Manet Community Health Center, Inc.

General Ledger Maintenance Criteria: Government Auditing Standards require that contractor organizations maintain their financial books and record keeping systems in accordance with general accepted accounting principles. This means that all accounts and subsidiary ledgers must be reconciled to the general ledger on a regular basis, to produce accurate internal and external financial reports. Condition: As of June 30, 2019, we noted various general ledger accounts that were not properly reconciled to the subsidiary ledgers, journals or schedules. In some cases, reconciliations were performed but variances were not specifically identified. The accounts affected included cash, investments, accruals, and other liabilities. Effect: The operating bank account reconciliation included an unidentified variance of up to $850,000 throughout fiscal year 2019. Management did discover and identify the majority of the variance before June 30, 2019; however, a reconciling item of approximately $150,000 remained at June 30, 2019. This variance is thought to be a historical or timing variance due to a difference between cash posted in the third-party billing system and cash posted to the operating bank account. The activities of the Affiliate and Manet Community Health Center, Incorporated (MCHC) are not properly segregated or reconciled throughout the year. Activities of the Affiliate are recorded in MCHC?s general ledger making it difficult to review activity between the entities and to reconcile investment activity. Further, certain donor restricted balances are held by the Affiliate but there has been no reconciliation to determine if donor restrictions have been met. Additional errors were discovered during the audit including missing payroll tax accruals, incorrect determination of capital versus operating leases, incorrect recording of journal entries associated with lease payments, and immaterial over-payments. Cause: The Controller reconciled cash with unidentified variances for numerous months, there was a lack of reconciliation performed to distinguish between the subsidiaries investment portfolios, resulting in a backlog of corrections during the audit. Repeated Finding: No Recommendation: Management should investigate and properly reconcile the differences in cash postings in order to accurately complete the operating bank reconciliation. Management should separate the activities of both entities, and determine if donor restricted assets can be released, returned or re-purposed. The Health Center should reassess the current monthly closing procedures and consider additional processes to aid in accurate financial reporting. Management should also update the month-end closing checklist to ensure accurate and timely internal combined financial statements are processed and maintained. Precise internal reporting is paramount in making informed business decisions throughout the year.

November 19, 2019 Department of Health and Human Services Manet Community Health Center, Incorporated and Affiliate respectfully submits the following corrective action plan for the year ended June 30, 2019. Name and address of independent public accounting firm: AAFCPAs 50 Washington Street Westborough, MA 01581 Audit period: July 1, 2018 ? June 30, 2019 The findings from the November 19, 2019 schedule of findings and questioned costs are discussed below. The findings are numbered consistently with the numbers assigned in the schedule. FINDINGS - FINANCIAL STATEMENT AUDIT FINDINGS Significant Deficiency 2019-001 General Ledger Maintenance Recommendation: Management should investigate and properly reconcile the differences in cash postings in order to accurately complete the operating bank reconciliation. Management should separate the activities of both entities, and determine if donor restricted assets can be released, returned or re-purposed. The Health Center should reassess the current monthly closing procedures and consider additional processes to aid in accurate financial reporting. Management should also update the month-end closing checklist to ensure accurate and timely internal combined financial statements are processed and maintained. Precise internal reporting is paramount in making informed business decisions throughout the year. Action Taken: While the health center is recruiting for a new CFO, new procedures have been implemented to ensure timely regulatory filings and receipt of cash. Enhanced reviews of account coding, reconciliations and reporting have been put in place. The new CFO will systematically evaluate the finance department?s structure, staffing, policies, and procedures relative to GAAP, HRSA standards, federal, state, and local regulations and grant requirements. A significant part of the evaluation will be a reassessment of the monthly closing checklist for adequacy, and a more detailed review of account balances will be completed during the monthly closing process. The checklist will show the status of account reconciliations including the responsible member of the finance team and will have sign offs for the monthly review and approval of all reconciliations by the Controller and a quarterly review by the CFO. A particular focus will be placed on timely reconciliations and identification of variances for cash, accounts receivable, accounts payable, and accruals within 14 days of month end. FINDINGS-FEDERAL AWARD PROGRAMS AUDITS SIGNIFICANT DEFICIENCY Department of Health and Human Services 2019-001 General Ledger Maintenance Recommendation: Management should investigate and properly reconcile the differences in cash postings in order to accurately complete the operating bank reconciliation. Management should separate the activities of both entities, and determine if donor restricted assets can be released, returned or re-purposed. The Health Center should reassess the current monthly closing procedures and consider additional processes to aid in accurate financial reporting. Management should also update the month-end closing checklist to ensure accurate and timely internal combined financial statements are processed and maintained. Precise internal reporting is paramount in making informed business decisions throughout the year. Action Taken: While the health center is recruiting for a new CFO, new procedures have been implemented to ensure timely regulatory filings and receipt of cash. Enhanced reviews of account coding, reconciliations and reporting have been put in place. The new CFO will systematically evaluate the finance department?s structure, staffing, policies, and procedures relative to GAAP, HRSA standards, federal, state, and local regulations and grant requirements. A significant part of the evaluation will be a reassessment of the monthly closing checklist for adequacy, and a more detailed review of account balances will be completed during the monthly closing process. The checklist will show the status of account reconciliations including the responsible member of the finance team and will have sign offs for the monthly review and approval of all reconciliations by the Controller and a quarterly review by the CFO. A particular focus will be placed on timely reconciliations and identification of variances for cash, accounts receivable, accounts payable, and accruals within 14 days of month end. It is estimated that all actions taken will be complete by December 31, 2019. If the Department of Health and Human Services has questions regarding this plan, please call Cynthia Sierra at 617-404-4101.