Redefining BPHC's Role in Financial Oversight and Audit Monitoring

1. Redefining BPHC’s Role in Financial OversightAudit Monitoring, Draw Down Restriction, and Financial Performance Measures

2. Agenda • Background • Policy Supports Transition • Progress to Date • What Stayed the Same? • What Changed for FY 2016? • Financial Performance Measures • Draw Down Restriction • Financial Audit • Audit Summary • Tools and Resources for Health Centers • FAQs

3. Background Historically, BPHC has had a very hands-on approach to monitoring grantees’ financial viability/stability. • In-depth financial review (e.g., budget, audit) and TA • Review and approval of Financial Recovery Plans (FRPs) • Ongoing review of monthly financials BPHC financial oversight often exceeded program requirements and compliance. • Detracted from grantee accountability and responsibility for their own financial viability • Duplicated role of OFAM and health center governing board • Put HRSA at higher risk by weighing in on viability plans (FRPs)

4. Policy Supports Transition HRSA’s Clarified Role In Financial Monitoring: Health Center Policies • PAL 2014-08 (Program Requirements Oversight) • PIN 2013-01 (Budgeting and Accounting Requirements) • PIN 2014-01 (Governance) • PIN 2014-02 (Sliding Fee/Billing & Collections) • Uniform Administrative Requirements: 45 CFR Part 75

5. Progress to Date • Financial Recovery Plans (FRPs) administratively lifted in August 2014 • Delineation of role of PO and GMS in budget review • PO: Programmatic review, ONLY • Does total budget align with scope of project? • Revised 90-day (Progressive Action) Budget condition in SAC/BPR PAR. POreviews/approves response. • GMS: Grants Administrative Requirements • Does Federal share include only allowable costs? • Does not exceed salary cap? • Numbers add up correctly? • 30-Day (non-Progressive Action) Budget condition. GMS reviews/approves response.

6. What Stayed the Same? Review/Follow-up on Program Compliance (via PAR and OSV) remains Critical! • Financial Management and Control Policies • Policies must assure separate functions appropriate to organizational size, safeguard assets, maintain financial viability • Billing & Collections and Sliding Fee Discounts • Maximize third-party payments, discounts to eligible patients and full charge above 200% FPL, etc. • Program Data Reports, Board Composition and Authority • Board receives timely, accurate reports that inform decision-making, budget approval, health center oversight, impact health center’s financial viability • Range of expertise on the Board (e.g., financial)

7. What Stayed the Same? Audit Resolution (how audit findings are resolved) • BPHC Role • Findings related to non-compliance with Financial Management and Controls Program Requirement • BPHC will still address through the Progressive Action conditioning process (PAR, OSV, and off-cycle) • OFAM Role • General Audit Findings (Monetary/Compliance Supplement) • OFAM/DFI will still perform their own, separate and required audit resolution process

8. What Changed for FY 2016? 1. Financial Performance Measures • Existing UDS-based Financial Measures • Total Cost Per patient • Medical Cost Per Medical Visit • Health Center Program Grant Cost per Patient (NEW for FY 2016) • The audit-based financial measures are no longer reportedto BPHC: • Change in Net Assets to Expense Ratio • Working Capital to Monthly Expense Ratio • Long-Term Debt to Equity Ratio

9. What Changed for FY 2016? 2. Draw Down Restriction – BPHC Role Reduced Identify and apply/monitor/lift DDR for “High Risk” grantee (programmatic notfinancial focus) • Failed to submit required program reports (e.g., UDS, O/E QPR, failed to open NAP site) • Poses immediate patient safety/public health or welfare concerns • Presence of an administrative (emergency) supplement or advance • Termination of grant/discontinuation of HRSA grant funds

10. What Changed for FY 2016? 2. Drawdown Restriction – OFAM Role Increased • Assessment of financial stability/viability using the single audit, trend data, and other DFI sources • Apply/monitor/lift DDR due to financial stability/viability concerns including (but not limited to) • Grantee bankruptcy • Going concern, concerns regarding viability • Significant operating loss and/or significant liabilities • Identified inadequacies in financial management systems • Documented allegations of wrongdoing

11. What Changed for FY 2016? 3. Financial Audit - Audit Collection • Beginning in FY2016, BPHC will no longer collect the financial audit • Federal Audit Clearinghouse (FAC) and National External Audit Review Center (NEAR) • Previous BPHC practice required Health Center Program grantees to submit their audit to BOTH HRSA and FAC; beginning in FY 2016, this will no longer occur • BPHC will align with the rest of HRSA and will receive audit information for those grantees that meet the Single Audit threshold via OFAM from NEAR • Reduces the grantees’ previous duplicative submissions to both HRSA and FAC

12. What Changed for FY 2016? 3. Financial Audit - Audit Collection • Beginning in FY2016, BPHC will no longer collect the financial audit (continued) • All Health Center grantees are still required to complete an annual financial audit • If they do not meet Single Audit requirements ($750K threshold), they do not submit their audit to FAC • As part of OFAM’s internal SOP, in order to complete and update the Financial Assessment, OFAM may request the annual financial audit or other relevant financial information in order to assess financial viability and risk to HRSA

13. What Changed for FY 2016? 3. Financial Audit - Audits Under the Threshold • OFAM is taking on the responsibility to individually request financial audits from grantees under the Single Audit threshold of $750K • Standard term to be placed on all Type 1, 2, and 5 awards (i.e., SAC, BPR, NAP NoAs) for FY 2016 onward • Ensure all grantees are aware of their obligation to conduct/complete a financial audit annually in accordance with Section 330/Health Center Program requirements, regardless of how much they expend in Federal grant funds during the year • OFAM has confirmed that they can and will reach out and request these individually (e.g., via a batch ad hoc submission request in EHB)

14. BPHC Modified Audit Summary inDFI Financial Assessment • Health Center Name • Financial Management and Controls Compliance Issues: (Yes/No) • Management Letter/Operational Comments: • Current Year Subpart F (A133): (Yes/No) • Summary of compliance issues (to include any repeat findings) • Prior Year Subpart F (A133): (Yes/No) • Summary of compliance issues (to include repeat findings, status of prior year audit findings) • Compliance Recommendations(Specificallywhat the health center MUST DO AND/OR SUBMIT to demonstrate compliance):

15. BPHC Modified Audit Summary • Small Town USA Health Center • Financial Management and Controls Compliance Issues: (Yes) • Management Letter/Operational Comments: N/A • Current Year Subpart F (A133): (Yes) • The center has a segregation of duties issue within the accounting functional areas of payroll and accounts payable. • Prior Year Subpart F (A133): (Yes) • The center’s prior year findings of failing to produce timely financial statements and lack of internal controls over timely bank reconciliations have been resolved. • Compliance Recommendations(Specifically what the health center MUST DO AND/OR SUBMIT to demonstrate compliance):Request assurance SMALL TOWN has addressed the audit findings noted above and has established effective processes to help assure the findings do not reoccur. SMALL TOWN must submit board approved financial management policies and procedures that properly establish internal controls within the segregation of duties of their payroll and accounts payable functions. The topics of check storage, accountability, issuance, signature, and reconciliations must be addressed within the policy in order to demonstrate compliance with BPHC program requirements. EXAMPLE

16. SAC PAR – Responsibilities and Data Sources: DFI FA & SAC Application Project Officer OFAM/DFI & DGMO Applications recommended for funding are subject to an objective financial assessment 1. DFI evaluates the financial management capability of applicants based on information from several sources 2. DFI makes a risk-level recommendation 3. GMS conducts a detailed cost analysis , which involves reviewing the budget within the application to ensure it is reasonable, allowable, and allocable and complies with applicable statute Reviews 1. ONLY the BPHC Modified Audit Summary, financial consultant’s assessment of compliance with Financial Management and Controls Program Requirement 2. Grantee’s self-disclosed comments in SAC application narrative 3. DFI funding risk level and acknowledges it in the PAR Recommends Condition for Financial Management and Controls Program Requirement if Modified Audit Summary indicates non-compliance Receives and analyzes Grantee’s submission to the progressive action condition and determines if it meets compliance requirements per the Modified Audit Summary; consults with financial consultant to determine compliance, as needed Focus: Assess Compliance & Document DFI Financial Risk Level

17. BPR PAR – Responsibilities and Data Sources: DFI FA & BPR Report Project Officer OFAM/DFI & DGMO Monitors Continued need for DDR, if applicable Collaborates With Program depending on the DDR request Reviews 1. ONLY any self-disclosed information in the progress report about financial management and controls, and comments on this in the Standard Review Checklist Q4 2. DFI funding risk level and acknowledges it in the PAR (e.g., “DFI indicates minimal or moderate risk” or “DFI indicates elevated risk, GMS to take appropriate risk mitigation steps per OFAM SOP”) Follows up With grantee, if applicable and as needed, throughout budget period on status of grantee’s corrective action plan for previously placed financial management conditions Focus: Progress and Document DFI Financial Risk Level

18. OSV/Site Visit Data Sources: Site Visit Report Project Officer OFAM/DFI & DGMO None OSV/Site Visit: Reviews and shares Most recent comments from Modified Audit Summary with the OSV team and notes any compliance findings on financial management and controls, which allows OSV team to verify current status of any corrective actions and to target better their review Recommends New condition off-cycle as part of post-OSV process if OSV identifies new non-compliance Receives and analyzes Grantee’s submission to the progressive action condition and determines if it meets compliance requirements per the Modified Audit Summary; consults with financial consultant to determine compliance, as needed Focus: Assess Compliance andRoutine Post-Award Monitoring

19. Off-Cycle– Responsibilities and Data Sources: DFI FA Project Officer OFAM/DGMO Receives Email from DFI regarding changes in the grantee’s risk level Takes Appropriate risk mitigation actions (i.e., add and/or remove conditions) per OFAM SOP (e.g., add DDR) if the DFI change is about financial viability Consults With PO when appropriate Receives Email from DFI regarding changes in the grantee’s risk level Reviews Risk level in EHB DFI Folder to determine if DFI change indicates elevated risk and assesses whether this indicates new non-compliance with Health Center Program requirements Recommends New condition(s), as needed Follows up With grantee, if applicable and as needed, throughout on status of grantee’s corrective action plan via the condition Focus: Assess Compliance andRoutine Post-Award Monitoring

20. What Changed for FY 2016? • Retirement of the Audit SOP • PAR Guidance, terms and conditions, existing Health Center Program requirements/policies, and OFAM roles and responsibilities support proper monitoring • No need for separate SOP on this Program Requirement • Conditions • No longer have the late audit condition (LALs will still have this condition because they are required to submit a financial audit with their applications) • Consolidation of Financial Management and Controls Condition • BPHC Audit Module & Reports • Retired

21. What Changed for FY 2016? • Consolidated Condition - R.5.4 Financial Management and Control Policies …Within 90 days, provide a plan to address the recent findings or deficiencies related to your health center’s ability to maintain accounting and internal control systems appropriate to the size and complexity of the organization reflecting Generally Accepted Accounting Principles (GAAP)OR provide board approved documentation that compliance with this requirement has been implemented. These may include findings, questioned costs, reportable conditions, and material weaknesses cited in your organization’s most recent audit. The plan must address how the health center’s financial management policies will assure separate functions appropriate to organizational size to safeguard assets and maintain financial stability. If any of the findings are repeat audit findings, also submit an auditor’s response that indicates these findings have been resolved. Please contact your project officer for additional assistance and/or information on the required elements of your response. (45 CFR 75.207(a) and 45 CFR 75.371)

22. Tools and Resources for Health Centers • BPHC Digest (July 2015) • Messaging about closing the Audit Module • PINs/PALs • PCAs and NCAs • Assist with financial performance and planning, best practices • BPHC supportive TA • Especially related to compliance areas (e.g., financial management, billing/collections, sliding fee, governance)

23. Frequently Asked Question # 1 Q1: My health center has informed me that they are filing bankruptcy? What steps do I need to take to ensure program integrity? A1: You will initially notify your Division leadership and add this health center to the BPHC Alert List in SharePoint. OFAM/DFI and OGC will need to be notified as well. DFI will then update their risk assessment within the Financial Assessment. DGMO will apply a draw down restriction. DFI will monitor financial viability through their periodic monitoring process. When warranted or applicable, DGMO lifts the draw down restriction, not Program. The project officer continues to monitor the execution of the grant from a programmatic stand point.

24. Frequently Asked Question # 2 Q2: What about health centers that have filed bankruptcy or have a going concern warning on their audit? What options do I have now that the Financial Recovery Plan (FRP) is no longer used? A2: The health center should be advised that they must take necessary actions to ensure that they can carry out the funded proposal and continue operations. In addition, they must ensure that all Federal funding is spent as described in their application and NoA (even though other funding sources may be limited and/or nonexistent). The health center should also be placed on a draw down restriction by DGMO. This level of oversight supports the continuance of health center activities while the Board of Directors works through the financial difficulties. PO should ensure that the grantee is on the BPHC Alert List.

25. Frequently Asked Question # 3 Q3: May I or MSCG site visit consultants still ask health centers in advance for their latest audit prior to an OSV? A3: No, you cannot request or collect it. You may ask to review the most recent audit on-site as part of the OSV. However, during your OSV prep, you can provide the fiscal consultant the latest audit summary that is attached within the DFI Financial Assessment. (Reminder - the Financial Assessment is a proprietary document and is not to be shared outside of HRSA).

26. Frequently Asked Question # 4 Q4: What is the role of the fiscal consultants as a result of the changes that have been discussed in this and previous training sessions? What access to fiscal consultants do project officers have? A4: The in-house fiscal consultants have migrated away from addressing financial viability. Their focus is on compliance and ensuring systems are in place (internal controls, billing and collections) to support proper accounting of grant dollars; they should not be consulted for sliding fee policy issues. The consultants are available for targeted support to project officers in reviewing condition submissions and OSV reports.

27. Frequently Asked Question # 5 Q5: My health center consistently has incurred financial losses over the last couple of years. They appear to be meeting our program requirements. In fact, they just had a successful Operational Site Visit (OSV). What can I do now that the Financial Recovery Plan (FRP) is no longer used? A5: The project officer’s focus should be on the health center’s ability to continue operating the health center program as proposed and serving patients in need of primary care. OSVs, PARs (PDRs for LALs), and your general oversight and monitoring (e.g., scheduled calls, review of Board minutes) should provide a basis for assessing the health center’s progress. If deemed a financial risk to HRSA by OFAM, DFI can mitigate this risk by applying a draw down restriction on funded health centers’ grant funds.

28. Frequently Asked Question # 6 Q6: What about Look-Alikes (LALs)? Does the same audit collection and BPHC review process apply? A6: No, since LALs do not receive our Federal grant, the same rules and procedures do not apply. BPHC will still be responsible for collecting the audit in the designation or certification application. Project officers may consult the in-house fiscal consultants for review of ONLY the Financial Management and Controls Program Requirement. The Missing Audit condition (only permitted for LALs, not H80-funded health centers) should be placed if the current audit is not submitted. The project officer should then follow the necessary progressive action steps.

29. Frequently Asked Question # 7 Q7: Now that BPHC will no longer receive audits, who will track and follow-up on late audits? A7: The Office of Federal Assistance Management (OFAM), more specifically, the Division of Financial Integrity (DFI), has the responsibility to track late audits from HRSA grantees.

30. Frequently Asked Question # 8 Q8: I am not an expert on Sliding Fee or Billing and Collections issues. Can I ask BPHC’s in-house financial consultants to assist me? A8: PIN 2014-02 Sliding Fee Discount and Related Billing and Collections Program Requirements provides specific guidance for staff and health centers on these topics. For case-specific needs not addressed within the PIN, please contact your OPPD policy liaison.

31. Frequently Asked Question # 9 Q9: My grantee just informed me that they cannot make payroll this month. What should I do? A9: First, inform your Division leadership and place on the BPHC Alert List. Subsequently, inform the Division of Financial Integrity (DFI) who will update the Financial Assessment. If necessary, the grantee may submit a request for an Administrative Supplement or Advance (review the Administrative Supplement SOP for more information). Technical Assistance resources to assist your grantee may include cooperative agreements, the PCA, NCA, or MSCG supportive TA.