Community Health Service Inc.

2024-003: U.S. Department of Health and Human Services Health Center Program Cluster- Health Center Program, Assistance Listing No. 93.224 Compliance Requirements: Cash Management Type of Finding - Material Noncompliance and Material Weakness in Internal Control over Compliance Condition – During our testing of grant drawdowns, we noted that the payroll expenditure support provided for individual drawdowns did not consistently agree to the amounts requested. Specifically, on a sample-by-sample basis, certain drawdowns were either overstated or understated when compared to the underlying payroll expenditures incurred for the respective period. While the aggregate payroll expenditures tested did reconcile to the total drawdown activity, the lack of alignment at the individual draw level indicates that draw requests were not consistently calculated based on contemporaneous, actual expenditures incurred at the time of each request. Criteria - In accordance with 2 CFR §200.305 (Payment), non-federal entities must minimize the time elapsing between the transfer of funds from the federal government and disbursement for program purposes. Additionally, entities are required to establish and maintain effective internal controls over compliance to ensure that drawdowns are based on actual, allowable expenditures and reflect immediate cash needs. Federal guidance further requires that amounts reported through drawdown systems agree to underlying accounting records. Cause – The Center does not have adequate internal controls in place to ensure that individual drawdown requests are supported by detailed, contemporaneous expenditure data. Specifically: there is no formal reconciliation process performed at the individual draw level between payroll expenditures and requested amounts prior to submission. Drawdowns appear to be based on cumulative or estimated balances, rather than actual expenditures incurred for the specific draw period. Review controls over the preparation and approval of draw requests are not sufficiently granular to detect discrepancies at the transaction level. Effect – Federal funds may not have been drawn in alignment with immediate cash needs at the time of each request. There is an increased risk of: temporary overdraws, which could result in excess federal cash on hand and potential interest liability. Underdraws, which could impact cash flow and program operations. Although total drawdowns reconciled in the aggregate, the lack of precision at the individual draw level indicates a systemic control deficiency that could lead to material noncompliance if not corrected. Questioned Costs – None Recommendation - We recommend that management strengthen internal controls over cash management by: Implementing a formal reconciliation process at the time of each drawdown, comparing: Actual payroll expenditures incurred for the draw period; the specific amount requested; requiring all draw requests to be supported by detailed, contemporaneous payroll reports; enhancing supervisory review procedures to ensure that each draw is individually supported and accurate, rather than relying on aggregate reconciliation; establishing documented procedures to ensure compliance with 2 CFR §200.305 requirements for timing and accuracy of federal cash draws Management Response to Findings – Management concurs with the finding.

2024-004: U.S. Department of Health and Human Services Health Center Program Cluster- Health Center Program, Assistance Listing No. 93.224 Compliance Requirements: Special Tests and Provisions Type of Finding - Material Noncompliance and Material Weakness in Internal Control over Compliance (Repeat Finding) Condition - Proper backup of sliding fee applications and supporting income level documents were not maintained or stored. Criteria - Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) requires that a non-federal entity prepare and apply a sliding fee discount schedule (SFDS) so that the amounts owed for health center services by eligible patients are adjusted (discounted) based on the patient’s ability to pay. Cause - The Center did not have internal controls to reasonably ensure compliance. Effect: Patients were potentially incorrectly given or not given proper sliding fee discounts. Context - A non statistical sample of 45 from a population of over 250 encounters was selected for testing. The proper supporting documents were not maintained for 12 encounters tested. The sample was not intended to be, and was not a statistically valid sample.  Repeat Finding - Repeat of finding of 2023-005. Recommendation - We recommend the Center implement internal controls to reasonably ensure its compliance with the requirements identified in Uniform Guidance. Management Response to Findings – Management concurs with the finding.

2024-005: U.S. Department of Health and Human Services Health Center Program Cluster- Health Center Program, Assistance Listing No. 93.224 Compliance Requirements: Reporting Type of Finding - Significant Deficiency in Internal Control over Compliance Condition - Federal Financial Reports (SF-425) were submitted after the required 90 day reporting deadline, indicating that controls over the timely submission of required federal reports were not operating effectively. Criteria - Title 2 CFR §200.328 requires non-Federal entities to submit required financial reports no later than 90 calendar days after the end of the reporting period, unless otherwise specified in the terms and conditions of the federal award. Cause - Controls and procedures designed to ensure timely preparation, review, and submission of required federal financial reports were not consistently followed, resulting in delayed submission of SF-425 reports. Effect - Failure to submit SF-425 reports timely increases the risk of noncompliance with federal reporting requirements and may result in delayed monitoring, enforcement actions, or other adverse consequences by the awarding agency. Context - In our sample of the yearly report needing to be filed, the submission was submitted 41 days late.  Recommendation - We recommend that the Center strengthen internal controls over federal financial reporting by implementing procedures to monitor reporting deadlines, including maintaining a formal tracking mechanism or compliance calendar for SF-425 due dates, assigning clear responsibility for report preparation and submission, and performing supervisory review to ensure SF-425 reports are submitted in accordance with federal requirements. Management Response to Findings - Management concurs with the finding.

U.S. Department of Health and Human Services Health Center Program Cluster- Health Center Program, Assistance Listing No. 93.224 Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs, Cash Management, Period of Performance, and Procurement, Suspension and Debarment Type of Finding - Material Noncompliance and Material Weakness in Internal Control over Compliance (Repeat Finding) Condition – The Organization was unable to provide adequate supporting documentation for certain payroll expenditures and drawdowns of federal reimbursement grants. Criteria - Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) requires that a non Federal entity must establish and maintain internal controls to reasonably ensure compliance with federal laws, regulations, and program compliance requirements. Cause – Due to inadequate controls over document retainage and the changing of third-party payroll providers, the Organization did not have internal controls in place to ensure proper documentation was maintained to support internal controls over the payroll disbursement process involving federal grant funds and for certain drawdowns of these funds. Effect – Material noncompliance with document retainage and support existed and expenditures for reimbursed costs could have potentially been unallowable. Questioned Costs – $2,119,816 (unsupported) Context/Sampling – In a non-statistical sample of 60 out of a population of more than 250, the Organization was not able to provide adequate supporting documentation for 55 selections to ensure controls were in place over their payroll disbursement process. Additionally, in the testing of all 79 drawdowns, 42 of the selections tested lacked adequate documentation to support the eligible payroll or non-payroll related expenditures. Recommendation - We recommend the Organization implement procedures to ensure its supporting documentation is maintained for all drawdown requests submitted. Management Response to Findings – Management concurs with the finding.

U.S. Department of Health and Human Services Health Center Program Cluster- Health Center Program, Assistance Listing No. 93.224 Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs, Cash Management, Period of Performance, and Procurement, Suspension and Debarment Type of Finding - Material Noncompliance and Material Weakness in Internal Control over Compliance (Repeat Finding) Condition – The Organization was unable to provide adequate supporting documentation for certain payroll expenditures and drawdowns of federal reimbursement grants. Criteria - Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) requires that a non Federal entity must establish and maintain internal controls to reasonably ensure compliance with federal laws, regulations, and program compliance requirements. Cause – Due to inadequate controls over document retainage and the changing of third-party payroll providers, the Organization did not have internal controls in place to ensure proper documentation was maintained to support internal controls over the payroll disbursement process involving federal grant funds and for certain drawdowns of these funds. Effect – Material noncompliance with document retainage and support existed and expenditures for reimbursed costs could have potentially been unallowable. Questioned Costs – $49,769 (unsupported) Context/Sampling – In a non-statistical sample of 60 out of a population of more than 250, the Organization was not able to provide adequate supporting documentation for 55 selections to ensure controls were in place over their payroll disbursement process. Additionally, in the testing of all 79 drawdowns, 2 of the selections tested lacked adequate documentation to support the eligible payroll or non-payroll related expenditures. Recommendation - We recommend the Organization implement procedures to ensure its supporting documentation is maintained for all drawdown requests submitted. Management Response to Findings – Management concurs with the finding.

U.S. Department of Health and Human Services Health Center Program Cluster- Health Center Program, Assistance Listing No. 93.224 Compliance Requirements: Special Tests and Provisions Type of Finding - Significant Deficiency in Internal Control over Compliance (Repeat Finding) Condition - Proper backup of sliding fee applications and supporting income level documents were not maintained or stored. Criteria - Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) requires that a non Federal entity prepare and apply a sliding fee discount schedule (SFDS) so that the amounts owed for health center services by eligible patients are adjusted (discounted) based on the patient’s ability to pay. Cause - The Organization did not have internal controls to reasonably ensure compliance. Effect - Patients were potentially incorrectly given or not given proper sliding fee discounts. Context - A non statistical sample of 40 from a population of over 250 encounters was selected for testing. The proper supporting documents were not maintained for 3 encounters tested. Recommendation - We recommend the Organization implement internal controls to reasonably ensure its compliance with the requirements identified in Uniform Guidance. Management Response to Findings – Management concurs with the finding.

U.S. Department of Health and Human Services Health Center Program Cluster- Health Center Program, Assistance Listing No. 93.224 Compliance Requirements: Special Tests and Provisions Type of Finding - Significant Deficiency in Internal Control over Compliance (Repeat Finding) Condition - Proper backup of sliding fee applications and supporting income level documents were not maintained or stored. Criteria - Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) requires that a non Federal entity prepare and apply a sliding fee discount schedule (SFDS) so that the amounts owed for health center services by eligible patients are adjusted (discounted) based on the patient’s ability to pay. Cause - The Organization did not have internal controls to reasonably ensure compliance. Effect - Patients were potentially incorrectly given or not given proper sliding fee discounts. Context - A non statistical sample of 40 from a population of over 250 encounters was selected for testing. The proper supporting documents were not maintained for 3 encounters tested. Recommendation - We recommend the Organization implement internal controls to reasonably ensure its compliance with the requirements identified in Uniform Guidance. Management Response to Findings – Management concurs with the finding.

U.S. Department of Health and Human Services Health Center Program Cluster- Health Center Program, Assistance Listing No. 93.224 Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs, Cash Management, Period of Performance, and Procurement, Suspension and Debarment Type of Finding - Material Noncompliance and Material Weakness in Internal Control over Compliance (Repeat Finding) Condition – The Organization was unable to provide adequate supporting documentation for certain payroll expenditures and drawdowns of federal reimbursement grants. Criteria - Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) requires that a non Federal entity must establish and maintain internal controls to reasonably ensure compliance with federal laws, regulations, and program compliance requirements. Cause – Due to inadequate controls over document retainage and the changing of third-party payroll providers, the Organization did not have internal controls in place to ensure proper documentation was maintained to support internal controls over the payroll disbursement process involving federal grant funds and for certain drawdowns of these funds. Effect – Material noncompliance with document retainage and support existed and expenditures for reimbursed costs could have potentially been unallowable. Questioned Costs – $1,186,535 (unsupported) Context/Sampling – In a non-statistical sample of 60 out of a population of more than 250, the Organization was not able to provide adequate supporting documentation for all selections to ensure controls were in place over their payroll disbursement process. Additionally, in the testing of all 51 drawdowns, 51 of the selections tested lacked adequate documentation to support the eligible payroll or non-payroll related expenditures. Recommendation - We recommend the Organization implement procedures to ensure its supporting documentation is maintained for all drawdown requests submitted. Management Response to Findings – Management concurs with the finding.

U.S. Department of Health and Human Services Health Center Program Cluster- Health Center Program, Assistance Listing No. 93.224 Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs, Cash Management, Period of Performance, and Procurement, Suspension and Debarment Type of Finding - Material Noncompliance and Material Weakness in Internal Control over Compliance (Repeat Finding) Condition – The Organization was unable to provide adequate supporting documentation for certain payroll expenditures and drawdowns of federal reimbursement grants. Criteria - Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) requires that a non Federal entity must establish and maintain internal controls to reasonably ensure compliance with federal laws, regulations, and program compliance requirements. Cause – Due to inadequate controls over document retainage and the changing of third-party payroll providers, the Organization did not have internal controls in place to ensure proper documentation was maintained to support internal controls over the payroll disbursement process involving federal grant funds and for certain drawdowns of these funds. Effect – Material noncompliance with document retainage and support existed and expenditures for reimbursed costs could have potentially been unallowable. Questioned Costs – $73,415 (unsupported) Context/Sampling – In a non-statistical sample of 60 out of a population of more than 250, the Organization was not able to provide adequate supporting documentation for all selections to ensure controls were in place over their payroll disbursement process. Additionally, in the testing of all 51 drawdowns, 12 of the selections tested lacked adequate documentation to support the eligible payroll or non-payroll related expenditures. Recommendation - We recommend the Organization implement procedures to ensure its supporting documentation is maintained for all drawdown requests submitted. Management Response to Findings – Management concurs with the finding.

2022-005: U.S. Department of Health and Human Services Health Center Program Cluster- Health Center Program, Assistance Listing No. 93.224 Compliance Requirements: Special Tests and Provisions Type of Finding - Significant Deficiency in Internal Control over Compliance (Repeat Finding) Condition - Proper backup of sliding fee applications and supporting income level documents were not maintained or stored. Criteria - Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) requires that a non Federal entity prepare and apply a sliding fee discount schedule (SFDS) so that the amounts owed for health center services by eligible patients are adjusted (discounted) based on the patient’s ability to pay. Cause - The Organization did not have internal controls to reasonably ensure compliance. Effect - Patients were potentially incorrectly given or not given proper sliding fee discounts. Context - A non statistical sample of 40 from a population of over 250 encounters was selected for testing. The proper supporting documents were not maintained for 6 encounters tested. Recommendation - We recommend the Organization implement internal controls to reasonably ensure its compliance with the requirements identified in Uniform Guidance. Management Response to Findings – Management concurs with the finding.

2022-005: U.S. Department of Health and Human Services Health Center Program Cluster- Health Center Program, Assistance Listing No. 93.224 Compliance Requirements: Special Tests and Provisions Type of Finding - Significant Deficiency in Internal Control over Compliance (Repeat Finding) Condition - Proper backup of sliding fee applications and supporting income level documents were not maintained or stored. Criteria - Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) requires that a non Federal entity prepare and apply a sliding fee discount schedule (SFDS) so that the amounts owed for health center services by eligible patients are adjusted (discounted) based on the patient’s ability to pay. Cause - The Organization did not have internal controls to reasonably ensure compliance. Effect - Patients were potentially incorrectly given or not given proper sliding fee discounts. Context - A non statistical sample of 40 from a population of over 250 encounters was selected for testing. The proper supporting documents were not maintained for 6 encounters tested. Recommendation - We recommend the Organization implement internal controls to reasonably ensure its compliance with the requirements identified in Uniform Guidance. Management Response to Findings – Management concurs with the finding.

Criteria - Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) requires that a non-Federal entity must establish and maintain internal controls to reasonably ensure compliance with federal laws, regulations, and program compliance requirements. Condition - Backup documentation for two reimbursement requests did not match the reimbursement amount. Cause - The Organization did not have internal controls in place to ensure proper amount was drawn down. Effect - The Organization drew down funds above and beyond what the backup documentation supported. Questioned Costs - None Context/Sampling - A non-statistical sample of 14 from a population of 69 reimbursement requests was selected for testing. Two reimbursement requests did not have proper supporting documentation for the received reimbursement. Repeat Finding from Prior Year(s) - No Recommendation - We recommend the Organization implement procedures to ensure its backup documentation matches and supports each reimbursement request. Views of Responsible Officials - Management agrees with this finding.

Criteria - Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) requires that a non-Federal entity prepare and apply a sliding fee discount schedule (SFDS) so that the amounts owed for health center services by eligible patients are adjusted (discounted) based on the patient?s ability to pay. Condition - Proper backup of sliding fee applications and supporting income level documents were not maintained or stored. Cause - The Organization did not have internal controls to reasonably ensure compliance. Effect - Patients were potentially incorrectly given or not given proper sliding fee discounts. Questioned Costs - None Context/Sampling - A non-statistical sample of 60 from a population of over 250 encounters was selected for testing. The proper supporting documents were not maintained for six encounters tested. Repeat Finding from Prior Year(s) - No Recommendation - We recommend the Organization implement internal controls to reasonably ensure its compliance with the requirements identified in Uniform Guidance. Views of Responsible Officials - Management agrees with this finding.

2020-003 U.S. Department of Health and Human Services Health Center Program Cluster Health Center Program, CFDA 93.224 Grants for New and Expanded Services Under the Health Center Program, CFDA 93.527 Procurement, Suspension, and Debarment Other Matter Compliance Finding Criteria: Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) requires that a non-Federal entity must use its own documented procurement procedures which reflect applicable state and local laws and regulations, provided that the procurements conform to applicable federal law and standards. Condition: Procurement policies were not updated to conform to applicable standards under Uniform Guidance. Cause: The Organization did not have proper procedures to ensure its procurement policies were updated to conform to the requirements identified in Uniform Guidance. Effect: The Organization?s procurement policy did not conform to applicable standards under Uniform Guidance. Questioned Costs: None Context/Sampling: No sampling was performed as the procurement policy was examined in its entirety. Repeat Finding from Prior Year(s): Yes Recommendation: We recommend the Organization ensure its procurement policies are updated to conform to the requirements identified in Uniform Guidance. Views of Responsible Officials: Management agrees with this finding.

U.S. Department of Health and Human Services Health Center Program Cluster Health Center Program, CFDA 93.224 Grants for New and Expanded Services Under the Health Center Program, CFDA 93.527 Cash Management Other Matter Compliance Finding Criteria: The OMB Compliance Supplement requires that non-Federal entities receiving Federal awards establish and maintain internal controls designed to reasonably ensure compliance with Federal laws, regulations, and program compliance requirements. Condition: Backup documentation for a reimbursement request did not match the reimbursement amount and there was no documentation of a true-up in later costs or reimbursement requests. Cause: Due to the accountant being on vacation during payroll, a draw on the federal funds was made. Backup documentation for reimbursement did not match the reimbursement amount and there was no documentation of a true-up in later costs or reimbursement requests. Effect: Incorrect amounts of Federal funds may be received. Questioned Costs: $46,514 Context/Sampling: A non-statistical sample of 25 from a population of 161 reimbursement requests was selected for testing. One reimbursement request did not have proper supporting documentation for the received reimbursement. Repeat Finding from Prior Year(s): No Recommendation: We recommend the Organization obtain backup documentation for each reimbursement request and if needed, provide documentation regarding a true-up in later reimbursement requests. Views of Responsible Officials: Management agrees with this finding.

U.S. Department of Health and Human Services Health Center Program Cluster Health Center Program, CFDA 93.224 Grants for New and Expanded Services Under the Health Center Program, CFDA 93.527 Procurement, Suspension, and Debarment Other Matter Compliance Finding Criteria: Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) requires that a non-Federal entity must use its own documented procurement procedures which reflect applicable state and local laws and regulations, provided that the procurements conform to applicable federal law and standards. Condition: Procurement policies were not updated to conform to applicable standards under Uniform Guidance. Cause: The Organization did not have internal controls to ensure its procurement policies were updated to conform to the requirements identified in Uniform Guidance. Effect: Procurement may have occurred that were not in accordance with the procurement methods required by Federal regulations. Questioned Costs: None Context/Sampling: No sampling was performed as the procurement policy was examined in its entirety. Repeat Finding from Prior Year(s): No Recommendation: We recommend the Organization ensure its procurement policies are updated to conform to the requirements identified in Uniform Guidance. Views of Responsible Officials: Management agrees with this finding.

U.S. Department of Health and Human Services Health Center Program Cluster Health Center Program, CFDA 93.224 Grants for New and Expanded Services Under the Health Center Program, CFDA 93.527 Special Tests and Provisions: Sliding Fee Discounts Other Matter Compliance Finding and Significant Deficiency in Internal Control over Compliance Criteria: The OMB Compliance Supplement requires that health centers prepare and apply a sliding fee discount schedule (SFDS) so that the amounts owed for health center services by eligible patients are adjusted (discounted) based on the patient?s ability to pay. Condition: There was a patient that was not eligible for a sliding fee adjustment based on income level who received a discount. Cause: The Organization did not properly apply the SFDS to a patient. Effect: Patients were potentially incorrectly given or not given proper sliding fee discounts. Questioned Costs: None Context/Sampling: A non-statistical sample of 60 from a population of over 250 encounters was selected for testing. One patient incorrectly received a sliding fee discount when the person did not qualify for one based on their income level. Repeat Finding from Prior Year(s): Yes; prior year finding 2018-003 Recommendation: We recommend the Organization implement internal controls to reasonably ensure its compliance with the requirements identified in Uniform Guidance. Views of Responsible Officials: Management agrees with this finding.

U.S. Department of Health and Human Services Health Center Program Cluster Health Center Program, CFDA 93.224 Grants for New and Expanded Services Under the Health Center Program, CFDA 93.527 Special Tests and Provisions: Sliding Fee Discounts Material Noncompliance and Material Weakness in Internal Control over Compliance Criteria: The OMB Compliance Supplement requires that health centers prepare and apply a sliding fee discount schedule (SFDS) so that the amounts owed for health center services by eligible patients are adjusted (discounted) based on the patient?s ability to pay. Condition: Proper back-up of sliding fee applications and supporting income level documents were not maintained or stored. Cause: The Organization did not have internal controls to reasonably ensure compliance. Effect: Patients were potentially incorrectly given or not given proper sliding fee discounts. Questioned Costs: None Context/Sampling: A non-statistical sample of 60 from a population of over 250 encounters was selected for testing. The proper supporting documents were not maintained for four encounters tested. Repeat Finding from Prior Year(s): No Recommendation: We recommend the Organization implement internal controls to reasonably ensure its compliance with the requirements identified in Uniform Guidance. Views of Responsible Officials: Management agrees with this finding.

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