Health Center Program Cluster – Assistance Listing Nos. 93.224 U.S Department of Health and Human Services Award No. 4 H8NCS54233-01-01, September 1, 2024 - August 31, 2025 Criteria or Specific Requirement – Cash Management – 2 CFR 200.305, Reporting - 2 CFR 200.328, and Period of Performance - 2 CFR 200.309 Condition – The Organization did not minimize the time elapsing between the transfer of funds to the Organization from the U.S. Treasury and the issuance of payments for program purposes by the Organization for one draw for the H8N award. The Organization improperly utilized estimated costs rather than actual expenditures within the appropriate period of performance. A corrected expenditure listing was created subsequent to the draw date; however, it was not completed timely before the draw request was made. In addition, in review of the expenditures noted $180,641 of grant funds were drawn down prior to disbursements of expenditures within the grant period during the fiscal year ended January 31, 2026. This draw was deposited in a non-interest bearing bank account resulting in no interest earned. Expenses allowable with the budget were available after the period of performance however the Annual FFR was filed noting full obligation of the award as of August 31, 2025. The Organization is required to prepare and submit an annual Federal Financial Report (FFR) for each grant year. This report is to be prepared using accurate financial information and was filed in error in review of the expenditure listing. Cause – Grant funds documentation was not initially maintained to support that funds were both not drawn down sooner than administratively necessary and within the period of performance which resulted in one draw being partially drawn down sooner than administratively necessary. In addition, this resulted in an error in the Annual FFR submitted improperly showing full obligation of the H8N amount awarded as of August 31, 2025. Effect or potential effect – The Organization did not comply with their federal cash drawdown policy or federal grant cash management and period of performance requirements. The Annual FFR was filed in error for award H8N. Questioned Costs – $180,641 Context – The Organization did not follow their process of determining whether sufficient grant expenditures had been incurred and disbursed prior to drawing down grant funds. Grant funds were drawn down prior to disbursements of expenditures for one draw. The value of this advance payment was reported in error as expenditures incurred through the grant period end in the annual FFR. Identification as a repeat finding, if applicable – No Recommendation – The Organization should ensure procedures are followed to prevent cash draws from being drawn down prior to disbursement of allowable expenditures within the period of performance for the award. In addition, the Organization should revise policies and procedures over federal reporting to ensure reports are prepared using accurate information and supporting documentation for federal grant reports should be maintained. Views of Responsible Officials and Planned Corrective Actions – Planned corrective action 1. Reconstruct and reconcile the transactions. By November 2026, the CFO will complete a transaction-level reconciliation of the $180,641 identified by the auditor and review the relevant draws for the H80 and H8N awards cited. The review will tie draw requests to the general ledger, bank activity, payment dates, grant budgets, supporting invoices or payroll, periods of performance, and submitted Federal Financial Reports. 2. Resolve questioned costs and reporting discrepancies. By December 2026, management will determine, based on source documentation and applicable award requirements, the amount, if any, that requires correction; communicate the results to the appropriate HRSA grants management and payment-system contacts; and obtain direction on any required return of funds, adjustment, or corrected reporting. NHHC will implement required remedies and retain correspondence, approvals, and transaction evidence. The $180,641 will remain an open questioned-cost matter until resolved through the applicable agency process. 3. Establish pre-draw controls. By December 2026, the CFO will revise and implement written cash-management procedures that require a grant-specific drawdown worksheet for each request. The worksheet will document eligible expenditures already disbursed or actual immediate cash requirements, planned payment dates, budget and award-period eligibility, available cash, and the requested amount. A designated Finance preparer will document the calculation, and the CFO will approve each draw before submission; exceptions will be escalated to the CEO. 4. Strengthen Federal Financial Report controls. By January 2027, Finance will implement an FFR preparation and review checklist that requires reconciling award-specific financial records with reported expenditures, disbursements, unliquidated obligations (where applicable), and reporting-period dates. The CFO will independently review and approve each FFR before submission. In coordination with HRSA and the payment-system administrator, Finance will address the identified H8N reporting error through the permitted correction process. 5. Test and monitor compliance. By March 2027, the CFO will document a review of all grant draw requests submitted during the first three months of the revised process and of any FFRs submitted during that period. The review will verify completed pre-draw support, approvals, cash timing, and report reconciliation. Exceptions will be investigated, corrected, and tracked to closure, with a summary provided to the CEO. Responsible contacts: Jason Wallace, Chief Executive Officer; Monica Lerma, Chief Financial Officer Anticipated completion: March 2027 Evidence of correction: Transaction-level draw reconciliation and questioned-cost analysis; HRSA and payment-system correspondence; written cash-management and FFR procedures; approved draw worksheets; FFR support and approval checklists; bank and expenditure records; and post-implementation testing reports. Agency-dependent resolution: NHHC's completion target excludes agency-controlled determinations of questioned costs and acceptance of corrected federal reporting.