Kagman Community Health Center, Inc.Non-Profit

Finding No. 2023-006 Federal Agency: U. S. Department of Health and Human Services Cluster: Health Centers Clusters AL No.: 93.224 Program Title: Community Health Centers Area: Schedule of Expenditures of Federal Awards (SEFA) Repeat Finding from Prior Audit? Yes Finding Type: Material Weakness in Internal Control over Compliance Questioned Cost: Unable to be determined due to discrepancies between the Schedule of Expenditures of Federal Awards and the grant expense schedule, which prevented the identification of a complete and accurate population of expenditures for testing. Criteria: Uniform Guidance (2 CFR §200.510(b)) requires nonfederal entities to prepare a complete and accurate SEFA that agrees with underlying accounting records and grant expense schedules. The SEFA must be subject to appropriate review to ensure accuracy and completeness. Condition: The amount reported on the SEFA for AL No. 93.224 did not agree with the related grant expense schedule. As a result, the SEFA could not be reconciled to the underlying accounting records for audit purposes. Cause: The SEFA was not adequately reviewed or reconciled to the grant expense schedule prior to submission for audit. This condition was attributable to weaknesses in financial reporting controls and the absence of effective oversight to ensure the accuracy of federal award reporting. Effect: Because the SEFA did not reconcile to the grant expense schedule, Kagman Community Health Center, Inc. cannot demonstrate that federal expenditures were accurately and completely reported. This creates a reasonable possibility that material misstatements in the SEFA may not be prevented or detected on a timely basis and weakens internal controls over financial reporting. Recommendation: Kagman Community Health Center, Inc. should strengthen internal controls over SEFA preparation by: 1. Reconciling the SEFA to grant expense schedules and accounting records prior to submission. 2. Implementing supervisory review procedures to verify the accuracy and completeness of SEFA amounts. 3. Maintaining documentation to support all federal expenditures reported on the SEFA. Views of the Officials: Kagman Community Health Center, Inc.’s response is documented in the corrective action plan.

Federal Agency: U. S. Department of Health and Human Services Cluster: Health Centers Clusters AL No.: 93.224 Program Title: Community Health Centers Area: Allowable Costs/Cost Principles Repeat Finding from Prior Audit? Yes Finding Type: Material Weakness in Internal Control over Compliance Questioned Cost: Unable to be determined due to discrepancies between the Schedule of Expenditures of Federal Awards and the grant expense schedule, which prevented the identification of a complete and accurate population of expenditures for testing. Criteria: Under Uniform Guidance (2 CFR Part 200, Subpart E), costs charged to federal awards must be allowable, allocable, reasonable, and adequately documented. Nonfederal entities must maintain sufficient records to support expenditures charged to federal programs. Condition: No expenditure selections were tested for cost principle compliance. The auditors were unable to identify a reliable population of expenditures for this program due to discrepancies between the SEFA and the underlying grant expense records. Cause: The SEFA for AL No. 93.224 did not reconcile to the grant expense records, and supporting documentation for program-specific expenditures was not sufficiently available. In addition, the absence of a formal turnover of accounting and grant records following personnel changes limited the availability of information necessary to identify a complete and accurate population for testing. Effect: Because no expenditures were tested, the auditors were unable to determine whether costs charged to AL No. 93.224 complied with applicable cost principles. This increases the risk that unallowable or unsupported costs may have been charged to the program and weakens internal controls over compliance with federal cost requirements. Recommendation: Kagman Community Health Center, Inc. should strengthen internal controls over federal cost compliance by: 1. Ensuring that expenditures charged to each federal program are accurately tracked, documented, and reconciled to the SEFA and accounting records. 2. Maintaining adequate supporting documentation to substantiate allowability, allocability, and reasonableness of costs charged to federal programs. 3. Implementing supervisory review procedures to ensure program-specific expenditures are complete, accurate, and available for audit review. Views of the Officials: Kagman Community Health Center, Inc.’s response is documented in the corrective action plan.

Federal Agency: U. S. Department of Health and Human Services Cluster: Health Centers Clusters AL No.: 93.224 Program Title: Community Health Centers Area: Cash Management Repeat Finding from Prior Audit? Yes Finding Type: Material Weakness in Internal Control over Compliance Questioned Cost: Unable to be determined Criteria: Under Uniform Guidance (2 CFR §200.305), non-federal entities must minimize the time elapsing between the transfer of federal funds and the disbursement of those funds. Specifically: • Non-federal entities receiving advance payments must limit drawdowns to immediate cash needs. • Trial balances should be reviewed for unearned revenue to assess whether advances are consistent with cash management requirements. • For cost-reimbursement arrangements, reimbursement requests should generally be limited to costs that have been disbursed or incurred in accordance with applicable regulations, including the Federal Acquisition Regulation (48 CFR §52.216-7(b)). Condition: Cash management testing for cash management could not be adequately performed. Trial balances, cash drawdown records, and supporting documentation necessary to determine whether federal funds were drawn and disbursed in compliance with cash management requirements were not available for audit review. Cause: Because adequate documentation was not available, the auditors were unable to determine whether Kagman Community Health Center, Inc. complied with federal cash management requirements for Assistance Listing No. 93.224. This increases the risk that federal funds may not have been drawn or disbursed in accordance with applicable regulations and weakens internal controls over compliance with cash management requirements. Effect: Because adequate documentation was not available, the auditors were unable to determine whether Kagman Community Health Center, Inc. complied with federal cash management requirements for AL No. 93.224. This increases the risk that federal funds may not have been drawn or disbursed in accordance with applicable regulations and weakens internal controls over compliance with cash management requirements. Recommendation: Kagman Community Health Center, Inc. should strengthen internal controls over federal cash management by: 1. Maintaining complete and accurate records of federal cash drawdowns, disbursements, and related trial balance activity. 2. Implementing procedures to regularly review unearned revenue balances to ensure compliance with cash management requirements. 3. Establishing formal turnover and record-retention procedures to ensure continuity of grant accounting and cash management documentation during personnel transitions. 4. Implementing supervisory review to ensure drawdowns and reimbursement requests comply with Uniform Guidance and applicable federal regulations. Views of the Officials: Kagman Community Health Center, Inc.’s response is documented in the corrective action plan.

Federal Agency: U. S. Department of Health and Human Services Cluster: Health Centers Clusters AL No.: 93.224 Program Title: Community Health Centers Area: Period of Performance Repeat Finding from Prior Audit? Yes Finding Type: Material Weakness in Internal Control over Compliance Questioned Cost: Unable to be determined Criteria: Under the OMB Compliance Supplement and Uniform Guidance (2 CFR §200.309), costs charged to a federal award must be incurred within the approved period of performance unless otherwise authorized by the federal awarding agency or pass-through entity. Specifically: • Costs recorded at the beginning of the period of performance must not have been incurred prior to the start date unless authorized. • Costs recorded near or after the end of the period of performance must have been incurred within the approved performance period. • Obligations not liquidated as of the end of the period of performance must be liquidated within the time period allowed by applicable regulations. Condition: No expenditure selections were tested for period of performance compliance. The auditors were unable to identify a reliable population of expenditures to test due to discrepancies between the SEFA and underlying grant expense records. Cause: The amount per SEFA for AL No. 93.224 did not reconcile to grant expense records, and supporting documentation for program-specific expenditures was not sufficiently available. Additionally, the absence of a formal turnover of accounting and grant records following personnel changes limited the availability of information necessary to identify a complete and accurate population for testing. Effect: Because no expenditures were tested, the auditors were unable to determine whether costs charged to AL No. 93.224 were incurred within the approved period of performance or whether obligations were liquidated within allowable timeframes. This increases the risk that costs incurred outside the period of performance may have been charged to the program and weakens internal controls over compliance with federal award requirements. Recommendation: Kagman Community Health Center, Inc. should strengthen internal controls over period of performance compliance by: 1. Ensuring that expenditures are accurately tracked by federal program and period of performance. 2. Maintaining documentation that clearly supports the timing of costs incurred and the liquidation of obligations. 3. Reconciling grant expense records to the SEFA to allow identification of a complete population for compliance testing. 4. Establishing formal turnover and record-retention procedures to ensure continuity of grant accounting documentation. Views of the Officials: Kagman Community Health Center, Inc.’s response is documented in the corrective action plan.

Federal Agency: U. S. Department of Health and Human Services Cluster: Health Centers Clusters AL No.: 93.224 Program Title: Community Health Centers Area: Procurement and Suspension and Debarment Repeat Finding from Prior Audit? Yes Finding Type: Material Weakness in Internal Control over Compliance Questioned Cost: Unable to be determined Criteria: Under Uniform Guidance (2 CFR §§200.317–200.327), non-federal entities must follow documented procurement procedures that provide for full and open competition and maintain records sufficient to detail the history of procurement. In addition, non-federal entities must verify that contractors are not suspended or debarred prior to contract award. Condition: No procurement transactions were tested. The auditors were unable to identify a reliable population of procurement transactions attributable to this program due to discrepancies between the SEFA and underlying accounting and procurement records. Cause: The SEFS for AL No. 93.224 did not reconcile to underlying accounting records, and procurement documentation specific to the program was not sufficiently available. Additionally, the absence of a formal turnover of accounting and procurement records following personnel changes limited the availability of information necessary to identify a complete and accurate population for testing. Effect: Because no procurement transactions were tested, the auditors were unable to determine whether Kagman Community Health Center, Inc. complied with federal procurement requirements, including competition, documentation, and suspension and debarment verification. This increases the risk of noncompliance with federal procurement standards and weakens internal controls over compliance with federal award requirements. Recommendation: Kagman Community Health Center, Inc. should strengthen internal controls over federal procurement compliance by: 1. Ensuring procurement transactions are properly identified, documented, and tracked by federal program. 2. Maintaining complete procurement records, including evidence of competition and suspension and debarment verification. 3. Reconciling procurement-related expenditures to the SEFA and accounting records to allow identification of a complete population for compliance testing. 4. Establishing formal turnover and record-retention procedures to ensure continuity of procurement documentation during personnel transitions. Views of the Officials: Kagman Community Health Center, Inc.’s response is documented in the corrective action plan.

Federal Agency: U. S. Department of Health and Human Services Cluster: Health Centers Clusters AL No.: 93.224 & 93.527 Program Title: Community Health Centers & Affordable Care Act (ACA) Grants for New and Expanded Services Under the Health Center Program Area: Reporting Repeat Finding from Prior Audit? Yes Finding Type: Material Weakness in Internal Control over Compliance Questioned Cost: $0.00 Criteria: Under Uniform Guidance (2 CFR §200.328), non-federal entities are required to submit complete, accurate, and timely financial and performance reports in accordance with federal award terms and conditions. Condition: The following SF-425, Federal Financial Reports for the reporting period ended March 31, 2023, were submitted after the required deadline of 90 days following the reporting period end date: AL No. Grant No. Reporting Date Date Submitted 93.224 21H8FCS41048C6 3/31/2023 7/27/2023 93.224 22H80CS31624 3/31/2023 8/3/2023 93.527 23H8GCS48480 11/30/2023 4/3/2024 Cause: Federal reporting requirements, including SF-425 and Uniform Data System (UDS) reporting, were not adequately monitored, documented, or retained. This condition was exacerbated by significant turnover in accounting and executive management and the absence of a formal turnover of federal reporting responsibilities and supporting records. Effect: Late submission of required federal financial reports and the absence of required UDS reporting documentation limit Kagman Community Health Center, Inc.’s ability to demonstrate compliance with federal reporting requirements. Recommendation: Kagman Community Health Center, Inc. should strengthen internal controls over federal reporting by: 1. Establishing procedures to track and monitor all federal financial and special reporting requirements, including SF-425 deadlines. 2. Implementing supervisory review procedures to verify the accuracy, completeness, and timeliness of federal reports prior to submission. 3. Establishing formal turnover and documentation procedures to ensure continuity of federal reporting responsibilities during personnel changes. Views of the Officials: Kagman Community Health Center, Inc.’s response is documented in the corrective action plan.

Federal Agency: U.S. Department of Health and Human Services AL Program: 93.224 Health Center Program (Community Health Centers, Migrant Health Centers, Health Care for the Homeless, and Public Housing Primary Care) Federal Award No.: H8031624, H8F41048, H8D36529 Area: Allowable Costs/Cost Principles Questioned Costs: $6,008 Criteria: In accordance with 2 CFR section 200.403(e), costs must be adequately documented. Condition: Of forty non-payroll expenditures tested, aggregating $128,258 of a total population of $2,220,614, the following were noted: 1. For one (or 3%), supporting Credit Card No Receipt Form (CCNRF) (document no C16791 totaling $51) indicates the original fuel receipt was provided to KCHC’s accounting office. However, no supporting fuel receipt was provided to the audit team supporting the CCNRF. 2. For one (or 3%), the invoice provided by KCHC did not match the expenditure details (invoice no. 21279098 totaling $5,957). The invoice provided by KCHC (invoice no. 212790986) was incorrect. Cause: KCHC did not enforce recordkeeping and monitoring controls over compliance with applicable allowable costs/cost principles requirements. Effect: KCHC is in noncompliance with applicable allowable costs/cost principles. Questioned costs of $6,008 result as the project questioned costs exceeds $25,000 threshold. Identification as a Repeat Finding: Finding No. 2021-004 Finding No. 2022-003, continued Federal Agency: U.S. Department of Health and Human Services AL Program: 93.224 Health Center Program (Community Health Centers, Migrant Health Centers, Health Care for the Homeless, and Public Housing Primary Care) Federal Award No.: H8031624, H8F41048, H8D36529 Area: Allowable Costs/Cost Principles Questioned Costs: $6,008 Recommendation: Program Expenditures should be approved only when supported by accurate and complete documents. Views of Responsible Officials: Management agrees with the finding and has developed a plan to correct the finding. Refer to separate Corrective Action Plan.

Federal Agency: U.S. Department of Health and Human Services AL Program: 93.224 Health Center Program (Community Health Centers, Migrant Health Centers, Health Care for the Homeless, and Public Housing Primary Care) Federal Award No.: H8031624 and H8D36529 Area: Cash Management Questioned Costs: $91,960 Criteria: In accordance with entity’s strict draw down policy, all grant drawdowns shall be on a reimbursement basis and drawn down on an as needed basis based on actual allowable expenditures in order to minimize/eliminate the time elapsing between the transfer of the Federal awards and the disbursement of the fund. Further, drawdowns may not be made to cover future expenditures. Condition: Of three SF-425 reports tested, for two (or 66%), cumulative expenditures reported were based on cumulative drawdowns for which amounts were higher than the cumulative expenditures per the underlying accounting records. As KCHC is on a strict reimbursement basis, the variance of $91,960 is questioned. Cause: KCHC did not follow its grant draw down reimbursement policy and monitoring controls over compliance with applicable cash management requirements. Effect: KCHC is in noncompliance with the cash management requirement and questioned costs of $91,960 result. Finding No. 2022-004, continued Federal Agency: U.S. Department of Health and Human Services AL Program: 93.224 Health Center Program (Community Health Centers, Migrant Health Centers, Health Care for the Homeless, and Public Housing Primary Care) Federal Award No.: H8031624 and H8D36529 Area: Cash Management Questioned Costs: $91,960 Recommendation: Responsible personnel should monitor drawdowns based on actual allowable expenditures to substantiate compliance with its draw down policy. Views of Responsible Officials: Management agrees with the finding and has developed a plan to correct the finding. Refer to separate Corrective Action Plan.

Finding No. 2022-005 Federal Agency: U.S. Department of Health and Human Services AL Program: 93.224 Health Center Program (Community Health Centers, Migrant Health Centers, Health Care for the Homeless, and Public Housing Primary Care) Federal Award No.: H8031624, H8F41048, H8D36529 Area: Period of Performance Questioned Costs: $98,002 Criteria: In accordance with 45 CFR section 75.309, a non-federal entity may charge only allowable costs incurred during the period of performance and any costs incurred before the Health and Human Services (HHS) awarding agency or pass-through entity made the Federal award that were authorized by the Federal awarding agency or pass-through entity. Condition: For forty subsequent expenditures tested, aggregating $98,002 of a total population of $348,465, the following were noted: 1. For twenty-three (or 58%), expenditures were incurred and/or obligated after the obligation period of 04/30/2022. Finding No. 2022-005, continued Federal Agency: U.S. Department of Health and Human Services AL Program: 93.224 Health Center Program (Community Health Centers, Migrant Health Centers, Health Care for the Homeless, and Public Housing Primary Care) Federal Award No.: H8031624, H8F41048, H8D36529 Area: Period of Performance Questioned Costs: $98,002 Condition, continued: 2. For one (or 3%), cancelled check or other form of evidence (document no. 73206, dated 06/06/2022 amounting to $190) was not provided; accordingly, KCHC was not able to substantiate that the payment was liquidated within the grant award’s 120 days liquidation period, for which the amount is questioned. 3. For sixteen (or 40%), no supporting documents were provided to substantiate that the expenditures were incurred within the period of performance. Cause: KCHC did not enforce recordkeeping and monitoring controls over compliance with applicable period of performance requirements. Finding No. 2022-005, continued Federal Agency: U.S. Department of Health and Human Services AL Program: 93.224 Health Center Program (Community Health Centers, Migrant Health Centers, Health Care for the Homeless, and Public Housing Primary Care) Federal Award No.: H8031624, H8F41048, H8D36529 Area: Period of Performance Questioned Costs: $98,002 Effect: KCHC is in noncompliance with applicable period of performance requirements and questioned costs of $98,002 result. Recommendation: Responsible personnel should establish a recordkeeping system whereby underlying support for each transaction is timely provided and is filed to facilitate easy retrieval substantiating compliance. Identification as a Repeat Finding: Finding No. 2021-005 Views of Responsible Officials: KCHC’s Corrective Action Plan provides a rationale for disagreement with the finding. Auditor response: The supporting evidence provided indicates that the expenditures were incurred after the period of performance. Further, KCHC failed to provide evidence of certain expenditures being incurred within the corresponding period of performance. The finding remains.

Finding No. 2022-006 Federal Agency: U.S. Department of Health and Human Services AL Program: 93.224 Health Center Program (Community Health Centers, Migrant Health Centers, Health Care for the Homeless, and Public Housing Primary Care) Federal Award No.: H8031624, H8F41048, H8D36529 Area: Procurement and Suspension and Debarment Questioned Costs: $126,567 Criteria: Non-federal entities other than states must follow the procurement standards set out at 2 CFR sections 200.318 through 200.326. They may use their own documented procedures, which reflect applicable state and local laws and regulations, provided that the procurements confirm to applicable federal statutes and the procurement requirements identified in 2 CFR Part 200. Further, KCHC’s procurement policy requires the following: • For small purchases between $10,001 to $250,000, price or rate quotes must be obtained from an adequate number of sources (at least two) and all quotes, including phone calls, web searches, etc., must be documented and kept on file. • To be allowable under a federal award, costs must be reasonable, allocable, and adequately documented and consistent with federal cost principles. Condition: Of forty non-payroll expenditures tested, aggregating $234,183 of a total population of $770,029, the following were noted: 1. For six (or 15%), supporting procurement package was not sufficient to demonstrate price or rate quotes had been obtained from an adequate number of sources. Finding No. 2022-006, continued Federal Agency: U.S. Department of Health and Human Services AL Program: 93.224 Health Center Program (Community Health Centers, Migrant Health Centers, Health Care for the Homeless, and Public Housing Primary Care) Federal Award No.: H8031624, H8F41048, H8D36529 Area: Procurement and Suspension and Debarment Questioned Costs: $126,567 Condition, continued: 2. For one (or 3%), no contractual agreement between KCHC and the vendor was provided to the audit team (invoice nos. 1235 and 1351 totaling $3,000 and $1,200, respectively). 3. For one (or 3%), supporting procurement package was not sufficient to support open and fair competition for document no. 2834 totaling $1,215. 4. For 11 (or 28%), no purchase order was provided. Cause: KCHC did not enforce recordkeeping and monitoring controls over compliance with applicable procurement and suspension and debarment requirements. Effect: KCHC is in noncompliance with applicable procurement requirements and questioned costs of $126,567 result.   Finding No. 2022-006, continued Federal Agency: U.S. Department of Health and Human Services AL Program: 93.224 Health Center Program (Community Health Centers, Migrant Health Centers, Health Care for the Homeless, and Public Housing Primary Care) Federal Award No.: H8031624, H8F41048, H8D36529 Area: Procurement and Suspension and Debarment Questioned Costs: $126,567 Effect, continued: Identification as a Repeat Finding: Finding No. 2021-006 Recommendation: Responsible personnel should establish a recordkeeping system whereby underlying support for each transaction is processed timely and is filed to facilitate easy retrieval substantiating procurement compliance. In addition, responsible personnel should enforce compliance with procurement regulations. Views of Responsible Officials: Management agrees with the finding and has developed a plan to correct the finding. Refer to separate Corrective Action Plan.

Finding No. 2022-007 Federal Agency: U.S. Department of Health and Human Services AL Program: 93.224 Health Center Program (Community Health Centers, Migrant Health Centers, Health Care for the Homeless, and Public Housing Primary Care) Federal Award No.: H8031624, H8F41048, H8D36529 Area: Reporting Questioned Costs: $-0- Criteria: In accordance with 2 CFR section 200.328 and applicable reporting requirements, the Program is required to submit an accurate SF-425, Federal Financial Report. Condition: For three (or 100%) SF-425 reports tested, the following variances were noted: 1. Grant Award H80CS31624 - 04/30/2022 Reporting Period End Date: 2. Grant Award H8DCS36429 - 03/31/2022 Reporting Period End Date: 3. Grant Award H8FCS41048 - 03/31/2022 Reporting Period End Date: Finding No. 2022-007, continued Federal Agency: U.S. Department of Health and Human Services AL Program: 93.224 Health Center Program (Community Health Centers, Migrant Health Centers, Health Care for the Homeless, and Public Housing Primary Care) Federal Award No.: H8031624, H8F41048, H8D36529 Area: Reporting Questioned Costs: $-0- Cause: KCHC did not effectively monitor the accuracy and completeness of the SF 425 report based on underlying accounting records. Effect: KCHC is in noncompliance with the SF-425 federal reporting requirements. No questioned costs are presented as the variances are due to reporting errors. Identification as a Repeat Finding: Finding No. 2021-007 Recommendation: Responsible personnel should take steps to monitor reports and determine that expenditures and program income reported on the SF-425 report are supported by underlying accounting reports. Views of Responsible Officials: Management agrees with the finding and has developed a plan to correct the finding. Refer to separate Corrective Action Plan.

Finding No.: 2021-004 Federal Agency: U.S. Department of Health and Human Services CFDA Program: 93.224 Health Center Program (Community Health Centers, Migrant Health Centers, Health Care for the Homeless, and Public Housing Primary Care) Area: Allowable Costs/Cost Principles Questioned Costs: $384,704 Criteria: In accordance with applicable allowable costs/cost principles requirements, costs must be adequately documented. Furthermore, in accordance with KCHC?s check disbursements policy, check disbursements over $10,000 require two signatories (except for standard operational costs paid on a regular basis and approved by the Board of Directors through the annual operating budget). Condition: 1. For three (or 8%) of forty non-payroll expenditures tested, aggregating $465,707 of a total population of $1,641,917, the check amount exceeded the $10,000 threshold; however, the check was signed by only one signatory. No questioned costs are presented as the contract was approved by the Board of Directors. See Schedule of Findings and Questioned Costs for chart/table Of thirty-six non-payroll expenditures tested, aggregating $397,591 of a total population of $1,641,917, the following were noted: 2. For five (or (14%), the check amount exceeded the $10,000 threshold; however, the check was signed by only one signatory, which practice does not conform to that exercised over locally funded transactions. See Schedule of Findings and Questioned Costs for chart/table 3. For four (or 11%), no underlying accounting records, such as obligating documents, invoices and source of payments, were provided. See Schedule of Findings and Questioned Costs for chart/table 4. For one (or 3%), the transaction pertains to construction and renovation, which is not an approved cost of the award. See Schedule of Findings and Questioned Costs for chart/table Cause: KCHC did not enforce recordkeeping and monitoring controls over compliance with applicable allowable costs/cost principles requirements. Effect: KCHC is in noncompliance with applicable allowable costs/cost principles requirements, and questioned costs of $384,704 exist. See Schedule of Findings and Questioned Costs for chart/table Identification as a Repeat Finding: Finding No. 2020-003 Recommendation: Responsible personnel should not approve program expenditures unless underlying support is provided for review and should make certain that checks exceeding the $10,000 threshold are signed by two authorized signatories before the checks are released. Views of Responsible Officials: KCHC?s Corrective Action Plan states agreement with Condition 1 and states disagreement with Conditions 2, 3 and 4 for the following reasons: Condition 2 - KCHC disagrees with the finding. For all the non-payroll expenditures tested, Board approval was obtained for all the projects, therefore, there should not be any questioned costs. In accordance with KCHC's Fiscal Policies and Procedures, KCHC is in compliance. Condition 3 - KCHC disagrees with the finding. KCHC?s underlying accounting records, such as obligating documents, invoices, and source of payments, have been readily available for examination. See 2021-004 Condition 3 attachment for the documentation. In accordance with KCHC?s Fiscal Policies and Procedures, Check Disbursement Policy, KCHC is in compliance. Condition 4 - KCHC disagrees with the finding. Document No. WC03312021-04 for General Ledger Date 04/16/2021 is an approved cost of the award. Also, the award listed in this finding is not the correct award. Per our NOA, CARES funding may be re-budgeted up to 25% without prior approval provided that the proposed use of funding aligns with the CARES funding intent. See attachment 2021-004 Condition 4 for the documentation. In accordance with KCHC?s Fiscal Policies and Procedures, KCHC is compliant with its applicable allowable costs/cost principles requirements. Auditor Response: Condition 2 - In accordance with KCHC?s check disbursements policy, check disbursements over $10,000 require two signatories. Condition 3 - Documents nos. 040721, 040121, 012921 and 072320 are general journal entries. While the journal vouchers were prepared and were provided, they were not supported by relevant documents. Therefore, the basis of the proposed entries is unknown. Condition 4 - Unlike other billings under the same contract, the selected transaction was charged to H80CS31624 for which there were no costs approved for the construction/renovation under this grant.

Finding No.: 2021-005 Federal Agency: U.S. Department of Health and Human Services CFDA Program: 93.224 Health Center Program (Community Health Centers, Migrant Health Centers, Health Care for the Homeless, and Public Housing Primary Care) Area: Period of Performance Questioned Costs: $996,575 Criteria: In accordance with applicable period of performance requirements, the entity shall liquidate all obligations incurred under the award not later than 90 days after the end of the funding period. Further, time extensions should be approved by the grantor. Condition: 1. For one Federal award, cumulative expenditures as of April 30, 2021, exceeded the authorized grant financial assistance. A reconciliation of the negative balance was not provided. See Schedule of Findings and Questioned Costs for chart/table 2. For five Federal awards, no carryover requests submitted to and approved by HRSA were provided for unused funding as of 04/30/21, and the unused funding was subsequently expended in FY 2022. Therefore, this ultimately becomes a questioned cost in the current audit as such expenditures do not appear to have been authorized by the grantor. See Schedule of Findings and Questioned Costs for chart/table Cause: KCHC did not effectively monitor compliance with applicable period of performance requirements. Effect: KCHC is in noncompliance with period of performance requirements, and questioned costs of $996,575 exist. See Schedule of Findings and Questioned Costs for chart/table Recommendation: Responsible personnel should monitor check payments so that liquidations occur timely. Furthermore, Grantor approval should be sought if extensions are needed. Views of Auditee and Corrective Action Plan: KCHC?s Corrective Action Plan states disagreement for the following reasons: Condition 1 - KCHC disagrees with the finding. Award No. 3 H80CS31624-02-04 for $650,000.00 was awarded to KCHC for the New Access Point (NAP). The NAP grant is combined with the main grant, H80CS31624, to total $1,996,025.00. Also, the documents for the reconciliation of the negative balance have been readily available for examination. On 05/02/2022, the Federal Financial Report (FFR), Form SF 425, for 04/30/2021 was submitted in HRSA PMS with the request to carryover the funds totaling $120,125.00 for the NAP. Form SF 425 for 04/30/2021 has an unobligated balance of $608,564.17, therefore, there should not be any questioned costs. KCHC is in compliance with the applicable period of performance requirements. Condition 2 - KCHC disagrees with the finding. The carryover request documents in question for the 04/30/2021 unused funding for the various grants have been readily available for examination. See attachment 2021-005 Condition 2 for documentation. KCHC is in compliance with the applicable period of performance requirements, therefore, there should not be any questioned costs. Auditor Response: Condition 1 - A reconciliation of the negative balance was not provided and thus, a finding was raised. Condition 2 - The carryover requests represented to having been submitted to and approved by HRSA were not provided to the auditor documenting approval for use of the unused funding and thus, a finding was raised.

Finding No.: 2021-006 Federal Agency: U.S. Department of Health and Human Services CFDA Program: 93.224 Health Center Program (Community Health Centers, Migrant Health Centers, Health Care for the Homeless, and Public Housing Primary Care) Award Numbers: H80CS31624, H8ECS38993, H8DCS36529 Area: Procurement and Suspension and Debarment Questioned Costs: $197,763 Criteria: KCHC?s procurement policy requires the following: ? For small purchases between $10,001 to $250,000, price or rate quotes must be obtained from an adequate number of sources (at least two) and all quotes, including phone calls, web searches, etc., must be documented and kept on file. ? Sole source procurement for $10,000 and greater may only be used when the item is available only from a single source; the public exigency or emergency will not permit a delay resulting from competitive solicitation; federal awarding agency or pass-through entity expressly authorizes its use in response to a written request or after solicitation of a number of sources competition is determined inadequate. In addition, justification of the use of noncompetitive proposal and any research on availability from multiple sources must be documented. Additionally, documentation of authorization must be retained and any initial solicitations from multiple sources which are concluded to be inadequate, and such reasoning, must be documented. ? The Chief Executive Officer has purchasing authority and dollar limits of $10,000, while the Board of Directors? purchasing authority and dollar limits are for amounts over $10,000. ? Audit services will be procured through a Request for Proposal (RFP). The RFP will be mailed or faxed to a minimum of three identified public accounting firms, and selection will be ranked accordingly using a systematic method based on selection criteria. Condition: Of forty non-payroll expenditures tested, aggregating $465,707 of a total population of $1,641,917, the following deficiencies were noted: 1. For three (or 8%), no board approval for procurements exceeding the $10,000 threshold were provided. Questioned costs of $10,780 exists for document no. 2021000210. Document nos. 3632 and 3633 were questioned at Finding No. 2021-004, Condition 2. See Schedule of Findings and Questioned Costs for chart/table 2. For four (or 10%), documentation in the procurement file was not sufficient to demonstrate price or rate quotes from an adequate number of sources. GSee Schedule of Findings and Questioned Costs for chart/table 3. For one (or 3%), audit services were not procured using the required Request for Proposal procedures in accordance with KCHC?s Fiscal Policies and Procedures. Instead, a request for quotation was sent to only one identified public accounting firm. See Schedule of Findings and Questioned Costs for chart/table 4. For two (or 5%), sole source procurement was used, but no written justification was provided. See Schedule of Findings and Questioned Costs for chart/table Cause: KCHC did not enforce recordkeeping and monitoring controls over compliance with applicable procurement requirements. Effect: KCHC is in noncompliance with applicable procurement requirements, and questioned costs of $197,763 exist. See Schedule of Findings and Questioned Costs for chart/table Identification as a Repeat Finding: Finding No. 2020-004 Recommendation: Responsible personnel should establish a recordkeeping system whereby underlying support for each transaction is processed timely and is filed to facilitate easy retrieval substantiating procurement compliance. In addition, responsible personnel should enforce compliance with procurement regulations. Views of Responsible Officials: KCHC?s Corrective Action Plan states disagreement for the following reasons: Condition 1 - KCHC disagrees with the finding. All three expenditures, Document No. 3633, 3632 & 2021000210, totaling $34,395, $34,395 & $10,780, respectively, were approved by the Board of Directors prior to disbursements. See attachment 2021-006 Condition 1 for documentation. In accordance with KCHC?s Fiscal Policies and Procedures, Procurement Policy, KCHC is in compliance. Condition 2 - KCHC disagrees with the finding. KCHC?s underlying accounting records, such as obligating documents, invoices and source of payments, have been readily available for examination. This finding is the same as 2021-004 Condition 3. In accordance with KCHC?s Fiscal Policies and Procedures, Check Disbursement Policy, KCHC is in compliance. Condition 3 - KCHC disagrees with the finding. The Finance Manager, Frances Santos, requested a quotation from two accounting firms, Deloitte & Touche LLC and Ernst & Young (CNMI), Inc. See attachment 2021-006 Condition 3 for documentation. In accordance with KCHC?s Fiscal Policies and Procedures, Audit and Tax Compliance Policy, KCHC is in compliance. Condition 4 - KCHC disagrees with the finding. KCHC amended its Commercial Space Lease Agreement on 01/01/2020 to include units A, B, C & D for the new Clinic. Sole source procurement was performed since KCHC had already been leasing the commercial space, units E, F & G, since 07/01/2018. Also, no other space in the area was available. See attachment 2021-006 Condition 4 for documentation. In accordance with KCHC?s Fiscal Policies and Procedures, Procurement Policy, KCHC is in compliance. Auditor Response: Condition 1 - No board approval for procurements exceeding the $10,000 threshold were provided. Condition 2 - In accordance with KCHC?s fiscal policies and procedures, price or rate quotes must be obtained from an adequate number of sources (at least two). In addition, all quotes, including phone calls, web searches, etc., must be documented and be kept on file. Services were selected through small purchase procurement processes; however, quotes from an adequate number of sources were not provided to the auditors. Condition 3 - The service was not procured using required Request for Proposal procedures in accordance with KCHC?s Fiscal Policies and Procedures. Condition 4 - No written justification for the sole source procurement was provided to the auditors.

Finding No.: 2021-007 Federal Agency: U.S. Department of Health and Human Services CFDA Program: 93.224 Health Center Program (Community Health Centers, Migrant Health Centers, Health Care for the Homeless, and Public Housing Primary Care) Award Numbers: H80CS31624, H8CCS34849, H8DCS36529 and H8ECS38993 Area: Reporting Questioned Costs: $-0- Criteria: In accordance with applicable reporting requirements, the Program should submit an accurate SF 425, Federal Financial Report. Condition: Total cumulative expenditures and program income amounts reported on the SF 425 report differ from underlying accounting records. In addition, review and approval of the SF 425 report was not evident. No questioned costs result as the recorded cumulative expenditures of $4,817,429 agreed with the cumulative drawdown amount reflected in the PMS system which KCHC uses to draw Federal funds. See Schedule of Findings and Questioned Costs for chart/table Cause: KCHC did not effectively monitor the accuracy and completeness of the SF 425 report based on underlying accounting records. Effect: KCHC is in noncompliance with SF 425 federal reporting requirements. Identification as a Repeat Finding: Finding No. 2020-005. Recommendation: Responsible personnel should take steps to monitor reports and determine that expenditures and program income reported on the SF 425 report are supported by underlying accounting records. Views of Responsible Officials: KCHC?s Corrective Action Plan states agreement and provides planned corrective actions.

Finding No.: 2020-003 Federal Agency: U.S. Department of Health and Human Services CFDA Program: 93.224 Health Center Program (Community Health Centers, Migrant Health Centers, Health Care for the Homeless, and Public Housing Primary Care) Award Numbers: H80CS31624, H8CCS34849 and H8DCS36529 Area: Allowable Costs/Cost Principles Questioned Costs: $24,343 Criteria: In accordance with applicable allowable costs/cost principles requirements, costs must be adequately documented. Furthermore, incentives costs, including social activities and any associated costs, such as gift cards for gasoline, shopping and movie passes, are unallowable unless authorized by the Grantor. In addition, in accordance with KCHC?s check disbursements policy, no payments can be made by electronic funds transfer (EFT), and check disbursements over $10,000 require two signatories (except for standard operational costs paid on a regular basis and approved by the Board of Directors through the annual operating budget). Condition: 1. Of forty-one non-payroll expenditures tested, aggregating $147,563 of a total population of $976,884, the following were noted: a. For one (or 2%), a board meeting and strategic plan session was held at an off-island site for which the travel expense was not included in the approved budget, and no written authorization from the Grantor was provided. In addition, documentation to justify the need to hold the board meeting and strategic plan session off-island was not on file. Further, a blank trip report was signed and submitted for TA #19-25, while trip reports for TA #19-16 and #19-24 were not on file. See Schedule of Findings and Questioned Costs for chart/table b. For four (or 10%), the expenditures were for unallowable incentive costs, such as gift cards for gasoline, shopping, and movie passes associated with team building activities held during a board/staff meeting. No written authorization from the Grantor was provided. See Schedule of Findings and Questioned Costs for chart/table c. For three (or 7%), the check amounts exceeded the $10,000 threshold; however, the checks were signed by only one signatory. See Schedule of Findings and Questioned Costs for chart/table No questioned costs are presented as the contract was approved by the Board of Directors. d. For four (or 10%), expenditures were paid through a form of electronic funds transfer (EFT), which is inconsistent with KCHC?s written policy that no payments can be made by EFT. See Schedule of Findings and Questioned Costs for chart/table No questioned costs are presented as expenditures are determined to be allowable based on invoices provided. 2. For one (or 3%) of thirty-eight payroll expenditures tested, aggregating $95,983 of a total population of $664,933, Board approval for the Chief Executive Officer?s salary wage increase was not evident. The increased amount of $7,350 is questioned. Cause: KCHC did not enforce recordkeeping and monitoring controls over compliance with applicable allowable costs/cost principles requirements. Effect: KCHC is in noncompliance with applicable allowable costs/cost principles requirements, and questioned costs of $24,343. Recommendation: Responsible personnel should establish a recordkeeping system whereby underlying support for each transaction is processed timely and is filed to facilitate easy retrieval substantiating costs. The responsible personnel should not approve program expenditures unless underlying support is provided for review and should make certain that checks exceeding the $10,000 threshold are signed by two authorized signatories before the checks are released. Further, KCHC should consider revising its check disbursement policy if EFT transactions are acceptable. Identification as a Repeat Finding: Finding No. 2019-001 Views of Responsible Officials: KCHC?s Corrective Action Plan states agreement with Condition 2 and states disagreement with Condition 1 for the following reasons: Condition 1a - KCHC disagrees with the finding. Written authorization from the Grantor for travel expenses performed by the Board of Directors and Management of KCHC is not needed. Travel was necessary in order to have the majority of the Board of Directors in one place, where their undivided attention as well as their complete focus, are given for the strategic plan sessions in order to complete their tasks as Board of Directors in regards to the Strategic Plan. Condition 1b - KCHC disagrees with the finding. All four expenditures totaling $675 were charged to account 8700 - Program Income and classified as KCHC - Non Federal. Federal funds were not drawn down for the $675. Condition 1c - KCHC disagrees with the finding. All three expenditures, GL dates 12/6/19, 1/22/20 & 2/6/20, document numbers 1584, RNV 2020-4628 & RNV 2020-4651, account number 7500, totaling $43,924, $45,601 & $67,609, respectively, were a part of Contract No. RNV19-0093 in which the contract was approved by the Board of Directors on 12/6/19 prior to the check disbursements. Condition 1d - KCHC disagrees with the finding. KCHC, as recommended by Deloitte during the presentation of the FY2019 draft audit reports to the Board of Directors, revised the section of the Check Disbursement Policy to strike out the sentence in the policy stating that no payments are made by electronic fund transfer (EFT). Auditor Response: Condition 1a: No documentation was provided to substantiate the necessity of travel to Korea over any available place within Saipan or neighboring islands that offers seclusion. Condition 1b: In accordance with KCHC?s Fiscal Policies and Procedures, any revenue generated as a result of activities funded with federal funds must be used for that same purpose and cannot be set aside as unrestricted funds. The Fiscal Policies and Procedures also states that KCHC is to ensure program income is used appropriately and meets the federal administrative requirements of 45 CFR ?75.307, to further eligible projects or project objectives and/or to finance the non-federal share of the project or the program. Condition 1c: We do not dispute Board approval of the contract. KCHC?s Fiscal Policies and Procedures for check disbursements over $10,000 requires a second signatory for each cited check that was well above the threshold. Condition 1d: Our recommendation was made on January 23, 2020, and KCHC effected the recommendation on May 28, 2020. The cited payments did not follow KCHC?s existing policy that was in effect at the time of each transaction.

Finding No.: 2020-004 Federal Agency: U.S. Department of Health and Human Services CFDA Program: 93.224 Health Center Program (Community Health Centers, Migrant Health Centers, Health Care for the Homeless, and Public Housing Primary Care) Award Numbers: H80CS31624, H8CCS34849 and H8DCS36529 Area: Procurement and Suspension and Debarment Questioned Costs: $230,867 Criteria: KCHC?s procurement policy requires the following: ? For small purchases between $10,001 to $250,000, price or rate quotes must be obtained from an adequate number of sources (at least two) and all quotes, including phone calls, web searches, etc., must be documented and kept on file. ? Sole source procurement for $10,000 and greater may only be used when the item is available only from a single source; the public exigency or emergency will not permit a delay resulting from competitive solicitation; federal awarding agency or pass-through entity expressly authorizes its use in response to a written request or after solicitation of a number of sources competition is determined inadequate. In addition, justification of the use of noncompetitive proposal and any research on availability from multiple sources must be documented. Additionally, documentation of authorization must be retained and any initial solicitations from multiple sources which are concluded to be inadequate, and such reasoning, must be documented. ? The Chief Executive Officer has purchasing authority and dollar limits of $10,000, while the Board of Directors? purchasing authority and dollar limits are for amounts over $10,000. ? Audit services will be procured through a Request for Proposal (RFP). The RFP will be mailed or faxed to a minimum of three identified public accounting firms, and selection will be ranked accordingly using a systematic method based on selection criteria. ? Under the Responsibility section of the procurement policy, no employee of KCHC or any member of the Board of Directors shall be directly or indirectly in the employ of any person, company or corporation seeking to do business with KCHC. None of these shall receive directly or indirectly any wages, commission, free gift, favor or payment from any such person, company or corporation. Any officer or employee guilty of any willful violation of this policy shall be subject to dismissal. Exceptions to this policy must be ratified by the Board of Directors and be fully disclosed to appropriate parties. Condition: Of forty-eight nonpayroll expenditures tested, aggregating $178,573 of a population of $976,884, the following deficiencies were noted: 1. For three (or 6%), documentation in the procurement file was not sufficient to demonstrate price or rate quotes from an adequate number of sources. See Schedule of Findings and Questioned Costs for chart/table 2. For three (or 6%), documentation justifying the selection of a contractor who submitted a higher bid was not provided. The higher bid amount of $188,913 exceeded the lower bid amount of $133,815 by $55,098, which is a questioned cost. See Schedule of Findings and Questioned Costs for chart/table 3. For two (or 4%), sole source procurement was used. Written justification for sole source procurement was not provided. See Schedule of Findings and Questioned Costs for chart/table 4. For one (or 2%), audit services were not procured using the required Request for Proposal procedures in accordance with KCHC?s Fiscal Policies and Procedures. Instead, a request for quotation was sent to two identified public accounting firms. See Schedule of Findings and Questioned Costs for chart/table No questioned costs are presented as KCHC?s selection resulted from a competitive process. 5. For two (or 4%), Board approval for procurements exceeding the $10,000 threshold was not provided. See Schedule of Findings and Questioned Costs for chart/table No questioned costs are presented as the amounts are questioned at Condition 1. 6.Two Board members declared potential conflicts of interest wherein the individuals are employed at companies for which KCHC does business; however, no documentation was provided to demonstrate that such exceptions to KCHC?s procurement policy were ratified by the Board of Directors. No questioned costs are presented due to our inability to quantify the extent of noncompliance. Cause: KCHC did not enforce recordkeeping and monitoring controls over compliance with applicable procurement requirements. Effect: KCHC is in noncompliance with applicable procurement requirements, and questioned costs of $230,867 exist. Recommendation: Responsible personnel should establish a recordkeeping system whereby underlying support for each transaction is processed timely and is filed to facilitate easy retrieval substantiating procurement compliance. In addition, responsible personnel should enforce compliance with procurement regulations. Views of Responsible Officials: KCHC?s Corrective Action Plan states agreement with Condition 1 for document numbers 19090 and 1138, Condition 5 and Condition 6. KCHC disagrees with other conditions, as follows: Condition 1 - KCHC disagrees with one (GL date 3/11/2020, document number 43922) of the three findings. During fiscal year 2019, three different quotes from three different Vendors were obtained. These documents were provided to Deloitte during fiscal year 2020 audit fieldwork. For fiscal year 2020, the health plan was renewed. Condition 2 - KCHC disagrees with the finding. The higher bidder amount of $188,913 was selected due to the Board of Directors (BOD) anticipation that the lower bidder could not complete the job due to lack of references, therefore, the BOD was not satisfied with the lower bidder. Condition 3 - KCHC disagrees with the finding. Other office spaces in Kagman were looked at, however, Chen Ya Zhen was the only building that was move-in ready, the rest were under renovation/construction. Condition 4 - KCHC disagrees with the finding. Under Table A of the Procurement of Contracted Services & Contract Monitoring Policy, small purchase procedure which is $10,001 to $250,000, only two price quotations are necessary in which we obtained. These documents were provided to Deloitte during fiscal year 2020 audit fieldwork. Auditor Response: Condition 1 for document number 43922: Since there was a 20% rate increase when the health insurance plan was renewed, KCHC should have obtained quotes from other health insurance providers for rate comparison purposes similar to the manner in which KCHC obtained a quote from another health insurance provider on August 5, 2020 covering fiscal year 2021. Condition 2: The Board?s rationale for selecting the higher bidder over the lowest bidder was not documented in the board minutes. The November 26, 2019 minutes set forth one opinion against the lowest bidder, one recommendation for the lowest bidder, and a tabling of the discussion. The January 23, 2020 board minutes state approval of a motion to ratify the renovation contract, with no documentation of any discussion. KCHC provided copies of email discussions among the Board members during the period between 11/29/2019 and 12/04/2019, and the discussions resulted in a vote via email in favor of the higher bidder. Contractor selection based on a vote is not in accordance with applicable procurement requirements since (1) KCHC chose which specific contractors to solicit for this small purchase procurement, and (2) concerns over performance could be addressed through a performance bond. As there is no evidence that the lowest bidder was debarred or suspended, the lowest bidder should have been awarded the contract. Condition 3: The procurement file contains neither documentation of the other office spaces that were looked at nor a written assessment of only one building being move-in ready. Condition 4: We acknowledge that the small purchase procedure under Table A allows for only two price quotations; however, the expenditure pertains to audit services which fall under the Audit and Tax Compliance Policy section of KCHC?s Fiscal Policies and Procedures that require a minimum of three proposals.

Finding No.: 2020-005 Federal Agency: U.S. Department of Health and Human Services CFDA Program: 93.224 Health Center Program (Community Health Centers, Migrant Health Centers, Health Care for the Homeless, and Public Housing Primary Care) Award Numbers: H80CS31624, H8CCS34849 and H8DCS36529 Area: Reporting Questioned Costs: $-0- Criteria: The Program is required to submit an accurate SF 425, Federal Financial Report. Condition: Total cumulative expenditures and program income amounts reported on the SF 425 report differ from underlying accounting records. In addition, review and approval of the SF 425 report was not evident. See Schedule of Findings and Questioned Costs for chart/table Cause: KCHC did not effectively monitor the accuracy and completeness of the SF 425 report based on underlying accounting records. Effect: KCHC is in noncompliance with SF 425 federal reporting requirements. No questioned costs result as the recorded cumulative expenditures of $2,649,216 agreed with the cumulative drawdown amount reflected in the PMS system which KCHC uses to drawdown federal funds. Recommendation: Responsible personnel should take steps to monitor reports and determine that expenditures and program income reported on the SF 425 report are supported by underlying accounting records. Views of Responsible Officials: KCHC?s Corrective Action Plan states agreement and provides planned corrective actions.

Finding No.: 2019-001 Federal Agency: U.S. Department of Health and Human Services CFDA Program: 93.224 Health Center Program (Community Health Centers, Migrant Health Centers, Health Care for the Homeless, and Public Housing Primary Care) Award Numbers: H80CS31624 Area: Allowable Costs/Cost Principles Questioned Costs: $1,325 Criteria: In accordance with applicable allowable costs/cost principles requirements, costs must be adequately documented in order to be allowable under Federal awards. Furthermore, costs of entertainment, including social activities and any associated costs, such as meals, are unallowable unless authorized by the Grantor. In addition, in accordance with KCHC?s check disbursements policy, no payments can be made by electronic funds transfer (EFT). Condition: Tests of major program expenditures noted the following: 1. For ten (or 91%) of eleven payroll expenditures, aggregating $5,090 of a population of $581,869, the notice of personnel action (NOPA) was not prepared during the fiscal year. No questioned cost is presented as the approved PAFs were subsequently prepared in September 2019, and the approved pay rates agree with the approved budget details applied during fiscal year 2019. 2. Of thirty-three non-payroll expenditures, aggregating $17,977 of a total population of $636,857, the following were noted: a. For four (or 12%), purchase orders and vendor invoices substantiating the expenditures were not provided: See Schedule of Findings and Questioned Costs for chart/table. b. For four (or 12%), the expenditures were for unallowable meal costs associated with such social activities as a farewell party and a Thanksgiving gathering. No written authorization from the Grantor was provided. See Schedule of Findings and Questioned Costs for chart/table. c. For twelve (or 36%), the purchase orders were not provided. KCHC?s written policy defines an adequately documented cost as that which is supported by accounting records and source documentation such as purchase orders. See Schedule of Findings and Questioned Costs for chart/table. No questioned cost is presented for the net amount of $4,010 as expenditures are determined allowable based on invoices provided. d. For four (or 12%), the expenditures were paid through a form of electronic funds transfer (EFT), which is inconsistent with KCHC?s written policy that no payments can be made by EFT. See Schedule of Findings and Questioned Costs for chart/table. No questioned cost is presented for the net amount of $3,224 as expenditures are determined allowable based on invoices provided. Cause: KCHC did not enforce recordkeeping and monitoring controls over compliance with applicable allowable costs/cost principles requirements. Effect: KCHC is in noncompliance with applicable allowable costs/cost principles requirements, and questioned costs of $1,325 exist since projected questioned costs exceed the threshold. Recommendation: Responsible personnel should establish a recordkeeping system whereby underlying support for each transaction is processed timely and is filed to facilitate easy retrieval substantiating costs. The responsible personnel should not approve program expenditures unless underlying support is provided for review. Furthermore, KCHC should consider revising its check disbursement policy if EFT transactions are acceptable. Views of Responsible Officials: KCHC agrees with the finding and provided a Corrective Action Plan.

Finding No.: 2019-002 Federal Agency: U.S. Department of Health and Human Services CFDA Program: 93.224 Health Center Program (Community Health Centers, Migrant Health Centers, Health Care for the Homeless, and Public Housing Primary Care) Award Numbers: H80CS31624 Area: Cash Management Questioned Costs: $-0- Criteria: In accordance with applicable cash management requirements, drawdowns of federal funds should be supported with underlying accounting records. Condition: For four (or 67%) of six drawdown requests tested, aggregating $77,474 of $1.1 million in total Federal draws, the following draws were not supported with underlying accounting records: See Schedule of Findings and Questioned Costs for chart/table. Cause: KCHC did not enforce recordkeeping and monitoring controls over compliance with applicable cash management requirements. Effect: KCHC is in noncompliance with applicable cash management requirements. No questioned cost is presented as total FY 2019 program expenditures exceed the total FY 2019 Federal draws by more than $85,000. Recommendation: Responsible personnel should establish a recordkeeping system whereby underlying support for each transaction is processed timely and is filed to facilitate easy retrieval substantiating Federal draws. Responsible personnel should not approve drawdown of federal funds unless underlying support is provided for review. Views of Responsible Officials: KCHC agrees with the finding and provided a Corrective Action Plan.

Finding No.: 2019-003 Federal Agency: U.S. Department of Health and Human Services CFDA Program: 93.224 Health Center Program (Community Health Centers, Migrant Health Centers, Health Care for the Homeless, and Public Housing Primary Care) Award Numbers: H80CS31624 Area: Equipment and Real Property Management Questioned Costs: $-0- Criteria: In accordance with applicable equipment and real property management requirements, property records must be maintained that include a description of the property, a serial number or other identification number, the source of funding for the property (including the FAIN), who holds title, the acquisition date, and cost of the property, percentage of Federal participation in the project costs for the Federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sale price of the property. Condition: Property records maintained have missing information or did not include required information, such as who holds title, percentage of Federal participation in the project costs for the Federal award under which the property was acquired, the location, use and condition of the property, and the ultimate disposition data including the date of disposal and sale price of the property. Cause: KCHC did not enforce compliance with applicable equipment and real property management requirements. Effect: KCHC is in noncompliance with applicable equipment and real property management requirements. The total capital outlays in FY 2019 is $20,894. No questioned cost is presented as we are unable to quantify the extent of the noncompliance. Recommendation: KCHC should consider identifying a fixed asset team and providing training on applicable equipment and real property management requirements, including documentation requirements. Views of Responsible Officials: KCHC agrees with the finding and provided a Corrective Action Plan.