MENDING HEARTS, INC.

2024-002 Untimely submission of data collection form and compliance with reporting requirements Federal Programs Information Funding Agency: U.S. Department of Health and Human Services Pass-Through Agency: TN Department of Mental Health & Substance Abuse Services 1) 93.959 Federal Block Grants for Prevention of Substance Abuse DGA 78087_2023-2024_023 and DGA 82413_2024-2026_204 2) 93.788 Opioid STR H79TI0883307 and DGA 78005_2022-2023_076 Criteria In accordance with 2 CFR Section 200.512(a), the audit must be complete, and the data collection form and the reporting package must be submitted within the earlier of 30 days after receipt of the auditor’s report(s), or nine months after the end of the audit period, adjusted for any extension permitted by the Office of Management and Budget. Mending Hearts did not meet the nine-month deadline. Condition The audit, reporting package and data collection form for the year ended June 30, 2024, was not filed by the deadline of March 31, 2025, to the Federal Audit Clearinghouse. Cause Mending Hearts has been in a period of expansion of their operations and has also experienced administrative staff changes, resulting in limited resources available to produce a complete, accurate and timely closing of the books. Effect or potential effect Delays in submission of audit reports, reporting packages and data collection forms raise concerns about Mending Hearts’ reliability in adhering to accounting and compliance requirements in a timely manner, potentially jeopardizing its ability to secure funding. Recommendation We recommend that Mending Hearts’ ensure that administrative staffing is sufficient to support the accounting and financial reporting functions of the organization. Views of responsible officers Management acknowledges this finding and will address remediation in the accompanying management’s corrective action plan in appendix A.

Criteria As required by the Uniform Guidance, a non-federal entity may not earn or keep any profit resulting from federal assistance, unless explicitly authorized by terms and conditions of the award. Condition Mending Hearts elected to charge the de minimis rate of 10 percent of modified total direct costs (“MTDC”) to the grant but did not calculate the de minimis rate using the appropriate base. Cause Rather than calculating 10 percent of MTDC to determine reimbursement requests, Mending Hearts allocated and requested reimbursement of indirect costs based on the total indirect costs included in the grant budget. Context The year ended June 30, 2023 represents the first year in which Mending Hearts has received a grant including budgeted indirect costs. Testing of indirect costs was based on the total direct costs requested for reimbursement during the fiscal year and, therefore, 100% of the indirect costs were tested. Auditor’s Recommendations Mending Hearts should determine MTDC prior to calculating the amount of indirect costs to include in grant reimbursement requests. The calculation should be reviewed by someone other than the individual preparing the calculation. Views of Responsible Officials Management agrees with the auditor’s recommendation and will calculate indirect cost reimbursement requests using the appropriate base going forward, and will implement appropriate review and approval procedures over the process. A future reimbursement request will be adjusted to offset the excess funding that was received during the year ended June 30, 2023. Effect Mending Hearts received excess funding of indirect costs of approximately $9,300 during the fiscal year. As correction of the excess funding will be made on a future reimbursement request, this largely represents a timing difference between costs incurred and the reimbursement of the related indirect costs allowed under the terms of the grant. Questioned Costs Questioned costs did not meet the $25,000 reporting threshold.

Criteria Under the requirements of the Federal Funding Accountability and Transparency Act (“FFATA”), recipients of grants or cooperative agreements are required to report first-tier subawards of $30,000 or more to the Federal Funding Accountability and Transparency Act Subaward Reporting System (“FSRS”) no later than the last day of the month following the month in which the subaward was made. Condition Mending Hearts did not timely report the $200,000 subaward granted to Meharry Medical College during the year ending June 30, 2023. Cause Mending Hearts was not aware of the FFATA reporting requirement. Effect Mending Hearts did not provide timely reporting of the $200,000 subaward granted to Meharry Medical College. Upon becoming aware of the filing requirements, Mending Hearts completed the required filing. Questioned Costs None. Context The year ended June 30, 2023 represents the first year in which Mending Hearts was subject to the FFATA reporting requirement, and the PPW grant is the only grant received during the year that included a pass-through of funding to a subrecipient. Testing, therefore, included the entire population of grants subject to the reporting requirement. Auditor’s Recommendations Mending Hearts should gain an understanding of when FFATA reporting is required, carefully review awards to identify grants subject to the reporting requirement, identify key data elements required for complete and accurate reporting, and ensure that reporting is completed no later than the last day of the month following the month in which a subaward is made. Views of Responsible Officials Management agrees with the auditor’s recommendation. On March 22, 2024, Mending Hearts registered with the FSRS and filed the required FFATA report associated with PPW subaward granted to Meharry Medical College.

Item #2021-001 Substance Abuse and Mental Health Services Projects of Regional and National Significance CFDA No. 93.243 Criteria Mending Hearts, Inc. (the ?Organization?) currently has no process whereby drawdown requests and underlying calculations are reviewed prior to submission. Condition and Context The monthly drawdown requests and underlying calculations submitted for reimbursement under the federal grant were not reviewed by an independent party prior to submission. Questioned Cost None Cause The Organization?s management was unaware that an independent review of the drawdown requests submitted was necessary. Effect The Organization submitted drawdown requests that were not reviewed by third party other than the preparer prior to submission. Recommendation We recommend the Organization?s management implement procedures whereby requests made in accordance with grant terms are reviewed by an independent party prior to submission to help ensure intentional or unintentional errors do not occur.

Item #2020-001 Substance Abuse and Mental Health Services Projects of Regional and National Significance CFDA No. 93.243 Criteria Mending Hearts, Inc. (the ?Organization?) currently has no process whereby drawdown requests and underlying calculations are reviewed prior to submission. Condition and Context The monthly drawdown requests and underlying calculations submitted for reimbursement under the federal grant were not reviewed by an independent party prior to submission. Questioned Cost None Cause The Organization?s management was unaware that an independent review of the drawdown requests submitted was necessary. Effect The Organization submitted drawdown requests that were not reviewed by third party other than the preparer prior to submission. Recommendation We recommend the Organization?s management implement procedures whereby requests made in accordance with grant terms are reviewed by an independent party prior to submission to help ensure intentional or unintentional errors do not occur. Views of Responsible Officials and Planned Corrective Actions The Organization agrees with the finding and the recommended procedures will be implemented.