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Finding 2024-001: Preparation of the Schedule of Expenditures of Federal Awards – Significant Deficiency in Internal Control Over Compliance Federal Program: Medicaid cluster (Assistance Listing No. 93.778) Federal Agency: U.S. Department of Health and Human Services Award Year: 2023-2024 Criteria: The Uniform Guidance (2 CFR 200) Section200.303(a) states that the non-federal entity must establish and maintain effective internal control over the federal award that provides reasonable assurance that the nonfederal entity is managing the federal award in compliance with federal statutes, regulations, and terms and conditions of the federal award. In addition, 2 CFR 200.510 requires an auditee to prepare a schedule of expenditures of Federal awards (SEFA) for the period covered by the auditee’s financial statements that, at a minimum, lists all individual Federal programs by Federal agency and provides total Federal awards expended for each individual Federal program. In accordance with the Uniform Guidance, the Organization is required to maintain a structure of internal control to ensure compliance with applicable reporting requirements. Condition / Context: During audit procedures over expenditures of federal awards for the year ended June 30, 2025, we noted that California Advancing & Innovating Medi-Cal Providing Access and Transforming Health Initiative: Capacity and Infrastructure Transition, Expansion, and Development (PATH CITED) grant Federal funding in the amount of $2,692,789 was not included in the SEFA for the year ended June 30, 2024. The Organization did not have sufficient controls to ensure the SEFA included all expenditures that qualified as an expenditure of a federal award during the period. Cause and Effect: At the time the PATH CITED program was implemented and expenditures were incurred during fiscal year 2023, the grant agreements and publicly available documentation from the California Department of Health Care Services (DHCS) did not identify the funding as federal passthrough assistance and did not include the related Assistance Listing Number or other federal award identification elements typically required under Uniform Guidance. Based on the information available at that time, the Organization did not identify the PATH CITED program as federal funding subject to SEFA reporting requirements and reasonably treated the funding as non-federal. As a result, total expenditures of Federal awards were understated for the year ended June 30, 2024 by $2,692,789. During audit procedures over expenditures of federal awards for the year ended June 30, 2025, DHCS provided the Organization’s management with information that the PATH CITED program expenditures contained Federal awards. Management has restated the 2024 SEFA to include $2,692,789 PATH CITED expenditures for the year ended June 30, 2024. Questioned costs: $0 Repeat Finding: Yes, Finding Number 2023-001. Recommendation: We recommend management strengthen existing policies and procedures and improve the effectiveness of related internal controls to confirm existence of federal assistance within all contracts, and strengthen the existing periodic review throughout the year to ensure compliance with SEFA reporting requirements as outlined in the Uniform Guidance. Views of Responsible Officials and Planned Corrective Action: Management acknowledges the omission of PATH CITED expenditures from the SEFA for the year ended June 30, 2024. Management notes that the federal nature of the PATH CITED program was not identified in the original grant documentation or publicly available information provided by DHCS at the time the funding was awarded. Upon confirmation in 2025 that the program includes federal pass-through funding, the Organization worked to restate the SEFA and include the appropriate federal expenditures.