CHOICE REGIONAL HEALTH NETWORKNon-Profit

Finding 2023-002 Material weakness in internal controls over compliance and instances of noncompliance related to allowable costs. Federal Agency: Department of Health and Human Services Program Title: National Organizations of State and Local Officials; Rural Health Care Services Outreach, Rural Health Network Development and Small Health Care Provider Quality Improvement Assistance Listing Number: 93.011; 93.912 Award Numbers: 1 G32HS42592-01-00; 4 GA1RH39546-01-07 Award Period: July 31, 2021 - July 31, 2023; September 1, 2020 - August 31, 2024 Criteria 2 U.S. Code of Federal Regulations (CFR) 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) Subpart E section 2 CFR 200.430(i)(1)(iii) (as codified by the Department of Health and Human Services [DHHS] in 45 CFR 75) requires direct costs be allocated based on the proportional benefit received by each award. Condition/Context for Evaluation In a population of 25 payroll costs, we noted 17 instances in which the amount allocated to the award was adjusted up or down based on a standard 86.67-hour period instead of the true calculated percentage. The adjustment was not applied equitably to all hours during the period, but only to the program with the largest total hours for the period. This resulted in five instances of overcharge to the award and 12 instances of undercharge to the award. Questioned Costs $265 Cause Due to a systematic error in the payroll system, the adjustments to employee hours were not adjusted equitably to all payroll hours, but instead applied to the program with the largest amount of hours. This resulted in systematic errors in the allocation of payroll compared the true proportional benefit received by each award with an undercharge in some instances and an overcharge in other instances compared to what the actual allocation percentage would have charged. Effect or Potential Effect The Organization did not have sufficient internal controls in place to ensure proper payroll system design and to review allocated costs for accuracy. Repeat Finding Yes. 2022-04 Recommendation We recommend that the Organization implement internal controls over payroll costs charged to awards to ensure they are properly calculated and allocated in accordance with 2 CFR 200.430(i)(1)(iii). Views of Responsible Officials of Auditee Management concurs with the finding and has provided the accompanying corrective action plan.

Material weakness in internal controls over compliance and instances of noncompliance related to cash management. Federal Agency: Department of Health and Human Services Program Title: National Organizations of State and Local Officials CFDA Number: 93.011 Award Numbers: 1 G32HS42592-01-00 Award Period: July 31, 2021 - July 31, 2023 Criteria 2 U.S. Code of Federal Regulations (CFR) 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards Subpart D (as codified by the Department of Health and Human Services [DHHS] in 45 CFR 75) requires the non-Federal entity to utilize a payment method to minimize the time elapsing between the transfer of funds from the United States Treasury or the pass-through entity and the disbursement by the non-Federal entity. Condition/Context for Evaluation During testing, we noted that there was only one cash draw that occurred during the year. For the cash draw selected, there was no documentation of approval for the cash draw. The Organization drew down from a federal award without incurring sufficient expenditures towards the related award. Advance draws were not approved for under the award. Questioned Costs Not applicable. Cause The Organization?s internal controls did not ensure that the cash draws were appropriately approved, and the time elapsing between the transfer of funds from the United States Treasury and disbursement was minimized. Effect or Potential Effect The Organization did not minimize the time elapsing between the drawdown of the federal funds and disbursement, resulting in cash received in excess of expenses incurred totaling $63,591 as of February 28, 2022. Allowable expenses were incurred in the following months to cover the overdraw. Repeat Finding Not applicable. Recommendation We recommend that the Organization implement the necessary internal controls to ensure payment methods are approved and minimize the time elapsing between the transfer of funds from the United States Treasury and disbursement. Views of Responsible Officials of Auditee Management concurs with the finding and has provided the accompanying corrective action plan.

Significant deficiency in internal controls over compliance and instances of noncompliance related to subrecipient monitoring. Federal Agency: Department of Health and Human Services Program Title: National Organizations of State and Local Officials CFDA Number: 93.011 Award Numbers: 1 G32HS42592-01-00 Award Period: July 31, 2021 - July 31, 2023 Criteria 2 U.S. Code of Federal Regulations (CFR) 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) Subpart D (as codified by the Department of Health and Human Services [DHHS] in 45 CFR 75) requires a pass-through entity to adopt compliance policies to ensure sub-recipients comply with requirements under the award, and evaluate each subrecipient?s risk of noncompliance with Federal statutes, regulations, and the terms and conditions of such agreements for the purposes of determining appropriate subrecipient monitoring. Condition/Context for Evaluation In a population of three subrecipients, no documentation was available showing an assessment of the risk of noncompliance of the subrecipients. For one subrecipient, a fixed fee award was issued that had not received prior approval by the federal funder. As such, when the payment to the subrecipient was made based on a fixed amount, the Organization was not monitoring to ensure the subrecipient was minimizing the time lapse between the receipt of payment and expenditures incurred. Questioned Costs Not applicable. Cause The Organization?s subrecipient monitoring policy did not include all the required provisions outlined in 2 CFR 200.332. Effect or Potential Effect The Organization did not fully comply with the requirements regarding subrecipient monitoring. Repeat Finding Not applicable. Recommendation We recommend that the Organization update the subrecipient monitoring policy to ensure a risk assessment is performed over all subrecipients and that any fixed fee awards receive prior approval from the federal funder. Views of Responsible Officials of Auditee Management concurs with the finding and has provided the accompanying corrective action plan.

Significant deficiency in internal controls over compliance and instances of noncompliance related to allowable costs. Federal Agency: Department of Health and Human Services Program Title: National Organizations of State and Local Officials CFDA Number: 93.011 Award Numbers: 1 G32HS42592-01-00 Award Period: July 31, 2021 - July 31, 2023 Criteria 2 U.S. Code of Federal Regulations (CFR) 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) Subpart E section 2 CFR 200.405 (as codified by the Department of Health and Human Services [DHHS] in 45 CFR 75) requires direct costs be allocated based on the proportional benefit received by each award. Condition/Context for Evaluation In a population of 25 payroll costs, we noted four instances in which the amount allocated to the award was a rounded percentage instead of the true calculated percentage. This resulted in three instances of overcharge to the award and one instance of undercharge to the award. Questioned Costs $76.58. Cause Due to turnover in staff, there was no standard procedure followed for how the payroll costs should be calculated and applied to the federal award. This resulted in an overall overcharge to the award compared to what the actual allocation percentage would have charged. Effect or Potential Effect The Organization did not have sufficient internal controls in place to review allocated costs for accuracy. Repeat Finding Not applicable. Recommendation We recommend that the Organization implement internal controls over payroll costs charged to awards to ensure they are calculated and allocated in accordance with 2 CFR 200.405. Views of Responsible Officials of Auditee Management concurs with the finding and has provided the accompanying corrective action plan.