NATIVE AMERICANS FOR COMMUNITY ACTION, INC.

Finding 2024-005: Single Audit Reporting Package Not Submitted in a Timely Manner (Repeat Finding of 2023-101) – Material Weakness Federal program: All federal programs Criteria: Section 200.512 of the Uniform Guidance requires the organization submit an annual single audit reporting package and submit the data collection form prior to nine months after the end of the audit period. Condition: NACA did not submit its single audit reporting package or data collection form within the required timeline. Cause: Financial reporting and adjustments through December 31, 2024 were delayed due to lack of proper oversight over the accounting team. Effect or Potential Effect: The late submission of the audited financial statements and data collection form resulted in NACA being noncompliant with the provisions of Section 200.512 of the Uniform Guidance. Recommendations: We recommend that NACA hire, train and retain an experienced accounting team including a CFO to effectively oversee the accounting processes and financial reporting responsibilities so that the preparation of its financial statements can be completed in a timely manner. Views of Responsible Officials and Planned Corrective Action: NACA management concurs with the finding and will implement the recommendation above.

Finding 2024-006 Allowable Costs/Cost Principles Overbilling of indirect costs – Material weakness in internal Control, material noncompliance Assistance Listing Number: 93.193 Program Title: Urban Indian Health Services Federal Agency: U.S. Department of Health and Human Services Pass-Through Entity: Indian Health Services Questioned Costs: $772,209 Criteria: As per grant agreement terms, NACA is allowed to request reimbursement for indirect costs (such as "overhead" or "administrative costs") they incur when providing the services described in the grant agreements. Some of the grant agreements specifically state the allowable indirect cost rate or that recovery of indirect costs are not allowed. Condition: During 2023 and 2024, NACA used an incorrect indirect cost rate, resulting in overbilling and over-reimbursement. Additionally, amounts were recorded to contracts that did not allow recovery of indirect costs. Some of these amounts were overbilled through a reduction in the deferred revenue balance. Cause: NACA experienced the loss of key staff that previously had background and experience with grant compliance relating to cost reimbursement agreements. The individual completing the cost reimbursement forms had not reviewed the grant agreements to realize that the indirect cost rates had changed. In addition, the process for review and approval of monthly cost reimbursement requests did not include review of the indirect cost rate being utilized. Effect or Potential Effect: As a result of applying an incorrect indirect cost rate, NACA overbilled the funding source for indirect costs in the amount of $266,825 either by direct overbilling or by overcharging to the deferred revenue balance. Additionally, indirect costs totaling $505,384 were recorded to contracts that did not allow recovery of indirect costs. Recommendation: We recommend that NACA implement a communication process between an individual with grant compliance responsibilities and the individual completing the cost reimbursement requests to ensure that the correct indirect cost rate is being utilized and to communicate on any changes to the rate. In addition, we recommend that the process for reviewing and approving cost reimbursement requests includes review of the indirect cost rate being utilized to ensure the rate is correct. Views of Responsible Officials and Planned Corrective Action: NACA management concurs with the finding and will implement the recommendation above.

Finding Number: 2024-007 Procurement/Suspension and Debarment Procurement policy not followed and suspension and debarment checks not completed – Material weakness in internal controls, material noncompliance Assistance Listing Number: 93.193 Program Title: Urban Indian Health Services Federal Agency: U.S. Department of Health and Human Services Pass-Through Entity: Indian Health Services Criteria: The Uniform Guidance at 2 CFR §§ 200.318–200.327 requires non-federal entities to establish and maintain written procurement policies and procedures that reflect applicable federal requirements and ensure compliance with federal procurement standards. These requirements apply regardless of the volume or frequency of procurement activity. In addition, 2 CFR § 200.213 and 2 CFR Part 180 require non-federal entities to ensure that they do not enter into covered transactions with vendors or contractors that are suspended or debarred and to have procedures in place to verify vendor eligibility prior to entering into such transactions. Condition: As a result of auditor testing, it was found that NACA did not follow written procurement policies and procedures during the audit period. Management indicated that procurement activity is limited and typically consists of routine or low-dollar purchases; however, no formal process existed to ensure that purchases made with federal funds complied with Uniform Guidance procurement requirements. Additionally, NACA did not have a documented process to verify whether vendors or contractors were suspended or debarred prior to entering into covered transactions, nor was evidence of such verification retained. NACA did not have a control process to ensure oversight over procurement policies and over suspension and debarment checks. Cause: During the year ended December 31, 2024, NACA has limited administrative resources and believed that the infrequency and low dollar amount of procurement activity did not necessitate formal procurement policies or suspension and debarment procedures. Effect: Without a suspension and debarment verification process and failure to follow established procurement policies and procedures, NACA is at increased risk of noncompliance with Uniform Guidance requirements, including the risk of entering into transactions with suspended or debarred vendors or failing to comply with applicable federal procurement standards. Recommendation: We recommend that NACA implement a process to obtain quotes for small purchases (individual purchases greater than $10,000) and to maintain documentation of those quotes. We also recommend that NACA implement a regular process for performing suspension and debarment checks for any vendors that are expected to be paid $25,000 or more on an annual basis and to maintain documentation of those checks. We also recommend NACA strengthen internal controls to ensure consistent adherence to existing procurement policies and procedures. This should include implementing monitoring or review controls to verify compliance with procurement requirements and ensuring that suspension and debarment checks are performed and documented for applicable transactions. Training may also be beneficial to reinforce staff understanding of procurement requirements and documentation expectations. Views of responsible officials: NACA concurs with the recommendation.

Finding Number: 2024-008 Cash Management Cost reimbursement reports not maintained – Material weakness in internal controls, material noncompliance Assistance Listing Number: 93.193 Program Title: Urban Indian Health Services Federal Agency: U.S. Department of Health and Human Services Award Number: H722IHS0128-22-00 Pass-Through Entity: Indian Health Services Criteria: The Uniform Guidance at 2 CFR § 200.302(a) requires non-Federal entities to maintain financial management systems that provide accurate, current, and complete disclosure of financial results. Additionally, 2 CFR § 200.334 requires retention of financial records, including reports submitted to the grantor, for a period of three years. Condition: As a result of auditor testing, it was found that NACA did not retain copies of cost reimbursement reports submitted to the grantor for the Urban Health Clinic/Substance Abuse Prevention and Title V contracts. As a result, auditors were unable to verify amounts reported or reconcile reported amounts to NACA’s accounting records. Also, NACA did not have internal controls in place to ensure that copies of cost reimbursement reports submitted to the grantor for the Urban Health Clinic/Substance Abuse Prevention and Title V contracts were maintained for internal records. Cause: NACA lacked procedures to ensure that financial reports submitted for reimbursement were retained in accordance with Federal record retention requirements. Effect: Failure to retain cost reimbursement reports increases the risk of noncompliance with Federal requirements and limits NACA’s ability to support amounts requested for reimbursement. This also impacts transparency and auditability of financial activity. Recommendation: We recommend that NACA implement a process to ensure all cost reimbursement reports are retained and properly organized. This should include establishing a centralized recordkeeping system and periodic review procedures to confirm completeness of financial reporting documentation. Views of responsible officials: NACA concurs with the recommendation.

Finding Number: 2024-009 Reporting Performance reports not maintained- Material weakness in internal controls, material noncompliance Assistance Listing Number: 93.193 Program Title: Urban Indian Health Services Federal Agency: U.S. Department of Health and Human Services Pass-Through Entity: Indian Health Services Criteria: The Uniform Guidance at 2 CFR § 200.302(a) requires non-Federal entities to maintain financial management systems that provide accurate, current, and complete disclosure of financial results for each Federal award. In addition, non-Federal entities must ensure required programmatic (performance) reports are supported by appropriate documentation. Condition: As a result of auditor testing, it was found that NACA did not maintain adequate supporting documentation for performance-related reports submitted to the grantor for the Title V program. Cause: During the year ended December 31, 2024, NACA had limited administrative resources and lacked formal procedures to ensure that performance reporting documentation was retained and properly organized. Effect: Without sufficient supporting documentation, NACA is at increased risk of noncompliance with Federal reporting requirements, and there is reduced transparency and accountability over reported program performance. Recommendation: We recommend that NACA strengthen internal controls over performance reporting by implementing procedures to retain supporting documentation for all submitted reports and establishing a review process to ensure completeness and accuracy. Views of responsible officials: NACA concurs with the recommendation.