THE BAY CLINIC, INC.

Finding 2020-003 Allowable Costs ? Significant Deficiency in Internal Control over Allowable Costs/Cost Principles Identification of the Federal Program: U.S. Department of Health and Human Services Health Center Program Cluster CFDA: No: 93.224/93.527 HBCS01127-18-00 Criteria or Specific Requirement: Uniform Guidance requires costs charged to federal funds under the Health Center Program Cluster comply with the cost principles at 45 CFR part 75, subpart E. Condition: During our test of controls over time charged, we noted one individual whose time is charged based on a budget. Budget estimates alone do not qualify as support for charges to federal awards, but may be used for interim accounting purposes, provided that the Clinic?s internal controls include a process to review after-the-fact the charges made to federal awards. Cause: The Clinic was not aware of the requirement. Effect or Potential Effect The clinic may not have identified unallowed costs for the federal program. Questioned Costs None Context: We selected 25 transactions from the federal program to test controls over allowable costs. Eight out of the 25 transactions were allocated based on a budget with no after-the-fact review. Recommendation: We recommend training for staff to ensure allowable cost requirements are followed. For staff time charged based on a budget, the clinic should perform a review of the allocation to ensure charges to federal programs approximate activity actually performed. Views of Responsible Official and Planned Corrective Action Plan: Management agrees with this finding. Refer to the corrective action plan.

Finding 2020-004 Cash Management ? Significant Deficiency in Internal Control over Compliance Identification of the Federal Program: U.S. Department of Health and Human Services Health Center Program Cluster CFDA: No: 93.224/93.527 HBCS01127-18-00 Criteria or Specific Requirement:: 2 CFR 200.302(b) of the compliance supplement requires organizations receiving federal funds to establish controls and procedures that would minimize the amount of time between drawdowns and the disbursements of grant funds. Condition: Processes and controls were not followed during the fiscal year to ensure the timing of federal cash draws was such that time elapsing between drawdown and the disbursement of funds was minimized. Cause: Processes and controls were not followed during the fiscal year due to turnover in the Finance department positions. Effect or Potential Effect Drawdowns may occur before needed for disbursement purposes. Questioned Costs None identified Context: During our audit, we noted support for drawdowns were missing and approximately $100.000 was drawn down in excess of disbursements. Recommendation: We recommend training for staff to ensure cash management requirements are followed. Management should track the status of the federally funded cash disbursements against the need to draw down funds on related grants. Reviews of the need for a drawdown or payment request being performed should be maintained in grant files. Views of Responsible Official and Planned Corrective Action Plan: Management agrees with this finding. Refer to the corrective action plan.

Finding 2020-005 Reporting ? Significant Deficiency in Internal Control over Compliance Identification of the Federal Program: U.S. Department of Health and Human Services Health Center Program Cluster CFDA: No: 93.224/93.527 HBCS01127-18-00 Criteria or Specific Requirement: Recipients of federal awards must establish verifiable controls over reports that are prepared and submitted. Condition: Management was not able to produce evidence that the Uniform Data System (UDS) report and the SF-425 Federal Financial Report were reviewed and approved prior to submission to the granting agency. Cause: Turnover in the Finance department positions resulted in evidence of review not being maintained in the file. Effect or Potential Effect Information submitted to the granting agency in the UDS and SF-425 and report might be incomplete or inaccurate. Questioned Costs None Context: Management was not able to produce evidence that UDS and SF-425 report were reviewed and approved prior to submission to the granting agency. Recommendation: A policy should be established and enforced for maintaining evidence of controls performed over applicable compliance requirements. Evidence of review and approval of the report should be retained by management and be available for inspection. Views of Responsible Official and Planned Corrective Action Plan: Management agrees with this finding. Refer to the corrective action plan.