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Audit (A-02-11-02004)

09-18-2012
Soundview Health Care Network Did Not Meet Select Financial Performance Measures and Claimed Unallowable Federal Grant Expenditures

Executive Summary

We found that Soundview Health Care Network (Soundview) did not meet select Health Resources and Services Administration (HRSA) financial performance measures. In addition, Soundview claimed Federal grant expenditures totaling $114,000 that were unallowable.

During calendar years (CY) 2008 through 2010, HRSA awarded Soundview grant funding totaling approximately $6.5 million. Of this amount, approximately $5.2 million in section 330 grant funding was awarded to supplement Soundview's health center operations. These grants were designed to serve designated medically underserved populations and areas, as well as vulnerable populations of migrant and seasonal farm workers, the homeless, and residents of public housing. These grants are commonly referred to as "section 330 grants." The remaining $1.3 million was awarded in CY 2009 under the American Recovery and Reinvestment Act of 2009 and included approximately $1 million under a Capital Improvement Program (CIP) grant to construct a new building and approximately $300,000 under an Increased Demand for Services (IDS) grant to increase access and reduce barriers to health care within Soundview's service area.

Soundview claimed these unallowable costs because of deficiencies in its internal controls. We could not determine the allowability of an additional $5.2 million because Soundview did not maintain after-the-fact certifications of activity for employees whose salaries were charged to the section 330 and IDS grants and because section 330 grant funds were not accounted for separate from other operational funds.

We recommended that HRSA (1) impose special award conditions to address shortcomings in Soundview's financial performance measures; (2) ensure that Soundview refunds $99,000 to the Federal Government ($22,000 related to the IDS grant and $77,000 related to the CIP grant); (3) either require Soundview to refund $5.2 million to the Federal Government ($5 million related to the section 330 grant and $156,000 related to the IDS grant) or work with Soundview to determine whether any of the costs that it claimed against these grants were allowable; (4) impose special award conditions to ensure that Soundview'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 section 330 grant funds separately from all other funds; (5) ensure that Soundview develops policies and procedures for determining the reasonableness, allocability, and allowability of expenditures; and (6) educate Soundview officials on Federal requirements for after-the-fact certifications and the proper period to charge costs. Soundview disagreed with most of our findings and recommendations.

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