal Award: No. 64.024 VA Homeless Providers Grant and Per Diem Program Federal Agency: U.S. Veterans Administration Pass-Through Entity: Not applicable Criteria or Specific Requirement: CFR section 200.403, Factors affecting allowability of costs, states costs must: conform to limitations or exclusions, be accorded consistent treatment, a cost may not be assigned to a Federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the Federal award as an indirect cost and be adequately documented. 2 CFR section 200.405, Allowable costs, states this standard is met if the cost is incurred specifically for the Federal award. 2 CFR section 200.430(i) Standards for Documentation of Personnel Expenses state charges to Federal awards for salaries must be based on records that accurately reflect the work performed and these records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated, support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award a Federal award and non-Federal award and charges for the salaries and wages of nonexempt employees… must be supported by records indicating the total number of hours worked each day. Condition: The Organization did not maintain an effective control environment to ensure costs incurred for expenditures charged to the program were in accordance with contract requirements and applicable cost principles. Records do not provide reasonable assurance that the charges are accurate, allowable, and properly allocated. Records do not appear to support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award or a Federal award and non-federal activity. Charges for non-exempt employees are not supported by records indicating the total number of hours worked each day. Expenditure details included costs that were allocated to the Federal award but may not have been incurred specifically for the Federal award. These costs included unsupported journal entries and uncategorized expenditures. Additionally, due to lack of budgets for the fiscal year, it was not determinable if costs conformed to limitations or exclusions set forth in the Federal award. Costs were not adequately documented, and it is unknown if costs were accorded consistent treatment. Cause: Factors beyond the control of current management, including poor recordkeeping, have caused financial records to be inadequate for audit purposes, as key members of the accounting department left the Organization before appropriately transferring knowledge and records related to the Federal awards. Effect or Potential Effect: Potential for unallowable activities, unallowable costs, and costs outside of the period of performance and additional questioned costs. Questioned Costs: Related questioned costs related to payroll expenditures are unknown. Questioned costs related to non-payroll expenditures are unknown. Context: During the year under audit, the issues represent a systemic problem, beyond the control of current management. Recommendation: Policies and procedures should be designed and implemented to ensure expenditures are reviewed for allowability before being charged to federal awards. Policies and procedures should be designed and implemented to ensure costs are reviewed for allowability before being charged to federal awards. Management should perform budget to actual analysis on a periodic basis to ensure that costs are not exceeding limitations. View of Responsible Officials: In response to finding number 2021-SA3, management agrees with the finding and will design, implement, and maintain policies and procedures that ensure expenditures are reviewed for allowability before being charged to Federal awards. Management will also design, implement, and maintain policies and procedures that ensure costs are reviewed for allowability before being charged to Federal awards. Further, management will perform budget-to-actual analysis on a periodic basis to ensure costs do not exceed limitations.

Finding Number: 2021-SA3 Material Weakness – Activities Allowed or Unallowed and Allowable Costs/Cost Principles and Period of Performance Compliance and Control Finding Federal Award: No. 64.024 VA Homeless Providers Grant and Per Diem Program Federal Agency: U.S. Veterans Administration Pass-Through Entity: Not applicable Criteria or Specific Requirement: CFR section 200.403, Factors affecting allowability of costs, states costs must: conform to limitations or exclusions, be accorded consistent treatment, a cost may not be assigned to a Federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the Federal award as an indirect cost and be adequately documented. 2 CFR section 200.405, Allowable costs, states this standard is met if the cost is incurred specifically for the Federal award. 2 CFR section 200.430(i) Standards for Documentation of Personnel Expenses state charges to Federal awards for salaries must be based on records that accurately reflect the work performed and these records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated, support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award a Federal award and non-Federal award and charges for the salaries and wages of nonexempt employees… must be supported by records indicating the total number of hours worked each day. Condition: The Organization did not maintain an effective control environment to ensure costs incurred for expenditures charged to the program were in accordance with contract requirements and applicable cost principles. Records do not provide reasonable assurance that the charges are accurate, allowable, and properly allocated. Records do not appear to support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award or a Federal award and non-federal activity. Charges for non-exempt employees are not supported by records indicating the total number of hours worked each day. Expenditure details included costs that were allocated to the Federal award but may not have been incurred specifically for the Federal award. These costs included unsupported journal entries and uncategorized expenditures. Additionally, due to lack of budgets for the fiscal year, it was not determinable if costs conformed to limitations or exclusions set forth in the Federal award. Costs were not adequately documented, and it is unknown if costs were accorded consistent treatment. Cause: Factors beyond the control of current management, including poor recordkeeping, have caused financial records to be inadequate for audit purposes, as key members of the accounting department left the Organization before appropriately transferring knowledge and records related to the Federal awards. Effect or Potential Effect: Potential for unallowable activities, unallowable costs, and costs outside of the period of performance and additional questioned costs. Questioned Costs: Related questioned costs related to payroll expenditures are unknown. Questioned costs related to non-payroll expenditures are unknown. Context: During the year under audit, the issues represent a systemic problem, beyond the control of current management. Recommendation: Policies and procedures should be designed and implemented to ensure expenditures are reviewed for allowability before being charged to federal awards. Policies and procedures should be designed and implemented to ensure costs are reviewed for allowability before being charged to federal awards. Management should perform budget to actual analysis on a periodic basis to ensure that costs are not exceeding limitations. View of Responsible Officials: In response to finding number 2021-SA3, management agrees with the finding and will design, implement, and maintain policies and procedures that ensure expenditures are reviewed for allowability before being charged to Federal awards. Management will also design, implement, and maintain policies and procedures that ensure costs are reviewed for allowability before being charged to Federal awards. Further, management will perform budget-to-actual analysis on a periodic basis to ensure costs do not exceed limitations.

Finding Number: 2021-SA3 Material Weakness – Activities Allowed or Unallowed and Allowable Costs/Cost Principles and Period of Performance Compliance and Control Finding Federal Award: No. 64.024 VA Homeless Providers Grant and Per Diem Program Federal Agency: U.S. Veterans Administration Pass-Through Entity: Not applicable Criteria or Specific Requirement: CFR section 200.403, Factors affecting allowability of costs, states costs must: conform to limitations or exclusions, be accorded consistent treatment, a cost may not be assigned to a Federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the Federal award as an indirect cost and be adequately documented. 2 CFR section 200.405, Allowable costs, states this standard is met if the cost is incurred specifically for the Federal award. 2 CFR section 200.430(i) Standards for Documentation of Personnel Expenses state charges to Federal awards for salaries must be based on records that accurately reflect the work performed and these records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated, support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award a Federal award and non-Federal award and charges for the salaries and wages of nonexempt employees… must be supported by records indicating the total number of hours worked each day. Condition: The Organization did not maintain an effective control environment to ensure costs incurred for expenditures charged to the program were in accordance with contract requirements and applicable cost principles. Records do not provide reasonable assurance that the charges are accurate, allowable, and properly allocated. Records do not appear to support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award or a Federal award and non-federal activity. Charges for non-exempt employees are not supported by records indicating the total number of hours worked each day. Expenditure details included costs that were allocated to the Federal award but may not have been incurred specifically for the Federal award. These costs included unsupported journal entries and uncategorized expenditures. Additionally, due to lack of budgets for the fiscal year, it was not determinable if costs conformed to limitations or exclusions set forth in the Federal award. Costs were not adequately documented, and it is unknown if costs were accorded consistent treatment. Cause: Factors beyond the control of current management, including poor recordkeeping, have caused financial records to be inadequate for audit purposes, as key members of the accounting department left the Organization before appropriately transferring knowledge and records related to the Federal awards. Effect or Potential Effect: Potential for unallowable activities, unallowable costs, and costs outside of the period of performance and additional questioned costs. Questioned Costs: Related questioned costs related to payroll expenditures are unknown. Questioned costs related to non-payroll expenditures are unknown. Context: During the year under audit, the issues represent a systemic problem, beyond the control of current management. Recommendation: Policies and procedures should be designed and implemented to ensure expenditures are reviewed for allowability before being charged to federal awards. Policies and procedures should be designed and implemented to ensure costs are reviewed for allowability before being charged to federal awards. Management should perform budget to actual analysis on a periodic basis to ensure that costs are not exceeding limitations. View of Responsible Officials: In response to finding number 2021-SA3, management agrees with the finding and will design, implement, and maintain policies and procedures that ensure expenditures are reviewed for allowability before being charged to Federal awards. Management will also design, implement, and maintain policies and procedures that ensure costs are reviewed for allowability before being charged to Federal awards. Further, management will perform budget-to-actual analysis on a periodic basis to ensure costs do not exceed limitations.

Finding Number: 2021-SA3 Material Weakness – Activities Allowed or Unallowed and Allowable Costs/Cost Principles and Period of Performance Compliance and Control Finding Federal Award: No. 64.024 VA Homeless Providers Grant and Per Diem Program Federal Agency: U.S. Veterans Administration Pass-Through Entity: Not applicable Criteria or Specific Requirement: CFR section 200.403, Factors affecting allowability of costs, states costs must: conform to limitations or exclusions, be accorded consistent treatment, a cost may not be assigned to a Federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the Federal award as an indirect cost and be adequately documented. 2 CFR section 200.405, Allowable costs, states this standard is met if the cost is incurred specifically for the Federal award. 2 CFR section 200.430(i) Standards for Documentation of Personnel Expenses state charges to Federal awards for salaries must be based on records that accurately reflect the work performed and these records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated, support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award a Federal award and non-Federal award and charges for the salaries and wages of nonexempt employees… must be supported by records indicating the total number of hours worked each day. Condition: The Organization did not maintain an effective control environment to ensure costs incurred for expenditures charged to the program were in accordance with contract requirements and applicable cost principles. Records do not provide reasonable assurance that the charges are accurate, allowable, and properly allocated. Records do not appear to support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award or a Federal award and non-federal activity. Charges for non-exempt employees are not supported by records indicating the total number of hours worked each day. Expenditure details included costs that were allocated to the Federal award but may not have been incurred specifically for the Federal award. These costs included unsupported journal entries and uncategorized expenditures. Additionally, due to lack of budgets for the fiscal year, it was not determinable if costs conformed to limitations or exclusions set forth in the Federal award. Costs were not adequately documented, and it is unknown if costs were accorded consistent treatment. Cause: Factors beyond the control of current management, including poor recordkeeping, have caused financial records to be inadequate for audit purposes, as key members of the accounting department left the Organization before appropriately transferring knowledge and records related to the Federal awards. Effect or Potential Effect: Potential for unallowable activities, unallowable costs, and costs outside of the period of performance and additional questioned costs. Questioned Costs: Related questioned costs related to payroll expenditures are unknown. Questioned costs related to non-payroll expenditures are unknown. Context: During the year under audit, the issues represent a systemic problem, beyond the control of current management. Recommendation: Policies and procedures should be designed and implemented to ensure expenditures are reviewed for allowability before being charged to federal awards. Policies and procedures should be designed and implemented to ensure costs are reviewed for allowability before being charged to federal awards. Management should perform budget to actual analysis on a periodic basis to ensure that costs are not exceeding limitations. View of Responsible Officials: In response to finding number 2021-SA3, management agrees with the finding and will design, implement, and maintain policies and procedures that ensure expenditures are reviewed for allowability before being charged to Federal awards. Management will also design, implement, and maintain policies and procedures that ensure costs are reviewed for allowability before being charged to Federal awards. Further, management will perform budget-to-actual analysis on a periodic basis to ensure costs do not exceed limitations.

Finding Number: 2021-SA3 Material Weakness – Activities Allowed or Unallowed and Allowable Costs/Cost Principles and Period of Performance Compliance and Control Finding Federal Award: No. 64.024 VA Homeless Providers Grant and Per Diem Program Federal Agency: U.S. Veterans Administration Pass-Through Entity: Not applicable Criteria or Specific Requirement: CFR section 200.403, Factors affecting allowability of costs, states costs must: conform to limitations or exclusions, be accorded consistent treatment, a cost may not be assigned to a Federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the Federal award as an indirect cost and be adequately documented. 2 CFR section 200.405, Allowable costs, states this standard is met if the cost is incurred specifically for the Federal award. 2 CFR section 200.430(i) Standards for Documentation of Personnel Expenses state charges to Federal awards for salaries must be based on records that accurately reflect the work performed and these records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated, support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award a Federal award and non-Federal award and charges for the salaries and wages of nonexempt employees… must be supported by records indicating the total number of hours worked each day. Condition: The Organization did not maintain an effective control environment to ensure costs incurred for expenditures charged to the program were in accordance with contract requirements and applicable cost principles. Records do not provide reasonable assurance that the charges are accurate, allowable, and properly allocated. Records do not appear to support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award or a Federal award and non-federal activity. Charges for non-exempt employees are not supported by records indicating the total number of hours worked each day. Expenditure details included costs that were allocated to the Federal award but may not have been incurred specifically for the Federal award. These costs included unsupported journal entries and uncategorized expenditures. Additionally, due to lack of budgets for the fiscal year, it was not determinable if costs conformed to limitations or exclusions set forth in the Federal award. Costs were not adequately documented, and it is unknown if costs were accorded consistent treatment. Cause: Factors beyond the control of current management, including poor recordkeeping, have caused financial records to be inadequate for audit purposes, as key members of the accounting department left the Organization before appropriately transferring knowledge and records related to the Federal awards. Effect or Potential Effect: Potential for unallowable activities, unallowable costs, and costs outside of the period of performance and additional questioned costs. Questioned Costs: Related questioned costs related to payroll expenditures are unknown. Questioned costs related to non-payroll expenditures are unknown. Context: During the year under audit, the issues represent a systemic problem, beyond the control of current management. Recommendation: Policies and procedures should be designed and implemented to ensure expenditures are reviewed for allowability before being charged to federal awards. Policies and procedures should be designed and implemented to ensure costs are reviewed for allowability before being charged to federal awards. Management should perform budget to actual analysis on a periodic basis to ensure that costs are not exceeding limitations. View of Responsible Officials: In response to finding number 2021-SA3, management agrees with the finding and will design, implement, and maintain policies and procedures that ensure expenditures are reviewed for allowability before being charged to Federal awards. Management will also design, implement, and maintain policies and procedures that ensure costs are reviewed for allowability before being charged to Federal awards. Further, management will perform budget-to-actual analysis on a periodic basis to ensure costs do not exceed limitations.

Finding Number: 2021-SA3 Material Weakness – Activities Allowed or Unallowed and Allowable Costs/Cost Principles and Period of Performance Compliance and Control Finding Federal Award: No. 64.024 VA Homeless Providers Grant and Per Diem Program Federal Agency: U.S. Veterans Administration Pass-Through Entity: Not applicable Criteria or Specific Requirement: CFR section 200.403, Factors affecting allowability of costs, states costs must: conform to limitations or exclusions, be accorded consistent treatment, a cost may not be assigned to a Federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the Federal award as an indirect cost and be adequately documented. 2 CFR section 200.405, Allowable costs, states this standard is met if the cost is incurred specifically for the Federal award. 2 CFR section 200.430(i) Standards for Documentation of Personnel Expenses state charges to Federal awards for salaries must be based on records that accurately reflect the work performed and these records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated, support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award a Federal award and non-Federal award and charges for the salaries and wages of nonexempt employees… must be supported by records indicating the total number of hours worked each day. Condition: The Organization did not maintain an effective control environment to ensure costs incurred for expenditures charged to the program were in accordance with contract requirements and applicable cost principles. Records do not provide reasonable assurance that the charges are accurate, allowable, and properly allocated. Records do not appear to support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award or a Federal award and non-federal activity. Charges for non-exempt employees are not supported by records indicating the total number of hours worked each day. Expenditure details included costs that were allocated to the Federal award but may not have been incurred specifically for the Federal award. These costs included unsupported journal entries and uncategorized expenditures. Additionally, due to lack of budgets for the fiscal year, it was not determinable if costs conformed to limitations or exclusions set forth in the Federal award. Costs were not adequately documented, and it is unknown if costs were accorded consistent treatment. Cause: Factors beyond the control of current management, including poor recordkeeping, have caused financial records to be inadequate for audit purposes, as key members of the accounting department left the Organization before appropriately transferring knowledge and records related to the Federal awards. Effect or Potential Effect: Potential for unallowable activities, unallowable costs, and costs outside of the period of performance and additional questioned costs. Questioned Costs: Related questioned costs related to payroll expenditures are unknown. Questioned costs related to non-payroll expenditures are unknown. Context: During the year under audit, the issues represent a systemic problem, beyond the control of current management. Recommendation: Policies and procedures should be designed and implemented to ensure expenditures are reviewed for allowability before being charged to federal awards. Policies and procedures should be designed and implemented to ensure costs are reviewed for allowability before being charged to federal awards. Management should perform budget to actual analysis on a periodic basis to ensure that costs are not exceeding limitations. View of Responsible Officials: In response to finding number 2021-SA3, management agrees with the finding and will design, implement, and maintain policies and procedures that ensure expenditures are reviewed for allowability before being charged to Federal awards. Management will also design, implement, and maintain policies and procedures that ensure costs are reviewed for allowability before being charged to Federal awards. Further, management will perform budget-to-actual analysis on a periodic basis to ensure costs do not exceed limitations.

Finding 2021-006 Payroll Documentation - Activities Allowed and Unallowed, Allowable Costs/Cost Principles – Noncompliance and Material Weakness in Internal Control over Compliance Agency Department of the Treasury ALN 21.019 Program COVID-19 - Coronavirus Relief Fund Award Year FY 2021 Pass-Through Agency State of Alaska Department of Commerce, Community, and Economic Development Pass-Through Entity Identifying Number 20-CRF-024 Criteria 2 CFR 200.303 requires that non-federal entities receiving federal awards establish and maintain internal control designed to reasonably ensure compliance with federal statutes, regulations, and terms and conditions of the federal award. 2 CFR 200.430 requires that charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. Per 2 CFR 200.430, these records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated and be incorporated into the official records of the non-Federal entity. Condition During our testing of payroll disbursements, we noted the following exceptions: - 20 out of the 60 expenditures sampled did not have properly maintained personnel action forms signed by the employee. - one out of the 60 expenditures sampled had an employee whose pay rate had decreased; however, no adjustment was made in the payroll system to reflect this decrease. Cause Internal controls were not in place throughout the entire fiscal year to ensure that all personnel action forms were reviewed and signed by the designated individuals and the payroll system is updated to reflect changes in pay rates. Effect or potential effect Federal funds could be expended for unallowed activities and unallowed costs. Questioned costs Below the reporting threshold. Context We tested a sample of 60 payroll transactions totaling to $148,729 from a population of 454 payroll transactions. The total amount of payroll expenditures charged to the program in fiscal year 2021 were $1,220,281. We noted 21 exceptions as noted in the condition. This is a condition identified per review of City's compliance with the specified requirements not using a statistically valid sample. Identification as a repeat finding This is a repeat finding from prior year. This was reported as finding 2020- 005 in the 2020 report. Recommendation Management should ensure the most current personnel action forms are reviewed and signed by the designated personnel. Views of responsible officials Management concurs with the finding. Management will review current employee pay rates within the payroll module and ensure the rates agree to the most current pay rate as specified in the employee’s current personnel action form.

2021-007 Lack of Documentation to Support Distribution of Wages (Significant Deficiency) Federal Agency: Department of Education Pass-through Agency: New Hampshire Department of Education Cluster/Program: Education Stabilization Fund Assistance Listing Numbers: 84.425D Passed-through Identification: #20204815 Compliance Requirement: Activities Allowed or Unallowed and Allowable Costs/Cost Principles Type of Finding: Internal Control over Compliance – Significant Deficiency Criteria or Specific Requirement: Federal regulations 2 CFR 200.303 states, the district, as a recipient of Federal funds, must establish and maintain effective internal controls over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In addition, under 2 CFR 200.430, it states that charges to federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must (1) be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated, (2) be incorporated into the official records of the non-Federal entity, (3) reasonably reflect the total activity for which the employee is compensated by the non-Federal entity, not exceeding 100% of compensated activities, and (4) support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award or a federal award and non-Federal award. Condition: During our review of payroll charged to the grant, we noted one employee who did not have documentation to support the distribution of the employee’s time spent on grant activities. Cause: Administrative oversight. Effect: The District did not have adequate documentation to support the distribution of the employee’s wages paid using grant funds. Questioned Costs: $3,136 Repeat Finding: No Recommendation: We recommend that documentation be retained to support the distribution of salaries and wages for all employees paid using grant funds. Views of Responsible Officials: Management’s views and corrective action plan is included at the end of this report.

Finding #SA2021-002: Support for Payroll Costs Charged to Grant Assistance Listing Number: 20.507 Assistance Listing Title: Federal Transit – Formula Grants (Urbanized Area Formula Program) Name of Federal Agency: Department of Transportation - Federal Transportation Administration Federal Award Identification Number: CA-2021-009-01, CA-2020-005-01, CA-2020-005-02 Criteria: 2 CFR Part 200.430(i), “Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards” requires that grantees adhere to the following, “Payroll systems must be based on records that accurately reflect the work performed” and “be supported by a system of internal controls that provides reasonable assurances that charges are accurate, allowable, and properly allocated...” The payroll records must be a part of the official record, reflect the employee’s total activity and show if the specific activity of the person is being paid by more than one federal award. Section 200.430(i)(viii) indicates that budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards, but may be used for interim accounting purposes, provided that the system for establishing the estimates produces reasonable approximations of the activity actually performed, among other requirements. Condition: We noted that the payroll costs for one employee were charged to the program based on a flat rate of 25% of the payroll costs, rather than based on the actual hours worked. Payroll costs, including salary and benefits, charged to the program during fiscal year 2021 totaled $8,997. Questioned Costs: We question costs of $8,997, which consists of the payroll and fringe benefits charged to the grant for the employee based on the flat percentage of pay and benefits for the full fiscal year. Effect: The City is not in compliance with the payroll documentation requirements set forth in 2 CFR Part 200.430(i). Cause: We understand that grant program staff were not aware of the payroll documentation requirement and due to staff turnover, Finance staff cannot determine whether any such documentation exists. Identification as a repeat finding: Yes, since 2019 Recommendation: The City should establish procedures to ensure that payroll costs charged to the program are documented in accordance with 2 CFR Part 200.430 for the Federal Transit-Formula Grants program and all federal grant programs. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.

Finding #SA2021-003: Pro-Rating Annual Payroll Costs Charged to Grant Assistance Listing Number: 21.019 Assistance Listing Title: COVID-19 - Coronavirus Relief Fund Name of Federal Agency: Department of Treasury Pass Through Entity: California Department of Finance Federal Award Identification Number: 390 Criteria: 2 CFR Part 200.430(i), “Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards” requires that grantees adhere to the following, “Payroll systems must be based on records that accurately reflect the work performed” and “be supported by a system of internal controls that provides reasonable assurances that charges are accurate, allowable, and properly allocated...” The payroll records must be a part of the official record, reflect the employee’s total activity and show if the specific activity of the person is being paid by more than one federal award. Condition: The City charged a portion of three months of police and fire salaries to the Coronavirus Relief Fund program, and we noted one employee’s pay during that time included an annual stipend of $12,333, of which 33% was charged to the federal award, or $4,070. Although the pay was related to the employee’s gross pay under the applicable memorandum of understanding for the period, since it was an annual amount paid during the time charged to the grant, it should have been pro-rated to charge only 25% of the stipend to the federal award. Therefore, only 33% of that 25%, or $1,017 should have been charged to the federal award. After the issue was discovered, we reviewed the other payroll charges for amounts that did not appear to be in line with regular salaries and noted the payroll charges included annual stipends for three employees totaling $35,905 of which 67% was charged to the federal award, or $24,061. Those amounts should have been prorated as noted above, therefore only 67% of 25%, or $6,015 should have been charged to the federal award. And, one employee’s vacation buy back, compensatory time off buy back, furlough used and administrative leave pay totaling $50,679 was charged to the grant, which does not appear to be related to the three-month period of salaries charged to the grant. Questioned Costs: We question costs in the amounts of $3,053, $18,046 and $50,679, for total questioned costs of $68,724. Effect: The City is not in compliance with the payroll documentation requirements set forth in 2 CFR Part 200.430(i). Cause: We understand that City staff compiled the report of eligible public safety payroll costs to be charged to the federal award and did not analyze to see if it included annual pay amounts that should be pro-rated for the time period of salaries charged. Recommendation: The City should establish procedures to ensure that payroll costs charged to the program are pro-rated when the costs cover a time period that is longer than that covered by or being charged to the grant award, to ensure that costs are allocated equitably between federal and non-federal funding sources. In addition, the City should work with the grantor to determine if other eligible public safety payroll costs are allowed to replace the ineligible costs, or if the questioned costs need to be returned to the grantor. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.

Finding 2021-003: Activities Allowed or Unallowed - Material Weakness Grantor: U.S. Department of Health and Human Services Federal Program Names: Health Center Program Cluster: Health Center Program (Community Health Centers, Migrant Health Centers, Health Care for the Homeless, and Public Housing Primary Care) COVID-19 Health Center Program (Community Health Centers, Migrant Health Centers, Health Care for the Homeless, and Public Housing Primary Care) Grants for New and Expanded Services under the Health Center Program Federal Assistance Listing Numbers: 93.224 and 93.527 Federal Award Identification Number and Year: H80CS26638 - 2020 and 2021, H8DCS35487 - 2020, H8CCS34364 - 2020, H8ECS38373 - 2020, and H8F40829 - 2021 Criteria In accordance with 2 CFR, Part 200.430(i)(1), charges to Federal awards for salaries and wages must be based on records that accurately reflect the actual work performed, which must, among other things: (i) be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) be incorporated into the official records of the non-Federal entity; (iii) and reasonably reflect the total activity for which the employee is compensated by the non-Federal entity. Additionally, costs must be adequately documented, as per 2 CFR 200.40.3(g). Condition Charges to Federal Awards for salaries and wages were not supported by properly approved payrates, and timesheets did not agree to payroll registers. Additionally, nonpayroll expenditures were not supported by proper approval. Cause The Center's internal controls over payroll were not consistently followed to ensure payrates were approved and timesheets agreed to payroll registers. Additionally, the Center's internal controls over nonpayroll expenditures were not consistently followed to ensure that expenditures were approved. Effect Failure to ensure accurate wage and allocation of employee's time across programs could result in non-compliance with the grant requirements or unallowable costs being charged. Additionally, failure to ensure accurate nonpayroll expenditures could result in non-compliance with the grant requirements or unallowable costs being charged. Questioned Costs None. Context We selected 25 payroll transactions charged to the federal program for testing. Out of the 25 transactions tested, we noted 21 instances where there was no formal approval of payrates and where they were not appropriately reflected in the payroll registers, 15 instances where timecards were not appropriately reflected in the payroll registers, and all 25 labor reports showed no formal approval documented. Additionally, for nonpayroll allowable costs, out of five transactions tested, we noted five instances where there was no formal approval showing review that the cost was allowable under the program. Identification of Repeat Finding Yes, see finding 2020-003. Recommendation We recommend that the Center consistently enforce its internal controls over payroll to ensure that the timesheet and payrates are reviewed and approved by the appropriate supervisor. Additionally, we recommend that the Center consistently reinforces its internal controls over nonpayroll expenditures to ensure all expenditures were approved by the appropriate supervisor. Views of Responsible Officials Management and the Board of Directors agree with the finding and will implement additional controls to ensure all expenditures have evidence of formal approval of review.

Finding 2021-003: Activities Allowed or Unallowed - Material Weakness Grantor: U.S. Department of Health and Human Services Federal Program Names: Health Center Program Cluster: Health Center Program (Community Health Centers, Migrant Health Centers, Health Care for the Homeless, and Public Housing Primary Care) COVID-19 Health Center Program (Community Health Centers, Migrant Health Centers, Health Care for the Homeless, and Public Housing Primary Care) Grants for New and Expanded Services under the Health Center Program Federal Assistance Listing Numbers: 93.224 and 93.527 Federal Award Identification Number and Year: H80CS26638 - 2020 and 2021, H8DCS35487 - 2020, H8CCS34364 - 2020, H8ECS38373 - 2020, and H8F40829 - 2021 Criteria In accordance with 2 CFR, Part 200.430(i)(1), charges to Federal awards for salaries and wages must be based on records that accurately reflect the actual work performed, which must, among other things: (i) be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) be incorporated into the official records of the non-Federal entity; (iii) and reasonably reflect the total activity for which the employee is compensated by the non-Federal entity. Additionally, costs must be adequately documented, as per 2 CFR 200.40.3(g). Condition Charges to Federal Awards for salaries and wages were not supported by properly approved payrates, and timesheets did not agree to payroll registers. Additionally, nonpayroll expenditures were not supported by proper approval. Cause The Center's internal controls over payroll were not consistently followed to ensure payrates were approved and timesheets agreed to payroll registers. Additionally, the Center's internal controls over nonpayroll expenditures were not consistently followed to ensure that expenditures were approved. Effect Failure to ensure accurate wage and allocation of employee's time across programs could result in non-compliance with the grant requirements or unallowable costs being charged. Additionally, failure to ensure accurate nonpayroll expenditures could result in non-compliance with the grant requirements or unallowable costs being charged. Questioned Costs None. Context We selected 25 payroll transactions charged to the federal program for testing. Out of the 25 transactions tested, we noted 21 instances where there was no formal approval of payrates and where they were not appropriately reflected in the payroll registers, 15 instances where timecards were not appropriately reflected in the payroll registers, and all 25 labor reports showed no formal approval documented. Additionally, for nonpayroll allowable costs, out of five transactions tested, we noted five instances where there was no formal approval showing review that the cost was allowable under the program. Identification of Repeat Finding Yes, see finding 2020-003. Recommendation We recommend that the Center consistently enforce its internal controls over payroll to ensure that the timesheet and payrates are reviewed and approved by the appropriate supervisor. Additionally, we recommend that the Center consistently reinforces its internal controls over nonpayroll expenditures to ensure all expenditures were approved by the appropriate supervisor. Views of Responsible Officials Management and the Board of Directors agree with the finding and will implement additional controls to ensure all expenditures have evidence of formal approval of review.

Finding 2021-003: Activities Allowed or Unallowed - Material Weakness Grantor: U.S. Department of Health and Human Services Federal Program Names: Health Center Program Cluster: Health Center Program (Community Health Centers, Migrant Health Centers, Health Care for the Homeless, and Public Housing Primary Care) COVID-19 Health Center Program (Community Health Centers, Migrant Health Centers, Health Care for the Homeless, and Public Housing Primary Care) Grants for New and Expanded Services under the Health Center Program Federal Assistance Listing Numbers: 93.224 and 93.527 Federal Award Identification Number and Year: H80CS26638 - 2020 and 2021, H8DCS35487 - 2020, H8CCS34364 - 2020, H8ECS38373 - 2020, and H8F40829 - 2021 Criteria In accordance with 2 CFR, Part 200.430(i)(1), charges to Federal awards for salaries and wages must be based on records that accurately reflect the actual work performed, which must, among other things: (i) be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) be incorporated into the official records of the non-Federal entity; (iii) and reasonably reflect the total activity for which the employee is compensated by the non-Federal entity. Additionally, costs must be adequately documented, as per 2 CFR 200.40.3(g). Condition Charges to Federal Awards for salaries and wages were not supported by properly approved payrates, and timesheets did not agree to payroll registers. Additionally, nonpayroll expenditures were not supported by proper approval. Cause The Center's internal controls over payroll were not consistently followed to ensure payrates were approved and timesheets agreed to payroll registers. Additionally, the Center's internal controls over nonpayroll expenditures were not consistently followed to ensure that expenditures were approved. Effect Failure to ensure accurate wage and allocation of employee's time across programs could result in non-compliance with the grant requirements or unallowable costs being charged. Additionally, failure to ensure accurate nonpayroll expenditures could result in non-compliance with the grant requirements or unallowable costs being charged. Questioned Costs None. Context We selected 25 payroll transactions charged to the federal program for testing. Out of the 25 transactions tested, we noted 21 instances where there was no formal approval of payrates and where they were not appropriately reflected in the payroll registers, 15 instances where timecards were not appropriately reflected in the payroll registers, and all 25 labor reports showed no formal approval documented. Additionally, for nonpayroll allowable costs, out of five transactions tested, we noted five instances where there was no formal approval showing review that the cost was allowable under the program. Identification of Repeat Finding Yes, see finding 2020-003. Recommendation We recommend that the Center consistently enforce its internal controls over payroll to ensure that the timesheet and payrates are reviewed and approved by the appropriate supervisor. Additionally, we recommend that the Center consistently reinforces its internal controls over nonpayroll expenditures to ensure all expenditures were approved by the appropriate supervisor. Views of Responsible Officials Management and the Board of Directors agree with the finding and will implement additional controls to ensure all expenditures have evidence of formal approval of review.

Finding 2021-003: Activities Allowed or Unallowed - Material Weakness Grantor: U.S. Department of Health and Human Services Federal Program Names: Health Center Program Cluster: Health Center Program (Community Health Centers, Migrant Health Centers, Health Care for the Homeless, and Public Housing Primary Care) COVID-19 Health Center Program (Community Health Centers, Migrant Health Centers, Health Care for the Homeless, and Public Housing Primary Care) Grants for New and Expanded Services under the Health Center Program Federal Assistance Listing Numbers: 93.224 and 93.527 Federal Award Identification Number and Year: H80CS26638 - 2020 and 2021, H8DCS35487 - 2020, H8CCS34364 - 2020, H8ECS38373 - 2020, and H8F40829 - 2021 Criteria In accordance with 2 CFR, Part 200.430(i)(1), charges to Federal awards for salaries and wages must be based on records that accurately reflect the actual work performed, which must, among other things: (i) be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) be incorporated into the official records of the non-Federal entity; (iii) and reasonably reflect the total activity for which the employee is compensated by the non-Federal entity. Additionally, costs must be adequately documented, as per 2 CFR 200.40.3(g). Condition Charges to Federal Awards for salaries and wages were not supported by properly approved payrates, and timesheets did not agree to payroll registers. Additionally, nonpayroll expenditures were not supported by proper approval. Cause The Center's internal controls over payroll were not consistently followed to ensure payrates were approved and timesheets agreed to payroll registers. Additionally, the Center's internal controls over nonpayroll expenditures were not consistently followed to ensure that expenditures were approved. Effect Failure to ensure accurate wage and allocation of employee's time across programs could result in non-compliance with the grant requirements or unallowable costs being charged. Additionally, failure to ensure accurate nonpayroll expenditures could result in non-compliance with the grant requirements or unallowable costs being charged. Questioned Costs None. Context We selected 25 payroll transactions charged to the federal program for testing. Out of the 25 transactions tested, we noted 21 instances where there was no formal approval of payrates and where they were not appropriately reflected in the payroll registers, 15 instances where timecards were not appropriately reflected in the payroll registers, and all 25 labor reports showed no formal approval documented. Additionally, for nonpayroll allowable costs, out of five transactions tested, we noted five instances where there was no formal approval showing review that the cost was allowable under the program. Identification of Repeat Finding Yes, see finding 2020-003. Recommendation We recommend that the Center consistently enforce its internal controls over payroll to ensure that the timesheet and payrates are reviewed and approved by the appropriate supervisor. Additionally, we recommend that the Center consistently reinforces its internal controls over nonpayroll expenditures to ensure all expenditures were approved by the appropriate supervisor. Views of Responsible Officials Management and the Board of Directors agree with the finding and will implement additional controls to ensure all expenditures have evidence of formal approval of review.

Finding 2021-003: Activities Allowed or Unallowed - Material Weakness Grantor: U.S. Department of Health and Human Services Federal Program Names: Health Center Program Cluster: Health Center Program (Community Health Centers, Migrant Health Centers, Health Care for the Homeless, and Public Housing Primary Care) COVID-19 Health Center Program (Community Health Centers, Migrant Health Centers, Health Care for the Homeless, and Public Housing Primary Care) Grants for New and Expanded Services under the Health Center Program Federal Assistance Listing Numbers: 93.224 and 93.527 Federal Award Identification Number and Year: H80CS26638 - 2020 and 2021, H8DCS35487 - 2020, H8CCS34364 - 2020, H8ECS38373 - 2020, and H8F40829 - 2021 Criteria In accordance with 2 CFR, Part 200.430(i)(1), charges to Federal awards for salaries and wages must be based on records that accurately reflect the actual work performed, which must, among other things: (i) be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) be incorporated into the official records of the non-Federal entity; (iii) and reasonably reflect the total activity for which the employee is compensated by the non-Federal entity. Additionally, costs must be adequately documented, as per 2 CFR 200.40.3(g). Condition Charges to Federal Awards for salaries and wages were not supported by properly approved payrates, and timesheets did not agree to payroll registers. Additionally, nonpayroll expenditures were not supported by proper approval. Cause The Center's internal controls over payroll were not consistently followed to ensure payrates were approved and timesheets agreed to payroll registers. Additionally, the Center's internal controls over nonpayroll expenditures were not consistently followed to ensure that expenditures were approved. Effect Failure to ensure accurate wage and allocation of employee's time across programs could result in non-compliance with the grant requirements or unallowable costs being charged. Additionally, failure to ensure accurate nonpayroll expenditures could result in non-compliance with the grant requirements or unallowable costs being charged. Questioned Costs None. Context We selected 25 payroll transactions charged to the federal program for testing. Out of the 25 transactions tested, we noted 21 instances where there was no formal approval of payrates and where they were not appropriately reflected in the payroll registers, 15 instances where timecards were not appropriately reflected in the payroll registers, and all 25 labor reports showed no formal approval documented. Additionally, for nonpayroll allowable costs, out of five transactions tested, we noted five instances where there was no formal approval showing review that the cost was allowable under the program. Identification of Repeat Finding Yes, see finding 2020-003. Recommendation We recommend that the Center consistently enforce its internal controls over payroll to ensure that the timesheet and payrates are reviewed and approved by the appropriate supervisor. Additionally, we recommend that the Center consistently reinforces its internal controls over nonpayroll expenditures to ensure all expenditures were approved by the appropriate supervisor. Views of Responsible Officials Management and the Board of Directors agree with the finding and will implement additional controls to ensure all expenditures have evidence of formal approval of review.

Finding 2021-003: Activities Allowed or Unallowed - Material Weakness Grantor: U.S. Department of Health and Human Services Federal Program Names: Health Center Program Cluster: Health Center Program (Community Health Centers, Migrant Health Centers, Health Care for the Homeless, and Public Housing Primary Care) COVID-19 Health Center Program (Community Health Centers, Migrant Health Centers, Health Care for the Homeless, and Public Housing Primary Care) Grants for New and Expanded Services under the Health Center Program Federal Assistance Listing Numbers: 93.224 and 93.527 Federal Award Identification Number and Year: H80CS26638 - 2020 and 2021, H8DCS35487 - 2020, H8CCS34364 - 2020, H8ECS38373 - 2020, and H8F40829 - 2021 Criteria In accordance with 2 CFR, Part 200.430(i)(1), charges to Federal awards for salaries and wages must be based on records that accurately reflect the actual work performed, which must, among other things: (i) be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) be incorporated into the official records of the non-Federal entity; (iii) and reasonably reflect the total activity for which the employee is compensated by the non-Federal entity. Additionally, costs must be adequately documented, as per 2 CFR 200.40.3(g). Condition Charges to Federal Awards for salaries and wages were not supported by properly approved payrates, and timesheets did not agree to payroll registers. Additionally, nonpayroll expenditures were not supported by proper approval. Cause The Center's internal controls over payroll were not consistently followed to ensure payrates were approved and timesheets agreed to payroll registers. Additionally, the Center's internal controls over nonpayroll expenditures were not consistently followed to ensure that expenditures were approved. Effect Failure to ensure accurate wage and allocation of employee's time across programs could result in non-compliance with the grant requirements or unallowable costs being charged. Additionally, failure to ensure accurate nonpayroll expenditures could result in non-compliance with the grant requirements or unallowable costs being charged. Questioned Costs None. Context We selected 25 payroll transactions charged to the federal program for testing. Out of the 25 transactions tested, we noted 21 instances where there was no formal approval of payrates and where they were not appropriately reflected in the payroll registers, 15 instances where timecards were not appropriately reflected in the payroll registers, and all 25 labor reports showed no formal approval documented. Additionally, for nonpayroll allowable costs, out of five transactions tested, we noted five instances where there was no formal approval showing review that the cost was allowable under the program. Identification of Repeat Finding Yes, see finding 2020-003. Recommendation We recommend that the Center consistently enforce its internal controls over payroll to ensure that the timesheet and payrates are reviewed and approved by the appropriate supervisor. Additionally, we recommend that the Center consistently reinforces its internal controls over nonpayroll expenditures to ensure all expenditures were approved by the appropriate supervisor. Views of Responsible Officials Management and the Board of Directors agree with the finding and will implement additional controls to ensure all expenditures have evidence of formal approval of review.

Federal Agency: Department of Housing and Urban Development and Department of Veterans Affairs Federal Program Name: Emergency Solutions Grant Program and VA Homeless Providers Grant and Per Diem Program Assistance Listing Number: 14.231 and 64.024 Federal Award Identification Number and Year: E20DW37001-2021 and ODMH543-1095-659-CM-20 Pass-Through Agency: North Carolina Department of Health and Human Services, Division of Aging and Adult Services Pass-Through Number(s): 00041416 Award Period: 7/29/2020 - 6/30/2021 and 10/1/2019 - 9/30/2021 Type of Finding: - Material Weakness in Internal Control over Compliance - Material Noncompliance (Modified Opinion) Criteria or specific requirement: In accordance with 2 CFR 200.302(b)(3), the recipient's financial management system must maintain records sufficient to identify the amount, source, and expenditure of federal funds for federal awards, These records must contain information necessary to identify federal awards, authorizations, financial obligations, unobligated balances, as well as assets, expenditures, income, and interest. All records must be supported by source documentation. In accordance with the Compliance Supplement, Part 6 – Internal Control, 2 CFR section 200.303 requires that non-Federal entities receiving federal awards establish and maintain internal control over the federal awards that provides reasonable assurance that the non-Federal entity is managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards. In accordance with 2 CFR 200.430 (a), costs of compensation are allowable to the extent that they satisfy the specific requirements of this part, and that the total compensation for individual employees: (1) Is reasonable for the services rendered and conforms to the established written policy of the non-Federal entity consistently applied to both Federal and non-Federal activities; (2) Follows an appointment made in accordance with a non-Federal entity's laws and/or rules or written policies and meets the requirements of Federal statute, where applicable; and (3) Is determined and supported as provided in paragraph (i) of this section, when applicable. In accordance with 2 CFR 200.430(g), charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. The records must: (1) Be supported by a system of internal control that provides reasonable assurance that the charges are accurate, allowable, and properly allocated, (2) Be incorporated into the official records of the recipient (3) Reasonably reflect the total activity for which the employee is compensated. Condition: During our testing, we noted the Organization did not have adequate controls to ensure that expenditures of federal awards were properly supported, reasonably reflective of the work performed, and properly reviewed and approved. Questioned costs: Assistance listing number: 14.231 Federal award identification number: E20DW37001-2021 Known questioned costs: $19,334 Assistance listing number: 64.024 Federal award identification number: ODMH543-1095-659-CM-20 Know questioned costs: $51,247 Context: During our testing, we noted the following related to the VA Homeless Providers Grant and Per Diem Program: 40 out of 40 payroll transactions tested for allowable costs and allowable activities were not allocated based on actual time worked on the grant and lacked adequate records. 27 out of 40 tested for allowable costs and allowable activities did not have evidence showing expenditures were allowable under the grant 25 out of 40 tested for allowable costs and allowable activities lacked evidence of review and approval 17 out of 17 tested for period of performance did not have evidence of review and approval 5 out of 17 tested for period of performance lacked appropriate supporting documentation showing the expenditures related to the grant During our testing, we noted the following related to the Emergency Solutions Grant Program: 20 of 40 tested for allowable costs and allowable activities lacked evidence showing the expenditures were allowable under the grant 3 of 40 tested for allowable costs and allowable activities were not allowable under the grant. 6 out of 11 payroll transactions tested for allowable costs and allowable activities were not allocated based on actual time worked on the grant and lacked adequate records. Cause: The Organization’s controls were not sufficient to ensure that expenditures of federal funds were supported, reasonably reflecting the work performed under the program, reviewed and approved, and only for allowable costs and allowable activities. Effect: The Organization could have incurred expenses that were not allowable under the grant beyond those identified. Repeat Finding: No Recommendation: We recommend the Organization develop a system of internal controls to ensure that salaries and related payroll expenses are tracked to reasonably reflect the actual time spent working on the programs. In addition we recommend that management retain all documents including evidence of review and approval for all expenditures of federal funds until the latter of the legally required retention period or completion of required audits. Views of responsible officials: There is no disagreement with the audit finding.

Finding 2020-009 Lack of Internal Controls Over Activities Allowed or Unallowed and Allowable Costs/Costs Principles Federal Agencies: U.S. Department of the Treasury Federal Programs: Coronavirus Relief Fund CFDA Numbers: 21.019 Award Number: SLT0591/0845/1405 Award Year: 2020 Type of Finding: Material weakness in internal control over compliance and material noncompliance. Criteria: Per 2 CFR part 200.430, personnel expenses recorded into a federal program must be based on records that accurately reflect the work performed. Hourly employees should be paid for hours worked and documented through a system of internal controls which provides reasonable assurance that the charges are accurate, allowable and properly allocated. Internal controls procedures should be in place to ensure that all cash disbursements and payroll transactions are adequately supported by documentation, approved with accurate account coding on the approval form, retained for support either in the vendor, employee, or program file. Condition and Context: During our testing of payroll transactions charged to the program, we noted that the Community is incorrectly calculating the gross pay from the timesheets. The Community is taking the employee’s hourly rate multiplied by the hours worked with minutes calculated using 100 minutes per hour instead of 60 minutes. This results in an underpayment on any partial hour worked. Additionally, we noted that nearly all employees tested did not have approved pay rates in their personnel files. Cause: Lack of internal controls over payroll transactions. Effect: Lack of internal control over payroll transactions poses the risk that the Community will expend federal funds for non-grant purposes. Questioned costs: None noted. In all cases noted, the employees were under paid. Repeat finding: This is a repeat of Finding 2019-009, therefore, we believe this to be a systemic issue. Recommendation: We recommend that management implement policies and procedures to ensure that all paychecks are supported by an approved pay rate, hours worked agree to the hours paid and are accurately calculated. Management Response: Management agrees with this finding, see Corrective Action Plan.

Finding 2020-009 Lack of Internal Controls Over Activities Allowed or Unallowed and Allowable Costs/Costs Principles Federal Agencies: U.S. Department of the Treasury Federal Programs: Coronavirus Relief Fund CFDA Numbers: 21.019 Award Number: SLT0591/0845/1405 Award Year: 2020 Type of Finding: Material weakness in internal control over compliance and material noncompliance. Criteria: Per 2 CFR part 200.430, personnel expenses recorded into a federal program must be based on records that accurately reflect the work performed. Hourly employees should be paid for hours worked and documented through a system of internal controls which provides reasonable assurance that the charges are accurate, allowable and properly allocated. Internal controls procedures should be in place to ensure that all cash disbursements and payroll transactions are adequately supported by documentation, approved with accurate account coding on the approval form, retained for support either in the vendor, employee, or program file. Condition and Context: During our testing of payroll transactions charged to the program, we noted that the Community is incorrectly calculating the gross pay from the timesheets. The Community is taking the employee’s hourly rate multiplied by the hours worked with minutes calculated using 100 minutes per hour instead of 60 minutes. This results in an underpayment on any partial hour worked. Additionally, we noted that nearly all employees tested did not have approved pay rates in their personnel files. Cause: Lack of internal controls over payroll transactions. Effect: Lack of internal control over payroll transactions poses the risk that the Community will expend federal funds for non-grant purposes. Questioned costs: None noted. In all cases noted, the employees were under paid. Repeat finding: This is a repeat of Finding 2019-009, therefore, we believe this to be a systemic issue. Recommendation: We recommend that management implement policies and procedures to ensure that all paychecks are supported by an approved pay rate, hours worked agree to the hours paid and are accurately calculated. Management Response: Management agrees with this finding, see Corrective Action Plan.

Finding 2020-009 Lack of Internal Controls Over Activities Allowed or Unallowed and Allowable Costs/Costs Principles Federal Agencies: U.S. Department of the Treasury Federal Programs: Coronavirus Relief Fund CFDA Numbers: 21.019 Award Number: SLT0591/0845/1405 Award Year: 2020 Type of Finding: Material weakness in internal control over compliance and material noncompliance. Criteria: Per 2 CFR part 200.430, personnel expenses recorded into a federal program must be based on records that accurately reflect the work performed. Hourly employees should be paid for hours worked and documented through a system of internal controls which provides reasonable assurance that the charges are accurate, allowable and properly allocated. Internal controls procedures should be in place to ensure that all cash disbursements and payroll transactions are adequately supported by documentation, approved with accurate account coding on the approval form, retained for support either in the vendor, employee, or program file. Condition and Context: During our testing of payroll transactions charged to the program, we noted that the Community is incorrectly calculating the gross pay from the timesheets. The Community is taking the employee’s hourly rate multiplied by the hours worked with minutes calculated using 100 minutes per hour instead of 60 minutes. This results in an underpayment on any partial hour worked. Additionally, we noted that nearly all employees tested did not have approved pay rates in their personnel files. Cause: Lack of internal controls over payroll transactions. Effect: Lack of internal control over payroll transactions poses the risk that the Community will expend federal funds for non-grant purposes. Questioned costs: None noted. In all cases noted, the employees were under paid. Repeat finding: This is a repeat of Finding 2019-009, therefore, we believe this to be a systemic issue. Recommendation: We recommend that management implement policies and procedures to ensure that all paychecks are supported by an approved pay rate, hours worked agree to the hours paid and are accurately calculated. Management Response: Management agrees with this finding, see Corrective Action Plan.

Finding 2020-009 Lack of Internal Controls Over Activities Allowed or Unallowed and Allowable Costs/Costs Principles Federal Agencies: U.S. Department of the Treasury Federal Programs: Coronavirus Relief Fund CFDA Numbers: 21.019 Award Number: SLT0591/0845/1405 Award Year: 2020 Type of Finding: Material weakness in internal control over compliance and material noncompliance. Criteria: Per 2 CFR part 200.430, personnel expenses recorded into a federal program must be based on records that accurately reflect the work performed. Hourly employees should be paid for hours worked and documented through a system of internal controls which provides reasonable assurance that the charges are accurate, allowable and properly allocated. Internal controls procedures should be in place to ensure that all cash disbursements and payroll transactions are adequately supported by documentation, approved with accurate account coding on the approval form, retained for support either in the vendor, employee, or program file. Condition and Context: During our testing of payroll transactions charged to the program, we noted that the Community is incorrectly calculating the gross pay from the timesheets. The Community is taking the employee’s hourly rate multiplied by the hours worked with minutes calculated using 100 minutes per hour instead of 60 minutes. This results in an underpayment on any partial hour worked. Additionally, we noted that nearly all employees tested did not have approved pay rates in their personnel files. Cause: Lack of internal controls over payroll transactions. Effect: Lack of internal control over payroll transactions poses the risk that the Community will expend federal funds for non-grant purposes. Questioned costs: None noted. In all cases noted, the employees were under paid. Repeat finding: This is a repeat of Finding 2019-009, therefore, we believe this to be a systemic issue. Recommendation: We recommend that management implement policies and procedures to ensure that all paychecks are supported by an approved pay rate, hours worked agree to the hours paid and are accurately calculated. Management Response: Management agrees with this finding, see Corrective Action Plan.

Finding 2020-005 - Material Weakness - Missing Supporting Documentation CFDA Number and Title: 84.287 Twenty-First Century Community Learning Centers Applicable Compliance Requirements: Activities Allowed or Unallowed Allowable Costs/Cost Principles Criteria: According to 2 CFR §200.430(i), charges to federal awards for salaries must be based on records that accurately reflect the work performed. These records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated. Additionally, the Twenty-First Century Community Learning Centers program requires grantees to maintain documentation that supports personnel costs charged to the grant, including time and effort records for staff funded in whole or in part by federal funds. Condition: During the audit of expenditures under the Twenty-First Century Community Learning Centers program pay records, such as timesheets, pay rates or equivalent documentation, which support time and effort charged to the grant were not available for review. The missing files had been stored on a drive maintained by a former employee and could not be recovered. Cause: The City did not retain or migrate payroll documentation from the former employee’s system, resulting in the loss of critical records necessary to support grant expenditures. Effect or Potential Effect: Without adequate documentation, the organization cannot substantiate the allowability of payroll costs charged to the 21st CCLC grant. This may result in questioned costs and potential repayment or corrective action requirements from the granting agency. Questioned Costs: $120,064 represent salaries charged to the grant where no timesheets could be provided. Context: The ten missing timesheets were for specific pay periods throughout the fiscal year. The questioned costs represent those employee’s salaries charged to the grant for the year. Recommendation: The City should establish and enforce a formal records retention policy that ensures all grant-related documentation, including payroll and time and effort records, is preserved and accessible. Additionally, procedures should be implemented to verify that personnel costs charged to the grant comply with federal requirements and program-specific guidance. Management’s Responses: See corrective action plan.

Criteria: The requirements for allowable costs related to wages and salaries are contained in 2 CFR Section 200.430. This states that salaries and wages charged to federal awards must be based on records that accurately reflect the work performed. These records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated. Condition: During the year under audit, PAX did not have a time and effort reporting system that met the requirements of the federal cost principles. Citation: 2 CFR 200.430 Cause: PAX did not have an effective internal control system in place for monitoring and documenting wages and salaries charged to the federal awards. Effect: PAX did not maintain adequate documentation to support salaries charged to the federal awards throughout the year. However, they provided attestations and other support to demonstrate that the salaries and wages were accurate, allowable, and properly allocated after year-end as part of the audit process. Questioned Costs: PAX charged $1,109,466 of wages and salaries to the major program. Context: This was a universal matter that impacted the entity as a whole. Repeat Finding: No Recommendation: We recommend that management establish internal control process, such as a time sheet reporting system, to capture which grant each employee spends time on. View of Responsible Officials: See Corrective Action Plan attached.

Criteria: • • §2 CFR 200.430 (i) Standards for Documentation of Personnel Expenses, establishes that “(1) Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated;” • • The Human Resources manuals that establish the hire procedures for the employee’s Authority, in its article 6.2 Job Description, establishes that the Authority shall prepare and keep up to date, for each authorized position in the career service, a clear and precise description of the essential and marginal duties and responsibilities, degree of authority, responsibility and supervision assigned to it. Condition: Four (4) employees, out of a sample of fifteen (15) files examined, had no job descriptions. Cause: The Program did not follow up the established procedures for hiring of personnel. Effects: Condition may result in noncompliance with the requirements of record retention and with internal controls as in place for COR3. Questioned Costs: None Recommendation: We recommended management to monitor the implementation of procedures in place to maintain updated employee’s personal file.

Grantor: U.S. Department of Health and Human Services Federal Program Names: Health Center Program Cluster: Health Center Program (Community Health Centers, Migrant Health Centers, Health Care for the Homeless, and Public Housing Primary Care), COVID-19 Health Center Program (Community Health Centers, Migrant Health Centers, Health Care for the Homeless, and Public Housing Primary Care), Grants for New and Expanded Services under the Health Center Program CFDA Numbers: 93.224 and 93.527 Criteria According to 2 CFR, Part 200.430(i)(1) charges to Federal awards for salaries and wages must be based on records that accurately reflect the actual work performed, which must, among other things: (i) be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) be incorporated into the official records of the non-Federal entity; (iii) and reasonably reflect the total activity for which the employee is compensated by the non-Federal entity. Additionally, costs must be adequately documented, as per 2 CFR 200.403(g). Condition Charges to Federal awards for salaries and wages were not supported by properly approved payrates, and timesheets did not agree to payroll registers. Additionally, nonpayroll expenditures were not supported by properly approval. Cause The Center’s internal controls over payroll were not consistently followed to ensure payrates were approved and timesheets agreed to payroll registers. Additionally, the Center’s internal controls over nonpayroll expenditures were not consistently followed to ensure that expenditures were approved. Effect Failure to ensure accurate wage and allocation of employee time across programs could result in non-compliance with the grant requirements or unallowable costs being charged. Additionally, failure to ensure accurate nonpayroll expenditures could result in a non-compliance with the grant requirements or unallowable costs being charged. Questioned Costs None. Context We selected 25 payroll transactions charged to the federal program to test controls over allowable costs. Out of the 25 transactions tested, we noted 15 instances where there was no formal approval of payrates, 4 instances where timecards did not appropriately reflect in the payroll registers, and all 25 labor reports showed no formal approval documented. Additionally, for nonpayroll allowable costs, out of 3 transactions tested, we noted 3 instances where there was no formal approval showing review that the cost was allowable under the program. Identification of Repeat Finding Not a repeat finding. Recommendation We recommend that the Center consistently enforce its internal controls over payroll to ensure that the timesheet and payrates are reviewed and approved by the appropriate supervisor. Additionally, we recommend that the Center consistently enforce its internal controls over nonpayroll expenditures to ensure all expenditures are approved by the appropriate supervisor. Views of Responsible Officials Management and the Board of Directors agree with the finding and will implement additional controls to ensure all expenditures have evidence of formal approval of review

Grantor: U.S. Department of Health and Human Services Federal Program Names: Health Center Program Cluster: Health Center Program (Community Health Centers, Migrant Health Centers, Health Care for the Homeless, and Public Housing Primary Care), COVID-19 Health Center Program (Community Health Centers, Migrant Health Centers, Health Care for the Homeless, and Public Housing Primary Care), Grants for New and Expanded Services under the Health Center Program CFDA Numbers: 93.224 and 93.527 Criteria According to 2 CFR, Part 200.430(i)(1) charges to Federal awards for salaries and wages must be based on records that accurately reflect the actual work performed, which must, among other things: (i) be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) be incorporated into the official records of the non-Federal entity; (iii) and reasonably reflect the total activity for which the employee is compensated by the non-Federal entity. Additionally, costs must be adequately documented, as per 2 CFR 200.403(g). Condition Charges to Federal awards for salaries and wages were not supported by properly approved payrates, and timesheets did not agree to payroll registers. Additionally, nonpayroll expenditures were not supported by properly approval. Cause The Center’s internal controls over payroll were not consistently followed to ensure payrates were approved and timesheets agreed to payroll registers. Additionally, the Center’s internal controls over nonpayroll expenditures were not consistently followed to ensure that expenditures were approved. Effect Failure to ensure accurate wage and allocation of employee time across programs could result in non-compliance with the grant requirements or unallowable costs being charged. Additionally, failure to ensure accurate nonpayroll expenditures could result in a non-compliance with the grant requirements or unallowable costs being charged. Questioned Costs None. Context We selected 25 payroll transactions charged to the federal program to test controls over allowable costs. Out of the 25 transactions tested, we noted 15 instances where there was no formal approval of payrates, 4 instances where timecards did not appropriately reflect in the payroll registers, and all 25 labor reports showed no formal approval documented. Additionally, for nonpayroll allowable costs, out of 3 transactions tested, we noted 3 instances where there was no formal approval showing review that the cost was allowable under the program. Identification of Repeat Finding Not a repeat finding. Recommendation We recommend that the Center consistently enforce its internal controls over payroll to ensure that the timesheet and payrates are reviewed and approved by the appropriate supervisor. Additionally, we recommend that the Center consistently enforce its internal controls over nonpayroll expenditures to ensure all expenditures are approved by the appropriate supervisor. Views of Responsible Officials Management and the Board of Directors agree with the finding and will implement additional controls to ensure all expenditures have evidence of formal approval of review