GATEWAY COMMUNITY HEALTH CENTERS, INC.Non-Profit

Type of Finding: Other Finding Criteria or Specific Requirement: The U. S. Department of Health and Human Services has implemented the Uniform Guidance at 45 CFR § 75. According to the Subpart F-Audits 45 CFR §75.501 (a) non-federal entities that expend $750,000 or more during the non-Federal entity's fiscal year in federal awards must have a single or program-specific audit conducted for that year in accordance with the provisions of this part. Guidance on determining Federal awards expended is provided at 45CFR § 75.502. The regulation obligates organizations expending federal grant funds over $750,000 to submit their required annual financial statement information within nine months of their year end to the Federal Audit Clearing House via the Internet. Condition/Context: The required annual financial statement submission to the Federal Audit Clearing House for the year ended by February 28, 2025. Cause: The Organization did not complete its annual audit in a timely manner. Effect: The Agency was temporarily out of compliance with federal requirements and guidelines. Recommendation: We recommend that the required annual financial statement submission to the Federal Audit Clearing House be made on a timely basis for the 2025 financial statements and for all future required submissions. Repeat Finding: This is a repeated finding.

Material Weakness Internal Controls Over Finacial Reporting Deficiencies in the Design of Controls Conditions: During our audit, we noted the organization does not have the following written Standard Operating Procedures (SOP), inadequate design of controls over the preparation of the financial statements, inadequate design of controls over significant accounts and processes, inadequate documentation of the components of internal controls. We have also found inadequate segregation of duties. The client has personnel and management under their employ who lack the qualifications and training to fulfill their assigned functions. There is also inadequate design of monitoring controls used to assess the design and operating effectiveness of the entity's internal control environment. Failures in the Operation of Internal Control Conditions: Failure of the information and communication component of internal control to provide complete and accurate output because of deficiencies in timeliness, completeness, and accuracy, failure to perform reconciliations of significant accounts. Poor Documentation Conditions: Lack of clear policies and procedures, making it difficult to monitor compliance and identify potential problems. Risk Assessment Failures Conditions: Not properly identifying and mitigating key risks within the organization. Lack of Management Review Conditions: Not actively monitoring and reviewing internal controls for effectiveness. Human Error Conditions: Mistakes made by employees due to poor training or lack of attention to detail. Criteria: 2 CFR Section 200.510 (a) - The auditee shall prepare financial statements that reflect its financial position, results of operation or change in net assets, and, where appropriate, cash flows for the fiscal year audited. Management is responsible for implementing a system of internal control over reconciling, verifying, and evaluating the nature of awards in accordance with applicable accounting standards. Management must assign accountable departmental employees and procedures must be in place for evaluating and documenting the nature of the various accounting steps of rollforwards and reconciliations in accordance with accounting standards and to ensure the accounts are being represented accurately. Effects of Conditions: Without SOPs there is a higher error rate, increased risk of compliance issues, operations stop or a lack of segregation of duties occur when key personnel are unavailable. Without internal controls over the preparation of the financial statements there is no assurance that management has accurate, timely and complete information, including accounting records. The organization faces an increased risk of fraud, errors in accounting, operational inefficiencies, compliance issues, damage to reputation, and difficulty in detecting and investigating fraudulent activity because of a lack of segregation of duties. The lack of monitoring can cause inaccurate financial reporting, increased risk of fraud, poor decision-making due to unreliable data, potential reputational damage, and missed opportunities to identify and correct financial problems early on, ultimately impacting the company's financial stability and overall performance. Cause of Conditions: The lack of SOPs (financial statement close, procure to pay, order tocash) created an environment that is not conducive for monitoring, reconciliation, and communication and can have a material impact on the entity’s financials. Policies and proceduresare not in place to ensure the effectiveness of financial management and oversight. The financial statement close process is not performed in a time manner to allow for reasonable financial statements to be prepared and reviewed by management and those charged with governance. Also, the entity lacks qualified staff in critical roles to ensure that the financial processes are initiated andmonitored and reported in a timely manner. Auditor’s Recommendation: We recommend that internal controls, along with a control matrix and SOPs, are documented and appropriately implemented and distributed to staff and management along with implementing an ongoing process of regularly reviewing and assessing the financial data. Also, we recommend hiring additional qualified staff and providing the training needed to the current staff and new hires.

Significant Deficiency Compliance and Reporting Major Federal Award Program Audit Department of Health and Human Services Assistance Listing Number 93.224 Health Center Program Cluster Statement of Condition: The required annual financial statement submission to the Federal Audit Clearing House for the year ended February 1, 2023. Criteria: The U. S. Department of Health and Human Services has implemented the Uniform Guidance at 45 CFR § 75. According to the Subpart F-Audits 45 CFR §75.501 (a) non-federal entities that expend $750,000 or more during the non-Federal entity's fiscal year in federal awards must have a single or program-specific audit conducted for that year in accordance with the provisions of this part. Guidance on determining Federal awards expended is provided at 45CFR § 75.502. The regulation obligates organizations expending federal grant funds over $750,000 to submit their required annual financial statement information within nine months of their year end to the Federal Audit Clearing House via the Internet. Effect of Condition: The Organization was temporarily out of compliance with federal requirements and guidelines. Cause of Condition: The Organization did not complete its annual audit in a timely manner. Recommendation: We recommend that the required annual financial statement submission to the Federal Audit Clearing House be made on a timely basis for the 2024 financial statements and for all future required submissions.

Significant Deficiency Internal Control Weakness and Non-Compliance Condition: Client provided more than one version of the SEFA which denotes errors to the previous version. Due to the client providing several versions of the SEFA, the final SEFA was not provided in a timely manner. Criteria: Per Code of Federal Regulations, the auditee must prepare a schedule of expenditures of Federal awards for the period covered by the auditee's financial statements which must include the total Federal awards expended as determined in accordance with, §200.514 states, “The auditor must determine whether the financial statements of the auditee are presented fairly in all material respects in accordance with generally accepted accounting principles. The auditor must also determine whether the schedule of expenditures of Federal awards is stated fairly in all material respects in relation to the auditee's financial statements as a whole”. Providing a SEFA with errors and or omissions impairs the afore-mentioned code regulations. Cause: The organization does not have effective controls over the review of the SEFA. Effect or Potential Effect: Over/understand the financial statement and grant revenue and expenses. Auditor’s Recommendation: Management should implement a review process with accounting on a quarterly basis to assure the accuracy and consistency of the SEFA

Significant Deficiency Internal Control Weakness – Violation of Federal and State Laws and Provisions Condition: The minimum requirement of at least 51% of the Board Members to utilize the Health Care Centers at least once in a two-year (24 mos.) period was not satisfied. The federal mandate of the funding agency is that the board must be comprised of at least 9 Board Members with a maximum of 25. Also, Gateway could not provide a complete list of the actual board members for the board meeting minutes for the 2022 fiscal year. Criteria: Compliance with Federal statutes, regulations, and the terms and conditions of Federal awards that may have a direct and material effect on each of its major programs per funding agency and the Compliance Supplement (OMB). Cause: Policies and procedures are not in place or implemented, to ensure the effectiveness of financial management, laws and regulations and oversight. Effect or Potential Effect: The loss of grant funding due to noncompliance. Auditor’s Recommendation: The board members should utilize the services of the clinics as mandated by the funding agency.

Material Weakness Internal Controls Over Finacial Reporting Deficiencies in the Design of Controls Conditions: During our audit, we noted the organization does not have the following written Standard Operating Procedures (SOP), inadequate design of controls over the preparation of the financial statements, inadequate design of controls over significant accounts and processes, inadequate documentation of the components of internal controls. We have also found inadequate segregation of duties. The client has personnel and management under their employ who lack the qualifications and training to fulfill their assigned functions. There is also inadequate design of monitoring controls used to assess the design and operating effectiveness of the entity's internal control environment. Failures in the Operation of Internal Control Conditions: Failure of the information and communication component of internal control to provide complete and accurate output because of deficiencies in timeliness, completeness, and accuracy, failure to perform reconciliations of significant accounts. Poor Documentation Conditions: Lack of clear policies and procedures, making it difficult to monitor compliance and identify potential problems. Risk Assessment Failures Conditions: Not properly identifying and mitigating key risks within the organization. Lack of Management Review Conditions: Not actively monitoring and reviewing internal controls for effectiveness. Human Error Conditions: Mistakes made by employees due to poor training or lack of attention to detail. Criteria: 2 CFR Section 200.510 (a) - The auditee shall prepare financial statements that reflect its financial position, results of operation or change in net assets, and, where appropriate, cash flows for the fiscal year audited. Management is responsible for implementing a system of internal control over reconciling, verifying, and evaluating the nature of awards in accordance with applicable accounting standards. Management must assign accountable departmental employees and procedures must be in place for evaluating and documenting the nature of the various accounting steps of rollforwards and reconciliations in accordance with accounting standards and to ensure the accounts are being represented accurately. Effects of Conditions: Without SOPs there is a higher error rate, increased risk of compliance issues, operations stop or a lack of segregation of duties occur when key personnel are unavailable. Without internal controls over the preparation of the financial statements there is no assurance that management has accurate, timely and complete information, including accounting records. The organization faces an increased risk of fraud, errors in accounting, operational inefficiencies, compliance issues, damage to reputation, and difficulty in detecting and investigating fraudulent activity because of a lack of segregation of duties. The lack of monitoring can cause inaccurate financial reporting, increased risk of fraud, poor decision-making due to unreliable data, potential reputational damage, and missed opportunities to identify and correct financial problems early on, ultimately impacting the company's financial stability and overall performance. Cause of Conditions: The lack of SOPs (financial statement close, procure to pay, order tocash) created an environment that is not conducive for monitoring, reconciliation, and communication and can have a material impact on the entity’s financials. Policies and proceduresare not in place to ensure the effectiveness of financial management and oversight. The financial statement close process is not performed in a time manner to allow for reasonable financial statements to be prepared and reviewed by management and those charged with governance. Also, the entity lacks qualified staff in critical roles to ensure that the financial processes are initiated andmonitored and reported in a timely manner. Auditor’s Recommendation: We recommend that internal controls, along with a control matrix and SOPs, are documented and appropriately implemented and distributed to staff and management along with implementing an ongoing process of regularly reviewing and assessing the financial data. Also, we recommend hiring additional qualified staff and providing the training needed to the current staff and new hires.

COMPLIANCE FINDINGS Compliance and Reporting Major Federal Award Program Audit Department of Health and Human Services Assistance Listing Number 93.224 Health Center Program Cluster Statement of Condition: The required annual financial statement submission to the Federal Audit Clearing House for the year ended February 1, 2023. Criteria: The U. S. Department of Health and Human Services has implemented the Uniform Guidance at 45 CFR § 75. According to the Subpart F-Audits 45 CFR §75.501 (a) non-federal entities that expend $750,000 or more during the non-Federal entity's fiscal year in federal awards must have a single or program-specific audit conducted for that year in accordance with the provisions of this part. Guidance on determining Federal awards expended is provided at 45CFR § 75.502. The regulation obligates organizations expending federal grant funds over $750,000 to submit their required annual financial statement information within nine months of their year end to the Federal Audit Clearing House via the Internet. Effect of Condition: The Organization was temporarily out of compliance with federal requirements and guidelines. Cause of Condition: The Organization did not complete its annual audit in a timely manner. Recommendation: We recommend that the required annual financial statement submission to the Federal Audit Clearing House be made on a timely basis for the 2024 financial statements and for all future required submissions.

Significant Deficiency Internal Control Weakness and Non-Compliance Condition: Client provided more than one version of the SEFA which denotes errors to the previous version. Due to the client providing several versions of the SEFA, the final SEFA was not provided in a timely manner. Criteria: Per Code of Federal Regulations, the auditee must prepare a schedule of expenditures of Federal awards for the period covered by the auditee's financial statements which must include the total Federal awards expended as determined in accordance with, §200.514 states, “The auditor must determine whether the financial statements of the auditee are presented fairly in all material respects in accordance with generally accepted accounting principles. The auditor must also determine whether the schedule of expenditures of Federal awards is stated fairly in all material respects in relation to the auditee's financial statements as a whole”. Providing a SEFA with errors and or omissions impairs the afore-mentioned code regulations. Cause: The organization does not have effective controls over the review of the SEFA. Effect or Potential Effect: Over/understand the financial statement and grant revenue and expenses. Auditor’s Recommendation: Management should implement a review process with accounting on a quarterly basis to assure the accuracy and consistency of the SEFA

Significant Deficiency Internal Control Weakness – Violation of Federal and State Laws and Provisions Condition: The minimum requirement of at least 51% of the Board Members to utilize the Health Care Centers at least once in a two-year (24 mos.) period was not satisfied. The federal mandate of the funding agency is that the board must be comprised of at least 9 Board Members with a maximum of 25. Also, Gateway could not provide a complete list of the actual board members for the board meeting minutes for the 2022 fiscal year. Criteria: Compliance with Federal statutes, regulations, and the terms and conditions of Federal awards that may have a direct and material effect on each of its major programs per funding agency and the Compliance Supplement (OMB). Cause: Policies and procedures are not in place or implemented, to ensure the effectiveness of financial management, laws and regulations and oversight. Effect or Potential Effect: The loss of grant funding due to noncompliance. Auditor’s Recommendation: The board members should utilize the services of the clinics as mandated by the funding Organization

Internal Controls over Cash Disbursements MATERIAL WEAKNESS Criteria: The Organization is required to have a financial control system in place to properly account for authorized and documented financial transactions Condition: During the audit, I noted numerous instances where cash disbursements were not properly approved, recorded and/or supported by proper documentation based on my detailed review. During my testing of 40 cash disbursements, I noted that twenty-one (21) disbursements which were not properly supported by documentation and/or properly authorized. Effect: Disbursements could be misclassified or paid to unauthorized vendors as well as being paid for unauthorized and/or disallowed costs. Cause: Lack of accounting supervisory review/oversight and lack of adhering to establish policies and procedures. Questioned Costs: Undeterminable Recommendations: Management should recruit, specifically an onsite Finance Officer, and develop accounting personnel to review and enforce current policies and procedures as well as implement additional review and supervisory procedures to ensure that all disbursements are properly approved, documented and recorded

Internal Controls over Collecting Patient Accounts Receivables and Evaluating Bad Debts MATERIAL WEAKNESS Criteria: The Organization is required to maximize collections and reimbursements under Medicaid, Medicare, or any other public assistance program or private health insurance program. The Organization is also required to have a financial control system in place to evaluate and collect on patients’ accounts. Condition: The methodology for estimating the allowance for doubtful accounts was not followed. Management does not follow written policies and procedures relative to bad debt write-offs. Effect: The allowance for doubtful accounts was based on net collections realized subsequent to year end and cannot be relied upon to project future collections, which should question the effectiveness and efficiency the collection process on past due patient accounts. Cause: The Organization is not able maximize its collections and reimbursements and to evaluate its receivables based on its documented policies and/or procedures. Questioned Costs: Undeterminable Recommendation: Recruit and develop staff to implement a collection and review policy, to include but not limited to, improved technology in the billing/collecting process. Also, enforce guidelines on reviewing and making appropriate adjustments on a quarterly basis to the Bad Debt Allowance.

Internal Controls over Submission of Regulatory Reporting SIGNIFICANT DEFICIENCY Criteria: The Organization is required to have an internal control system in place to ensure that its Form 990 with the IRS and audit report with the Federal Audit Clearinghouse (FAC) are filed on a timely basis. Condition: During the audit, it was noted that Form 990 and FAC were not filed timely for FYE 5/31/2021. Effect: Late filing fines may be incurred and grant funding may be suspended until reports received. Cause: Audit engagements are not consistently planned and completed due to reasons undeterminable. Questioned Costs: Undeterminable Recommendations: Board should approve funding for audit engagements in a more timely matter as well as require the CEO and/or CFO to communicate the status of all external reporting requirements on a monthly basis regardless if there is a scheduled monthly Board meeting. Also, Board should become more involved in the planning of audit engagements

Significant Deficiency Internal Control Weakness ? Timely Submission of Regulatory Requirements: Condition: Tax Form 990 ? September30, 2020; the 990 was filed on September 30, 2021.

Material Weakness Internal Control Weakness ? Violation of Laws and Regulations Condition: The minimum requirement of at least 51% of the Board Members to utilize the Health Care Centers at least once in a two-year (24 mos.) period was not satisfied.

Significant Deficiency Internal Controls over Financial Reporting Condition: Gateway does not have a documented financial close process that was adhered to during the audit.

Material Weakness Internal Control Weakness and Non-Compliance Condition: Client provided more than one version of the SEFA which denotes errors to the previous version.

Significant Deficiency Internal Control Weakness ? Timely Submission of Regulatory Requirements Condition: During the audit it was noted the FAC were not filed for the year ended May 31, 2020.

Significant Deficiency and Non-Compliance Internal Control Weakness ? Violation of Laws and Regulations Condition: Board Members did not perform the requirement of utilizing the health care centers at least once in a two-year (24 mos.) period.

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