Finding 580197 (2023-001)

FINDINGS AND QUESTIONED COSTS FOR FEDERAL AWARDS CURRENT YEAR 2023-001 Federal Awarding Agency: Department of Health and Human Services Program title and ALN: Health Center Program Cluster: Health Center Program (Community Health Centers, Migrant Health Centers, Health Care for the Homeless, and Public Housing Primary Care) ALN 93.224 and Grants for New and Expanded Services under the Health Center Program, ALN 93.527 Compliance requirements applicable to finding: Activities Allowed or Unallowed, Reporting, and Special Tests and Provisions Findings: Significant deficiency in internal control over compliance of major programs. Questioned Costs: No questioned costs to report. Criteria: The clinic is funded by a mix of federal grants, private grants and service revenues. The federal grants are restricted for specific purposes. Condition and Context: One of the organization’s key controls over the federal programs is the use of classes in QuickBooks to track individual grants within the HCP cluster. Random sampling of expenditures reimbursed under the Health Center Program revealed transactions that were reimbursed by the H8F grant (see SEFA), but were coded to other classes in QuickBooks, which resulted in incorrect allocation of expenditures and revenues in reports filtered by class. Cause: The COVID-19 pandemic has resulted in significant new funding streams for health care providers like Asher Community Health Center. The new funding streams have similar requirements, and they are grouped in the same federal cluster, but they have individual tracking and reporting requirements. This has added complexity to the grant tracking process that requires more precision, time, and effort from the entity’s CFO, who is the processor of all financial transactions. Rebudgeting of H8F grant is also a contributing factor to the classification errors in QuickBooks. HHS allowed the clinic to rebudget the grant once the original grant agreement expired in April 2022. The rebudgeted expenditures allowed the entity to claim expenditures for reimbursement that had not been included in the original budget. However, when these rebudgeted invoices were reimbursed by the H8F grant, they were not reclassified to the H8F class in QuickBooks. Effect: We noted the profit and loss by class for the fiscal year 2022-23 for the H8F class showed a net profit, which is incongruent with a reimbursement-based grant reported on the accrual basis of accounting. If the internal controls were applied consistently, the profit and loss should show no profit or loss. Recommendation: We recommend the entity update their financial policy to include the following steps: • Prior to submitting a draw request for federal funds, a Profit and Loss by Class should be exported from the QuickBooks file. The total federal draw should match the total expenditures on the report for the applicable time frame. This report should be kept with the payroll reports and invoices for the draw. • Prior to submitting the Federal Financial Report, the same Profit and Loss by Class should be exported for the grant period referenced in the report. The report from QuickBooks should be reconciled to the FFR prior to submission. • As part of the monthly financial review, the CEO should review the Profit and Loss by Class from QuickBooks to verify the federal grant classes do not show a profit or a loss, unless there are timing variances. The grants are reimbursement grants, so the net income should be zero, assuming the allocation of transactions across the classes is accurate. Views of responsible officials and planned corrective actions: • Asher CHC agrees to the Auditors recommendations above in addition the CPA firm that oversees our accounting department will review monthly draws. • Prior to submitting a draw request for federal funds, a Profit and Loss by Class should be exported from the QuickBooks file. The total federal draw should match the total expenditures on the report for the applicable time frame. This report should be kept with the payroll reports and invoices for the draw. • Prior to submitting the Federal Financial Report, the same Profit and Loss by Class should be exported for the grant period referenced in the report. The report from QuickBooks should be reconciled to the FFR prior to submission. • As part of the monthly financial review, the CEO should review the Profit and Loss by Class from QuickBooks to verify the federal grant classes do not show a profit or a loss, unless there are timing variances. The grants are reimbursement grants, so the net income should be zero, assuming the allocation of transactions across the classes is accurate PRIOR YEAR Our audit did not disclose any findings and questioned costs as defined by OMB Uniform Guidance: Cost principles, Audit and Administrative requirements for federal awards for the year ended June 30, 2022