WYOMING PRIMARY CARE ASSOCIATION, INC.

FINANCIAL AND COMPLIANCE REPORT MARCH 31, 2015

CONTENTS INDEPENDENT AUDITOR S REPORT 1 and 2 FINANCIAL STATEMENTS Statement of cash receipts and disbursements 3 Notes to financial statement 4-6 SUPPLEMENTARY INFORMATION Schedule of expenditures of Federal awards 7 Note to schedule of expenditures of Federal awards 7 INDEPENDENT AUDITOR S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS 8 and 9 INDEPENDENT AUDITOR S REPORT ON COMPLIANCE FOR EACH- MAJOR FEDERAL PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY OMB CIRCULAR A-133 10 and 11 Schedule of Findings and Questioned Costs 12-16 Summary Schedule of Prior Year Federal Audit Findings 17

INDEPENDENT AUDITOR S REPORT To the Board of Directors Wyoming Primary Care Association, Inc. Cheyenne, Wyoming Report on the Financial Statements We have audited the accompanying financial statement of Wyoming Primary Care Association, Inc. (the Association ), which comprise the statement of cash receipts and disbursements for the year ended March 31, 2015, and the related notes to the financial statement. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of this financial statement in accordance with the cash basis of accounting described in Note 1, this includes determining that the cash basis of accounting is an acceptable basis for the preparation of the financial statement in the circumstances; this also includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express an opinion on this financial statement based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statement. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statement, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statement in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statement. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statement referred to above presents fairly, in all material respects, the cash receipts and disbursements of the Association for the year ended March 31, 2015, and its cash and certificates of deposit balances at March 31, 2015, in accordance with the cash basis of accounting described in Note 1. 1

Other Matters Basis of Accounting We draw attention to Note 1 of the financial statement, which describes the basis of accounting. The financial statement is prepared on the cash basis of accounting, which is a basis of accounting other than accounting principles generally accepted in the United States of America. Our opinion is not modified with respect to this matter. Other Information Our audit was conducted for the purpose of forming an opinion on the financial statement as a whole. The accompanying schedule of expenditures of Federal awards, as required by U.S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, is presented for purposes of additional analysis and is not a required part of the financial statement. The schedule of expenditures of Federal awards is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statement. Such information has been subjected to the auditing procedures applied in the audit of the financial statement and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statement or to the financial statement itself, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the schedule of expenditures of Federal awards is fairly stated, in all material respects, in relation to the financial statement as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 17, 2015, on our consideration of the Association s internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Association s internal control over financial reporting and compliance. Cheyenne, Wyoming December 17, 2015 2

STATEMENT OF CASH RECEIPTS AND DISBURSEMENTS Year Ended March 31, 2015 Support and Receipts Received Federal grants (Note 2) $ 521,007 Other income 24,014 Membership dues 11,525 Interest income 70 Total receipts 556,616 Expenses Paid Employee compensation 152,243 Employee compensation - nonfederal 12,749 Employee benefits (Note 4) 31,054 Employee benefits - nonfederal (Note 4) 3,584 Payroll taxes 25,732 Payroll taxes - nonfederal 2,306 Travel 98,614 Travel - nonfederal 4,075 Contractual services (Note 6) 109,894 Rent (Note 3) 27,941 Professional fees 3,754 Telecommunications/information technology 15,853 Meeting expense 4,437 Meeting expense - nonfederal 6,090 Printing and copying (Note 3) 5,297 Other 3,646 Other - nonfederal 800 Marketing 20,504 Dues and subscriptions 4,608 Supplies 2,841 Insurance 1,629 Postage 374 Advertising 26,181 Total expenses paid 564,206 (Deficit) of cash receipts over disbursements (7,590) Cash and certificates of deposit, beginning 72,147 Cash and certificates of deposit, ending $ 64,557 See Notes to Financial Statement. 3

NOTES TO FINANCIAL STATEMENT Note 1. Nature of Activities and Significant Accounting Policies Nature of activities: The Wyoming Primary Care Association, Inc. (the Association ) is a nonprofit corporation organized under the laws of the State of Wyoming. The Association s stated mission is to provide a coordinating structure that is of service to those public and private non-profit primary health care programs whose main purpose is to serve the medically indigent and medically underserved people in Wyoming and to promote improved access to primary health care through appropriate action and advocacy. Basis of accounting: The Association s accounts are maintained on a cash basis, and the statement of cash receipts and disbursements reflects only cash received and disbursed. Therefore, receivables and payables, inventories, long-lived assets, accrued income and expenditures and depreciation, which would be recognized under accounting principles generally accepted in the United States of America, and which may be material in amount, are not recognized in the accompanying financial statement. Income taxes: The Association is exempt from income tax under Section 501(c)(3) of the Internal Revenue Code except to the extent of taxes on unrelated business income, if any. The Financial Accounting Standards Board issued guidance on accounting for uncertainty in income taxes. Management evaluated the Association s tax positions and concluded that the Association had taken no uncertain tax positions that require disclosure in the financial statements to comply with the provisions of this guidance. With few exceptions, the Association is no longer subject to income tax examinations by the U.S. Federal, state or local tax authorities except for the last three years filed. Cash and certificates of deposit: The Association considers all cash held with financial institutions including certificates of deposit with an original maturity of six months or less as cash and certificates of deposit. Advertising: Advertising paid for the year ended March 31, 2015 was $26,181. Subsequent events: Events occurring subsequent to the statement of cash receipts and disbursements date have been evaluated for financial statement impact or disclosure through December 17, 2015, the date the financial statements were available to be issued. 4

NOTES TO FINANCIAL STATEMENT Note 2. Revenue from Governmental Units The Association receives substantial revenue from the Federal Government. A significant reduction in the level of this revenue would have a material effect on the Association s activities. Note 3. Leases The Association leases office space under a lease agreement. This lease expires on March 31, 2016 and requires monthly lease payments of $2,050 from January 2014 through December 2014, and $2,100 from January 2015 through March 2016. The Association also has a lease agreement for office equipment, which expires in May 2018. This lease agreement requires monthly payments of $310. Future minimum payments consisted of the following at March 31, 2015: 2016 $ 28,920 2017 3,720 2018 3,720 2019 $ 620 36,980 Total lease disbursements for the year ended March 31, 2015 were $30,520. Note 4. Retirement Commitments All Association full-time employees participate in a simplified employee pension plan. The Association contributes 8% of each participant s salary to the plan. Pension plan contributions were $13,512 for the year ended March 31, 2015. Note 5. Compensated Absences The Association provides vacation to its employees up to a maximum of 160 hours. At March 31, 2015, the liability for vested vacation is $10,063. 5

NOTES TO FINANCIAL STATEMENT Note 6. Related Party Transactions The Association entered into an unsecured note receivable on February 22, 2012 with Sweetwater County Community Health Center of which a board member is the Chief Executive Officer. The note receivable was to help pay for a feasibility study in the amount of $25,000. The note receivable has an annual interest rate of 5%. The first payment was due six months from the issue date; however, it has been delayed based on the Center s ability to pay. During the July 2014 board minutes, a decision was made to revisit the Center s ability to pay in one year. The Association was also engaged in business with Health Works (formerly known as Cheyenne Health and Wellness Center), in which the Chief Executive Officer and Clinical Nursing Manager of this entity are board members of the Association. During the year ended March 31, 2015, the Association paid $4,210 for contractual services occurring in the ordinary course of business to this entity. 6

SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS Year Ended March 31, 2015 Federal Federal Grantor/Pass-Through CFDA Grant Grantor/Program Title Number Number Expenditures U.S. Department of Health and Human Services: Health Resources and Services Administration Technical and Non-Financial Assistance to Health Centers 93.129 U58CS06849 $ 534,602 NOTE TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS Basis of Presentation: The accompanying schedule of expenditures of Federal awards includes the Federal grant activity of Wyoming Primary Care Association, Inc. and is presented on the cash basis of accounting. The information in this schedule is presented in accordance with the requirements of OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. 7

INDEPENDENT AUDITOR S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS To the Board of Directors Wyoming Primary Care Association, Inc. Cheyenne, Wyoming We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statement of Wyoming Primary Care Association, Inc. (the Association ) as of and for the year ended March 31, 2015, and the related notes to the financial statement, which collectively comprise the Association s basic financial statement, and have issued our report thereon dated December 17, 2015. Internal Control over Financial Reporting In planning and performing our audit of the financial statement, we considered the Association s internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the financial statement, but not for the purpose of expressing an opinion on the effectiveness of the Association s internal control. Accordingly, we do not express an opinion on the effectiveness of the Association s internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity s financial statements will not be prevented, or detected and corrected, on a timely basis. A significant deficiency is a deficiency, or combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and, therefore, material weaknesses or significant deficiencies may exist that were not identified. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. We did identify certain deficiencies in internal control, described in the accompanying schedule of findings and questioned costs as items 2015-001 and 2015-002 that we consider to be significant deficiencies. 8

Compliance and Other Matters As part of obtaining reasonable assurance about whether the Association s financial statement is free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. The Association s Response to Findings The Association s responses to the findings identified in our audit are described in the accompanying schedule of findings and questioned costs. The Association s responses were not subjected to the auditing procedures applied in the audit of the financial statement and, accordingly, we express no opinion on them. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the Association s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Association s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Cheyenne, Wyoming December 17, 2015 9

INDEPENDENT AUDITOR S REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY OMB CIRCULAR A-133 To the Board of Directors Wyoming Primary Care Association, Inc. Cheyenne, Wyoming Report on Compliance for Each Major Federal Program We have audited Wyoming Primary Care Association, Inc. s (the Association ) compliance with the types of compliance requirements described in the U.S. Office of Management and Budget (OMB) Circular A-133 Compliance Supplement that could have a direct and material effect on its major Federal program for the year ended March 31, 2015. The Association s major Federal program is identified in the summary of auditor s results section of the accompanying schedule of findings and questioned costs. Management s Responsibility Management is responsible for compliance with the requirements of laws, regulations, contracts and grants applicable to its major Federal program. Auditor s Responsibility Our responsibility is to express an opinion on compliance of the Association s major Federal program based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and OMB Circular A-133, Audits of States, Local Governments and Non-Profit Organizations. Those standards and OMB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major Federal program occurred. An audit includes examining, on a test basis, evidence about the Association s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion on compliance for the major Federal program. However, our audit does not provide a legal determination on the Association s compliance. Opinion on Each Major Federal Program In our opinion, the Association complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on its major Federal program for the year ended March 31, 2015. Other Matters The results of our auditing procedures disclosed an instance of noncompliance, which is required to be reported in accordance with OMB Circular A-133 and which is described in the accompanying schedule of findings and questioned costs as item 2015-003. Our opinion on each major Federal program is not modified with respect to this matter. 10

The Association s response to the noncompliance finding identified in our audit is described in the accompanying schedule of findings and questioned costs. The Association s response was not subjected to the auditing procedures applied in the audit of compliance and, accordingly, we express no opinion on the response. Report on Internal Control over Compliance Management of the Association is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered the Association s internal control over compliance with the types of requirements that could have a direct and material effect on their major Federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for the major Federal program and to test and report on internal control over compliance in accordance with OMB Circular A-133, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the Association s internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a Federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a Federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a Federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that were not identified. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, we identified certain deficiencies in internal control over compliance, as described in the accompanying schedule of findings and questioned costs as items 2015-004 and 2015-005 that we consider to be significant deficiencies. The Association s responses to the internal control over compliance findings identified in our audit are described in the accompanying schedule of findings and questioned costs. The Association s responses were not subjected to the auditing procedures applied in the audit of compliance and, accordingly, we express no opinion on the responses. The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of OMB Circular A-133. Accordingly, this report is not suitable for any other purpose. Cheyenne, Wyoming December 17, 2015 11

SCHEDULE OF FINDINGS AND QUESTIONED COSTS Year Ended March 31, 2015 I. SUMMARY OF INDEPENDENT AUDITOR S RESULTS A. Financial Statements Type of auditor s report issued: Unmodified Internal control over financial reporting: Material weaknesses identified? Yes X No Significant deficiencies identified that are not considered to be material weaknesses? X Yes None Reported Noncompliance material to financial statements noted? Yes X No B. Federal Awards Internal control over major programs: Material weaknesses identified? Yes X No Significant deficiencies identified that are not considered to be material weaknesses? X Yes None Reported Type of auditor s report issued on compliance for major programs: Unmodified Any audit findings disclosed that are required to be reported in accordance with Section 510(a) of Circular A-133? X Yes No Identification of major programs: CFDA Numbers Name of Federal Program or Cluster 93.129 Technical and Non-financial Assistance to Health Centers Dollar threshold used to distinguish between Type A and Type B programs: $300,000 Auditee qualified as low-risk auditee? Yes X No 12

SCHEDULE OF FINDINGS AND QUESTIONED COSTS Year Ended March 31, 2015 II. FINANCIAL STATEMENT FINDINGS 2015-001: Cash Reconciliation Condition: As part of our audit, it came to our attention that the Association had reconciled its main cash account to the general ledger as of year end; however, the reconciliation included improper reconciling items. Upon identification of the discrepancy, the Association successfully reconciled the cash account to the general ledger. Criteria: The Association s internal control structure must include processes in place to safeguard the Association s assets and ensure policy and procedures are appropriately followed including reconciliation of bank accounts. Cause: The Association recognized cash receipts occurring in April 2015 as outstanding deposits at March 31, 2015. The incorrect recognition of cash receipts was due to the contract accountant attempting to recognize receipts at the same time as cash disbursements. Effect: Without a proper understanding of the recognition of cash receipts, the Association could be susceptible to incorrect financial reporting. Recommendation: We recommend that the Association ensure proper processes are in place to ensure cash receipts are not recognized until the draw request has been received from the Federal Awarding Agency. Auditee Response: The Association made efforts to ensure compliance as the fiscal year was being closed; however, the Association is now aware of the need to maintain year-end cash account balances and will handle cash receipts appropriately in future fiscal years. 2015-002: Quarterly Payroll Forms Condition: The Association was unable to provide a copy of the third quarter 2014 IRS Form 941 when requested for testing. In addition, the Association was unable to provide documentation which properly reconciled to the fourth quarter 2014 IRS Form 941. Criteria: The Association s internal control structure must include the retention of required payroll filings and supporting documentation to ensure proper reconciliation and proof of submittal. Cause: The cause was the result of a transition in external accountants, and a copy of the form and supporting documentation was lost during the transfer of information between the previous and current external accountant. Effect: Failure to retain required payroll forms and documentation could cause the Association to not be able to answer questions if an issue in the submission arose. Recommendation: We recommend that management and the external accountant retain copies, either electronic or paper, of supporting documentation and all forms filed with the IRS. 13

SCHEDULE OF FINDINGS AND QUESTIONED COSTS Year Ended March 31, 2015 Auditee Response: The Association has endeavored to improve the completion and oversight of documentation for IRS filings with the new external accountant. The Association has moved all files to a cloud-based system to provide better efficiency and security; it is not anticipated that important documents will be misplaced in future fiscal years. III. FINDINGS AND QUESTIONED COSTS FOR FEDERAL AWARDS 2015-003: Form SF-SAC Single Audit Data Collection Form Catalog of Federal Assistance (CFDA) Number and Title: CFDA #93.129 Technical and Non-Financial Assistance to Health Centers Federal Agency Name: U.S. Department of Health and Human Services Pass-Through Entity Name (if applicable): N/A Award Number/Name: U58CS06849-08-03 Award Year(s): April 1, 2013 March 31, 2014 Condition: We noted that the Form SF-SAC Single Audit Data Collection Form was not submitted within the required time period following completion of the Association s fiscal year 2014 audit. Criteria: According to CFR 200.512 Report Submission: (a) General. (1) The audit must be completed and the data collection form described in paragraph (b) of this section and reporting package described in paragraph (c) of this section must be submitted within the earlier of 30 calendar days after receipt of the auditor s report(s), or nine months after the end of the audit period. Cause: There was a lack of timely involvement by management in the process of electronically certifying the data collection form within the required time period. Effect: Failure to submit timely data collection forms may indicate the need for closer monitoring by the Federal agency or may result in possible award delays or enforcement actions. Recommendation: We recommend that management take more responsibility in ensuring that all required reports and forms are signed and submitted in a timely manner, and become more aware of the due dates of such items. We also recommend developing an internal policy and adding this task to the job description of the Executive Director. Questioned Costs: $0 Auditee Response: The Association will more closely monitor the submittal process of the data collection form, with the responsibility of signing the data collection form falling directly to the Executive Director to ensure timely submittal for future audits. 14

SCHEDULE OF FINDINGS AND QUESTIONED COSTS Year Ended March 31, 2015 2015-004: Payroll Expenditures Catalog of Federal Assistance (CFDA) Number and Title: CFDA #93.129 Technical and Non-Financial Assistance to Health Centers Federal Agency Name: U.S. Department of Health and Human Services Pass-Through Entity Name (if applicable): N/A Award Number/Name: U58CS06849 Award Year(s): April 1, 2014 March 31, 2015 Condition: Of the 25 expenditures selected for testing compliance with activities allowed or unallowed, allowable costs/cost principles, we noted three payroll expenditures which were not supported by formal employee time and effort logs or time certifications. Criteria: OMB Circular A-122, Cost Principles for Non-Profit Organizations, require that costs be adequately documented and costs must be allocated in accordance with relative benefits received by the program. Cause: The cause is lack of effective controls surrounding the payroll allocation as well as human oversight. Effect: By not maintaining appropriate supporting documentation for payroll expenditures, the Federal awarding agency may take appropriate action to ensure compliance. Recommendation: We recommend that the Association implement controls to maintain formal documentation of the wage allocations to the Federal program. Questioned Costs: $0 Auditee Response: The Association took the audit recommendations from the previous year s audit seriously and developed a timesheet that would provide the required information which could be efficiently completed in light of staff workloads. Even though the staff began completing the timesheets in September 2014, the Executive Director did not review/sign the timesheets in a timely manner nor were the timesheets made available to the auditors for their review. The Association is aware of the need for time and effort documentation and will follow the process in the future. 15

SCHEDULE OF FINDINGS AND QUESTIONED COSTS Year Ended March 31, 2015 2015-005: Suspension and Debarment Catalog of Federal Assistance (CFDA) Number and Title: CFDA #93.129 Technical and Non-Financial Assistance to Health Centers Federal Agency Name: U.S. Department of Health and Human Services Pass-Through Entity Name (if applicable): N/A Award Number/Name: U58CS06849 Award Year(s): April 1, 2014 March 31, 2015 Condition: The Association has a formal policy in place to verify vendors with contracts in excess of $25,000 were not suspended nor debarred from receiving Federal funds. However, we noted one vendor contract in excess of $25,000 in which the Association was not able to provide support of their assessment that the vendor was not suspended nor debarred from receiving Federal funds. Criteria: The Association must design internal controls to reasonably ensure compliance with Federal laws, regulations, and program compliance requirements. Per review of 2 CFR 215.13, non-federal entities are prohibited from contracting with or making subawards under covered transactions to parties that are suspended or debarred or whose principals are suspended or debarred. Covered transactions include procurement contracts for goods or services equal to or in excess of $25,000 and all non-procurement transactions (e.g. subawards to recipients). Cause: The Association does not maintain proof of verification of suspension and debarment checks on contracted vendors. Effect: If the Association is not maintaining proof that vendors with which it contracts are neither suspended nor debarred, it is possible that the Association could contract with a vendor that is suspended or debarred, in which case the Association may be required to return the funds expended to that vendor to the Federal oversight or pass-through agency. Recommendation: We recommend that the Association maintain supporting documentation of vendor verifications. Questioned Costs: $0 Auditee Response: The Association took the audit recommendation from the previous year s audit seriously and a form was developed to be used in all vendor files that would determine whether the verification was necessary. Unfortunately, responsible staff did not follow the guidelines to ensure compliance with the internal process. The Association is aware of the need for verification that contracts in excess of $25,000 were not suspended nor debarred and will follow that guidelines in the future. 16

SUMMARY SCHEDULE OF PRIOR YEAR FEDERAL AUDIT FINDINGS Year Ended March 31, 2015 Finding 2014-002: Payroll Expenditures Catalog of Federal Assistance (CFDA) Number and Title: CFDA #93.129 Technical and Non-Financial Assistance to Health Centers Federal Agency Name: U.S. Department of Health and Human Services Pass-Through Entity Name (if applicable): N/A Award Number/Name: U58CS06849-08-03 Award Year(s): April 1, 2013 March 31, 2014 Status The Association implemented a procedure during fiscal year 2015 to ensure personnel files were cleaned up and time and effort logs were maintained. Auditor Response: Although personnel files now include documentation supporting employee wage rates, see current year finding 2015-004 as no time and effort logs were maintained. Of the 25 expenditures selected for testing compliance with activities allowed or unallowed, allowable costs/cost principles, we noted four payroll expenditures which were not supported by formal employee wage rates or time and effort logs. 2014-003: Procurement Catalog of Federal Assistance (CFDA) Number and Title: CFDA #93.129 Technical and Non-Financial Assistance to Health Centers Federal Agency Name: U.S. Department of Health and Human Services Pass-Through Entity Name (if applicable): N/A Award Number/Name: U58CS06849-08-03 Award Year(s): April 1, 2013 March 31, 2014 The Association implemented a formal procurement policy during fiscal year 2015. Auditor Response: We reviewed the new policy and noted no instances where the Association failed to follow the policy. The Association does not have a formal procurement policy in place. 2014-004: Suspension and Debarment Catalog of Federal Assistance (CFDA) Number and Title: CFDA #93.129 Technical and Non-Financial Assistance to Health Centers Federal Agency Name: U.S. Department of Health and Human Services Pass-Through Entity Name (if applicable): N/A Award Number/Name: U58CS06849-08-03 Award Year(s): April 1, 2013 March 31, 2014 The Association assigned the task of suspension and debarment checks to the Office Manager. Auditor Response: Although a process was established to verify that vendors with contracts in excess of $25,000 were not suspended or debarred from receiving Federal funds, see current year finding 2015-005 as proof of verification was not maintained. The Association does not have a formal policy in place to verify vendors with contracts in excess of $25,000 were not suspended nor debarred from receiving Federal funds. We noted three vendor contracts in excess of $25,000 in which the Association did not perform procedures to ensure the vendor was not suspended nor debarred from receiving Federal funds. 17