Hi Sally,
Thank you for this information.
According to your XML output Assessment scan correctly detected that install_flash_player_12_active_x120038.msi is installed and applicable on affected client.
So it looks like detection is working correctly. Probably information about Installed/applicable updates have not been received by NS correctly.
Could you please try to execute Windows System assessment scan task on affected client from NS console and then check compliance reports?
In case if update is still not shown as installed in report, please execute "AexPatchAssessment.exe -out test.xml" on affected client.
Then open created text.xml and find all strings containing QAF120038.
Could you please also check version of AexPatchAssessment.exe on affected client - is it 7.5.2000.39?
Please write here your findings.
Thank you,
Roman