Civic Heart Community Services

Finding #2025-002 – Significant Deficiency. Applicable federal programs: U. S. Department of Health and Human Services, Direct Federal Funding, Cooperative Agreement to Support Navigators in Federally-facilitated Exchanges, Assistance Listing #93.332, Contract #NAVCA240482-01-00, Contract year: 08/27/24 – 08/26/25. U. S. Department of Health and Human Services, Direct Federal Funding, Affordable Care Act (ACA) Personal Responsibility Education Program, Assistance Listing #93.092, Contract #90AK0075-03-03, Contract year: 09/30/23 – 09/29/25. Criteria: Reporting and allowable costs – Management of Civic Heart is responsible for establishing and maintaining an effective system of internal control over government grant billing requests to ensure all grant reimbursement requests are properly prepared and recorded and that all costs submitted for reimbursement are properly allocated, where applicable. Condition and context: Civic Heart’s internal controls over grant billing requests were not sufficient to ensure that grant billing requests were consistently independently reviewed and approved. Transaction testing for details and internal controls revealed the following: 1) 3 out of 12 grant billing requests did not have evidence of independent review and approval. 2) 3 of 3 pay period journal entries used to allocate payroll expense between departments and funding sources did not have evidence of independent review and approval. Cause and effect: Transitions in the accounting and management team resulted in independent reviews of grant billing requests and payroll allocation journal entries either not occurring or documentation of such review and approval not being retained. Failure to establish and maintain an adequate system of internal control over financial reporting adversely affects Civic Heart’s ability to prepare financial statements in accordance with GAAP and may result in improper grant billings. Questioned costs: Unknown. Recommendation: Same as finding reported as #2025-001. Views of responsible officers and planned corrective action: Management agrees with the finding. See Corrective Action Plan.

Finding #2025-003 – Significant Deficiency and Other Noncompliance. Applicable federal programs: U. S. Department of Health and Human Services, Direct Federal Funding, Cooperative Agreement to Support Navigators in Federally-facilitated Exchanges, Assistance Listing #93.332, Contract # NAVCA240482-01-00, Contract year: 08/27/24 – 08/26/25. U. S. Department of Health and Human Services, Direct Federal Funding, Affordable Care Act (ACA) Personal Responsibility Education Program, Assistance Listing #93.092, Contract #90AK0075-03-03, Contract year: 09/30/23 – 09/29/25. Criteria: Allowable costs and period of performance – The Uniform Guidance, Subpart E Cost Principles, establishes costs principles which must be followed for expenditures to be allowable and requires a system of internal controls sufficient to ensure that costs are properly charged to the appropriate general ledger object and class code. The Uniform Guidance §200.309 period of performance requires expenditures be incurred during the period of the federal grant award in order to be allowable. Condition and context: During our testing of payroll, non-payroll and indirect cost pool transactions, we identified the following exceptions: Controls over allowable cost and other non-compliance: AL #93.092 Affordable Care Act (ACA) Personal Responsibility Education Program. In a sample of 40 non-payroll transactions tested for internal controls and compliance for allowable cost we found one instance of an annual subscription for the term ending May 2026 charged to a grant which ended September 29, 2025 resulting in eight months, or approximately $1,200, charged outside the period of performance. Partial repeat of finding #2024-004. Controls over period of performance and other non-compliance: AL #93.332 Cooperative Agreement to Support Navigators in Federally-facilitated Exchanges. In a period-of-performance sample of 18 vendor transactions with grant charges close to grant beginning or ending dates during the audit period, we found 3 instances or $1,003 of vendor costs charged outside the grant period of performance. Additionally, testing of payroll charged at the end of the grant period revealed that approximately $6,693 was charged outside the period of performance. Cause and Effect: Failure to follow Civic Heart’s policies and procedures related to review of coding for charges to the grants resulted in costs charged outside the grant’s period of performance. Questioned costs: $8,896. Recommendation: Emphasize adherence to established policies and procedures to ensure maintenance and review of payroll spreadsheets and general ledger coding for all transactions. View of responsible officials and planned corrective actions: Management agrees with the finding. See Corrective Action Plan.

Finding #2025-004 – Significant Deficiency and Other Noncompliance. Applicable federal programs: U. S. Department of Health and Human Services, Direct Federal Funding, Cooperative Agreement to Support Navigators in Federally-facilitated Exchanges, Assistance Listing #93.332, Contract #NAVCA240482-01-00, Contract year: 08/27/24 – 08/26/25. U. S. Department of Health and Human Services, Direct Federal Funding, Affordable Care Act (ACA) Personal Responsibility Education Program, Assistance Listing #93.092, Contract #90AK0075-03-03, Contract year: 09/30/23 – 09/29/25. Criteria: Reporting – The Uniform Guidance §200.508 and §200.510 requires management to prepare a schedule of expenditures of federal wards (SEFA) for the period covered by the auditee’s financial statements which must include the total federal awards expended and amounts expended by subrecipients. Management is responsible for establishing and maintaining an effective system of internal control sufficient to prepare the SEFA in accordance with Uniform Guidance. Condition and context: Civic Heart had not performed a reconciliation of federal expenditures resulting in errors in reported expenditures. Additionally, subrecipient expenditures were not identified for two programs. There was no independent review of the SEFA. During the audit of the 2025 fiscal year, it was noted that the SEFA for the year ended August 31, 2024 overstated expenditures for the HIV Prevention Activities – Non-Governmental Organizational Based program (AL #93.939) by $52,013. The 2024 SEFA included expenditures that were allowable in accordance with the grant agreement but not billed to the federal agency for reimbursement. An audit adjustment reducing the current year expenditures was required. Cause: Transitions in the accounting and management team resulted in failure to follow Civic Heart’s policies and procedures related to preparation and review of the SEFA. Effect: Adjustments of approximately $52,600 were required to properly report expenditures and adjustments of approximately $76,600 were required to properly report subrecipient expenditures on the SEFA. Recommendation: Emphasize adherence to established policies and procedures to reconcile the federal expenditures to the federal program revenue on a routine basis and formalize the independent review process for the SEFA and grant billings. View of responsible officials and planned corrective actions: Management agrees with the finding. See Corrective Action Plan.

Finding #2024-003 – Material Weakness and Other Noncompliance. Applicable federal programs: U. S. Department of Health and Human Services, Direct Federal Funding, HIV Prevention Activities Non-Governmental Organizational Based, Assistance Listing #93.939, Contract #6NU62PS924649-03-03, Contract year: 07/01/23 – 06/30/24, Contract #5NU62PS924649-04-00, Contract year: 07/01/24 – 06/30/25. U. S. Department of Health and Human Services, Direct Federal Funding, Cooperative Agreement to Support Navigators in Federally-Facilitated Exchanges, Assistance Listing #93.332, Contract #NAVCA210403-03-03, Contract year: 08/27/23 – 08/26/24, Contract #NAVCA240482-01-00, Contract year: 08/27/24 – 08/26/25. U. S. Department of Health and Human Services, Direct Federal Funding, Children’s Health Insurance Program, Assistance Listing #93.767, Contract #2Y2CMS331859-02-05, Contract year: 07/01/23 – 06/30/25. U. S. Department of Health and Human Services, Passed through Texas Health and Human Services Commission, Block Grants for Prevention and Treatment of Substance Abuse, Assistance Listing #93.959, Contract #HHS000539700204 YPI, Contract year: 09/01/23 – 08/31/24, Contract #HHS000539700204 YPS, Contract year: 09/01/23 – 08/31/24, Contract #HHS000539700204 YPU, Contract year: 09/01/23 – 08/31/24. Criteria: Allowable costs – The Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, §200.430 requires that charges to awards for salaries and wages be based on records that accurately reflect the work performed. These records must: 1) be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable and properly allocated; 2) reasonably reflect the total activity for which the employee is compensated; 3) comply with the established accounting policies and practices of the agency; and 4) support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one activity. Without sufficient controls, costs may be inappropriately charged to a federal award. Condition and context: Time and effort reporting is based on the amount reflected in the budget rather than actual time spent on the program. Additionally, the allocation of certain shared costs are impacted as they are charged to the program based on the direct salary percentages. Repeat of finding #2023-001. Cause: Prior to the audit finding reported to management in May 2023, management had a lack of understanding regarding the requirements for charging payroll costs caused improper reporting of time incurred on the federal awards. Effect: Failure to establish controls for adherence with the Uniform Guidance for allowable costs may result in unallowed costs charged to the program. Questioned costs: Unknown. Recommendation: Provide training to ensure that salaries and wages charged to federal programs are supported by personnel activity reports based on actual time worked. Views of responsible officers and planned corrective action: Management agrees with the finding. See Corrective Action Plan.

Finding #2024-004 – Significant Deficiency and Other Noncompliance. Applicable federal programs: U. S. Department of Health and Human Services, Direct Federal Funding, HIV Prevention Activities Non-Governmental Organizational Based, Assistance Listing #93.939, Contract #6NU62PS924649-03-03, Contract year: 07/01/23 – 06/30/24, Contract #5NU62PS924649-04-00, Contract year: 07/01/24 – 06/30/25. U. S. Department of Health and Human Services, Direct Federal Funding, Cooperative Agreement to Support Navigators in Federally-Facilitated Exchanges, Assistance Listing #93.332, Contract #NAVCA210403-03-03, Contract year: 08/27/23 – 08/26/24, Contract #NAVCA240482-01-00, Contract year: 08/27/24 – 08/26/25. U. S. Department of Health and Human Services, Direct Federal Funding, Children’s Health Insurance Program, Assistance Listing #93.767, Contract #2Y2CMS331859-02-05, Contract year: 07/01/23 – 06/30/25. U. S. Department of Health and Human Services, Passed through Texas Health and Human Services Commission, Block Grants for Prevention and Treatment of Substance Abuse, Assistance Listing #93.959, Contract #HHS000539700204 YPI, Contract year: 09/01/23 – 08/31/24, Contract #HHS000539700204 YPS, Contract year: 09/01/23 – 08/31/24, Contract #HHS000539700204 YPU, Contract year: 09/01/23 – 08/31/24. Criteria: Allowable costs and period of performance – The Uniform Guidance, Subpart E Cost Principles, establishes costs principles which must be followed for expenditures to be allowable and requires a system of internal controls sufficient to ensure that costs are properly charged to the appropriate general ledger object and class code. The Uniform Guidance §200.309 period of performance requires expenditures be incurred during the period of the federal grant award in order to be allowable. Condition and context: During our testing of payroll, non-payroll and indirect cost pool transactions, we identified the following exceptions: Controls over allowable cost compliance – all major programs, In a sample of 59 non-payroll transactions tested for internal controls over compliance: One instance of annual advertising contract charged in full rather than establishing a prepaid expense for the eleven months after Civic Heart’s year-end of August 31, 2024. The applicable grant period is July 1, 2023 through June 30, 2025 and thus, only one month, or approximately $417, was outside the period of performance (AL #93.767 Children’s Health Insurance Program). One instance of $2,700 charged to wrong program. Allowable costs of the Navigator program were charged to Connecting Kids program due to coding to the wrong class code in the general ledger. (AL#93.767 Children’s Health Insurance Program (Connecting Kids). In a sample of 135 payroll transactions tested for internal controls over compliance: Four instances of errors in the amount of costs charged to class code due to a clerical error in the payroll allocation spreadsheet. (AL #93.959 Block Grants for Prevention and Treatment of Substance Abuse and AL #93.939 HIV Prevention Activities Non-Governmental Organizational Based). Other non-compliance: AL #93.767 Children’s Health Insurance Program: In a sample of 40 payroll or vendor charges, one instance of non-compliance with allowable cost compliance ($417). AL #93.332 Cooperative Agreement to Support Navigators in Federally-Facilitated Exchanges: In a sample of 42 payroll or vendor charges, one instance of non-compliance with allowable cost compliance ($2,700). AL #93.939 HIV Prevention Activities Non-Governmental Organizational Based: In a sample of 40 payroll or vendor charges, two instances of non-compliance with allowable costs due to charge to the wrong program. Controls over period of performance – all major programs. In a sample of 56 vendor transactions and 4 pay periods with grant beginning or ending dates during the audit period, we found: 13 instances of charging vendor costs to the wrong grant period. One instance of charging payroll costs to the wrong grant period. Other non-compliance: AL #93.332 Cooperative Agreement to Support Navigators in Federally-Facilitated Exchanges: In a sample of 14 vendor charges tested, we found 4 exceptions for charging to the wrong grant period (approximately $3,120). AL #93.939 HIV Prevention Activities Non-Governmental Organizational Based. In a sample of 27 vendor charges tested, we found 4 exceptions for charging to the wrong grant period (approximately $480). In a sample of four pay periods tested, we found one exception for charging costs to the wrong grant period (approximately $5,350). AL# 93.959 Block Grants for Prevention and Treatment of Substance Abuse. In a sample of 25 vendor charges tested, we found 5 exceptions for charging to the wrong grant period (approximately $660). Cause: Failure to follow Civic Heart’s policies and procedures related to review of coding for charges to the general ledger. Effect: Failure to follow established internal control policies and procedures resulted in errors and unallowable costs being charged to the grant. Questioned costs: $12,727. Recommendation: Emphasize adherence to established policies and procedures to ensure maintenance of payroll spreadsheets and reviews of coding for all transactions. View of responsible officials: Management agrees with the finding. See Corrective Action Plan.

Finding #2024-005 – Significant Deficiency and Other Noncompliance. Applicable federal program: U. S. Department of Health and Human Services, Direct Federal Funding, HIV Prevention Activities Non-Governmental Organizational Based, Assistance Listing #93.939, Contract #6NU62PS924649-03-03, Contract year: 07/01/23 – 06/30/24, Contract #5NU62PS924649-04-00, Contract year: 07/01/24 – 06/30/25. Criteria: Special Tests and Provisions – Federal regulations require Civic Heart to provide referral services to HIV positive clients. Clients who refuse referrals must receive three documented attempts to receive the referral. If the referral is not accepted, the client must be referred to Disease Intervention Specialists (DIS) with the Centers for Disease Control and Prevention and the referral must be documented in the client’s file within 30 days. Condition and context: During our testing of 40 client case files, we noted one HIV positive client where there was no documentation of declined referrals sent to DIS. Cause: The finding occurred as a result of Civic Heart’s failure to follow its policies and procedures and federal regulations. Effect: Failure to retain referral documentation can result in unallowable costs. Recommendation: Re-emphasize procedures to ensure proper retention of referral documentation. Views of responsible officials and planned corrective action: Management agrees with the finding. See Corrective Action Plan.

Finding #2023-001 – Material Weakness and Other Noncompliance. Applicable federal programs: U. S. Department of Health and Human Services, Direct Federal Funding, Cooperative Agreement to Support Navigators in Federally-facilitated Exchanges, Assistance Listing #93.332, Contract #NAVCA210403-02-02, Contract year: 08/27/22 – 08/26/23, Contract #NAVCA210403-03-00, Contract year: 08/27/23 – 08/26/24. U. S. Department of Health and Human Services, Passed through Texas Health and Human Services Commission, Block Grants for Prevention and Treatment of Substance Abuse, Assistance Listing #93.959, Contract #HHS000539700204 YPI, Contract year: 09/01/22 – 08/31/23, Contract #HHS000539700204 YPS, Contract year: 09/01/22 – 08/31/23, Contract #HHS000539700204 YPU, Contract year: 09/01/22 – 08/31/23. Criteria: Allowable costs – The Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, §200.430 requires that charges to awards for salaries and wages be based on records that accurately reflect the work performed. These records must: 1) be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable and properly allocated; 2) reasonably reflect the total activity for which the employee is compensated; 3) comply with the established accounting policies and practices of the agency; and 4) support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one activity. Without sufficient controls, costs may be inappropriately charged to a federal funding stream. Condition and context: Time and effort reporting is based on the amount reflected in the budget rather than actual time spent on the program. Additionally, the allocation of certain costs are impacted as they are charged to the program based on the direct salary percentages. Repeat of finding #2022-001. Cause: Prior to the audit finding reported to management in May 2023, management had a lack of understanding regarding the requirements for charging payroll costs caused improper reporting of time incurred on the federal awards. Management is working to implement new controls and procedures to fully comply with time and effort reporting as required by Uniform Guidance. Effect: Failure to establish controls for adherence with the Uniform Guidance for allowable costs may result in unallowed costs charged to the program. Questioned costs: Unknown. Recommendation: Provide training to ensure that salaries and wages charged to federal programs are supported by personnel activity reports based on actual time worked. Views of responsible officers and planned corrective action: Management agrees with the finding. See Corrective Action Plan.

Finding #2023-002 – Significant Deficiency and Other Noncompliance. Applicable federal programs: U. S. Department of Housing and Urban Development, Direct Federal Funding, Continuum of Care Program, Assistance Listing #14.267, Contract # TX0392L6E002107, Contract year: 09/01/22 – 08/31/23. U. S. Department of Health and Human Services, Direct Federal Funding, Cooperative Agreement to Support Navigators in Federally-facilitated Exchanges, Assistance Listing #93.332, Contract #NAVCA210403-02-02, Contract year: 08/27/22 – 08/26/23, Contract #NAVCA210403-03-00, Contract year: 08/27/23 – 08/26/24. U. S. Department of Health and Human Services, Passed through Texas Health and Human Services Commission, Block Grants for Prevention and Treatment of Substance Abuse, Assistance Listing #93.959, Contract #HHS000539700204 YPI, Contract year: 09/01/22 – 08/31/23, Contract #HHS000539700204 YPS, Contract year: 09/01/22 – 08/31/23, Contract #HHS000539700204 YPU, Contract year: 09/01/22 – 08/31/23. Criteria: Procurement and Suspension and Debarment – The Uniform Guidance §180 prohibits contracting with parties that are suspended or debarred. The determination of whether the contracting party is suspended or debarred or otherwise excluded from participating in the transaction may be made by checking the System for Award Management (SAM) Exclusions maintained by the General Services Administration. Condition and context: Civic Heart amended its procurement policy in July 2023 to include a provision that Civic Heart will restrict awards, subawards, and contracts with certain parties that are debarred, suspended, or otherwise excluded from or ineligible. Although, Civic Heart was unable to provide evidence that such verification had been made during fiscal year 2023, we tested a sample of 13 vendors and found none to be suspended or debarred. Partial repeat of finding #2022-002. Cause: Civic Heart amended its procurement policy eleven months into fiscal year 2023 as a result of the 2022 audit finding. Although the policy was amended, the provision requiring verification of lack of suspension and debarment was not placed into service until after August 31, 2023. Effect: Failure to follow all requirements of Civic Heart’s procurement policy, including verification of lack of suspension and debarment could result in selecting vendors who are not eligible to be paid with federal monies. Recommendation: Implement procedures and provide training to personnel regarding verification that potential vendors are not debarred, suspended, or otherwise excluded from or ineligible for participation as required by their procurement policy. Views of responsible officials and planned corrective action: Management agrees with the finding. See Corrective Action Plan.