Agape Community Health Center Inc.

Federal Programs: Department of Health and Human Services, Health Center Program Cluster ALN 93.224 and 93.526 Condition/Criteria: Uniform Guidance 2 CFR 200.512(a) established the filing requirements for the submission of single audits to the federal audit clearing house. It states the single audit reporting package must be submitted 30 days after receipt of the auditor's report(s), or 9 months after the end of the fiscal year —whichever comes first. Cause: Accounting department insufficiently staffed and lack of adequate technical support. Effect: Because the Organization’s financial statements were materially misstated, this resulted in late submission to the Federal Audit Clearinghouse the past two years. Repeat Finding: Yes Recommendation: The Organization should implement stronger processes and related internal controls surrounding financial reporting. It should address employee staffing and retention within the accounting department and evaluate opportunities to implement technology to streamline processes. Views of Responsible Officials: The Organization’s management agrees with the finding and has decided to outsource accounting to a firm that well versed in this specialized healthcare field.

Condition/Criteria: General ledger account balances should be reconciled to subsidiary ledgers and supporting documentation in a timely manner to ensure the accuracy and completeness of the financial statements. Cause: The Organization experienced an increase in turnover of accounting personnel in addition to constraints arising as a result of COVID-19. Effect: The Organization’s financial statements could be misstated due to errors not detected and/or corrected in a timely manner. This also resulted in several audit adjustments.

Condition/Criteria: General ledger account balances should be reconciled to subsidiary ledgers and supporting documentation in a timely manner to ensure the accuracy and completeness of the financial statements. Cause: The Organization experienced an increase in turnover of accounting personnel in addition to constraints arising as a result of COVID-19. Effect: The Organization’s financial statements could be misstated due to errors not detected and/or corrected in a timely manner. This also resulted in several audit adjustments.

Criteria: Management is responsible for establishing and maintaining effective internal controls over financial reporting. Effective internal controls should include preparation of account reconciliations which should be reviewed by a person independent of the preparer in a timely manner. Supporting documentation of the reconciliations and of the review should be maintained by the Organization. In addition, entries posted as a result of the reconciliations should be reviewed by a person independent of the preparer and support of the review should be maintained by the Organization. Condition: Several misstatements of the Organization’s financial statements were discovered during the financial statement audit. Areas in which adjustments were proposed and recorded for the financial statements to be in conformity with accounting principles generally accepted in the United States of America (GAAP) include: • Patient receivable and their related reserves • Net assets • Credit card payable • Accrued salaries • Accounts payable and related expense Cause: The Organization failed to identify certain adjustments required to present the financial statements in accordance with GAAP. Management should review existing policies and procedures for necessary changes and formalize reconciliation and journal entry review processes. Effect: Account reconciliations were not prepared for several general ledger accounts. As a result, several adjusting journal entries were proposed and recorded during the financial statement audit for the financial statements to be materially correct and in conformity with GAAP.

Criteria: Management is responsible for establishing and maintaining effective internal controls over financial reporting. Effective internal controls should include preparation of account reconciliations which should be reviewed by a person independent of the preparer in a timely manner. Supporting documentation of the reconciliations and of the review should be maintained by the Organization. In addition, entries posted as a result of the reconciliations should be reviewed by a person independent of the preparer and support of the review should be maintained by the Organization. Condition: Several misstatements of the Organization’s financial statements were discovered during the financial statement audit. Areas in which adjustments were proposed and recorded for the financial statements to be in conformity with accounting principles generally accepted in the United States of America (GAAP) include: • Patient receivable and their related reserves • Net assets • Credit card payable • Accrued salaries • Accounts payable and related expense Cause: The Organization failed to identify certain adjustments required to present the financial statements in accordance with GAAP. Management should review existing policies and procedures for necessary changes and formalize reconciliation and journal entry review processes. Effect: Account reconciliations were not prepared for several general ledger accounts. As a result, several adjusting journal entries were proposed and recorded during the financial statement audit for the financial statements to be materially correct and in conformity with GAAP.

Criteria: In order to maintain the proper internal controls regarding the processing of invoices, the disbursements system should require proper approvals and support for disbursements. Condition: The Organization had expenditures with no backup to support the disbursement. This resulted in a 5% error rate. Also, the Organization had several disbursements that had backup support; however, there was no approval of the disbursement. Cause: Accounting staff turnover at the Organization. Effect: The lack of proper controls increases the risk of error, fraud, misappropriation of assets and inaccurate financial reporting. Questioned Cost: None

Criteria: In order to maintain the proper internal controls regarding the processing of invoices, the disbursements system should require proper approvals and support for disbursements. Condition: The Organization had expenditures with no backup to support the disbursement. This resulted in a 5% error rate. Also, the Organization had several disbursements that had backup support; however, there was no approval of the disbursement. Cause: Accounting staff turnover at the Organization. Effect: The lack of proper controls increases the risk of error, fraud, misappropriation of assets and inaccurate financial reporting. Questioned Cost: None

Criteria: Based on documented internal controls, the Organization should be able to provide approved support for employee pay rates and agree to payroll reports. There should be no inconsistences between approved pay rates and payroll reports. Condition: The Organization was not able to provide support for employee's most recently approved pay rate. Cause: Discussions with Organization employees indicate the cause of missing documentation, approvals and inconsistencies was due to turn over in the Human Resources area. Effect: The missing support and missing rate approvals could result in improper payroll expenditures. Questioned Cost: None

Criteria: Based on documented internal controls, the Organization should be able to provide approved support for employee pay rates and agree to payroll reports. There should be no inconsistences between approved pay rates and payroll reports. Condition: The Organization was not able to provide support for employee's most recently approved pay rate. Cause: Discussions with Organization employees indicate the cause of missing documentation, approvals and inconsistencies was due to turn over in the Human Resources area. Effect: The missing support and missing rate approvals could result in improper payroll expenditures. Questioned Cost: None

Criteria: Federal grant compliance provisions require that the Organization correctly identify a patient's ability to pay and that the rates for services be adjusted accordingly based on the sliding fee schedule. The Organization is required to follow its sliding fee policy when providing discounts to eligible patients. Condition: In the sample of 35 tested items, patient information for 19 claims were inadequate to determine the proper sliding fee discount or the patient was given an inappropriate discount based on information provided. Cause: There was inadequate understanding and inconsistent handling of the documentation requirements of the sliding fee discount program policies and procedures by certain employees who were involved in sliding fee discount determination. Effect: Lack of strict enforcement of the policy of sliding fee eligibility determination and compliance may have resulted in the Center providing incorrect discounts for services provided. Questioned Costs: None reported Context/Sampling: For 3 of 10 over 200% income level patients selected for testing; the accounts had a discount applied improperly. Also, 16 of 25 less than 200% income level patients selected for testing, had various documents missing and could not be completely tested. This sampling was not, and was not intended to be, a statistically valid sample. The finding appears to be a systemic issue.

Criteria: Federal grant compliance provisions require that the Organization correctly identify a patient's ability to pay and that the rates for services be adjusted accordingly based on the sliding fee schedule. The Organization is required to follow its sliding fee policy when providing discounts to eligible patients. Condition: In the sample of 35 tested items, patient information for 19 claims were inadequate to determine the proper sliding fee discount or the patient was given an inappropriate discount based on information provided. Cause: There was inadequate understanding and inconsistent handling of the documentation requirements of the sliding fee discount program policies and procedures by certain employees who were involved in sliding fee discount determination. Effect: Lack of strict enforcement of the policy of sliding fee eligibility determination and compliance may have resulted in the Center providing incorrect discounts for services provided. Questioned Costs: None reported Context/Sampling: For 3 of 10 over 200% income level patients selected for testing; the accounts had a discount applied improperly. Also, 16 of 25 less than 200% income level patients selected for testing, had various documents missing and could not be completely tested. This sampling was not, and was not intended to be, a statistically valid sample. The finding appears to be a systemic issue.

Finding: 2021-001 Preparation and Review of Reconciliations and Journal Entries Criteria: Management is responsible for establishing and maintaining effective internal controls over financial reporting. Effective internal controls should include preparation of account reconciliations which should be reviewed by a person independent of the preparer in a timely manner. Supporting documentation of the reconciliations and of the review should be maintained by the Organization. In addition, entries posted as a result of the reconciliations should be reviewed by a person independent of the preparer and support of the review should be maintained by the Organization. Condition: Several material misstatements of the Organization?s financial statements were discovered during the financial statement audit. Areas in which adjustments were proposed and recorded for the financial statements to be in conformity with accounting principles generally accepted in the United States of America (GAAP) include: ? Patient receivable and their related reserves ? Net assets ? Property and equipment ? Grant revenue and receivables ? Accounts payable and related expense Cause: The Organization failed to identify certain adjustments required to present the financial statements in accordance with GAAP. Management should review existing policies and procedures for necessary changes and formalize reconciliation and journal entry review processes. Effect: Account reconciliations were not prepared for several general ledger accounts. As a result, several adjusting journal entries were proposed and recorded during the financial statement audit for the financial statements to be materially correct and in conformity with GAAP. Recommendation: Management should implement a process for reconciliation of all accounts. Processes should also be implemented to ensure that all reconciliations and journal entries are reviewed by a person independent of the preparer. The reconciliations and reviews should be documented. Views of Responsible Officials: Management concurs and will review the policies and procedures for necessary changes and formalize the reconciliation and journal entry review processes. Contact Person: Dave Fancher, Finance Director Anticipated Date of Completion: October 31, 2022

Finding: 2021-002 Sliding Fee Discounts Federal Programs: Department of Health and Human Services Health Center Program Cluster CFDA 93.224 and 93.527 Criteria: Uniform Guidance, Special Tests & Provisions, Sliding Fee Discounts Condition: Health Centers receiving funding under the Health Center Program Cluster must prepare and apply a sliding fee discount so that the amounts owed for health center services by eligible patients are discounted based on the patient?s ability to pay. During compliance testing, it was determined that the Organization did not properly apply the sliding fee discounts for 9 patients out of a sample of 20 patients for the year ended December 31, 2021. Cause: There were deficiencies in internal controls to ensure that proper documentation was obtained and that proper sliding fee discounts were applied to patient accounts in accordance with the Organization?s sliding fee scale. Effect: Discounts were not properly applied to patient accounts. Questioned Costs: None reported Context/Sampling: For 9 of 20 patients selected for testing; the account had an incorrect discount applied. This sample was not, and was not intended to be, a statistically valid sample. The finding appears to be a systemic issue. Repeat Finding from Prior Year: No Recommendation: It is recommended that proper training be given to employees and that the sliding fee discounts be reviewed by a supervisor on a periodic basis the ensure compliance with the sliding fee scale. Views of Responsible Officials: Management concurs. Efforts will be made to implement corrective actions as recommended above. Contact Person: Dave Francher, Finance Director Anticipated Date of Completion: October 31, 2022

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