Hillcrest Family Services, Inc

U.S. Department of Health and Human Services Federal Financial Assistance Listing Number 93.696, 1H79SM088927-01, September 29, 2024 and September 29, 2025 Certified Community Behavioral Health Clinic Expansion Grants Cash Management Significant Deficiency in Internal Control over Compliance 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 During our testing of reimbursement requests, there was no documentation available for the review and approval procedures performed. Cause The Organization did not have an adequate internal control policy to require the documentation of the reimbursement requests’ review and approval. Effect Inaccurate reimbursement requests may be prepared, which could lead to amounts received in error. Questioned Costs None. Context/Sampling There was a total of two reimbursement requests prepared for the year ended June 30, 2025 all of which were selected for testing. None of the reimbursement requests contained documentation of the request being reviewed or approved. Repeat Finding from Prior Year(s) Yes, prior year finding 2024-005 Recommendation We recommend the Organization enhance internal control policies to require documentation of the review and approval procedures performed in the preparation and review of reimbursement requests. Views of Responsible Individuals Management agrees with the finding.

U.S. Department of Health and Human Services Federal Financial Assistance Listing Number 93.696, 1H79SM088927-01, September 29, 2024 and September 29, 2025 Certified Community Behavioral Health Clinic Expansion Grants Reporting Significant Deficiency in Internal Control over Compliance 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 During our testing of reporting, there was no documentation available for the review and approval procedures performed for one of the reports tested. Cause The Organization did not have an adequate internal control policy to require the documentation of the reports’ review and approval. Effect Inaccurate reports may be prepared, which could lead to amounts reported in error. Questioned Costs None. Context/Sampling There was a total of two reports prepared for the year ended June 30, 2025 all of which were selected for testing. One of the reports did not contain documentation of the report being reviewed or approved. Repeat Finding from Prior Year(s) No Recommendation We recommend the Organization enhance internal control policies to require documentation of the review and approval procedures performed in the preparation and review of reports. Views of Responsible Individuals Management agrees with the finding.

U.S. Department of Health and Human Services Federal Financial Assistance Listing Number 93.696, 1H79SM088927-01, September 29, 2024 and September 29, 2025 Certified Community Behavioral Health Clinic Expansion Grants Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Period of Performance Material Weakness in Internal Control over Compliance and Noncompliance 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 During our testing, not all expenditures allocated to the federal program had documentation of review and approval. In addition, an expenditure was determined to be unallowed. Cause The Organization did not have an adequate internal control policy to ensure review and approval of expenditures and the allocation of expenditures to the federal program was documented and all expenditures were allowed. Effect The lack of adequate policies governing the recording of expenditures to the program increases the risk that employees participating in the federal award administration may not be able to detect and correct noncompliance in a timely manner. Questioned Costs $73,600 Context/Sampling A nonstatistical sample of 60 direct expenditures and two indirect expenditures submitted for reimbursement were selected for testing. Of these 62, 54 did not show evidence of proper review and approval prior to being allocated to the federal program and one was determined to be unallowed. Repeat Finding from Prior Year(s) Yes, prior year finding 2024-006 Recommendation We recommend that the Organization enhance internal control policies to ensure all expenditures are reviewed and approved prior to payment to ensure that all payments are necessary for the program and correct. Views of Responsible Individuals Management agrees with the finding.

U.S. Department of Health and Human Services Federal Financial Assistance Listing Number 93.696, 1H79SM088927-01, September 29, 2024 and September 29, 2025 Certified Community Behavioral Health Clinic Expansion Grants Procurement and Suspension and Debarment Material Weakness in Internal Control over Compliance and Noncompliance Criteria The Uniform Guidance, Section 200.303 Internal Controls, requires the non‐federal entity must establish and maintain effective internal controls over federal awards that provide reasonable assurance that awards are being managed in compliance with federal statutes, regulations and the terms and conditions of the federal award. Condition The Organization entered into contracts with vendors for services without following their procurement policy. Cause There is a lack of controls over procurement, suspension and debarment as a whole. Effect Failure to follow a written procurement policy that was consistent with Federal, State, local, and tribal laws and regulations may result in disallowed costs. Questioned Costs $133,600 was paid during fiscal year 2025 to vendors without following the procurement policy. Context/Sampling EB reviewed the procurement, suspension and debarment policy. A nonstatistical sample of four vendors were selected for testing. Of these four, two did not follow appropriate procurement, suspension and debarment procedures. Repeat Finding from Prior Year(s) Yes, prior year finding 2024-007 Recommendation We recommend that management review and follow its policy prior to entering into any contracts with vendors. Views of Responsible Individuals Management agrees with the finding.

U.S. Department of Health and Human Services Federal Financial Assistance Listing Number 93.829 Section 223 Demonstration Programs to Improve Community Mental Health Services – 1H79SM088927-01 Cash Management Significant Deficiency in Internal Control over Compliance 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 During our testing of reimbursement requests, there was no documentation available for the review and approval procedures performed. Cause The Organization did not have an adequate internal control policy to require the documentation of the reimbursement requests’ review and approval. Effect Inaccurate reimbursement requests may be prepared, which could lead to amounts received or reported in error. Questioned Costs None. Context/Sampling There was a total of two reimbursement requests prepared for the year ended June 30, 2024 all of which were selected for testing. None of the reimbursement requests contained documentation of the request being reviewed or approved. Repeat Finding from Prior Year(s) Yes Recommendation We recommend the Organization enhance internal control policies to require documentation of the review and approval procedures performed in the preparation and review of reimbursement requests and reports. Views of Responsible Individuals Management agrees with the finding.

U.S. Department of Health and Human Services Federal Financial Assistance Listing Number 93.829 Section 223 Demonstration Programs to Improve Community Mental Health Services - 1H79SM088927-01 Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Period of Performance Material Weakness in Internal Control over Compliance 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 During our testing, some payroll expenditures were not fully supported by underlying payroll information. In addition, there was no documentation of review and approval of expenditures allocation to the federal program. Cause The Organization did not have an adequate internal control policy to ensure review and approval of expenditures and the allocation of expenditures to the federal program was documented. Effect The lack of adequate policies governing the recording of expenditures to the program increases the risk that employees participating in the federal award administration may not be able to detect and correct noncompliance in a timely manner. Questioned Costs None reported. Context/Sampling A nonstatistical sample of 21 direct expenditures and 2 indirect expenditures submitted for reimbursement were selected for testing. Of these 23, 5 were not fully supported by underlying payroll information and none showed evidence of proper review and approval prior to being allocated to the federal program. Repeat Finding from Prior Year(s) No Recommendation We recommend that the Organization enhance internal control policies to ensure all expenditures are reviewed and approved prior to payment to ensure that all payments are necessary for the program and correct. Views of Responsible Individuals Management agrees with the finding.

U.S. Department of Health and Human Services Federal Financial Assistance Listing Number 93.829 Section 223 Demonstration Programs to Improve Community Mental Health Services - 1H79SM088927-01 Procurement and Suspension and Debarment Material Weakness in Internal Control over Compliance and Noncompliance Criteria The Uniform Guidance, Section 200.303 Internal Controls, requires the non-federal entity must establish and maintain effective internal controls over federal awards that provide reasonable assurance that awards are being managed in compliance with federal statutes, regulations and the terms and conditions of the federal award. The non-Federal entity must have and use documented procurement procedures, consistent with State, local, and tribal laws and regulations and the standards of this section, for the acquisition of property or services required under a Federal award or subaward. The non- Federal entity's documented procurement procedures must conform to the procurement standards identified in §§ 200.318 through 200.327. Condition The Organization did not have a written procurement policy that was consistent with Federal, State, local, and tribal laws and regulations. In addition, the Organization entered into a contract with a vendor for services without obtaining quotes from other vendors. Cause There is a lack of controls over the written procurement, suspension and debarment policy and over procurement, suspension and debarment as a whole. Effect Failure to maintain a written procurement policy that was consistent with Federal, State, local, and tribal laws and regulations may result in disallowed costs. Questioned Costs $37,000 was paid during fiscal year 2024 to a vendor without obtaining quotes. Context/Sampling EB reviewed the procurement, suspension and debarment policy. A nonstatistical sample of 3 vendors were selected for testing. Of these 3, 1 did not follow appropriate procurement, suspension and debarment procedures. Repeat Finding from Prior Year(s) Yes Recommendation We recommend that management implement a written procurement, suspension and debarment policy that meets Federal, State, local, and tribal laws and regulations. We recommend that management review this policy regularly to confirm that it meets the requirements. We also recommend that management review this policy prior to entering into any contracts with vendors. Views of Responsible Individuals Management agrees with the finding.

U.S. Department of Health and Human Services Federal Financial Assistance Listing Number 93.829 Section 223 Demonstration Programs to Improve Community Mental Health Services ‐ 6H79SM083306‐01M002 Cash Management and Reporting Significant Deficiency in Internal Control over Compliance 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: During our testing of reimbursement requests and reporting, there was no documentation available for the review and approval procedures performed. Cause: The Organization did not have an adequate internal control policy to require the documentation of the reimbursement requests’ and reports review and approval. Effect: Inaccurate reimbursement requests or reports may be prepared, which could lead to amounts received or reported in error. Questioned Costs: None. Context/Sampling: There was a total of two reimbursement requests and one report prepared for the year ended June 30, 2023 all of which were selected for testing. None of the reimbursement requests or reports contained documentation of the request being reviewed or approved. Repeat Finding from Prior Year(s): Yes for cash management, but no for reporting. Recommendation: We recommend the Organization enhance internal control policies to require documentation of the review and approval procedures performed in the preparation and review of reimbursement requests and reports. Views of Responsible Individuals: Management agrees with the finding.

U.S. Department of Health and Human Services Federal Financial Assistance Listing Number 93.829 Section 223 Demonstration Programs to Improve Community Mental Health Services ‐ 6H79SM083306‐01M002 Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Period of Performance Significant Deficiency in Internal Control over Compliance 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: During our testing, there was no documentation of review and approval of employee timecards for a portion of the sample selected. Cause: The Organization did not have an adequate internal control policy to ensure review and approval of employee timecards was documented. Effect: The lack of adequate policies governing employee timecards increases the risk that employees participating in the federal award administration may not be able to detect and correct noncompliance in a timely manner. Questioned Costs: None. Context/Sampling: A nonstatistical sample of 65 expenditures submitted for reimbursement were selected for testing. Of these 65, 1 did not show evidence of proper review and approval prior to payment. Repeat Finding from Prior Year(s): Yes. Recommendation: We recommend that the Organization enhance internal control policies to ensure all employee timecards are reviewed and approved prior to payment to ensure that all payments are necessary and correct. Views of Responsible Individuals: Management agrees with the finding.

U.S. Department of Health and Human Services Federal Financial Assistance Listing Number 93.829 Section 223 Demonstration Programs to Improve Community Mental Health Services ‐ 6H79SM083306‐01M002 Procurement and Suspension and Debarment Significant Deficiency in Internal Control over Compliance Criteria: The Uniform Guidance, Section 200.303 Internal Controls, requires the non‐federal entity must establish and maintain effective internal controls over federal awards that provide reasonable assurance that awards are being managed in compliance with federal statutes, regulations and the terms and conditions of the federal award. The non‐Federal entity must have and use documented procurement procedures, consistent with State, local, and tribal laws and regulations and the standards of this section, for the acquisition of property or services required under a Federal award or subaward. The non‐ Federal entity's documented procurement procedures must conform to the procurement standards identified in §§ 200.318 through 200.327. Condition: The Organization did not have a written procurement policy that was consistent with Federal, State, local, and tribal laws and regulations. Cause: There is a lack of controls over the written procurement, suspension and debarment policy. Effect: Failure to maintain a written procurement policy that was consistent with Federal, State, local, and tribal laws and regulations may result in disallowed costs. Questioned Costs: None. Context/Sampling: EB reviewed the procurement, suspension and debarment policy. Repeat Finding from Prior Year(s): Yes. Recommendation: We recommend that management implement a written procurement, suspension and debarment policy that meets Federal, State, local, and tribal laws and regulations. We also recommend that management review this policy regularly to confirm that it meets the requirements. Views of Responsible Individuals: Management agrees with the finding.

U.S. Department of Health and Human Services Federal Financial Assistance Listing/CFDA Number 93.829 Section 223 Demonstration Programs to Improve Community Mental Health Services - 6H79SM083306-01M002 Cash Management Significant Deficiency in Internal Control over Compliance 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 During our testing of reimbursement requests, there was no documentation available for the review and approval procedures performed. Cause The Organization did not have an adequate internal control policy to require the documentation of the reimbursement requests? review and approval. Effect Inaccurate reimbursement requests may be prepared, which could lead to amounts received in error. Questioned Costs None. Context/Sampling There was a total of seven reimbursement requests prepared for the year ended June 30, 2022. Of these, three were selected for testing. Two of the three did not contain documentation of the request being reviewed or approved. Repeat Finding from Yes. Prior Year(s) Recommendation We recommend the Organization enhance internal control policies to require documentation of the review and approval procedures performed in the preparation and review of reimbursement requests. Views of Responsible Management agrees with the finding. Individuals

U.S. Department of Health and Human Services Federal Financial Assistance Listing/CFDA Number 93.829 Section 223 Demonstration Programs to Improve Community Mental Health Services - 6H79SM083306-01M002 Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Period of Performance Significant Deficiency in Internal Control over Compliance 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 During our testing, there was no documentation of review and approval of employee timecards for a portion of the sample selected. Cause The Organization did not have an adequate internal control policy to ensure review and approval of employee timecards was documented. Effect The lack of adequate policies governing employee timecards increases the risk that employees participating in the federal award administration may not be able to detect and correct noncompliance in a timely manner. Questioned Costs None. Context/Sampling A nonstatistical sample of 60 expenditures submitted for reimbursement were selected for testing. Of these 60, 3 did not show evidence of proper review and approval prior to payment. Repeat Finding from No. Prior Year(s) Recommendation We recommend that the Organization enhance internal control policies to ensure all employee timecards are reviewed and approved prior to payment to ensure that all payments are necessary and correct. Views of Responsible Management agrees with the finding. Individuals

U.S. Department of Health and Human Services Federal Financial Assistance Listing/CFDA Number 93.829 Section 223 Demonstration Programs to Improve Community Mental Health Services - 6H79SM083306-01M002 Procurement and Suspension and Debarment Significant Deficiency in Internal Control over Compliance Criteria The Uniform Guidance, Section 200.303 Internal Controls, requires the non-federal entity must establish and maintain effective internal controls over federal awards that provide reasonable assurance that awards are being managed in compliance with federal statutes, regulations and the terms and conditions of the federal award. The non-Federal entity must have and use documented procurement procedures, consistent with State, local, and tribal laws and regulations and the standards of this section, for the acquisition of property or services required under a Federal award or subaward. The non- Federal entity's documented procurement procedures must conform to the procurement standards identified in ?? 200.318 through 200.327. Condition The Organization did not have a written procurement policy that was consistent with Federal, State, local, and tribal laws and regulations. Cause There is a lack of controls over the written procurement, suspension and debarment policy. Effect Failure to maintain a written procurement policy that was consistent with Federal, State, local, and tribal laws and regulations may result in disallowed costs. Questioned Costs None. Context/Sampling EB reviewed the procurement, suspension and debarment policy. Repeat Finding from No. Prior Year(s) Recommendation We recommend that management implement a written review procurement, suspension and debarment policy Federal, State, local, and tribal laws and regulations. We also recommend that management review this policy regularly to confirm that it meets the requirements. Views of Responsible Management agrees with the finding. Individuals

2021 - 003 U.S. Department of Health and Human Services Federal Financial Assistance Listing/CFDA Number 93.829 Section 223 Demonstration Programs to Improve Community Mental Health Services - 6H79SM083306-01M002 U.S. Department of Agriculture Federal Financial Assistance Listing/CFDA Number 10.557 Special Supplemental Nutrition Program for Women, Infants, and Children - 58880AO35 Cash Management Significant Deficiency in Internal Control over Compliance 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: During our testing of reimbursement requests, there was no documentation available for the review and approval procedures performed. Cause: The Organization did not have an adequate internal control policy to require the documentation of the reimbursement requests? review and approval. Effect Inaccurate reimbursement requests may be prepared, which could lead to amounts received in error. Questioned Costs: None. Context/Sampling: For CFDA number 93.829, there was a total of three reimbursement requests prepared for the year ended June 30, 2021. All three were selected for testing. None of the three contained documentation of the request being reviewed or approved. For CFDA number 10.557, there was a total of twelve reimbursement requests prepared for the year ended June 30, 2021. Four were selected for testing, one of the four did not contain documentation of the request being reviewed or approved. Repeat Finding from Prior Year(s)No. Recommendation: We recommend the Organization enhance internal control policies to require documentation of the review and approval procedures performed in the preparation and review of reimbursement requests. Views of Responsible Individuals: Management agrees with the finding. In the future, management will ensure that documentation of the approval process for reimbursement is kept.

2021 - 004 U.S. Department of Health and Human Services Federal Financial Assistance Listing/CFDA Number 93.829 Section 223 Demonstration Programs to Improve Community Mental Health Services - 6H79SM083306-01M002 Reporting Material Weakness in Internal Control over Compliance and Material Noncompliance 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: The Certified Community Behavioral Health Clinic Expansion Grant requires quarterly Federal Financial Reports (SF-425). For the year ended June 30, 2021, the Organization failed to file the first and second quarter reports. In addition, the third and fourth quarter reports contained errors. The errors noted include inaccurate reporting period end dates and amounts not substantiated by the general ledger. Cause: The Organization did not have an adequate internal control policy to ensure the required reports were filed and filed accurately. Effect: The required reports were not submitted in accordance grant requirements. Questioned Costs: None. Context/Sampling: There was a total of four quarterly reports required for the year ended June 30, 2021. All four were selected for testing. Repeat Finding from Prior Years(s): No. Recommendation: We recommend the Organization enhance internal control policies to ensure required reports are filed accurately. Views of Responsible Individuals: Management agrees with the finding. With significant turnover and CCBHC being a new grant, adequate processes were not put into place initially to make sure that the quarterly reports were being submitted. Management will oversee the submissions of the quarterly reports to ensure the accurate time period is being submitted and approved.

2021 - 005 U.S. Department of Health and Human Services Federal Financial Assistance Listing/CFDA Number 93.829 Section 223 Demonstration Programs to Improve Community Mental Health Services - 6H79SM083306-01M002 Allowable Costs Significant Deficiency in Internal Control over Compliance 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: We selected a sample of 60 expenditures and reviewed the overall grant activity for the year ended June 30, 2021. We noted the following in our testing: 4 of the 60 expenditures tested involved ineffective controls over the review of program service reimbursements, in which $1,720 of billing adjustments were not considered and did not reduce the amount being requested for reimbursement. Cause: The Organization did not have an adequate internal control policy to ensure the correct amounts of program service reimbursements were requested. Effect: The Organization reimbursement related to program services exceeded costs by $1,720. Questioned Costs: None. Context/Sampling: A nonstatistical sample of 60 expenditures submitted for reimbursement were selected for testing, which accounted for $233,296 of $667,671 of direct program expenditures. Repeat Finding from Prior Years(s): No. Recommendation: We recommend the Organization enhance internal control policies to ensure billing adjustments are considered when requesting program service reimbursements. Views of Responsible Individuals: Management agrees with the finding. This issue has been resolved, and the audit showed no variance in the later months of the year. Management will continue to ensure that the billing adjustments are being accounted for.

2021 - 006 U.S. Department of Health and Human Services Federal Financial Assistance Listing/CFDA Number 93.829 Section 223 Demonstration Programs to Improve Community Mental Health Services - 6H79SM083306-01M002 Procurement and Suspension and Debarment Significant Deficiency in Internal Control over Compliance 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. Non-federal entities are also prohibited from contracting with or making subawards under covered transactions to parties that are suspended or debarred. ?Covered transactions? include those procurement contracts for goods and services awarded under a non-procurement transaction (e.g., grant or cooperative agreement) that are expected to equal or exceed $25,000 or meet other criteria as specified in 2 CFR section 180.220. When a non-federal entity enters into a covered transaction with an entity at a lower tier, the nonfederal entity must verify that the entity, as defined in 2 CFR section 180.995 and agency adopting regulations, is not suspended or debarred or otherwise excluded from participating in the transaction. This verification may be accomplished by (1) checking the Excluded Parties List System (EPLS) maintained by the General Services Administration (GSA) and available at https://sam.gov, (2) collecting a certification from that entity, or (3) adding a clause or condition to the covered transaction with that entity. Condition: We tested compliance and internal controls over suspension and debarment and noted one vendor in which there was no documentation to support the contractor was not suspended or debarred. Cause: There is a lack of controls over the suspension and debarment. Effect: Failure to provide documentation of the suspension and debarment verification being performed may result in disallowed cost. Questioned Costs: None. Context/Sampling: Only one vendor met the threshold noted above. Therefore, the vendor was the only vendor selected for suspension and debarment testing. Repeat Finding from Prior Year(s): No. Recommendation: We recommend that management review and improve the approval and documentation process for program expenditures to identify ?covered transactions? and ensure suspension and debarment verifications are performed. Views of Responsible Individuals: Management agrees with the finding. Management will review the requirements of our policy for federal grant programs and make sure that they adhere to the federal grant requirements.

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