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Audit (A-02-11-02013)

Mount Vernon Neighborhood Health Center, Inc., Claimed Unallowable Federal Grant Expenditures

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We found that Mount Vernon Neighborhood Health Center, Inc., (Mount Vernon) claimed Federal grant expenditures totaling $42,000 that were unallowable.

In 2009, the Health Resources and Services Administration (HRSA) awarded Mount Vernon approximately $4.2 million in Recovery Act funds. Approximately $2.5 million of this amount was awarded under a Capital Improvement Program (CIP) grant to upgrade Mount Vernon's Practice Management System and medical equipment. Approximately $1.7 million was awarded under an Increased Demand for Services (IDS) grant to sustain Mount Vernon's workforce and hire additional staff.

Mount Vernon claimed these unallowable expenditures because it misinterpreted the IDS and CIP grant award terms and conditions, and claimed unallocable and duplicate costs. We could not determine the allowability of an additional $1.6 million claimed by Mount Vernon because it did not properly maintain personnel activity reports for employees charged to the IDS grant. In addition, Mount Vernon drew down approximately $250,000 in CIP grant funds for which it did not have an immediate cash need. We did not determine the $250,000 to be unallowable because Mount Vernon expended the grant funds for allowable expenditures. However, we are reporting on the matter because Mount Vernon did not follow its existing policies and procedures for drawing down Federal funds.

We recommended that HRSA (1) ensure that Mount Vernon refunds $42,000 to the Federal Government ($3,000 related to the IDS grant, and $39,000 related to the CIP grant); (2) either require Mount Vernon to refund $1.6 million in IDS grant funds to the Federal Government or work with Mount Vernon to determine whether any of these costs claimed against the grant were allowable; (3) educate Mount Vernon officials on Federal requirements for the proper period to charge costs and supporting salaries and wages and ensure that Mount Vernon maintains personnel activity reports for each employee who works on Federal awards; and (4) ensure that Mount Vernon adheres to its policies and procedures for drawing down Federal funds. Mount Vernon generally disagreed with our findings.

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