Hidalgo Medical Services Did Not Comply With All Federal Requirements Related to Its Capital Development Grant

Hidalgo Medical Services (HMS), in Lordsburg, New Mexico, did not comply with all applicable Federal requirements and grant terms related to its Patient Protection and Affordable Care Act-funded capital development grant. Specifically:

• HMS spent $898,000 to construct a wellness center in Lordsburg but did not use it for community health center purposes, as described in its grant application.
• HMS's financial management system neither adequately identified the source and application of funds for U.S. Department of Health and Human Services-sponsored activities nor provided effective control over and accountability for all funds. In addition, HMS did not record all grant award payments in accounting records separate from the records of other funds.
• HMS did not maintain sufficient records for equipment acquired with Federal funds.
• HMS did not justify its decision not to use a competitive bidding process in selecting an equipment vendor.

HMS did not provide the community health services described in the application because of changes in management after submission of the grant application and construction of the building. Current management told us that HMS does not intend to provide services as described in the grant application because a medical clinic nearby already provides a broad range of health-related services. In addition, a lack of awareness of Federal grant policies and procedures led to inadequate financial, property management, and procurement controls over grant funds.

We recommended that HRSA either (1) require HMS to refund $898,000 to the Federal Government for the unallowable grant expenses for the wellness center or (2) provide HMS with disposition instructions for the wellness center and, upon disposition, require HMS to refund to the Federal Government either the current wellness center's fair market value or the $898,000 Federal share of the wellness center's cost, whichever is lower. We also recommended that HRSA work with HMS to strengthen its financial, property management, and procurement controls over grant funds. HMS disagreed with our recommendations. HRSA concurred with our recommendations.