Case 2: Primary Care Financial Management
The Health Center Program provides grants to nonprofit private and public entities that serve designated medically underserved populations and areas and vulnerable populations of migrant and seasonal farm workers, homeless individuals, and public housing residents. These grants are commonly referred to as "section 330 grants."
Under the American Recovery and Reinvestment Act of 2009, P.L. No. 111-5 (Recovery Act), enacted February 17, 2009, HRSA received $2.5 billion, $2 billion of which was to expand the Health Center Program by serving more patients, stimulating new jobs, and meeting the expected increase in demand for primary healthcare services among the Nation’s uninsured and underserved populations. HRSA awarded a number of grants using Recovery Act funding in support of the Health Center Program, including Health Information Technology Implementation (HIT), Capital Improvement Program (CIP), New Access Point (NAP), and Increased Demand for Services (IDS) grants.
ABC Primary Care, Inc. (ABC Primary), is a nonprofit organization that operates community health centers in San Antonio, Texas, and the surrounding area. ABC Primary provides medical, dental, and mental health services and is funded primarily by patient service revenues and Federal grants. During fiscal years 2010 and 2011 (February 1, 2009, through January 31, 2011), ABC Primary received approximately $9.8 million (Federal share) in section 330 grant funding to supplement its health center operations. For project periods ranging from March 2009 through May 2012, HRSA awarded Barrio funding for five Recovery Act grants totaling $7,518,980: $4,024,697 under two HIT grants, $1,447,420 under a CIP grant, $1,300,000 under an NAP grant, and $746,863 under an IDS grant.
OBJECTIVES
Our objectives were to determine whether:
(1) The costs that ABC Primary claimed were allowable and
(2) ABC Primary had adequate controls over its financial management system.
SUMMARY OF FINDINGS
Of the $16,020,116 that we reviewed, $3,417,461 was allowable. We could not determine whether salary and fringe benefit costs totaling $12,543,068 that ABC Primary claimed were allowable because ABC Primary did not maintain personnel activity reports for employees who worked on its section 330, HIT, NAP, and IDS grants and because the accounting records for the section 330 and NAP grants did not separate expenditures related to the Federal grants from those related to other funding sources. ABC Primary recorded additional potentially unallowable costs of $50,240 for compensation increases and $9,347 for interest expense.
ABC Primary did not have adequate controls over its financial management system. Specifically, ABC Primary did not draw down funds based on the cash needs for each project and did not prepare and complete bank statement reconciliations in a timely manner. Also, ABC Primary did not have adequate procurement procedures to ensure that it obtained reasonable pricing when procuring goods and services.
Source: United States Department of Health and Human Services. (2013). Barrio Comprehensive Family Health Care Center, Inc., Did not always follow federal regulations. Retrieved from http://oig.hhs.gov/oas/reports/region6/61100067.asp
1. What would you recommend that ABC Primary do to tighten up the financial management of the practice?
The following may be included as they were cited as deficiencies in the current operations:
- Develop and implement procedures to maintain personnel activity reports for each employee of ABC Primary who works on Federal awards;
- Ensure that ABC Primary’s financial system provides accurate, current, and complete disclosure of financial results, identifies the source and application of funds for HHS-sponsored activities, and accounts for grant funds separately from all other funds;
- Develop and implement procedures requiring analysis of lease and purchase alternatives for ABC Primary;
- Develop and implement procedures to ensure that requests for cash advances for ABC Primary are limited to the amounts needed to carry out approved projects;
- Follow its policies to ensure that bank statement reconciliations are prepared and approved monthly by senior management of ABC Primary; and
- Develop and implement procedures to make and document a cost analysis for each procurement action of ABC Primary.
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