PRIORITY HEALTH CARE, INC.

FINANCIAL AND COMPLIANCE AUDIT TOGETHER WITH

INDEPENDENT AUDITOR'S REPORT

FOR THE YEAR ENDED DECEMBER 31, 2015

TABLE OF CONTENTS

PAGE

INDEPENDENT AUDITOR'S REPORT I

STATEMENT OF FINANCIAL POSITION AS OF DECEMBER 31. 2015 4

STATEMENT OF ACTIVITIES FOR THE YEAR ENDED DECEMBER 31.2015 5

STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31. 2015 6

NOTES TO THE FINANCIAL STATEMENTS 7

SCHEDULE OF FUNCTIONAL EXPENSES FOR THE YEAR ENDED DECEMBER 31, 2015 14

SCHEDULE OF AGENCY HEAD COMPENSATION FOR THE YEAR ENDED DECEMBER 31. 2015 15

SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED DECEMBER 31. 2015 16

NOTES TO THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS 17

REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE

GOVERNMENT AUDITING STANDARDS 18

TABLE OF CONTENTS, CONTINUED

PAGE

INDEPENDENT AUDITOR'S REPORT ON COMPEIANCE FOR EACH MAJOR FEDERAE PROGRAM AND ON INTERNAE CONTROE OVER COMPEIANCE REQUIRED BY UNIFORM GUIDANCE 21

SCHEDUEES OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED DECEMBER 31, 2015

Schedule I - Summary of the Independent Auditor's Results 25

Schedule II - Financial Statement Findings 26

Schedule III - Federal Award Findings and Questioned 26

SCHEDUEE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS 26

INDEPENDENT AUDITOR'S REPORT

To the Board of Directors Priority Health Care, Inc.

New Orleans, Louisiana

Report on the Financial Statements

I have audited the aeeompanying financial statements of Priority Health Care, Inc. (PHC), which comprise the statement of fmaneial position as of December 31, 2015, and die related statements of activities, and cash flows for the year then ended, and the related notes to the financial statements.

Management's Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditor's Responsibility

My responsibility is to express an opinion on these financial statements based on my audits. I conducted my audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

INDEPENDENT AUDITOR'S REPORT (CONTINUED)

Auditor's Responsibility, Continued

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, I express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my audit opinion.

Opinion

In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of PHC as of December 31, 2015, and the changes in its net assets and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Other Information

My audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The schedule of functional expenditures is presented for purposes of additional analysis and is not a required part of the financial statements. The accompanying schedule of expenditures of federal awards, as required by Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, is presented for purposes of additional analysis and is also not a required part of the financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In my opinion, the information is fairly stated, in all material respects, in relation to the financial statements as a whole.

1

INDEPENDENT AUDITOR'S REPORT (CONTINUED)

Other Reporting Required by Government Auditing Standards

In accordance with Government Auditing Standards, I have also issued my report dated June 7, 2016 on my consideration of PHC's internal eontrol over financial reporting and on my tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of my testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering PHC's internal control over financial reporting and compliance.

VGR, CPA New Orleans, Louisiana

June 7, 2016

PRIORITY HEALTH CARE, INC STATEMENT OF FINANCIAE POSITION

AS OF DECEMBER 31. 2015

ASSETS

Assets: Cash and equivalents (NOTES 2 and 6) $ 729,155 Grants receivable (NOTES 6 and 8) 387,684 Pharmacy receivable (NOTES 6 and 9) 145,682 Accounts Receivable net of

allowance of $60,465 (NOTE 6) 22,533 Property, plant and equipment

net of accumulated depreciation and amortization of $4,384 (NOTES 2 and 7) 93,159

Total assets $ 1.378.213

EIABIEITIES AND NET ASSETS

Eiabilities: Accounts payable (NOTE 6) $ 41,283 Salaries payable (NOTE 6) 18,262

Total liabilities 59,545

Net Assets (NOTE 2): Unrestricted 1,318,668

Total net assets 1,318,668

Total liabilities and net assets $ 1.378.213

The accompanying notes are an integral part of these financial statements

PRIORITY HEALTH CARE, INC STATEMENT OF ACTIVITIES

FOR THE YEAR ENDED DECEMBER 31.2015

Revenues and Other Support Grants and contracts $ 1,471,934 Pharmacy Revenue 2,226,546 Coinsurance Income 185,174 Fundraising 12,469 Contribution s 5,538 Other income 3,686

Total revenues and other support 3,905,347

Expenses Support services 353,569 Program services 2,970,905 Fundraising 11,027

Total expenses 3,335,501

Change in net assets 569,846

Net assets, beginning of year 748,822

Net assets, end of year S E318.668

The accompanying notes are an integral part of these financial statements 4

PRIORITY HEALTH CARE, INC. STATEMENT OF CASH FEOWS

FOR THE YEAR ENDED DECEMBER 3 E 2015

Cash Flows from Operating Activities:

Change in net assets $ 569,846 Adjustments to reeoneile ehange in net assets

to net eash provide by operating aetivities: Depreeiation expense 3,203

Inerease/Deerease in: Inerease in grants reeeivable (158,252) Deerease in notes reeeivable 12,463 Inerease in reeeivable (22,533) Inerease in pharmaey reeeivable (6,129) Deerease in aeeounts payable (42,062) Deerease in salaries payable (8,456)

Net eash provided by operating aetivities 348,080

Cash Flows from Investing Aetivities: Purehase of property and equipment (90,934)

Net eash used in investing aetivities (90,934)

Net inerease in eash 257,146

Cash, beginning of year 472,009

Cash, end of year S 729.155

The aeeompanying notes are an integral part of these fmaneial statements

PRIORITY HEALTH CARE, INC. NOTES TO THE FINANCIAL STATEMENTS

NOTE I - ORGANIZATION:

Priority Health Care, Inc. (PHC) is a non-profit primary medical and social service agency established in 2009 to meet the medical and social service needs of residents in the eastern New Orleans metro area. PHC is classified by the IRS as a 501(c)(3) tax exempt organization, and serves the parishes of Jefferson, Orleans, St. Bernard, St. Tammany, St. Charles, St. John the Baptist, St. James and Plaquemines, with its clinic and offices located in Marrero, LA.

The mission of PHC is to provide holistic health care to underserved communities that empower people to live healthy lives. The purpose of PHC is to offer services on a sliding fee scale to ensure everyone has access to needed care which they can afford in order to adopt lifestyle choices that have a positive effect on their health.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Principles of Accounting

PHC is a non-profit community based organization whose financial statements are prepared on the accrual basis.

Basis of Reporting

PHC has adopted the provisions of FASB Accounting Standards Codification, Topic 958, 'Accounting for Not-for-Profit Entities", and reports its financial position and activities according to three classes of net assets according to externally (donor) imposed restrictions.

A description of the three net asset categories is as follows:

Unrestricted net assets include funds not subject to donor-imposed stipulations. The revenues received and expenses incurred in conducting the mission of PHC are included in this category.

PRIORITY HEALTH CARE, INC. NOTES TO THE FINANCIAL STATEMENTS. CONTINUED

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES. CONTINUED:

Basis of Reporting, Continued

Temporarily restricted net assets include realized gains and losses, investment income and gifts and contributions for which donor-imposed restrictions (capital improvements, etc.) have not been met.

Permanently restricted net assets are contributions which are required by the donor-imposed restriction to be invested in perpetuity and only the income be made available for program operations in accordance with the donor restrictions. Such income is reflected in temporarily restricted net assets until utilized for donor imposed purposes.

As of December 31, 2015, PHC did not have any temporarily or permanently restricted net assets.

Cash and Cash Equivalents

For purposes of the Statements of Cash Flows, PHC considers all short-term, highly liquid investments with maturity of three months or less at the time of purchase to be cash equivalents.

Property, Plant, and Equipment

PHC capitalizes items with a unit cost of greater than $5,000 and a useful life greater than one (1) year. Property, plant, and equipment is recorded at historical cost, if purchased, or at fair market value at the date of the gift, if donated. Additions, improvements and expenditures that significantly extend the useful life of an asset are capitalized. Depreciation is provided using the straight-line method over the estimated useful lives of the assets which range from three (3) to twenty-seven (27) years.

Functional Allocation of Expenses

The costs of providing the various programs and activities have been summarized on a functional basis in the Statement of Activities. Accordingly, certain costs have been allocated among the programs and supporting services benefitted.

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PRIORITY HEALTH CARE, INC. NOTES TO THE FINANCIAL STATEMENTS. CONTINUED

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES. CONTINUED:

Support and Revenues

Revenues received under grant programs are recognized when earned.

Contributions are considered to be available for unrestricted use unless specifically restricted by the donor or the board of directors.

Fair Value

PHC has adopted certain provisions of EASE Accounting Standards Codification Topic 820, "Fair Value Measurements and Disclosures." ASC Topic 820 refines the definition of fair value, establishes specific requirements as well as guidelines for a consistent framework to measure fair value, and expands disclosure requirements about fair value measurements. ASC Topic 820 requires PHC to maximize the use of observable market inputs, minimize the use of unobservable market inputs, and disclose in the form of an outlined hierarchy, the details of such fair value measurements.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.

NOTE 3 - ECONOMIC DEPENDENCY:

The primary source of revenue for PHC is federal grants provided through various funding agencies. The continued success of PHC is dependent upon the renewal of contracts from current funding sources.

NOTE 4 - INCOME TAXES:

PHC is a tax-exempt organization under section 501(c)(3) of the Internal Revenue Code. Accordingly, no provisions for federal or state income taxes have been recorded in the accompanying financial statements. Should PHC's tax status be challenged in the future, the 2012, 2013 and 2014 tax years are open for examination by the IRS.

PRIORITY HEALTH CARE, INC. NOTES TO THE FINANCIAL STATEMENTS. CONTINUED

NOTE 5 - COMMITMENTS AND CONTINGENCIES:

Participation in Grant Programs

PHC is a recipient of grant funds from certain funding sources. These grants are governed by various federal, state and local guidelines, regulations, and contractual agreements.

The administration of the program and activities funded by the grants are under the control and administration of PHC and are subject to audit and/or review by the applicable funding source. Any grant funds found not to be properly spent in accordance with the terms, conditions, and regulations of the funding source may be subject to recapture.

NOTE 6 - FAIR VALUE MEASUREMENTS OF FINANCIAL ASSETS AND LIABILITIES:

In accordance with EASE ASC Topic 820, fair value is defined as the price that PHC would receive to sell an asset or pay to transfer a liability in a timely transaction with an independent buyer in the principal market, or in the absence of a principal market the most advantageous market for the asset or liability. ASC Topic 820 established a three-tier hierarchy to distinguish between (1) inputs that reflect the assumptions market participants would use in pricing an asset or liability developed based on market data obtained from sources independent of the reporting entity (observable inputs) and (2) inputs that reflect the reporting entity's own assumptions about the assumptions market participants would use in pricing an asset or liability developed based on the best information available in the circumstances (unobservable inputs) and to established classification of fair value measurements for disclosure purposes.

Various inputs are used in determining the value of PHC assets or liabilities. The inputs are summarized in the three broad levels listed below:

Level 1 -Quoted prices are available in active markets for identical investments as of the reporting date.

PRIORITY HEALTH CARE, INC. NOTES TO THE FINANCIAL STATEMENTS. CONTINUED

NOTE 6 - FAIR VALUE MEASUREMENTS OF FINANCIAL ASSETS AND LIABILITIES. CONTINUED:

Level 2 - Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date, and fair value is determined through the use of models or other valuation methodologies.

Level 3-Pricing inputs are unobservable for the investment and include situations where there is little, if any market activity. The inputs into the determination of fair value require significant management judgment or estimation.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment's level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. PHC's assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment. All investments are considered Level 1 investments.

The carrying value and the estimated fair values of PHC's financial instruments at December 31. 2015 are as follows:

Carrying Fair Description Value Value

Cash and cash equivalents $729,155 $729,155 Grants receivable 387,684 387,684 Pharmacy receivable 145,682 145,682 Accounts receivable 22,533 22,533 Accounts payable 41,283 41,283 Salaries payable 18,262 18,262

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PRIORITY HEALTH CARE, INC. NOTES TO THE FINANCIAL STATEMENTS. CONTINUED

NOTE 7 - PROPERTY. PLANT AND EQUIPMENT:

Balance at 01/01/15

Furniture and fixtures Leasehold improvements Accumulated depreciation

Net property, plant, and equipment

; 6,609 $ -0-

a.i80)

S 5.429 $

Additions (Reductions)

61,381 29,553 (3.204)

87.730

Balance at 12/31/15

67,990 29,553 (4.384)

S93.159

Depreciation expense for the year ended December 31, 2015 totaled $3,203.

NOTE 8 - GRANTS RECEIVABLE:

As of December 31, 2015 grants receivable consisted of the following:

Description

Mayor's Office of Health Policy State Office of Public Health Health Resources and Service Administration Louisiana Public Health Institute

Amount

243,133 34,269 92,687 17.595

Total $ 387.684

NOTE 9 - PHARMACY RECEIVABLE:

As of December 31, 2015, pharmacy receivable consists of Avita Drugs which totaled $145,682.

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PRIORITY HEALTH CARE, INC. NOTES TO THE FINANCIAL STATEMENTS. CONTINUED

NOTE 10 - CONCENTRATION OF CREDIT RISK:

PHC maintains cash balances at a national bank. Accounts at this institution is insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000. PHC has not experiences any loss such accounts. At December 31, 2015, PHC's uninsured balance is $479,154. PHC believes it is not exposed to any significant credit risk on its cash balances.

NOTE 11 - SUBSEQUENT EVENTS:

EASE Accounting Standards Codifications Topic 855-10, "Subsequent Events" requires the disclosure of the date through which PHC has evaluated subsequent events and the reason for selecting that date. PHC evaluated subsequent events from January 1, 2015 to June 7, 2016, the date the financial statements were available to be issued.

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SUPPLEMENTARY INFORMATION

SCHEDULE OF FUNCTIONAL EXPENSES

PRIORITY HEALTH CARE, INC STATEMENT OF FUNCTIONAL EXPENSES

FOR THE YEAR ENDED DECEMBER 31. 2015

Program Services

Support Services Fundraising Total

Pharmacy Expenses 410,704 - - 410,704 Salaries & Wages 762,198 125,963 - 888,161 Professional Fees 139,733 136,623 6,918 283,273 Insurance 102,466 6,408 - 108,874 Rent 107,391 21,473 - 128,864 Client Services 111,181 472 - 111,653 Business Expenses - 3,448 - 3,448 Depreciation 2,259 944 - 3,203 Facilities and Equipment Expense 27,118 13,782 - 40,900 Postage and Printing 7,195 1,109 536 8,840 Computer Service & Repairs 6,101 180 - 6,281 Marketing - 2,658 956 3,614 Supplies 21,330 22,842 550 44,722 Employee Incentives - 275 - 275 Telephone 19,076 981 - 20,057 Fundraising Expenses - 1,035 2,067 3,102 Conventions and Training - 800 - 800 Travel 10,401 3,829 - 14,230 Books, Subscriptions, Reference - 377 - 377 Membership Fees - 3,178 - 3,178 Operations 1,637 7,192 - 8,828 Lab Fees and Vaccine Expenses 130,927 - - 130,927 Prescription and Medication Expenses 1,011,027 - - 1,011,027 Bad Debt Expense 100,161 - - 100,161 TOTAL EXPENSES 2,970,906 353,568 11,026 3,335,500

The accompanying notes are an integral part of these financial statements 14

PRIORITY HEALTH CARE, INC AGENCY HEAD COMPENSATION

EORTHEYEAR ENDED DECEMBER 31. 2015

Agency Head Name: Tamara Pierre Purpose Amount

Salary 118,372.80 Benefits - insurance 577.92 Benefits - retirement Benefits - other Car allowance Vehicle provided by organization Per diem 407.00 Reimbursements 167.60 Travel Registration fees 325.00 Conference Travel 2,829.10 Continuing professional education fees Housing Unvouchered expenses Special meals

Act 706 of the 2014 Legislative Session requires the disclosure of the total compensation, reimbursement, benefits, and other payments made to the agency head, political subdivision head or Chief executive officer, related to the position; including but not limited to travel housing, unvouchered expenses (such as travel advances) oer diem, and registration fees.

See the Independent Auditor's Report on Supplementary Information 15

PRIORITY HEALTH CARE, INC. SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

FOR THE YEAR ENDED DECEMBER 31. 2015

GRANTOR CFDA

NUMBER ENTITY NUMBER ACTIVITY

U.S. Department of Health & Human Services

Awards From A Pass-Through Entity City of New Orleans

Ryan White-HlV Emergency Relief Project Grant 93.914 N/A $ 934,222

Louisiana Public Health Institute Community Programs to Improve Minority Health Grant Program 93.137 N/A 50.193

Health Resources and Service Administration Community Health Centers, Health Care for the Homeless and Public Housing Primary Care 93.224 N/A 282.951

Louisiana Department of Health and Hospitals HIV Prevention Activities Health Department Based 93.940 N/A 190.393

Total U.S. Department of Health & Human Services 1.457.759

Total Expenditures of Federal Awards $ E457.759

See the Independent Auditor's Report on Supplementary Information 16

PRIORITY HEALTH CARE, INC. NOTES TO THE SCHEDUEE OF EXPENDITURES OF FEDERAE AWARDS

FOR THE YEAR ENDED DECEMBER 31.2015

NOTE 1 - Basis of Accounting:

The accompanying Schedule of Expenditures of Federal Awards includes the federal grant activity of PHC and is presented on the accrual basis of accounting. The information in this schedule is presented in accordance with the requirements of OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Therefore, some amounts presented in this schedule may differ from amounts presented, or used in the preparation of, the basic financial statements.

17

INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE

AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS

To the Board of Directors Priority Health Care, Inc. New Orleans, Louisiana

I have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of Priority Health Care, Inc. (PHC) (a non-profit organization) which comprise the statement of financial position as of December 31, 2015, and the related statements of activities, and cash flows for the year then ended, and the related notes to the financial statements, and have issued my report thereon dated June 7, 2016.

Internal Control Over Financial Reporting

In plarming and performing my audit of the financial statements, I considered PHC's internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing my opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of PHC's internal control. Accordingly, I do not express an opinion on the effectiveness of PHC's internal control.

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INDEPENDENT AUDITOR'S REPORT ON INTERNAE CONTROE OVER FINANCIAE REPORTING AND ON COMPEIANCE

AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAE STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS

(CONTINUED)

Internal Control Over Financial Reporting, Continued

A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.

My consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during my audit 1 did not identify any deficiencies in internal control that 1 consider to be material weaknesses. However, material weaknesses may exist that have not been identified.

Compliance and Other Matters

As part of obtaining reasonable assurance about whether PRC's financial statements are free from material misstatement, 1 performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of my audit, and accordingly, 1 do not express such an opinion. The results of my tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.

19

INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE

AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS

(CONTINUED)

Purpose of this Report

The purpose of this report is solely to describe the scope of my testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity's internal control and compliance. Accordingly, this communication is not suitable for any other purpose; however under Louisiana Revised Statute 24:513, this report is distributed by the Legislative Auditor as a public document.

VGR, CPA New Orleans, Louisiana

June 7, 2016

m

INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL PROGRAM AND ON INTERNAL CONTROL OVER

COMPLIANCE REQUIRED BY THE UNIFORM GUIDANCE

To the Board of Directors Priority Health Care, Inc. New Orleans, Louisiana

Report on Compliance for Each Major Federal Program

I have audited the Priority Health Care, Inc.'s (PHC's) compliance with the types of compliance requirements described in the 0MB Compliance Supplement that could have a direct and material effect on each of PHC major federal programs for the year ended December 31, 2015. PHC's major federal programs are identified in the summary of auditor's results section of the accompanying schedule of findings and questioned costs.

Managements Responsibility

Management is responsible for compliance with the requirements of laws, regulations, contracts, and grants applicable to its federal programs.

Auditors Responsibility

My responsibility is to express an opinion on compliance for each of PHC's major federal programs based on my audit of the types of compliance requirements referred to above. 1 conducted my audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards^ issued by the Comptroller General nf

91

INDEPENDENT AUDITOR'S REPORT ON COMPEIANCE FOR EACH MAJOR FEDERAE PROGRAM AND ON INTERNAE CONTROE OVER

COMPEIANCE REQUIRED BY OMB CIRCUEAR A-133

(CONTINUED)

Auditor's Responsibility, Continued

the United States; and the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements of Federal Awards Those standards and the Uniform Guidance require that I plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about PHC compliance with those requirements and performing such other procedures as 1 considered necessary in the circumstances.

1 believe that my audit provides a reasonable basis for my opinion on compliance for each major federal program. However, my audit does not provide a legal determination of PRC's compliance.

Opinion on Each Major Federal Program

In my opinion, PHC complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended December 31, 2015.

Report on Internal Control over Compliance

The management of PHC is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing my audit of compliance, 1 considered PHC's internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with the Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, 1 do not express an opinion on the effectiveness of PHC s internal control over compliance.

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INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE

REQUIRED BY 0MB CIRCULAR A-133

(CONTINUED)

Report on Internal Control over Compliance, Continued

A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance.

My consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal eontrol over compliance that might be material weaknesses or significant deficiencies. I did not identify any deficiencies in internal control over compliance that I eonsider to be material weaknesses. However, material weaknesses may exist that have not been identified.

The purpose of this report on internal control over eompliance is solely to describe the scope oif my testing of internal control over compliance and the results of that testing based on the requirements ̂ the Uniform Guidance. Accordingly, this report is not suitable^r^y other purpo^.

VGR, CPA "*77 New Orleans, Louisiana

June 7,2016

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SCHEDULE OF FINDINGS AND QUESTIONED COSTS

PRIORITY HEALTH CARE, INC. SCHEDULE OF FINDINGS AND QUESTIONED COSTS

FOR THE YEAR ENDED DECEMBER 31.2015

SCHEDULE I - Summary of the Independent Auditor's Results

1. Type of report issued on the financial statements. Unmodified opinion

2. Did the audit disclose any significant deficiencies in internal control? No

3. Did the audit disclose any material weaknesses in internal control?

4. Did the audit disclose any noncompliance which is material to the financial statements of the organization?

5. Did the audit disclose any significant deficiencies in internal control over major programs? No

6. Did the audit disclose any material weaknesses in internal control over major programs?

7. Type of report issued on compliance for major programs. Unmodified

8. Did the audit disclose any audit findings which the independent auditors are required to report under OMB Circular A-133, Section 510(a)? No

9. Was a management letter issued? Yes

10. The following is an identification of major programs:

CFDA or Name of Contract Number Federal Program

93.914 HIV Emergency Relief Project Grants

11. The dollar threshold used to distinguish between Type A and Type B Programs, as described in OMB Circular A-133, Section 520(b) was S300.000.

12. Did the auditee qualify as a low risk auditee under OMB Circular A-133, Section 530? No

25

PRIORITY HEALTH CARE, INC. SCHEDULE OF FINDINGS AND QUESTIONED COSTS

FOR THE YEAR ENDED DECEMBER 31, 2015, CONTINUED

None noted.

None noted.

SCHEDULE H - Financial Statement Findings

SCHEDULE HI - Federal Awards Findings

26

SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COST

PRIORITY HEALTH CARE^ A UNIVERSAL APPROACH TO CARE

Priority Health Care 4700 Wichers Drive, Suite 300

Marrero, LA 70072 Office: 504.309.6057* Fax: 504.309.6084

PRIORITY HEALTH CARE, INC.

Re: Response to Auditor's Comments

CURRENT YEAR MANAGEMENT LETTER COMMENTS

2015-01 Inputting invoices

Condition

During my audit I noted that invoices are dated at the time of receipt and not at the date of service or date of the invoice. As such PHC is duplicating effort by inputting invoices and in-tum creating accruals at year end.

Recommendation

I recommend that management create bills in the accounting system dated the date of the invoice.

POLICY

1. Priority Health Care (PHC) shall distribute four (4) types of payments:

a. Checks to vendors

b. Checks to employees

c. Petty cash d. Debit/Credit ACH

2. This policy shall address payment disbursements to vendors.

3. PHC provides payments for goods and services received on a 30-day basis. Departure from this guideline will be approved by the Senior Accountant or CHIEF EXECUTIVE OFFICER.

4. Vendor invoices will be entered utilizing the dates listed on the invoice. 5. Vendor payments will distributed within the four (4) types of payments listed above for

all payments that fall outside of the scope of the petty cash and credit card charges policies.

6. No payments shall be processed without adequate supporting documentation including but not limited to:

a. A vendor invoice detailing services or goods indicating amount due.

b. A completed purchase order or check request, indicating the amount to be paid, general ledger account to be charged and proper authorization from the department head, based on budgetary responsibility.

c. Other supporting documentation, such as receiving document, where appropriate.

6. In those cases, where a vendor invoice is unavailable (such as a registration to a training seminar), a copy of the brochure or enrollment form detailing the nature of the purchase and the amount due will serve as supporting documentation.

7. PHC processes checks to vendors on a bi-weekly basis opposite of payroll weeks unless there is an unusual circumstance requiring an interim check run.

8. The CHIEF EXECUTIVE OFFICER, CHIEF FINANCIAL OFFICER or other designee reviews checks and supporting documentation prior to payment, initialing their approval.

9. All vendor checks shall be delivered via U.S. Mail, unless specifically indicated otherwise.

10. Checks require two signatures. 11. The following officers of PHC are authorized to sign checks:

a. CHIEF EXECUTIVE OFFICER b. Board of Directors President

12. Signing of blank checks is prohibited. 13. Checks that are not negotiated shall:

a. Have the word "VOID" prominently written in ink on the face of the check.

ACCOUNTS PAYABLE PROCESSING

14. Stop-payment shall be issued, and a second check re-issued, when a check: a. Does not reach vendor destination within fourteen (14) business days of

mailing, or b. Is determined to be faulty in some other fashion.

15. Blank checks shall be physically protected under lock and key at all times. 16. Accounts payable files shall be maintained alphabetically by vendor. 17. Vendors shall be instructed to forward all invoices for payment to "Accounts Payable". 1 R PniH invnir.PS and r.liprk dnfMimpntatinn ars maintained in the Vender Paid files

PROCEDURE

1. Senior Accountant attaches any and all applicable supporting documentation. And assures that departmental approval is made.

2. Senior Accountant or CHIEF FINANCIAL OFFICER codes the purchase order with appropriate general ledger account number.

3. Checks are cut for all processed invoices, according to terms. 4. Checks are sent for appropriate signatures. 5. Checks are distributed via U.S. Mail, unless otherwise indicated. 6. Accounts payable files are updated as detailed above.

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Condition

During my audit I noted that PHC does not have a policy relative to setting up an allowance for doubtful accounts for its receivables. As such there is not a uniform time specified as to when receivables are to be written off.

Recommendation

1 recommend that management create and implement a standard policy to allow for the writing off of bad debts.

POLICY

1. PHC shall establish and maintain a fee schedule that details all charges for PROCEDURE performed, following PROCEDURE outlined in Fee Determination Policy.

2. All services performed for any patient shall be documented on a PHC encounter form, or special entry form as needed.

3. Services are offered at a discounted rate to individuals who qualify following PROCEDURE outlined in Discounted Services Policy. Adjustments discounting the fee shall be made following PROCEDURE outlined in Adjustments to Fees Policy.

4. PHC shall file claims on behalf of insured patients following PROCEDURE outlined in Claims Processing Policy. Adjustments required by contractual arrangements shall be made following PROCEDURE outlined in Adjustment to Fees Policy.

5. Services not covered under contractual arrangement or insurance shall be the responsibility of the insured.

6. Patient account balances shall be monitored on a periodic basis. Three (3) attempts will be made by mail to collect delinquent accounts. After the 3"^^ attempt accounts balances deemed not to be collectible shall be written off if over 1-year-old.

PROCEDURE

1. To date, the Center is approved to implement Bad Debt Write-offs of balances which were attempted to be collected, but were uncollectible by the Center. The Center may implement bad debt write off of balances: • On patient accounts which qualify for a sliding fee discount after 365 days of no

collection. • On Medicaid and Medicare accounts after 365 days from the date of service, and once

all appeals have been exhausted. • On commercial private insurance accoimts and patient accounts which are 100% ftill

pay. The patient accounting system sends a "final letter" to the guarantor at the 90"^ day for all Self-Pay accounts and payment plans that have had no payment in 90 days. If no payment or contact is made, the account processes to bad debt at aooroximatelv 120 total davs. After 120 davs from the date of service.

2. The Center may utilize inside staff members or an outside soft collections company if it is proven that there is a positive financial benefit to doing such.

BAD DEBT MANAGEMENT

3. Bad Debt Write-offs are also removed as balances from the Accounts Receivables balance in the financial statements.

4. Sliding Fee Scale Adjustments are removed from A/R balances immediately.

Selina Senegal CFO