BAKERSFIELD AMERICAN INDIAN HEALTH PROJECTNon-Profit

Program: Indian Health Service Behavioral Health Programs Assistance Listing No.: 93.654 Federal Agency: U.S. Department of Health and Human Services, Indian Health Service Pass-Through Agency: N/A Federal Award Year: FY23-24 Compliance Requirement: Activities Allowed or Unallowed; Allowable Costs/Cost Principles; Procurement and Suspension and Debarment; and Reporting. Questioned Cost: $224,506 Repeat Finding: No Condition: BAIHP recorded $224,506 of estimated project costs as federal expenditures before the related costs were incurred and without sufficient documentation supporting the nature, amount, timing, allowability, and allocation of the costs. The estimated amounts were included in the SEFA for the year ended December 31, 2024. BAIHP did not reconcile these estimated amounts to actual costs subsequently incurred and could not provide a complete audit trail between the amounts recorded, underlying source documentation, and amounts reported on the SEFA. BAIHP also had not established written procurement policies incorporating the applicable federal procurement requirements. Documentation was not retained to demonstrate that purchases were procured in accordance with applicable federal requirements and BAIHP’s established purchasing procedures. In addition, financial reports submitted to the federal agency included amounts that could not be traced to or reconciled with the accounting records and supporting documentation. Required financial reports were submitted after the deadlines established by the federal award. Criteria: Federal awards may only be used for costs that are allowable, allocable, reasonable, necessary, and adequately documented in accordance with applicable federal cost principles and the terms and conditions of the federal award. Records supporting expenditures charged to a federal award should be sufficient to demonstrate the nature, amount, and timing of the costs and permit the costs to be traced to the underlying accounting records. Non-Federal entities must establish and maintain effective internal controls over federal awards and must maintain and use documented procurement procedures that comply with applicable federal requirements. Procurement transactions must be conducted in a manner consistent with applicable federal procurement standards and an entity's established procedures.Recipients are also required to submit complete, accurate, and timely financial reports in accordance with applicable federal requirements and the terms and conditions of the federal award. Reported amounts should be supported by underlying accounting records and other appropriate documentation. Cause: BAIHP did not have adequate controls over the recording, review, and reporting of federal award expenditures. Specifically, procedures were not in place to ensure that expenditures were recorded based on actual costs incurred and supported by appropriate documentation before being charged to the federal award. Additionally, BAIHP had not established procurement policies and procedures that incorporated applicable federal procurement requirements and did not maintain sufficient documentation to demonstrate compliance with its internal purchasing procedures. BAIHP also lacked adequate procedures for reconciling amounts reported to the federal agency to underlying accounting records and for ensuring required reports were submitted by the applicable deadlines.Effect: BAIHP reported federal expenditures before the related costs were incurred and could not demonstrate that certain expenditures were allowable, allocable, adequately supported, and incurred within the applicable period of performance. BAIHP also could not demonstrate compliance with applicable procurement requirements for certain purchases. Certain financial reports could not be reconciled to the accounting records and supporting documentation, and required reports were not submitted by the established deadlines. These conditions resulted in material noncompliance with the affected compliance requirements and were the basis for the adverse opinion on compliance for the Indian Health Service Behavioral Health Programs. Known questioned costs of $224,506 were identified under Activities Allowed or Unallowed and Allowable Costs/Cost Principles. Because BAIHP did not maintain sufficient documentation for the remaining affected expenditures, additional questioned costs may exist, but their amount could not be determined. Recommendation: Management should strengthen its internal controls over federal award expenditures from the initial purchasing and recording of costs through the reporting of those costs to the federal agency. Management should discontinue the practice of recording estimated expenditures to federal awards and record expenditures only when allowable costs have been incurred and can be adequately supported. Supporting documentation should demonstrate the nature, amount, purpose, and timing of each expenditure and should be maintained in a manner that allows the expenditure to be readily traced to the general ledger and underlying source documentation. Management should establish and implement written policies and procedures that are consistent with applicable federal procurement requirements and clearly define the procurement methods, approval requirements, documentation, and monitoring procedures applicable to federally funded purchases. Management should also retain sufficient documentation to demonstrate compliance with both federal procurement requirements and internally established purchasing procedures. Management should also establish procedures requiring federal financial reports to be reconciled to the underlying accounting records and supporting documentation before submission. Such procedures should include documented supervisory review to verify the accuracy and completeness of reported amounts and to ensure reports are submitted by the deadlines established by the federal award or grant agreement. Questioned Costs: Known questioned costs of $224,506 were identified under Activities Allowed or Unallowed and Allowable Costs/Cost Principles. Additional questioned costs may exist; however, their amount could not be determined because sufficient supporting documentation was not available. Management's Response: See Corrective Action Plan.

Condition: During our review of compliance over reporting, we found that the monthly reports were not timely completed. In addition, the reports included amounts inconsistent with the amounts recorded in the accounting system. Criteria: Recipients of Federal awards must submit performance and financial reports as required by the terms and conditions of the award. Reports must be accurate, complete, and submitted timely as specified by the awarding agency. Cause: Internal controls over reporting compliance requirements were not properly designed and were not placed in operation. Management is responsible for compliance with requirements over reporting and for the design, implementation, and maintenance of effective internal controls over compliance with the requirements of laws, statutes, regulations, rules, and provisions of grant agreements applicable to its federal program. Effect: Failure to submit accurate and timely reports may result in noncompliance with the Uniform Guidance and grant terms, potentially impacting continued funding or triggering additional oversight by the awarding agency. Recommendation: We recommend that management strengthen internal controls over the reporting process, including implementing a reporting calendar, assigning clear responsibilities for report preparation and review, and conducting training for personnel involved in report preparation. Management’s Response: See Corrective Action Plan.

Condition: During our review of compliance over reporting, we found that the monthly reports were not timely completed. In addition, the reports included amounts inconsistent with the amounts recorded in the accounting system. Criteria: Recipients of Federal awards must submit performance and financial reports as required by the terms and conditions of the award. Reports must be accurate, complete, and submitted timely as specified by the awarding agency. Cause: Internal controls over reporting compliance requirements were not properly designed and were not placed in operation. Management is responsible for compliance with requirements over reporting and for the design, implementation, and maintenance of effective internal controls over compliance with the requirements of laws, statutes, regulations, rules, and provisions of grant agreements applicable to its federal program. Effect: Failure to submit accurate and timely reports may result in noncompliance with the Uniform Guidance and grant terms, potentially impacting continued funding or triggering additional oversight by the awarding agency. Recommendation: We recommend that management strengthen internal controls over the reporting process, including implementing a reporting calendar, assigning clear responsibilities for report preparation and review, and conducting training for personnel involved in report preparation. Management’s Response: See Corrective Action Plan.

Condition: During our review of compliance over reporting, we found that the December 31, 2022 monthly invoices were not timely completed. In addition, the reports included indirect costs that did not have adequate support and therefore deemed unallowable in nature and excluded from the expenses reflected in the SEFA. Criteria: Federal financial report submissions are required within a specific time frame as imposed by the grantor. There are mechanisms in place to identify risks of faulty reporting caused by such items as lack of current knowledge of, inconsistent application of, or carelessness or disregard for standards and reporting requirements of Federal awards. A supervisory review of reports is performed to assure accuracy and completeness of data and information included in the reports. Cause: Internal controls over reporting compliance requirements were not properly designed and were not placed in operation. Management is responsible for compliance with requirements over Reporting and for the design, implementation, and maintenance of effective internal controls over compliance with the requirements of laws, statutes, regulations, rules, and provisions of grant agreements applicable to its federal program. Effect: As a result of this condition, the December 31, 2022 monthly invoices were not timely completed and submitted to the appropriate funding agency. Recommendation: We recommend BAIHP develop a policies and procedures manual for reporting compliance, which should include a checklist detailing all the necessary steps to ensure a proper submission of year-end invoices.

Condition: During our review of compliance over eligibility, we identified one ineligible patient related to eligibility testing due to missing documentation to support eligibility determination. Criteria: Eligibility Control Activities including written policies to provide direction for making and documenting eligibility determinations, procedures to calculate eligibility amounts are consistent with program requirements, and a process for periodic eligibility re-determinations in accordance with program requirements are required to ensure only eligible individuals are receiving assistance using federal funding. Cause: Internal controls over eligibility compliance requirements were not properly designed and were not placed in operation. Management is responsible for compliance with requirements over Eligibility and for the design, implementation, and maintenance of effective internal controls over compliance with the requirements of laws, statutes, regulations, rules, and provisions of grant agreements applicable to its federal program. Effect: As a result of this condition, patient medical records include missing information regarding patient’s eligibility to receive medical assistance using federal funding. Recommendation: We recommend BAIHP implement a checklist detailing what documentation is required and what must be retained when determining a patient is eligible for benefits under the program and should include a secondary review of the patient file by someone other than the preparer.