Audit 296116

Program: AL 93.558 – Temporary Assistance for Needy Families; AL 93.563 – Child Support Enforcement; AL 93.568 – Low Income Home Energy Assistance (LIHEAP); AL 93.575 – Child Care and Development Block Grant; AL 93.658 – Foster Care Title IV-E; AL 93.778 – Medical Assistance Program; AL 10.561 – State Administrative Matching Grants for the Supplemental Nutrition Assistance Program – Allowable Costs/Cost Principles Grant Number & Year: 2001NETANF, FFY 2020; 2301NECSES, FFY 2023; 2301NELIEA, FFY 2023; 2301NECCDD, FFY 2023; 2301NEFOST, FFY 2023; 2305NE5ADM, FFY 2023; 233NE406S2514, FFY 2023 Federal Grantor Agency: U.S. Department of Health and Human Services and U.S. Department of Agriculture Criteria: 45 CFR § 75.405(a) (October 1, 2022) and 2 CFR § 200.405 (January 1, 2023) state, in part, the following: A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. 45 CFR § 75.403 (October 1, 2022) and 2 CFR § 200.403 (January 1, 2023) provide the following, in relevant part: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. * * * * (g) Be adequately documented. See also §§ 75.300 through 75.309. Per 45 CFR § 75.303 (October 1, 2022) and 2 CFR § 200.303 (January 1, 2023), The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Title 45 CFR § 75.302 (October 1, 2022) and 2 CFR § 200.302 (January 1, 2023) require financial management systems of the State sufficient to permit preparation of required reports and permit the tracing of funds to expenditures adequate to establish the use of these funds were in accordance with applicable regulations. EnterpriseOne is the official accounting system for the State of Nebraska, and all expenditures are generated from it. Good internal control requires procedures to ensure that amounts charged to Federal funds are proper. Condition: Procedures to ensure journal entries and adjustments to the Public Assistance Cost Allocation Plan (PACAP) were not adequate, resulting in multiple Federal programs being overcharged. Repeat Finding: No Questioned Costs: $581,496 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: Each quarter, as the PACAP is prepared, the Agency makes multiple adjustments for costs that either were charged to Federal funds and should not have been, or costs that were not charged to Federal funds but are claimable to a Federal grant. We tested five adjustments between two quarters. One adjustment tested for the quarter ended December 31, 2022, was recorded to charge the Foster Care grant for allowable costs incurred by the Foster Care Review Office (FCRO), a separate agency. The amounts provided by FCRO erroneously included payroll charges from a previous quarter, inflating the amount charged. The FCRO later caught the mistake and adjusted the internal spreadsheet but did not alert the Agency to the error, so a correcting adjustment was never made to the PACAP. The amount charged was $353,984; however, the adjustment should have been $212,725, a difference of $141,259. Foster Care is matched at 50%, so the grant was overcharged $70,629, which are questioned costs. Due to this error, we reviewed a second Foster Care adjustment for the quarter ending March 31, 2023, and noted the Agency’s calculation included amounts for a State funded program that should have been removed, resulting in the grant being overcharged an additional $1,561. We also tested six journal entries that moved costs between cost centers to determine any impact on the PACAP and if those journal entries were appropriate. We noted three improper journal entries that the Agency had not corrected as of the end of the fiscal year: • A journal entry for $526,487 was performed in November 2022 to temporarily move postage costs of multiple programs from State funds to the Child Support Enforcement (CSE) grant until new coding could be created in the State’s accounting system to track expenses from one fiscal year to another. The intent was to reverse the entry as soon as the new coding was completed; however, the reversing entry was never performed. Since the Agency performs a quarterly adjustment for the CSE grant to charge indirect costs identified by the Agency’s PACAP to the grant, the CSE grant was overcharged a total of $263,628. No correcting entry had been made as of September 30, 2023. These are considered questioned costs. • A journal entry for $207,369 was performed in December 2022 to move expenses to allow payroll to post. The intent was to reverse the entry before the end of the fiscal year; however, that was not done. The expenses were moved from Medicaid administration and were charged to the Central Services and Supplies Cost Center, which is then allocated to numerous other Cost Centers that are further allocated or charged directly to Federal programs such as TANF and Child Care. Due to the intricacies of PACAP allocations, exact questioned costs are unknown. No correcting entry was made as of September 30, 2023. • A journal entry for $5,317,640 was done in February 2023 to move Premium Pay to the Coronavirus State and Local Fiscal Recovery Funds (CSLFRF) grant as additional pay for certain job roles allowed under that grant. However, the entry performed included some lines that were miscoded, most significantly a line for $764,187 that was supposed to move money within the same Cost Center (CC 25C21910 – Field Office Administration); however, it pulled costs out of Cost Center 25C21780 - Protection and Safety Policy Chief instead. Additionally, we confirmed with the Agency that the costs charged to CC 25C21910 under the CSLFRF grant were also allocated to other Federal programs through the PACAP, essentially charging Federal programs twice. Due to the intricacies of the PACAP allocations, total questioned costs are unknown; however, we were able to determine that this error caused Medicaid to be overcharged $149,478, LIHEAP to be overcharged $33,447, SNAP to be overcharged $44,984, Child Care to be overcharged $10,412, and TANF to be overcharged $7,357. Cause: Inadequate procedures to ensure that adjustments to the PACAP are proper and that journal entries are appropriate for each program. Effect: Unallowable expenditures were charged to Federal funds and there is an increased risk for errors, fraud, and non-compliance with Federal regulations. Recommendation: We recommend the Agency strengthen procedures to ensure adjusting entries are complete and accurate. We further recommend the Agency strengthen procedures to ensure compliance with Federal regulations. Management Response: The Agency agrees.

Program: AL 93.658 - Foster Care Title IV-E; AL 10.561 - State Administrative Matching Grants for the Supplemental Nutrition Assistance Program; AL 93.659 - Adoption Assistance – Allowable Costs/Cost Principles Grant Number & Year: 2301NEFOST, FFY 2023; 202323S251443, FFY 2023; 2301NEADPT, FFY 2023 Federal Grantor Agency: U.S. Department of Health and Human Services and U.S. Department of Agriculture Criteria: 45 CFR § 75.405(a) (October 1, 2022) and 2 CFR § 200.405 (January 1, 2023) state, in part, the following: A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. 45 CFR § 75.403 (October 1, 2022) and 2 CFR § 200.403 (January 1, 2023) provide the following, in relevant part: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. * * * * (g) Be adequately documented. See also §§ 75.300 through 75.309. Per 45 CFR § 75.303 (October 1, 2022) and 2 CFR § 200.303 (January 1, 2023), The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Per the CAP’s RMTS Time Study Design/Coding Structure: [P]articipants are asked whether they are working on an activity that is client related. If they select “Yes” to this question, they are asked to identify the Case ID and type of case . . . . Per the CAP’s RMTS Survey Validation: The contractor and the NE DHHS staff review subsample responses to ensure the activity selected matches the description provided. If the activity and description do not match, the participant is notified and the moment is considered invalid. Per the CAP’s RMTS Response Time/Non-Responses: Participants have two (2) calendar days to respond to each moment. The two (2) day response time allows workers who may spend time outside of their office location and away from email the opportunity to respond to the moment before it expires. The two (2) day period is inclusive of calendar hours and not business days . . . . Good internal control and sound accounting practices require procedures to ensure that staff know how to complete accurate random moment time studies, which are used to allocate costs to Federal programs. Condition: The Agency did not have adequate procedures to ensure payroll charges were proper. Repeat Finding: 2022-024 Questioned Costs: $55,666 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: The Random Moment Time Study (RMTS) is conducted on an ongoing basis to provide data for the allocations of direct and indirect costs to various programs. The objective is to identify employee efforts directly related to programs administered by the Agency. We tested 55 RMTS surveys and noted 18 errors resulting in questioned costs as follows: • For 10 of 15 surveys tested, the workers erroneously reported they were working on a Foster Care IV-E (Federally funded) case when the survey should have been reported as Foster Care Non IV-E; therefore, Foster Care was overcharged. o For two surveys, the cases had previously been IV-E Foster Care cases but were changed to Non IV-E cases the month prior to the surveys submitted by the Child and Family Services Specialists. o For one survey, the worker completed the survey three calendar days after the RMTS was generated and the activity described on the survey form was for the date submitted, not when the RMTS was generated. • For 7 of 19 Supplemental Nutrition Assistance Program (SNAP) surveys tested, the RMTS survey form appeared to have been completed incorrectly. o For two surveys, the workers selected SNAP; however, per the case files, the case worker appeared to be working on Low Income Home Energy Assistance (LIHEAP) and not on SNAP. o For one survey, the worker stated on the survey form they were working on a case activity for SNAP; however, no case file name or identification case number was given to identify what case was being worked. o For three surveys, the workers selected the SNAP program; however, we could not confirm from the documentation on file what the worker was working on, and the questioned costs are unknown. o For one survey, the case worker selected the SNAP program; however, per the case files, the case worker appeared to be working on other programs along with SNAP at the time of the survey. • For one of seven Adoption IV-E surveys tested, the worker erroneously reported that they were working on an Adoption IV-E case when the survey should have been reported as Foster Care IV-E; therefore, Adoption IV-E was overcharged. Total known Federal payment errors, amount tested, error rate (amount of errors/amount tested), total dollars charged via RMTS, and potential dollars at risk (dollar rate multiplied by the population total dollars charged) are summarized below by program: See Schedule of Findings and Questioned Costs for chart/table. Cause: The Agency’s training of staff and supervisor reviews of RMTS surveys were not sufficient to ensure the surveys were accurately completed. Effect: Random moment sampling is based on the laws of probability, which state, in essence, that there is a high probability that a relatively small number of random surveys will yield an accurate depiction of the overall characteristics of the population for which the sample was taken. If RMTS surveys are not accurate, there is an increased risk costs will be allocated incorrectly between programs. Recommendation: We recommend the Agency improve procedures to ensure that random moment surveys are accurate and adequately reviewed. Management Response: The Agency agrees.

Program: AL 10.553 – School Breakfast Program; AL 10.555 – National School Lunch Program; AL 10.556 – Special Milk Program for Children; AL 10.559 – Summer Food Service Program for Children; and AL 10.582 – Fresh Fruit and Vegetable Program – Reporting Grant Number & Year: Various, including 233NE308N1199, FFY 2023; and 233NE377L1603, FFY 2023 Federal Grantor Agency: U.S. Department of Agriculture Criteria: 2 CFR § 170, Appendix A I. (January 1, 2023) states, in part, the following: a. Reporting of first-tier subawards. Applicability. Unless you are exempt as provided in paragraph d. of this award term, you must report each action that equals or exceeds $30,000 in Federal funds for a subaward to a non-Federal entity or Federal agency . . . . 2. Where and when to report. i. The non-Federal entity or Federal agency must report each obligating action described in paragraph a.1. of this award term to http://www.fsrs.gov. ii. For subaward information, report no later than the end of the month following the month in which the obligation was made. Good internal control requires procedures to ensure all required reports are submitted on time. Condition: Federal Funding Accountability and Transparency Act (FFATA) reporting for the Child Nutrition programs has not been completed since December 2020. Repeat Finding: No Questioned Costs: None Statistical Sample: No Context: For fiscal year ended June 30, 2023, the Agency paid subrecipients from the Child Nutrition programs $148,896,593. As explained to the APA, however, the Agency has been unable to submit the required FFATA reporting since December 2020. The Agency had submitted a ticket to the U.S. General Service Administration’s Federal Service Desk (FSD) and reached out to other state agencies for assistance but has been unable to resolve the issue. Cause: The Agency has attempted to complete FFATA submissions but has been unable to do so. It is unknown why the submissions are unsuccessful. Effect: Without adequate procedures to ensure that FFATA reports are submitted in a timely manner, there is an increased risk of the State not being in compliance with Federal regulations. Recommendation: We recommend the Agency continue to reach out to the FSD to resolve this issue and complete FFATA reporting as soon as possible. Management Response: The NDE disagrees with this audit finding for the following reasons: NDE Nutrition Services has made several attempts to resolve the FFATA reporting issue in the FSRS by contacting the FSRS help desk dating back to August 2021. These attempts have not produced a resolution; instead, the unresolved ticket has been closed by FSRS staff and has been requested to be re-opened by NDE Nutrition Services staff. The NDE has also made contact with the Branch Chief of the MPRO Grants Management team to request support to resolve the reporting issue. This did not help resolve the issue. APA Response: The Agency is responsible for completing the required FFATA reporting. Regardless of the reasons for failing to do so, the fact remains that no such reporting has occurred since December 2020.

Program: AL 10.553 – School Breakfast Program; AL 10.555 – National School Lunch Program; AL 10.556 – Special Milk Program for Children; AL 10.559 – Summer Food Service Program for Children; and AL 10.582 – Fresh Fruit and Vegetable Program – Reporting Grant Number & Year: Various, including 233NE308N1199, FFY 2023; and 233NE377L1603, FFY 2023 Federal Grantor Agency: U.S. Department of Agriculture Criteria: 2 CFR § 170, Appendix A I. (January 1, 2023) states, in part, the following: a. Reporting of first-tier subawards. Applicability. Unless you are exempt as provided in paragraph d. of this award term, you must report each action that equals or exceeds $30,000 in Federal funds for a subaward to a non-Federal entity or Federal agency . . . . 2. Where and when to report. i. The non-Federal entity or Federal agency must report each obligating action described in paragraph a.1. of this award term to http://www.fsrs.gov. ii. For subaward information, report no later than the end of the month following the month in which the obligation was made. Good internal control requires procedures to ensure all required reports are submitted on time. Condition: Federal Funding Accountability and Transparency Act (FFATA) reporting for the Child Nutrition programs has not been completed since December 2020. Repeat Finding: No Questioned Costs: None Statistical Sample: No Context: For fiscal year ended June 30, 2023, the Agency paid subrecipients from the Child Nutrition programs $148,896,593. As explained to the APA, however, the Agency has been unable to submit the required FFATA reporting since December 2020. The Agency had submitted a ticket to the U.S. General Service Administration’s Federal Service Desk (FSD) and reached out to other state agencies for assistance but has been unable to resolve the issue. Cause: The Agency has attempted to complete FFATA submissions but has been unable to do so. It is unknown why the submissions are unsuccessful. Effect: Without adequate procedures to ensure that FFATA reports are submitted in a timely manner, there is an increased risk of the State not being in compliance with Federal regulations. Recommendation: We recommend the Agency continue to reach out to the FSD to resolve this issue and complete FFATA reporting as soon as possible. Management Response: The NDE disagrees with this audit finding for the following reasons: NDE Nutrition Services has made several attempts to resolve the FFATA reporting issue in the FSRS by contacting the FSRS help desk dating back to August 2021. These attempts have not produced a resolution; instead, the unresolved ticket has been closed by FSRS staff and has been requested to be re-opened by NDE Nutrition Services staff. The NDE has also made contact with the Branch Chief of the MPRO Grants Management team to request support to resolve the reporting issue. This did not help resolve the issue. APA Response: The Agency is responsible for completing the required FFATA reporting. Regardless of the reasons for failing to do so, the fact remains that no such reporting has occurred since December 2020.

Program: AL 10.555 – National School Lunch Program – Allowability Grant Number & Year: 233NE308N1199, FFY 2023 Federal Grantor Agency: U.S. Department of Agriculture Criteria: 7 CFR § 210.18(f) (January 1, 2023) states, in relevant part, the following: During the course of an administrative review for the National School Lunch Program and the School Breakfast Program, the State agency must monitor compliance with the critical and general areas in paragraphs (g) and (h) of this section, respectively. 7 CFR § 210.18(g)(1)(ii) (January 1, 2023) provides the following, as is relevant: The State agency must gather information and conduct an on-site visit to ensure that the processes used by the school food authority and reviewed school(s) to count, record, consolidate, and report the number of reimbursable meals/snacks served to eligible students by category (i.e., free, reduced price or paid meal) are in compliance with program requirements and yield correct claims. The State agency must determine whether: (A) The daily meal counts, by type, for the review period are more than the product of the number of children determined by the school/school food authority to be eligible for free, reduced price, and paid meals for the review period times an attendance factor. If the meal count, for any type, appears questionable or significantly exceeds the product of the number of eligibles, for that type, times an attendance factor, documentation showing good cause must be available for review by the State agency. * * * * (C) For each school selected for review, all meals are correctly counted, recorded, consolidated and reported for the day they are served. Good internal control requires procedures to ensure reviews of programs include a review of a claim to ensure the correct number of meals is claimed. Condition: For one of 26 school food authorities (SFA) tested, the Agency’s administrative review did not include a review of a claim to ensure the correct number of meals was claimed by the SFA for each category (free, reduced, paid). Repeat Finding: No Questioned Costs: $1,061 known Statistical Sample: No Context: The Agency relies on administrative reviews completed for each SFA to ensure that the SFAs are claiming the correct number of meals. For one SFA tested, the administrative review completed for school year 2022-2023 did not include a review of a claim to ensure that the correct number of meals was claimed by the SFA. After the APA’s inquiry into the matter, the Agency reviewed a claim for February 2023 and noted an overpayment of $1,061. The Agency subsequently requested that the overpayment be reimbursed. The total amount of the February 2023 claim was $11,304, and this SFA claimed $107,337 for school year 2022-2023. The APA performed an overview of the other claims for this SFA during the year, noting that the month of February 2023 was an outlier and had claimed over 70 meals per day more than any other month during the school year. Additionally, the Agency’s procedure for when an error is found on a claim is to review the prior month’s claim to determine if there is a systematic issue. However, documentation could not be provided to support that the prior month’s claim was reviewed. Cause: Inadequate review and monitoring procedures. Effect: Without adequate review procedures, there is an increased risk of not only costs failing to comply with Federal regulations but also loss of Federal funds due to error or fraud. Recommendation: We recommend the Agency implement procedures to ensure that administrative reviews performed by the Agency include a review of meals claimed, and documentation is maintained to support that such reviews were performed. Management Response: The Administrative Review that was found to not verify a claim for reimbursement was addressed by reviewing the claim submitted for the school’s review month – February 2023. The review identified a claiming error of 1,248 Paid price meals. This information was completed in the 300 series on-site review forms in the CNP system. A follow-up review letter was also issued. The February 2023 edit check document was used to validate and correct the claim. Finally, NDE Central Accounting received a check from the SFA to cover the overclaimed amount. APA Response: The Agency did not complete its review of the February 2023 claim until after it was brought to its attention by the APA, which then resulted in the Agency seeking reimbursement for the overclaimed amount.

Program: AL 10.553 – School Breakfast Program; AL 10.555 – National School Lunch Program; AL 10.556 – Special Milk Program for Children; AL 10.559 – Summer Food Service Program for Children; and AL 10.582 – Fresh Fruit and Vegetable Program – Reporting Grant Number & Year: Various, including 233NE308N1199, FFY 2023; and 233NE377L1603, FFY 2023 Federal Grantor Agency: U.S. Department of Agriculture Criteria: 2 CFR § 170, Appendix A I. (January 1, 2023) states, in part, the following: a. Reporting of first-tier subawards. Applicability. Unless you are exempt as provided in paragraph d. of this award term, you must report each action that equals or exceeds $30,000 in Federal funds for a subaward to a non-Federal entity or Federal agency . . . . 2. Where and when to report. i. The non-Federal entity or Federal agency must report each obligating action described in paragraph a.1. of this award term to http://www.fsrs.gov. ii. For subaward information, report no later than the end of the month following the month in which the obligation was made. Good internal control requires procedures to ensure all required reports are submitted on time. Condition: Federal Funding Accountability and Transparency Act (FFATA) reporting for the Child Nutrition programs has not been completed since December 2020. Repeat Finding: No Questioned Costs: None Statistical Sample: No Context: For fiscal year ended June 30, 2023, the Agency paid subrecipients from the Child Nutrition programs $148,896,593. As explained to the APA, however, the Agency has been unable to submit the required FFATA reporting since December 2020. The Agency had submitted a ticket to the U.S. General Service Administration’s Federal Service Desk (FSD) and reached out to other state agencies for assistance but has been unable to resolve the issue. Cause: The Agency has attempted to complete FFATA submissions but has been unable to do so. It is unknown why the submissions are unsuccessful. Effect: Without adequate procedures to ensure that FFATA reports are submitted in a timely manner, there is an increased risk of the State not being in compliance with Federal regulations. Recommendation: We recommend the Agency continue to reach out to the FSD to resolve this issue and complete FFATA reporting as soon as possible. Management Response: The NDE disagrees with this audit finding for the following reasons: NDE Nutrition Services has made several attempts to resolve the FFATA reporting issue in the FSRS by contacting the FSRS help desk dating back to August 2021. These attempts have not produced a resolution; instead, the unresolved ticket has been closed by FSRS staff and has been requested to be re-opened by NDE Nutrition Services staff. The NDE has also made contact with the Branch Chief of the MPRO Grants Management team to request support to resolve the reporting issue. This did not help resolve the issue. APA Response: The Agency is responsible for completing the required FFATA reporting. Regardless of the reasons for failing to do so, the fact remains that no such reporting has occurred since December 2020.

Program: AL 10.553 – School Breakfast Program; AL 10.555 – National School Lunch Program; AL 10.556 – Special Milk Program for Children; AL 10.559 – Summer Food Service Program for Children; and AL 10.582 – Fresh Fruit and Vegetable Program – Reporting Grant Number & Year: Various, including 233NE308N1199, FFY 2023; and 233NE377L1603, FFY 2023 Federal Grantor Agency: U.S. Department of Agriculture Criteria: 2 CFR § 170, Appendix A I. (January 1, 2023) states, in part, the following: a. Reporting of first-tier subawards. Applicability. Unless you are exempt as provided in paragraph d. of this award term, you must report each action that equals or exceeds $30,000 in Federal funds for a subaward to a non-Federal entity or Federal agency . . . . 2. Where and when to report. i. The non-Federal entity or Federal agency must report each obligating action described in paragraph a.1. of this award term to http://www.fsrs.gov. ii. For subaward information, report no later than the end of the month following the month in which the obligation was made. Good internal control requires procedures to ensure all required reports are submitted on time. Condition: Federal Funding Accountability and Transparency Act (FFATA) reporting for the Child Nutrition programs has not been completed since December 2020. Repeat Finding: No Questioned Costs: None Statistical Sample: No Context: For fiscal year ended June 30, 2023, the Agency paid subrecipients from the Child Nutrition programs $148,896,593. As explained to the APA, however, the Agency has been unable to submit the required FFATA reporting since December 2020. The Agency had submitted a ticket to the U.S. General Service Administration’s Federal Service Desk (FSD) and reached out to other state agencies for assistance but has been unable to resolve the issue. Cause: The Agency has attempted to complete FFATA submissions but has been unable to do so. It is unknown why the submissions are unsuccessful. Effect: Without adequate procedures to ensure that FFATA reports are submitted in a timely manner, there is an increased risk of the State not being in compliance with Federal regulations. Recommendation: We recommend the Agency continue to reach out to the FSD to resolve this issue and complete FFATA reporting as soon as possible. Management Response: The NDE disagrees with this audit finding for the following reasons: NDE Nutrition Services has made several attempts to resolve the FFATA reporting issue in the FSRS by contacting the FSRS help desk dating back to August 2021. These attempts have not produced a resolution; instead, the unresolved ticket has been closed by FSRS staff and has been requested to be re-opened by NDE Nutrition Services staff. The NDE has also made contact with the Branch Chief of the MPRO Grants Management team to request support to resolve the reporting issue. This did not help resolve the issue. APA Response: The Agency is responsible for completing the required FFATA reporting. Regardless of the reasons for failing to do so, the fact remains that no such reporting has occurred since December 2020.

Program: AL 10.553 – School Breakfast Program; AL 10.555 – National School Lunch Program; AL 10.556 – Special Milk Program for Children; AL 10.559 – Summer Food Service Program for Children; and AL 10.582 – Fresh Fruit and Vegetable Program – Reporting Grant Number & Year: Various, including 233NE308N1199, FFY 2023; and 233NE377L1603, FFY 2023 Federal Grantor Agency: U.S. Department of Agriculture Criteria: 2 CFR § 170, Appendix A I. (January 1, 2023) states, in part, the following: a. Reporting of first-tier subawards. Applicability. Unless you are exempt as provided in paragraph d. of this award term, you must report each action that equals or exceeds $30,000 in Federal funds for a subaward to a non-Federal entity or Federal agency . . . . 2. Where and when to report. i. The non-Federal entity or Federal agency must report each obligating action described in paragraph a.1. of this award term to http://www.fsrs.gov. ii. For subaward information, report no later than the end of the month following the month in which the obligation was made. Good internal control requires procedures to ensure all required reports are submitted on time. Condition: Federal Funding Accountability and Transparency Act (FFATA) reporting for the Child Nutrition programs has not been completed since December 2020. Repeat Finding: No Questioned Costs: None Statistical Sample: No Context: For fiscal year ended June 30, 2023, the Agency paid subrecipients from the Child Nutrition programs $148,896,593. As explained to the APA, however, the Agency has been unable to submit the required FFATA reporting since December 2020. The Agency had submitted a ticket to the U.S. General Service Administration’s Federal Service Desk (FSD) and reached out to other state agencies for assistance but has been unable to resolve the issue. Cause: The Agency has attempted to complete FFATA submissions but has been unable to do so. It is unknown why the submissions are unsuccessful. Effect: Without adequate procedures to ensure that FFATA reports are submitted in a timely manner, there is an increased risk of the State not being in compliance with Federal regulations. Recommendation: We recommend the Agency continue to reach out to the FSD to resolve this issue and complete FFATA reporting as soon as possible. Management Response: The NDE disagrees with this audit finding for the following reasons: NDE Nutrition Services has made several attempts to resolve the FFATA reporting issue in the FSRS by contacting the FSRS help desk dating back to August 2021. These attempts have not produced a resolution; instead, the unresolved ticket has been closed by FSRS staff and has been requested to be re-opened by NDE Nutrition Services staff. The NDE has also made contact with the Branch Chief of the MPRO Grants Management team to request support to resolve the reporting issue. This did not help resolve the issue. APA Response: The Agency is responsible for completing the required FFATA reporting. Regardless of the reasons for failing to do so, the fact remains that no such reporting has occurred since December 2020.

Program: AL 12.401 – National Guard Military Operations and Maintenance (O&M) Projects – Cash Management & Reporting Grant Number & Year: Appendices – W91243-21-2-1001, FFY 2021; W91243-22-2-1001, FFY 2022; W91243-22-2-1002, FFY 2022; W91243-22-2-1005, FFY 2022; W91243-22-2-1007, FFY 2022; W91243-22-2-1021, FFY 2022; W91243-22-2-1023, FFY 2022; W91243-22-2-1031, FFY 2022; W91243-23-2-1001, FFY 2023; W91243-23-2-1003, FFY 2023; W91243-23-2-1005, FFY 2023; W91243-23-2-1010, FFY 2023; W91243-23-2-1021, FFY 2023; W91243-23-2-1023, FFY 2023; W91243-23-2-1024, FFY 2023; W91243-23-2-1031, FFY 2023. Federal Grantor Agency: U.S. Department of Defense Criteria: Per 2 CFR § 1128.100 and 2 CFR § 1128.200 (January 1, 2023), the Department of Defense adopted the Uniform Administrative Requirements, Cost Principles, and Audit Requirements set forth at 2 CFR parts 200.302, 200.303, and 200.305. Per 2 CFR § 200.303 (January 1, 2023): The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Title 2 CFR § 200.302 (January 1, 2023) requires financial management systems of the State be sufficient to permit both the preparation of required reports and tracing of funds to expenditures adequate to establish that the use of these funds was in accordance with applicable regulations. EnterpriseOne is the official accounting system for the State of Nebraska, and all expenditures are generated from it. Title 2 CFR § 200.305(a) (January 1, 2023) states, in part, “For states, payments are governed by Treasury-State Cash Management Improvement Act (CMIA) agreements and default procedures codified at 31 CFR part 205 . . . .” Title 31 CFR Part 205 (July 1, 2022) implements the CMIA and requires State recipients to enter into agreements that document accepted funding techniques for Federal assistance programs. The CMIA Agreement between the State of Nebraska, Secretary of the Treasury, and U.S. Department of the Treasury, for the period July 1, 2022, through June 30, 2023, allows the program to request Federal funds in accordance with the monthly draw funding technique, which bases the amount requested on costs estimated to be incurred in the next month. Master Cooperative Agreement (October 2022), Article V – Payment, Section 503, Payment by Advance Method, states, “The advance payment method shall be according to procedures established in current NGB-AQ policy, NGR 5-1 Chapter 11 or successor CNGB I & M, and 2 CFR §200.305.” National Guard Policy (NG Policy) 5-1, National Guard Grants and Cooperative Agreements, Section 11-5, Advance Payment Method, Section (5), states, in part, “[T]he grantee agrees to minimize the time elapsing between the transfer of funds from the U.S. Treasury and their disbursement by the State. (no more than 45 days).” GCAPL 20-02 AQ-A Policy (February 4, 2020) turned NGR 5-1 into NG Policy 5-1. It generally maintained the principles and operational aspects of NGR 5-1, except as provisions of the document were adjusted in the AQ-A Policy. The AQ-A Policy did not make any changes to the 45-day requirement found in NGR 5-1. Instructions for OMB Standard Form 270 (REV. 1/2016) include the following for line 11a, “Enter program outlays to date (net of refunds, rebates, and discounts), in the appropriate columns. For requests prepared on a cash basis, outlays are the sum of actual cash disbursements for goods and services, the amount of indirect expenses charged, the value of in- kind contributions applied, and the amount of cash advances and payments made to subcontractors and subrecipients.” Title 2 CFR § 200.511(b) (January 1, 2023) states in relevant part, the following: The summary schedule of prior audit findings must report the status of all audit findings included in the prior audit’s schedule of findings and questioned costs. . . . * * * * (2) When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding's recurrence and planned corrective action, and any partial corrective action taken. When corrective action taken is significantly different from corrective action previously reported in a corrective action plan or in the Federal agency's or pass-through entity's management decision, the summary schedule must provide an explanation. A good internal control plan would include procedures to ensure that the times between the drawdown of Federal funds and the disbursements thereof are minimized and in compliance with State of Nebraska CMIA Agreement and National Guard Regulations. Condition: The Agency was not in compliance with the Federal cash management requirements during the fiscal year and did not properly report program outlays on the OMB Standard Form (SF) 270. A similar finding was noted in the prior audit. Repeat Finding: 2022-050 Questioned Costs: None Statistical Sample: No Context: We tested 25 drawdowns of Federal funds to support the Agency’s operations and noted the following: • Eleven drawdowns were not in compliance with NG Policy 5-1. The draws were expended from 48 to 166 days after the drawdown of Federal funds. The table below provides a summary of the 11 draws: See Schedule of Findings and Questioned Costs for chart/table. • In addition, five draws were not in compliance with CMIA Agreement requirements. Advance amounts were requested based on estimated costs to be incurred during the month covered by the requests. To determine the reasonableness of the estimates, the APA determined the time it took the Agency to expend amounts advanced (without consideration of any cash on hand). Five draws were expended between 48 and 111 days after the drawdown of Federal funds. • For 23 of 25 SF-270’s tested, the Agency did not properly report total program outlays on the OMB SF-270 report. The Agency reported the total drawdowns for the program to date, rather than actual cash disbursements, as total program outlays. The variance between what was reported and what should have been reported ranged from an underreporting of $45,247 to an overreporting of $1,143,496, with a net total overreporting of expenditures by $5,104,828 for the 25 reports tested. A similar finding was noted during the previous audit. In the Summary Schedule of Prior Audit Findings, the Agency stated the following as a reason for the recurrence: The requirement per the CMIA Agreement which requires the program to request Federal funds in accordance with the pre-issuance funding technique and that such funds are to be requested and deposited in a state account not more than three business days prior to disbursement of funds is not a reasonable standard for the National Guard Military Operations and Maintenance Program. The Agency stated further that it will seek a modification to the CMIA Agreement. However, under the State’s fiscal year 2022 and 2023 CMIA Agreements, the program is no longer required to follow the pre-issuance funding technique and instead follows the monthly draw funding technique. Thus, the Summary Schedule of Prior Audit Findings is not accurate. Cause: Inadequate procedures for estimating cash needs for the upcoming month. Regarding SF-270 reporting, the Agency stated that it did not plan to implement corrective action until State fiscal year 2024. Effect: The Agency is not in compliance with Federal cash management and reporting requirements, which could result in sanctions. Additionally, there is an increased risk for the loss of Federal funding. Recommendation: We recommend the Agency ensure the amount of time between the Federal draw and the disbursement of funds by the State is minimized and in compliance with the State of Nebraska CMIA Agreement and National Guard requirements. We also recommend the Agency report total program outlays in compliance with Federal requirements. Management Response: The Agency agrees with the finding. The drawdown timeline is a partial result of the variances in federal reimbursement functionalities and advance state requirement functionalities. The State Services Support Division has simultaneously been prioritizing workloads due to staffing shortages persistent through the first quarter end of fiscal year 2023-2024.

Program: Various, including AL 84.027 – Special Education Grants to States; AL 84.173 – COVID-19 Special Education Preschool Grants; AL 84.425D – COVID-19 Education Stabilization Fund – Elementary and Secondary School Emergency Relief Fund (ESSER I and ESSER II); AL 84.425U – COVID-19 Education Stabilization Fund – American Rescue Plan – Elementary and Secondary School Emergency Relief Fund (ARP ESSER) – Subrecipient Monitoring Grant Number & Year: Various, including H027A210079, FFY 2022; H173X210077, FFY 2022; S425D200048, grant period ending 9/30/2022; S425D210048, grant period ending 9/30/2023; S425U210048, grant period ending 9/30/2024. Federal Grantor Agency: U.S. Department of Education Criteria: Per 2 CFR § 3474.1 (January 1, 2023), the U.S. Department of Education adopted the OMB Uniform Guidance in 2 CFR part 200, except for 2 CFR § 200.102(a) and 200.207(a). Per 2 CFR § 200.403 (January 1, 2023), allowable costs must be necessary, reasonable, and adequately documented. 2 CFR § 200.332 (January 1, 2023) states, in relevant part, the following: All pass-through entities must: * * * * (d) Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. * * * * (2) Following-up and ensuring that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the Federal award provided to the subrecipient from the pass-through entity detected through audits, on-site reviews, and written confirmation from the subrecipient, highlighting the status of actions planned or taken to address Single Audit findings related to the particular subaward. (3) Issuing a management decision for applicable audit findings pertaining only to the Federal award provided to the subrecipient from the pass-through entity as required by § 200.521. (4) The pass-through entity is responsible for resolving audit findings specifically related to the subaward[.] * * * * (f) Verify that every subrecipient is audited as required by Subpart F of this part when it is expected that the subrecipient's Federal awards expended during the respective fiscal year equaled or exceeded the threshold set forth in § 200.501. 2 CFR § 200.521 (January 1, 2023) states, in relevant part, the following: (c) Pass-through entity. As provided in § 200.332(d), the pass-through entity must be responsible for issuing a management decision for audit findings that relate to Federal awards it makes to subrecipients. (d) Time requirements. The Federal awarding agency or pass-through entity responsible for issuing a management decision must do so within six months of acceptance of the audit report by the FAC. Good internal control requires procedures to ensure that subrecipients are using grant funds for allowable purposes. Good internal control also requires procedures to ensure that subrecipient Single Audit reports are being reviewed, and management decision letters are being issued in a timely manner to ensure that corrective action is being implemented. Condition: For 3 of 27 subrecipients tested that received Federal funds from the Special Education Cluster, the Agency did not perform adequate subrecipient monitoring to ensure that funds were used for allowable purposes. For seven subrecipients tested that received Federal funds from the Education Stabilization Fund and/or Special Education Cluster, the Agency did not issue a management decision letter within the time requirement for five subrecipients and did not issue a management decision letter for two subrecipients. The Agency also failed to track and review the Single Audit report for one subrecipient. Repeat Finding: No Questioned Costs: Unknown Statistical Sample: No Context: The Agency performs various subrecipient monitoring activities during the year to ensure that subrecipients are using funds for an allowable purpose. These activities include reviewing a sample of expenditures from all reimbursement requests, tracking subrecipient audit requirements and reviewing Single Audit reports, and performing fiscal monitoring on a three-year basis. During review of reimbursement requests, the Agency does not perform procedures to ensure that salary and benefits allocated to the Special Education (SPED) grants are adequately supported by underlying documentation for a majority of its subrecipients. Rather the Agency relies on the fiscal monitoring to test that payroll is being properly allocated to grants, and the subrecipients have procedures in place to comply with Uniform Guidance Requirements. During testing of 27 subrecipients that received SPED grants, we noted the following for three subrecipients: • For the first subrecipient, the Agency had never completed a fiscal monitoring review. The Agency indicated that it was currently conducting fiscal monitoring of the school, but the subrecipient had been slow to provide documentation, resulting in delays. • The second subrecipient also did not have a fiscal monitoring review. At the time of the reimbursement, moreover, the Agency did not review any underlying documentation to support the costs allocated to the grant. The Agency stated that it relied on the entity’s annual audit to ensure costs were allocated properly; however, the subrecipient had not had a recent Single Audit in which the Special Education Cluster was a major program. • The third subrecipient had a fiscal monitoring review of payroll costs, but there was no documentation to show that the Agency had reviewed other purchased services at the time of reimbursement or during the fiscal monitoring. During review of the Agency’s procedures for reviewing subrecipient Single Audits, we noted the following: • For two subrecipients tested, their Single Audits noted significant deficiencies and material weaknesses, including one instance of questioned costs totaling $105,273; however, the Agency did not issue a management decision letter on the findings or provide documentation of any follow-up performed. • For five subrecipients tested, the management decision letter was issued eight to nine months after the audit was made available on the Federal Audit Clearinghouse (FAC). • One subrecipient was not being tracked by the Agency. This subrecipient had received $939,358 in Federal funds from the Agency. After the APA pointed this out, the Agency obtained a copy of the subrecipient’s Single Audit report, which noted no findings. Cause: Inadequate subrecipient monitoring procedures. The Agency stated it had other priorities during the year that delayed its review of the subrecipients’ Single Audit reports. Effect: Without adequate procedures, there is increased risk of noncompliance with Federal regulations, audit findings of subrecipients not being corrected, and an increased risk of loss or misuse of funds. Recommendation: We recommend the Agency review its procedures for reimbursements and fiscal monitoring to ensure subrecipients are operating in compliance with Federal requirements. We also recommend the Agency improve procedures to ensure that all subrecipients are being tracked for Single Audit requirements, and management decisions are issued in response to all findings in a timely manner. Management Response: First SPED subrecipient – The first recipient’s fiscal monitoring review is part of the current annual group of recipients being monitored; set to close June 30, 2024. Second SPED subrecipient – As part of the FY2020 federal Single Audit testing conducted by KPMG, determined the after-the-fact verification as a method to certify that the payment received on a project is reasonable in relation to the amount of work performed. Third SPED subrecipient – Purchased services and supplies were reviewed during fiscal monitoring, but the documentation was in paper form, not electronic, and was not initially provided to the auditors when requested. It was provided on March 4, 2024, when located. Single Audits – Due to extensive time commitment to State audit facilitation and Education Stabilization Fund Annual Performance Reporting, some management decision letters were not issued or were issued late. The NDE staff member performing the annual audit reviews was not aware of an additional subrecipient that needed reviewed. APA Response: The Special Education Cluster was not a major program for the second subrecipient in FY2020. For the third subrecipient, we originally requested the Agency’s fiscal monitoring documentation on December 21, 2023. Neb. Rev. Stat. § 84-305(2) (Cum. Supp. 2022) requires compliance with such a request to occur within “three business days after actual receipt of the request.” The only exceptions to that three-day response requirement are if there is “a legal basis for refusal to comply with the request” or “the entire request cannot with reasonable good faith efforts be fulfilled within three business days after actual receipt of the request due to the significant difficulty or the extensiveness of the request.” In either instance, § 84-305(2) requires the recipient of the request to take specific action in claiming the exception. The Agency failed to do so, clearly violating § 84-305(2). In no case not involving a legal basis for noncompliance, moreover, may the required compliance “exceed three calendar weeks after actual receipt of such request by any public entity.” Nevertheless, the additional documentation was not provided until over 11 weeks after being requested, which is another clear violation of § 84-305(2).

Program: Various, including AL 84.027 – Special Education Grants to States; AL 84.173 – COVID-19 Special Education Preschool Grants; AL 84.425D – COVID-19 Education Stabilization Fund – Elementary and Secondary School Emergency Relief Fund (ESSER I and ESSER II); AL 84.425U – COVID-19 Education Stabilization Fund – American Rescue Plan – Elementary and Secondary School Emergency Relief Fund (ARP ESSER) – Subrecipient Monitoring Grant Number & Year: Various, including H027A210079, FFY 2022; H173X210077, FFY 2022; S425D200048, grant period ending 9/30/2022; S425D210048, grant period ending 9/30/2023; S425U210048, grant period ending 9/30/2024. Federal Grantor Agency: U.S. Department of Education Criteria: Per 2 CFR § 3474.1 (January 1, 2023), the U.S. Department of Education adopted the OMB Uniform Guidance in 2 CFR part 200, except for 2 CFR § 200.102(a) and 200.207(a). Per 2 CFR § 200.403 (January 1, 2023), allowable costs must be necessary, reasonable, and adequately documented. 2 CFR § 200.332 (January 1, 2023) states, in relevant part, the following: All pass-through entities must: * * * * (d) Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. * * * * (2) Following-up and ensuring that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the Federal award provided to the subrecipient from the pass-through entity detected through audits, on-site reviews, and written confirmation from the subrecipient, highlighting the status of actions planned or taken to address Single Audit findings related to the particular subaward. (3) Issuing a management decision for applicable audit findings pertaining only to the Federal award provided to the subrecipient from the pass-through entity as required by § 200.521. (4) The pass-through entity is responsible for resolving audit findings specifically related to the subaward[.] * * * * (f) Verify that every subrecipient is audited as required by Subpart F of this part when it is expected that the subrecipient's Federal awards expended during the respective fiscal year equaled or exceeded the threshold set forth in § 200.501. 2 CFR § 200.521 (January 1, 2023) states, in relevant part, the following: (c) Pass-through entity. As provided in § 200.332(d), the pass-through entity must be responsible for issuing a management decision for audit findings that relate to Federal awards it makes to subrecipients. (d) Time requirements. The Federal awarding agency or pass-through entity responsible for issuing a management decision must do so within six months of acceptance of the audit report by the FAC. Good internal control requires procedures to ensure that subrecipients are using grant funds for allowable purposes. Good internal control also requires procedures to ensure that subrecipient Single Audit reports are being reviewed, and management decision letters are being issued in a timely manner to ensure that corrective action is being implemented. Condition: For 3 of 27 subrecipients tested that received Federal funds from the Special Education Cluster, the Agency did not perform adequate subrecipient monitoring to ensure that funds were used for allowable purposes. For seven subrecipients tested that received Federal funds from the Education Stabilization Fund and/or Special Education Cluster, the Agency did not issue a management decision letter within the time requirement for five subrecipients and did not issue a management decision letter for two subrecipients. The Agency also failed to track and review the Single Audit report for one subrecipient. Repeat Finding: No Questioned Costs: Unknown Statistical Sample: No Context: The Agency performs various subrecipient monitoring activities during the year to ensure that subrecipients are using funds for an allowable purpose. These activities include reviewing a sample of expenditures from all reimbursement requests, tracking subrecipient audit requirements and reviewing Single Audit reports, and performing fiscal monitoring on a three-year basis. During review of reimbursement requests, the Agency does not perform procedures to ensure that salary and benefits allocated to the Special Education (SPED) grants are adequately supported by underlying documentation for a majority of its subrecipients. Rather the Agency relies on the fiscal monitoring to test that payroll is being properly allocated to grants, and the subrecipients have procedures in place to comply with Uniform Guidance Requirements. During testing of 27 subrecipients that received SPED grants, we noted the following for three subrecipients: • For the first subrecipient, the Agency had never completed a fiscal monitoring review. The Agency indicated that it was currently conducting fiscal monitoring of the school, but the subrecipient had been slow to provide documentation, resulting in delays. • The second subrecipient also did not have a fiscal monitoring review. At the time of the reimbursement, moreover, the Agency did not review any underlying documentation to support the costs allocated to the grant. The Agency stated that it relied on the entity’s annual audit to ensure costs were allocated properly; however, the subrecipient had not had a recent Single Audit in which the Special Education Cluster was a major program. • The third subrecipient had a fiscal monitoring review of payroll costs, but there was no documentation to show that the Agency had reviewed other purchased services at the time of reimbursement or during the fiscal monitoring. During review of the Agency’s procedures for reviewing subrecipient Single Audits, we noted the following: • For two subrecipients tested, their Single Audits noted significant deficiencies and material weaknesses, including one instance of questioned costs totaling $105,273; however, the Agency did not issue a management decision letter on the findings or provide documentation of any follow-up performed. • For five subrecipients tested, the management decision letter was issued eight to nine months after the audit was made available on the Federal Audit Clearinghouse (FAC). • One subrecipient was not being tracked by the Agency. This subrecipient had received $939,358 in Federal funds from the Agency. After the APA pointed this out, the Agency obtained a copy of the subrecipient’s Single Audit report, which noted no findings. Cause: Inadequate subrecipient monitoring procedures. The Agency stated it had other priorities during the year that delayed its review of the subrecipients’ Single Audit reports. Effect: Without adequate procedures, there is increased risk of noncompliance with Federal regulations, audit findings of subrecipients not being corrected, and an increased risk of loss or misuse of funds. Recommendation: We recommend the Agency review its procedures for reimbursements and fiscal monitoring to ensure subrecipients are operating in compliance with Federal requirements. We also recommend the Agency improve procedures to ensure that all subrecipients are being tracked for Single Audit requirements, and management decisions are issued in response to all findings in a timely manner. Management Response: First SPED subrecipient – The first recipient’s fiscal monitoring review is part of the current annual group of recipients being monitored; set to close June 30, 2024. Second SPED subrecipient – As part of the FY2020 federal Single Audit testing conducted by KPMG, determined the after-the-fact verification as a method to certify that the payment received on a project is reasonable in relation to the amount of work performed. Third SPED subrecipient – Purchased services and supplies were reviewed during fiscal monitoring, but the documentation was in paper form, not electronic, and was not initially provided to the auditors when requested. It was provided on March 4, 2024, when located. Single Audits – Due to extensive time commitment to State audit facilitation and Education Stabilization Fund Annual Performance Reporting, some management decision letters were not issued or were issued late. The NDE staff member performing the annual audit reviews was not aware of an additional subrecipient that needed reviewed. APA Response: The Special Education Cluster was not a major program for the second subrecipient in FY2020. For the third subrecipient, we originally requested the Agency’s fiscal monitoring documentation on December 21, 2023. Neb. Rev. Stat. § 84-305(2) (Cum. Supp. 2022) requires compliance with such a request to occur within “three business days after actual receipt of the request.” The only exceptions to that three-day response requirement are if there is “a legal basis for refusal to comply with the request” or “the entire request cannot with reasonable good faith efforts be fulfilled within three business days after actual receipt of the request due to the significant difficulty or the extensiveness of the request.” In either instance, § 84-305(2) requires the recipient of the request to take specific action in claiming the exception. The Agency failed to do so, clearly violating § 84-305(2). In no case not involving a legal basis for noncompliance, moreover, may the required compliance “exceed three calendar weeks after actual receipt of such request by any public entity.” Nevertheless, the additional documentation was not provided until over 11 weeks after being requested, which is another clear violation of § 84-305(2).

Program: AL 84.287 – Twenty-First Century Community Learning Centers – Subrecipient Monitoring Grant Number & Year: S287C210027, FFY 2022 Federal Grantor Agency: U.S. Department of Education Criteria: Per 2 CFR § 3474.1 (January 1, 2023), the U.S. Department of Education adopted the OMB Uniform Guidance in 2 CFR part 200, except for 2 CFR § 200.102(a) and 200.207(a). 2 CFR § 200.332 (January 1, 2023) states, in relevant part, the following: All pass-through entities must: * * * * (d) Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. 2 CFR § 200.508 (January 1, 2023) states, in relevant part, the following: The auditee must: * * * * (d) Provide the auditor with access to personnel, accounts, books, records, supporting documentation, and other information as needed for the auditor to perform the audit required by this part. Neb. Rev. Stat. § 84-305(2) (Cum. Supp. 2022) states, in relevant part, the following: Upon receipt of a written request by the Auditor of Public Accounts for access to any information or records, the public entity shall provide to the auditor as soon as is practicable and without delay, but not more than three business days after actual receipt of the request, either (a) the requested materials or (b)(i) if there is a legal basis for refusal to comply with the request, a written denial of the request together with the information specified in subsection (1) of this section or (ii) if the entire request cannot with reasonable good faith efforts be fulfilled within three business days after actual receipt of the request due to the significant difficulty or the extensiveness of the request, a written explanation, including the earliest practicable date for fulfilling the request, and an opportunity for the auditor to modify or prioritize the items within the request. No delay due to the significant difficulty or the extensiveness of any request for access to information or records shall exceed three calendar weeks after actual receipt of such request by any public entity. (Emphasis added.) A proper system of internal control includes procedures to ensure the Department’s fiscal monitoring polices are followed. Good internal control also requires procedures to ensure audit information is provided promptly in accordance with State and Federal requirements. Condition: The Agency failed to perform fiscal monitoring of one subrecipient tested for the Twenty-First Century Community Learning Centers grant. Contrary to § 84-305(2), moreover, the Agency failed to respond promptly to requests for information. Repeat Finding: No Questioned Costs: None Statistical Sample: No Context: The Agency performed a review of a reimbursement request for $183,825, where staff compared the amount claimed to the school-provided accounting records and payroll reports with employee names. The Agency’s policy then requires further fiscal monitoring on at least a three-year rotational basis for all school districts. As part of this process, a more detailed review of time and effort documentation is supposed to be completed. According to Agency staff, fiscal monitoring was scheduled for October 2022; however, school district staff stated that the timing would not work for them. The Agency began its review in December 2022, but the process had yet to be completed – more than a year later – due to a lack of responsiveness from the school district. Fiscal monitoring of the school district was last performed in fiscal year 2020. Additionally, the APA asked the Agency on January 11, 2024, for documentation to support the payroll expenses on the reimbursement request. On January 12, 2024, the Agency presented the APA with the documentation from the school district; however, this was the same documentation provided previously to the Agency at the time of reimbursement. This documentation was insufficient to support the payroll expenses questioned. On March 1, 2024, seven weeks after the APA’s request, the Agency produced the additional information to support the payroll expenses. Cause: Inadequate subrecipient monitoring procedures. Effect: Without adequate monitoring procedures, there is an increased risk for the payment of unallowable Federal expenses. Recommendation: We recommend the Agency strengthen its procedures for ensuring that fiscal monitoring is completed in accordance with the Agency’s policies. We further recommend the Agency implement procedures to ensure compliance with both 2 CFR § 200.508 and § 84-305(2). Management Response: The Grants Compliance Section is the Agency’s internal control function performing the requirements within 2 CFR 200.332, applying risk assessment to determine the annual fiscal monitoring base cadence and sequential sampling; non-probability sampling ensuring all recipients are subject to fiscal monitoring efforts in a three-year cycle at a minimum. As education subrecipients have received a significant influx of subawards to mitigate post-COVID supports for Nebraska education with limited staff capacity, the Department has remained mindful of these conditions and completed fiscal monitoring activities and issued an exit letter on September 5, 2023. APA Response: This finding was included as Comment 4 in the Annual Comprehensive Financial Report (ACFR) management letter dated December 13, 2023. The Agency responded, in part, “Fiscal monitoring of Lexington Public Schools was being performed in 2023 but was not completed as of the time of the ACFR audit.” When the Single Audit team requested the payroll documentation, the Agency did not inform the APA that monitoring was completed until March 5, 2024, which is well past the time requirements set out in § 84-305(2). Regardless, the fiscal monitoring was not completed within three years.

Program: Various, including AL 84.027 – Special Education Grants to States; AL 84.173 – COVID-19 Special Education Preschool Grants; AL 84.425D – COVID-19 Education Stabilization Fund – Elementary and Secondary School Emergency Relief Fund (ESSER I and ESSER II); AL 84.425U – COVID-19 Education Stabilization Fund – American Rescue Plan – Elementary and Secondary School Emergency Relief Fund (ARP ESSER) – Subrecipient Monitoring Grant Number & Year: Various, including H027A210079, FFY 2022; H173X210077, FFY 2022; S425D200048, grant period ending 9/30/2022; S425D210048, grant period ending 9/30/2023; S425U210048, grant period ending 9/30/2024. Federal Grantor Agency: U.S. Department of Education Criteria: Per 2 CFR § 3474.1 (January 1, 2023), the U.S. Department of Education adopted the OMB Uniform Guidance in 2 CFR part 200, except for 2 CFR § 200.102(a) and 200.207(a). Per 2 CFR § 200.403 (January 1, 2023), allowable costs must be necessary, reasonable, and adequately documented. 2 CFR § 200.332 (January 1, 2023) states, in relevant part, the following: All pass-through entities must: * * * * (d) Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. * * * * (2) Following-up and ensuring that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the Federal award provided to the subrecipient from the pass-through entity detected through audits, on-site reviews, and written confirmation from the subrecipient, highlighting the status of actions planned or taken to address Single Audit findings related to the particular subaward. (3) Issuing a management decision for applicable audit findings pertaining only to the Federal award provided to the subrecipient from the pass-through entity as required by § 200.521. (4) The pass-through entity is responsible for resolving audit findings specifically related to the subaward[.] * * * * (f) Verify that every subrecipient is audited as required by Subpart F of this part when it is expected that the subrecipient's Federal awards expended during the respective fiscal year equaled or exceeded the threshold set forth in § 200.501. 2 CFR § 200.521 (January 1, 2023) states, in relevant part, the following: (c) Pass-through entity. As provided in § 200.332(d), the pass-through entity must be responsible for issuing a management decision for audit findings that relate to Federal awards it makes to subrecipients. (d) Time requirements. The Federal awarding agency or pass-through entity responsible for issuing a management decision must do so within six months of acceptance of the audit report by the FAC. Good internal control requires procedures to ensure that subrecipients are using grant funds for allowable purposes. Good internal control also requires procedures to ensure that subrecipient Single Audit reports are being reviewed, and management decision letters are being issued in a timely manner to ensure that corrective action is being implemented. Condition: For 3 of 27 subrecipients tested that received Federal funds from the Special Education Cluster, the Agency did not perform adequate subrecipient monitoring to ensure that funds were used for allowable purposes. For seven subrecipients tested that received Federal funds from the Education Stabilization Fund and/or Special Education Cluster, the Agency did not issue a management decision letter within the time requirement for five subrecipients and did not issue a management decision letter for two subrecipients. The Agency also failed to track and review the Single Audit report for one subrecipient. Repeat Finding: No Questioned Costs: Unknown Statistical Sample: No Context: The Agency performs various subrecipient monitoring activities during the year to ensure that subrecipients are using funds for an allowable purpose. These activities include reviewing a sample of expenditures from all reimbursement requests, tracking subrecipient audit requirements and reviewing Single Audit reports, and performing fiscal monitoring on a three-year basis. During review of reimbursement requests, the Agency does not perform procedures to ensure that salary and benefits allocated to the Special Education (SPED) grants are adequately supported by underlying documentation for a majority of its subrecipients. Rather the Agency relies on the fiscal monitoring to test that payroll is being properly allocated to grants, and the subrecipients have procedures in place to comply with Uniform Guidance Requirements. During testing of 27 subrecipients that received SPED grants, we noted the following for three subrecipients: • For the first subrecipient, the Agency had never completed a fiscal monitoring review. The Agency indicated that it was currently conducting fiscal monitoring of the school, but the subrecipient had been slow to provide documentation, resulting in delays. • The second subrecipient also did not have a fiscal monitoring review. At the time of the reimbursement, moreover, the Agency did not review any underlying documentation to support the costs allocated to the grant. The Agency stated that it relied on the entity’s annual audit to ensure costs were allocated properly; however, the subrecipient had not had a recent Single Audit in which the Special Education Cluster was a major program. • The third subrecipient had a fiscal monitoring review of payroll costs, but there was no documentation to show that the Agency had reviewed other purchased services at the time of reimbursement or during the fiscal monitoring. During review of the Agency’s procedures for reviewing subrecipient Single Audits, we noted the following: • For two subrecipients tested, their Single Audits noted significant deficiencies and material weaknesses, including one instance of questioned costs totaling $105,273; however, the Agency did not issue a management decision letter on the findings or provide documentation of any follow-up performed. • For five subrecipients tested, the management decision letter was issued eight to nine months after the audit was made available on the Federal Audit Clearinghouse (FAC). • One subrecipient was not being tracked by the Agency. This subrecipient had received $939,358 in Federal funds from the Agency. After the APA pointed this out, the Agency obtained a copy of the subrecipient’s Single Audit report, which noted no findings. Cause: Inadequate subrecipient monitoring procedures. The Agency stated it had other priorities during the year that delayed its review of the subrecipients’ Single Audit reports. Effect: Without adequate procedures, there is increased risk of noncompliance with Federal regulations, audit findings of subrecipients not being corrected, and an increased risk of loss or misuse of funds. Recommendation: We recommend the Agency review its procedures for reimbursements and fiscal monitoring to ensure subrecipients are operating in compliance with Federal requirements. We also recommend the Agency improve procedures to ensure that all subrecipients are being tracked for Single Audit requirements, and management decisions are issued in response to all findings in a timely manner. Management Response: First SPED subrecipient – The first recipient’s fiscal monitoring review is part of the current annual group of recipients being monitored; set to close June 30, 2024. Second SPED subrecipient – As part of the FY2020 federal Single Audit testing conducted by KPMG, determined the after-the-fact verification as a method to certify that the payment received on a project is reasonable in relation to the amount of work performed. Third SPED subrecipient – Purchased services and supplies were reviewed during fiscal monitoring, but the documentation was in paper form, not electronic, and was not initially provided to the auditors when requested. It was provided on March 4, 2024, when located. Single Audits – Due to extensive time commitment to State audit facilitation and Education Stabilization Fund Annual Performance Reporting, some management decision letters were not issued or were issued late. The NDE staff member performing the annual audit reviews was not aware of an additional subrecipient that needed reviewed. APA Response: The Special Education Cluster was not a major program for the second subrecipient in FY2020. For the third subrecipient, we originally requested the Agency’s fiscal monitoring documentation on December 21, 2023. Neb. Rev. Stat. § 84-305(2) (Cum. Supp. 2022) requires compliance with such a request to occur within “three business days after actual receipt of the request.” The only exceptions to that three-day response requirement are if there is “a legal basis for refusal to comply with the request” or “the entire request cannot with reasonable good faith efforts be fulfilled within three business days after actual receipt of the request due to the significant difficulty or the extensiveness of the request.” In either instance, § 84-305(2) requires the recipient of the request to take specific action in claiming the exception. The Agency failed to do so, clearly violating § 84-305(2). In no case not involving a legal basis for noncompliance, moreover, may the required compliance “exceed three calendar weeks after actual receipt of such request by any public entity.” Nevertheless, the additional documentation was not provided until over 11 weeks after being requested, which is another clear violation of § 84-305(2).

Program: Various, including AL 84.027 – Special Education Grants to States; AL 84.173 – COVID-19 Special Education Preschool Grants; AL 84.425D – COVID-19 Education Stabilization Fund – Elementary and Secondary School Emergency Relief Fund (ESSER I and ESSER II); AL 84.425U – COVID-19 Education Stabilization Fund – American Rescue Plan – Elementary and Secondary School Emergency Relief Fund (ARP ESSER) – Subrecipient Monitoring Grant Number & Year: Various, including H027A210079, FFY 2022; H173X210077, FFY 2022; S425D200048, grant period ending 9/30/2022; S425D210048, grant period ending 9/30/2023; S425U210048, grant period ending 9/30/2024. Federal Grantor Agency: U.S. Department of Education Criteria: Per 2 CFR § 3474.1 (January 1, 2023), the U.S. Department of Education adopted the OMB Uniform Guidance in 2 CFR part 200, except for 2 CFR § 200.102(a) and 200.207(a). Per 2 CFR § 200.403 (January 1, 2023), allowable costs must be necessary, reasonable, and adequately documented. 2 CFR § 200.332 (January 1, 2023) states, in relevant part, the following: All pass-through entities must: * * * * (d) Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. * * * * (2) Following-up and ensuring that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the Federal award provided to the subrecipient from the pass-through entity detected through audits, on-site reviews, and written confirmation from the subrecipient, highlighting the status of actions planned or taken to address Single Audit findings related to the particular subaward. (3) Issuing a management decision for applicable audit findings pertaining only to the Federal award provided to the subrecipient from the pass-through entity as required by § 200.521. (4) The pass-through entity is responsible for resolving audit findings specifically related to the subaward[.] * * * * (f) Verify that every subrecipient is audited as required by Subpart F of this part when it is expected that the subrecipient's Federal awards expended during the respective fiscal year equaled or exceeded the threshold set forth in § 200.501. 2 CFR § 200.521 (January 1, 2023) states, in relevant part, the following: (c) Pass-through entity. As provided in § 200.332(d), the pass-through entity must be responsible for issuing a management decision for audit findings that relate to Federal awards it makes to subrecipients. (d) Time requirements. The Federal awarding agency or pass-through entity responsible for issuing a management decision must do so within six months of acceptance of the audit report by the FAC. Good internal control requires procedures to ensure that subrecipients are using grant funds for allowable purposes. Good internal control also requires procedures to ensure that subrecipient Single Audit reports are being reviewed, and management decision letters are being issued in a timely manner to ensure that corrective action is being implemented. Condition: For 3 of 27 subrecipients tested that received Federal funds from the Special Education Cluster, the Agency did not perform adequate subrecipient monitoring to ensure that funds were used for allowable purposes. For seven subrecipients tested that received Federal funds from the Education Stabilization Fund and/or Special Education Cluster, the Agency did not issue a management decision letter within the time requirement for five subrecipients and did not issue a management decision letter for two subrecipients. The Agency also failed to track and review the Single Audit report for one subrecipient. Repeat Finding: No Questioned Costs: Unknown Statistical Sample: No Context: The Agency performs various subrecipient monitoring activities during the year to ensure that subrecipients are using funds for an allowable purpose. These activities include reviewing a sample of expenditures from all reimbursement requests, tracking subrecipient audit requirements and reviewing Single Audit reports, and performing fiscal monitoring on a three-year basis. During review of reimbursement requests, the Agency does not perform procedures to ensure that salary and benefits allocated to the Special Education (SPED) grants are adequately supported by underlying documentation for a majority of its subrecipients. Rather the Agency relies on the fiscal monitoring to test that payroll is being properly allocated to grants, and the subrecipients have procedures in place to comply with Uniform Guidance Requirements. During testing of 27 subrecipients that received SPED grants, we noted the following for three subrecipients: • For the first subrecipient, the Agency had never completed a fiscal monitoring review. The Agency indicated that it was currently conducting fiscal monitoring of the school, but the subrecipient had been slow to provide documentation, resulting in delays. • The second subrecipient also did not have a fiscal monitoring review. At the time of the reimbursement, moreover, the Agency did not review any underlying documentation to support the costs allocated to the grant. The Agency stated that it relied on the entity’s annual audit to ensure costs were allocated properly; however, the subrecipient had not had a recent Single Audit in which the Special Education Cluster was a major program. • The third subrecipient had a fiscal monitoring review of payroll costs, but there was no documentation to show that the Agency had reviewed other purchased services at the time of reimbursement or during the fiscal monitoring. During review of the Agency’s procedures for reviewing subrecipient Single Audits, we noted the following: • For two subrecipients tested, their Single Audits noted significant deficiencies and material weaknesses, including one instance of questioned costs totaling $105,273; however, the Agency did not issue a management decision letter on the findings or provide documentation of any follow-up performed. • For five subrecipients tested, the management decision letter was issued eight to nine months after the audit was made available on the Federal Audit Clearinghouse (FAC). • One subrecipient was not being tracked by the Agency. This subrecipient had received $939,358 in Federal funds from the Agency. After the APA pointed this out, the Agency obtained a copy of the subrecipient’s Single Audit report, which noted no findings. Cause: Inadequate subrecipient monitoring procedures. The Agency stated it had other priorities during the year that delayed its review of the subrecipients’ Single Audit reports. Effect: Without adequate procedures, there is increased risk of noncompliance with Federal regulations, audit findings of subrecipients not being corrected, and an increased risk of loss or misuse of funds. Recommendation: We recommend the Agency review its procedures for reimbursements and fiscal monitoring to ensure subrecipients are operating in compliance with Federal requirements. We also recommend the Agency improve procedures to ensure that all subrecipients are being tracked for Single Audit requirements, and management decisions are issued in response to all findings in a timely manner. Management Response: First SPED subrecipient – The first recipient’s fiscal monitoring review is part of the current annual group of recipients being monitored; set to close June 30, 2024. Second SPED subrecipient – As part of the FY2020 federal Single Audit testing conducted by KPMG, determined the after-the-fact verification as a method to certify that the payment received on a project is reasonable in relation to the amount of work performed. Third SPED subrecipient – Purchased services and supplies were reviewed during fiscal monitoring, but the documentation was in paper form, not electronic, and was not initially provided to the auditors when requested. It was provided on March 4, 2024, when located. Single Audits – Due to extensive time commitment to State audit facilitation and Education Stabilization Fund Annual Performance Reporting, some management decision letters were not issued or were issued late. The NDE staff member performing the annual audit reviews was not aware of an additional subrecipient that needed reviewed. APA Response: The Special Education Cluster was not a major program for the second subrecipient in FY2020. For the third subrecipient, we originally requested the Agency’s fiscal monitoring documentation on December 21, 2023. Neb. Rev. Stat. § 84-305(2) (Cum. Supp. 2022) requires compliance with such a request to occur within “three business days after actual receipt of the request.” The only exceptions to that three-day response requirement are if there is “a legal basis for refusal to comply with the request” or “the entire request cannot with reasonable good faith efforts be fulfilled within three business days after actual receipt of the request due to the significant difficulty or the extensiveness of the request.” In either instance, § 84-305(2) requires the recipient of the request to take specific action in claiming the exception. The Agency failed to do so, clearly violating § 84-305(2). In no case not involving a legal basis for noncompliance, moreover, may the required compliance “exceed three calendar weeks after actual receipt of such request by any public entity.” Nevertheless, the additional documentation was not provided until over 11 weeks after being requested, which is another clear violation of § 84-305(2).

Program: Various, including AL 84.027 – Special Education Grants to States; AL 84.173 – COVID-19 Special Education Preschool Grants; AL 84.425D – COVID-19 Education Stabilization Fund – Elementary and Secondary School Emergency Relief Fund (ESSER I and ESSER II); AL 84.425U – COVID-19 Education Stabilization Fund – American Rescue Plan – Elementary and Secondary School Emergency Relief Fund (ARP ESSER) – Subrecipient Monitoring Grant Number & Year: Various, including H027A210079, FFY 2022; H173X210077, FFY 2022; S425D200048, grant period ending 9/30/2022; S425D210048, grant period ending 9/30/2023; S425U210048, grant period ending 9/30/2024. Federal Grantor Agency: U.S. Department of Education Criteria: Per 2 CFR § 3474.1 (January 1, 2023), the U.S. Department of Education adopted the OMB Uniform Guidance in 2 CFR part 200, except for 2 CFR § 200.102(a) and 200.207(a). Per 2 CFR § 200.403 (January 1, 2023), allowable costs must be necessary, reasonable, and adequately documented. 2 CFR § 200.332 (January 1, 2023) states, in relevant part, the following: All pass-through entities must: * * * * (d) Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. * * * * (2) Following-up and ensuring that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the Federal award provided to the subrecipient from the pass-through entity detected through audits, on-site reviews, and written confirmation from the subrecipient, highlighting the status of actions planned or taken to address Single Audit findings related to the particular subaward. (3) Issuing a management decision for applicable audit findings pertaining only to the Federal award provided to the subrecipient from the pass-through entity as required by § 200.521. (4) The pass-through entity is responsible for resolving audit findings specifically related to the subaward[.] * * * * (f) Verify that every subrecipient is audited as required by Subpart F of this part when it is expected that the subrecipient's Federal awards expended during the respective fiscal year equaled or exceeded the threshold set forth in § 200.501. 2 CFR § 200.521 (January 1, 2023) states, in relevant part, the following: (c) Pass-through entity. As provided in § 200.332(d), the pass-through entity must be responsible for issuing a management decision for audit findings that relate to Federal awards it makes to subrecipients. (d) Time requirements. The Federal awarding agency or pass-through entity responsible for issuing a management decision must do so within six months of acceptance of the audit report by the FAC. Good internal control requires procedures to ensure that subrecipients are using grant funds for allowable purposes. Good internal control also requires procedures to ensure that subrecipient Single Audit reports are being reviewed, and management decision letters are being issued in a timely manner to ensure that corrective action is being implemented. Condition: For 3 of 27 subrecipients tested that received Federal funds from the Special Education Cluster, the Agency did not perform adequate subrecipient monitoring to ensure that funds were used for allowable purposes. For seven subrecipients tested that received Federal funds from the Education Stabilization Fund and/or Special Education Cluster, the Agency did not issue a management decision letter within the time requirement for five subrecipients and did not issue a management decision letter for two subrecipients. The Agency also failed to track and review the Single Audit report for one subrecipient. Repeat Finding: No Questioned Costs: Unknown Statistical Sample: No Context: The Agency performs various subrecipient monitoring activities during the year to ensure that subrecipients are using funds for an allowable purpose. These activities include reviewing a sample of expenditures from all reimbursement requests, tracking subrecipient audit requirements and reviewing Single Audit reports, and performing fiscal monitoring on a three-year basis. During review of reimbursement requests, the Agency does not perform procedures to ensure that salary and benefits allocated to the Special Education (SPED) grants are adequately supported by underlying documentation for a majority of its subrecipients. Rather the Agency relies on the fiscal monitoring to test that payroll is being properly allocated to grants, and the subrecipients have procedures in place to comply with Uniform Guidance Requirements. During testing of 27 subrecipients that received SPED grants, we noted the following for three subrecipients: • For the first subrecipient, the Agency had never completed a fiscal monitoring review. The Agency indicated that it was currently conducting fiscal monitoring of the school, but the subrecipient had been slow to provide documentation, resulting in delays. • The second subrecipient also did not have a fiscal monitoring review. At the time of the reimbursement, moreover, the Agency did not review any underlying documentation to support the costs allocated to the grant. The Agency stated that it relied on the entity’s annual audit to ensure costs were allocated properly; however, the subrecipient had not had a recent Single Audit in which the Special Education Cluster was a major program. • The third subrecipient had a fiscal monitoring review of payroll costs, but there was no documentation to show that the Agency had reviewed other purchased services at the time of reimbursement or during the fiscal monitoring. During review of the Agency’s procedures for reviewing subrecipient Single Audits, we noted the following: • For two subrecipients tested, their Single Audits noted significant deficiencies and material weaknesses, including one instance of questioned costs totaling $105,273; however, the Agency did not issue a management decision letter on the findings or provide documentation of any follow-up performed. • For five subrecipients tested, the management decision letter was issued eight to nine months after the audit was made available on the Federal Audit Clearinghouse (FAC). • One subrecipient was not being tracked by the Agency. This subrecipient had received $939,358 in Federal funds from the Agency. After the APA pointed this out, the Agency obtained a copy of the subrecipient’s Single Audit report, which noted no findings. Cause: Inadequate subrecipient monitoring procedures. The Agency stated it had other priorities during the year that delayed its review of the subrecipients’ Single Audit reports. Effect: Without adequate procedures, there is increased risk of noncompliance with Federal regulations, audit findings of subrecipients not being corrected, and an increased risk of loss or misuse of funds. Recommendation: We recommend the Agency review its procedures for reimbursements and fiscal monitoring to ensure subrecipients are operating in compliance with Federal requirements. We also recommend the Agency improve procedures to ensure that all subrecipients are being tracked for Single Audit requirements, and management decisions are issued in response to all findings in a timely manner. Management Response: First SPED subrecipient – The first recipient’s fiscal monitoring review is part of the current annual group of recipients being monitored; set to close June 30, 2024. Second SPED subrecipient – As part of the FY2020 federal Single Audit testing conducted by KPMG, determined the after-the-fact verification as a method to certify that the payment received on a project is reasonable in relation to the amount of work performed. Third SPED subrecipient – Purchased services and supplies were reviewed during fiscal monitoring, but the documentation was in paper form, not electronic, and was not initially provided to the auditors when requested. It was provided on March 4, 2024, when located. Single Audits – Due to extensive time commitment to State audit facilitation and Education Stabilization Fund Annual Performance Reporting, some management decision letters were not issued or were issued late. The NDE staff member performing the annual audit reviews was not aware of an additional subrecipient that needed reviewed. APA Response: The Special Education Cluster was not a major program for the second subrecipient in FY2020. For the third subrecipient, we originally requested the Agency’s fiscal monitoring documentation on December 21, 2023. Neb. Rev. Stat. § 84-305(2) (Cum. Supp. 2022) requires compliance with such a request to occur within “three business days after actual receipt of the request.” The only exceptions to that three-day response requirement are if there is “a legal basis for refusal to comply with the request” or “the entire request cannot with reasonable good faith efforts be fulfilled within three business days after actual receipt of the request due to the significant difficulty or the extensiveness of the request.” In either instance, § 84-305(2) requires the recipient of the request to take specific action in claiming the exception. The Agency failed to do so, clearly violating § 84-305(2). In no case not involving a legal basis for noncompliance, moreover, may the required compliance “exceed three calendar weeks after actual receipt of such request by any public entity.” Nevertheless, the additional documentation was not provided until over 11 weeks after being requested, which is another clear violation of § 84-305(2).

Program: AL 84.425U – COVID-19 Education Stabilization Fund – American Rescue Plan – Elementary and Secondary School Emergency Relief Fund (ARP ESSER) – Reporting Grant Number & Year: S425U210048, grant period ending 9/30/2024 Federal Grantor Agency: U.S. Department of Education Criteria: 2 CFR § 170, Appendix A I. (January 1, 2023) states, in part, the following: a. Reporting of first-tier subawards. Applicability. Unless you are exempt as provided in paragraph d. of this award term, you must report each action that equals or exceeds $30,000 in Federal funds for a subaward to a non-Federal entity or Federal agency . . . . 2. Where and when to report. i. The non-Federal entity or Federal agency must report each obligating action described in paragraph a.1. of this award term to http://www.fsrs.gov. ii. For subaward information, report no later than the end of the month following the month in which the obligation was made. Good internal control requires procedures to ensure all subawards subject to Federal Funding Accountability and Transparency Act (FFATA) reporting are submitted on time. Condition: FFATA reporting was not submitted for 2 of 11 subawards tested. Additionally, two other subawards were not submitted timely. Repeat Finding: No Questioned Costs: None Statistical Sample: No Context: The Agency had 104 subawards obligated during the fiscal year ended June 30, 2023. We tested 11 of the subawards. Two of those subawards were not reported in FFATA Subaward Reporting System (FSRS) as of February 7, 2024. The subawards should have been reported by September 30, 2022, and April 30, 2023. Additionally, the Agency did not submit two other subawards tested timely. The subawards were both reported 122 days late. See Schedule of Findings and Questioned Costs for chart/table. Cause: Inadequate review and reporting procedures. Effect: Without adequate procedures, there is an increased risk of noncompliance with Federal regulations. Recommendation: We recommend the Agency review its procedures for FFATA reporting to ensure compliance with Federal Requirements. Management Response: For the two subawards not reported, the NDE staff completing the FFATA reporting was not aware these subawards were issued. Regarding untimely reporting, the NDE staff was trying a new method to streamline reporting, but it was determined some amendments were missed. These subawards were reported at the time the error was found, which was a few months late.

Program: AL 93.069 – Public Health Emergency Preparedness (PHEP); AL 93.889 – National Bioterrorism Hospital Preparedness Program (HPP) – Allowability & Subrecipient Monitoring Grant Number & Year: NU90TP922039, Project Period through June 30, 2024; U3REP190555, Project Period through June 30, 2024 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR § 75.352(d) (October 1, 2022) requires a pass-through entity to: “Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved.” 45 CFR § 75.302(a) (October 1, 2022) requires the State to have accounting procedures sufficient to allow for “the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award.” 45 CFR § 75.403 (October 1, 2022) requires costs to be reasonable, necessary, and adequately documented. A good internal control plan requires procedures to ensure subrecipients comply with applicable cost principles. 45 CFR § 75.405(a) (October 1, 2022) states, in part, the following: A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. This standard is met if the cost: (1) Is incurred specifically for the Federal award; (2) Benefits both the Federal award and other work of the non-Federal entity and can be distributed in proportions that may be approximated using reasonable methods; and (3) Is necessary to the overall operation of the non-Federal entity and is assignable in part to the Federal award in accordance with the principles in this subpart. 45 CFR § 75.430(i)(1) (October 1, 2022) states, in part, the following: Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; * * * * (vii) Support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. (viii) Budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards . . . . 45 CFR § 75.431(b) (October 1, 2022) states the following: The cost of fringe benefits in the form of regular compensation paid to employees during periods of authorized absences from the job, such as for annual leave, family-related leave, sick leave, holidays, court leave, military leave, administrative leave, and other similar benefits, are allowable if all of the following criteria are met: * * * * (3) The accounting basis (cash or accrual) selected for costing each type of leave is consistently followed by the non-Federal entity or specified grouping of employees. * * * * (ii) The accrual basis may be only used for those types of leave for which a liability as defined by GAAP exists when the leave is earned. When a non-Federal entity uses the accrual basis of accounting, allowable leave costs are the lesser of the amount accrued or funded. 45 CFR § 75.431(c) (October 1, 2022) states the following: The cost of fringe benefits in the form of employer contributions or expenses for social security; employee life, health, unemployment, and worker's compensation insurance (except as indicated in § 75.447); pension plan costs (see paragraph (i) of this section); and other similar benefits are allowable, provided such benefits are granted under established written policies. Such benefits, must be allocated to Federal awards and all other activities in a manner consistent with the pattern of benefits attributable to the individuals or group(s) of employees whose salaries and wages are chargeable to such Federal awards and other activities, and charged as direct or indirect costs in accordance with the non-Federal entity's accounting practices. A good internal control plan requires procedures to ensure salaries and wages charged to subawards are properly documented, and payments made to subrecipients apply to work performed under the subaward project description. 45 CFR § 75.406(a) (October 1, 2022) says the following: Applicable credits refer to those receipts or reduction-of-expenditure-type transactions that offset or reduce expense items allocable to the Federal award as direct or indirect (F&A) costs. Examples of such transactions are: Purchase discounts, rebates or allowances, recoveries or indemnities on losses, insurance refunds or rebates, and adjustments of overpayments or erroneous charges. To the extent that such credits accruing to or received by the non-Federal entity relate to allowable costs, they must be credited to the Federal award either as a cost reduction or cash refund, as appropriate. Condition: Subrecipient monitoring procedures were inadequate. A similar finding has been noted in prior audits since 2014. Repeat Finding: 2022-025 Questioned Costs: $13,025 known (NU90TP922039) Statistical Sample: No Context: The Agency made 161 aid payments, totaling $5,353,085, during fiscal year ended June 30, 2023. This included payments to 34 subrecipients. Subrecipient reimbursement requests included an invoice and budget workbook showing expenses by category; however, no source documentation, such as invoices and timesheets, were submitted. The Agency has subrecipient monitoring procedures that include financial monitoring, such as desk reviews; however, desk reviews were performed for only 12 of 34 subrecipients during the fiscal year. The Agency did not perform any desk reviews for the HPP program. We selected a sample of 16 payments, totaling $360,772, which included eight subrecipients with desk reviews. When a desk review was not completed or not adequate, we offered the Agency the opportunity to gather supporting documentation from subrecipients. Documentation submitted was inadequate for 5 of 16 payments tested. All five of these subrecipients had Agency desk reviews. We initially allowed the Agency four weeks to provide support. After we reviewed that support, we allowed the Agency an additional two weeks to provide further support. We noted the following after considering all support provided: • Two payments did not have adequate documentation to support that fringe benefits charged to the grant were allowable and in accordance with Federal cost principles. In one case, the subrecipient was charging accrued leave to the subaward, while its financial statements were being prepared on a cash basis. In the other case, the personnel costs were calculated based on projected or budgeted hours devoted to the subaward, rather than actual hours worked. • Six payments did not have adequate documentation to support non-payroll charges. o Allocated costs for facilities, phones, and other charges did not have adequate support for the amount charged to the grant. For example, the full cost of two phone lines was charged for two employees; however, neither employee worked 100% on the program. Also, multiple subrecipients allocated costs based on estimated hours worked on the program, rather than the actual time worked. o One subrecipient was using reward points earned from purchasing supplies for seemingly personal benefit. The reward points could be used for discounts on future purchases or for free office supplies that would further benefit the program; instead, we noted invoices showing that reward points were used for such items as Millennium Falcon blankets, a luxury robe and spa set, deluxe slippers, a traveler's toiletry set, and a travel cooler set. o One subrecipient was reimbursed for sales tax; however, the entity was tax exempt. Subrecipient aid payments for the fiscal year ended June 30, 2023, totaled $5,353,085. Federal payment errors noted were $13,025. The total sample tested was $360,772. The dollar error rate for the sample was 3.61%. This estimates the potential dollars at risk for the fiscal year to be $193,246 (dollar error rate multiplied by the population). Cause: Inadequate procedures and staff turnover. Effect: Without adequate subrecipient monitoring procedures, there is an increased risk for the misuse of Federal funds and noncompliance with Federal regulations. Recommendation: We recommend the Agency perform adequate subrecipient monitoring to ensure costs are allowable and Federal regulations are adhered to. Management Response: The Agency partially agrees. The agency agrees with a portion of questioned costs. Notably, sales tax paid by an exempt entity. The agency partially disagrees with allocated costs not being supported by documentation. In one instance, it appears allocated costs were undercharged to the award rather than overcharged. The agency disagrees with APA's contention that the phone lines noted in the finding were not allocated appropriately. As provided by the subrecipient, but for the preparedness funds, these staff would not have these lines and both staff are listed as part of the local health department's emergency response plan. APA notes a use of reward points being used for seemingly personal benefit. The agency disagrees. The subrecipient used the rewards points to purchase items for an employee recognition event. The use of these points appears consistent with the subrecipient's policy regarding compliance with the Nebraska Local Government Miscellaneous Expenditure Act. APA Response: Documentation provided to the auditors was inadequate to support the allocation of costs charged. The Agency could not support that the two phone lines were used exclusively for the program; moreover, the employees did not work 100% on the program. As noted, Federal cost principles require costs to be charged based on the relative benefits received. Additionally, we were not provided the subrecipient’s policy regarding employee recognition.

Program: AL 93.069 – Public Health Emergency Preparedness (PHEP); AL 93.889 – National Bioterrorism Hospital Preparedness Program (HPP) – Matching and Reporting Grant Number & Year: NU90TP922039, Budget period through June 30, 2022; U3REP190555, Budget period through June 30, 2022 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR § 75.302(a) (October 1, 2022) states the following: Each state must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state's own funds. In addition, the state's and the other non-Federal entity's financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. Per 45 CFR Appendix VII to Part 75: Provisional rate means a temporary indirect cost rate applicable to a specified period which is used for funding, interim reimbursement, and reporting indirect costs on Federal awards pending the establishment of a “final” rate for that period. 45 CFR § 75.306 (October 1, 2022) states, in part, the following: (b) For all Federal awards, any shared costs or matching funds and all contributions, including cash and third party in-kind contributions, must be accepted as part of the non-Federal entity’s cost sharing or matching when such contributions meet all of the following criteria: (1) Are verifiable from the non-Federal entity's records; (2) Are not included as contributions for any other Federal award; (3) Are necessary and reasonable for accomplishment of project or program objectives; (4) Are allowable under subpart E of this part; * * * * (f) When a third-party organization furnishes the services of an employee, these services must be valued at the employee's regular rate of pay plus an amount of fringe benefits that is reasonable, necessary, allocable, and otherwise allowable, and indirect costs at either the third-party organization's approved federally negotiated indirect cost rate or, a rate in accordance with § 75.414(f), provided these services employ the same skill(s) for which the employee is normally paid. Where donated services are treated as indirect costs, indirect cost rates will separate the value of the donated services so that reimbursement for the donated services will not be made. 45 CFR § 75.403(a) requires costs to be “necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles.” A good internal control plan requires procedures to ensure documentation is adequate to support that matching funds are in accordance with Federal requirements. Condition: The Agency did not have adequate documentation to support the amount of matching funds provided and reported on the annual Federal Financial Report. A similar finding was noted in the prior audit. We also noted the Agency did not use the final approved indirect cost rate (IDCR) to report indirect costs (IDC). Repeat Finding: 2022-026 Questioned Costs: Unknown Statistical Sample: No Context: We tested the annual reports for PHEP and HPP for the budget period ended June 30, 2022. The reports included PHEP expenditures through September 21, 2022, and HPP expenditures through October 21, 2022. We noted the following: • Both reports used the interim indirect cost rate rather than the final approved indirect cost rate. The final indirect cost rate was approved on August 22, 2022, prior to the submission of both reports. See Schedule of Findings and Questioned Costs for chart/table. • The Agency reported $93,374 in State matching expenditures for the HPP grant, which included $87,300 of third-party in-kind match. However, only $1,905 was adequately supported and verifiable. Cause: Inadequate procedures. Effect: Noncompliance with Federal requirements, which could lead to Federal sanctions. Recommendation: We recommend the Agency implement procedures to ensure matching amounts are adequately supported and in accordance with Federal requirements. Management Response: The Agency partially agrees. In the reporting period under review, locally-provided match was insufficiently reported. However, the agency will substantiate additional match within the period of the cooperative agreement budget cycle so that total match over the five year period is sufficient to meet federal requirements.

Program: AL 93.069 – Public Health Emergency Preparedness (PHEP); AL 93.889 – National Bioterrorism Hospital Preparedness Program (HPP) – Allowability & Subrecipient Monitoring Grant Number & Year: NU90TP922039, Project Period through June 30, 2024; U3REP190555, Project Period through June 30, 2024 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR § 75.352(d) (October 1, 2022) requires a pass-through entity to: “Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved.” 45 CFR § 75.302(a) (October 1, 2022) requires the State to have accounting procedures sufficient to allow for “the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award.” 45 CFR § 75.403 (October 1, 2022) requires costs to be reasonable, necessary, and adequately documented. A good internal control plan requires procedures to ensure subrecipients comply with applicable cost principles. 45 CFR § 75.405(a) (October 1, 2022) states, in part, the following: A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. This standard is met if the cost: (1) Is incurred specifically for the Federal award; (2) Benefits both the Federal award and other work of the non-Federal entity and can be distributed in proportions that may be approximated using reasonable methods; and (3) Is necessary to the overall operation of the non-Federal entity and is assignable in part to the Federal award in accordance with the principles in this subpart. 45 CFR § 75.430(i)(1) (October 1, 2022) states, in part, the following: Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; * * * * (vii) Support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. (viii) Budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards . . . . 45 CFR § 75.431(b) (October 1, 2022) states the following: The cost of fringe benefits in the form of regular compensation paid to employees during periods of authorized absences from the job, such as for annual leave, family-related leave, sick leave, holidays, court leave, military leave, administrative leave, and other similar benefits, are allowable if all of the following criteria are met: * * * * (3) The accounting basis (cash or accrual) selected for costing each type of leave is consistently followed by the non-Federal entity or specified grouping of employees. * * * * (ii) The accrual basis may be only used for those types of leave for which a liability as defined by GAAP exists when the leave is earned. When a non-Federal entity uses the accrual basis of accounting, allowable leave costs are the lesser of the amount accrued or funded. 45 CFR § 75.431(c) (October 1, 2022) states the following: The cost of fringe benefits in the form of employer contributions or expenses for social security; employee life, health, unemployment, and worker's compensation insurance (except as indicated in § 75.447); pension plan costs (see paragraph (i) of this section); and other similar benefits are allowable, provided such benefits are granted under established written policies. Such benefits, must be allocated to Federal awards and all other activities in a manner consistent with the pattern of benefits attributable to the individuals or group(s) of employees whose salaries and wages are chargeable to such Federal awards and other activities, and charged as direct or indirect costs in accordance with the non-Federal entity's accounting practices. A good internal control plan requires procedures to ensure salaries and wages charged to subawards are properly documented, and payments made to subrecipients apply to work performed under the subaward project description. 45 CFR § 75.406(a) (October 1, 2022) says the following: Applicable credits refer to those receipts or reduction-of-expenditure-type transactions that offset or reduce expense items allocable to the Federal award as direct or indirect (F&A) costs. Examples of such transactions are: Purchase discounts, rebates or allowances, recoveries or indemnities on losses, insurance refunds or rebates, and adjustments of overpayments or erroneous charges. To the extent that such credits accruing to or received by the non-Federal entity relate to allowable costs, they must be credited to the Federal award either as a cost reduction or cash refund, as appropriate. Condition: Subrecipient monitoring procedures were inadequate. A similar finding has been noted in prior audits since 2014. Repeat Finding: 2022-025 Questioned Costs: $13,025 known (NU90TP922039) Statistical Sample: No Context: The Agency made 161 aid payments, totaling $5,353,085, during fiscal year ended June 30, 2023. This included payments to 34 subrecipients. Subrecipient reimbursement requests included an invoice and budget workbook showing expenses by category; however, no source documentation, such as invoices and timesheets, were submitted. The Agency has subrecipient monitoring procedures that include financial monitoring, such as desk reviews; however, desk reviews were performed for only 12 of 34 subrecipients during the fiscal year. The Agency did not perform any desk reviews for the HPP program. We selected a sample of 16 payments, totaling $360,772, which included eight subrecipients with desk reviews. When a desk review was not completed or not adequate, we offered the Agency the opportunity to gather supporting documentation from subrecipients. Documentation submitted was inadequate for 5 of 16 payments tested. All five of these subrecipients had Agency desk reviews. We initially allowed the Agency four weeks to provide support. After we reviewed that support, we allowed the Agency an additional two weeks to provide further support. We noted the following after considering all support provided: • Two payments did not have adequate documentation to support that fringe benefits charged to the grant were allowable and in accordance with Federal cost principles. In one case, the subrecipient was charging accrued leave to the subaward, while its financial statements were being prepared on a cash basis. In the other case, the personnel costs were calculated based on projected or budgeted hours devoted to the subaward, rather than actual hours worked. • Six payments did not have adequate documentation to support non-payroll charges. o Allocated costs for facilities, phones, and other charges did not have adequate support for the amount charged to the grant. For example, the full cost of two phone lines was charged for two employees; however, neither employee worked 100% on the program. Also, multiple subrecipients allocated costs based on estimated hours worked on the program, rather than the actual time worked. o One subrecipient was using reward points earned from purchasing supplies for seemingly personal benefit. The reward points could be used for discounts on future purchases or for free office supplies that would further benefit the program; instead, we noted invoices showing that reward points were used for such items as Millennium Falcon blankets, a luxury robe and spa set, deluxe slippers, a traveler's toiletry set, and a travel cooler set. o One subrecipient was reimbursed for sales tax; however, the entity was tax exempt. Subrecipient aid payments for the fiscal year ended June 30, 2023, totaled $5,353,085. Federal payment errors noted were $13,025. The total sample tested was $360,772. The dollar error rate for the sample was 3.61%. This estimates the potential dollars at risk for the fiscal year to be $193,246 (dollar error rate multiplied by the population). Cause: Inadequate procedures and staff turnover. Effect: Without adequate subrecipient monitoring procedures, there is an increased risk for the misuse of Federal funds and noncompliance with Federal regulations. Recommendation: We recommend the Agency perform adequate subrecipient monitoring to ensure costs are allowable and Federal regulations are adhered to. Management Response: The Agency partially agrees. The agency agrees with a portion of questioned costs. Notably, sales tax paid by an exempt entity. The agency partially disagrees with allocated costs not being supported by documentation. In one instance, it appears allocated costs were undercharged to the award rather than overcharged. The agency disagrees with APA's contention that the phone lines noted in the finding were not allocated appropriately. As provided by the subrecipient, but for the preparedness funds, these staff would not have these lines and both staff are listed as part of the local health department's emergency response plan. APA notes a use of reward points being used for seemingly personal benefit. The agency disagrees. The subrecipient used the rewards points to purchase items for an employee recognition event. The use of these points appears consistent with the subrecipient's policy regarding compliance with the Nebraska Local Government Miscellaneous Expenditure Act. APA Response: Documentation provided to the auditors was inadequate to support the allocation of costs charged. The Agency could not support that the two phone lines were used exclusively for the program; moreover, the employees did not work 100% on the program. As noted, Federal cost principles require costs to be charged based on the relative benefits received. Additionally, we were not provided the subrecipient’s policy regarding employee recognition.

Program: AL 93.069 – Public Health Emergency Preparedness (PHEP); AL 93.889 – National Bioterrorism Hospital Preparedness Program (HPP) – Matching and Reporting Grant Number & Year: NU90TP922039, Budget period through June 30, 2022; U3REP190555, Budget period through June 30, 2022 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR § 75.302(a) (October 1, 2022) states the following: Each state must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state's own funds. In addition, the state's and the other non-Federal entity's financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. Per 45 CFR Appendix VII to Part 75: Provisional rate means a temporary indirect cost rate applicable to a specified period which is used for funding, interim reimbursement, and reporting indirect costs on Federal awards pending the establishment of a “final” rate for that period. 45 CFR § 75.306 (October 1, 2022) states, in part, the following: (b) For all Federal awards, any shared costs or matching funds and all contributions, including cash and third party in-kind contributions, must be accepted as part of the non-Federal entity’s cost sharing or matching when such contributions meet all of the following criteria: (1) Are verifiable from the non-Federal entity's records; (2) Are not included as contributions for any other Federal award; (3) Are necessary and reasonable for accomplishment of project or program objectives; (4) Are allowable under subpart E of this part; * * * * (f) When a third-party organization furnishes the services of an employee, these services must be valued at the employee's regular rate of pay plus an amount of fringe benefits that is reasonable, necessary, allocable, and otherwise allowable, and indirect costs at either the third-party organization's approved federally negotiated indirect cost rate or, a rate in accordance with § 75.414(f), provided these services employ the same skill(s) for which the employee is normally paid. Where donated services are treated as indirect costs, indirect cost rates will separate the value of the donated services so that reimbursement for the donated services will not be made. 45 CFR § 75.403(a) requires costs to be “necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles.” A good internal control plan requires procedures to ensure documentation is adequate to support that matching funds are in accordance with Federal requirements. Condition: The Agency did not have adequate documentation to support the amount of matching funds provided and reported on the annual Federal Financial Report. A similar finding was noted in the prior audit. We also noted the Agency did not use the final approved indirect cost rate (IDCR) to report indirect costs (IDC). Repeat Finding: 2022-026 Questioned Costs: Unknown Statistical Sample: No Context: We tested the annual reports for PHEP and HPP for the budget period ended June 30, 2022. The reports included PHEP expenditures through September 21, 2022, and HPP expenditures through October 21, 2022. We noted the following: • Both reports used the interim indirect cost rate rather than the final approved indirect cost rate. The final indirect cost rate was approved on August 22, 2022, prior to the submission of both reports. See Schedule of Findings and Questioned Costs for chart/table. • The Agency reported $93,374 in State matching expenditures for the HPP grant, which included $87,300 of third-party in-kind match. However, only $1,905 was adequately supported and verifiable. Cause: Inadequate procedures. Effect: Noncompliance with Federal requirements, which could lead to Federal sanctions. Recommendation: We recommend the Agency implement procedures to ensure matching amounts are adequately supported and in accordance with Federal requirements. Management Response: The Agency partially agrees. In the reporting period under review, locally-provided match was insufficiently reported. However, the agency will substantiate additional match within the period of the cooperative agreement budget cycle so that total match over the five year period is sufficient to meet federal requirements.

Program: AL 93.268 - Immunization Cooperative Agreements; AL 93.323 - Epidemiology and Laboratory Capacity for Infectious Diseases (ELC); AL 93.558 - Temporary Assistance for Needy Families (TANF); AL 93.563 - Child Support Enforcement; AL 93.778 - Medical Assistance Program – Allowable Cost/Cost Principles Grant Number & Year: 19NH23IP922589, FFY 2022; 19NU50CK000547; FFY 2023; 2001NETANF, FFY 2020; 2201NECSES, FFY 2022; 2301NECSES, FFY 2023; 2305NE5ADM, FFY 2023 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR § 75.405(a) (October 1, 2022) states, in part, the following: A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. 45 CFR § 75.403 (October 1, 2022) provides the following, in relevant part: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. * * * * (g) Be adequately documented. See also §§ 75.300 through 75.309. Per 45 CFR § 75.303 (October 1, 2022): The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. 45 CFR § 75.430(i) (October 1, 2022) requires payroll expenses charged to Federal awards be based on official records that accurately reflect the work performed. Good internal control and sound accounting practices require policies and procedures to ensure that all payroll costs are properly recorded within the State Accounting System and allocated to the proper funding source for activities performed. Condition: The Agency did not have adequate procedures to ensure payroll charges were proper. Repeat Finding: No Questioned Costs: $91,150 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: We selected 31 employee paychecks paid with Federal funds. Twelve of the 31 tested had payroll charged to Child Support Enforcement. One employee tested was a Child Support Enforcement Worker through September 25, 2022, and changed positions to a Youth Security Specialist II on September 26, 2022. The employee’s payroll costs were not updated to be charged to cost center 25C40360 Youth Rehabilitation and Treatment Centers, which only records costs to the General fund. Instead, the employee’s payroll costs continued to be charged to cost center 25C21750 Child Support Operations. As a result, for the pay period tested, Child Support Enforcement was overcharged by $2,206. During the fiscal year, this employee had an additional $25,726 incorrectly charged to Child Support Enforcement. A Program Accuracy Specialist was recorded to the 25C43060 Child Support Enforcement cost center; however, the supervisor the employee worked with was not charged to this cost center. According to the supervisor, no employees under their management were assigned to read child support enforcement cases. As a result, for the pay period tested, Child Support Enforcement was overcharged by $1,704. During the fiscal year, this employee had an additional $27,976 incorrectly charged to Child Support Enforcement. We noted another Program Accuracy Specialist with this same supervisor also recorded to Child Support Enforcement. During the fiscal year, this employee had $30,670 incorrectly charged to Child Support Enforcement. We tested $20,143 Federal payroll charges to Child Support Enforcement and noted $3,910 in sampled questioned costs and $84,372 additional questioned costs. Federal payroll charges for Child Support Enforcement totaled $3,920,653. Six of the 31 employees tested had payroll charged to TANF. One employee was a Contract Procurement Manager whose payroll expense was split between State funds, TANF and Medicaid. The payroll costs were to be allocated based on a time study; however, the Agency had not completed a revised time study. Therefore, we were unable to ensure the grants were correctly charged. The Agency indicated no time study was done for the entirety of fiscal year 2023. We tested $9,557 Federal payroll charges to TANF and noted $99 in questioned costs. We tested $3,482 in Medicaid payroll charges and noted $197 in questioned costs. We tested the April 19, 2023, paycheck for an Epidemiology Surveillance Coordinator. Payroll expenses were allocated with 75% to the ELC grant and 25% to the Immunization grant. The Agency did not provide documentation to support how this split was determined. An email was provided on July 28, 2023, with a breakdown of the activities and hours the employee worked for each grant; however, the number of hours in the email did not agree to the hours worked per the paycheck. Additionally, to charge payroll expenses to a Federal grant, a timesheet or other official record that accurately reflects the work performed is required. We tested $3,692 Federal payroll charges to ELC and noted $1,929 in questioned costs. We tested $3,659 in Federal payroll charges to Immunization and noted $643 in questioned costs. Cause: Inadequate policies and procedures for review and documentation of payroll expenses. Additionally, the Agency did not change the cost center for one employee who changed positions. Effect: Without adequate documentation to support the allocation of costs, there is an increased risk of programs not being charged the proper amounts. Recommendation: We recommend the Agency improve procedures to ensure that employee pay is recorded correctly in the State Accounting System, and those costs are properly allocated and charged. Management Response: The Agency agrees.

Program: AL 93.268 - Immunization Cooperative Agreements; AL 93.323 - Epidemiology and Laboratory Capacity for Infectious Diseases (ELC); AL 93.558 - Temporary Assistance for Needy Families (TANF); AL 93.563 - Child Support Enforcement; AL 93.778 - Medical Assistance Program – Allowable Cost/Cost Principles Grant Number & Year: 19NH23IP922589, FFY 2022; 19NU50CK000547; FFY 2023; 2001NETANF, FFY 2020; 2201NECSES, FFY 2022; 2301NECSES, FFY 2023; 2305NE5ADM, FFY 2023 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR § 75.405(a) (October 1, 2022) states, in part, the following: A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. 45 CFR § 75.403 (October 1, 2022) provides the following, in relevant part: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. * * * * (g) Be adequately documented. See also §§ 75.300 through 75.309. Per 45 CFR § 75.303 (October 1, 2022): The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. 45 CFR § 75.430(i) (October 1, 2022) requires payroll expenses charged to Federal awards be based on official records that accurately reflect the work performed. Good internal control and sound accounting practices require policies and procedures to ensure that all payroll costs are properly recorded within the State Accounting System and allocated to the proper funding source for activities performed. Condition: The Agency did not have adequate procedures to ensure payroll charges were proper. Repeat Finding: No Questioned Costs: $91,150 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: We selected 31 employee paychecks paid with Federal funds. Twelve of the 31 tested had payroll charged to Child Support Enforcement. One employee tested was a Child Support Enforcement Worker through September 25, 2022, and changed positions to a Youth Security Specialist II on September 26, 2022. The employee’s payroll costs were not updated to be charged to cost center 25C40360 Youth Rehabilitation and Treatment Centers, which only records costs to the General fund. Instead, the employee’s payroll costs continued to be charged to cost center 25C21750 Child Support Operations. As a result, for the pay period tested, Child Support Enforcement was overcharged by $2,206. During the fiscal year, this employee had an additional $25,726 incorrectly charged to Child Support Enforcement. A Program Accuracy Specialist was recorded to the 25C43060 Child Support Enforcement cost center; however, the supervisor the employee worked with was not charged to this cost center. According to the supervisor, no employees under their management were assigned to read child support enforcement cases. As a result, for the pay period tested, Child Support Enforcement was overcharged by $1,704. During the fiscal year, this employee had an additional $27,976 incorrectly charged to Child Support Enforcement. We noted another Program Accuracy Specialist with this same supervisor also recorded to Child Support Enforcement. During the fiscal year, this employee had $30,670 incorrectly charged to Child Support Enforcement. We tested $20,143 Federal payroll charges to Child Support Enforcement and noted $3,910 in sampled questioned costs and $84,372 additional questioned costs. Federal payroll charges for Child Support Enforcement totaled $3,920,653. Six of the 31 employees tested had payroll charged to TANF. One employee was a Contract Procurement Manager whose payroll expense was split between State funds, TANF and Medicaid. The payroll costs were to be allocated based on a time study; however, the Agency had not completed a revised time study. Therefore, we were unable to ensure the grants were correctly charged. The Agency indicated no time study was done for the entirety of fiscal year 2023. We tested $9,557 Federal payroll charges to TANF and noted $99 in questioned costs. We tested $3,482 in Medicaid payroll charges and noted $197 in questioned costs. We tested the April 19, 2023, paycheck for an Epidemiology Surveillance Coordinator. Payroll expenses were allocated with 75% to the ELC grant and 25% to the Immunization grant. The Agency did not provide documentation to support how this split was determined. An email was provided on July 28, 2023, with a breakdown of the activities and hours the employee worked for each grant; however, the number of hours in the email did not agree to the hours worked per the paycheck. Additionally, to charge payroll expenses to a Federal grant, a timesheet or other official record that accurately reflects the work performed is required. We tested $3,692 Federal payroll charges to ELC and noted $1,929 in questioned costs. We tested $3,659 in Federal payroll charges to Immunization and noted $643 in questioned costs. Cause: Inadequate policies and procedures for review and documentation of payroll expenses. Additionally, the Agency did not change the cost center for one employee who changed positions. Effect: Without adequate documentation to support the allocation of costs, there is an increased risk of programs not being charged the proper amounts. Recommendation: We recommend the Agency improve procedures to ensure that employee pay is recorded correctly in the State Accounting System, and those costs are properly allocated and charged. Management Response: The Agency agrees.

Program: AL 93.323 – COVID-19 Epidemiology & Laboratory Capacity for Infectious Diseases – Allowability & Subrecipient Monitoring Grant Number & Year: NU50CK000547, period ending July 31, 2024 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Good internal control requires procedures to ensure payments are allowable and in accordance with Federal requirements. 45 CFR § 75.403 (October 1, 2022) requires costs to be reasonable, necessary, and adequately documented. 45 CFR § 75.404 (October 1, 2022) states, in part, the following: A cost is reasonable if, in its nature and amount, it does not exceed that which would be incurred by a prudent person under the circumstances prevailing at the time the decision was made to incur the cost. 45 CFR § 75.302(a) (October 1, 2022) requires the State to have accounting procedures sufficient to allow for “the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award.” 45 CFR § 75.352(d) (October 1, 2022) requires a pass-through entity to: “Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved.” 45 CFR § 75.511(b) (October 1, 2022) states, in relevant part, the following: The summary schedule of prior audit findings must report the status of all audit findings included in the prior audit’s schedule of findings and questioned costs. . . . * * * * (2) When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding’s recurrence and planned corrective action, and any partial corrective action taken. When corrective action taken is significantly different from corrective action previously reported in a corrective action plan or in the Federal agency’s or pass-through entity’s management decision, the summary schedule must provide an explanation. Neb. Rev. Stat. § 84-305(2) (Cum. Supp. 2022) states, in relevant part, the following: Upon receipt of a written request by the Auditor of Public Accounts for access to any information or records, the public entity shall provide to the auditor as soon as is practicable and without delay, but not more than three business days after actual receipt of the request, either (a) the requested materials or (b)(i) if there is a legal basis for refusal to comply with the request, a written denial of the request together with the information specified in subsection (1) of this section or (ii) if the entire request cannot with reasonable good faith efforts be fulfilled within three business days after actual receipt of the request due to the significant difficulty or the extensiveness of the request, a written explanation, including the earliest practicable date for fulfilling the request, and an opportunity for the auditor to modify or prioritize the items within the request. No delay due to the significant difficulty or the extensiveness of any request for access to information or records shall exceed three calendar weeks after actual receipt of such request by any public entity. (Emphasis added.) Condition: The Agency lacked adequate documentation to support that Epidemiology & Laboratory Capacity for Infectious Diseases (ELC) expenditures were allowable and in accordance with Federal requirements. A similar finding was noted in the prior audit. The Summary Schedule of Prior Audit Findings lists the status as complete. Repeat Finding: 2022-027 Questioned Costs: $236,188 known Statistical Sample: No Context: ELC expenditures for the fiscal year totaled $24,568,124. Of that amount, $11,575,904 comprised payments to subrecipients. We tested the three largest payments to subrecipients, totaling $2,935,844. We also tested the largest journal entry. We noted the following: • One subrecipient payment tested, totaling $747,489, lacked adequate documentation to ensure costs were in accordance with Federal cost principles. We noted questioned costs of $236,188. o Payments related to call center services did not have a contract, and there was no support for the percentage charged to the subaward. We requested information from the Agency on November 17, 2023, for the contract and allocation basis; however, as of January 31, 2024, no contract or additional information had been received. o Contract payments to a doctor to “furnish the full range of primary and preventive health care services” did not have support for the percentage charged to the subaward. The doctor was paid $27,052 monthly for a minimum of 14 days per month, and 50-60% of the payment was charged to the subaward. o Payroll and fringe benefits were not adequately supported, including $6,000 that appears to have been related to a loan reimbursement lacking adequate support that the amount was allowable or related to the subaward. Also, various fringe benefits were not adequately supported. The subrecipient was paid $1,645,791 during the fiscal year. • We tested a journal entry for $2,993,082 related to air purifiers and filters that were shipped directly to daycares and schools across the State. After the orders were placed in December 2022, the Agency completed no procedures to ensure that the entities received the items ordered until October 2023. A total of 1,978 air purifiers and 2,934 filters were ordered by 231 daycares and schools. We reviewed the orders and, on December 8, 2023, requested documentation to support that the 15 largest orders were received in full. The Agency provided us with emails confirming that 11 of those 15 orders were received. The emails did not provide any details about how many items were ordered or received, only that items were received. The 15 orders totaled $794,962 of the $2,993,082 journal entry, and the 4 orders not confirmed totaled $230,242. Initially, we questioned the costs of the orders for which the Agency was unable to confirm receipt. Then, on February 7, 2024, eight weeks after our original request, the Agency provided us with four additional emails, dated February 7, 2024, (13 months after the orders were received) indicating that the four recipients related to the questioned costs did receive their orders. Again, none of the emails contained details of how many items were, in fact, ordered or received. Cause: Inadequate procedures. Effect: Without adequate controls, there is an increased risk for misuse of funds and abuse or fraud to occur. Recommendation: We recommend the Agency implement procedures to ensure that costs are necessary, reasonable, and in accordance with Federal requirements and contract provisions. We further recommend implementing procedures to track orders that are paid by the Agency to ensure ordered items are received in full. Lastly, we recommend the Agency implement procedures to ensure compliance with § 84-305. Management Response: The Agency agrees.

Program: Various, including AL 93.575, 93.596 – CCDF Cluster; AL 93.558 – Temporary Assistance for Needy Families –– Reporting Grant Number & Year: Various, including 2301NECCDF, FFY 2023; 2101NETANF, FFY 2021 Federal Grantor Agency: Various, including U.S. Department of Health and Human Services Criteria: A good internal control plan requires: 1) adequate procedures to ensure the Schedule of Expenditures of Federal Awards (SEFA) is properly presented; and 2) the auditee to reconcile the SEFA to the financial statements to ensure the schedule is complete and accurate. Title 45 CFR § 75.510(b) (October 1, 2022) and Title 2 CFR § 200.510(b) (January 1, 2023) state in part: The auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee's financial statements which must include the total Federal awards expended . . . . At a minimum, the schedule must: * * * * (3) Provide total Federal awards expended for each individual Federal program . . . (4) Include the total amount provided to subrecipients from each Federal program. Neb. Rev. Stat. § 81-1111(1) (Reissue 2014) states, in part, the following: Subject to the supervision of the Director of Administrative Services, the Accounting Administrator shall have the authority to prescribe the system of accounts and accounting to be maintained by the state and its departments and agencies, develop necessary accounting policies and procedures, coordinate and approve all proposed financial systems, and manage all accounting matters of the state's central system. EnterpriseOne is the official accounting system of the State. Title 45 CFR § 75.511(a) (October 1, 2022) and 2 CFR § 200.511 (January 1, 2023) require the auditee to prepare a summary schedule of prior audit findings. Subsection (b)(2) of both regulations provides the following, as is relevant: When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding’s recurrence and planned corrective action, and any partial corrective action taken. Condition: Several programs did not have expenditures or the amount provided to subrecipients accurately reported on the SEFA. We notified Administrative Services of the errors, and the SEFA was subsequently adjusted. The Summary Schedule of Prior Audit Findings lists the status as “completed.” A similar finding was noted in the prior audit. Repeat Finding: 2022-018 Questioned Costs: None Statistical Sample: No Context: Administrative Services is responsible for managing the accounting matters of the State and certifies the data collection form for the Statewide Single Audit. Administrative Services compiles the SEFA from information provided by the individual agencies and submits it to the auditor. During our review, we noted the following: The Department of Health and Human Services (DHHS) did not accurately report expenditures for several programs, including underreporting AL 93.575 by $3,909,201, underreporting AL 93.596 by $7,416,246, and overreporting AL 93.558 by $11,325,447. The Department of Military underreported AL 21.027 by $920,874. The Department of Labor underreported AL 17.225 by $3,696,585. Twenty-three programs for various State agencies needed correction. The total expenditures and amounts provided to subrecipients originally reported and per the final SEFA were as follows: See Schedule of Findings and Questioned Costs for chart/table. Cause: Administrative Services did not have adequate procedures to ensure the accuracy of amounts not pulled directly from the accounting system. Administrative Services established a specific account code for aid to subrecipients, but not all agencies utilized this account code. Effect: Increased risk for the SEFA to be inaccurate, which could lead to Federal sanctions or programs not audited that should be. Recommendation: We recommend Administrative Services improve procedures to ensure the SEFA is complete and accurate. Management Response: We will continue to work with State teammates to ensure the SEFA is accurate and complete. The original total SEFA expenditures were 99.98% accurate. APA Response: We agree that SEFA adjustments were not significant in total. However, errors amounting to millions of dollars for individual programs are unquestionably significant to those programs. Such errors could result, moreover, in a program not being audited as a major program when it should be.

Program: AL 93.558 – Temporary Assistance for Needy Families; AL 93.563 – Child Support Enforcement; AL 93.568 – Low Income Home Energy Assistance (LIHEAP); AL 93.575 – Child Care and Development Block Grant; AL 93.658 – Foster Care Title IV-E; AL 93.778 – Medical Assistance Program; AL 10.561 – State Administrative Matching Grants for the Supplemental Nutrition Assistance Program – Allowable Costs/Cost Principles Grant Number & Year: 2001NETANF, FFY 2020; 2301NECSES, FFY 2023; 2301NELIEA, FFY 2023; 2301NECCDD, FFY 2023; 2301NEFOST, FFY 2023; 2305NE5ADM, FFY 2023; 233NE406S2514, FFY 2023 Federal Grantor Agency: U.S. Department of Health and Human Services and U.S. Department of Agriculture Criteria: 45 CFR § 75.405(a) (October 1, 2022) and 2 CFR § 200.405 (January 1, 2023) state, in part, the following: A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. 45 CFR § 75.403 (October 1, 2022) and 2 CFR § 200.403 (January 1, 2023) provide the following, in relevant part: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. * * * * (g) Be adequately documented. See also §§ 75.300 through 75.309. Per 45 CFR § 75.303 (October 1, 2022) and 2 CFR § 200.303 (January 1, 2023), The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Title 45 CFR § 75.302 (October 1, 2022) and 2 CFR § 200.302 (January 1, 2023) require financial management systems of the State sufficient to permit preparation of required reports and permit the tracing of funds to expenditures adequate to establish the use of these funds were in accordance with applicable regulations. EnterpriseOne is the official accounting system for the State of Nebraska, and all expenditures are generated from it. Good internal control requires procedures to ensure that amounts charged to Federal funds are proper. Condition: Procedures to ensure journal entries and adjustments to the Public Assistance Cost Allocation Plan (PACAP) were not adequate, resulting in multiple Federal programs being overcharged. Repeat Finding: No Questioned Costs: $581,496 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: Each quarter, as the PACAP is prepared, the Agency makes multiple adjustments for costs that either were charged to Federal funds and should not have been, or costs that were not charged to Federal funds but are claimable to a Federal grant. We tested five adjustments between two quarters. One adjustment tested for the quarter ended December 31, 2022, was recorded to charge the Foster Care grant for allowable costs incurred by the Foster Care Review Office (FCRO), a separate agency. The amounts provided by FCRO erroneously included payroll charges from a previous quarter, inflating the amount charged. The FCRO later caught the mistake and adjusted the internal spreadsheet but did not alert the Agency to the error, so a correcting adjustment was never made to the PACAP. The amount charged was $353,984; however, the adjustment should have been $212,725, a difference of $141,259. Foster Care is matched at 50%, so the grant was overcharged $70,629, which are questioned costs. Due to this error, we reviewed a second Foster Care adjustment for the quarter ending March 31, 2023, and noted the Agency’s calculation included amounts for a State funded program that should have been removed, resulting in the grant being overcharged an additional $1,561. We also tested six journal entries that moved costs between cost centers to determine any impact on the PACAP and if those journal entries were appropriate. We noted three improper journal entries that the Agency had not corrected as of the end of the fiscal year: • A journal entry for $526,487 was performed in November 2022 to temporarily move postage costs of multiple programs from State funds to the Child Support Enforcement (CSE) grant until new coding could be created in the State’s accounting system to track expenses from one fiscal year to another. The intent was to reverse the entry as soon as the new coding was completed; however, the reversing entry was never performed. Since the Agency performs a quarterly adjustment for the CSE grant to charge indirect costs identified by the Agency’s PACAP to the grant, the CSE grant was overcharged a total of $263,628. No correcting entry had been made as of September 30, 2023. These are considered questioned costs. • A journal entry for $207,369 was performed in December 2022 to move expenses to allow payroll to post. The intent was to reverse the entry before the end of the fiscal year; however, that was not done. The expenses were moved from Medicaid administration and were charged to the Central Services and Supplies Cost Center, which is then allocated to numerous other Cost Centers that are further allocated or charged directly to Federal programs such as TANF and Child Care. Due to the intricacies of PACAP allocations, exact questioned costs are unknown. No correcting entry was made as of September 30, 2023. • A journal entry for $5,317,640 was done in February 2023 to move Premium Pay to the Coronavirus State and Local Fiscal Recovery Funds (CSLFRF) grant as additional pay for certain job roles allowed under that grant. However, the entry performed included some lines that were miscoded, most significantly a line for $764,187 that was supposed to move money within the same Cost Center (CC 25C21910 – Field Office Administration); however, it pulled costs out of Cost Center 25C21780 - Protection and Safety Policy Chief instead. Additionally, we confirmed with the Agency that the costs charged to CC 25C21910 under the CSLFRF grant were also allocated to other Federal programs through the PACAP, essentially charging Federal programs twice. Due to the intricacies of the PACAP allocations, total questioned costs are unknown; however, we were able to determine that this error caused Medicaid to be overcharged $149,478, LIHEAP to be overcharged $33,447, SNAP to be overcharged $44,984, Child Care to be overcharged $10,412, and TANF to be overcharged $7,357. Cause: Inadequate procedures to ensure that adjustments to the PACAP are proper and that journal entries are appropriate for each program. Effect: Unallowable expenditures were charged to Federal funds and there is an increased risk for errors, fraud, and non-compliance with Federal regulations. Recommendation: We recommend the Agency strengthen procedures to ensure adjusting entries are complete and accurate. We further recommend the Agency strengthen procedures to ensure compliance with Federal regulations. Management Response: The Agency agrees.

Program: AL 93.268 - Immunization Cooperative Agreements; AL 93.323 - Epidemiology and Laboratory Capacity for Infectious Diseases (ELC); AL 93.558 - Temporary Assistance for Needy Families (TANF); AL 93.563 - Child Support Enforcement; AL 93.778 - Medical Assistance Program – Allowable Cost/Cost Principles Grant Number & Year: 19NH23IP922589, FFY 2022; 19NU50CK000547; FFY 2023; 2001NETANF, FFY 2020; 2201NECSES, FFY 2022; 2301NECSES, FFY 2023; 2305NE5ADM, FFY 2023 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR § 75.405(a) (October 1, 2022) states, in part, the following: A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. 45 CFR § 75.403 (October 1, 2022) provides the following, in relevant part: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. * * * * (g) Be adequately documented. See also §§ 75.300 through 75.309. Per 45 CFR § 75.303 (October 1, 2022): The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. 45 CFR § 75.430(i) (October 1, 2022) requires payroll expenses charged to Federal awards be based on official records that accurately reflect the work performed. Good internal control and sound accounting practices require policies and procedures to ensure that all payroll costs are properly recorded within the State Accounting System and allocated to the proper funding source for activities performed. Condition: The Agency did not have adequate procedures to ensure payroll charges were proper. Repeat Finding: No Questioned Costs: $91,150 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: We selected 31 employee paychecks paid with Federal funds. Twelve of the 31 tested had payroll charged to Child Support Enforcement. One employee tested was a Child Support Enforcement Worker through September 25, 2022, and changed positions to a Youth Security Specialist II on September 26, 2022. The employee’s payroll costs were not updated to be charged to cost center 25C40360 Youth Rehabilitation and Treatment Centers, which only records costs to the General fund. Instead, the employee’s payroll costs continued to be charged to cost center 25C21750 Child Support Operations. As a result, for the pay period tested, Child Support Enforcement was overcharged by $2,206. During the fiscal year, this employee had an additional $25,726 incorrectly charged to Child Support Enforcement. A Program Accuracy Specialist was recorded to the 25C43060 Child Support Enforcement cost center; however, the supervisor the employee worked with was not charged to this cost center. According to the supervisor, no employees under their management were assigned to read child support enforcement cases. As a result, for the pay period tested, Child Support Enforcement was overcharged by $1,704. During the fiscal year, this employee had an additional $27,976 incorrectly charged to Child Support Enforcement. We noted another Program Accuracy Specialist with this same supervisor also recorded to Child Support Enforcement. During the fiscal year, this employee had $30,670 incorrectly charged to Child Support Enforcement. We tested $20,143 Federal payroll charges to Child Support Enforcement and noted $3,910 in sampled questioned costs and $84,372 additional questioned costs. Federal payroll charges for Child Support Enforcement totaled $3,920,653. Six of the 31 employees tested had payroll charged to TANF. One employee was a Contract Procurement Manager whose payroll expense was split between State funds, TANF and Medicaid. The payroll costs were to be allocated based on a time study; however, the Agency had not completed a revised time study. Therefore, we were unable to ensure the grants were correctly charged. The Agency indicated no time study was done for the entirety of fiscal year 2023. We tested $9,557 Federal payroll charges to TANF and noted $99 in questioned costs. We tested $3,482 in Medicaid payroll charges and noted $197 in questioned costs. We tested the April 19, 2023, paycheck for an Epidemiology Surveillance Coordinator. Payroll expenses were allocated with 75% to the ELC grant and 25% to the Immunization grant. The Agency did not provide documentation to support how this split was determined. An email was provided on July 28, 2023, with a breakdown of the activities and hours the employee worked for each grant; however, the number of hours in the email did not agree to the hours worked per the paycheck. Additionally, to charge payroll expenses to a Federal grant, a timesheet or other official record that accurately reflects the work performed is required. We tested $3,692 Federal payroll charges to ELC and noted $1,929 in questioned costs. We tested $3,659 in Federal payroll charges to Immunization and noted $643 in questioned costs. Cause: Inadequate policies and procedures for review and documentation of payroll expenses. Additionally, the Agency did not change the cost center for one employee who changed positions. Effect: Without adequate documentation to support the allocation of costs, there is an increased risk of programs not being charged the proper amounts. Recommendation: We recommend the Agency improve procedures to ensure that employee pay is recorded correctly in the State Accounting System, and those costs are properly allocated and charged. Management Response: The Agency agrees.

Program: AL 93.558 – Temporary Assistance for Needy Families (TANF) – Allowability & Eligibility Grant Number & Year: 2001NETANF, FFY 2020; 2101NETANF, FFY 2021 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 45 CFR § 75.403 (October 1, 2022), costs must be necessary, reasonable, and adequately documented. Per Nebraska’s Combined State Plan (Program Years 2020-2023): DHHS will use TANF funds to support an array services to assist needy families with children so that children can be cared for in their own homes . . . . The eligibility criteria will be needs based as indicated by the family’s program eligibility status for Aid to Dependent Children (ADC), Supplemental Nutrition Assistance Program (SNAP), SSI or Medicaid. Medicaid eligibility will be based on parent income and not state ward status of an identified child. Per 45 CFR § 75.302(a) (October 1, 2022): Each state must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state's own funds. In addition, the state's and the other non- Federal entity's financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. Per 45 CFR § 75.303(a) (October 1, 2022) the non-Federal agency must do the following: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Good internal control requires procedures to ensure compliance with Federal regulations. Condition: Child welfare claims paid with TANF funds were not in accordance with State and Federal requirements. A similar finding was noted in the prior audit. Repeat Finding: 2022-029 Questioned Costs: $3,426 known (2001NETANF, $2,853; 2101NETANF, $573) Statistical Sample: No Context: The State Plan allows for payment of certain child welfare costs from Federal TANF funds. To identify eligible claims, the Agency performs a query of the NFOCUS system to pull claims for certain services (e.g., family support services, intensive family preservations and drug testing) for families in an active TANF, SNAP, or Medicaid case or an SSI recipient. The Agency transferred $4,203,769 from State general funds to Federal TANF funds during fiscal year 2023. We reviewed the NFOCUS detail and noted 3,571 claims totaling $1,011,922 charged to TANF identified as no active TANF, SNAP, or Medicaid case. We selected 10 of these claims, totaling $3,426, and reviewed the case eligibility information on NFOCUS. For all 10 claims tested, there was no active TANF, SNAP, or Medicaid case or SSI for the family and/or no child in the home at the time of service; therefore, per the State Plan, these claims were not eligible. The known questioned costs for claims tested was $3,426. The potential dollars at risk is $1,011,922 identified as no active TANF, SNAP, or Medicaid case. Cause: Inadequate review procedures. The NFOCUS detailed active program cases, but the Agency failed to exclude those cases that were not active for TANF, SNAP, or Medicaid. Effect: Without adequate controls to ensure claims are paid per Federal requirements, there is an increased risk for loss or misuse of funds. Recommendation: We recommend the Agency improve procedures to ensure compliance with the Federal requirements. Management Response: The Agency agrees.

Program: AL 93.558 – Temporary Assistance for Needy Families (TANF) – Allowability & Eligibility Grant Number & Year: 2001NETANF, FFY 2020; 2101NETANF, FFY 2021 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 45 CFR § 75.403 (October 1, 2022), costs must be necessary, reasonable, and adequately documented. Per 42 U.S.C. § 608(a)(4), “A State . . . shall not use any part of the grant to provide assistance to an individual who has not attained 18 years of age, is not married, has a minor child at least 12 weeks of age in his or her care, and has not successfully completed a high-school education (or its equivalent), if the individual does not participate in – (A) educational activities directed toward the attainment of a high school diploma or its equivalent; or (B) an alternative educational or training program that has been approved by the State.” The Nebraska State Plan for TANF, effective from July 1, 2020 to June 30, 2024, states, “Failure of a dependent child age 16, 17, or 18 to attend school without participating in any other Employment First approved work activity results in removal of the child’s needs from the ADC unit.” Title 468 NAC 4-002.01(D) states that a work-eligible individual includes “A dependent child age 16, 17, or 18 who quits school or reduces hours under full-time status according to the educational institution’s standards. This dependent child remains a work-eligible individual even if he or she returns to school.” Per Title 468 NAC 4-002.02(F), a "dependent child age 16, 17, or 18” may be excluded as a work-eligible individual if he or she is “a full-time student and regularly attending an elementary or secondary school according to the educational institution’s standards . . . . If the child is enrolled full-time for the next school term, the child’s attendance in the first month of the school term must be verified.” Title 465 NAC 2-001.02A, states, in relevant part, the following: The applicant or client must request a fair hearing within 90 days following the date the notice of adverse action is mailed. . . . If the client submits a request for a hearing within ten days following the date the notice is mailed, the staff shall not take the adverse action until a fair hearing decision is rendered. Per Title 468 NAC 4-010.02(A), “If the parent fails or refuses to participate in Employment First without good cause, the result is the loss of Aid to Dependent Children cash assistance for the entire family.” Title 468 NAC 4-010.02(A)(i)(1) outlines the length of each sanction: If the individual who has failed or refused to participate in EF is a parent, the sanctions will be as follows: (i) The first imposition of a sanction will last one month or until the failure to participate ceases, whichever is longer. (ii) The second sanction will last for three months or until the failure to participate ceases, whichever is longer. (iii) The third and subsequent sanctions must not be imposed without a second-level supervisory review. This sanction will last for a minimum of 12 months or until the failure to participate ceases, whichever is longer. Per Title 468 NAC 3-008.05(B)(ii), “All overpayments, regardless of cause, must be recouped if there is an active Aid to Dependent Children grant case or a recovery must be attempted from a closed grant case, if the outstanding overpayment amount is $35 or more.” A good internal control plan requires eligibility determinations and payments to be accurate. Condition: Three of 25 TANF cash assistance payments tested were not in compliance with State and Federal requirements. Repeat Finding: 2022-030 Questioned Costs: $1,216 known (2001NETANF, $654; 2101NETANF, $562) Statistical Sample: No Context: For two cases tested, the Agency failed to verify that a dependent child was a full-time student regularly attending school. The dependent child should have been removed from the family unit until such verification was received. For one case, the school status for a 17-year-old dependent was not verified, resulting in questioned costs of $77 for the January 2023 benefit payment tested and an additional $346 in questioned costs for benefit payments for August 2022 through December 2022. For the second case, the school status for a 16-year-old dependent was not verified, resulting in questioned costs of $77 for the February 2023 benefit payment tested and an additional $308 in questioned costs for benefit payments for November 2022 through January 2023 and March 2023. For another case tested, the March 2023 benefit payment should not have been issued to the client, resulting in questioned costs of $408. A third Employment First sanction was imposed on February 10, 2023, effective March 1, 2023, and the case was closed. The Notice of Action regarding the adverse action was mailed to the client on February 13, 2023. The client appealed the sanction; however, the request for fair hearing form was not received by the Agency until March 6, 2023 – 21 days after the Notice of Action was mailed. The worker processed the March 2023 benefit payment on March 7, 2023, even though the appeal request form was not submitted in 10 days. The error was identified by the Agency on March 8, 2023, and the case was closed again as of April 1, 2023. The appeal hearing was held on April 3, 2023, and on April 7, 2023, the Employment First sanction was affirmed, and the case remained closed. As of end of fieldwork on October 25, 2023, no overpayment has been established. Federal payment errors noted in the sample were $562 with additional out-of-sample questioned costs of $654. The Federal sample tested was $10,028, and the total Federal cash assistance expenditures during the fiscal year were $13,140,182. Based on the sample tested, the case error rate was 12% (3/25). The dollar error rate was 5.6% ($562/$10,028), which projects the potential dollars at risk for fiscal year 2023 to be $735,850. Cause: Worker error. Effect: Increased risk that Federal funds will be paid to ineligible individuals. Recommendation: We recommend that the Agency implement procedures to ensure compliance with State and Federal regulations. Management Response: The Agency agrees.

Program: AL 93.558 – Temporary Assistance for Needy Families (TANF) – Reporting Grant Number & Year: 2101NETANF, FFY 2021; 2201NETANF, FFY 2022 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 45 CFR § 75.302(a) (October 1, 2022): Each state must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state's own funds. In addition, the state's and the other non- Federal entity's financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. Per 42 USC § 611, each State must “collect on a monthly basis, and report to the Secretary on a quarterly basis,” case record information on the families receiving TANF assistance. 45 CFR § 265.3(a) (October 1, 2022) states the following: (1) Each State must collect on a monthly basis, and file on a quarterly basis, the data specified in the TANF Data Report and the TANF Financial Report (or, as applicable, the Territorial Financial Report). (2) Each State that claims MOE expenditures for a separate State program(s) must collect on a monthly basis, and file on a quarterly basis, the data specified in the SSP-MOE Data Report. 45 CFR § 265.7(a) (October 1, 2022) states the following: Each State's quarterly reports (the TANF Data Report, the TANF Financial Report (or Territorial Financial Report), and the SSP-MOE Data Report) must be complete and accurate and filed by the due date. The TANF Data Report instructions contain the following: For purposes of completing this report, include all TANF eligible families receiving assistance (i.e., families funded under the TANF block grant and State MOE funded TANF families) as families receiving assistance under the State (Tribal) TANF Program. All counts of families and recipients should be unduplicated monthly totals. * * * * Instruction: Enter the number of families receiving assistance under the State (Tribal) TANF Program for each month of the quarter. A. First Month: B. Second Month: C. Third Month: Good internal control requires procedures to ensure reports are accurate, and any issues are resolved in a timely manner. Condition: The Agency was unable to provide a detail of cases to support the Section Three Total Number of SSP-MOE Families. Also, issues noted during the Agency’s review were not resolved timely. A similar finding was noted in the prior audit. Repeat Finding: 2022-031 Questioned Costs: None Statistical Sample: No Context: We tested the total number of families reported on the ACF-199 and ACF-209 reports for September 2022 and February 2023. We asked the Agency to provide the detail of unduplicated families for those months. The Agency provided four Notepad text files for each month. The auditor copied the files to Excel and removed duplicate cases; however, the number of families per the Notepad files did not agree to the number of families reported for the ACF-209 reports. September 2022 Total SSP-MOE families reported was 310, and the number of families per the Notepad files was 388. February 2023 Total SSP-MOE families reported was 1,111, and the number of families per the Notepad files was 412. Program staff review a sample each month of three 199 reports and three 209 reports. Issues noted were sent to the Agency IT staff. One of the issues noted was that closed cases appeared on the reports. This issue was noted prior to May 2021 but had not been resolved by the IT staff as of October 31, 2023. Cause: Adequate resources were not devoted to correcting reporting errors noted. Effect: Increased risk for inaccurate reporting and non-compliance with Federal requirements. Recommendation: We recommend the Agency implement procedures to ensure reports are accurate, and any system issues are resolved in a timely manner. Management Response: The Agency agrees.

Program: AL 93.558 – Temporary Assistance for Needy Families (TANF) – Allowability & Subrecipient Monitoring Grant Number & Year: 2001NETANF, FFY 2020 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR § 75.352 (October 1, 2022) requires a pass-through entity to do the following: (d) Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; . . . * * * * (f) Verify that every subrecipient is audited as required by subpart F of this part when it is expected that the subrecipient's Federal awards expended during the respective fiscal year equaled or exceeded the threshold set forth in § 75.501. 45 CFR § 75.403 (October 1, 2022) requires costs be reasonable, necessary, determined in accordance with generally accepted accounting principles (GAAP) and adequately documented. 45 CFR § 75.430(i)(1) (October 1, 2022) provides the following, in relevant part: (1) Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-Federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non-Federal entity, not exceeding 100% of compensated activities (for IHE, this per the IHE's definition of IBS); (iv) Encompass both federally assisted and all other activities compensated by the non-Federal entity on an integrated basis, but may include the use of subsidiary records as defined in the non-Federal entity's written policy; * * * * (vii) Support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. (viii) Budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards . . . [.] Per 45 CFR § 75.431(c) (October 1, 2022): The cost of fringe benefits . . . must be allocated to Federal awards and all other activities in a manner consistent with the pattern of benefits attributable to the individuals or group(s) of employees whose salaries and wages are chargeable to such Federal awards and other activities, and charged as direct or indirect costs in accordance with the non-Federal entity's accounting practices. Per the subaward agreement, “Under this Subaward, DHHS shall only pay for actual and allowable costs.” Good internal control requires procedures to ensure State and Federal requirements are met. Condition: Subrecipient monitoring procedures should be improved. Repeat Finding: No Questioned Costs: $10,921 known Statistical Sample: No Context: We requested the financial monitoring files for two subrecipients. The Agency performed financial desk reviews for subrecipients; however, the reviews tested were not adequate. When desk reviews did not maintain adequate documentation, we provided the Agency with the opportunity to obtain additional support from the subrecipient. We tested one payment for each of the two subrecipients and noted the following: • One payment did not have adequate support for salaries and benefits. Time records did not reflect the total activity for employees. Additionally, fringe benefits were based on budgeted amounts, not actual costs. The payment tested was $110,492, and we question $2,963. The subrecipient was paid $1,750,753 during the fiscal year. We further noted this subrecipient should have had a Single audit submitted for fiscal year ended June 30, 2022, by March 31, 2023; however, none had been submitted. After our inquiry, the Agency followed up with the subrecipient on October 25, 2023, and the subrecipient stated the fiscal year 2022 audit had not yet been completed. • A second payment tested did not have adequate support. Time records did not reflect the total activity for employees, and there was not adequate support for employees who worked on more than one activity. Also, an overbilling was not corrected. The payment tested was for $114,895, and we question $7,958. The subrecipient was paid $1,426,186 during the fiscal year. Fourteen subrecipients were paid a total of $15,223,886 during the fiscal year. Cause: Inadequate review and staff turnover. Effect: Noncompliance with Federal regulations and increased risk for fraud or errors to occur. Recommendation: We recommend the Agency improve procedures to ensure compliance with Federal regulations, including cost principles. We further recommend the Agency improve procedures to ensure that subrecipients have a Single audit completed and submitted, as required. Management Response: The Agency agrees.

Program: Various, including AL 93.778 – Medical Assistance Program (Medicaid), and AL 93.563 – Child Support Enforcement – Allowable Costs/Cost Principles Grant Number & Year: Various, including 2205NE5ADM, FFY 2022; 2201NECSES, FFY 2022 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 2 CFR § 200.403 (January 1, 2023) and 45 CFR § 75.403 (October 1, 2022) state, in relevant part, the following: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: * * * * (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. * * * * (g) Be adequately documented. 2 CFR § 200.405(b) (January 1, 2023) and 45 CFR § 75.405(b) (October 1, 2022) state, in relevant part, the following: All activities which benefit from the non-Federal entity’s indirect (F&A) cost, including unallowable activities and donated services by the non-Federal entity or third parties, will receive an appropriate allocation of indirect costs. 2 CFR § 200, Appendix V, subsection (G)(2), (January 1, 2023) and 45 CFR § 75 Appendix V, subsection (G)(2), (October 1, 2022) state the following: Internal service funds are dependent upon a reasonable level of working capital reserve to operate from one billing cycle to the next. Charges by an internal service activity to provide for the establishment and maintenance of a reasonable level of working capital reserve, in addition to the full recovery of costs, are allowable. A working capital reserve as part of retained earnings of up to 60 calendar days cash expenses for normal operating purposes is considered reasonable. A working capital reserve exceeding 60 calendar days may be approved by the cognizant agency for indirect costs in exceptional cases. 2 CFR § 200, Appendix V, subsection (G)(4), (January 1, 2023) and 45 CFR § 75 Appendix V, subsection (G)(4), (October 1, 2022) state, in relevant part, the following: Billing rates used to charge Federal awards must be based on the estimated costs of providing the services, including an estimate of the allocable central service costs. A comparison of the revenues generated by each billed service (including revenues whether or not billed or collected) to the actual allowable costs of the service will be made at least annually and an adjustment will be made for the difference between the revenue and the allowable costs. Neb. Rev Stat. § 81-1120.22 (Cum. Supp. 2022) states the following: The Director of Communications shall develop a system of equitable billings and charges for communications services provided in any consolidated or joint-use system of communications. Such system of charges shall reflect, as nearly as may be practical, the actual share of costs incurred on behalf of or for services to each department, agency, or political subdivision provided communications services. Using agencies shall pay for such services out of appropriated or available funds. Beginning July 1, 2011, all payments shall be credited to the Communications Revolving Fund. Beginning July 1, 2011, all collections for payment of telephone expenses shall be credited to the Communications Revolving Fund. 2 CFR § 200.444(a) (January 1, 2023) and 45 CFR § 75.444(a) (October 1, 2022) state, in relevant part, the following: For states . . . the general costs of government are unallowable . . . . Unallowable costs include: (1) Salaries and expenses of the Office of the Governor of a state . . . . (2) Salaries and other expenses of a state legislature . . . . A good internal control plan requires: • Procedures to ensure rate charges are equitable, reflect actual costs incurred, and are reviewed periodically to ensure charges are appropriate for the services provided. • Adequate documentation is maintained to support both rates charged and the approval of those rates. Condition: The Agency did not have adequate documentation to support the allocation of information services and communications costs in developing rates charged by the Office of the Chief Information Officer (OCIO). Additionally, the OCIO did not maintain adequate documentation to support that charges were reasonable, equitable, and consistently applied. We also noted the Agency did not have adequate documentation to support the allocation of security costs in developing building rental rates, and the Agency’s Materiel Division did not maintain adequate documentation to support that charges were reasonable, equitable, and consistently applied. A similar finding has been noted in prior audits since 2015. Repeat Finding: 2022-017 Questioned Costs: Unknown Statistical Sample: No Context: We noted the following: Office of the Chief Information Officer (OCIO) For 6 of 14 OCIO rates selected for testing, documentation provided by the division was not adequate to support the rate charged. • Five of the rates selected utilized an employee time allocation spreadsheet prepared by the OCIO. The spreadsheet was prepared by supervisors utilizing an estimate of how much time each year every employee spends on services provided by the division. During testing, it was noted that these estimates are not backed by a time study, nor is a review of actual hours worked on each service completed by the division. • For one rate selected, we identified variances between the total for networking equipment used in the calculation of the rate charged and the totals per the supporting documentation provided, netting to $1,313,693. When asked about the variances, the OCIO was unable to explain why the amounts did not agree. • For one rate tested, the rate included equipment and maintenance costs incurred by the University of Nebraska (University). The fee was related to the network operated and maintained by Network Nebraska (a collaborative aggregation partnership between the OCIO, the University, and the Nebraska Educational Telecommunications commission). The OCIO receipts funds from the services provided to participants on the network. However, it was noted during testing that the OCIO does not pay the University for its portion of costs incurred for this fee. Per documentation provided to support the calculation of the rate charged, the University incurs $582,049 of the total annual costs of $788,510. For 8 of 14 OCIO rates selected for testing, the rate charged was not reasonable or was improper. • For the six rates previously mentioned above, we were unable to determine if the rate was proper due to the lack of supporting documentation. • For one rate tested, we noted that actual costs incurred for the service provided recalculated to 40 cents per unit. The OCIO charged 22 cents per unit for the service. Total units sold for the service in calendar year 2022 were 39,348,448, resulting in an expected loss of $7,165,169. • For one rate tested, we noted that the rate calculation included employee salaries as a base for costs incurred. Per the calculation, the OCIO utilized salaries that were effective as of January 1, 2018. We compared the hourly compensation for a sample of employees at January 1, 2018, and as of July 1, 2021. During this period, we noted an average pay increase of 9.1% for the employees selected; thus, the rate charged is inappropriate per the actual costs incurred for providing the service. For 3 of 15 OCIO receipts tested, documentation provided was not adequate to support the rate charged. • For one receipt tested, we noted that the OCIO did not charge from an outside communications provider at the same rate that was shown on the invoice from the provider. These rates were “Re-rated” by the OCIO and then charged to the agency. The OCIO could not provide support for how the re-rates were determined. The APA selected seven rates from the OCIO billing to trace to support, and five of those rates could not be traced back to the provider invoice. Of the total payment of $116,175, $11,397 was charged at a rate that could not be traced to support. • For one receipt tested, we noted that the amount charged for a monthly Supreme Court retainer fee of $56,250 is determined by a rate calculated by the OCIO, but the OCIO could not provide support for the amounts used in the calculation. • For one receipt tested, $9,057 was charged for IT Support. This was based on an employee’s annual salary being paid 90% by the agency and 10% by the OCIO. The OCIO could not provide supporting documentation for how the 90/10 split was determined. In addition to the testing mentioned previously, we asked the OCIO how rates are calculated and what procedures are performed to ensure that the rates are appropriate. Most of the rates selected for testing were last updated in 2020. The staff that created these rates are no longer with the OCIO due to turnover. The OCIO reviews each rate on a yearly basis to determine if the amount charged is appropriate based on actual costs incurred. However, no documentation on the individual rate setting processes was developed or maintained when the rates were initially created.  The APA reviewed the OCIO’s fund balances and found them to be compliant with Federal regulations. However, because some rates charged are improper or inadequately supported, there is a risk of some Federal programs being overcharged and some being undercharged. The OCIO receipted $36,684,244 in Federal dollars for services performed for Federal programs. Of this amount, $16,480,956 was charged to Medicaid, and $4,597,226 was charged to Child Support Enforcement. Building Division The rental rate charged to agencies for building space includes an allocation for indirect administrative costs, grounds keeping, security, and energy management. We noted that security costs were allocated for neither the Capitol nor the Governor’s residence, even though security is provided at those locations. Because those locations were not allocated any security costs, Federal programs could be overcharged. Additionally, security costs for the Capitol and the Governor’s residence are general costs of government and, therefore, not allowable. The fiscal year 2023 indirect allocations for security were $785,709. Print Shop As noted in prior audits, the Print Shop lacked adequate support for service rates charged. The Agency was in the process of developing new rates using a new methodology, but no changes were made for fiscal year 2023. Receipts from sales for fiscal year 2023 totaled $3,058,910. Cause: Inadequate procedures. Per the Agency, the methodology used to allocate the security allocation is based on a management decision; however, management cannot simply choose to disregard Federal regulations. Effect: When information services and communications costs are not allocated to all agencies in an equitable manner, there is an increased risk that Federal programs will not be charged in accordance with Federal cost principles. Additionally, without adequate controls and procedures to ensure rates are equitable and based on actual costs, there is an increased risk that Federal programs or State agencies will be overcharged for services. When security costs are not allocated to all buildings in an equitable manner, Federal programs will not be charged in accordance with Federal cost principles. Recommendation: We recommend the Agency review its allocation of information and communications costs to ensure that the costs are allocated in an equitable manner to all activities that benefit from the services. Additionally, we recommend the Agency maintain adequate documentation to support charges and ensure rates are equitable and reflect the actual costs incurred for services. We also recommend the Agency improve procedures to ensure that published rates are the actual rates charged. Lastly, we recommend the Agency review its allocation of security costs to ensure that the costs are allocated in an equitable manner to all activities that benefit from the services, in accordance with Federal regulations. Management Response: The OCIO agrees with the findings as identified by the APA. The Building and Grounds security allocation is based on a management business decision. The Print Shop lacked the data needed to substantiate published rates at the individual service line level. In response to prior findings, the Print Shop purchased a Cost Rate Advisor license to support future rate setting methodology at the individual service line level. That tool is currently being utilized to build Print Shop rates for the fiscal year 2026 - 2027 biennium. APA Response: As noted above, security costs for the Capitol and the Governor’s residence are general costs of government; therefore, despite any management business decision, such costs are not allowable.

Program: AL 93.558 – Temporary Assistance for Needy Families; AL 93.563 – Child Support Enforcement; AL 93.568 – Low Income Home Energy Assistance (LIHEAP); AL 93.575 – Child Care and Development Block Grant; AL 93.658 – Foster Care Title IV-E; AL 93.778 – Medical Assistance Program; AL 10.561 – State Administrative Matching Grants for the Supplemental Nutrition Assistance Program – Allowable Costs/Cost Principles Grant Number & Year: 2001NETANF, FFY 2020; 2301NECSES, FFY 2023; 2301NELIEA, FFY 2023; 2301NECCDD, FFY 2023; 2301NEFOST, FFY 2023; 2305NE5ADM, FFY 2023; 233NE406S2514, FFY 2023 Federal Grantor Agency: U.S. Department of Health and Human Services and U.S. Department of Agriculture Criteria: 45 CFR § 75.405(a) (October 1, 2022) and 2 CFR § 200.405 (January 1, 2023) state, in part, the following: A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. 45 CFR § 75.403 (October 1, 2022) and 2 CFR § 200.403 (January 1, 2023) provide the following, in relevant part: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. * * * * (g) Be adequately documented. See also §§ 75.300 through 75.309. Per 45 CFR § 75.303 (October 1, 2022) and 2 CFR § 200.303 (January 1, 2023), The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Title 45 CFR § 75.302 (October 1, 2022) and 2 CFR § 200.302 (January 1, 2023) require financial management systems of the State sufficient to permit preparation of required reports and permit the tracing of funds to expenditures adequate to establish the use of these funds were in accordance with applicable regulations. EnterpriseOne is the official accounting system for the State of Nebraska, and all expenditures are generated from it. Good internal control requires procedures to ensure that amounts charged to Federal funds are proper. Condition: Procedures to ensure journal entries and adjustments to the Public Assistance Cost Allocation Plan (PACAP) were not adequate, resulting in multiple Federal programs being overcharged. Repeat Finding: No Questioned Costs: $581,496 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: Each quarter, as the PACAP is prepared, the Agency makes multiple adjustments for costs that either were charged to Federal funds and should not have been, or costs that were not charged to Federal funds but are claimable to a Federal grant. We tested five adjustments between two quarters. One adjustment tested for the quarter ended December 31, 2022, was recorded to charge the Foster Care grant for allowable costs incurred by the Foster Care Review Office (FCRO), a separate agency. The amounts provided by FCRO erroneously included payroll charges from a previous quarter, inflating the amount charged. The FCRO later caught the mistake and adjusted the internal spreadsheet but did not alert the Agency to the error, so a correcting adjustment was never made to the PACAP. The amount charged was $353,984; however, the adjustment should have been $212,725, a difference of $141,259. Foster Care is matched at 50%, so the grant was overcharged $70,629, which are questioned costs. Due to this error, we reviewed a second Foster Care adjustment for the quarter ending March 31, 2023, and noted the Agency’s calculation included amounts for a State funded program that should have been removed, resulting in the grant being overcharged an additional $1,561. We also tested six journal entries that moved costs between cost centers to determine any impact on the PACAP and if those journal entries were appropriate. We noted three improper journal entries that the Agency had not corrected as of the end of the fiscal year: • A journal entry for $526,487 was performed in November 2022 to temporarily move postage costs of multiple programs from State funds to the Child Support Enforcement (CSE) grant until new coding could be created in the State’s accounting system to track expenses from one fiscal year to another. The intent was to reverse the entry as soon as the new coding was completed; however, the reversing entry was never performed. Since the Agency performs a quarterly adjustment for the CSE grant to charge indirect costs identified by the Agency’s PACAP to the grant, the CSE grant was overcharged a total of $263,628. No correcting entry had been made as of September 30, 2023. These are considered questioned costs. • A journal entry for $207,369 was performed in December 2022 to move expenses to allow payroll to post. The intent was to reverse the entry before the end of the fiscal year; however, that was not done. The expenses were moved from Medicaid administration and were charged to the Central Services and Supplies Cost Center, which is then allocated to numerous other Cost Centers that are further allocated or charged directly to Federal programs such as TANF and Child Care. Due to the intricacies of PACAP allocations, exact questioned costs are unknown. No correcting entry was made as of September 30, 2023. • A journal entry for $5,317,640 was done in February 2023 to move Premium Pay to the Coronavirus State and Local Fiscal Recovery Funds (CSLFRF) grant as additional pay for certain job roles allowed under that grant. However, the entry performed included some lines that were miscoded, most significantly a line for $764,187 that was supposed to move money within the same Cost Center (CC 25C21910 – Field Office Administration); however, it pulled costs out of Cost Center 25C21780 - Protection and Safety Policy Chief instead. Additionally, we confirmed with the Agency that the costs charged to CC 25C21910 under the CSLFRF grant were also allocated to other Federal programs through the PACAP, essentially charging Federal programs twice. Due to the intricacies of the PACAP allocations, total questioned costs are unknown; however, we were able to determine that this error caused Medicaid to be overcharged $149,478, LIHEAP to be overcharged $33,447, SNAP to be overcharged $44,984, Child Care to be overcharged $10,412, and TANF to be overcharged $7,357. Cause: Inadequate procedures to ensure that adjustments to the PACAP are proper and that journal entries are appropriate for each program. Effect: Unallowable expenditures were charged to Federal funds and there is an increased risk for errors, fraud, and non-compliance with Federal regulations. Recommendation: We recommend the Agency strengthen procedures to ensure adjusting entries are complete and accurate. We further recommend the Agency strengthen procedures to ensure compliance with Federal regulations. Management Response: The Agency agrees.

Program: AL 93.268 - Immunization Cooperative Agreements; AL 93.323 - Epidemiology and Laboratory Capacity for Infectious Diseases (ELC); AL 93.558 - Temporary Assistance for Needy Families (TANF); AL 93.563 - Child Support Enforcement; AL 93.778 - Medical Assistance Program – Allowable Cost/Cost Principles Grant Number & Year: 19NH23IP922589, FFY 2022; 19NU50CK000547; FFY 2023; 2001NETANF, FFY 2020; 2201NECSES, FFY 2022; 2301NECSES, FFY 2023; 2305NE5ADM, FFY 2023 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR § 75.405(a) (October 1, 2022) states, in part, the following: A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. 45 CFR § 75.403 (October 1, 2022) provides the following, in relevant part: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. * * * * (g) Be adequately documented. See also §§ 75.300 through 75.309. Per 45 CFR § 75.303 (October 1, 2022): The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. 45 CFR § 75.430(i) (October 1, 2022) requires payroll expenses charged to Federal awards be based on official records that accurately reflect the work performed. Good internal control and sound accounting practices require policies and procedures to ensure that all payroll costs are properly recorded within the State Accounting System and allocated to the proper funding source for activities performed. Condition: The Agency did not have adequate procedures to ensure payroll charges were proper. Repeat Finding: No Questioned Costs: $91,150 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: We selected 31 employee paychecks paid with Federal funds. Twelve of the 31 tested had payroll charged to Child Support Enforcement. One employee tested was a Child Support Enforcement Worker through September 25, 2022, and changed positions to a Youth Security Specialist II on September 26, 2022. The employee’s payroll costs were not updated to be charged to cost center 25C40360 Youth Rehabilitation and Treatment Centers, which only records costs to the General fund. Instead, the employee’s payroll costs continued to be charged to cost center 25C21750 Child Support Operations. As a result, for the pay period tested, Child Support Enforcement was overcharged by $2,206. During the fiscal year, this employee had an additional $25,726 incorrectly charged to Child Support Enforcement. A Program Accuracy Specialist was recorded to the 25C43060 Child Support Enforcement cost center; however, the supervisor the employee worked with was not charged to this cost center. According to the supervisor, no employees under their management were assigned to read child support enforcement cases. As a result, for the pay period tested, Child Support Enforcement was overcharged by $1,704. During the fiscal year, this employee had an additional $27,976 incorrectly charged to Child Support Enforcement. We noted another Program Accuracy Specialist with this same supervisor also recorded to Child Support Enforcement. During the fiscal year, this employee had $30,670 incorrectly charged to Child Support Enforcement. We tested $20,143 Federal payroll charges to Child Support Enforcement and noted $3,910 in sampled questioned costs and $84,372 additional questioned costs. Federal payroll charges for Child Support Enforcement totaled $3,920,653. Six of the 31 employees tested had payroll charged to TANF. One employee was a Contract Procurement Manager whose payroll expense was split between State funds, TANF and Medicaid. The payroll costs were to be allocated based on a time study; however, the Agency had not completed a revised time study. Therefore, we were unable to ensure the grants were correctly charged. The Agency indicated no time study was done for the entirety of fiscal year 2023. We tested $9,557 Federal payroll charges to TANF and noted $99 in questioned costs. We tested $3,482 in Medicaid payroll charges and noted $197 in questioned costs. We tested the April 19, 2023, paycheck for an Epidemiology Surveillance Coordinator. Payroll expenses were allocated with 75% to the ELC grant and 25% to the Immunization grant. The Agency did not provide documentation to support how this split was determined. An email was provided on July 28, 2023, with a breakdown of the activities and hours the employee worked for each grant; however, the number of hours in the email did not agree to the hours worked per the paycheck. Additionally, to charge payroll expenses to a Federal grant, a timesheet or other official record that accurately reflects the work performed is required. We tested $3,692 Federal payroll charges to ELC and noted $1,929 in questioned costs. We tested $3,659 in Federal payroll charges to Immunization and noted $643 in questioned costs. Cause: Inadequate policies and procedures for review and documentation of payroll expenses. Additionally, the Agency did not change the cost center for one employee who changed positions. Effect: Without adequate documentation to support the allocation of costs, there is an increased risk of programs not being charged the proper amounts. Recommendation: We recommend the Agency improve procedures to ensure that employee pay is recorded correctly in the State Accounting System, and those costs are properly allocated and charged. Management Response: The Agency agrees.

Program: AL 93.566 – Refugee and Entrant Assistance State/Replacement Designee Administered Programs – Allowability & Eligibility Grant Number & Year: 2201NERCMA, FFY 2022; 2301NERCMA, FFY 2023 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 45 CFR § 75.303 (October 1, 2022), The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Per the U.S. Department of Health and Human Services’ Office of Refugee Resettlement (ORR) guidance, published in the Federal Register on March 28, 2022, at 87 FR 17312: In accordance with ORR regulations, the Director of ORR is announcing the expansion of the Refugee Cash Assistance (RCA) and Refugee Medical Assistance (RMA) eligibility period from 8 months to 12 months of assistance for participants whose date of eligibility for ORR benefits is on or after October 1, 2021. Per 45 CFR § 400.66(e) (October 1, 2022), “The State agency may use the date of application as the date refugee cash assistance begins in order to provide payments quickly to newly arrived refugees.” Title 470 NAC 2-002 states, in part, the following: Eligibility begins with the date of arrival in the United States, if the refugee meets all eligibility requirements. For asylees, victims of severe forms of trafficking, and Cuban and Haitian Parolees eligibility begins with the date of granted status. The time limit is applied to each refugee separately, not to the unit as a whole. If the refugee applies after the date of arrival in the United States, they may receive assistance for the remaining months of their eligibility period. Per Title 470 NAC 1-010, “Eligibility is redetermined at six months. Eligibility may be redetermined in less than six months to coordinate review dates for more than one program. An application is required as part of the eligibility review and to establish a new eligibility period.” Title 45 CFR § 400.2 (October 1, 2022) defines refugee cash assistance (RCA) as “cash assistance provided under section 412(e) of the Act to refugees who are ineligible for TANF [Temporary Assistance for Needy Families], OAA [Old Age Assistance], AB [Aid to the Blind], APTD [Aid to the Permanently and Totally Disabled], AABD [Aid to the Aged, Blind, and Disabled], or SSI [Supplemental Security Income].” Title 45 CFR § 400.2 defines refugee medical assistance (RMA) as, “(a) Medical assistance provided under section 412(e) of the Act to refugees who are ineligible for the Medicaid program[.]” Title 468 NAC 2-001 explains the eligibility requirements for Nebraska’s TANF program, including “(B) United States citizenship or alien status; (C) Nebraska residence; . . . (F) Age requirement for a dependent child; . . . .” Title 477 NAC 2-001 provides, in relevant part, the following: To be eligible for Medicaid, an individual must satisfy the requirements of the following eligibility criteria, as applicable: 1. Application; 2. U.S. citizenship or alien status (see Appendix 477-000-003 and 477-000-004); 3. Nebraska residence; 4. Social Security number; 5. Age (limited to ABD, Former Foster Care, Children, 599 CHIP, Former Ward, Women’s Cancer Program)[.] Title 45 CFR § 401.2 (October 1, 2022) states the following: For purposes of this part a Cuban and Haitian entrant or entrant is defined as: (a) Any individual granted parole status as a Cuban/Haitian Entrant (Status Pending) or granted any other special status subsequently established under the immigration laws for nationals of Cuba or Haiti, regardless of the status of the individual at the time assistance or services are provided; and (b) Any other national of Cuba or Haiti (1) Who: (i) Was paroled into the United States and has not acquired any other status under the Immigration and Nationality Act; (ii) Is the subject of exclusion or deportation proceedings under the Immigration and Nationality Act; or (iii) Has an application for asylum pending with the Immigration and Naturalization Service; and (2) With respect to whom a final, nonappealable, and legally enforceable order of deportation or exclusion has not been entered. The Agency utilizes SAVE (Systematic Alien Verification for Entitlements) to determine an applicant’s status. SAVE is an online service that allows Federal, State, and local benefit-granting agencies to verify a benefit applicant’s immigration status or naturalized/derived citizenship. SAVE is administered by U.S. Citizenship and Immigration Services, a component of the Department of Homeland Security. Good internal control requires procedures to maintain SAVE documentation used to verify an applicant’s status and ensure the applicant is not under an active order of deportation. Condition: Refugee assistance payments were not in compliance with State and Federal requirements. Repeat Finding: No Questioned Costs: $9,092 known (2201NERCMA, $1,957; 2301NERCMA, $7,135) Statistical Sample: No Context: The Refugee and Entrant Assistance program provides aid payments both directly to individuals who are deemed eligible for cash assistance (RCA) and also medical assistance (RMA) through the managed care program. We tested 25 RCA payments and 25 RMA payments to a total of 35 recipients. (For 15 of these recipients, we tested both RCA and RMA payments.) We noted the following: • One recipient tested, who received both RCA and RMA, was over the age of 65 and may have qualified for other assistance programs before refugee assistance; however, a referral to other programs was not completed. Refugee assistance is not allowable for individuals eligible for other programs, such as Medicaid and OAA. • Another recipient, who received both RCA and RMA, had been in the U.S. for over 12 months and had, in fact, became a permanent resident in August 2013. Therefore, she was ineligible for Refugee assistance. • We tested 25 recipients to determine whether eligibility had been redetermined at six months, as required. o One recipient tested entered the United States on January 30, 2022, and applied for assistance on February 25, 2022, making his eligibility redetermination due on or about August 26, 2022. We reviewed all support for the recipient’s case and were unable to verify that a redetermination of eligibility, including a new application, was completed. The Agency confirmed that no documentation was on file to support completion of the redetermination. The recipient continued to receive benefits until January 2023, when his 12-month eligibility period had expired. o Another recipient tested entered the United States on June 25, 2022, and applied for assistance on July 5, 2022, making her eligibility redetermination due on or about January 3, 2023. We observed that an eligibility redetermination was recorded to the recipient’s case on December 15, 2022; however, the Agency did not receive a new application at that time. The Agency was unable to verify that an application was provided before eligibility was redetermined. The recipient continued to receive benefits until May 2023, when her 12-month eligibility period had expired. • For 25 of 35 recipients, adequate documentation was not on file to support that the Agency had verified, using the SAVE system, that the individual was not under an active order of deportation prior to starting benefit payments. In some cases, we were unable to verify if a SAVE system query had been completed at all. One of the recipients had a SAVE response of “No Status,” which indicates an immigration status was not found for the applicant, and updated documents were required for a new search. After our inquiry, the Agency requested new SAVE responses; therefore, we did not question costs related to SAVE documentation. Refugee Cash Assistance payments for the fiscal year totaled $6,924,438. The Federal sample tested was $8,099, and Federal payment errors noted for the RCA sample tested were $331. The dollar error rate for the sample was 4.09% ($331/8,099), which estimates the potential dollars at risk for fiscal year 2023 to be $283,210 (dollar rate multiplied by the population). Refugee Medical Assistance payments for the fiscal year totaled $5,058,730. The Federal sample tested was $3,949, and Federal payment errors noted for the RMA sample tested were $327. The dollar error rate for the sample was 8.28% ($327/3,949), which estimates the potential dollars at risk for the fiscal year 2023 to be $418,863 (dollar rate multiplied by the population). In addition to the $658 Federal questioned costs noted on the sample items tested, we noted $3,133 of Federal questioned costs on other cash assistance payments to the recipients noted above during the fiscal year and $5,301 of Federal questioned costs for other medical assistance payments on behalf of these recipients. Cause: Ineffective controls. Written procedures are in place but not consistently followed. Effect: Increased risk for loss or misuse of funds. Recommendation: We recommend the Agency strengthen procedures to ensure payments are adequately supported and in accordance with State and Federal regulations. We further recommend the Agency ensure that SAVE documentation is maintained on file. Management Response: The Agency agrees.

Program: AL 93.566 – Refugee and Entrant Assistance State/Replacement Designee Administered Programs – Allowability & Subrecipient Monitoring Grant Number & Year: 2101NERSSS, FFY 2021; 2201NERSSS, FFY 2022 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR § 75.352(d) (October 1, 2022) requires a pass-through entity to: “Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved.” 45 CFR § 75.302(a) (October 1, 2022) requires the State to have accounting procedures sufficient to allow for “the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award.” 45 CFR § 75.403 (October 1, 2022) requires costs to be reasonable, necessary, and adequately documented. 45 CFR § 75.405(a) (October 1, 2022) states the following: A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. This standard is met if the cost: (1) Is incurred specifically for the Federal award; (2) Benefits both the Federal award and other work of the non-Federal entity and can be distributed in proportions that may be approximated using reasonable methods; and (3) Is necessary to the overall operation of the non-Federal entity and is assignable in part to the Federal award in accordance with the principles in this subpart. 45 CFR § 75.430(i)(1) (October 1, 2022) states, in part, the following: Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; * * * * (vii) Support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. (viii) Budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards . . . . 45 CFR § 75.431(c) (October 1, 2022) states the following: The cost of fringe benefits in the form of employer contributions or expenses for social security; employee life, health, unemployment, and worker's compensation insurance (except as indicated in § 75.447); pension plan costs (see paragraph (i) of this section); and other similar benefits are allowable, provided such benefits are granted under established written policies. Such benefits, must be allocated to Federal awards and all other activities in a manner consistent with the pattern of benefits attributable to the individuals or group(s) of employees whose salaries and wages are chargeable to such Federal awards and other activities, and charged as direct or indirect costs in accordance with the non-Federal entity's accounting practices. 45 CFR § 75.2 (October 1, 2022) defines general purpose equipment as follows: [E]quipment which is not limited to research, medical, scientific or other technical activities. Examples include office equipment and furnishings, modular offices, telephone networks, information technology equipment and systems, air conditioning equipment, reproduction and printing equipment, and motor vehicles. 45 CFR § 75.2 (October 1, 2022) defines capital assets as follows: [T]angible or intangible assets used in operations having a useful life of more than one year which are capitalized in accordance with GAAP. Capital assets include: (1) Land, buildings (facilities), equipment, and intellectual property (including software) whether acquired by purchase, construction, manufacture, lease-purchase, exchange, or through capital leases . . . . 45 CFR § 75.439(b)(1) (October 1, 2022) states, "Capital expenditures for general purpose equipment, buildings, and land are unallowable as direct charges, except with the prior written approval of the HHS awarding agency or pass-through entity." A good internal control plan requires procedures to ensure that subrecipient expenditures are properly documented, in accordance with Federal regulations, and apply to work performed under the subaward project description. Condition: Subrecipient monitoring procedures were inadequate. Repeat Finding: No Questioned Costs: $400,864 known (2101NERSSS, $154; 2201NERSSS, $400,710) Statistical Sample: No Context: The Agency paid 14 subrecipients a total of $5,212,322 during the fiscal year ended June 30, 2023, for the Refugee and Entrant Assistance program (Program). Subrecipients provide employment services, social support services, and legal assistance to refugees. Subrecipient reimbursement requests are submitted quarterly with a summarized invoice of costs incurred and a Budget Workbook showing expenses by category; however, no source documentation, such as invoices and timesheets, are required at the time of reimbursement. Program staff were unable to provide any program-specific procedures; however, they eventually did provide Agency-wide procedures for subrecipient monitoring and noted that program-specific procedures were being written. These Agency-wide procedures indicate that each reimbursement invoice should include timesheets or time studies, paystubs, and receipts, among other documentation, to support that expenses are allowable. Program staff also provided a schedule used to review one quarter of reimbursed expenses for each subrecipient, throughout the year, looking at three subrecipients each quarter. We selected the four highest-paid subrecipients of the fiscal year and requested the support that the Program obtained from its review of the scheduled quarter. The Agency obtained minimal invoice support for the desk reviews and did not request any documentation to support personnel costs, such as paystubs and timesheets, nor any underlying support for amounts used for allocated expenses. Due to the inadequacy of desk review documentation, we offered the Agency the opportunity to gather supporting documentation from the subrecipients. We allowed the Agency three weeks to obtain support and an additional week after our review. However, the support provided was not adequate for any of the four subrecipients tested. We noted the following: • Documentation was not adequate to support that personnel charges were allowable and in accordance with Federal cost principles. Time records were missing or did not agree to time charged or were not in accordance with 45 CFR § 75.430(i). We also noted personnel costs charged using budgeted amounts, which is not allowable. We further noted fringe benefits were not adequately supported. • Documentation was not adequate to support the percentage of non-payroll expenses charged to the Program. Numerous charges were based on allocations, which are allowable only if distributed using reasonable methods in accordance with relative benefits received. Support was not adequate to determine the allocation was proper, for example: o One subrecipient had a finance agreement that appeared to be for equipment with a principal amount of $153,028 and monthly payments of $5,390. The subaward was charged $1,250 per month, but there was no support for how this amount was determined or that it was reasonably distributed in accordance with benefits received. In addition, this appears to be a capital expenditure for general purpose equipment, and prior written approval was not on file. Also, there was no support detailing the items purchased to determine if allowable per the grant and Federal cost principles. o One subrecipient charged 92% of workers’ compensation insurance to the grant, but documentation was not adequate to support this percentage agreed to staff time worked on the grant. o One subrecipient did not have support for the percentage of rent charged to the grant. o One subrecipient had accounting fees charged each month on varying percentages, but the basis for those percentages was not supported. • Indirect costs were not calculated correctly on one reimbursement tested. Below is a summary of amounts paid and support reviewed by the Agency for those four subrecipients. See Schedule of Findings and Questioned Costs for chart/table. Cause: Inadequate procedures. Effect: Without adequate subrecipient monitoring procedures, there is an increased risk for the misuse of Federal funds and noncompliance with Federal regulations. Recommendation: We recommend the Agency perform adequate subrecipient monitoring to ensure both the allowability of costs and adherence to Federal regulations. Management Response: The Agency agrees.

Program: AL 93.558 – Temporary Assistance for Needy Families; AL 93.563 – Child Support Enforcement; AL 93.568 – Low Income Home Energy Assistance (LIHEAP); AL 93.575 – Child Care and Development Block Grant; AL 93.658 – Foster Care Title IV-E; AL 93.778 – Medical Assistance Program; AL 10.561 – State Administrative Matching Grants for the Supplemental Nutrition Assistance Program – Allowable Costs/Cost Principles Grant Number & Year: 2001NETANF, FFY 2020; 2301NECSES, FFY 2023; 2301NELIEA, FFY 2023; 2301NECCDD, FFY 2023; 2301NEFOST, FFY 2023; 2305NE5ADM, FFY 2023; 233NE406S2514, FFY 2023 Federal Grantor Agency: U.S. Department of Health and Human Services and U.S. Department of Agriculture Criteria: 45 CFR § 75.405(a) (October 1, 2022) and 2 CFR § 200.405 (January 1, 2023) state, in part, the following: A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. 45 CFR § 75.403 (October 1, 2022) and 2 CFR § 200.403 (January 1, 2023) provide the following, in relevant part: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. * * * * (g) Be adequately documented. See also §§ 75.300 through 75.309. Per 45 CFR § 75.303 (October 1, 2022) and 2 CFR § 200.303 (January 1, 2023), The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Title 45 CFR § 75.302 (October 1, 2022) and 2 CFR § 200.302 (January 1, 2023) require financial management systems of the State sufficient to permit preparation of required reports and permit the tracing of funds to expenditures adequate to establish the use of these funds were in accordance with applicable regulations. EnterpriseOne is the official accounting system for the State of Nebraska, and all expenditures are generated from it. Good internal control requires procedures to ensure that amounts charged to Federal funds are proper. Condition: Procedures to ensure journal entries and adjustments to the Public Assistance Cost Allocation Plan (PACAP) were not adequate, resulting in multiple Federal programs being overcharged. Repeat Finding: No Questioned Costs: $581,496 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: Each quarter, as the PACAP is prepared, the Agency makes multiple adjustments for costs that either were charged to Federal funds and should not have been, or costs that were not charged to Federal funds but are claimable to a Federal grant. We tested five adjustments between two quarters. One adjustment tested for the quarter ended December 31, 2022, was recorded to charge the Foster Care grant for allowable costs incurred by the Foster Care Review Office (FCRO), a separate agency. The amounts provided by FCRO erroneously included payroll charges from a previous quarter, inflating the amount charged. The FCRO later caught the mistake and adjusted the internal spreadsheet but did not alert the Agency to the error, so a correcting adjustment was never made to the PACAP. The amount charged was $353,984; however, the adjustment should have been $212,725, a difference of $141,259. Foster Care is matched at 50%, so the grant was overcharged $70,629, which are questioned costs. Due to this error, we reviewed a second Foster Care adjustment for the quarter ending March 31, 2023, and noted the Agency’s calculation included amounts for a State funded program that should have been removed, resulting in the grant being overcharged an additional $1,561. We also tested six journal entries that moved costs between cost centers to determine any impact on the PACAP and if those journal entries were appropriate. We noted three improper journal entries that the Agency had not corrected as of the end of the fiscal year: • A journal entry for $526,487 was performed in November 2022 to temporarily move postage costs of multiple programs from State funds to the Child Support Enforcement (CSE) grant until new coding could be created in the State’s accounting system to track expenses from one fiscal year to another. The intent was to reverse the entry as soon as the new coding was completed; however, the reversing entry was never performed. Since the Agency performs a quarterly adjustment for the CSE grant to charge indirect costs identified by the Agency’s PACAP to the grant, the CSE grant was overcharged a total of $263,628. No correcting entry had been made as of September 30, 2023. These are considered questioned costs. • A journal entry for $207,369 was performed in December 2022 to move expenses to allow payroll to post. The intent was to reverse the entry before the end of the fiscal year; however, that was not done. The expenses were moved from Medicaid administration and were charged to the Central Services and Supplies Cost Center, which is then allocated to numerous other Cost Centers that are further allocated or charged directly to Federal programs such as TANF and Child Care. Due to the intricacies of PACAP allocations, exact questioned costs are unknown. No correcting entry was made as of September 30, 2023. • A journal entry for $5,317,640 was done in February 2023 to move Premium Pay to the Coronavirus State and Local Fiscal Recovery Funds (CSLFRF) grant as additional pay for certain job roles allowed under that grant. However, the entry performed included some lines that were miscoded, most significantly a line for $764,187 that was supposed to move money within the same Cost Center (CC 25C21910 – Field Office Administration); however, it pulled costs out of Cost Center 25C21780 - Protection and Safety Policy Chief instead. Additionally, we confirmed with the Agency that the costs charged to CC 25C21910 under the CSLFRF grant were also allocated to other Federal programs through the PACAP, essentially charging Federal programs twice. Due to the intricacies of the PACAP allocations, total questioned costs are unknown; however, we were able to determine that this error caused Medicaid to be overcharged $149,478, LIHEAP to be overcharged $33,447, SNAP to be overcharged $44,984, Child Care to be overcharged $10,412, and TANF to be overcharged $7,357. Cause: Inadequate procedures to ensure that adjustments to the PACAP are proper and that journal entries are appropriate for each program. Effect: Unallowable expenditures were charged to Federal funds and there is an increased risk for errors, fraud, and non-compliance with Federal regulations. Recommendation: We recommend the Agency strengthen procedures to ensure adjusting entries are complete and accurate. We further recommend the Agency strengthen procedures to ensure compliance with Federal regulations. Management Response: The Agency agrees.

Program: AL 93.568 – Low-Income Home Energy Assistance (LIHEAP) – Reporting Grant Number & Year: 2201NELIEA, FFY 2022 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR § 96.30(a) (October 1, 2022) requires “fiscal control and accounting procedures must be sufficient to (a) permit preparation of reports required by the statute authorizing the block grant . . . .” 45 CFR § 96.82(a) (October 1, 2022) states the following: Each grantee which is a State or an insular area which receives an annual allotment of at least $200,000 shall submit to the Department, as part of its LIHEAP grant application, the data required by section 2605(c)(1)(G) of Public Law 97–35 (42 U.S.C. 8624(c)(1)(G)) for the 12-month period corresponding to the Federal fiscal year (October 1–September 30) preceding the fiscal year for which funds are requested. The data shall be reported separately for LIHEAP heating, cooling, crisis, and weatherization assistance. 42 U.S.C. § 8624(c)(1)(G) requires a plan that does the following: [S]tates, with respect to the 12-month period specified by the Secretary, the number and income levels of households which apply and the number which are assisted with funds provided under this subchapter, and the number of households so assisted with- (i) one or more members who had attained 60 years of age; (ii) one or more members who were disabled; and (iii) one or more young children; . . . . The Instructions for the LIHEAP Household Report, published November 30, 2022, by the U.S. Division of Energy Assistance, contains the following: Concept of Unduplicated Household Counts * * * * The concept of unduplicated counts means that an item, such as a household, is counted only once for a specific data variable. However, unduplicated counting becomes complex when there are multiple data variables. Such counting requires the use of computerized data systems and tracking of households across a state’s entire LIHEAP program, including households receiving weatherization through LIHEAP funds. Unduplicated household data must be reported separately for EACH type of LIHEAP assistance and for ANY type of LIHEAP assistance, as described in “Unduplicated Household Counts” under Section II of these instructions. * * * * Section II - Assisted Households by Poverty Intervals for Each Type of LIHEAP Assistance Household poverty levels must be reported according to the specified percent intervals. The number of assisted and applicant households are to be counted by poverty level for EACH Type of LIHEAP Assistance and each line, but not for applicant and assisted households that received ANY Type of LIHEAP Assistance. . . . * * * * Uniform Counting and Reporting Annual gross household incomes, adjusted by the number of household members (household size), are to be used in computing household poverty percentages, using the 2021 HHS Poverty Guidelines that were in effect at the beginning of FFY 2022 (October 1, 2021). Gross Household Income Adjusted by Household Size * * * * A household's gross annual income and/or household size can change during the fiscal year. If a household received two benefits or services under the same type of LIHEAP assistance, use that household's gross annual income and household size at the time of the initial determination of benefits or services in calculating that household's poverty level for statistical reporting. Condition: The Agency lacked adequate procedures to ensure that Household Report information was complete and accurate. A similar finding was noted in the prior audit. Repeat Finding: 2022-033 Questioned Costs: None Statistical Sample: No Context: In its LIHEAP Household Report for FFY 2022, the Agency reported 762 applicant households for the weatherization program. This information for weatherization applicant households was provided by the Nebraska Department of Environment and Energy (NDEE), which obtained the figures from its subrecipients. NDEE forwarded the information to the Agency for reporting. We noted the following: • The report logic and formulas to count households by poverty level was inaccurate, resulting in 103 households not being included. • Duplicates were noted within the data provided by the subrecipients. Only one line should be reported per household; however, 46 lines were observed to be duplicates. The applicants reported by poverty level, and the correct numbers after considering the errors noted are listed in the table below: See Schedule of Findings and Questioned Costs for chart/table. We selected a sample of 10 households included on the FFY 2022 Household Report as LIHEAP assisted households, LIHEAP applicant households, or weatherization-assisted households. Two of the 10 households tested were reported or classified improperly, as follows: • One household was reported at the “Under 75% Poverty” income level. However, based on the Agency’s calculation of annual income of $15,872/year for a household size of two, this is 91% of the 2021 Federal poverty level for a household of two, which was $17,420. • One household was reported at the “Under 75% Poverty” income level. However, based on the Agency’s calculation of annual income of $11,352/year for a household size of one, this is 88% of the 2021 Federal poverty level for a household of one, which was $12,880. Cause: Inadequate review procedures. The logic error noted in the prior audit has not been corrected. Effect: Without adequate procedures to ensure reports contain accurate information, there is increased risk of noncompliance with Federal regulations. Recommendation: We recommend the Agency strengthen its procedures to ensure all participants of the LIHEAP program are reflected properly in the Household Report. Management Response: The Agency agrees.

Program: Various, including AL 93.575, 93.596 – CCDF Cluster; AL 93.558 – Temporary Assistance for Needy Families –– Reporting Grant Number & Year: Various, including 2301NECCDF, FFY 2023; 2101NETANF, FFY 2021 Federal Grantor Agency: Various, including U.S. Department of Health and Human Services Criteria: A good internal control plan requires: 1) adequate procedures to ensure the Schedule of Expenditures of Federal Awards (SEFA) is properly presented; and 2) the auditee to reconcile the SEFA to the financial statements to ensure the schedule is complete and accurate. Title 45 CFR § 75.510(b) (October 1, 2022) and Title 2 CFR § 200.510(b) (January 1, 2023) state in part: The auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee's financial statements which must include the total Federal awards expended . . . . At a minimum, the schedule must: * * * * (3) Provide total Federal awards expended for each individual Federal program . . . (4) Include the total amount provided to subrecipients from each Federal program. Neb. Rev. Stat. § 81-1111(1) (Reissue 2014) states, in part, the following: Subject to the supervision of the Director of Administrative Services, the Accounting Administrator shall have the authority to prescribe the system of accounts and accounting to be maintained by the state and its departments and agencies, develop necessary accounting policies and procedures, coordinate and approve all proposed financial systems, and manage all accounting matters of the state's central system. EnterpriseOne is the official accounting system of the State. Title 45 CFR § 75.511(a) (October 1, 2022) and 2 CFR § 200.511 (January 1, 2023) require the auditee to prepare a summary schedule of prior audit findings. Subsection (b)(2) of both regulations provides the following, as is relevant: When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding’s recurrence and planned corrective action, and any partial corrective action taken. Condition: Several programs did not have expenditures or the amount provided to subrecipients accurately reported on the SEFA. We notified Administrative Services of the errors, and the SEFA was subsequently adjusted. The Summary Schedule of Prior Audit Findings lists the status as “completed.” A similar finding was noted in the prior audit. Repeat Finding: 2022-018 Questioned Costs: None Statistical Sample: No Context: Administrative Services is responsible for managing the accounting matters of the State and certifies the data collection form for the Statewide Single Audit. Administrative Services compiles the SEFA from information provided by the individual agencies and submits it to the auditor. During our review, we noted the following: The Department of Health and Human Services (DHHS) did not accurately report expenditures for several programs, including underreporting AL 93.575 by $3,909,201, underreporting AL 93.596 by $7,416,246, and overreporting AL 93.558 by $11,325,447. The Department of Military underreported AL 21.027 by $920,874. The Department of Labor underreported AL 17.225 by $3,696,585. Twenty-three programs for various State agencies needed correction. The total expenditures and amounts provided to subrecipients originally reported and per the final SEFA were as follows: See Schedule of Findings and Questioned Costs for chart/table. Cause: Administrative Services did not have adequate procedures to ensure the accuracy of amounts not pulled directly from the accounting system. Administrative Services established a specific account code for aid to subrecipients, but not all agencies utilized this account code. Effect: Increased risk for the SEFA to be inaccurate, which could lead to Federal sanctions or programs not audited that should be. Recommendation: We recommend Administrative Services improve procedures to ensure the SEFA is complete and accurate. Management Response: We will continue to work with State teammates to ensure the SEFA is accurate and complete. The original total SEFA expenditures were 99.98% accurate. APA Response: We agree that SEFA adjustments were not significant in total. However, errors amounting to millions of dollars for individual programs are unquestionably significant to those programs. Such errors could result, moreover, in a program not being audited as a major program when it should be.

Program: AL 93.558 – Temporary Assistance for Needy Families; AL 93.563 – Child Support Enforcement; AL 93.568 – Low Income Home Energy Assistance (LIHEAP); AL 93.575 – Child Care and Development Block Grant; AL 93.658 – Foster Care Title IV-E; AL 93.778 – Medical Assistance Program; AL 10.561 – State Administrative Matching Grants for the Supplemental Nutrition Assistance Program – Allowable Costs/Cost Principles Grant Number & Year: 2001NETANF, FFY 2020; 2301NECSES, FFY 2023; 2301NELIEA, FFY 2023; 2301NECCDD, FFY 2023; 2301NEFOST, FFY 2023; 2305NE5ADM, FFY 2023; 233NE406S2514, FFY 2023 Federal Grantor Agency: U.S. Department of Health and Human Services and U.S. Department of Agriculture Criteria: 45 CFR § 75.405(a) (October 1, 2022) and 2 CFR § 200.405 (January 1, 2023) state, in part, the following: A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. 45 CFR § 75.403 (October 1, 2022) and 2 CFR § 200.403 (January 1, 2023) provide the following, in relevant part: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. * * * * (g) Be adequately documented. See also §§ 75.300 through 75.309. Per 45 CFR § 75.303 (October 1, 2022) and 2 CFR § 200.303 (January 1, 2023), The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Title 45 CFR § 75.302 (October 1, 2022) and 2 CFR § 200.302 (January 1, 2023) require financial management systems of the State sufficient to permit preparation of required reports and permit the tracing of funds to expenditures adequate to establish the use of these funds were in accordance with applicable regulations. EnterpriseOne is the official accounting system for the State of Nebraska, and all expenditures are generated from it. Good internal control requires procedures to ensure that amounts charged to Federal funds are proper. Condition: Procedures to ensure journal entries and adjustments to the Public Assistance Cost Allocation Plan (PACAP) were not adequate, resulting in multiple Federal programs being overcharged. Repeat Finding: No Questioned Costs: $581,496 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: Each quarter, as the PACAP is prepared, the Agency makes multiple adjustments for costs that either were charged to Federal funds and should not have been, or costs that were not charged to Federal funds but are claimable to a Federal grant. We tested five adjustments between two quarters. One adjustment tested for the quarter ended December 31, 2022, was recorded to charge the Foster Care grant for allowable costs incurred by the Foster Care Review Office (FCRO), a separate agency. The amounts provided by FCRO erroneously included payroll charges from a previous quarter, inflating the amount charged. The FCRO later caught the mistake and adjusted the internal spreadsheet but did not alert the Agency to the error, so a correcting adjustment was never made to the PACAP. The amount charged was $353,984; however, the adjustment should have been $212,725, a difference of $141,259. Foster Care is matched at 50%, so the grant was overcharged $70,629, which are questioned costs. Due to this error, we reviewed a second Foster Care adjustment for the quarter ending March 31, 2023, and noted the Agency’s calculation included amounts for a State funded program that should have been removed, resulting in the grant being overcharged an additional $1,561. We also tested six journal entries that moved costs between cost centers to determine any impact on the PACAP and if those journal entries were appropriate. We noted three improper journal entries that the Agency had not corrected as of the end of the fiscal year: • A journal entry for $526,487 was performed in November 2022 to temporarily move postage costs of multiple programs from State funds to the Child Support Enforcement (CSE) grant until new coding could be created in the State’s accounting system to track expenses from one fiscal year to another. The intent was to reverse the entry as soon as the new coding was completed; however, the reversing entry was never performed. Since the Agency performs a quarterly adjustment for the CSE grant to charge indirect costs identified by the Agency’s PACAP to the grant, the CSE grant was overcharged a total of $263,628. No correcting entry had been made as of September 30, 2023. These are considered questioned costs. • A journal entry for $207,369 was performed in December 2022 to move expenses to allow payroll to post. The intent was to reverse the entry before the end of the fiscal year; however, that was not done. The expenses were moved from Medicaid administration and were charged to the Central Services and Supplies Cost Center, which is then allocated to numerous other Cost Centers that are further allocated or charged directly to Federal programs such as TANF and Child Care. Due to the intricacies of PACAP allocations, exact questioned costs are unknown. No correcting entry was made as of September 30, 2023. • A journal entry for $5,317,640 was done in February 2023 to move Premium Pay to the Coronavirus State and Local Fiscal Recovery Funds (CSLFRF) grant as additional pay for certain job roles allowed under that grant. However, the entry performed included some lines that were miscoded, most significantly a line for $764,187 that was supposed to move money within the same Cost Center (CC 25C21910 – Field Office Administration); however, it pulled costs out of Cost Center 25C21780 - Protection and Safety Policy Chief instead. Additionally, we confirmed with the Agency that the costs charged to CC 25C21910 under the CSLFRF grant were also allocated to other Federal programs through the PACAP, essentially charging Federal programs twice. Due to the intricacies of the PACAP allocations, total questioned costs are unknown; however, we were able to determine that this error caused Medicaid to be overcharged $149,478, LIHEAP to be overcharged $33,447, SNAP to be overcharged $44,984, Child Care to be overcharged $10,412, and TANF to be overcharged $7,357. Cause: Inadequate procedures to ensure that adjustments to the PACAP are proper and that journal entries are appropriate for each program. Effect: Unallowable expenditures were charged to Federal funds and there is an increased risk for errors, fraud, and non-compliance with Federal regulations. Recommendation: We recommend the Agency strengthen procedures to ensure adjusting entries are complete and accurate. We further recommend the Agency strengthen procedures to ensure compliance with Federal regulations. Management Response: The Agency agrees.

Program: AL 93.575 and 93.596 – CCDF Cluster – Allowability & Eligibility Grant Number & Year: 2201NETANF, FFY 2022; 2001NECCDF, FFY 2020; 2301NECCDM, FFY 2023; 2301NECCDF, FFY 2023; 2101NECCC5, FFY 2021 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR § 75.403 (October 1, 2022) provides the following, in relevant part: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. * * * * (g) Be adequately documented. See also §§ 75.300 through 75.309. Per 45 CFR § 75.303 (October 1, 2022): The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. 42 USC § 9858k(b) states, “With regard to services provided to students enrolled in grades 1 through 12, no financial assistance provided under this subchapter shall be expended for— (1) any services provided to such students during the regular school day[.]” 45 CFR § 98.67(a) (October 1, 2022) states, “Lead Agencies shall expend and account for CCDF [Child Care and Development Fund] funds in accordance with their own laws and procedures for expending and accounting for their own funds.” To be eligible for services, 45 CFR § 98.20 (October 1, 2022) requires a child to be under 13 years of age, a citizen, and residing with a family whose income does not exceed 85% of the State’s median income. Title 392 of the Nebraska Administrative Code (NAC) 2-013.03(A) (Eff. 9/15/2020) states, “A recipient is limited to a maximum of sixty hours of Child Care Subsidy per week. A week is defined as the seven day period from Sunday through Saturday.” Title 392 NAC 3-004.01(A) (Eff. 9/15/2020) states, “The Department pays by attendance, not enrollment." Title 392 NAC 3-004.01(A)(i) (Eff. 9/15/2020) states, “The provider may bill the full authorized amount for times that the child is absent on a scheduled day, up to five times per month.” Title 392 NAC 3-001.02(D) (Eff. 9/15/2020) states, “The recipient and child care provider must ensure that the services are delivered as authorized.” Title 392 NAC 4-001 (Eff. 9/15/2020) states, in relevant part, “In order for a child care provider to participate in the subsidy program: . . . (F) Service provider enrollments are in effect for up to 12 months, are not back-dated, and must be completed and signed by all parties on or before the effective date.” Title 392 NAC 4-002 (Eff. 9/15/2020) states, in relevant part, “Before furnishing any service, each provider must sign an enrollment form agreeing: (A) No payments will be made for child care provided to a child before the service authorization date; (B) To provide service only as authorized, in accordance with the Department’s standards; . . . (G) To retain authorizations, billing documents, and attendance records for four years to support and document all claims[.]” The Child Care Provider Handbook (Handbook), dated January 2008, Section IV.C., states, in relevant part, “You must complete the Attendance Calendar to accurately reflect the dates on which child care services were provided as well as the exact number of hours of service provided. For each day, partial hours of service provided should be rounded up to the next quarter hour[.]” Additionally, the Handbook Section I, defines a “Full Day of Care” as “Five hours and 46 minutes (6 hours) through 9 hours (9 hours and 59 minutes) unless the child care program defines its day as more than 9 hours.” Section IV.A., of the Handbook goes on to state, “K.1. Authorized Units. Hourly or daily units listed on the Authorization are for the total time frame of the Authorization period - less than 6 hours are hourly units - 6 hours or more are daily units[.]” EnterpriseOne is the official accounting system for the State of Nebraska, and all expenditures are generated from it. Good internal control requires procedures to ensure that payments are in accordance with Federal and State requirements. Condition: Child care payments did not comply with Federal and State requirements. A similar finding has been noted in our previous audit reports since 2007. Repeat Finding: 2022-034 Questioned Costs: $163,622 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: We noted claims that lacked support and/or did not agree to support, services billed more than authorized, and duplicate claims charged, as detailed below. Random Sample We tested 30 child care claims paid with Federal funds. We noted 11 claims with errors. Some payments had more than one type of error. • For eight claims tested, there were discrepancies between the attendance sheet and the claim billed: o For one claim, the Agency was unable to obtain the attendance calendar from a provider who had closed in October 2022. With no attendance calendar, we were unable to verify the accuracy of the claim amount. o For two claims, two providers were authorized to provide care for the same child at the same time. We requested the attendance calendars from the second provider and found overlapping claims where both providers were billing for the same time period.  For one claim, there were two days with a total 5.75 overlapping hours of care.  For another claim we noted 17 hours and seven days of overlapping care. o For five claims, the providers billed for more hours and/or days than what was recorded on the child’s attendance sheet:  One provider billed a day with 9 hours and 53 minutes of care as one day plus one hour. Per the NAC, the additional time over a day unit is not billed until the care has reached 10 hours.  One provider billed for 19 days of child care, while the attendance calendar for the child showed only 18 days of care.  One provider billed 12 days and one hour of child care. The attendance calendar showed 7 days and four hours of care.  One provider billed for 19 days of child care, while the attendance sheet showed only 16 days of care.  One provider billed for four days and 60 hours of child care. The attendance sheet showed 65 hours of care, but no days. • For two claims tested, the providers provided care for a child over the authorized amount. o One provider was authorized to provide child care to a child for up to 18 hours per week while the father was working as a self-employed maintenance worker, which is the equivalent of three days of care. The provider claimed four days of care (totaling 31 hours). o One provider was authorized to provide child care up to 27 hours per week – equivalent to four days at one day unit each (more than six hours each). The provider claimed five to six day units each week in the month tested. Weekly hours provided ranged from 32 to 45 hours. • For three claims tested, the School Age Care claimed did not agree to the school schedule of the child. School Age Care is authorized for before and after school and on days school is not in attendance. o Two providers were recording the child’s “out” time each morning at 9:00 a.m. and the “in” time in the afternoon at 4:00 p.m. The school day started at 8:50 a.m. and ended at 4:05 p.m. While the NAC does allow for rounding to the nearest quarter hour for each day’s total time of services, the “in” and “out” times should not be rounded. It would not be possible for the child to leave daycare at 9:00 a.m. and arrive at school at 8:50 a.m., or to leave school at 4:05 p.m. and arrive at daycare at 4:00 p.m. The Agency agreed that this practice was adding an extra 15 minutes or quarter hour to each day. o For one claim, the provider charged a full day of care on a school day during which the child would have been in school. The Agency could not explain why a full day of care was being charged on a day that school was in session. • For one claim, the Agency could not provide a birth record or birth certificate for the child; therefore, we could not verify that the child was under 13 years old. • For one claim, the Agency was unable to provide the agreement between the Agency and the provider that would have been valid at the time of service. Federal payment errors noted for the sample tested were $1,458. The total Federal sample tested was $10,095, and total child care Federal assistance claims for the fiscal year were $45,598,523. Based on the sample tested, the case error rate was 36.67% (11/30). The dollar error rate for the sample was 14.44% ($1,458/10,095), which estimates the potential dollars at risk for the fiscal year 2023 to be $6,584,427 (dollar rate multiplied by the population). In addition to the $1,458 questioned costs noted on the sample items tested, we noted $695 of questioned costs on other line items of the claims reviewed, which resulted from missing and inaccurate documentation and service authorizations being exceeded. Unusual Claims Tested We reviewed the detail of child care claims for unusual items, such as excessive hours billed in a month. Four of five claims tested were improper.  One provider billed 348 hours for School Age care provided during one month. We reviewed the attendance calendar, which showed that care was provided from 6:00 a.m. to 6:00 p.m. or 9:00 p.m. every day but Sundays. This is not reasonable, as it includes hours when the School Age child should have been in school. We also noted the provider billed over the authorized hours of care. The provider was authorized to provide care up to 53 hours per week; however, during the last two weeks of the month, the provider claimed 60 hours of care. After identifying the dates and times that the child would have been attending school, we then recalculated attendance with reasonable in and out times, up to the authorized hours per week, and determined that the provider overbilled by $906. We consider these questioned costs.  One provider billed 240 hours at a rate of $5.50/hour for School Age care provided during one month. We reviewed the attendance calendar, and the care was overnight from 7:00 p.m. to 7:00 a.m. (12 hours), so the provider should have been billing for one day unit (up to 10 hours) plus 2 additional hourly units for each day of care. We recalculated what the claim should have been with 20 day units at $34/day and 40 hourly units at $5.50/hour and question the difference, or $460.  One provider billed care of one School Age child between the dates of May 1, 2021, and May 17, 2021, for 231 hours at a rate of $2.25/hour and 17 days at a rate of $15/day. We requested the attendance records to verify the claim, but the Agency was unable to provide the documentation because the provider had closed. Without the attendance calendar needed to verify the propriety of these units, we question the $775 paid.  One provider billed 240 hours of overtime during one month. We requested the attendance records to verify the claim, but the Agency was unable to provide the documentation. The provider responded to the Agency that she would not be sending in an attendance calendar because she had thrown away all the documentation when the Agency closed her down. Without the attendance calendar to verify the reasonableness of these units, we question the $997 paid. Duplicate Claims Child care claims are initially paid from State funds. Journal entries are then performed throughout the year to transfer costs to Federal funds. A detailed listing of claims accompanies these journal entries to show which claims are included in the amounts moved from State funds to Federal funds. We reviewed the detailed claim listings for each journal entry completed during the fiscal year and found that duplicate claims were included in two journal entries. The journal entry in March 2023 included 428 claims, totaling $158,331, that had been charged to Federal funds in September 2022; therefore, $158,331 is considered questioned costs. Cause: Ineffective review. The Agency does not have automated procedures to ensure: 1) attendance records agree to billing documents; 2) service authorizations are not exceeded; and 3) claims are in accordance with regulations. Effect: Ineffective review of claims increases the risk for errors and misuse of State and Federal funds. Recommendation: We recommend the Agency implement procedures to ensure payments are allowable, adequately supported, and in accordance with State and Federal regulations. We further recommend the Agency ensure billing documents agree with attendance sheets. We also recommend the Agency implement procedures to ensure journal entries do not charge duplicate claims. Finally, we recommend the Agency take the necessary action to recover the overpayments. Management Response: The Agency agrees.

Program: AL 93.575 and 93.596 – CCDF Cluster – Special Tests and Provisions Grant Number & Year: Various, including 2301NECCDF, FFY 2023 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 45 CFR § 98.41 (October 1, 2022), the State must have requirements to protect the health and safety of children, including the prevention and control of infectious diseases, building and physical premises safety, and health and safety training. Per 391 NAC 3-005.09A and NAC 4-005.09A: The Department will make a fire inspection referral when: . . . 2. Every two years following the initial fire inspection[.] Per 391 NAC 3-005.09B: The Department will make a sanitation inspection referral when: . . . 2. Every two years following the initial sanitation inspection . . . [.] A good internal control plan requires that adequate documentation be maintained to support compliance with health and safety requirements. Condition: The Agency lacked adequate procedures for ensuring that health and safety requirements were met for child care providers. A similar finding was noted in the prior audit. Repeat Finding: 2022-035 Questioned Costs: None Statistical Sample: No Context: We tested 17 child care centers subject to fire and sanitation inspections. For six child care centers tested, a required inspection had not been performed as of fieldwork on November 13, 2023. The Agency has made referrals for the fire and sanitation inspections; however, the inspections are overdue, and the Agency is ultimately responsible for ensuring that these inspections are performed. See Schedule of Findings and Questioned Costs for chart/table. Cause: Depending on the city or county, the Agency relies on local fire departments or the State Fire Marshal to conduct fire inspections for child care centers. The Agency makes a referral to the fire department when an inspection is due, but the Agency does not pay for these inspections and cannot control the timing of the inspections. Effect: Without adequate procedures to ensure health and safety requirements are met, there is an increased risk of noncompliance with Federal regulations and the possibility of children being cared for in unsafe facilities. Recommendation: We recommend the Agency implement procedures to ensure all health and safety requirements are met for child care centers. These procedures should include regular follow-up with the Fire Marshall or local fire departments and local health departments or the Environmental Health Agency to ensure the inspections are completed timely. This also should include establishing a documented review of inspection requirements for school-age-only child care centers as well as child care centers located in a school. Management Response: The Agency partially agrees. It is agreed that some sanitation and fire inspections have not been conducted every 2 years. These inspections are conducted by entities external to DHHS. Resources are an issue for these entities, which contributes to not meeting the regulatory timeframes for DHHS Children's Services Licensing. The Agency disagrees with the finding, in part, because DHHS has policy and procedure for making timely referrals, as required by regulations. DHHS has had extensive documented communication and follow up with these entities after the policy and procedure changes in 2020, 2021, 2022 and 2023; however, DHHS has no authority to require these entities to complete the inspections more promptly or release completed inspections when the licensee has not paid for the fire or sanitation inspection. DHHS will continue to implement policies and procedures: File Review by Child Care Licensing Supervisors and Fire and Sanitation Inspection Referrals. It is accurate that "per 45 CFR § 98.41 (October 1, 2020), the State must have requirements to protect the health and safety of children, including the prevention and control of infectious diseases, building and physical premises safety, and health and safety training." DHHS disagrees that: "The Agency did not have adequate procedures in place to ensure health and safety requirements were met for child care providers." Regulations 391 NAC 1-5 include robust requirements to address a healthy and safe environment that includes: environmental services and safety, physical plant standards, communicable diseases, children excluded due to illness, medications, food safety, emergency preparedness, safety training and nutrition and food service training. Child Care Inspection Specialists conduct inspections pursuant to these regulations, checking on compliance in the areas listed above, and these inspections are conducted once or twice annually as required by statute. It is important to note that if serious fire safety and sanitation concerns are observed at any inspection that may endanger the health and safety of children in care, it is standard practice to work with the appropriate authority to request an immediate inspection. Fire and sanitation have always responded timely to these requests. This has been a long-standing policy and procedure in Children's Services Licensing specific to Family Child Care Homes I and II and is part of the child care licensing regulations. 391 NAC Chapters 1-5: 1-005.08 Inspection by Other Entities 2-005.09 Inspection by Other Entities 3-005.09 Inspections by Other Entities 4-005.09 Inspections by Other Entities 5-005.09 Inspections by Other Entities APA Response: The Agency is the recipient of the Federal funds and is, therefore, ultimately responsible to ensure that fire and sanitation inspections are performed. Without such inspections, there is an increased risk of children being cared for in unsafe facilities.

Program: AL 93.575 – Child Care and Development Block Grant – Period of Performance Grant Number & Year: 2101NECCDD, FFY 2021 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 45 CFR § 98.60(d) (October 1, 2022): The following obligation and liquidation provisions apply to States and Territories: (1) Discretionary Fund allotments shall be obligated in the fiscal year in which funds are awarded or in the succeeding fiscal year. Unliquidated obligations as of the end of the succeeding fiscal year shall be liquidated within one year. * * * * (5) Obligations may include subgrants or contracts that require the payment of funds to a third party (e.g., subgrantee or contractor). However, the following are not considered third party subgrantees or contractors: (i) A local office of the Lead Agency; (ii) Another entity at the same level of government as the Lead Agency; or (iii) A local office of another entity at the same level of government as the Lead Agency. According to 45 CFR § 75.511(a) (October 1, 2022), “The auditee is responsible for follow-up and corrective action on all audit findings. As part of this responsibility, the auditee must prepare a summary schedule of prior audit findings.” Per 45 CFR § 75.511(b), “The summary schedule of prior audit findings must report the status of all audit findings included in the prior audit’s schedule of findings and questioned costs.” 45 CFR § 75.511(b)(1) adds, “When audit findings were fully corrected, the summary schedule need only list the audit findings and state that corrective action was taken.” Finally, 45 CFR § 75.511(b)(2) provides, “When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding’s recurrence and planned corrective action, and any partial corrective action taken.” A good internal control plan requires procedures to ensure compliance with Federal regulations. Condition: Expenditures were charged to the FFY 2021 grant after the period of performance. A similar finding was noted in the prior audit. The Summary Schedule of Prior Findings lists the status as complete. Repeat Finding: 2022-036 Questioned Costs: $1,939,538 known Statistical Sample: No Context: The FFY 2021 Child Care Discretionary grant must be obligated by September 30, 2022. We noted $1,939,538 paid from October 5, 2022, through June 28, 2023, for Agency employee payroll. Cause: Ineffective control procedures. Effect: Noncompliance with Federal regulations. Recommendation: We recommend the Agency improve procedures to ensure expenditures charged are within the allowed time period. Management Response: The Agency agrees.

Program: AL 93.575 – COVID-19 Child Care and Development Block Grant – Allowability Grant Number & Year: 2101NECCC5, FFY 2021 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR § 98.67(a) (October 1, 2022) states, “Lead Agencies shall expend and account for CCDF [Child Care and Development Fund] funds in accordance with their own laws and procedures for expending and accounting for their own funds.” The Contractor’s “4.1a Payment Processing Manual v2.0” provides a summary of the payment criteria for the Workforce Recognition Retention Stipend Grants (WRRS) and Loan Repayment and Debt Reduction Grants (LRDR), as follows: • WRRS grant: Base Award $2,500; $750 for Full-Time and $0 for Part-Time; $500 for 5+ years of tenure and $250 for 1-5 years of tenure; $1,000 for Teachers and Assistant Teachers and $0 for all other roles; $500 for Night (9pm to 6am) and Weekend Shift Workers and $0 for Day Shift Workers; and a $1,750 bonus for Family Home Child Care I and II facilities. • LRDR grant: Base award up to $20,000 but not to exceed total eligible student loan debt. Additional $5,000 bonus was made available for teachers and assistant teachers and $5,000 bonus was made available to applicants with master’s degrees. Good internal control requires procedures to ensure that State and Federal requirements are met. Good internal control also requires procedures to ensure that grant applications are accurate, and amounts awarded are adequately supported. Condition: The Agency did not have adequate procedures to ensure that grant applications were accurate, or funds paid to child care providers were spent properly. Repeat Finding: No Questioned Costs: $32,000 known Statistical Sample: No Context: Section 2201 of the American Rescue Plan Act (ARPA) of 2021 provided Federal funding to increase provider rates and workforce compensation so that child care providers can retain a skilled workforce and deliver higher-quality care to children receiving subsidies. Secondarily, states were to implement policies to build the supply of child care in low-income communities and underserved populations. The Coronavirus Response and Relief Supplemental Appropriations (CRRSA) Act (Public Law 116-260), signed into law on December 27, 2020, provides states with supplemental child care funds to address the immediate needs of families struggling to pay for child care and child care providers facing financial uncertainty due to the COVID-19 pandemic, including supporting the stability of the child care sector. The Agency entered into an emergency contract on September 7, 2022, with a contractor to manage applications, program requirements, and distribution of over $60 million in ARPA and CRRSA funds for three grants defined by the Agency. These grants were: 1. Business and Child Care Partnership Grants (BCC) to increase child care capacity throughout the State of Nebraska. This funding would help individuals, businesses, and organizations create new child care programs and enable existing licensed child care programs to increase their license capacity. 2. Workforce Recognition Retention Stipend Grants (WRRS) to support and recognize Nebraska’s child care workforce quickly and efficiently and to help workers improve their financial well-being and, more broadly, shape the future of child care and early education in the state by incentivizing workers to stay in the field. 3. Loan Repayment and Debt Reduction Grants (LRDR) to increase economic stability for child care providers with student loans by decreasing their debt burden and to help workers improve their financial well-being and, more broadly, shape the future of child care and early education in the state by incentivizing workers to stay in the field. We tested a total of 33 grants paid and noted the following: BCC We tested 13 of 125 BCC grants. Total BCC grants paid to recipients in the fiscal year totaled $23,303,985. Individual grants ranged from $4,611 to $1,506,362 with 11 applicants receiving over $500,000 each. Payments were made to grant recipients beginning in March 2023; however, recipients had until July 2023 to spend the funds. This deadline was then extended to December 31, 2023. We noted 7 of 17 locations (among the 13 recipients tested) had increased license capacity as of testing on October 12, 2023. However, there was no support that the other locations had increased license capacity. The remaining recipients would have until December 31, 2023, to increase capacity, which was after our audit period. The Agency indicated staff would review licensing requirements after December. The Agency’s contractor requested support from 10% of the grantees, reviewing 20 grantees and $2,916,561 of expenditures. The Agency did not have procedures to perform any further sampling of the remaining 105 grants or over $20 million in expenditures to ensure expenditures were in accordance with the purpose of the Federal grants. We tested 13 grants to determine that the purpose was to increase child care capacity, and the recipient was eligible; however, as the recipient had until December 31, 2023, to spend the funds, we were unable to determine if all funds were spent in accordance with Federal and State requirements. According to the Agency, if any recipients have not spent funds fully by December 31, 2023, staff will inform them and direct the unspent funds to be returned to the State. WRRS and LRDR We tested 10 of 5,148 WRRS grants and 10 of 744 LRDR grants. Total WRRS grants paid to recipients in the fiscal year totaled $23,477,750. Individual grants ranged from $2,500 to $7,250. Total LRDR grants paid to recipients in the fiscal year totaled $12,377,871. Individual grants ranged from $592 to $30,000. The Agency created a grant funding formula based on various factors for the WRRS and LRDR grants. We noted that documentation was inadequate to support the grant amount. • For 11 applicants, the Agency was unable to provide documentation to support that it verified what was reported on the grantee’s application. Grantees received additional funds over the base grant if they reported meeting certain criteria. o Seven applicants received an additional $1,000 on top of the WRRS Base grant for being a teacher or teacher’s assistant. o Four applicants received an additional $5,000 in student loan reduction (i.e., the LRDR grant) for being a teacher or teacher’s assistant. o One of the four applicants also received an additional $5,000 in student loan reduction (i.e., the LRDR grant) for having her master’s degree in a field related to child care. The support provided showed that she had yet to complete the process of obtaining her degree; in fact, no classes were completed after 2012. Federal payment errors noted for the sample tested were $32,000 ($7,000 WRRS; $25,000 LRDR). The total sample tested for WRRS was $44,250, and the total WRRS grant payments for the fiscal year were $23,477,750. The WRRS dollar error rate for the sample was 15.82% ($7,000/$44,250), which estimates the potential dollars at risk for fiscal year 2023 to be $3,714,180 (dollar rate multiplied by the population). The total sample tested for LRDR was $195,673, and the total LRDR grant payments for the fiscal year were $12,357,871. The LRDR dollar error rate for the sample was 12.78% ($25,000/$195,673), which estimates the potential dollars at risk for fiscal year 2023 to be $1,579,336 (dollar rate multiplied by the population). Cause: Inadequate procedures to ensure applications were accurate. Effect: A lack of adequate supporting documentation increases the risk of payments not being in accordance with State and Federal requirements, leading to a loss of Federal funds. Recommendation: We recommend the Agency implement procedures to ensure payments are allowable, adequately supported, and in accordance with State and Federal regulations. Management Response: The Agency agrees.

Program: Various, including AL 93.575, 93.596 – CCDF Cluster; AL 93.558 – Temporary Assistance for Needy Families –– Reporting Grant Number & Year: Various, including 2301NECCDF, FFY 2023; 2101NETANF, FFY 2021 Federal Grantor Agency: Various, including U.S. Department of Health and Human Services Criteria: A good internal control plan requires: 1) adequate procedures to ensure the Schedule of Expenditures of Federal Awards (SEFA) is properly presented; and 2) the auditee to reconcile the SEFA to the financial statements to ensure the schedule is complete and accurate. Title 45 CFR § 75.510(b) (October 1, 2022) and Title 2 CFR § 200.510(b) (January 1, 2023) state in part: The auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee's financial statements which must include the total Federal awards expended . . . . At a minimum, the schedule must: * * * * (3) Provide total Federal awards expended for each individual Federal program . . . (4) Include the total amount provided to subrecipients from each Federal program. Neb. Rev. Stat. § 81-1111(1) (Reissue 2014) states, in part, the following: Subject to the supervision of the Director of Administrative Services, the Accounting Administrator shall have the authority to prescribe the system of accounts and accounting to be maintained by the state and its departments and agencies, develop necessary accounting policies and procedures, coordinate and approve all proposed financial systems, and manage all accounting matters of the state's central system. EnterpriseOne is the official accounting system of the State. Title 45 CFR § 75.511(a) (October 1, 2022) and 2 CFR § 200.511 (January 1, 2023) require the auditee to prepare a summary schedule of prior audit findings. Subsection (b)(2) of both regulations provides the following, as is relevant: When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding’s recurrence and planned corrective action, and any partial corrective action taken. Condition: Several programs did not have expenditures or the amount provided to subrecipients accurately reported on the SEFA. We notified Administrative Services of the errors, and the SEFA was subsequently adjusted. The Summary Schedule of Prior Audit Findings lists the status as “completed.” A similar finding was noted in the prior audit. Repeat Finding: 2022-018 Questioned Costs: None Statistical Sample: No Context: Administrative Services is responsible for managing the accounting matters of the State and certifies the data collection form for the Statewide Single Audit. Administrative Services compiles the SEFA from information provided by the individual agencies and submits it to the auditor. During our review, we noted the following: The Department of Health and Human Services (DHHS) did not accurately report expenditures for several programs, including underreporting AL 93.575 by $3,909,201, underreporting AL 93.596 by $7,416,246, and overreporting AL 93.558 by $11,325,447. The Department of Military underreported AL 21.027 by $920,874. The Department of Labor underreported AL 17.225 by $3,696,585. Twenty-three programs for various State agencies needed correction. The total expenditures and amounts provided to subrecipients originally reported and per the final SEFA were as follows: See Schedule of Findings and Questioned Costs for chart/table. Cause: Administrative Services did not have adequate procedures to ensure the accuracy of amounts not pulled directly from the accounting system. Administrative Services established a specific account code for aid to subrecipients, but not all agencies utilized this account code. Effect: Increased risk for the SEFA to be inaccurate, which could lead to Federal sanctions or programs not audited that should be. Recommendation: We recommend Administrative Services improve procedures to ensure the SEFA is complete and accurate. Management Response: We will continue to work with State teammates to ensure the SEFA is accurate and complete. The original total SEFA expenditures were 99.98% accurate. APA Response: We agree that SEFA adjustments were not significant in total. However, errors amounting to millions of dollars for individual programs are unquestionably significant to those programs. Such errors could result, moreover, in a program not being audited as a major program when it should be.

Program: AL 93.575 and 93.596 – CCDF Cluster – Allowability & Eligibility Grant Number & Year: 2201NETANF, FFY 2022; 2001NECCDF, FFY 2020; 2301NECCDM, FFY 2023; 2301NECCDF, FFY 2023; 2101NECCC5, FFY 2021 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR § 75.403 (October 1, 2022) provides the following, in relevant part: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. * * * * (g) Be adequately documented. See also §§ 75.300 through 75.309. Per 45 CFR § 75.303 (October 1, 2022): The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. 42 USC § 9858k(b) states, “With regard to services provided to students enrolled in grades 1 through 12, no financial assistance provided under this subchapter shall be expended for— (1) any services provided to such students during the regular school day[.]” 45 CFR § 98.67(a) (October 1, 2022) states, “Lead Agencies shall expend and account for CCDF [Child Care and Development Fund] funds in accordance with their own laws and procedures for expending and accounting for their own funds.” To be eligible for services, 45 CFR § 98.20 (October 1, 2022) requires a child to be under 13 years of age, a citizen, and residing with a family whose income does not exceed 85% of the State’s median income. Title 392 of the Nebraska Administrative Code (NAC) 2-013.03(A) (Eff. 9/15/2020) states, “A recipient is limited to a maximum of sixty hours of Child Care Subsidy per week. A week is defined as the seven day period from Sunday through Saturday.” Title 392 NAC 3-004.01(A) (Eff. 9/15/2020) states, “The Department pays by attendance, not enrollment." Title 392 NAC 3-004.01(A)(i) (Eff. 9/15/2020) states, “The provider may bill the full authorized amount for times that the child is absent on a scheduled day, up to five times per month.” Title 392 NAC 3-001.02(D) (Eff. 9/15/2020) states, “The recipient and child care provider must ensure that the services are delivered as authorized.” Title 392 NAC 4-001 (Eff. 9/15/2020) states, in relevant part, “In order for a child care provider to participate in the subsidy program: . . . (F) Service provider enrollments are in effect for up to 12 months, are not back-dated, and must be completed and signed by all parties on or before the effective date.” Title 392 NAC 4-002 (Eff. 9/15/2020) states, in relevant part, “Before furnishing any service, each provider must sign an enrollment form agreeing: (A) No payments will be made for child care provided to a child before the service authorization date; (B) To provide service only as authorized, in accordance with the Department’s standards; . . . (G) To retain authorizations, billing documents, and attendance records for four years to support and document all claims[.]” The Child Care Provider Handbook (Handbook), dated January 2008, Section IV.C., states, in relevant part, “You must complete the Attendance Calendar to accurately reflect the dates on which child care services were provided as well as the exact number of hours of service provided. For each day, partial hours of service provided should be rounded up to the next quarter hour[.]” Additionally, the Handbook Section I, defines a “Full Day of Care” as “Five hours and 46 minutes (6 hours) through 9 hours (9 hours and 59 minutes) unless the child care program defines its day as more than 9 hours.” Section IV.A., of the Handbook goes on to state, “K.1. Authorized Units. Hourly or daily units listed on the Authorization are for the total time frame of the Authorization period - less than 6 hours are hourly units - 6 hours or more are daily units[.]” EnterpriseOne is the official accounting system for the State of Nebraska, and all expenditures are generated from it. Good internal control requires procedures to ensure that payments are in accordance with Federal and State requirements. Condition: Child care payments did not comply with Federal and State requirements. A similar finding has been noted in our previous audit reports since 2007. Repeat Finding: 2022-034 Questioned Costs: $163,622 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: We noted claims that lacked support and/or did not agree to support, services billed more than authorized, and duplicate claims charged, as detailed below. Random Sample We tested 30 child care claims paid with Federal funds. We noted 11 claims with errors. Some payments had more than one type of error. • For eight claims tested, there were discrepancies between the attendance sheet and the claim billed: o For one claim, the Agency was unable to obtain the attendance calendar from a provider who had closed in October 2022. With no attendance calendar, we were unable to verify the accuracy of the claim amount. o For two claims, two providers were authorized to provide care for the same child at the same time. We requested the attendance calendars from the second provider and found overlapping claims where both providers were billing for the same time period.  For one claim, there were two days with a total 5.75 overlapping hours of care.  For another claim we noted 17 hours and seven days of overlapping care. o For five claims, the providers billed for more hours and/or days than what was recorded on the child’s attendance sheet:  One provider billed a day with 9 hours and 53 minutes of care as one day plus one hour. Per the NAC, the additional time over a day unit is not billed until the care has reached 10 hours.  One provider billed for 19 days of child care, while the attendance calendar for the child showed only 18 days of care.  One provider billed 12 days and one hour of child care. The attendance calendar showed 7 days and four hours of care.  One provider billed for 19 days of child care, while the attendance sheet showed only 16 days of care.  One provider billed for four days and 60 hours of child care. The attendance sheet showed 65 hours of care, but no days. • For two claims tested, the providers provided care for a child over the authorized amount. o One provider was authorized to provide child care to a child for up to 18 hours per week while the father was working as a self-employed maintenance worker, which is the equivalent of three days of care. The provider claimed four days of care (totaling 31 hours). o One provider was authorized to provide child care up to 27 hours per week – equivalent to four days at one day unit each (more than six hours each). The provider claimed five to six day units each week in the month tested. Weekly hours provided ranged from 32 to 45 hours. • For three claims tested, the School Age Care claimed did not agree to the school schedule of the child. School Age Care is authorized for before and after school and on days school is not in attendance. o Two providers were recording the child’s “out” time each morning at 9:00 a.m. and the “in” time in the afternoon at 4:00 p.m. The school day started at 8:50 a.m. and ended at 4:05 p.m. While the NAC does allow for rounding to the nearest quarter hour for each day’s total time of services, the “in” and “out” times should not be rounded. It would not be possible for the child to leave daycare at 9:00 a.m. and arrive at school at 8:50 a.m., or to leave school at 4:05 p.m. and arrive at daycare at 4:00 p.m. The Agency agreed that this practice was adding an extra 15 minutes or quarter hour to each day. o For one claim, the provider charged a full day of care on a school day during which the child would have been in school. The Agency could not explain why a full day of care was being charged on a day that school was in session. • For one claim, the Agency could not provide a birth record or birth certificate for the child; therefore, we could not verify that the child was under 13 years old. • For one claim, the Agency was unable to provide the agreement between the Agency and the provider that would have been valid at the time of service. Federal payment errors noted for the sample tested were $1,458. The total Federal sample tested was $10,095, and total child care Federal assistance claims for the fiscal year were $45,598,523. Based on the sample tested, the case error rate was 36.67% (11/30). The dollar error rate for the sample was 14.44% ($1,458/10,095), which estimates the potential dollars at risk for the fiscal year 2023 to be $6,584,427 (dollar rate multiplied by the population). In addition to the $1,458 questioned costs noted on the sample items tested, we noted $695 of questioned costs on other line items of the claims reviewed, which resulted from missing and inaccurate documentation and service authorizations being exceeded. Unusual Claims Tested We reviewed the detail of child care claims for unusual items, such as excessive hours billed in a month. Four of five claims tested were improper.  One provider billed 348 hours for School Age care provided during one month. We reviewed the attendance calendar, which showed that care was provided from 6:00 a.m. to 6:00 p.m. or 9:00 p.m. every day but Sundays. This is not reasonable, as it includes hours when the School Age child should have been in school. We also noted the provider billed over the authorized hours of care. The provider was authorized to provide care up to 53 hours per week; however, during the last two weeks of the month, the provider claimed 60 hours of care. After identifying the dates and times that the child would have been attending school, we then recalculated attendance with reasonable in and out times, up to the authorized hours per week, and determined that the provider overbilled by $906. We consider these questioned costs.  One provider billed 240 hours at a rate of $5.50/hour for School Age care provided during one month. We reviewed the attendance calendar, and the care was overnight from 7:00 p.m. to 7:00 a.m. (12 hours), so the provider should have been billing for one day unit (up to 10 hours) plus 2 additional hourly units for each day of care. We recalculated what the claim should have been with 20 day units at $34/day and 40 hourly units at $5.50/hour and question the difference, or $460.  One provider billed care of one School Age child between the dates of May 1, 2021, and May 17, 2021, for 231 hours at a rate of $2.25/hour and 17 days at a rate of $15/day. We requested the attendance records to verify the claim, but the Agency was unable to provide the documentation because the provider had closed. Without the attendance calendar needed to verify the propriety of these units, we question the $775 paid.  One provider billed 240 hours of overtime during one month. We requested the attendance records to verify the claim, but the Agency was unable to provide the documentation. The provider responded to the Agency that she would not be sending in an attendance calendar because she had thrown away all the documentation when the Agency closed her down. Without the attendance calendar to verify the reasonableness of these units, we question the $997 paid. Duplicate Claims Child care claims are initially paid from State funds. Journal entries are then performed throughout the year to transfer costs to Federal funds. A detailed listing of claims accompanies these journal entries to show which claims are included in the amounts moved from State funds to Federal funds. We reviewed the detailed claim listings for each journal entry completed during the fiscal year and found that duplicate claims were included in two journal entries. The journal entry in March 2023 included 428 claims, totaling $158,331, that had been charged to Federal funds in September 2022; therefore, $158,331 is considered questioned costs. Cause: Ineffective review. The Agency does not have automated procedures to ensure: 1) attendance records agree to billing documents; 2) service authorizations are not exceeded; and 3) claims are in accordance with regulations. Effect: Ineffective review of claims increases the risk for errors and misuse of State and Federal funds. Recommendation: We recommend the Agency implement procedures to ensure payments are allowable, adequately supported, and in accordance with State and Federal regulations. We further recommend the Agency ensure billing documents agree with attendance sheets. We also recommend the Agency implement procedures to ensure journal entries do not charge duplicate claims. Finally, we recommend the Agency take the necessary action to recover the overpayments. Management Response: The Agency agrees.

Program: AL 93.575 and 93.596 – CCDF Cluster – Special Tests and Provisions Grant Number & Year: Various, including 2301NECCDF, FFY 2023 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 45 CFR § 98.41 (October 1, 2022), the State must have requirements to protect the health and safety of children, including the prevention and control of infectious diseases, building and physical premises safety, and health and safety training. Per 391 NAC 3-005.09A and NAC 4-005.09A: The Department will make a fire inspection referral when: . . . 2. Every two years following the initial fire inspection[.] Per 391 NAC 3-005.09B: The Department will make a sanitation inspection referral when: . . . 2. Every two years following the initial sanitation inspection . . . [.] A good internal control plan requires that adequate documentation be maintained to support compliance with health and safety requirements. Condition: The Agency lacked adequate procedures for ensuring that health and safety requirements were met for child care providers. A similar finding was noted in the prior audit. Repeat Finding: 2022-035 Questioned Costs: None Statistical Sample: No Context: We tested 17 child care centers subject to fire and sanitation inspections. For six child care centers tested, a required inspection had not been performed as of fieldwork on November 13, 2023. The Agency has made referrals for the fire and sanitation inspections; however, the inspections are overdue, and the Agency is ultimately responsible for ensuring that these inspections are performed. See Schedule of Findings and Questioned Costs for chart/table. Cause: Depending on the city or county, the Agency relies on local fire departments or the State Fire Marshal to conduct fire inspections for child care centers. The Agency makes a referral to the fire department when an inspection is due, but the Agency does not pay for these inspections and cannot control the timing of the inspections. Effect: Without adequate procedures to ensure health and safety requirements are met, there is an increased risk of noncompliance with Federal regulations and the possibility of children being cared for in unsafe facilities. Recommendation: We recommend the Agency implement procedures to ensure all health and safety requirements are met for child care centers. These procedures should include regular follow-up with the Fire Marshall or local fire departments and local health departments or the Environmental Health Agency to ensure the inspections are completed timely. This also should include establishing a documented review of inspection requirements for school-age-only child care centers as well as child care centers located in a school. Management Response: The Agency partially agrees. It is agreed that some sanitation and fire inspections have not been conducted every 2 years. These inspections are conducted by entities external to DHHS. Resources are an issue for these entities, which contributes to not meeting the regulatory timeframes for DHHS Children's Services Licensing. The Agency disagrees with the finding, in part, because DHHS has policy and procedure for making timely referrals, as required by regulations. DHHS has had extensive documented communication and follow up with these entities after the policy and procedure changes in 2020, 2021, 2022 and 2023; however, DHHS has no authority to require these entities to complete the inspections more promptly or release completed inspections when the licensee has not paid for the fire or sanitation inspection. DHHS will continue to implement policies and procedures: File Review by Child Care Licensing Supervisors and Fire and Sanitation Inspection Referrals. It is accurate that "per 45 CFR § 98.41 (October 1, 2020), the State must have requirements to protect the health and safety of children, including the prevention and control of infectious diseases, building and physical premises safety, and health and safety training." DHHS disagrees that: "The Agency did not have adequate procedures in place to ensure health and safety requirements were met for child care providers." Regulations 391 NAC 1-5 include robust requirements to address a healthy and safe environment that includes: environmental services and safety, physical plant standards, communicable diseases, children excluded due to illness, medications, food safety, emergency preparedness, safety training and nutrition and food service training. Child Care Inspection Specialists conduct inspections pursuant to these regulations, checking on compliance in the areas listed above, and these inspections are conducted once or twice annually as required by statute. It is important to note that if serious fire safety and sanitation concerns are observed at any inspection that may endanger the health and safety of children in care, it is standard practice to work with the appropriate authority to request an immediate inspection. Fire and sanitation have always responded timely to these requests. This has been a long-standing policy and procedure in Children's Services Licensing specific to Family Child Care Homes I and II and is part of the child care licensing regulations. 391 NAC Chapters 1-5: 1-005.08 Inspection by Other Entities 2-005.09 Inspection by Other Entities 3-005.09 Inspections by Other Entities 4-005.09 Inspections by Other Entities 5-005.09 Inspections by Other Entities APA Response: The Agency is the recipient of the Federal funds and is, therefore, ultimately responsible to ensure that fire and sanitation inspections are performed. Without such inspections, there is an increased risk of children being cared for in unsafe facilities.

Program: AL 93.558 – Temporary Assistance for Needy Families; AL 93.563 – Child Support Enforcement; AL 93.568 – Low Income Home Energy Assistance (LIHEAP); AL 93.575 – Child Care and Development Block Grant; AL 93.658 – Foster Care Title IV-E; AL 93.778 – Medical Assistance Program; AL 10.561 – State Administrative Matching Grants for the Supplemental Nutrition Assistance Program – Allowable Costs/Cost Principles Grant Number & Year: 2001NETANF, FFY 2020; 2301NECSES, FFY 2023; 2301NELIEA, FFY 2023; 2301NECCDD, FFY 2023; 2301NEFOST, FFY 2023; 2305NE5ADM, FFY 2023; 233NE406S2514, FFY 2023 Federal Grantor Agency: U.S. Department of Health and Human Services and U.S. Department of Agriculture Criteria: 45 CFR § 75.405(a) (October 1, 2022) and 2 CFR § 200.405 (January 1, 2023) state, in part, the following: A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. 45 CFR § 75.403 (October 1, 2022) and 2 CFR § 200.403 (January 1, 2023) provide the following, in relevant part: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. * * * * (g) Be adequately documented. See also §§ 75.300 through 75.309. Per 45 CFR § 75.303 (October 1, 2022) and 2 CFR § 200.303 (January 1, 2023), The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Title 45 CFR § 75.302 (October 1, 2022) and 2 CFR § 200.302 (January 1, 2023) require financial management systems of the State sufficient to permit preparation of required reports and permit the tracing of funds to expenditures adequate to establish the use of these funds were in accordance with applicable regulations. EnterpriseOne is the official accounting system for the State of Nebraska, and all expenditures are generated from it. Good internal control requires procedures to ensure that amounts charged to Federal funds are proper. Condition: Procedures to ensure journal entries and adjustments to the Public Assistance Cost Allocation Plan (PACAP) were not adequate, resulting in multiple Federal programs being overcharged. Repeat Finding: No Questioned Costs: $581,496 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: Each quarter, as the PACAP is prepared, the Agency makes multiple adjustments for costs that either were charged to Federal funds and should not have been, or costs that were not charged to Federal funds but are claimable to a Federal grant. We tested five adjustments between two quarters. One adjustment tested for the quarter ended December 31, 2022, was recorded to charge the Foster Care grant for allowable costs incurred by the Foster Care Review Office (FCRO), a separate agency. The amounts provided by FCRO erroneously included payroll charges from a previous quarter, inflating the amount charged. The FCRO later caught the mistake and adjusted the internal spreadsheet but did not alert the Agency to the error, so a correcting adjustment was never made to the PACAP. The amount charged was $353,984; however, the adjustment should have been $212,725, a difference of $141,259. Foster Care is matched at 50%, so the grant was overcharged $70,629, which are questioned costs. Due to this error, we reviewed a second Foster Care adjustment for the quarter ending March 31, 2023, and noted the Agency’s calculation included amounts for a State funded program that should have been removed, resulting in the grant being overcharged an additional $1,561. We also tested six journal entries that moved costs between cost centers to determine any impact on the PACAP and if those journal entries were appropriate. We noted three improper journal entries that the Agency had not corrected as of the end of the fiscal year: • A journal entry for $526,487 was performed in November 2022 to temporarily move postage costs of multiple programs from State funds to the Child Support Enforcement (CSE) grant until new coding could be created in the State’s accounting system to track expenses from one fiscal year to another. The intent was to reverse the entry as soon as the new coding was completed; however, the reversing entry was never performed. Since the Agency performs a quarterly adjustment for the CSE grant to charge indirect costs identified by the Agency’s PACAP to the grant, the CSE grant was overcharged a total of $263,628. No correcting entry had been made as of September 30, 2023. These are considered questioned costs. • A journal entry for $207,369 was performed in December 2022 to move expenses to allow payroll to post. The intent was to reverse the entry before the end of the fiscal year; however, that was not done. The expenses were moved from Medicaid administration and were charged to the Central Services and Supplies Cost Center, which is then allocated to numerous other Cost Centers that are further allocated or charged directly to Federal programs such as TANF and Child Care. Due to the intricacies of PACAP allocations, exact questioned costs are unknown. No correcting entry was made as of September 30, 2023. • A journal entry for $5,317,640 was done in February 2023 to move Premium Pay to the Coronavirus State and Local Fiscal Recovery Funds (CSLFRF) grant as additional pay for certain job roles allowed under that grant. However, the entry performed included some lines that were miscoded, most significantly a line for $764,187 that was supposed to move money within the same Cost Center (CC 25C21910 – Field Office Administration); however, it pulled costs out of Cost Center 25C21780 - Protection and Safety Policy Chief instead. Additionally, we confirmed with the Agency that the costs charged to CC 25C21910 under the CSLFRF grant were also allocated to other Federal programs through the PACAP, essentially charging Federal programs twice. Due to the intricacies of the PACAP allocations, total questioned costs are unknown; however, we were able to determine that this error caused Medicaid to be overcharged $149,478, LIHEAP to be overcharged $33,447, SNAP to be overcharged $44,984, Child Care to be overcharged $10,412, and TANF to be overcharged $7,357. Cause: Inadequate procedures to ensure that adjustments to the PACAP are proper and that journal entries are appropriate for each program. Effect: Unallowable expenditures were charged to Federal funds and there is an increased risk for errors, fraud, and non-compliance with Federal regulations. Recommendation: We recommend the Agency strengthen procedures to ensure adjusting entries are complete and accurate. We further recommend the Agency strengthen procedures to ensure compliance with Federal regulations. Management Response: The Agency agrees.

Program: AL 93.658 - Foster Care Title IV-E; AL 10.561 - State Administrative Matching Grants for the Supplemental Nutrition Assistance Program; AL 93.659 - Adoption Assistance – Allowable Costs/Cost Principles Grant Number & Year: 2301NEFOST, FFY 2023; 202323S251443, FFY 2023; 2301NEADPT, FFY 2023 Federal Grantor Agency: U.S. Department of Health and Human Services and U.S. Department of Agriculture Criteria: 45 CFR § 75.405(a) (October 1, 2022) and 2 CFR § 200.405 (January 1, 2023) state, in part, the following: A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. 45 CFR § 75.403 (October 1, 2022) and 2 CFR § 200.403 (January 1, 2023) provide the following, in relevant part: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. * * * * (g) Be adequately documented. See also §§ 75.300 through 75.309. Per 45 CFR § 75.303 (October 1, 2022) and 2 CFR § 200.303 (January 1, 2023), The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Per the CAP’s RMTS Time Study Design/Coding Structure: [P]articipants are asked whether they are working on an activity that is client related. If they select “Yes” to this question, they are asked to identify the Case ID and type of case . . . . Per the CAP’s RMTS Survey Validation: The contractor and the NE DHHS staff review subsample responses to ensure the activity selected matches the description provided. If the activity and description do not match, the participant is notified and the moment is considered invalid. Per the CAP’s RMTS Response Time/Non-Responses: Participants have two (2) calendar days to respond to each moment. The two (2) day response time allows workers who may spend time outside of their office location and away from email the opportunity to respond to the moment before it expires. The two (2) day period is inclusive of calendar hours and not business days . . . . Good internal control and sound accounting practices require procedures to ensure that staff know how to complete accurate random moment time studies, which are used to allocate costs to Federal programs. Condition: The Agency did not have adequate procedures to ensure payroll charges were proper. Repeat Finding: 2022-024 Questioned Costs: $55,666 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: The Random Moment Time Study (RMTS) is conducted on an ongoing basis to provide data for the allocations of direct and indirect costs to various programs. The objective is to identify employee efforts directly related to programs administered by the Agency. We tested 55 RMTS surveys and noted 18 errors resulting in questioned costs as follows: • For 10 of 15 surveys tested, the workers erroneously reported they were working on a Foster Care IV-E (Federally funded) case when the survey should have been reported as Foster Care Non IV-E; therefore, Foster Care was overcharged. o For two surveys, the cases had previously been IV-E Foster Care cases but were changed to Non IV-E cases the month prior to the surveys submitted by the Child and Family Services Specialists. o For one survey, the worker completed the survey three calendar days after the RMTS was generated and the activity described on the survey form was for the date submitted, not when the RMTS was generated. • For 7 of 19 Supplemental Nutrition Assistance Program (SNAP) surveys tested, the RMTS survey form appeared to have been completed incorrectly. o For two surveys, the workers selected SNAP; however, per the case files, the case worker appeared to be working on Low Income Home Energy Assistance (LIHEAP) and not on SNAP. o For one survey, the worker stated on the survey form they were working on a case activity for SNAP; however, no case file name or identification case number was given to identify what case was being worked. o For three surveys, the workers selected the SNAP program; however, we could not confirm from the documentation on file what the worker was working on, and the questioned costs are unknown. o For one survey, the case worker selected the SNAP program; however, per the case files, the case worker appeared to be working on other programs along with SNAP at the time of the survey. • For one of seven Adoption IV-E surveys tested, the worker erroneously reported that they were working on an Adoption IV-E case when the survey should have been reported as Foster Care IV-E; therefore, Adoption IV-E was overcharged. Total known Federal payment errors, amount tested, error rate (amount of errors/amount tested), total dollars charged via RMTS, and potential dollars at risk (dollar rate multiplied by the population total dollars charged) are summarized below by program: See Schedule of Findings and Questioned Costs for chart/table. Cause: The Agency’s training of staff and supervisor reviews of RMTS surveys were not sufficient to ensure the surveys were accurately completed. Effect: Random moment sampling is based on the laws of probability, which state, in essence, that there is a high probability that a relatively small number of random surveys will yield an accurate depiction of the overall characteristics of the population for which the sample was taken. If RMTS surveys are not accurate, there is an increased risk costs will be allocated incorrectly between programs. Recommendation: We recommend the Agency improve procedures to ensure that random moment surveys are accurate and adequately reviewed. Management Response: The Agency agrees.

Program: AL 93.658 – Foster Care Title IV-E – Reporting Grant Number & Year: 2201NEFOST, FFY 2022; 2301NEFOST, FFY 2023 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: A good internal control plan requires procedures to ensure that reports are accurate and complete and reconcile to the accounting system. 45 CFR § 75.302 (October 1, 2022) states, in part, the following: (a) Each state must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state's own funds. In addition, the state's and the other non- Federal entity's financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. See also §75.450. (b) The financial management system of each non-Federal entity must provide for . . . (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements . . . . Per 45 CFR § 1356.60(a) (October 1, 2022), Federal matching funds for foster care maintenance payments are available at the Federal medical assistance percentage. Per 45 CFR § 1356.60(c), Federal financial participation is 50% for administrative expenditures. Condition: The Agency lacked adequate procedures to ensure the accuracy of Federal Financial Reports (FFRs). Repeat Finding: No Questioned Costs: Unknown Statistical Sample: No Context: We tested the FFRs for the quarters ended September 2022 and March 2023 and noted the following: • Part I, Line 1a, Maintenance Payments – Foster Family Home, current quarter claims for the September 2022 report included $4,765,533 related to prior-period administration expenses that should have been reported as a prior-period adjustment. The total maintenance on Line 1a was overstated by $4,765,533, and administration adjustments were understated by that amount. As maintenance is matched at 64% and administration at 50%, the total Federal share was overreported by $667,175. • The supporting worksheets for the March 2023 report contained a clerical error. As a result, administrative costs were understated by $16,904, with the Federal share understated by $8,452. Cause: Clerical errors and inadequate review. Effect: Increased risk for errors and non-compliance with Federal requirements. Recommendation: We recommend the Agency implement procedures to ensure that Federal reports are accurate and reconcile to the accounting system. Management Response: The Agency agrees

Program: AL 93.658 – Foster Care Title IV-E; AL 93.658 – COVID-19 Foster Care Title IV-E – Allowability Grant Number & Year: 2301NEFOST, FFY 2023 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 45 CFR § 75.403 (October 1, 2022), costs must be necessary, reasonable, and adequately documented. Per 45 § CFR 75.303(a) (October 1, 2022), the Agency must do the following: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. 45 CFR § 75.302(a) (October 1, 2022) states the following: Each state must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state's own funds. In addition, the state's and the other non- Federal entity's financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. Title 392 NAC 4-002. (Eff. 9/15/2020) states, in relevant part, “Before furnishing any service, each provider must sign an enrollment form agreeing: (A) No payments will be made for child care provided to a child before the service authorization date; (B) To provide service only as authorized, in accordance with the Department’s standards;” and “(G) To retain authorizations, billing documents, and attendance records for four years to support and document all claims[.]” The Child Care Provider Handbook (Handbook), dated January 2008, states, in relevant part, “You must complete the Attendance Calendar to accurately reflect the dates on which child care services were provided as well as the exact number of hours of service provided. For each day, partial hours of service provided should be rounded up to the next quarter hour[.]” Condition: The Agency did not have adequate documentation on file to support Foster Care payments for childcare services. Repeat Finding: No Questioned Costs: $577 known (2301NEFOST, $521; 2301NEFOST-COVID-19, $56) Statistical Sample: No Context: For 1 of 25 claims tested, the Agency was unable to obtain the childcare attendance calendar from the provider. With no attendance calendar, we were unable to verify that the payment amount was accurate, resulting in questioned costs of $577. Federal payment errors noted in the sample were $577. The Federal sample tested was $13,527, and the total Federal Foster Care maintenance payments during the fiscal year were $5,401,586. Based on the sample tested, the case error rate was 4% (1/25). The dollar error rate was 4.27% ($577/$13,527), which estimates the potential dollars at risk for fiscal year 2023 to be $230,648 (dollar rate multiplied by population). Cause: Employee oversight; inadequate procedures to ensure documentation was on file. Effect: When adequate support is not on file, there is an increased risk of both non-compliance with State and Federal requirements and improper payments. Recommendation: We recommend the Agency implement procedures to ensure the maintenance of adequate documentation for supporting that expenditures are allowable and proper in accordance with State and Federal regulations. Management Response: The Agency agrees

Program: AL 93.658 – Foster Care Title IV-E; AL 93.658 – COVID-19 Foster Care Title IV-E – Allowability Grant Number & Year: 2301NEFOST, FFY 2023 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 45 CFR § 75.403 (October 1, 2022), costs must be necessary, reasonable, and adequately documented. Per 45 § CFR 75.303(a) (October 1, 2022), the Agency must do the following: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. 45 CFR § 75.302(a) (October 1, 2022) states the following: Each state must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state's own funds. In addition, the state's and the other non- Federal entity's financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. Title 392 NAC 4-002. (Eff. 9/15/2020) states, in relevant part, “Before furnishing any service, each provider must sign an enrollment form agreeing: (A) No payments will be made for child care provided to a child before the service authorization date; (B) To provide service only as authorized, in accordance with the Department’s standards;” and “(G) To retain authorizations, billing documents, and attendance records for four years to support and document all claims[.]” The Child Care Provider Handbook (Handbook), dated January 2008, states, in relevant part, “You must complete the Attendance Calendar to accurately reflect the dates on which child care services were provided as well as the exact number of hours of service provided. For each day, partial hours of service provided should be rounded up to the next quarter hour[.]” Condition: The Agency did not have adequate documentation on file to support Foster Care payments for childcare services. Repeat Finding: No Questioned Costs: $577 known (2301NEFOST, $521; 2301NEFOST-COVID-19, $56) Statistical Sample: No Context: For 1 of 25 claims tested, the Agency was unable to obtain the childcare attendance calendar from the provider. With no attendance calendar, we were unable to verify that the payment amount was accurate, resulting in questioned costs of $577. Federal payment errors noted in the sample were $577. The Federal sample tested was $13,527, and the total Federal Foster Care maintenance payments during the fiscal year were $5,401,586. Based on the sample tested, the case error rate was 4% (1/25). The dollar error rate was 4.27% ($577/$13,527), which estimates the potential dollars at risk for fiscal year 2023 to be $230,648 (dollar rate multiplied by population). Cause: Employee oversight; inadequate procedures to ensure documentation was on file. Effect: When adequate support is not on file, there is an increased risk of both non-compliance with State and Federal requirements and improper payments. Recommendation: We recommend the Agency implement procedures to ensure the maintenance of adequate documentation for supporting that expenditures are allowable and proper in accordance with State and Federal regulations. Management Response: The Agency agrees

Program: AL 93.658 - Foster Care Title IV-E; AL 10.561 - State Administrative Matching Grants for the Supplemental Nutrition Assistance Program; AL 93.659 - Adoption Assistance – Allowable Costs/Cost Principles Grant Number & Year: 2301NEFOST, FFY 2023; 202323S251443, FFY 2023; 2301NEADPT, FFY 2023 Federal Grantor Agency: U.S. Department of Health and Human Services and U.S. Department of Agriculture Criteria: 45 CFR § 75.405(a) (October 1, 2022) and 2 CFR § 200.405 (January 1, 2023) state, in part, the following: A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. 45 CFR § 75.403 (October 1, 2022) and 2 CFR § 200.403 (January 1, 2023) provide the following, in relevant part: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. * * * * (g) Be adequately documented. See also §§ 75.300 through 75.309. Per 45 CFR § 75.303 (October 1, 2022) and 2 CFR § 200.303 (January 1, 2023), The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Per the CAP’s RMTS Time Study Design/Coding Structure: [P]articipants are asked whether they are working on an activity that is client related. If they select “Yes” to this question, they are asked to identify the Case ID and type of case . . . . Per the CAP’s RMTS Survey Validation: The contractor and the NE DHHS staff review subsample responses to ensure the activity selected matches the description provided. If the activity and description do not match, the participant is notified and the moment is considered invalid. Per the CAP’s RMTS Response Time/Non-Responses: Participants have two (2) calendar days to respond to each moment. The two (2) day response time allows workers who may spend time outside of their office location and away from email the opportunity to respond to the moment before it expires. The two (2) day period is inclusive of calendar hours and not business days . . . . Good internal control and sound accounting practices require procedures to ensure that staff know how to complete accurate random moment time studies, which are used to allocate costs to Federal programs. Condition: The Agency did not have adequate procedures to ensure payroll charges were proper. Repeat Finding: 2022-024 Questioned Costs: $55,666 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: The Random Moment Time Study (RMTS) is conducted on an ongoing basis to provide data for the allocations of direct and indirect costs to various programs. The objective is to identify employee efforts directly related to programs administered by the Agency. We tested 55 RMTS surveys and noted 18 errors resulting in questioned costs as follows: • For 10 of 15 surveys tested, the workers erroneously reported they were working on a Foster Care IV-E (Federally funded) case when the survey should have been reported as Foster Care Non IV-E; therefore, Foster Care was overcharged. o For two surveys, the cases had previously been IV-E Foster Care cases but were changed to Non IV-E cases the month prior to the surveys submitted by the Child and Family Services Specialists. o For one survey, the worker completed the survey three calendar days after the RMTS was generated and the activity described on the survey form was for the date submitted, not when the RMTS was generated. • For 7 of 19 Supplemental Nutrition Assistance Program (SNAP) surveys tested, the RMTS survey form appeared to have been completed incorrectly. o For two surveys, the workers selected SNAP; however, per the case files, the case worker appeared to be working on Low Income Home Energy Assistance (LIHEAP) and not on SNAP. o For one survey, the worker stated on the survey form they were working on a case activity for SNAP; however, no case file name or identification case number was given to identify what case was being worked. o For three surveys, the workers selected the SNAP program; however, we could not confirm from the documentation on file what the worker was working on, and the questioned costs are unknown. o For one survey, the case worker selected the SNAP program; however, per the case files, the case worker appeared to be working on other programs along with SNAP at the time of the survey. • For one of seven Adoption IV-E surveys tested, the worker erroneously reported that they were working on an Adoption IV-E case when the survey should have been reported as Foster Care IV-E; therefore, Adoption IV-E was overcharged. Total known Federal payment errors, amount tested, error rate (amount of errors/amount tested), total dollars charged via RMTS, and potential dollars at risk (dollar rate multiplied by the population total dollars charged) are summarized below by program: See Schedule of Findings and Questioned Costs for chart/table. Cause: The Agency’s training of staff and supervisor reviews of RMTS surveys were not sufficient to ensure the surveys were accurately completed. Effect: Random moment sampling is based on the laws of probability, which state, in essence, that there is a high probability that a relatively small number of random surveys will yield an accurate depiction of the overall characteristics of the population for which the sample was taken. If RMTS surveys are not accurate, there is an increased risk costs will be allocated incorrectly between programs. Recommendation: We recommend the Agency improve procedures to ensure that random moment surveys are accurate and adequately reviewed. Management Response: The Agency agrees.

Program: AL 93.659 – Adoption Assistance – Reporting Grant Number & Year: 2201NEADPT, FFY 2022; 2301NEADPT, FFY 2023 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: A good internal control plan requires procedures to ensure that reports are accurate and complete and reconcile to the accounting system. EnterpriseOne is the official accounting system of the State. 45 CFR § 75.302 (October 1, 2022) states, in part, the following: (a) Each state must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state's own funds. In addition, the state's and the other non- Federal entity's financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. See also §75.450. (b) The financial management system of each non-Federal entity must provide for… (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements… Per Instructions for Completion of Form CB – 496 Part 4: Line 9. Prior Reported FFYs - Total Cumulative Expenditure of Calculated Adoption Savings (Line 1 Amount) – This line includes the cumulative total of calculated adoption savings that were expended and reported on Form CB-496 Part 4 in those Part 4 reporting periods consisting of all prior FFYs. An entry is made only in Column B since this line does not contain any amounts sourced from the current FFY. The entry must be taken directly from the amount reported on the CB-496 Part 4 for the immediately prior FFY on line 14, Column C. Title IV-E agencies are required to enter into an adoption assistance agreement with the prospective adoptive parents of any child who meets specified criteria by applying differing, and less restrictive, program eligibility criteria. This results in some number of children who, under previously applied program eligibility criteria, would not have been determined as Title IV-E eligible, but who will now be determined as Title IV-E eligible for adoption assistance. Each Title IV-E agency is required to calculate and spend an amount equal to any savings in Title IV-E agency expenditures as a result of applying the differing program eligibility criteria for a Federal fiscal year (FFY) for services permitted under Title IV-B or IV-E. These non-Federal funds are referred to as “adoption savings.” The State is required to spend an amount equal to any adoption savings in State expenditures for a fiscal year for any services that may be provided under Title IV-B or IV-E. Per 42 U.S. Code § 673(a)(8)(D)(ii) “Any State spending required under clause (i) shall be used to supplement, and not supplant, any Federal or non-Federal funds used to provide any service under part B or this part.” Condition: The Agency lacked adequate procedures for ensuring the accuracy of Federal Financial Reports (FFRs). Repeat Finding: No Questioned Costs: Unknown Statistical Sample: No Context: We tested the FFRs for the quarters ended December 2022 and March 2023 and noted the following: • For both reports tested, Line 20, Adoption Assistance Payments, was incorrect. The Line 20 total for December was understated by $679,601, and the Federal share was understated by $435,420. The Line 20 total for March was understated by $643,861, and the Federal share was understated by $412,522. This was due to reducing expenditures for the Federal debit side of a journal entry but including the General Fund credit side. Both sides of journal entries should be considered. We reviewed the September 2022 and June 2023 reports for this issue and noted similar errors with the Federal share being understated by $417,414 and $41,971 respectively. • For both reports tested, the Federal and State shares of expenditures reported did not agree to the EnterpriseOne accounting system. For December, the Agency did not include all allowable General Fund expenditures. For March, the Agency performed a journal entry that moved $1 million from Federal funds to State General funds. This entry was meant to be temporary but was not reversed. As a result, the Federal Share reported was $1 million more than the accounting system, and the State Share reported was $1 million less than the accounting system. • A reconciliation of the reports to the accounting system was not done each quarter. The Agency indicated its intention to do a reconciliation annually; however, due to staff turnover, it was not performed. As of the date of fieldwork, November 29, 2023, the reconciliation had not been completed. We also tested Part 4 of the September 2022 report for the Annual Adoption Savings Calculation and Accounting Report. • Line 9b, Cumulative Calculated Adoption Savings, was reported as $25,184,469 but should have been reported as $28,490,558 to agree with Line 14c of the previous report. • Line 12a, Expenditures of Adoption Savings on Other Title IV-B or IV-E Allowable Services, reported $868,963, but these expenditures should not have been included. These expenditures were paid with Federal funds and State matching funds and, therefore, are not allowable uses of Adoption Savings. • Line 11a, Expenditures for Children at Risk of Foster Care, was reported as $962,268 but was overstated by $134,722 due to including expenditures paid with Federal funds. Cause: Inadequate review and staff turnover. Effect: Increased risk for errors and non-compliance with Federal requirements. Recommendation: We recommend the Agency implement procedures to ensure Federal reports are accurate and reconcile to the accounting system. Management Response: The Agency agrees

Program: AL 93.778 – Medical Assistance Program; AL 93.767 – Children’s Health Insurance Program (CHIP) – Special Tests and Provisions Grant Number & Year: All open, including 2305NE5MAP, FFY 2023 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per Title 42 CFR § 455.104(b)(4) (October 1, 2022), the State Medicaid Agency must require the disclosing entity provide the following disclosures: The name, address, date of birth, and Social Security Number of any managing employee of the disclosing entity (or fiscal agent or managed care entity). Per 42 CFR § 455.101 (October 1, 2022): Managing employee means a general manager, business manager, administrator, director, or other individual who exercises operational or managerial control over, or who directly or indirectly conducts the day-to-day operation of an institution, organization, or agency. Per the Medicaid Provider Enrollment Compendium (MPEC) (3/22/21) Section 1.4.1C: There are not exceptions to the managing employee disclosure requirement. To the extent any individual meets the definition of “managing employee” under § 455.101, their information is required to be disclosed. MPEC Section 1.4.1C states further the following: However, if a non-profit entity has managing employees, to the extent these individuals meet the definition of “managing employee” under § 455.101; they would have to be disclosed as such. In addition, as discussed further below, entities, including non-profit entities, that are organized as corporations must provide disclosures regarding their officers and directors . . . . If a corporation has, for instance, a Director of Finance who is not a member of the board of directors, he/she would not need to be disclosed as a director/board member. However, as discussed in section C., below, to the extent he/she meets the definition of “managing employee” under § 455.101; he/she would have to be disclosed as a “managing employee.” Per 42 CFR § 455.436 (October 1, 2022), the State Medicaid Agency must do the following: (a) Confirm the identity and determine the exclusion status of providers and any person with an ownership or control interest or who is an agent or managing employee of the provider through routine checks of Federal databases. (b) Check the Social Security Administration’s Death Master File, the National Plan and Provider Enumeration System (NPPES), the List of Excluded Individuals/Entities (LEIE), the Excluded Parties List System (EPLS), and any such other databases as the Secretary may prescribe. (c)(1) Consult appropriate databases to confirm identity upon enrollment and reenrollment; and (2) Check the LEIE and EPLS no less frequently than monthly. 45 CFR § 75.303 (October 1, 2022) requires the Agency to “[e]stablish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award.” Good internal control requires procedures to ensure that all required disclosures are provided. Condition: Two of 25 providers tested did not include disclosure requirements for managing employees. Repeat Finding: 2022-042 Questioned Costs: Unknown Statistical Sample: No Context: We tested screening and enrollment for 25 Medicaid/CHIP providers. We noted that two providers, both non-profit corporations, failed to disclose any managing employee. Therefore, no screenings for managing employees were performed for these two providers. Cause: The Agency relies on each provider’s disclosure to be complete, true, and accurate. The provider is allowed to complete the enrollment process even if an owner or managing employee is not disclosed. Effect: Without adequate procedures to ensure providers are screened, and disclosures are complete, there is an increased risk of provider ineligibility, which could result in unallowable costs or potential harm to patients. Recommendation: We recommend the Agency obtain disclosures and screen providers as required by Federal regulations. Management Response: The Agency agrees.

Program: Various, including AL 93.778 – Medical Assistance Program (Medicaid), and AL 93.563 – Child Support Enforcement – Allowable Costs/Cost Principles Grant Number & Year: Various, including 2205NE5ADM, FFY 2022; 2201NECSES, FFY 2022 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 2 CFR § 200.403 (January 1, 2023) and 45 CFR § 75.403 (October 1, 2022) state, in relevant part, the following: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: * * * * (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. * * * * (g) Be adequately documented. 2 CFR § 200.405(b) (January 1, 2023) and 45 CFR § 75.405(b) (October 1, 2022) state, in relevant part, the following: All activities which benefit from the non-Federal entity’s indirect (F&A) cost, including unallowable activities and donated services by the non-Federal entity or third parties, will receive an appropriate allocation of indirect costs. 2 CFR § 200, Appendix V, subsection (G)(2), (January 1, 2023) and 45 CFR § 75 Appendix V, subsection (G)(2), (October 1, 2022) state the following: Internal service funds are dependent upon a reasonable level of working capital reserve to operate from one billing cycle to the next. Charges by an internal service activity to provide for the establishment and maintenance of a reasonable level of working capital reserve, in addition to the full recovery of costs, are allowable. A working capital reserve as part of retained earnings of up to 60 calendar days cash expenses for normal operating purposes is considered reasonable. A working capital reserve exceeding 60 calendar days may be approved by the cognizant agency for indirect costs in exceptional cases. 2 CFR § 200, Appendix V, subsection (G)(4), (January 1, 2023) and 45 CFR § 75 Appendix V, subsection (G)(4), (October 1, 2022) state, in relevant part, the following: Billing rates used to charge Federal awards must be based on the estimated costs of providing the services, including an estimate of the allocable central service costs. A comparison of the revenues generated by each billed service (including revenues whether or not billed or collected) to the actual allowable costs of the service will be made at least annually and an adjustment will be made for the difference between the revenue and the allowable costs. Neb. Rev Stat. § 81-1120.22 (Cum. Supp. 2022) states the following: The Director of Communications shall develop a system of equitable billings and charges for communications services provided in any consolidated or joint-use system of communications. Such system of charges shall reflect, as nearly as may be practical, the actual share of costs incurred on behalf of or for services to each department, agency, or political subdivision provided communications services. Using agencies shall pay for such services out of appropriated or available funds. Beginning July 1, 2011, all payments shall be credited to the Communications Revolving Fund. Beginning July 1, 2011, all collections for payment of telephone expenses shall be credited to the Communications Revolving Fund. 2 CFR § 200.444(a) (January 1, 2023) and 45 CFR § 75.444(a) (October 1, 2022) state, in relevant part, the following: For states . . . the general costs of government are unallowable . . . . Unallowable costs include: (1) Salaries and expenses of the Office of the Governor of a state . . . . (2) Salaries and other expenses of a state legislature . . . . A good internal control plan requires: • Procedures to ensure rate charges are equitable, reflect actual costs incurred, and are reviewed periodically to ensure charges are appropriate for the services provided. • Adequate documentation is maintained to support both rates charged and the approval of those rates. Condition: The Agency did not have adequate documentation to support the allocation of information services and communications costs in developing rates charged by the Office of the Chief Information Officer (OCIO). Additionally, the OCIO did not maintain adequate documentation to support that charges were reasonable, equitable, and consistently applied. We also noted the Agency did not have adequate documentation to support the allocation of security costs in developing building rental rates, and the Agency’s Materiel Division did not maintain adequate documentation to support that charges were reasonable, equitable, and consistently applied. A similar finding has been noted in prior audits since 2015. Repeat Finding: 2022-017 Questioned Costs: Unknown Statistical Sample: No Context: We noted the following: Office of the Chief Information Officer (OCIO) For 6 of 14 OCIO rates selected for testing, documentation provided by the division was not adequate to support the rate charged. • Five of the rates selected utilized an employee time allocation spreadsheet prepared by the OCIO. The spreadsheet was prepared by supervisors utilizing an estimate of how much time each year every employee spends on services provided by the division. During testing, it was noted that these estimates are not backed by a time study, nor is a review of actual hours worked on each service completed by the division. • For one rate selected, we identified variances between the total for networking equipment used in the calculation of the rate charged and the totals per the supporting documentation provided, netting to $1,313,693. When asked about the variances, the OCIO was unable to explain why the amounts did not agree. • For one rate tested, the rate included equipment and maintenance costs incurred by the University of Nebraska (University). The fee was related to the network operated and maintained by Network Nebraska (a collaborative aggregation partnership between the OCIO, the University, and the Nebraska Educational Telecommunications commission). The OCIO receipts funds from the services provided to participants on the network. However, it was noted during testing that the OCIO does not pay the University for its portion of costs incurred for this fee. Per documentation provided to support the calculation of the rate charged, the University incurs $582,049 of the total annual costs of $788,510. For 8 of 14 OCIO rates selected for testing, the rate charged was not reasonable or was improper. • For the six rates previously mentioned above, we were unable to determine if the rate was proper due to the lack of supporting documentation. • For one rate tested, we noted that actual costs incurred for the service provided recalculated to 40 cents per unit. The OCIO charged 22 cents per unit for the service. Total units sold for the service in calendar year 2022 were 39,348,448, resulting in an expected loss of $7,165,169. • For one rate tested, we noted that the rate calculation included employee salaries as a base for costs incurred. Per the calculation, the OCIO utilized salaries that were effective as of January 1, 2018. We compared the hourly compensation for a sample of employees at January 1, 2018, and as of July 1, 2021. During this period, we noted an average pay increase of 9.1% for the employees selected; thus, the rate charged is inappropriate per the actual costs incurred for providing the service. For 3 of 15 OCIO receipts tested, documentation provided was not adequate to support the rate charged. • For one receipt tested, we noted that the OCIO did not charge from an outside communications provider at the same rate that was shown on the invoice from the provider. These rates were “Re-rated” by the OCIO and then charged to the agency. The OCIO could not provide support for how the re-rates were determined. The APA selected seven rates from the OCIO billing to trace to support, and five of those rates could not be traced back to the provider invoice. Of the total payment of $116,175, $11,397 was charged at a rate that could not be traced to support. • For one receipt tested, we noted that the amount charged for a monthly Supreme Court retainer fee of $56,250 is determined by a rate calculated by the OCIO, but the OCIO could not provide support for the amounts used in the calculation. • For one receipt tested, $9,057 was charged for IT Support. This was based on an employee’s annual salary being paid 90% by the agency and 10% by the OCIO. The OCIO could not provide supporting documentation for how the 90/10 split was determined. In addition to the testing mentioned previously, we asked the OCIO how rates are calculated and what procedures are performed to ensure that the rates are appropriate. Most of the rates selected for testing were last updated in 2020. The staff that created these rates are no longer with the OCIO due to turnover. The OCIO reviews each rate on a yearly basis to determine if the amount charged is appropriate based on actual costs incurred. However, no documentation on the individual rate setting processes was developed or maintained when the rates were initially created.  The APA reviewed the OCIO’s fund balances and found them to be compliant with Federal regulations. However, because some rates charged are improper or inadequately supported, there is a risk of some Federal programs being overcharged and some being undercharged. The OCIO receipted $36,684,244 in Federal dollars for services performed for Federal programs. Of this amount, $16,480,956 was charged to Medicaid, and $4,597,226 was charged to Child Support Enforcement. Building Division The rental rate charged to agencies for building space includes an allocation for indirect administrative costs, grounds keeping, security, and energy management. We noted that security costs were allocated for neither the Capitol nor the Governor’s residence, even though security is provided at those locations. Because those locations were not allocated any security costs, Federal programs could be overcharged. Additionally, security costs for the Capitol and the Governor’s residence are general costs of government and, therefore, not allowable. The fiscal year 2023 indirect allocations for security were $785,709. Print Shop As noted in prior audits, the Print Shop lacked adequate support for service rates charged. The Agency was in the process of developing new rates using a new methodology, but no changes were made for fiscal year 2023. Receipts from sales for fiscal year 2023 totaled $3,058,910. Cause: Inadequate procedures. Per the Agency, the methodology used to allocate the security allocation is based on a management decision; however, management cannot simply choose to disregard Federal regulations. Effect: When information services and communications costs are not allocated to all agencies in an equitable manner, there is an increased risk that Federal programs will not be charged in accordance with Federal cost principles. Additionally, without adequate controls and procedures to ensure rates are equitable and based on actual costs, there is an increased risk that Federal programs or State agencies will be overcharged for services. When security costs are not allocated to all buildings in an equitable manner, Federal programs will not be charged in accordance with Federal cost principles. Recommendation: We recommend the Agency review its allocation of information and communications costs to ensure that the costs are allocated in an equitable manner to all activities that benefit from the services. Additionally, we recommend the Agency maintain adequate documentation to support charges and ensure rates are equitable and reflect the actual costs incurred for services. We also recommend the Agency improve procedures to ensure that published rates are the actual rates charged. Lastly, we recommend the Agency review its allocation of security costs to ensure that the costs are allocated in an equitable manner to all activities that benefit from the services, in accordance with Federal regulations. Management Response: The OCIO agrees with the findings as identified by the APA. The Building and Grounds security allocation is based on a management business decision. The Print Shop lacked the data needed to substantiate published rates at the individual service line level. In response to prior findings, the Print Shop purchased a Cost Rate Advisor license to support future rate setting methodology at the individual service line level. That tool is currently being utilized to build Print Shop rates for the fiscal year 2026 - 2027 biennium. APA Response: As noted above, security costs for the Capitol and the Governor’s residence are general costs of government; therefore, despite any management business decision, such costs are not allowable.

Program: AL 93.558 – Temporary Assistance for Needy Families; AL 93.563 – Child Support Enforcement; AL 93.568 – Low Income Home Energy Assistance (LIHEAP); AL 93.575 – Child Care and Development Block Grant; AL 93.658 – Foster Care Title IV-E; AL 93.778 – Medical Assistance Program; AL 10.561 – State Administrative Matching Grants for the Supplemental Nutrition Assistance Program – Allowable Costs/Cost Principles Grant Number & Year: 2001NETANF, FFY 2020; 2301NECSES, FFY 2023; 2301NELIEA, FFY 2023; 2301NECCDD, FFY 2023; 2301NEFOST, FFY 2023; 2305NE5ADM, FFY 2023; 233NE406S2514, FFY 2023 Federal Grantor Agency: U.S. Department of Health and Human Services and U.S. Department of Agriculture Criteria: 45 CFR § 75.405(a) (October 1, 2022) and 2 CFR § 200.405 (January 1, 2023) state, in part, the following: A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. 45 CFR § 75.403 (October 1, 2022) and 2 CFR § 200.403 (January 1, 2023) provide the following, in relevant part: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. * * * * (g) Be adequately documented. See also §§ 75.300 through 75.309. Per 45 CFR § 75.303 (October 1, 2022) and 2 CFR § 200.303 (January 1, 2023), The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Title 45 CFR § 75.302 (October 1, 2022) and 2 CFR § 200.302 (January 1, 2023) require financial management systems of the State sufficient to permit preparation of required reports and permit the tracing of funds to expenditures adequate to establish the use of these funds were in accordance with applicable regulations. EnterpriseOne is the official accounting system for the State of Nebraska, and all expenditures are generated from it. Good internal control requires procedures to ensure that amounts charged to Federal funds are proper. Condition: Procedures to ensure journal entries and adjustments to the Public Assistance Cost Allocation Plan (PACAP) were not adequate, resulting in multiple Federal programs being overcharged. Repeat Finding: No Questioned Costs: $581,496 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: Each quarter, as the PACAP is prepared, the Agency makes multiple adjustments for costs that either were charged to Federal funds and should not have been, or costs that were not charged to Federal funds but are claimable to a Federal grant. We tested five adjustments between two quarters. One adjustment tested for the quarter ended December 31, 2022, was recorded to charge the Foster Care grant for allowable costs incurred by the Foster Care Review Office (FCRO), a separate agency. The amounts provided by FCRO erroneously included payroll charges from a previous quarter, inflating the amount charged. The FCRO later caught the mistake and adjusted the internal spreadsheet but did not alert the Agency to the error, so a correcting adjustment was never made to the PACAP. The amount charged was $353,984; however, the adjustment should have been $212,725, a difference of $141,259. Foster Care is matched at 50%, so the grant was overcharged $70,629, which are questioned costs. Due to this error, we reviewed a second Foster Care adjustment for the quarter ending March 31, 2023, and noted the Agency’s calculation included amounts for a State funded program that should have been removed, resulting in the grant being overcharged an additional $1,561. We also tested six journal entries that moved costs between cost centers to determine any impact on the PACAP and if those journal entries were appropriate. We noted three improper journal entries that the Agency had not corrected as of the end of the fiscal year: • A journal entry for $526,487 was performed in November 2022 to temporarily move postage costs of multiple programs from State funds to the Child Support Enforcement (CSE) grant until new coding could be created in the State’s accounting system to track expenses from one fiscal year to another. The intent was to reverse the entry as soon as the new coding was completed; however, the reversing entry was never performed. Since the Agency performs a quarterly adjustment for the CSE grant to charge indirect costs identified by the Agency’s PACAP to the grant, the CSE grant was overcharged a total of $263,628. No correcting entry had been made as of September 30, 2023. These are considered questioned costs. • A journal entry for $207,369 was performed in December 2022 to move expenses to allow payroll to post. The intent was to reverse the entry before the end of the fiscal year; however, that was not done. The expenses were moved from Medicaid administration and were charged to the Central Services and Supplies Cost Center, which is then allocated to numerous other Cost Centers that are further allocated or charged directly to Federal programs such as TANF and Child Care. Due to the intricacies of PACAP allocations, exact questioned costs are unknown. No correcting entry was made as of September 30, 2023. • A journal entry for $5,317,640 was done in February 2023 to move Premium Pay to the Coronavirus State and Local Fiscal Recovery Funds (CSLFRF) grant as additional pay for certain job roles allowed under that grant. However, the entry performed included some lines that were miscoded, most significantly a line for $764,187 that was supposed to move money within the same Cost Center (CC 25C21910 – Field Office Administration); however, it pulled costs out of Cost Center 25C21780 - Protection and Safety Policy Chief instead. Additionally, we confirmed with the Agency that the costs charged to CC 25C21910 under the CSLFRF grant were also allocated to other Federal programs through the PACAP, essentially charging Federal programs twice. Due to the intricacies of the PACAP allocations, total questioned costs are unknown; however, we were able to determine that this error caused Medicaid to be overcharged $149,478, LIHEAP to be overcharged $33,447, SNAP to be overcharged $44,984, Child Care to be overcharged $10,412, and TANF to be overcharged $7,357. Cause: Inadequate procedures to ensure that adjustments to the PACAP are proper and that journal entries are appropriate for each program. Effect: Unallowable expenditures were charged to Federal funds and there is an increased risk for errors, fraud, and non-compliance with Federal regulations. Recommendation: We recommend the Agency strengthen procedures to ensure adjusting entries are complete and accurate. We further recommend the Agency strengthen procedures to ensure compliance with Federal regulations. Management Response: The Agency agrees.

Program: Various, including AL 93.778 – Medical Assistance Program – Allowable Costs/Cost Principles Grant Number & Year: Various, including 2305NE5ADM, FFY 2023 Federal Grantor Agency: Various, including U.S. Department of Health and Human Services Criteria: 45 CFR § 75.303 (October 1, 2022) states, in relevant part, the following: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. 45 CFR § 75.403 (October 1, 2022) requires costs to be necessary, reasonable, and adequately documented. 45 CFR § 75.302 (October 1, 2022) requires financial management systems of the State be sufficient to permit both preparation of required reports and tracing of funds to expenditures adequate to establish that the use of those funds was in accordance with applicable regulations. 45 CFR § 75.405(a) (October 1, 2022) states, in part, the following: A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. Good internal control requires procedures to ensure that amounts charged to Federal programs are proper. Condition: The Agency did not properly charge Federal programs for twelve allocations tested. A similar finding was noted in the prior audit. Repeat Finding: 2022-023 Questioned Costs: $498,214 known Statistical Sample: No Context: We tested 23 PACAP allocations. We noted errors for 12 of 23 allocations tested, resulting in various programs undercharged or overcharged. The net effect of errors noted resulted in $498,214 overcharged for the Medicaid program, which are considered questioned costs, with undercharges to other various Federal programs ranging from $7,505 to $125,868. We noted the following: Time and Effort Report Allocations • We tested the allocation of cost center 25C21940 Field Office Resource Development for quarter ended December 31, 2022, which allocated $1,516,328 of administration costs, based on Time & Effort reports. The payroll costs for 92 employees were charged to the cost center; however, four of the employees’ payroll costs should not have been charged to the cost center. The four employees tested included a Child and Family Services Specialist Supervisor, a Program Accuracy Specialist, and two Program Specialists. All these employees were, at one time, Resource Developers; however, when their roles changed, their pay source was not updated. As a result of these employees being charged to the Resource Development cost center instead of their appropriate cost centers, numerous programs were not charged correctly, ranging from undercharges of $837 to overcharges of $1,808. Medicaid was overcharged $538. Additionally, we were unable to determine how the payroll costs of $17,095 to one of the Program Specialists should have been allocated. RMTS Allocations • We tested the allocation of cost center 25C21960 Field Office Social Services Casework for quarter ended December 31, 2022, which allocated $7,682,207 of administration costs, based on Random Moment Time Study (RMTS) results. There were several errors found in the sorting process of the RMTS results to Federal programs, resulting in several programs undercharged or overcharged. Medicaid was overcharged $2,644. • We tested the allocation of cost center 25C21920 Field Office Child Protection & Safety Services for the quarter ended March 31, 2023, which allocated $14,187,156 in administration costs based on RMTS results. Below are the issues noted: o RMTS observations for Trial Home Visits were not included in the allocation. As a result, State programs were undercharged, and Federal programs were overcharged. o The RMTS observations for Child Protection Initial Assessment were not properly allocated. As a result, Foster Care was overcharged, and Adoption Assistance and Guardianship Assistance were undercharged. o The RMTS Observation coded as “Non-Court/Child Protection Initial Assessment/Alternative Response (AR)” was misallocated to both State and Federal programs, causing Guardianship Assistance to be overcharged and Adoption Assistance and Foster Care to be undercharged. Labor Hours Statistics • We tested six allocations based on labor hours statistics. All six allocations were calculated incorrectly. Labor hours statistics are gathered by using an Agency-wide report of all employee time, and then filtering that report for specific pay type codes (e.g., regular pay, holiday pay, sick pay, etc.) and specific programs and divisions within the Agency. Below is a summary of allocations tested: See Schedule of Findings and Questioned Costs for chart/table. We noted the following during testing: o Cost center 25C21910 is allocated based on a formatted Labor Hours report, which should only include field offices.  For the quarter ended December 31, 2022, the Agency did not remove irrelevant pay type codes (such as overtime, shift differentials, and termination payouts), and included labor hours for two programs that were not related to field office employees.  For the quarter ended March 31, 2023, the Agency was unable to provide the Labor Hours report it used to calculate the allocation percentages. We recalculated both quarters using the report formatting instructions provided by the Agency and found that the Agency’s errors caused numerous programs to be undercharged by as much as $17,670, while overcharging the Medicaid grant by $301,485. o Cost centers 25C20960 and 25C20975 are allocated based on all Agency hours worked (i.e., does not include paid leave) and excludes two thirds of the labor hours from 24-hour facilities. The Agency did not properly format any of the quarterly Labor Hours reports by removing irrelevant pay type codes (such as Shift Differentials and Sick and Vacation leave paid) and dividing the hours in the 24-hours facilities by three. These repeated errors skewed the data used for the allocations in all three quarters tested. We were able to identify undercharges to Medicaid of $117,611; however, due to the intricacies of these PACAP allocations, we were unable to determine total questioned costs. The largest variances are listed below: See Schedule of Findings and Questioned Costs for chart/table. Recipient Counts • We tested the allocation of cost center 25C20990 IST Application NFOCUS Applications for the quarter ended March 31, 2023, which allocated $6,672,560 in administration costs, based on recipient counts per NFOCUS/MMIS reports. NFOCUS and MMIS are databases used to manage various programs such as SNAP, Child Care, TANF, and Medicaid. We noted that the recipient counts used in the allocation did not agree to support. The Miscellaneous State programs did not include 1,653 recipients, resulting in the State being undercharged and all other programs being overcharged, such as Medicaid for $5,939. Additionally, we were unable to trace the recipient counts to documentation that supported allocating $3,857,377 to Medicaid and $486,931 to CHIP. The Agency did not maintain the recipient count reports used at the time of the allocation. The Agency was able to generate a historical report; however, while the report amounts were similar, they did not agree with the counts used in the allocation. The Agency did maintain system summary reports at the time of the allocation, and the total counts on the summary reports did agree to amounts used for the allocation. However, as the summary reports used did not maintain the detail of members counted, we could not verify the accuracy of the reports used. • We tested the allocation of cost center 25C23006 Expansion Call Center for quarter ended March 31, 2023, which allocated $2,934,314 in administration costs, based on recipient counts per NFOCUS/MMIS reports. It was determined that the same allocation numbers had been used since at least the quarter ended December 31, 2020, and were not being updated each quarter to account for actual benefiting programs. The Agency agreed that the allocation should have been updated each quarter, and it will start doing so as of the June 30, 2023, quarter end. We recalculated what the allocation should have been for each benefiting program and noted variances to numerous programs including overcharges to Medicaid of $305,219. Other • We tested the allocation of cost center 25C23823 iServe IAPD H971 – Shared for quarter ended December 31, 2022, which allocated $3,457,879 in project costs based on the project’s cost allocation plan. The Agency is developing the new iServe Nebraska Portal, which is an application for Nebraskans to apply for benefits from Federal and State programs. This application will be replacing ACCESSNebraska, the current application used by Nebraskans to apply for benefits. For the implementation phase of the project, the Agency was only allocating costs to the following four programs: LIHEAP, TANF, SNAP, and Medicaid. However, there are other Federal and State programs that will utilize the iServe application. We reviewed documentation obtained in the prior year, including correspondence from the Agency’s Federal contacts, which stated, “As long as SNAP, Medicaid, LIHEAP, and TANF are the only benefiting programs for the State’s iServe Nebraska Portal project, the State may just include these four programs in the development of its cost allocation plan. If/when the State decides to add other Federal programs that will benefit from enhancements to the portal, it will need to revisit and adjust its cost allocation plan.” We asked again this year for documentation to support that only the four programs being charged were benefiting from this stage of the project, such as internal planning documents. The Agency was still unable to provide adequate documentation to support our request. We were unable to calculate questioned costs as we were not able to determine which Federal and State programs should receive an allocation, and the basis for how the costs would be allocated to these programs. See table below for how the costs were allocated. See Schedule of Findings and Questioned Costs for chart/table. Cause: Inadequate procedures to ensure that system reports were set up and formatted correctly, employees coded their time correctly, and that allocations were adequately supported and calculated correctly. Effect: Without adequate documentation to support the allocation of costs, there is increased risk of programs not being charged the proper amounts. Recommendation: We recommend the Agency improve procedures to ensure that employee pay is recorded correctly in E1, that system reports are set up correctly and formatting instructions are followed, and that costs are properly allocated and charged, based on supporting documentation. Management Response: The Agency partially agrees. The Agency provided the federally approved Cost Allocation Management (CAM) Toolkit that was used to develop and explain all aspects of the iServe methodology. Premise for this finding is based upon locking DHHS into conversations had with the Federal Government in very early-on planning stages of the APD, prior to APD submission and approval. All communication between DHHS and the Federal Government regarding iServe has been clear and concise, and the Federal Government has agreed with DHHS’s approach, as is evidenced in the communication that has been provided as well as the APD methodology approval that has been received. APA Response: As noted above, correspondence from the Agency’s Federal contacts stated, “As long as SNAP, Medicaid, LIHEAP, and TANF are the only benefiting programs for the State’s iServe Nebraska Portal project, the State may just include these four programs in the development of its cost allocation plan. If/when the State decides to add other Federal programs that will benefit from enhancements to the portal, it will need to revisit and adjust its cost allocation plan.” We asked again this year for documentation to support that only the four programs being charged were benefiting from this stage of the project, such as internal planning documents. The Agency was still unable to provide adequate documentation to support our request.

Program: AL 93.268 - Immunization Cooperative Agreements; AL 93.323 - Epidemiology and Laboratory Capacity for Infectious Diseases (ELC); AL 93.558 - Temporary Assistance for Needy Families (TANF); AL 93.563 - Child Support Enforcement; AL 93.778 - Medical Assistance Program – Allowable Cost/Cost Principles Grant Number & Year: 19NH23IP922589, FFY 2022; 19NU50CK000547; FFY 2023; 2001NETANF, FFY 2020; 2201NECSES, FFY 2022; 2301NECSES, FFY 2023; 2305NE5ADM, FFY 2023 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR § 75.405(a) (October 1, 2022) states, in part, the following: A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. 45 CFR § 75.403 (October 1, 2022) provides the following, in relevant part: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. * * * * (g) Be adequately documented. See also §§ 75.300 through 75.309. Per 45 CFR § 75.303 (October 1, 2022): The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. 45 CFR § 75.430(i) (October 1, 2022) requires payroll expenses charged to Federal awards be based on official records that accurately reflect the work performed. Good internal control and sound accounting practices require policies and procedures to ensure that all payroll costs are properly recorded within the State Accounting System and allocated to the proper funding source for activities performed. Condition: The Agency did not have adequate procedures to ensure payroll charges were proper. Repeat Finding: No Questioned Costs: $91,150 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: We selected 31 employee paychecks paid with Federal funds. Twelve of the 31 tested had payroll charged to Child Support Enforcement. One employee tested was a Child Support Enforcement Worker through September 25, 2022, and changed positions to a Youth Security Specialist II on September 26, 2022. The employee’s payroll costs were not updated to be charged to cost center 25C40360 Youth Rehabilitation and Treatment Centers, which only records costs to the General fund. Instead, the employee’s payroll costs continued to be charged to cost center 25C21750 Child Support Operations. As a result, for the pay period tested, Child Support Enforcement was overcharged by $2,206. During the fiscal year, this employee had an additional $25,726 incorrectly charged to Child Support Enforcement. A Program Accuracy Specialist was recorded to the 25C43060 Child Support Enforcement cost center; however, the supervisor the employee worked with was not charged to this cost center. According to the supervisor, no employees under their management were assigned to read child support enforcement cases. As a result, for the pay period tested, Child Support Enforcement was overcharged by $1,704. During the fiscal year, this employee had an additional $27,976 incorrectly charged to Child Support Enforcement. We noted another Program Accuracy Specialist with this same supervisor also recorded to Child Support Enforcement. During the fiscal year, this employee had $30,670 incorrectly charged to Child Support Enforcement. We tested $20,143 Federal payroll charges to Child Support Enforcement and noted $3,910 in sampled questioned costs and $84,372 additional questioned costs. Federal payroll charges for Child Support Enforcement totaled $3,920,653. Six of the 31 employees tested had payroll charged to TANF. One employee was a Contract Procurement Manager whose payroll expense was split between State funds, TANF and Medicaid. The payroll costs were to be allocated based on a time study; however, the Agency had not completed a revised time study. Therefore, we were unable to ensure the grants were correctly charged. The Agency indicated no time study was done for the entirety of fiscal year 2023. We tested $9,557 Federal payroll charges to TANF and noted $99 in questioned costs. We tested $3,482 in Medicaid payroll charges and noted $197 in questioned costs. We tested the April 19, 2023, paycheck for an Epidemiology Surveillance Coordinator. Payroll expenses were allocated with 75% to the ELC grant and 25% to the Immunization grant. The Agency did not provide documentation to support how this split was determined. An email was provided on July 28, 2023, with a breakdown of the activities and hours the employee worked for each grant; however, the number of hours in the email did not agree to the hours worked per the paycheck. Additionally, to charge payroll expenses to a Federal grant, a timesheet or other official record that accurately reflects the work performed is required. We tested $3,692 Federal payroll charges to ELC and noted $1,929 in questioned costs. We tested $3,659 in Federal payroll charges to Immunization and noted $643 in questioned costs. Cause: Inadequate policies and procedures for review and documentation of payroll expenses. Additionally, the Agency did not change the cost center for one employee who changed positions. Effect: Without adequate documentation to support the allocation of costs, there is an increased risk of programs not being charged the proper amounts. Recommendation: We recommend the Agency improve procedures to ensure that employee pay is recorded correctly in the State Accounting System, and those costs are properly allocated and charged. Management Response: The Agency agrees.

Program: AL 93.778 – Medical Assistance Program; AL 93.778 – COVID-19 Medical Assistance Program - Allowability Grant Number & Year: 2305NE5MAP, FFY 2023; 2205NE5MAP, FFY 2022 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 45 CFR § 75.302(a) (October 1, 2022), “Each state must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state's own funds.” Per 45 CFR § 75.403 (October 1, 2022), costs must be necessary, reasonable, and adequately documented. Title 471 NAC 15-003.02(H) requires that the provider perform the personal assistance services noted on the service plan, accurately documenting services provided in the Electronic Visit Verification (EVV) system and confirming that services were received as authorized according to Agency procedures. Title 471 NAC 15-005.02(A) states, “Providers cannot provide services to more than one client at a time.” That same regulation says also, “Medicaid will not pay for services that were not performed during the actual hours noted by the provider in the Electronic Visit Verification (EVV) system.” A good internal control plan requires procedures to ensure that services provided agree to the service needs assessment. Section 1903(l)(5)(A) of the Social Security Act states the following: The term “electronic visit verification system” means, with respect to personal care services or home health care services, a system under which visits conducted as part of such services are electronically verified with respect to – (i) the type of service performed; (ii) the individual receiving the service; (iii) the date of the service; (iv) the location of service delivery; (v) the individual providing the service; and (vi) the time the service begins and ends. Public Law 114-255, § 12006 (December 13, 2016) (“21st Century Cures Act”) provides, as is relevant, the following: (a) Section 1903 of the Social Security Act (42 U.S.C. 1396b) is amended by inserting after subsection (k) the following new subsection: ‘‘(l)(1) Subject to paragraphs (3) and (4), with respect to any amount expended for personal care services or home health care services requiring an in-home visit by a provider that are provided under a State plan under this title (or under a waiver of the plan) and furnished in a calendar quarter beginning on or after January 1, 2019 (or, in the case of home health care services, on or after January 1, 2023), unless a State requires the use of an electronic visit verification system for such services furnished in such quarter under the plan or such waiver, the Federal medical assistance percentage shall be reduced— ‘‘(A) in the case of personal care services— ‘‘(i) for calendar quarters in 2019 and 2020, by .25 percentage points; ‘‘(ii) for calendar quarters in 2021, by .5 percentage points; ‘‘(iii) for calendar quarters in 2022, by .75 percentage points; and ‘‘(iv) for calendar quarters in 2023 and each year thereafter, by 1 percentage point[.] 42 CFR § 440.167(a)(2) (October 1, 2022) states, in part, that personal care services are those provided “by an individual who is qualified to provide such services and who is not a member of the individual's family[.]” 42 CFR § 440.167(b) adds, “For purposes of this section, family member means a legally responsible relative.” Neb. Rev. Stat. § 28-512 (Reissue 2016) creates the offense of “theft by deception.” That statute says the following, in relevant part: A person commits theft if he obtains property of another by deception. A person deceives if he intentionally: (1) Creates or reinforces a false impression, including false impressions as to law, value, intention, or other state of mind; but deception as to a person's intention to perform a promise shall not be inferred from the fact alone that he did not subsequently perform the promise; or (2) Prevents another from acquiring information which would affect his judgment of a transaction; or (3) Fails to correct a false impression which the deceiver previously created or reinforced, or which the deceiver knows to be influencing another to whom he stands in a fiduciary or confidential relationship[.] Further, Neb. Rev. Stat. § 28-911 (Reissue 2016) prohibits “abuse of public records,” as follows: (1) A person commits abuse of public records, if: (a) He knowingly makes a false entry in or falsely alters any public record; or (b) Knowing he lacks the authority to do so, he intentionally destroys, mutilates, conceals, removes, or impairs the availability of any public record; or (c) Knowing he lacks the authority to retain the record, he refuses to deliver up a public record in his possession upon proper request of any person lawfully entitled to receive such record; or (d) He makes, presents, or uses any record, document, or thing, knowing it to be false, and with the intention that it be taken as a genuine part of the public record. (2) As used in this section, the term public record includes all official books, papers, or records created, received, or used by or in any governmental office or agency. (3) Abuse of public records is a Class II misdemeanor. Condition: During testing of personal assistance service (PAS) claims, we noted the following: • Personal assistance services appeared to be claimed at the same time that the provider was working at another job or at other activities, resulting in apparent fraudulent billings and payments. • Services provided lacked adequate supporting documentation. This included providers being able to submit claims without verifying the location where those services were provided. • Services billed exceeded the number of hours authorized under the service needs assessments. • Providers billed for unreasonable amounts of time – including, among other things, for more daily hours than are in a 24-hour period and for unfeasible scenarios, such as the supposed performance of a week’s worth of duties for one client in only three days. • Providers received overtime pay for unauthorized services, meaning that they were compensated at an increased rate for services ineligible for payment in the first place. • Client guardians or parents were paid for providing services, which violates governing regulations prohibiting such arrangements. A similar finding has been noted in prior audits since 2014. Repeat Finding: 2022-039 Questioned Costs: $53,758 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: The Agency offers PAS (assistance with hygiene, mobility, housekeeping, etc.) to Medicaid recipients with disabilities and chronic conditions. The services to be provided are based on individual needs and criteria that must be determined in a written service needs assessment (SNA). The Agency implemented an EVV system for PAS providers on January 3, 2021, as required by Section 12006(a) of the 21st Century Cures Act, passed by Congress in 2016. The EVV system electronically captures and verifies provider visit information, and providers were required to submit claims to the Agency electronically through this application. We initially selected five provider payments for testing – and, from those, one week of services submitted through the EVV system. A week of service billed by the provider may include multiple claims and clients. Due to the numerous issues identified with the billings, we expanded testing and randomly selected an additional five provider payments for testing, and one week of services. We noted issues with 9 of 10 providers tested. In addition to the billing issues identified for the weeks tested, we also noted that three of these providers had outside employment or participated in activities that conflicted with the PAS hours billed. We obtained more documentation for additional weeks. Based on the documentation obtained, we identified $14,397 in potentially fraudulent payments made to the providers during fiscal year 2023. See Schedule of Findings and Questioned Costs for chart/table. In addition to the potentially fraudulent payments related to hours claimed while at another job or activity, we noted $44,534 in Federal payment errors related to other issues, for total Federal questioned costs of $53,758. The Federal share of payments tested totaled $81,926. The total Federal share of PAS claims for the fiscal year was $5,416,039, and the State share was $3,814,632. Federal payment errors noted in the random sample totaled $268. The total Federal sample tested for the random sample was $979. The total dollar error rate was 27.37%, which estimates the potential dollars at risk for fiscal year 2023 to be $1,482,370 (dollar rate multiplied by the population). The following details issues with each provider. Provider #1 This provider was authorized a total of 87.25 hours of service per week for three different clients. For the week tested, the provider manually created the claims for payment and did not use the EVV system to create a visit form; therefore, the claims did not capture client signatures or verify the location of the visit through the Global Positioning System (GPS). Likewise, there was no listing of the activities performed to ensure compliance with the SNA. We requested the claim detail for a second week of services and, again, the provider manually created the claims and did not enter a visit in the EVV system. Consequently, we questioned all of the claims selected for testing. We noted further that the provider exceeded the SNA by 12 hours and billed 24.5 hours of service on one day, which is impossible. We reviewed three additional weeks of claims and noted also that the provider exceeded the SNA by .25 to 2 hours each week, resulting in additional questioned costs. Most concerning was the fact that the provider worked two additional jobs during the time that she billed for personal assistance services. The provider worked as a dental hygienist and as a pharmacy technician. The provider billed personal assistance services beginning at 6:00 a.m. every day until at least 5:30 p.m. The dental office with which the provider was employed was open only from 8:00 a.m. to 5:00 p.m., Monday through Friday. During the week of February 5, 2023, the provider claimed 87 hours for PAS, of which 43.75 hours were claimed to have been provided between 8:00 a.m. and 5:00 p.m., Monday through Friday. As the provider did not use the EVV, it is unknown where she was at the times the services were claimed; however, considering the provider’s other employment, it is possible that fraud may have occurred. We obtained the pharmacy technician employment records for the provider and compared the PAS billings to those records from July 2022 through January 2023. We identified 101 days during which PAS hours billed overlapped with times that the provider was working as a pharmacy technician. In determining these overlapped hours, we did not factor in any travel time that may have occurred between client homes and the provider’s place of employment; therefore, the possibility of additional fraudulent payments exists. The provider billed 1,200 hours of personal assistance services during this time period, and more than half of these hours could not have been provided. We questioned 770 hours as potential fraud, totaling $8,678. We also noted that the provider did not complete all of the PAS visits through a device using GPS; therefore, additional questioned costs resulted from not using the GPS verification method. Given that many of the visits completed with GPS verification overlapped with the times that the provider was working at the pharmacy, another individual appears to have aided the provider in falsely claiming that personal assistance services were provided. The employment records for the provider included the exact time punched in and out for the shifts worked. Below are a few examples of the hours billed by the provider and the hours the provider worked at the pharmacy. Clients 1 and 2 live at the same residence, and Client 3 is the provider’s mother. See Schedule of Findings and Questioned Costs for chart/table. In addition to the apparent fraudulent hours billed, the provider received overtime pay for the weeks reviewed. Providers are paid at time and one-half for services in excess of 40 hours each week. The provider evidently received overtime pay, in part, due to the apparent fraudulent billing. The provider was paid overtime for 21 weeks from July 2022 through December 2022. This resulted in additional questioned costs of $3,140 for potential fraud. Federal questioned costs not related to other employment totaled $3,604. Provider #2 This provider was authorized a total of 116.75 hours of service per week for four different clients. For the week tested of December 18, 2022, through December 24, 2022, the provider billed 121.25 hours of service. This provider manually completed visits; consequently, there was no location verification, and no client signatures were captured. Therefore, we questioned the claims for the week tested. We also identified other issues for the week tested. We noted the provider billed a total of 32 hours of service for the four clients on December 22, 2022, which is impossible. Also, for one client, the visit forms for this day supported only 2.75 hours, but the provider billed 20 hours for the client. The provider also exceeded the service authorization by 75 quarterly units or 18.75 hours for the week. Due to the issues noted, we reviewed additional weeks and claims of service. This resulted in more questioned costs for the provider exceeding the SNA. The provider exceeded the SNA for 8 of the 15 weeks reviewed, ranging from .25 to 11.5 hours overbilled. Per documentation in the case file, the provider was involved in a court case pertaining to her own child. On December 2, 2022, a law enforcement raid was conducted at the provider’s home, which revealed Fentanyl and firearms. The provider was not present at the time and, when contacted later, claimed to be on vacation; however, the provider billed for 14.5 hours of services that day. Despite appearing in court on December 20, 2022, at 11:30 a.m., the provider billed for client services that same day from 10:15 a.m. to 1:30 p.m. Based on these discrepancies, we requested the EVV records for the remaining days billed in December 2022. None of the additional visit forms were completed through a device using GPS to track the location, and no signatures were obtained; therefore, we questioned these claims. The case file also included documentation of supervised visits that occurred between the provider and the provider’s child at the provider’s home. Reviewing the EVV records for the days that the visits occurred, we noted that the times the provider billed for PAS services overlapped with the times of these supervised visits. The provider could not have provided the majority of PAS services billed on these days. Again, the visit forms did not contain verification of the location where the services were provided. We questioned the hours billed for each of these days. See Schedule of Findings and Questioned Costs for chart/table. Lastly, the provider had other employment as a medical assistant and a student bus driver. It is likely that the hours of other employment conflicted with the PAS hours billed. We requested the provider’s employment records for July 2022 through December 2022. While comparing the employment records to the days and hours billed for PAS services, we identified 40 days from June 27, 2022, through November 16, 2022, during which hours worked overlapped with times billed for PAS services. We questioned any PAS hours billed that overlapped with the provider’s employment hours as potential fraud. In determining these overlapped hours, we did not factor in any travel time that may have occurred between client homes and the provider’s place of employment; therefore, the possibility of additional fraudulent payments exists. We also noted the provider did not complete the PAS visits through a device using GPS; therefore, any times billed on these 40 days were also questioned for inadequate documentation. Apparent fraudulent PAS hours billed totaled $1,383. Overlapping times ranged from 1.25 hours to 5.25 hours per day. The table below contains a few examples of overlapping hours billed by the provider: See Schedule of Findings and Questioned Costs for chart/table. In addition to the apparent fraudulent overlapped hours, the provider was paid for overtime for the weeks reviewed. The provider received overtime, in part, due to the apparent fraudulent billing. All overtime hours paid during fiscal year 2023 were questioned, either due to the fraudulent hours billed for the week, or for inadequate documentation for not using the GPS verification method. This resulted in additional questioned costs of $204 for potential fraud. Federal questioned costs not related to employment issues totaled $6,671. Provider #3 This provider was authorized a total of 97.5 hours of service per week for four clients. For the week initially tested, six visit forms were entered through a personal computer, so there was no location verification and no client signature. Five of these visits occurred in the evening, from 7:00 p.m. to 10:15 p.m., for 3.25 hours. The provider incorrectly billed 4 hours for one of these visits. The visits with no location verification were questioned. We also noted mileage variances on the visit forms entered through a mobile device when GPS tracking was utilized. There were two visits with a 20-mile variance from the location of the client and where the provider apparently ended the visit. There are unknown questioned costs for these mileage variances. The service authorizations for each of the clients included some services to be performed every day of the week; however, only two of the four clients were billed daily for services. For example, if a client was authorized for a bath seven times per week, but the provider performed the service on only three days, we considered the hours charged for four baths to be overbilled. We reviewed additional weeks during the fiscal year, and there were additional questioned costs based on the frequency of the task authorized. This provider also received overtime pay for several of the weeks reviewed. Therefore, the provider was not only overpaid due to billing for tasks that were not provided as authorized but also received overtime pay based upon some of those overbillings, resulting in additional questioned costs. Federal questioned costs for issues not related to other employment and activities totaled $880. The provider was also receiving wages from a home health care company during fiscal year 2023. Based on the wages earned there, the provider appears to have been working full-time, and hours claimed for PAS likely overlapped with hours worked at the home health care company. We requested the provider’s employment records from the home health care company, and the employer responded that the provider was a salaried employee and did not have a set schedule. The provider also stated that a timesheet was not kept. We performed a social media search and found several posts on Facebook that depicted the provider being out of-state on several weekends during fiscal year 2023. We compared those apparent out-of-state dates to the dates of billed services. The provider billed at least nine days that conflicted with these trips outside of Nebraska. The provider billed 94.25 hours during these days, resulting in potential fraud of $992. Four of the nine days billed did not use the GPS verification method for any of the clients. Based on the Facebook posts, however, the provider was attending an event in Indianapolis, Indiana, on March 11 and 12, 2023, but billed 8.25 hours of services for each of these days. On March 31, 2023, the provider billed 15.75 hours; however, she appeared to be in Arizona. No GPS verification was used on June 6, 2023, and the provider billed 10.75 hours, but appeared to be in Arizona. For the remaining five days, the hours billed did not agree to the times logged through GPS. Additionally, times overlapped between services, and travel time between client homes was unreasonable, or part of the hours billed did not use the GPS verification method. For those visit forms that indicated GPS verification was used, another individual may have entered information into the verification system. The table below contains examples of some of the discrepancies noted: See Schedule of Findings and Questioned Costs for chart/table. Provider #4 The Agency authorized this provider to provide 118 hours of service per week (approximately 40 hours for each of 3 clients). It is not reasonable to authorize this many hours of service for one provider, as it would take over 17 hours every day of the week in order to perform all the tasks noted on the SNA. For the week tested, the provider billed 454 quarterly units or 113.5 hours. This included billing 9.5 hours on November 18, 2022, from 7:10 p.m. to 12:04 a.m., even though this is only 5 hours, and then an additional 23.75 hours on November 19, 2022, from 12:06 a.m. to 11:57 p.m. Each SNA of these clients included some services to be performed every day of the week. The provider billed for tasks authorized for seven days per week but did not provide services on each of those seven days for all clients. For example, if a client was authorized for a bath seven times for the week, but the provider performed services on only three days, we considered the hours charged for four baths to be overbilled. We reviewed an additional two weeks of services and found more errors for not following the SNA. There were $757 Federal questioned costs for not following the SNA. It should be noted that only these three weeks were reviewed, so there may be additional questioned costs for other weeks based on the frequency of the task authorized. See Schedule of Findings and Questioned Costs for chart/table. The provider also received overtime pay for these three weeks. In addition to being overpaid due to billing for tasks that were not provided as authorized, the provider received overtime pay for this overbilling, resulting in an additional $269 in Federal questioned costs. Providers are paid at time and one-half for services in excess of 40 hours each week. Per the Agency, a claims overtime team reviews the service authorizations to ensure they are not exceeded. For the three weeks reviewed alone, the provider was paid for 60.82, 73.86 and 61.65 hours of overtime. This provider has had similar findings in prior audits since 2021, with no changes to the number of hours authorized by the Agency. Provider #5 Per documentation provided from the EVV system for the week tested, the provider used a personal computer to clock in and out, so there was no GPS verification of the visit location. The visit forms noted that the provider was unable to clock in with a cell phone; however, the services were being provided at the provider’s home. On April 14, 2023, the Agency notified the provider by letter that using a personal computer that did not have GPS to verify location was not compliant with either the Cures Act or Agency EVV guidelines. This letter gave the provider 90 days to achieve compliance. The Agency sent a second noncompliance letter to the provider on August 30, 2023, giving her an additional 30 days to comply. The claims tested are questioned due to the provider’s failure to comply with Federal regulations. We noted also that the provider was the parent and co-guardian of the two clients to whom services were provided. Per 42 CFR § 440.167, personal care services cannot be provided by a member of the individual’s family. A family member is defined as “a legally responsible relative.” As the co-guardian, the provider was a legally responsible relative of the clients and, therefore, not allowed to be paid for those services. Thus, all payments made during fiscal year 2023 are questioned. The Federal share was $32,083. Provider #6 The provider used a device with GPS tracking to record her visits. Although the visit form supported only 3.75 hours of services, the provider billed 5 hours, resulting in Federal questioned costs of $9. Provider #7 This provider was authorized for up to 107 quarterly hour units or up to 26.75 hours of PAS services per week. For the week tested, the provider used a personal computer to complete visits in the EVV system, resulting in the location not being verified through GPS tracking and no client signatures being obtained. Therefore, we question the claims, resulting in Federal questioned costs of $202. We also noted that the provider performed personal care services for two additional clients under the Aged and Disabled Waiver. One of these clients also lived with the client to whom PAS services were provided. Because the provider did not use a device with GPS tracking, it is possible that she could have provided services for these two clients during the same time, which is not allowable. For the week tested, the provider billed a total of 116 hours of service for all three clients. The provider also exceeded the authorization for the week tested by 1.25 hours. We noted that the Agency sent a letter to the provider in April 2023 about the overbilling of 1.25 hours for the week tested; however, the accounts receivable was not established until September 30, 2023, after we inquired about the overbilling. The Agency also sent a letter to the provider on April 14, 2023, giving her 90 days to comply with the EVV regulations. No changes were made, so the Agency sent a second letter to the provider on August 30, 2023, giving the provider an additional 30 days to come into compliance. A third letter was sent on September 29, 2023, giving the provider an additional 30 days to comply. It is unreasonable to allow a provider who is not compliant with EVV regulations to continue billing for five months of services. The provider was also paid for overtime hours for the week tested. The provider received $351 in Federal share overtime pay for 74.75 hours of overtime. The overtime was paid under the PAS program. However, only 26.75 hours were related to PAS, and 88 hours were billed under the Aged and Disabled (AD) Waiver; therefore, the overtime should have been charge under the AD Waiver. Per the Agency, the overtime was paid under the PAS program because the Federal share reimbursement is higher, which is not reasonable. Provider #8 This provider was authorized for up to 164 quarterly hour units or up to 41 hours per week for two clients living in the same household. The provider exceeded the service authorization for both clients by .25 hours each, resulting in Federal questioned costs of $4. The service authorization for both clients included some services to be performed every day of the week; however, services performed were not reasonable based on the times the provider billed. For example, one client was authorized for reminding or coaxing to eat three times a day for seven days a week. The provider billed from 6:00 a.m. to 9:30 a.m. every day for this client. It is not reasonable that the client would be eating only in the morning. We allowed the hours charged for one meal. Additionally, both clients were authorized for the administration of medication three times a day for seven days; however, based on the time during which the provider was providing services, the administration of medication appears to have occurred only once per day. This resulted in additional Federal questioned costs of $51. Provider #9 The provider used a device with GPS tracking to record her visits; however, the provider exceeded the SNA by two quarterly units or .5 hours for one client resulting in Federal questioned costs of $4. Cause: Procedures were inadequate to prevent and/or detect errors. Effect: An inadequate review of PAS claims increases the risk of services provided not being in accordance with the recipient’s needs, as well as a risk of services being billed but not provided. There is a significant risk for fraud or abuse to occur and not be detected. State and Federal funds appear to have been misspent. Recommendation: We recommend the Agency implement procedures to ensure payments are allowable, adequately supported, and in accordance with State and Federal regulations. We further recommend the Agency immediately discontinue paying claims that are not in accordance with EVV/GPS requirements. Additionally, because this comment gives rise to concerns regarding possible violations of State statute, we are forwarding the information herein to the Nebraska Attorney General for further review. Management Response: The Agency agrees.

Program: AL 93.778 – Medical Assistance Program; AL 93.778 – COVID-19 Medical Assistance Program – Allowability & Eligibility Grant Number & Year: 2205NE5MAP, FFY 2022; 2305NE5MAP, FFY 2023 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 45 CFR § 75.303 (October 1, 2022): The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Per 45 CFR § 75.302(a) (October 1, 2022), “Each state must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state’s own funds.” 45 CFR § 75.403(g) requires costs to be adequately documented. Per 477 NAC 23-003.01: The total equity value of available non-excluded resources of the client . . . is determined and compared with the established maximum for available resources the client may own and still be considered eligible. If the total equity value of available non-excluded resources exceeds the established maximum, the client is ineligible. Per 477 NAC 23-003.10, the established maximum for available resources which a client may own and still be eligible is $4,000 for a one-member unit. 477 NAC 23-003.04(A) defines a “deprivation of resources” as follows: Any action taken by the applicant or client, or any other person or entity, which reduces or eliminates the applicant’s, client’s, or spouse’s recorded ownership or control of the asset for less than fair market value is a deprivation of resources. The fair market value of a resource at the time the resource was disposed of must be verified and the equity value of the resource must be determined by taking into consideration any encumbrances against the resource. . . . 477 NAC 23-003.04(G) states the following, in relevant part: “To determine if a client or his or her spouse deprived himself or herself of a resource to qualify for Medicaid, the Department must look back 60 months before the month of application.” 471 NAC 12-006 states the following, in relevant part: When an individual requests admission to or continuous residence in a Medicaid-certified nursing facility (NF), the facility must implement the preadmission screening and resident review (PASRR) as defined in this chapter. An individual who has an indication or diagnosis of serious mental illness, intellectual disability or a related condition, or a dual diagnosis may be admitted to a nursing facility (NF) or continue to reside in a nursing facility (NF) only when the individual is determined to be appropriate for nursing facility (NF) services through the preadmission screening and resident review (PASRR). Title 42 CFR § 433.400(b) (October 1, 2022) states the following, in relevant part: “A beneficiary is not validly enrolled if the agency determines the eligibility was erroneously granted at the most recent determination . . . because of agency error or fraud . . . .” 42 CFR § 435.916(b) (October 1, 2022) requires the Agency to make a redetermination of eligibility in accordance with provisions of paragraph (a)(2) of that section, which states, “The agency must make a redetermination of eligibility without requiring information from the individual if able to do so based on reliable information contained in the individual’s account or other more current information available to the agency, including but not limited to information accessed through any data bases accessed by the agency . . . .” A good internal control plan requires procedures to ensure that income and resources are updated for changes timely, adequately documented, and verified. Title 45 CFR § 75.511(a) (October 1, 2022) requires the auditee to prepare a summary schedule of prior audit findings. Per subsection (b)(2) of that same regulation, “When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding’s recurrence and planned corrective action, and any partial corrective action taken.” Condition: The Agency did not adequately verify the income and resources of individuals residing in long- term care facilities to ensure limits were not exceeded, and the individuals were eligible. Additionally, one nursing facility payment tested was paid prior to the preadmission screening and resident review being completed. The Summary Schedule of Prior Audit Findings state the corrective action is complete. A similar finding was noted in the prior audit. Repeat Finding: 2022-040 Questioned Costs: $20,153 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: We tested 25 long-term care facility payments and noted the following issues: The budgets for two recipients used the wrong living arrangement, causing the share of cost to be understated. • For one nursing home recipient, the Medicaid benefit was determined as if the recipient was living in an apartment or house. For the June 2022 budget, the recipient received an unearned income disregard of $20 and a standard of need of $392. The standard of need should have been $60 with no unearned income disregard. This resulted in questioned costs of $87. There were additional out-of-sample questioned costs for July 2022 through September 2022 benefits totaling $261. • For another nursing home recipient, the September 2022 budget included an unearned income disregard of $20 and a $1,133 standard of need. The standard of need should have been $60 with no unearned income disregard. This resulted in questioned costs of $665. The Medicaid budgets used the incorrect living arrangement the entire fiscal year resulting in additional out-of-sample questioned costs of $7,313. The countable resources for two recipients were not calculated correctly. • For one recipient, the budget for February 2023 did not include the correct bank balances. There was a $2,000 transfer between two bank accounts the recipient owned that was not accounted for in the balances. If the $2,000 had been included, the recipient would have been over resources by $1,589, resulting in questioned costs of $1,018. • Proper verification of life insurance policies was not obtained for one recipient. The worker approved the recipient for Medicaid prior to obtaining adequate documentation to support the amount of life insurance declared on the application. The worker initially received one policy statement that supported a portion of the premiums being withdrawn from the checking account and a portion of the declared policy value. After Medicaid was approved on February 8, 2022, verification was obtained on March 22, 2022, for two additional policies showing the countable value exceeded the $4,000 resource limit. The Agency did not close the Medicaid case, citing the continued enrollment requirement during the COVID-19 Public Health Emergency. However, per the DHHS COVID-19 FAQ document and Title 42 CFR § 433.400(b), if an individual was enrolled due to agency error, that individual was not validly enrolled, and the case should close. For the claim tested for May 2023 services, the recipient was over resources by $1,545. The entire claim is questioned, resulting in questioned costs of $4,045. Additionally, for this recipient, the May 2023 budget included the railroad retirement amount for calendar year 2022. The Agency did not obtain verification of the amount for calendar year 2023. An increase in income would increase the share of cost and lower the amount paid by Medicaid. For one recipient, the payment of seven days of nursing home care was made prior to the completion of the Level II preadmission screening and resident review (PASRR). The recipient entered the nursing facility on June 22, 2022, and the Level II PASRR was not completed until June 29, 2022. The days paid from June 22, 2022, through June 28, 2022, were not allowable, resulting in questioned costs of $532. For one recipient who entered a nursing home in January 2023, the Agency did not complete the required five-year look back for potential deprivation of resources. According to documentation provided by the Agency, only two years were reviewed. The applications submitted in December 2022 and February 2023 for the recipient denied that any substantial property was sold in the last five years. However, information received from the Douglas County assessor website noted that the recipient sold a home for $144,000 in May 2018. Since the Agency did not review the required five years of bank balances, no information was obtained regarding the sale of the house and where any proceeds from the sale were deposited and how the funds were spent to ensure there was no deprivation of resources. The entire claim is questioned resulting in questioned costs of $6,232. Federal payment errors noted in the sample were $12,579 and additional out-of-sample questioned costs of $7,574. The Federal sample tested was $118,651, and the total Federal long-term care facility expenditures during the fiscal year were $299,652,791. Based on the sample tested, the case error rate was 24% (6/25). The dollar error rate was 10.6% ($12,579/$118,651), which estimates the potential dollars at risk for fiscal year 2023 to be $31,763,196 (dollar error rate multiplied by population). Cause: Worker error and inadequate review. Effect: If income and resources are not adequately verified, there is an increased risk recipients will be inappropriately determined eligible for Medicaid or determined eligible with an incorrect share of cost. Recommendation: We recommend the Agency implement procedures to ensure all resources are identified, verified, and adequately documented. We further recommend the Agency improve procedures to ensure adherence to State and Federal regulations. Management Response: The Agency agrees.

Program: AL 93.778 – Medical Assistance Program – Special Tests and Provisions Grant Number & Year: All open, including 2305NE5MAP, FFY 2023 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Title 42 CFR § 447.253(b)(1)(i) (October 1, 2022) provides the following: The Medicaid agency pays for inpatient hospital services and long-term care facility services through the use of rates that are reasonable and adequate to meet the costs that must be incurred by efficiently and economically operated providers to provide services in conformity with applicable State and Federal laws, regulations, and quality and safety standards. According to 42 CFR § 447.253(g) (October 1, 2022), “The Medicaid agency must provide for periodic audits of the financial and statistical records of participating providers.” The Nebraska Medicaid State Plan, Attachment 4.19-D, 12-011.11 (Audits), says the following: The Department will perform at least one initial desk audit and may perform subsequent desk audits and/or a periodic field audit of each cost report. Selection of subsequent desk audits and field audits will be made as determined necessary by the Department to maintain the integrity of the Nebraska Medical Assistance Program. The Department may retain an outside independent public accounting firm, licensed to do business in Nebraska or the state where the financial records are maintained, to perform the audits. Audit reports must be completed on all field audits and desk audits. American Institute of Certified Public Accountants (AICPA) Professional Standards AU-C Section 520.07 states, “If analytical procedures performed in accordance with this section identify fluctuations or relationships that are inconsistent with other relevant information or that differ from expected values by a significant amount, the auditor should investigate such differences by a. inquiring of management and obtaining appropriate audit evidence relevant to management's responses and b. performing other audit procedures as necessary in the circumstances.” AICPA Professional Standards AU-C Section 500 states that audit evidence obtained directly by the auditor is more reliable than audit evidence obtained indirectly or by inference, and using electronic information may require the auditor to perform additional audit procedures to establish reliability. A good internal control plan requires desk audits to include testing a sample of expenses to supporting documentation. Condition: Desk audit procedures could be improved. A similar finding was noted in the prior audit. Repeat Finding: 2022-041 Questioned Costs: Unknown Statistical Sample: No Context: Agency procedures require a desk audit on each annual cost report provided by long-term care facilities that receive Medicaid funding and a field audit on facilities identified by the Agency as high risk. The Agency contracted with an accounting firm to complete the desk audits of nearly all facilities in Nebraska and any necessary field audits. The contractor completed 16 field audits on cost reports from 2018 through 2021. As of June 30, 2023, the contractor had not yet completed the risk assessments for the 2022 cost reports or identified high-risk facilities for 2022. We reviewed 20 desk audits and noted that limited procedures were performed. Costs were traced to the facilities’ trial balance, but no underlying supporting documentation was obtained for significant costs, such as salaries, food, or supplies. In many of the desk audits, large increases in costs were attributed to the COVID-19 health emergency, without gaining any additional support to verify the higher costs. The contractor did request verbal explanations for large variances; however, appropriate audit evidence was not requested to verify the explanations. For example, one facility had a 31% increase in "Other" costs for $608,641, which was explained as supply cost and engineering contract increases, while another facility had an increase of 451% or $1,328,713 in Purchase Services - Direct care, which was explained as due to a decrease in direct staff; however, direct staffing costs decreased only $603,499. In neither example did the contractor obtain any underlying invoices to determine if the increased costs for supplies and services were accurate, nor any documentation to support that the number of direct staff had decreased. Additionally, looking at variances alone would not support that expenses are accurate and not misstated from year to year. This is especially critical on the fiscal year 2022 cost reports, as these reports will be used to base rates for the next four years, starting with fiscal year 2024 rates. The total Federal share of long-term care facility expenditures during fiscal year 2023 was over $299 million. Cause: The contract does not require the accounting firm to obtain underlying support for expenses. Effect: When facilities do not have adequate desk audits performed, there is an increased risk for submitted cost reports to contain errors or fraud. Recommendation: We recommend the Agency ensure desk audits provide reasonable assurance that cost reports are accurate. Management Response: The Agency agrees.

Program: AL 93.778 – Medical Assistance Program; AL 93.767 – Children’s Health Insurance Program (CHIP) – Special Tests and Provisions Grant Number & Year: All open, including 2305NE5MAP, FFY 2023 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per Title 42 CFR § 455.104(b)(4) (October 1, 2022), the State Medicaid Agency must require the disclosing entity provide the following disclosures: The name, address, date of birth, and Social Security Number of any managing employee of the disclosing entity (or fiscal agent or managed care entity). Per 42 CFR § 455.101 (October 1, 2022): Managing employee means a general manager, business manager, administrator, director, or other individual who exercises operational or managerial control over, or who directly or indirectly conducts the day-to-day operation of an institution, organization, or agency. Per the Medicaid Provider Enrollment Compendium (MPEC) (3/22/21) Section 1.4.1C: There are not exceptions to the managing employee disclosure requirement. To the extent any individual meets the definition of “managing employee” under § 455.101, their information is required to be disclosed. MPEC Section 1.4.1C states further the following: However, if a non-profit entity has managing employees, to the extent these individuals meet the definition of “managing employee” under § 455.101; they would have to be disclosed as such. In addition, as discussed further below, entities, including non-profit entities, that are organized as corporations must provide disclosures regarding their officers and directors . . . . If a corporation has, for instance, a Director of Finance who is not a member of the board of directors, he/she would not need to be disclosed as a director/board member. However, as discussed in section C., below, to the extent he/she meets the definition of “managing employee” under § 455.101; he/she would have to be disclosed as a “managing employee.” Per 42 CFR § 455.436 (October 1, 2022), the State Medicaid Agency must do the following: (a) Confirm the identity and determine the exclusion status of providers and any person with an ownership or control interest or who is an agent or managing employee of the provider through routine checks of Federal databases. (b) Check the Social Security Administration’s Death Master File, the National Plan and Provider Enumeration System (NPPES), the List of Excluded Individuals/Entities (LEIE), the Excluded Parties List System (EPLS), and any such other databases as the Secretary may prescribe. (c)(1) Consult appropriate databases to confirm identity upon enrollment and reenrollment; and (2) Check the LEIE and EPLS no less frequently than monthly. 45 CFR § 75.303 (October 1, 2022) requires the Agency to “[e]stablish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award.” Good internal control requires procedures to ensure that all required disclosures are provided. Condition: Two of 25 providers tested did not include disclosure requirements for managing employees. Repeat Finding: 2022-042 Questioned Costs: Unknown Statistical Sample: No Context: We tested screening and enrollment for 25 Medicaid/CHIP providers. We noted that two providers, both non-profit corporations, failed to disclose any managing employee. Therefore, no screenings for managing employees were performed for these two providers. Cause: The Agency relies on each provider’s disclosure to be complete, true, and accurate. The provider is allowed to complete the enrollment process even if an owner or managing employee is not disclosed. Effect: Without adequate procedures to ensure providers are screened, and disclosures are complete, there is an increased risk of provider ineligibility, which could result in unallowable costs or potential harm to patients. Recommendation: We recommend the Agency obtain disclosures and screen providers as required by Federal regulations. Management Response: The Agency agrees.

Program: AL 93.778 – Medical Assistance Program – Special Tests and Provisions Grant Number & Year: 2305NE5MAP, FFY 2023 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 42 CFR § 438.3(m) (October 1, 2022), “The contract must require MCOs [managed care organizations], PIHPs [prepaid inpatient health plans], and PAHPs [prepaid ambulatory health plans] to submit audited financial reports specific to the Medicaid contract on an annual basis. The audit must be conducted in accordance with generally accepted accounting principles and generally accepted auditing standards.” A good internal control plan requires policies and procedures to ensure that mandatory financial audits are completed in accordance with Federal regulations. Condition: The Agency does not have adequate policies and procedures to ensure that required managed care financial audits are completed in accordance with Federal regulations. The MCO and PAHP audited financial reports for year ended December 31, 2022, were not conducted in accordance with generally accepted accounting principles (GAAP). A similar finding was noted in the prior audit. Repeat Finding: 2022-044 Questioned Costs: Unknown Statistical Sample: No Context: Nebraska Total Care, Inc., Community Care Health Plan of Nebraska, Inc., United Healthcare of the Midlands, Inc., and MCNA Insurance Company had audits performed in accordance with generally accepted auditing standards; however, the financial statements were not in accordance with GAAP. The financial statements for the MCOs were prepared using “accounting practices prescribed or permitted by the Nebraska Department of Insurance, which is a basis of accounting other than U.S. generally accepted accounting principles.” The PAHP audit was prepared using “accounting practices prescribed or permitted by the Texas Department of Insurance . . . .” The Department of Insurance has adopted the Statement of Statutory Accounting Principles (SSAP) found in the National Association of Insurance Commissioners’ (NAIC) manual. Cause: The MCO and PAHP audited financial reports are completed for the Nebraska Department of Insurance, which does not require the audit to be conducted in accordance with GAAP. Amendments to the contracts have been drafted to incorporate GAAP requirements and should be in place prior to January 1, 2024. Effect: When the financial audits completed by the MCOs and PAHP are not conducted according to GAAP, the Agency is not in compliance with Federal regulations, and there is an increased risk for fraud or errors. Recommendation: We recommend the Agency require the MCO and PAHP financial audits to be conducted in accordance with GAAP. Management Response: The Agency agrees.

Program: AL 93.778 – Medical Assistance Program – Special Tests and Provisions Grant Number & Year: All open, including 2305NE5MAP, FFY 2023 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Title 42 CFR § 455.1 (October 1, 2022) sets forth requirements for a State fraud detection and investigation program, including a method to verify whether services reimbursed by Medicaid were actually furnished to beneficiaries. The Agency’s Program Integrity (PI) and Special Investigations Units (SIU) perform these functions. Per 42 CFR § 455.14 (October 1, 2022): If the agency receives a complaint of Medicaid fraud or abuse from any source or identifies any questionable practices, it must conduct a preliminary investigation to determine whether there is sufficient basis to warrant a full investigation. The Nebraska Medicaid State Plan, Section 4.5 (Medicaid Agency Fraud Detection and Investigation Program), states, “The Medicaid agency has established and will maintain methods, criteria and procedures that meet all requirements of 42 CFR 455.13 through 455.21 and 455.23 for prevention and control of program fraud and abuse.” Under Program Integrity’s Policies and Procedures: Preliminary Investigations • Preliminary investigations of referrals will be completed within 70 days of the opening of the case. • Preliminary investigations of cases identified through exception profiling will be completed within 90 days of the opening of the case. • Preliminary investigations of cases identified through projects will be completed within 120 days of the opening of the case. This includes cases that are sourced from another case. Full investigations • Each month, investigators will review their cases and use their professional judgment to determine the prioritization of their active cases. The following guidelines will be considered in this review: o The investigation of a provider for termination due to a finding on annual or monthly screening is a HIGH priority o Client health & safety influences the priority of a case o Definitive interpretation of regulations influences the priority of a case o Cases in the preliminary investigation phase are of a moderate priority A good internal control plan requires procedures to ensure cases are reviewed, adequately collected on, and appropriate dispositions are made in a timely manner. Condition: Procedures should be improved to ensure cases are investigated timely, and steps taken are adequately documented. Repeat Finding: 2022-045 Questioned Costs: Unknown Statistical Sample: No Context: Program Integrity (PI) is tasked with, among other things, investigating cases of potential provider fraud in the Medicaid Program. Cases received are delegated to investigators who track their activity notes and documentation in one central Investigative Case Management system (ICM). Substantial cases with a large amount of money that may be due back will be referred to the Attorney General’s Medicaid Fraud and Patient Abuse Unit (MFPAU). In cases that are not referred and accepted by MFPAU, PI can sanction a provider, request a refund, provide education, and/or terminate the provider from the Medicaid Program. The Special Investigations Unit (SIU) investigates allegations of suspected recipient fraud. We tested 20 PI cases and 6 SIU cases and noted the following: • One SIU case did not get assigned to an investigator when it was initially received. The original reporter mentioned both Medicaid and Medicare, so it was assumed that the case was for Medicare fraud. However, there was no support to show that any review was done to confirm Medicaid was not involved, nor any support to show that the case was referred to Medicare. Medicaid paid $8,824 in managed care capitation payments for the recipient during the fiscal year. After APA discussed this with SIU, a case was opened. • Four PI cases did not have adequate and timely follow-ups once they were opened: o Based on a brief review, the Federal Bureau of Investigation (FBI) brought one case to the Nebraska Attorney General regarding a counseling office that may have been overbilling. The PI investigator declined to interview the source of the referral and reviewed only claim data to see if there was any obvious overbilling for one provider at the counseling office. No other investigative work was done. No documentation was requested from the provider to support the charges billed, such as time sheets to show when providers were working to agree to hours and dates billed. o One case was opened in June 2022 for a provider billing for Applied Behavioral Analysis (ABA) services and services for children under three years of age, when the provider did not have appropriately licensed practitioners for such services. The opening notes on the case indicated the investigator was going to educate the provider and request a refund; however, neither of those steps had been taken as of July 2023 because the investigator was waiting to see if the State legislature passed a bill related to ABA services. No real actions had occurred on the case for nearly seven months. o One case was referred to PI by a Managed Care Organization (MCO) for a provider potentially overbilling for Mental Health services and concerns of crossing boundaries with a patient. It was unclear if Medicaid claims were reviewed to see if the Provider was overbilling other MCOs. It was also unclear if the proper authorities, such as the Licensure Unit, were notified about the allegation for crossing boundaries with a patient, so a proper investigation could take place. o One case was opened in December 2022 regarding a provider billing for Personal Care and Companion Services that were allegedly not being rendered. The client reported to have text messages supporting that services were not provided. The investigator requested the text messages in February 2023, but no further follow up was completed on the case until we asked about it in August 2023. According to the program administrator, this case was not a high priority due to no risk of health and safety. Medicaid paid the provider $2,996,377 for claimed services in fiscal year 2023. Additionally, we noted that PI was not following current policies and procedures for identifying potential fraud, waste, and abuse. Its policies and procedures indicated it would review the statewide SURS (surveillance and utilization review subsystem) report quarterly and “a minimum of three provider and three recipient cases will be opened from the SURS Ranking Reports.” After December 2022, no cases were opened from the SURS report. The Agency confirmed this and stated, “One of the issues the Program Integrity Team has been facing for the past two years is vacant positions. With the number of staff decreased, focusing on cases based on allegations and NMEP removals was prioritized. Those are cases that had a greater concern for patient health and safety. . . . The procedures will be updated." Cause: The Agency did not follow proper procedures, including supervisor reviews of cases, to ensure Medicaid cases were properly and timely worked. The Program is understaffed. Effect: When potential fraud cases are not adequately and timely pursued, there is an increased risk for misuse of funds and potential harm to individuals receiving services. Recommendation: We recommend the Agency strengthen procedures to ensure cases are properly and timely reviewed, and appropriate dispositions are made. Management Response: The Agency agrees.

Program: AL 93.778 – Medical Assistance Program; AL 93.778 – COVID-19 Medical Assistance Program - Allowability Grant Number & Year: 2305NE5MAP, FFY 2023; 2205NE5MAP, FFY 2022 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 45 CFR § 75.302(a) (October 1, 2022), “Each state must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state's own funds.” Per 45 CFR § 75.403 (October 1, 2022), costs must be necessary, reasonable, and adequately documented. Title 471 NAC 15-003.02(H) requires that the provider perform the personal assistance services noted on the service plan, accurately documenting services provided in the Electronic Visit Verification (EVV) system and confirming that services were received as authorized according to Agency procedures. Title 471 NAC 15-005.02(A) states, “Providers cannot provide services to more than one client at a time.” That same regulation says also, “Medicaid will not pay for services that were not performed during the actual hours noted by the provider in the Electronic Visit Verification (EVV) system.” A good internal control plan requires procedures to ensure that services provided agree to the service needs assessment. Section 1903(l)(5)(A) of the Social Security Act states the following: The term “electronic visit verification system” means, with respect to personal care services or home health care services, a system under which visits conducted as part of such services are electronically verified with respect to – (i) the type of service performed; (ii) the individual receiving the service; (iii) the date of the service; (iv) the location of service delivery; (v) the individual providing the service; and (vi) the time the service begins and ends. Public Law 114-255, § 12006 (December 13, 2016) (“21st Century Cures Act”) provides, as is relevant, the following: (a) Section 1903 of the Social Security Act (42 U.S.C. 1396b) is amended by inserting after subsection (k) the following new subsection: ‘‘(l)(1) Subject to paragraphs (3) and (4), with respect to any amount expended for personal care services or home health care services requiring an in-home visit by a provider that are provided under a State plan under this title (or under a waiver of the plan) and furnished in a calendar quarter beginning on or after January 1, 2019 (or, in the case of home health care services, on or after January 1, 2023), unless a State requires the use of an electronic visit verification system for such services furnished in such quarter under the plan or such waiver, the Federal medical assistance percentage shall be reduced— ‘‘(A) in the case of personal care services— ‘‘(i) for calendar quarters in 2019 and 2020, by .25 percentage points; ‘‘(ii) for calendar quarters in 2021, by .5 percentage points; ‘‘(iii) for calendar quarters in 2022, by .75 percentage points; and ‘‘(iv) for calendar quarters in 2023 and each year thereafter, by 1 percentage point[.] 42 CFR § 440.167(a)(2) (October 1, 2022) states, in part, that personal care services are those provided “by an individual who is qualified to provide such services and who is not a member of the individual's family[.]” 42 CFR § 440.167(b) adds, “For purposes of this section, family member means a legally responsible relative.” Neb. Rev. Stat. § 28-512 (Reissue 2016) creates the offense of “theft by deception.” That statute says the following, in relevant part: A person commits theft if he obtains property of another by deception. A person deceives if he intentionally: (1) Creates or reinforces a false impression, including false impressions as to law, value, intention, or other state of mind; but deception as to a person's intention to perform a promise shall not be inferred from the fact alone that he did not subsequently perform the promise; or (2) Prevents another from acquiring information which would affect his judgment of a transaction; or (3) Fails to correct a false impression which the deceiver previously created or reinforced, or which the deceiver knows to be influencing another to whom he stands in a fiduciary or confidential relationship[.] Further, Neb. Rev. Stat. § 28-911 (Reissue 2016) prohibits “abuse of public records,” as follows: (1) A person commits abuse of public records, if: (a) He knowingly makes a false entry in or falsely alters any public record; or (b) Knowing he lacks the authority to do so, he intentionally destroys, mutilates, conceals, removes, or impairs the availability of any public record; or (c) Knowing he lacks the authority to retain the record, he refuses to deliver up a public record in his possession upon proper request of any person lawfully entitled to receive such record; or (d) He makes, presents, or uses any record, document, or thing, knowing it to be false, and with the intention that it be taken as a genuine part of the public record. (2) As used in this section, the term public record includes all official books, papers, or records created, received, or used by or in any governmental office or agency. (3) Abuse of public records is a Class II misdemeanor. Condition: During testing of personal assistance service (PAS) claims, we noted the following: • Personal assistance services appeared to be claimed at the same time that the provider was working at another job or at other activities, resulting in apparent fraudulent billings and payments. • Services provided lacked adequate supporting documentation. This included providers being able to submit claims without verifying the location where those services were provided. • Services billed exceeded the number of hours authorized under the service needs assessments. • Providers billed for unreasonable amounts of time – including, among other things, for more daily hours than are in a 24-hour period and for unfeasible scenarios, such as the supposed performance of a week’s worth of duties for one client in only three days. • Providers received overtime pay for unauthorized services, meaning that they were compensated at an increased rate for services ineligible for payment in the first place. • Client guardians or parents were paid for providing services, which violates governing regulations prohibiting such arrangements. A similar finding has been noted in prior audits since 2014. Repeat Finding: 2022-039 Questioned Costs: $53,758 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: The Agency offers PAS (assistance with hygiene, mobility, housekeeping, etc.) to Medicaid recipients with disabilities and chronic conditions. The services to be provided are based on individual needs and criteria that must be determined in a written service needs assessment (SNA). The Agency implemented an EVV system for PAS providers on January 3, 2021, as required by Section 12006(a) of the 21st Century Cures Act, passed by Congress in 2016. The EVV system electronically captures and verifies provider visit information, and providers were required to submit claims to the Agency electronically through this application. We initially selected five provider payments for testing – and, from those, one week of services submitted through the EVV system. A week of service billed by the provider may include multiple claims and clients. Due to the numerous issues identified with the billings, we expanded testing and randomly selected an additional five provider payments for testing, and one week of services. We noted issues with 9 of 10 providers tested. In addition to the billing issues identified for the weeks tested, we also noted that three of these providers had outside employment or participated in activities that conflicted with the PAS hours billed. We obtained more documentation for additional weeks. Based on the documentation obtained, we identified $14,397 in potentially fraudulent payments made to the providers during fiscal year 2023. See Schedule of Findings and Questioned Costs for chart/table. In addition to the potentially fraudulent payments related to hours claimed while at another job or activity, we noted $44,534 in Federal payment errors related to other issues, for total Federal questioned costs of $53,758. The Federal share of payments tested totaled $81,926. The total Federal share of PAS claims for the fiscal year was $5,416,039, and the State share was $3,814,632. Federal payment errors noted in the random sample totaled $268. The total Federal sample tested for the random sample was $979. The total dollar error rate was 27.37%, which estimates the potential dollars at risk for fiscal year 2023 to be $1,482,370 (dollar rate multiplied by the population). The following details issues with each provider. Provider #1 This provider was authorized a total of 87.25 hours of service per week for three different clients. For the week tested, the provider manually created the claims for payment and did not use the EVV system to create a visit form; therefore, the claims did not capture client signatures or verify the location of the visit through the Global Positioning System (GPS). Likewise, there was no listing of the activities performed to ensure compliance with the SNA. We requested the claim detail for a second week of services and, again, the provider manually created the claims and did not enter a visit in the EVV system. Consequently, we questioned all of the claims selected for testing. We noted further that the provider exceeded the SNA by 12 hours and billed 24.5 hours of service on one day, which is impossible. We reviewed three additional weeks of claims and noted also that the provider exceeded the SNA by .25 to 2 hours each week, resulting in additional questioned costs. Most concerning was the fact that the provider worked two additional jobs during the time that she billed for personal assistance services. The provider worked as a dental hygienist and as a pharmacy technician. The provider billed personal assistance services beginning at 6:00 a.m. every day until at least 5:30 p.m. The dental office with which the provider was employed was open only from 8:00 a.m. to 5:00 p.m., Monday through Friday. During the week of February 5, 2023, the provider claimed 87 hours for PAS, of which 43.75 hours were claimed to have been provided between 8:00 a.m. and 5:00 p.m., Monday through Friday. As the provider did not use the EVV, it is unknown where she was at the times the services were claimed; however, considering the provider’s other employment, it is possible that fraud may have occurred. We obtained the pharmacy technician employment records for the provider and compared the PAS billings to those records from July 2022 through January 2023. We identified 101 days during which PAS hours billed overlapped with times that the provider was working as a pharmacy technician. In determining these overlapped hours, we did not factor in any travel time that may have occurred between client homes and the provider’s place of employment; therefore, the possibility of additional fraudulent payments exists. The provider billed 1,200 hours of personal assistance services during this time period, and more than half of these hours could not have been provided. We questioned 770 hours as potential fraud, totaling $8,678. We also noted that the provider did not complete all of the PAS visits through a device using GPS; therefore, additional questioned costs resulted from not using the GPS verification method. Given that many of the visits completed with GPS verification overlapped with the times that the provider was working at the pharmacy, another individual appears to have aided the provider in falsely claiming that personal assistance services were provided. The employment records for the provider included the exact time punched in and out for the shifts worked. Below are a few examples of the hours billed by the provider and the hours the provider worked at the pharmacy. Clients 1 and 2 live at the same residence, and Client 3 is the provider’s mother. See Schedule of Findings and Questioned Costs for chart/table. In addition to the apparent fraudulent hours billed, the provider received overtime pay for the weeks reviewed. Providers are paid at time and one-half for services in excess of 40 hours each week. The provider evidently received overtime pay, in part, due to the apparent fraudulent billing. The provider was paid overtime for 21 weeks from July 2022 through December 2022. This resulted in additional questioned costs of $3,140 for potential fraud. Federal questioned costs not related to other employment totaled $3,604. Provider #2 This provider was authorized a total of 116.75 hours of service per week for four different clients. For the week tested of December 18, 2022, through December 24, 2022, the provider billed 121.25 hours of service. This provider manually completed visits; consequently, there was no location verification, and no client signatures were captured. Therefore, we questioned the claims for the week tested. We also identified other issues for the week tested. We noted the provider billed a total of 32 hours of service for the four clients on December 22, 2022, which is impossible. Also, for one client, the visit forms for this day supported only 2.75 hours, but the provider billed 20 hours for the client. The provider also exceeded the service authorization by 75 quarterly units or 18.75 hours for the week. Due to the issues noted, we reviewed additional weeks and claims of service. This resulted in more questioned costs for the provider exceeding the SNA. The provider exceeded the SNA for 8 of the 15 weeks reviewed, ranging from .25 to 11.5 hours overbilled. Per documentation in the case file, the provider was involved in a court case pertaining to her own child. On December 2, 2022, a law enforcement raid was conducted at the provider’s home, which revealed Fentanyl and firearms. The provider was not present at the time and, when contacted later, claimed to be on vacation; however, the provider billed for 14.5 hours of services that day. Despite appearing in court on December 20, 2022, at 11:30 a.m., the provider billed for client services that same day from 10:15 a.m. to 1:30 p.m. Based on these discrepancies, we requested the EVV records for the remaining days billed in December 2022. None of the additional visit forms were completed through a device using GPS to track the location, and no signatures were obtained; therefore, we questioned these claims. The case file also included documentation of supervised visits that occurred between the provider and the provider’s child at the provider’s home. Reviewing the EVV records for the days that the visits occurred, we noted that the times the provider billed for PAS services overlapped with the times of these supervised visits. The provider could not have provided the majority of PAS services billed on these days. Again, the visit forms did not contain verification of the location where the services were provided. We questioned the hours billed for each of these days. See Schedule of Findings and Questioned Costs for chart/table. Lastly, the provider had other employment as a medical assistant and a student bus driver. It is likely that the hours of other employment conflicted with the PAS hours billed. We requested the provider’s employment records for July 2022 through December 2022. While comparing the employment records to the days and hours billed for PAS services, we identified 40 days from June 27, 2022, through November 16, 2022, during which hours worked overlapped with times billed for PAS services. We questioned any PAS hours billed that overlapped with the provider’s employment hours as potential fraud. In determining these overlapped hours, we did not factor in any travel time that may have occurred between client homes and the provider’s place of employment; therefore, the possibility of additional fraudulent payments exists. We also noted the provider did not complete the PAS visits through a device using GPS; therefore, any times billed on these 40 days were also questioned for inadequate documentation. Apparent fraudulent PAS hours billed totaled $1,383. Overlapping times ranged from 1.25 hours to 5.25 hours per day. The table below contains a few examples of overlapping hours billed by the provider: See Schedule of Findings and Questioned Costs for chart/table. In addition to the apparent fraudulent overlapped hours, the provider was paid for overtime for the weeks reviewed. The provider received overtime, in part, due to the apparent fraudulent billing. All overtime hours paid during fiscal year 2023 were questioned, either due to the fraudulent hours billed for the week, or for inadequate documentation for not using the GPS verification method. This resulted in additional questioned costs of $204 for potential fraud. Federal questioned costs not related to employment issues totaled $6,671. Provider #3 This provider was authorized a total of 97.5 hours of service per week for four clients. For the week initially tested, six visit forms were entered through a personal computer, so there was no location verification and no client signature. Five of these visits occurred in the evening, from 7:00 p.m. to 10:15 p.m., for 3.25 hours. The provider incorrectly billed 4 hours for one of these visits. The visits with no location verification were questioned. We also noted mileage variances on the visit forms entered through a mobile device when GPS tracking was utilized. There were two visits with a 20-mile variance from the location of the client and where the provider apparently ended the visit. There are unknown questioned costs for these mileage variances. The service authorizations for each of the clients included some services to be performed every day of the week; however, only two of the four clients were billed daily for services. For example, if a client was authorized for a bath seven times per week, but the provider performed the service on only three days, we considered the hours charged for four baths to be overbilled. We reviewed additional weeks during the fiscal year, and there were additional questioned costs based on the frequency of the task authorized. This provider also received overtime pay for several of the weeks reviewed. Therefore, the provider was not only overpaid due to billing for tasks that were not provided as authorized but also received overtime pay based upon some of those overbillings, resulting in additional questioned costs. Federal questioned costs for issues not related to other employment and activities totaled $880. The provider was also receiving wages from a home health care company during fiscal year 2023. Based on the wages earned there, the provider appears to have been working full-time, and hours claimed for PAS likely overlapped with hours worked at the home health care company. We requested the provider’s employment records from the home health care company, and the employer responded that the provider was a salaried employee and did not have a set schedule. The provider also stated that a timesheet was not kept. We performed a social media search and found several posts on Facebook that depicted the provider being out of-state on several weekends during fiscal year 2023. We compared those apparent out-of-state dates to the dates of billed services. The provider billed at least nine days that conflicted with these trips outside of Nebraska. The provider billed 94.25 hours during these days, resulting in potential fraud of $992. Four of the nine days billed did not use the GPS verification method for any of the clients. Based on the Facebook posts, however, the provider was attending an event in Indianapolis, Indiana, on March 11 and 12, 2023, but billed 8.25 hours of services for each of these days. On March 31, 2023, the provider billed 15.75 hours; however, she appeared to be in Arizona. No GPS verification was used on June 6, 2023, and the provider billed 10.75 hours, but appeared to be in Arizona. For the remaining five days, the hours billed did not agree to the times logged through GPS. Additionally, times overlapped between services, and travel time between client homes was unreasonable, or part of the hours billed did not use the GPS verification method. For those visit forms that indicated GPS verification was used, another individual may have entered information into the verification system. The table below contains examples of some of the discrepancies noted: See Schedule of Findings and Questioned Costs for chart/table. Provider #4 The Agency authorized this provider to provide 118 hours of service per week (approximately 40 hours for each of 3 clients). It is not reasonable to authorize this many hours of service for one provider, as it would take over 17 hours every day of the week in order to perform all the tasks noted on the SNA. For the week tested, the provider billed 454 quarterly units or 113.5 hours. This included billing 9.5 hours on November 18, 2022, from 7:10 p.m. to 12:04 a.m., even though this is only 5 hours, and then an additional 23.75 hours on November 19, 2022, from 12:06 a.m. to 11:57 p.m. Each SNA of these clients included some services to be performed every day of the week. The provider billed for tasks authorized for seven days per week but did not provide services on each of those seven days for all clients. For example, if a client was authorized for a bath seven times for the week, but the provider performed services on only three days, we considered the hours charged for four baths to be overbilled. We reviewed an additional two weeks of services and found more errors for not following the SNA. There were $757 Federal questioned costs for not following the SNA. It should be noted that only these three weeks were reviewed, so there may be additional questioned costs for other weeks based on the frequency of the task authorized. See Schedule of Findings and Questioned Costs for chart/table. The provider also received overtime pay for these three weeks. In addition to being overpaid due to billing for tasks that were not provided as authorized, the provider received overtime pay for this overbilling, resulting in an additional $269 in Federal questioned costs. Providers are paid at time and one-half for services in excess of 40 hours each week. Per the Agency, a claims overtime team reviews the service authorizations to ensure they are not exceeded. For the three weeks reviewed alone, the provider was paid for 60.82, 73.86 and 61.65 hours of overtime. This provider has had similar findings in prior audits since 2021, with no changes to the number of hours authorized by the Agency. Provider #5 Per documentation provided from the EVV system for the week tested, the provider used a personal computer to clock in and out, so there was no GPS verification of the visit location. The visit forms noted that the provider was unable to clock in with a cell phone; however, the services were being provided at the provider’s home. On April 14, 2023, the Agency notified the provider by letter that using a personal computer that did not have GPS to verify location was not compliant with either the Cures Act or Agency EVV guidelines. This letter gave the provider 90 days to achieve compliance. The Agency sent a second noncompliance letter to the provider on August 30, 2023, giving her an additional 30 days to comply. The claims tested are questioned due to the provider’s failure to comply with Federal regulations. We noted also that the provider was the parent and co-guardian of the two clients to whom services were provided. Per 42 CFR § 440.167, personal care services cannot be provided by a member of the individual’s family. A family member is defined as “a legally responsible relative.” As the co-guardian, the provider was a legally responsible relative of the clients and, therefore, not allowed to be paid for those services. Thus, all payments made during fiscal year 2023 are questioned. The Federal share was $32,083. Provider #6 The provider used a device with GPS tracking to record her visits. Although the visit form supported only 3.75 hours of services, the provider billed 5 hours, resulting in Federal questioned costs of $9. Provider #7 This provider was authorized for up to 107 quarterly hour units or up to 26.75 hours of PAS services per week. For the week tested, the provider used a personal computer to complete visits in the EVV system, resulting in the location not being verified through GPS tracking and no client signatures being obtained. Therefore, we question the claims, resulting in Federal questioned costs of $202. We also noted that the provider performed personal care services for two additional clients under the Aged and Disabled Waiver. One of these clients also lived with the client to whom PAS services were provided. Because the provider did not use a device with GPS tracking, it is possible that she could have provided services for these two clients during the same time, which is not allowable. For the week tested, the provider billed a total of 116 hours of service for all three clients. The provider also exceeded the authorization for the week tested by 1.25 hours. We noted that the Agency sent a letter to the provider in April 2023 about the overbilling of 1.25 hours for the week tested; however, the accounts receivable was not established until September 30, 2023, after we inquired about the overbilling. The Agency also sent a letter to the provider on April 14, 2023, giving her 90 days to comply with the EVV regulations. No changes were made, so the Agency sent a second letter to the provider on August 30, 2023, giving the provider an additional 30 days to come into compliance. A third letter was sent on September 29, 2023, giving the provider an additional 30 days to comply. It is unreasonable to allow a provider who is not compliant with EVV regulations to continue billing for five months of services. The provider was also paid for overtime hours for the week tested. The provider received $351 in Federal share overtime pay for 74.75 hours of overtime. The overtime was paid under the PAS program. However, only 26.75 hours were related to PAS, and 88 hours were billed under the Aged and Disabled (AD) Waiver; therefore, the overtime should have been charge under the AD Waiver. Per the Agency, the overtime was paid under the PAS program because the Federal share reimbursement is higher, which is not reasonable. Provider #8 This provider was authorized for up to 164 quarterly hour units or up to 41 hours per week for two clients living in the same household. The provider exceeded the service authorization for both clients by .25 hours each, resulting in Federal questioned costs of $4. The service authorization for both clients included some services to be performed every day of the week; however, services performed were not reasonable based on the times the provider billed. For example, one client was authorized for reminding or coaxing to eat three times a day for seven days a week. The provider billed from 6:00 a.m. to 9:30 a.m. every day for this client. It is not reasonable that the client would be eating only in the morning. We allowed the hours charged for one meal. Additionally, both clients were authorized for the administration of medication three times a day for seven days; however, based on the time during which the provider was providing services, the administration of medication appears to have occurred only once per day. This resulted in additional Federal questioned costs of $51. Provider #9 The provider used a device with GPS tracking to record her visits; however, the provider exceeded the SNA by two quarterly units or .5 hours for one client resulting in Federal questioned costs of $4. Cause: Procedures were inadequate to prevent and/or detect errors. Effect: An inadequate review of PAS claims increases the risk of services provided not being in accordance with the recipient’s needs, as well as a risk of services being billed but not provided. There is a significant risk for fraud or abuse to occur and not be detected. State and Federal funds appear to have been misspent. Recommendation: We recommend the Agency implement procedures to ensure payments are allowable, adequately supported, and in accordance with State and Federal regulations. We further recommend the Agency immediately discontinue paying claims that are not in accordance with EVV/GPS requirements. Additionally, because this comment gives rise to concerns regarding possible violations of State statute, we are forwarding the information herein to the Nebraska Attorney General for further review. Management Response: The Agency agrees.

Program: AL 93.778 – Medical Assistance Program; AL 93.778 – COVID-19 Medical Assistance Program – Allowability & Eligibility Grant Number & Year: 2205NE5MAP, FFY 2022; 2305NE5MAP, FFY 2023 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 45 CFR § 75.303 (October 1, 2022): The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Per 45 CFR § 75.302(a) (October 1, 2022), “Each state must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state’s own funds.” 45 CFR § 75.403(g) requires costs to be adequately documented. Per 477 NAC 23-003.01: The total equity value of available non-excluded resources of the client . . . is determined and compared with the established maximum for available resources the client may own and still be considered eligible. If the total equity value of available non-excluded resources exceeds the established maximum, the client is ineligible. Per 477 NAC 23-003.10, the established maximum for available resources which a client may own and still be eligible is $4,000 for a one-member unit. 477 NAC 23-003.04(A) defines a “deprivation of resources” as follows: Any action taken by the applicant or client, or any other person or entity, which reduces or eliminates the applicant’s, client’s, or spouse’s recorded ownership or control of the asset for less than fair market value is a deprivation of resources. The fair market value of a resource at the time the resource was disposed of must be verified and the equity value of the resource must be determined by taking into consideration any encumbrances against the resource. . . . 477 NAC 23-003.04(G) states the following, in relevant part: “To determine if a client or his or her spouse deprived himself or herself of a resource to qualify for Medicaid, the Department must look back 60 months before the month of application.” 471 NAC 12-006 states the following, in relevant part: When an individual requests admission to or continuous residence in a Medicaid-certified nursing facility (NF), the facility must implement the preadmission screening and resident review (PASRR) as defined in this chapter. An individual who has an indication or diagnosis of serious mental illness, intellectual disability or a related condition, or a dual diagnosis may be admitted to a nursing facility (NF) or continue to reside in a nursing facility (NF) only when the individual is determined to be appropriate for nursing facility (NF) services through the preadmission screening and resident review (PASRR). Title 42 CFR § 433.400(b) (October 1, 2022) states the following, in relevant part: “A beneficiary is not validly enrolled if the agency determines the eligibility was erroneously granted at the most recent determination . . . because of agency error or fraud . . . .” 42 CFR § 435.916(b) (October 1, 2022) requires the Agency to make a redetermination of eligibility in accordance with provisions of paragraph (a)(2) of that section, which states, “The agency must make a redetermination of eligibility without requiring information from the individual if able to do so based on reliable information contained in the individual’s account or other more current information available to the agency, including but not limited to information accessed through any data bases accessed by the agency . . . .” A good internal control plan requires procedures to ensure that income and resources are updated for changes timely, adequately documented, and verified. Title 45 CFR § 75.511(a) (October 1, 2022) requires the auditee to prepare a summary schedule of prior audit findings. Per subsection (b)(2) of that same regulation, “When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding’s recurrence and planned corrective action, and any partial corrective action taken.” Condition: The Agency did not adequately verify the income and resources of individuals residing in long- term care facilities to ensure limits were not exceeded, and the individuals were eligible. Additionally, one nursing facility payment tested was paid prior to the preadmission screening and resident review being completed. The Summary Schedule of Prior Audit Findings state the corrective action is complete. A similar finding was noted in the prior audit. Repeat Finding: 2022-040 Questioned Costs: $20,153 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: We tested 25 long-term care facility payments and noted the following issues: The budgets for two recipients used the wrong living arrangement, causing the share of cost to be understated. • For one nursing home recipient, the Medicaid benefit was determined as if the recipient was living in an apartment or house. For the June 2022 budget, the recipient received an unearned income disregard of $20 and a standard of need of $392. The standard of need should have been $60 with no unearned income disregard. This resulted in questioned costs of $87. There were additional out-of-sample questioned costs for July 2022 through September 2022 benefits totaling $261. • For another nursing home recipient, the September 2022 budget included an unearned income disregard of $20 and a $1,133 standard of need. The standard of need should have been $60 with no unearned income disregard. This resulted in questioned costs of $665. The Medicaid budgets used the incorrect living arrangement the entire fiscal year resulting in additional out-of-sample questioned costs of $7,313. The countable resources for two recipients were not calculated correctly. • For one recipient, the budget for February 2023 did not include the correct bank balances. There was a $2,000 transfer between two bank accounts the recipient owned that was not accounted for in the balances. If the $2,000 had been included, the recipient would have been over resources by $1,589, resulting in questioned costs of $1,018. • Proper verification of life insurance policies was not obtained for one recipient. The worker approved the recipient for Medicaid prior to obtaining adequate documentation to support the amount of life insurance declared on the application. The worker initially received one policy statement that supported a portion of the premiums being withdrawn from the checking account and a portion of the declared policy value. After Medicaid was approved on February 8, 2022, verification was obtained on March 22, 2022, for two additional policies showing the countable value exceeded the $4,000 resource limit. The Agency did not close the Medicaid case, citing the continued enrollment requirement during the COVID-19 Public Health Emergency. However, per the DHHS COVID-19 FAQ document and Title 42 CFR § 433.400(b), if an individual was enrolled due to agency error, that individual was not validly enrolled, and the case should close. For the claim tested for May 2023 services, the recipient was over resources by $1,545. The entire claim is questioned, resulting in questioned costs of $4,045. Additionally, for this recipient, the May 2023 budget included the railroad retirement amount for calendar year 2022. The Agency did not obtain verification of the amount for calendar year 2023. An increase in income would increase the share of cost and lower the amount paid by Medicaid. For one recipient, the payment of seven days of nursing home care was made prior to the completion of the Level II preadmission screening and resident review (PASRR). The recipient entered the nursing facility on June 22, 2022, and the Level II PASRR was not completed until June 29, 2022. The days paid from June 22, 2022, through June 28, 2022, were not allowable, resulting in questioned costs of $532. For one recipient who entered a nursing home in January 2023, the Agency did not complete the required five-year look back for potential deprivation of resources. According to documentation provided by the Agency, only two years were reviewed. The applications submitted in December 2022 and February 2023 for the recipient denied that any substantial property was sold in the last five years. However, information received from the Douglas County assessor website noted that the recipient sold a home for $144,000 in May 2018. Since the Agency did not review the required five years of bank balances, no information was obtained regarding the sale of the house and where any proceeds from the sale were deposited and how the funds were spent to ensure there was no deprivation of resources. The entire claim is questioned resulting in questioned costs of $6,232. Federal payment errors noted in the sample were $12,579 and additional out-of-sample questioned costs of $7,574. The Federal sample tested was $118,651, and the total Federal long-term care facility expenditures during the fiscal year were $299,652,791. Based on the sample tested, the case error rate was 24% (6/25). The dollar error rate was 10.6% ($12,579/$118,651), which estimates the potential dollars at risk for fiscal year 2023 to be $31,763,196 (dollar error rate multiplied by population). Cause: Worker error and inadequate review. Effect: If income and resources are not adequately verified, there is an increased risk recipients will be inappropriately determined eligible for Medicaid or determined eligible with an incorrect share of cost. Recommendation: We recommend the Agency implement procedures to ensure all resources are identified, verified, and adequately documented. We further recommend the Agency improve procedures to ensure adherence to State and Federal regulations. Management Response: The Agency agrees.

Program: AL 97.036 – Disaster Grants - Public Assistance (Presidentially Declared Disasters) – Subrecipient Monitoring Grant Number & Year: All open, including 4420-DR-NE, declared March 21, 2019 Federal Grantor Agency: U.S. Department of Homeland Security Criteria: 2 CFR § 200.332 (January 1, 2023) states, in relevant part, the following: All pass-through entities must: * * * * (d) Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. Pass-through entity monitoring of the subrecipient must include: (1) Reviewing financial and performance reports required by the pass-through entity. (2) Following-up and ensuring that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the Federal award provided to the subrecipient from the pass-through entity detected through audits, on-site reviews, and written confirmation from the subrecipient, highlighting the status of actions planned or taken to address Single Audit findings related to the particular subaward. (3) Issuing a management decision for applicable audit findings pertaining only to the Federal award provided to the subrecipient from the pass-through entity as required by § 200.521. * * * * (f) Verify that every subrecipient is audited as required by Subpart F of this part when it is expected that the subrecipient’s Federal awards expended during the respective fiscal year equaled or exceeded the threshold set forth in §200.501 2 CFR § 200.501(b) (January 1, 2023) states, in relevant part, the following: “A non-Federal entity that expends $750,000 or more during the non-Federal entity’s fiscal year in Federal awards must have a single audit conducted in accordance with § 200.514 . . .” Per Chapter VII, Section B, of the Agency’s 2023 Annual Administrative Plan for the Public Assistance Program, it is the State’s responsibility to review Single audits completed by subrecipients and to ensure appropriate action is taken for adverse findings. A good internal control plan requires procedures to ensure subrecipient audits are reviewed timely. Condition: The Agency did not ensure subrecipient Single Audits were obtained timely. Repeat Finding: No Questioned Costs: None Statistical Sample: No Context: The Agency utilizes a spreadsheet to track whether subrecipients obtain Single Audits when required. Additionally, the Agency sends letters to all subrecipients requiring them to respond on whether they were required to obtain a Single Audit. However, the Agency did not complete these processes during fiscal year 2023. We selected six subrecipients for testing that would have required a Single Audit be issued during State fiscal year 2023 based on the amount of funds they received from the Agency. For all six subrecipients tested, the Agency had not verified whether or not the subrecipients obtained Single Audits prior to our inquiry in December 2023. One of the six subrecipients appears to have required a Single Audit because it received $1,261,565 in disaster grant funds passed through the Agency during fiscal year 2022, but it did not obtain one. Cause: According to Agency representatives, the process was not completed due to a severe lack of staffing. Effect: Without adequate monitoring procedures, there is an increased risk that Federal awards could be used for unallowable costs. Recommendation: We recommend the Agency implement procedures to ensure subrecipient audits are reviewed timely. Management Response: Due to the Agency’s extreme staffing shortage which has persisted for two years, NEMA has had to prioritize workload. This has been particularly acute with Federal Aid Administrators to whom the tasks of subrecipient monitoring fall. Several projects slipped the normal timeframes for completion.

Program: AL 97.036 – Disaster Grants - Public Assistance (Presidentially Declared Disasters) – Reporting Grant Number & Year: 4420-DR-NE, declared March 21, 2019; 4521-DR-NE, declared April 4, 2020; 4641-DR-NE, declared February 23, 2022; 4662-DR-NE, declared July 27, 2022 Federal Grantor Agency: U.S. Department of Homeland Security Criteria: 2 CFR § 170, Appendix A I. (January 1, 2023) states, in relevant part, the following: a. Reporting of first-tier subawards. Applicability. Unless you are exempt as provided in paragraph d. of this award term, you must report each action that equals or exceeds $30,000 in Federal funds for a subaward to a non-Federal entity or Federal agency . . . . 2. Where and when to report. i. The non-Federal entity or Federal agency must report each obligating action described in paragraph a.1. of this award term to http://www.fsrs.gov. ii. For subaward information, report no later than the end of the month following the month in which the obligation was made. Good internal control requires procedures to ensure that all subawards subject to Federal Funding Accountability and Transparency Act (FFATA) reporting are submitted on time. Condition: FFATA reporting was not submitted for one of 22 subawards tested. FFATA reporting was not submitted timely for 21 of 22 subawards tested. Repeat Finding: No Questioned Costs: None Statistical Sample: No Context: The Agency had 215 subawards obligated during the fiscal year ended June 30, 2023. We tested 22 of the subawards. One of those subawards was not reported as of January 30, 2024. The subaward should have been reported by February 28, 2023. The subrecipient has not obtained a unique identifying number. The Agency first followed up with the subrecipient regarding the need to register for a unique identifying number over 10 months after funds were obligated to the subrecipient. Additionally, the Agency did not submit the other 21 subawards tested timely. The subawards were reported between 105 and 435 days late. See Schedule of Findings and Questioned Costs for chart/table. Cause: Procedures were not properly implemented to ensure that all subawards were reported as required. Effect: Without adequate procedures, there is an increased risk that subawards will not be reported timely, if at all. Recommendation: We recommend the Agency improve its procedures to ensure that all subawards are reported as required. Management Response: Due to the Agency’s extreme staffing shortage which has persisted for two years, NEMA has had to prioritize workload. This has been particularly acute with Federal Aid Administrators to whom the tasks of subrecipient monitoring fall. Several projects slipped the normal timeframes for completion.

Program: AL 14.228 – Community Development Block Grants – Reporting Grant Number & Year: B-20-DW-31-0001, grant period 6/15/2020 to 6/15/2026; B-22-DC-31-0001, grant period 7/1/2022 to 9/1/2029 Federal Grantor Agency: U.S. Department of Housing & Urban Development Criteria: 2 CFR § 170, Appendix A I. (January 1, 2023) states, in relevant part, the following: a. Reporting of first-tier subawards. Applicability. Unless you are exempt as provided in paragraph d. of this award term, you must report each action that equals or exceeds $30,000 in Federal funds for a subaward to a non-Federal entity or Federal agency . . . . 2. Where and when to report. i. The non-Federal entity or Federal agency must report each obligating action described in paragraph a.1. of this award term to http://www.fsrs.gov. ii. For subaward information, report no later than the end of the month following the month in which the obligation was made. Good internal control requires procedures to ensure all subawards subject to FFATA reporting are submitted on time. Condition: FFATA reporting was not submitted for three of nine subawards tested. Repeat Finding: No Questioned Costs: None Statistical Sample: No Context: The Agency had 43 subawards obligated during the fiscal year ended June 30, 2023. We tested nine of the subawards, and three of those subawards were not reported in the Federal Funding Accountability and Transparency Act (FFATA) Subaward Reporting System (FSRS) as of December 21, 2023. One subaward should have been reported by April 30, 2023, and two subawards should have been reported by June 30, 2023. See Schedule of Findings and Questioned Costs for chart/table. Cause: Procedures were not properly implemented to ensure that all subawards were reported as required. Effect: Without adequate procedures, there is an increased risk that subawards will not be reported timely. Recommendation: We recommend the Agency improve its procedures to ensure that all subawards are reported in FSRS as required. Management Response: DED acknowledges that the FFATA information for some of its subawards were not reported in FSRS in a timely manner.

Program: AL 17.225 – Unemployment Insurance – State – Allowability & Eligibility Grant Number & Year: N/A Federal Grantor Agency: U.S. Department of Labor Repeat Finding: 2022-046 Questioned Costs: $36,869 Statistical Sample: No Summary: Audit Finding 2023-014, included in Part II of this report, relates to both the financial statements and Federal awards. The APA performed a random sample of benefit payments and tested payments to State employees, individuals with high wages, and other payments. Our procedures revealed adjudication issues, improper payments to claimants, and other issues. The APA randomly selected 40 claimant benefit payments. The total sample tested was $22,178, and questioned costs for payments tested were $4,493. Total benefit payments for the fiscal year ended June 30, 2023, were $62,550,014. Based on the sample tested, the dollar error rate for the sample was 20.26% ($4,493/$22,178), which estimates the potential dollars at risk for fiscal year 2023 to be $12,672,633 (dollar error rate multiplied by population). We noted additional questioned costs during testing, totaling $32,376. A similar finding was noted in the prior audit. The Summary Schedule of Prior Audit Findings lists the status as completed. Recommendation: We recommend the Agency implement procedures to prevent the payment of improper Unemployment Insurance (UI) benefits by ensuring compliance with applicable State and Federal requirements. At a minimum, those procedures should ensure the following: 1) proper adjudication actions – including wage crossmatches, investigations into suspect separation from employment information, and separation information requests being sent to employers – are undertaken; and 2) neither ineligible State employees nor other ineligible claimants receive benefit payments. Management Response: The Department acknowledges the finding but notes that the funds at issue are comprised entirely of unemployment benefit overpayments. The Department questions the categorization of benefit overpayments as Questioned or Disallowed Costs. Regular state unemployment benefit payments are made from Nebraska taxes collected by the Department as part of the unemployment program and deposited to the federal Unemployment Trust Fund (UTF) for the payment of state unemployment benefits. Those UTF monies are never intermingled with administrative grant funds awarded to the Department for the administration of the Nebraska unemployment program. Previous final determinations of the United States Department of Labor have found the errant payment of benefits to be disallowed but not subject to Federal debt collection. The Department understands the importance of quality unemployment insurance adjudication and is taking to steps to correct the findings noted above. APA Response: State unemployment tax revenues must be deposited to the Unemployment Trust Fund in the U.S. Treasury. Therefore, as noted in the OMB Compliance Supplement, expenditures from State UI funds must be included with Federal funds on the Schedule of Expenditures of Federal Awards (SEFA). Costs included on the SEFA that are not supported at the time of the audit or are a result of a violation or possible violation of a statute are considered questioned costs, as defined by the Uniform Guidance at 2 CFR § 200.1.

Program: AL 20.509 – Formula Grants for Rural Areas – Allowability & Subrecipient Monitoring Grant Number & Year: NE-2019-013-00, Performance End FFY 2023; NE-2022-019-00, Performance End FFY 2024 Federal Grantor Agency: U.S. Department of Transportation Criteria: Per 2 CFR § 1201.1 (January 1, 2023), the U.S. Department of Transportation adopted the Uniform Administrative Requirements, Cost Principles, and Audit Requirements set forth at Title 2 CFR part 200. 2 CFR § 200.403 (January 1, 2023) requires costs to be reasonable, necessary, and adequately documented. A good internal control plan requires procedures to be in place to ensure compliance with Federal and State requirements. 2 CFR § 200.332(d) (January 1, 2023) requires the pass-through entity to do the following: Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. 2 CFR § 200.430(i)(1) (January 1, 2023) states the following, in relevant part: Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; * * * * (vii) Support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. (viii) Budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards . . . . 2 CFR § 200.431(b) (January 1, 2023) states the following, in relevant part: Leave. The cost of fringe benefits in the form of regular compensation paid to employees during periods of authorized absences from the job, such as for annual leave, family-related leave, sick leave, holidays, court leave, military leave, administrative leave, and other similar benefits, are allowable if all of the following criteria are met: * * * * (2) The costs are equitably allocated to all related activities, including Federal awards . . . . 2 CFR § 200.467 (January 1, 2023) states the following: Costs of selling and marketing any products or services of the non-Federal entity (unless allowed under § 200.421) are unallowable, except as direct costs, with prior approval by the Federal awarding agency when necessary for the performance of the Federal award. Per 2 CFR § 200.405(a) (January 1, 2023), “A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received.” Condition: The Agency lacked adequate documentation to support that payments were for allowable activities and in accordance with allowable cost principles. A similar finding was noted in the prior audit. Repeat Finding: 2022-057 Questioned Costs: $82,967 known (NE-2019-013-00 $82,121; NE-2022-019-00 $846) Statistical Sample: No Context: During the fiscal year, the Agency paid 58 subrecipients a total of $10,974,293. We selected 24 payments to subrecipients for testing. The Agency performed financial reviews for subrecipients; however, the reviews tested did not always include all necessary supporting documentation. When additional documentation was needed, we gave the Agency the opportunity to obtain additional support from the subrecipient; however, adequate support was not always obtained or able to be provided. Our random sample included an operating assistance reimbursement to North Fork Area Transit (NFAT). As identified in both the prior Single audit and a separate letter sent to the Agency, dated August 7, 2023, reimbursements for questionable expenditures were made to NFAT during the period April 1, 2022, to November 30, 2022. The former NFAT director was alleged to have committed fraud during this period. Our current testing included the reimbursement for NFAT’s August 2022 expenditures. The payment tested reimbursed NFAT $201,438 in Federal dollars. Of that amount, $78,348 was questioned, as follows: • NFAT was reimbursed $21,665 for nonoperating personnel when the timesheets supporting the time worked were all copies of the same timesheet. • NFAT was reimbursed $29,072 for operating personnel hours worked that did not appear reasonable. We noted nine employees whose hours for the four-week period were between 234.6 to 321.12 hours. This averages from 58.65 to 80.28 hours per week for each employee. Such large weekly averages give rise to concerns about not only the reasonableness and necessity of these payments but also possible compliance issues with labor standards – not to mention safety issues for riders. This was also identified in the letter dated August 7, 2023, in which employees were identified as working excessive overtime. An additional $376 was questioned, as the number of work hours for which one employee received compensation did not agree to those listed on his timesheet. • NFAT was reimbursed $12,874 for vendor payments that never appear to have cleared the bank. Invoices and checks were provided to support the maintenance expenses reimbursed; however, the checks provided never cleared the bank. This was also identified in the letter dated August 7, 2023, which noted that the Director appeared to have written the checks but not paid the vendors. • NFAT was reimbursed $14,361 for a duplicate payment. An invoice and check were provided to support the reimbursement of an insurance expense; however, this same expense was also submitted and reimbursed by the Agency in NFAT’s September 2022 request for reimbursement. We also noted issues with 12 of the 24 subrecipient payments tested, amounting to $4,619 in questioned costs, due to the following: • For eight subrecipients tested, documentation was inadequate to support that personnel charges were allowable and in accordance with Federal cost principles, resulting in questioned costs of $2,705. Specifically, we noted the following: o Payments for employee leave was not equitably allocated based on time worked. o One subrecipient had wages reimbursed based on budgeted amounts. o One subrecipient was reimbursed for health insurance for two employees who had elected to receive wages in lieu of such insurance. o One subrecipient requested reimbursement for wages that did not agree with the amount paid to employees. • For six subrecipients tested, questioned costs of $1,914 were identified due to inadequate support for capital and nonoperating costs. Questioned costs included the following: o One subrecipient was reimbursed for carpet adhesive that was later returned to the store. The subrecipient reimbursed the Director for the purchase of the carpet adhesive on her personal credit card, but the Agency was unable to identify a subsequent reimbursement request that reduced the amount sought for the returned items. Additionally, the subrecipient paid the Director for travel to another state to purchase the carpet adhesive, which not only could have been obtained from a more nearby merchant but also was ultimately returned. o Unreasonable travel reimbursements were noted. Among those was reimbursement for costs incurred by the subrecipient’s Director to travel to a meeting of an unaffiliated organization’s Board of Directors upon which she served as a member. That travel to attend a separate Board meeting was unrelated to the transit program. o A subrecipient was reimbursed for fees related to obtaining a trademark, which appears to have been a marketing expense that was not approved by the Federal awarding agency. o One subrecipient was reimbursed for an administrative fee that was not supported. The payment tested included a 7% administrative fee that was not specified in the agreement. o One subrecipient was reimbursed for unreasonable items, such as Christmas décor and Christmas candy. o One subrecipient was reimbursed for bookkeeping expenses; however, the subrecipient did not provide documentation to support that the amount allocated for that purpose was reasonable. Based on the sample tested, we estimate the potential dollars at risk for the fiscal year to be $501,670, as detailed below: See Schedule of Findings and Questioned Costs for chart/table. Cause: Procedures were inadequate to ensure that costs were in accordance with Federal requirements. Effect: Increased risk for errors or misuse of funds. Recommendation: We recommend the Agency strengthen subrecipient monitoring procedures. We further recommend the Agency improve procedures to ensure expenditures are allowable and in accordance with Federal regulations. Management Response: NDOT concurs with the findings and has revised reimbursement guidelines for subrecipients, clarifying allowed expenses and required documentation. Over the next 6-12 months, NDOT will conduct training sessions with subrecipients and collaborate with internal auditors on compliance matters. The establishment of the “Federal Oversight” unit within the Transit Section aims to improve monitoring, consistency, and compliance with federal requirements for all subrecipients.

Program: AL 20.509 – Formula Grants for Rural Areas – Subrecipient Monitoring Grant Number & Year: NE-2021-011-00, Performance End FFY 2024; NE-2022-019-00, Performance End FFY 2024 Federal Grantor Agency: U.S. Department of Transportation Criteria: Per 2 CFR § 1201.1 (January 1, 2023), the U.S. Department of Transportation adopted the Uniform Administrative Requirements, Cost Principles, and Audit Requirements set forth at Title 2 CFR part 200. 2 CFR § 200.332 (January 1, 2023) requires all pass-through entities to do the following: (a) Ensure that every subaward is clearly identified to the subrecipient as a subaward and includes the following information at the time of the subaward and if any of these data elements change, include the changes in subsequent subaward modification. . . . Required information includes: (1) Federal award identification. * * * * (iii) Federal Award Identification Number (FAIN); (iv) Federal Award Date (see the definition of Federal award date in § 200.1 of this part) of award to the recipient by the Federal agency; (v) Subaward Period of Performance Start and End Date[.] Good internal control requires procedures to ensure that subrecipients are informed of all required information. Condition: The Agency did not communicate all required information to subrecipients. Repeat Finding: No Questioned Costs: None Statistical Sample: No Context: During the fiscal year, 58 subrecipients received Federal funding. We tested six subrecipients and noted that the Agency did not properly communicate to them the FAIN, the Federal award date, or the subaward period of performance start and end dates. For the six subrecipients tested, the Agency provided a supplemental agreement that identified the availability of new Federal funding; however, the supplemental agreement did not communicate all necessary Federal award information. Subrecipient expenditures totaled $10,974,293 during the fiscal year. Cause: The supplemental agreement sent to all subrecipients did not include the FAIN, the Federal award date, or the subaward period of performance start and end dates. Effect: When subrecipients are not informed of all required information, there is an increased risk for subrecipient noncompliance, including with audit requirements. Recommendation: We recommend the Agency strengthen subrecipient agreements to ensure that subrecipient program agreements include all information required to be communicated. Management Response: NDOT acknowledges all findings and has incorporated Federal Identification details into the updated supplemental agreement template, intending to include all FAIN information in future supplemental agreements.

Program: AL 21.023 – COVID-19 Emergency Rental Assistance – Allowability & Eligibility & Period of Performance Grant Number & Year: N/A Federal Grantor Agency: U.S. Department of the Treasury Criteria: Per 2 CFR § 1000.10 (January 1, 2023), the U.S. Department of the Treasury adopted the Uniform Administrative Requirements, Cost Principles, and Audit Requirements set forth at 2 CFR part 200. Per 2 CFR § 200.303 (January 1, 2023): The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. 2 CFR § 200.403 (January 1, 2023) states, in part, the following: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. * * * * (g) Be adequately documented. 2 CFR § 200.405(d) (January 1, 2023) states the following, in relevant part: If a cost benefits two or more projects or activities in proportions that can be determined without undue effort or cost, the cost must be allocated to the projects based on the proportional benefit. If a cost benefits two or more projects or activities in proportions that cannot be determined because of the interrelationship of the work involved, then, notwithstanding paragraph (c) of this section, the costs may be allocated or transferred to benefitted projects on any reasonable documented basis. Per 2 CFR § 1108.285 (January 1, 2023): Period of performance means the time during which a recipient or subrecipient may incur new obligations to carry out the work authorized under an award or subaward, respectively. Question 7 in the Frequently Asked Questions (FAQ) guidance document (Revised July 27, 2022), issued by the U.S. Department of the Treasury, for the Emergency Rental Assistance program, states the following: For both ERA1 and ERA2, other expenses related to housing include relocation expenses (including prospective relocation expenses), such as rental security deposits, and rental fees, which may include application or screening fees. It can also include reasonable accrued late fees (if not included in rental or utility arrears), and Internet service provided to the rental unit. . . . All payments for housing-related expenses must be supported by documentary evidence such as a bill, invoice, or evidence of payment to the provider of the service. Question 4 of the same FAQ guidance document also states the following: The statute establishing ERA1 provides that grantees may determine income eligibility based on either (i) the household’s total income for calendar year 2020, or (ii) sufficient confirmation of the household’s monthly income at the time of application, as determined by the Secretary of the Treasury (Secretary). . . . In order to provide assistance rapidly, during the public health emergency related to COVID-19 the grantee may rely on a self-attestation of household income without further verification if the applicant confirms in their application or other document that they are unable to provide documentation of their income. If a written attestation without further verification is relied on to document the majority of the applicant’s income, the grantee must reassess the household’s income every three months, by obtaining appropriate documentation or a new self-attestation. The Emergency Rental Assistance (ERA1): Closeout Resource (September 16, 2022), also promulgated by the U.S. Department of the Treasury, contains the following: The end date of the award period of performance is the last day for a grantee to obligate funds for ERA1 activities (September 30, 2022 for award funds received pursuant to the grantee’s initial allocation and December 29, 2022 for reallocated funds). Funds statutorily available for administrative costs are not considered to be “automatically” obligated; therefore, grantees must obligate award funds by the end of the award period of performance to cover their administrative costs for closeout activities. Good internal control requires procedures to ensure that adequate supporting documentation is obtained and utilized during the application review process. Good internal control also requires procedures to ensure compliance with Federal regulations. Condition: Procedures were inadequate to ensure that payments were allowable, and individuals were eligible for assistance. A similar finding was noted in the prior audit. For one contract payment tested, the costs had neither been obligated nor occurred prior to the end of the period of performance for the ERA1 program. Additionally, the costs were associated with multiple programs but charged only to the ERA1 program. Repeat Finding: 2022-052 Questioned Costs: $172,809 known Statistical Sample: No Context: We noted that 7 of 25 assistance payments tested had errors or inadequate support, as follows: • One payment lacked documentation to support the tenant’s 2020 income or monthly income at the time of the application. • Five payments were for rent assistance for October and/or November 2022, which is after the period of performance. • One payment was for late fees; however, the lease agreement provided did not contain a late fee clause. Federal payment errors for the sample tested were $7,809. The total sample tested was $35,575, and assistance payments for the fiscal year totaled $4,678,044. Based on the sample tested, the dollar error rate for the sample was 21.95% ($7,809/$35,575), which estimates the potential dollars at risk for fiscal year 2023 to be $1,026,831 (dollar rate multiplied by the population). We tested three contract payments made after January 1, 2023. One payment for $165,000 was to obtain licenses to access ServiceNow for the period October 7, 2023, to January 31, 2026. This item was added to the contract on January 13, 2023. Additionally, it was noted that this access was purchased to access information related to other programs, along with ERA1. Therefore, these costs were not incurred or obligated prior to the end of the period of performance for ERA1, and the costs were not allocated to all benefitting programs as required. Cause: Inadequate review. Effect: Increased risk of loss or misuse of funds and non-compliance with Federal guidelines. Recommendation: We recommend the Agency improve procedures to ensure expenditures charged are within the allowed time period, adequately documented, and comply with Federal requirements. Management Response: Coordination with the contractor is ongoing. Audit findings are shared and revised as training and management attention was discussed. There are many checks and balance steps that continue to be discussed and revised on a weekly basis during call in monitoring and reporting session.

Program: AL 21.026 – COVID-19 Homeowner Assistance Fund – Subrecipient Monitoring Grant Number & Year: N/A Federal Grantor Agency: U.S. Department of the Treasury Criteria: Per 2 CFR § 1000.10 (January 1, 2023) the U.S. Department of the Treasury adopted the Uniform Administrative Requirements, Cost Principles, and Audit Requirements set forth at 2 CFR part 200. 2 CFR § 200.331 (January 1, 2023) states the following, in relevant part: The non-Federal entity may concurrently receive Federal awards as a recipient, a subrecipient, and a contractor, depending on the substance of its agreements with Federal awarding agencies and pass-through entities. Therefore, a pass-through entity must make case-by-case determinations whether each agreement it makes for the disbursement of Federal program funds casts the party receiving the funds in the role of a subrecipient or a contractor. The Federal awarding agency may supply and require recipients to comply with additional guidance to support these determinations provided such guidance does not conflict with this section. (a) Subrecipients. A subaward is for the purpose of carrying out a portion of a Federal award and creates a Federal assistance relationship with the subrecipient. See definition of Subaward in § 200.1 of this part. Characteristics which support the classification of the non-Federal entity as a subrecipient include when the non-Federal entity: (1) Determines who is eligible to receive what Federal assistance; (2) Has its performance measured in relation to whether objectives of a Federal program were met; (3) Has responsibility for programmatic decision-making; (4) Is responsible for adherence to applicable Federal program requirements specified in the Federal award; and (5) In accordance with its agreement, uses the Federal funds to carry out a program for a public purpose specified in authorizing statute, as opposed to providing goods or services for the benefit of the pass-through entity. (b) Contractors. A contract is for the purpose of obtaining goods and services for the non-Federal entity’s own use and creates a procurement relationship with the contractor. See the definition of contract in § 200.1 of this part. Characteristics indicative of a procurement relationship between the non-Federal entity and a contractor are when the contractor: (1) Provides the goods and services within normal business operations; (2) Provides similar goods or services to many different purchasers; (3) Normally operates in a competitive environment; (4) Provides goods or services that are ancillary to the operation of the Federal program; and (5) Is not subject to compliance requirements of the Federal program as a result of the agreement, though similar requirements may apply for other reasons. (c) Use of judgment in making determination. In determining whether an agreement between a pass-through entity and another non-Federal entity casts the latter as a subrecipient or a contractor, the substance of the relationship is more important than the form of the agreement. All of the characteristics listed above may not be present in all cases, and the pass-through entity must use judgment in classifying each agreement as a subaward or a procurement contract. 2 CFR § 200.511(b) (January 1, 2023) states, as is relevant, the following: The summary schedule of prior audit findings must report the status of all audit findings included in the prior audit's schedule of findings and questioned costs. . . . (2) When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding's recurrence and planned corrective action, and any partial corrective action taken. When corrective action taken is significantly different from corrective action previously reported in a corrective action plan or in the Federal agency's or pass-through entity's management decision, the summary schedule must provide an explanation. (3) When the auditee believes the audit findings are no longer valid or do not warrant further action, the reasons for this position must be described in the summary schedule. Condition: The Agency did not properly consider the Nebraska Investment Finance Authority (NIFA) to be a subrecipient. Additionally, the Agency did not properly complete the Summary Schedule of Prior Audit Findings. Repeat Finding: 2022-055 Questioned Costs: None Statistical Sample: No Context: In the previous fiscal year, the Agency considered NIFA to be a subrecipient and reported $451,581 in subrecipient expenditures on the Schedule of Expenditures of Federal Awards (SEFA). During the fiscal year ended June 30, 2023, the Agency paid NIFA $92,255 for ongoing Homeowner Assistance Fund (HAF) program administration. These payments were not reported as subrecipient expenditures because the Agency changed its determination and now considers NIFA to be a contractor rather than a subrecipient of the program. The APA disagrees with the Agency’s position that NIFA should be considered a contractor, as NIFA determines, to a substantial degree, the eligibility of applicants and, through that determination, informs State Accounting of which assistance payments are to be made and to whom. Additionally, NIFA is required to adhere to applicable Federal program requirements in the Federal award, and NIFA is administering the HAF program for a public purpose, not for the benefit of the Agency. Further, the position that NIFA is a contractor, rather than a subrecipient, of the HAF program does not reflect the Agency’s position in the Summary Schedule of Prior Audit Findings. The Schedule notes the following partial action taken: The Military Department will use subrecipient policies and procedures it has in place to continue to monitor the performance of NIFA and ensure that Federal guidelines are followed, and requirements are met. The Schedule also noted the following corrective action planned: The Military Department will modify the memorandum of Understanding between the parties to identify NIFA as a subrecipient and advise them of any additional requirements. The Agency’s position that NIFA is not a subrecipient of the HAF program was not properly communicated in the Summary Schedule of Prior Audit Findings as required by 2 CFR § 200.511(b)(2). Cause: Agency oversight. Effect: Noncompliance with Federal guidelines. Recommendation: We recommend the Agency implement procedures to review Federal guidelines to ensure subrecipients are properly identified, and that the Summary Schedule of Prior Audit Findings is completed properly. Management Response: Due to the Agency’s turnover recently, the response to this audit finding was in error. We agree with the finding and consider NIFA to be a Sub-Recipient.

Program: AL 21.026 – COVID-19 Homeowner Assistance Fund – Allowability Grant Number & Year: N/A Federal Grantor Agency: U.S. Department of the Treasury Criteria: Per 2 CFR § 1000.10 (January 1, 2023), the U.S. Department of the Treasury adopted the Uniform Administrative Requirements, Cost Principles, and Audit Requirements set forth at 2 CFR part 200. Per 2 CFR § 200.303 (January 1, 2023) states, in part, the following: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. . . . 2 CFR § 200.403 (January 1, 2023) states, in relevant part, the following: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: * * * * (g) Be adequately documented. Condition: The Agency lacked adequate procedures for ensuring that payments were allowable. Repeat Finding: No Questioned Costs: $215 known Statistical Sample: No Context: We tested 25 assistance payments. One payment tested was for the incorrect amount. Per supporting documentation reviewed, the applicant owed $257 in past due utilities; however, a payment of $472 was issued to pay this outstanding balance, resulting in an overpayment of $215. The total sample tested was $50,612, and total assistance payments for the fiscal year were $27,300,898. Based on the sample tested, the case error rate was 4% (1/25). The dollar error rate for the sample was 0.42% ($215/50,612), which estimates the potential dollars at risk for fiscal year 2023 to be $114,664 (dollar rate multiplied by the population). Cause: Staff errors and inadequate review. Effect: Increased risk for errors or fraud. Recommendation: We recommend the Agency improve procedures for ensuring that payments are proper. Management Response: The agency recognizes the findings and agree with staff errors.

Program: AL 21.027 – COVID-19 – Coronavirus State and Local Fiscal Recovery Funds – Allowability & Subrecipient Monitoring Grant Number & Year: SLFRP1965, March 3, 2021, through December 31, 2024 Federal Grantor Agency: U.S. Department of the Treasury Criteria: 31 CFR § 35.6(b) (July 1, 2022) states, in relevant part, the following: A recipient may use funds to respond to the public health emergency or its negative economic impacts if the use meets the criteria provided in paragraph (b)(1) of this section or is enumerated in paragraph (b)(3) of this section; provided that, in case of a use of funds for a capital expenditure under paragraph (b)(1) or (b)(3) of this section, the use of funds must also meet the criteria provided in paragraph (b)(4) of this section. Treasury may also articulate additional eligible programs, services, or capital expenditures from time to time that satisfy the eligibility criteria of this paragraph (b), which shall be eligible under this paragraph (b). (1) Identifying eligible responses to the public health emergency or its negative economic impacts. (i) A program, service, or capital expenditure is eligible under this paragraph (b)(1) if a recipient identifies a harm or impact to a beneficiary or class of beneficiaries caused or exacerbated by the public health emergency or its negative economic impacts and the program, service, or capital expenditure responds to such harm. (ii) A program, service, or capital expenditure responds to a harm or impact experienced by an identified beneficiary or class of beneficiaries if it is reasonably designed to benefit the beneficiary or class of beneficiaries that experienced the harm or impact and is related and reasonably proportional to the extent and type of harm or impact experienced. * * * * (3) A recipient may use funds to respond to the public health emergency or its negative economic impacts on a beneficiary or class of beneficiaries for one or more of the following purposes unless such use is grossly disproportionate to the harm caused or exacerbated by the public health emergency or its negative economic impacts: * * * * (ii) Responding to the negative economic impacts of the public health emergency for purposes including: * * * * (C) Assistance to nonprofit organizations including programs, services, or capital expenditures, including loans or grants to mitigate financial hardship such as declines in revenues or increased costs, or technical assistance[.] 31 CFR § 35.6(c) (July 1, 2022) states the following: A recipient may use funds to provide premium pay to eligible workers of the recipient who perform essential work or to provide grants to eligible employers that have eligible workers who perform essential work, provided that any premium pay or grants provided under this paragraph (c) must respond to eligible workers performing essential work during the COVID–19 public health emergency. A recipient uses premium pay or grants provided under this paragraph (c) to respond to eligible workers performing essential work during the COVID–19 public health emergency if: (1) The eligible worker's total wages and remuneration, including the premium pay, is less than or equal to 150 percent of the greater of such eligible worker's residing State's or county's average annual wage for all occupations as defined by the Bureau of Labor Statistics' Occupational Employment and Wage Statistics; (2) The eligible worker is not exempt from the Fair Labor Standards Act overtime provisions (29 U.S.C. 207); or (3) The recipient has submitted to the Secretary a written justification that explains how providing premium pay to the eligible worker is responsive to the eligible worker performing essential work during the COVID–19 public health emergency (such as a description of the eligible workers' duties, health, or financial risks faced due to COVID–19, and why the recipient determined that the premium pay was responsive despite the worker's higher income). 31 CFR § 35.3 (July 1, 2022) defines “premium pay,” in relevant part, as follows: Premium pay means an amount of up to $13 per hour that is paid to an eligible worker, in addition to wages or remuneration the eligible worker otherwise receives, for all work performed by the eligible worker during the COVID–19 public health emergency. Such amount may not exceed $25,000 in total over the period of performance with respect to any single eligible worker. Additionally, the “Final Rule” was released by the U.S. Department of the Treasury on January 6, 2022. The Final Rule, Section II. Eligible Uses, A. Public Health and Negative Economic Impacts, 1. General Provisions: Structure and Standards, a. Standards for Identifying a Public Health or Negative Economic Impact, Standards: Designating a Negative Economic Impact, states the following, in relevant part: (Page 4344) First, there must be a negative economic impact, or an economic harm, experienced by an individual or a class. The recipient should assess whether, and the extent to which, there has been an economic harm, such as loss of earnings or revenue, that resulted from the COVID-19 public health emergency. A recipient should first consider whether an economic harm exists and then whether this harm was caused or made worse by the COVID-19 public health emergency. * * * * Second, the response must be designed to address the identified economic harm or impact resulting from or exacerbated by the public health emergency. In selecting responses, the recipient must assess whether, and the extent to which, the use would respond to or address this harm or impact. * * * * Responses must be reasonably designed to benefit the individual or class that experienced the negative economic impact or harm. Uses of funds should be assessed based on their responsiveness to their intended beneficiary and the ability of the response to address the impact or harm experienced by that beneficiary. Responses must also be related and reasonably proportional to the extent and type of harm experienced. The Final Rule, Section II. Eligible Uses, A. Public Health and Negative Economic Impacts, 3. Negative Economic Impacts, c. Assistance to Nonprofits, states the following, in relevant part: (Page 4380) The interim final rule provided for, and the final rule maintains, the ability for recipients to provide direct assistance to nonprofits that experienced public health or negative economic impacts of the pandemic. Specifically, recipients may provide direct assistance to nonprofits if the nonprofit has experienced a public health or negative economic impact as a result of the pandemic. For example, if a nonprofit organization experienced impacts like decreased revenues or increased costs (e.g., through reduced contributions or uncompensated increases in service need), and a recipient provides funds to address that impact, then it is providing direct assistance to the nonprofit as a beneficiary under Subsection (c)(1) of Sections 602 and 603. Direct assistance may take the form of loans, grants, in-kind assistance, technical assistance, or other services that respond to the negative economic impacts of the COVID–19 public health emergency. The Final Rule, Section II. Eligible Uses, A. Public Health and Negative Economic Impacts, 4. General Provisions: Other, a. Public Sector Capacity and Workforce, states the following, in relevant part: (Page 4386) The final rule allows for an expanded set of eligible uses to restore and support public sector employment. Eligible uses include hiring up to a pre-pandemic baseline that is adjusted for historic underinvestment in the public sector, providing additional funds for employees who experienced pay cuts or were furloughed, avoiding layoffs, providing worker retention incentives, and paying for ancillary administrative costs related to hiring. * * * * The final rule provides two options to restore pre-pandemic employment, depending on recipient’s needs. Under the first and simpler option, recipients may use SLFRF funds to rehire staff for pre-pandemic positions that were unfilled or were eliminated due the pandemic without undergoing further analysis. Under the second option, the final rule provides recipients an option to hire above the pre-pandemic baseline, by adjusting the pre-pandemic baseline for historical growth in public sector employment over time, as well as flexibility on roles for hire. * * * * To pursue the second option, recipients should undergo the analysis provided below. In short, this option allows recipients to pay for payroll and covered benefits associated with the recipient increasing its number of budgeted full-time equivalent employees (FTEs) up to 7.5 percent above its pre-pandemic employment baseline, which adjusts for the continued underinvestment in state and local governments since the Great Recession. * * * * Funds may be used to maintain current compensation levels, with adjustments for inflation, in order to prevent layoffs that would otherwise be necessary. Recipients must be able to substantiate that layoffs were likely in the absence of SLFRF funds and would be substantially due to the public health emergency or its negative economic impacts (e.g., fiscal pressures on state and local budgets) and should document their assessment. * * * * Funds may be used to provide worker retention incentives, which are designed to persuade employees to remain with the employer as compared to other employment options. Recipients must be able to substantiate that the employees were likely to leave employment in the absence of the retention incentive and should document their assessment. * * * * All worker retention incentives must be narrowly tailored to need and should not exceed incentives traditionally offered by the recipient or compensation that alternative employers may offer to compete for the employees. Further, because retention incentives are intended to provide additional incentive to remain with the employer, they must be entirely additive to an employee’s regular rate of wages and other remuneration and may not be used to reduce or substitute for an employee’s normal earnings. Treasury will presume that retention incentives that are less than 25 percent of the rate of base pay for an individual employee or 10 percent for a group or category of employees are reasonably proportional to the need to retain employees, as long as the other requirements are met. The Final Rule, Section II. Eligible Uses, A. Public Health and Negative Economic Impacts, 4. General Provisions: Other, b. Capital Expenditures, Overview of General Standards, states the following, in relevant part: (Page 4391) Large capital expenditures intended for general economic development or to aid the travel, tourism, and hospitality industries—such as convention centers and stadiums—are, on balance, generally not reasonably proportional to addressing the negative economic impacts of the pandemic, as the efficacy of a large capital expenditure intended for general economic development in remedying pandemic harms may be very limited compared to its cost. The Final Rule, Footnote 230, states the following, in relevant part: (Page 4379) Ultimately, recipients must comply with the eligible use requirements and any other applicable laws or requirements and are responsible for the actions of their subrecipients or beneficiaries. Per 2 CFR § 1000.10 (January 1, 2023), “[T]he Department of the Treasury adopts the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, set forth at 2 CFR part 200.” 2 CFR § 200.332 (January 1, 2023) states, in relevant part, the following: All pass-through entities must: * * * * (d) Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. 2 CFR § 200.430(i)(1) (January 1, 2023) states, in relevant part, the following: Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: * * * * (vii) Support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non- Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. 2 CFR § 200.303 (January 1, 2023) states, in relevant part, the following: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Per 2 CFR § 200.403 (January 1, 2023), costs must be necessary, reasonable, and adequately documented. Good internal control and sound business practices requires procedures for ensuring that: 1) grants issued to beneficiaries are reasonable and proportional to the harm identified; 2) premium pay is correctly calculated; and 3) all expenditures of funds are for allowable purposes. Condition: The State lacked procedures for ensuring that grants issued to beneficiaries for worker retention and incentives were used for such purposes. The State lacked both procedures and the requisite knowledge to ensure that the premium charged to the grant was allowable. The State lacked procedures to ensure that grants to nonprofits were proportional to the negative economic harm incurred. The State lacked subrecipient monitoring procedures. The State possibly made fraudulent payments under the State’s nursing scholarship program. Repeat Finding: No Questioned Costs: $23,452,594 Known Statistical Sample: No Context: We noted the following: Payments to Developmental Disability Providers, Assisted-Living Facilities, and Nursing Facilities for Employee Retention and Recruitment Nebraska Legislative Bill (LB) 1014 (2022), section 23, appropriated $20,000,000 from the Coronavirus State and Local Fiscal Recovery Funds (CSLFRF) grant to the Department of Health and Human Services (DHHS) for state fiscal year 2023 to be used for Developmental Disability (DD) provider rate increases for the purpose of enhancing employee retention and recruitment at the DD providers. DHHS implemented a 9% rate increase for select DD services in state fiscal year 2023. During the fiscal year, DD claims were paid out using State and Federal funds in accordance with the applicable Federal matching percentage (FMAP). In June 2023, DHHS made a journal entry to transfer $19,995,679 in expenditures from the State and Federal General Funds to the CSLFRF grant in accordance with the FMAP rates. LB 1014, section 27, appropriated $5,462,800 from the CSLFRF grant to DHHS for State fiscal year 2023 to be paid out to assisted-living facilities for the following: 1) “Incentives for staff members employed by the licensed assisted-living facility in order to enhance employee recruitment and retention”; and 2) “Assistance with costs for supplies and equipment purchased by the licensed assisted-living facility.” DHHS paid out $5,068,000 to assisted-living facilities during state fiscal year 2023. LB 1014, section 28, appropriated $20,000,000 from the CSLFRF grant to DHHS for state fiscal year 2023 to be paid out to Medicaid-certified nursing facilities. The funds were to be used to provide supplemental incentive payments for direct care staff members employed at the nursing facilities. DHHS paid out $20,000,000 to nursing facilities during state fiscal year 2023. During a testing of a random sample of 25 CSLFRF payments, we tested seven payments to nursing facilities, totaling $1,304,915. We asked for documentation of how DHHS ensured that the payments were used for allowable employee retention and recruitment programs, and for any documented assessments that were required by the Final Rule for worker incentive programs. According to DHHS, the funds were paid out in accordance with the requirements of LB 1014; however, DHHS acknowledged lacking procedures to ensure that the beneficiaries were using the funds for eligible recruitment and retention purposes. Additionally, DHHS failed to provide the required documented assessments per the Final Rule. Given the lack of procedures to support that funds were being used for allowable purposes, all seven payments of the $1,304,915 tested are considered questioned costs. Additionally, the entire $20,000,000 paid out during the fiscal year are considered potential dollars at risk. Additionally, we tested one $110,400 payment to an assisted-living facility under LB 1014, Section 27. Similar to the nursing facility payments tested, DHHS lacked procedures for ensuring that the assisted-living facilities were using the funds for eligible recruitment and retention purposes. Therefore, the $110,400 payment tested is considered a questioned cost. Lastly, we tested the journal entries transferring $19,995,679 in expenditures to the CSLFRF grant for DD provider rate increases. Again, DHHS lacked procedures for ensuring that the DD providers were using the funds for eligible recruitment and retention purposes. Therefore, the journal entries tested for $19,995,679 are considered questioned costs. We also noted that, due to an oversight error, one nursing facility that had certified Medicaid beds did not receive its proportional allocation of $43,138. Instead, that amount was split among the other nursing facilities that received payments. Premium Pay LB 1014, section 12, appropriated $3,546,602 to the Department of Veterans’ Affairs (DVA) from the CSLFRF grant to be used for premium pay. In September 2022, the DVA posted journal entries to move payroll costs of $3,546,602 to the CSLFRF grant. However, we noted that the DVA did not review the premium pay eligibility requirements, which resulted in the following errors: • The DVA moved $357,039 of payroll costs associated with individuals who had earnings of more than 150% of the applicable average wage for all occupations and were not exempt from the Fair Labor Standards Act overtime provisions, which is not allowable. • $145,205 of the payroll costs moved were for premium pay that exceeded $25,000 per person, which is not allowable. • The DVA moved payroll costs that were not for premium pay and were not in addition to wages the workers were already receiving. From a detail test of 25 employees, $371,683 out of $585,901 of payroll costs were not related to premium pay. After the errors noted above were communicated to the DVA, the DVA recalculated the amount to charge the CSLFRF grant for premium pay, and the DVA calculated that only $1,518,092 should have been charged to the CSLFRF grant. We verified that, for the 25 employees previously tested, the DVA’s revised calculation agreed to our calculation. We verified also that the DVA’s revised calculation excluded individuals whose wages exceeded 150% of the applicable average wage for all occupations, and premium pay was capped at $25,000 for each employee. Therefore, the $2,028,510 difference between the $3,546,602 charged to the grant and the revised calculation of $1,518,092 is considered a questioned cost. Assistance to Nonprofits LB 1014, section 46, appropriated $100,000,000 to the Department of Economic Development (DED) from the CSLFRF grant to be used to provide grants to qualified nonprofit organizations to assist with capital projects that have been delayed due to COVID-19. In order to receive a grant, a nonprofit had to submit a grant application attesting to have experienced negative economic harm due to the public health emergency. During our testing, we noted that DED did not require nonprofits to submit documentation to substantiate having experienced a negative economic impact due to the pandemic that was equivalent or reasonably proportional to the grant award. We also noted that, for two of the nonprofit payments selected for testing, the two nonprofits received grant awards of $12,664,600 each to be used solely for the purpose of construction and development of sports complexes for competitive sports and economic growth. Per the CSLFRF Final Rule, large capital projects intended for general economic growth are not generally proportional responses to negative harm. Therefore, if the nonprofits had not suffered an economic harm due to COVID-19, these projects would otherwise not be an eligible use of CSLFRF funds. We gave DED the opportunity to obtain documentation from the nonprofits to support that they experienced a negative economic impact proportional to the amount awarded. In all instances, DED was able to obtain documentation substantiating the negative economic harm in excess of the grant amounts awarded. University of Nebraska The University of Nebraska (University) was awarded $86,650,000 in a subaward to be used for a number of projects, including increasing the capacity of behavioral health care and rural health care. To monitor this subaward, the Military Department (Military) received and reviewed reports from the University and would have monthly meetings to discuss updates and whether deadlines were being met. Military stated that, beyond these monthly meetings, there were no planned procedures for reviewing any expenditures to ensure they were for allowable purposes and met the requirements of the Uniform Guidance, which is set out under 2 CFR Part 200 to establish uniform administrative requirements, cost principles, and audit requirements for Federal awards to non-Federal entities. We selected one CSLFRF expenditure recorded by the University. The payment was for $116,670 and made to a subrecipient of the University. The subrecipient was a behavioral health provider and was used to increase telehealth capacity. During review of supporting documentation, we noted that adequate documentation was not on file to support the salary and fringe benefits charged to the CSLFRF grant for the two subrecipient employees tested. The employees’ salary and fringe benefits had been allocated to the CSLFRF grant based on historical data and “prior experience with similar programs.” As noted in 2 CFR § 200.430(h)(8)(viii), however, “Budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards . . . .” Consequently, we consider the $8,090 in salary and benefits charged for the two employees to be questioned costs. The total salary and fringe benefits reimbursed on the payment tested amounted to $29,277. Nursing Scholarships During testing procedures, DHHS reported to us $5,000 in payments that were made due to fraudulent nursing scholarship applications submitted to, and accepted by, DHHS. Per DHHS’s subsequent review, the applicant fraudulently claimed on her application that she was enrolled in a nursing program during the spring and summer 2023 terms. DHHS has reported this to the U.S. Department of the Treasury. These $5,000 payments are considered questioned costs. Cause: The State had inadequate procedures to ensure that the grant was used for allowable purposes, and staff had inadequate knowledge of the requirements of the CSLFRF. Effect: Without adequate supporting documentation and review procedures, there is an increased risk that Federal awards could be used for unallowable costs. Recommendation: We recommend the State strengthen procedures for ensuring that all Federal funds are used for intended and allowable purposes. We further recommend that the State take steps to recoup any payments for which either the beneficiary cannot support the proper use of the grant funds received or to the economic harm experienced. Management Response: Payments to Developmental Disability Providers, Assisted-Living Facilities, and Nursing Facilities for Employee Retention and Recruitment: Department of Health and Human Services (DHHS) disagrees with questioned costs of $21,410,994 ($1,304,915 Nursing Facilities, $110,400 Assisted Living Facilities, $19,995,679 Developmental Disabilities Providers). Payments made to Developmental Disability Providers, Assisted-Living Facilities, and Nursing Facilities followed federal regulations and were accurately distributed as directed by the legislature and signed legislation, LB1014. Payments to each facility were based on approved amounts in the legislative bill. In addition, DHHS properly passed requirements and regulatory information on to the providers. DHHS issued the following guidance document (as required by the legislation as well) https://dhhs.ne.gov/Grants%20and%20Contract%20Opportunity%20Docs/LB1014%20Guidance%20Document_DHHS%20DL%206-13-22.pdf#search=LB1014. If DHHS becomes aware of known unallowable activities, we will recoup applicable funds. Premium Pay: As noted in the Auditors Comments, NDVA made the necessary corrections to their workbooks to comply with these guidelines. However, the amounts reflected in the Auditors comments were only for eligible expenses through September of 2022 and did not take into consideration the entire Fiscal Year 2023. NDVA’s eligible expenses as of June 30, 2023, were $3,695,625, which exceeded the $3,546,602 appropriated in LB 1014 by approximately $148,460. Assistance to Nonprofits: DED acknowledges that with respect to its American Rescue Plan Act Shovel-Ready program in some cases it did not collect sufficient documentation to show the nonprofit organization suffered an economic harm related to and reasonably proportionate to DED’s award. University of Nebraska: NEMA continues to monitor the University of Nebraska (University) subaward through the review of reports and monthly progress meetings. APA Response: Per the CSLFRF final rule, the recipient, which is the State, must comply with the eligible use requirements and is ultimately responsible for the actions of its beneficiaries. No documentation was provided to support that the funds granted to Developmental Disability Providers, Assisted-Living Facilities, and Nursing Facilities were spent on allowable retention and recruitment efforts or that any applicable pre-analysis required by the CSLFRF final rule was completed. The journal entry prepared by NDVA was done in September 2022. It covers the premium pay given in November 2021 to June 2022. We were not provided a spreadsheet with updated calculations, nor did the Agency make any adjustments in the accounting system to show this as an offset of fiscal year 2023 expenses.

Program: AL 21.027 – COVID-19 – Coronavirus State and Local Fiscal Recovery Funds – Reporting Grant Number & Year: SLFRP1965, March 3, 2021, through December 31, 2024 Federal Grantor Agency: U.S. Department of the Treasury Criteria: 31 CFR § 35.6(b)(4) (July 1, 2022) states, in relevant part, the following: A recipient, other than a Tribal government, must prepare a written justification for certain capital expenditures according to Table 1 to paragraph (b)(4) of this section. Such written justification must include the following elements: (i) Describe the harm or need to be addressed; (ii) Explain why a capital expenditure is appropriate; and (iii) Compare the proposed capital expenditure to at least two alternative capital expenditures and demonstrate why the proposed capital expenditure is superior. See Schedule of Findings and Questioned Costs for chart/table. Good internal control and sound business practices require policies and procedures to ensure that all CSLFRF reporting requirements are met, including the maintenance of written justification on file for projects with expected capital expenditures of more than $1 million. Condition: The Department of Administrative Services (DAS) was responsible for preparing the Quarterly Project and Expenditure Reports. DAS lacked procedures to ensure that CSLFRF obligations were reported accurately on the Quarterly Project and Expenditure Reports, or written justification was on file for all projects with expected capital expenditures over $1 million. Repeat Finding: No Questioned Costs: None Statistical Sample: No Context: We tested the quarters ending December 31, 2022, and June 30, 2023, Project and Expenditure Reports. We noted the following: Current and Cumulative Obligations Reported We selected for testing two of 21 projects from the quarter ending December 31, 2022, report and six of 57 projects from the quarter ending June 30, 2023. Two of the projects tested did not have current obligations or cumulative obligations reported correctly. The State reported cumulative obligations of $116,897,124 under project 72652020 (Shovel Ready). The Department of Economic Development (DED) was the agency responsible for administering this project. DED provided documentation showing that cumulative obligations were only $113,411,816 at December 31, 2022. Consequently, the December report was overstated by $3,485,308. However, we also noted that the State Legislature appropriated only $100 million in CSLFRF funds to be used on the Shovel Ready projects. Per discussion with DED, the difference between the amount of obligation and the amount of CSLFRF appropriations will be covered by State funds. Therefore, only $100 million in CSLFRF funds were obligated to the Shovel Ready project, so the report was overstated by a total of $16,897,124. We also reviewed the June 2023 report and noted that cumulative obligations were still being overstated by $13,503,516. Additionally, DED had obligated the funds for this project prior to October 1, 2022; however, the report incorrectly showed all these funds as obligated during the current period. Current period obligations were properly reported as $0 on the quarter ending June 30, 2023, report. We also noted that the cumulative obligations and current period obligations for Project 33209901 (State Park System Lagoon Projects) were not properly reported on the quarter ending June 30, 2023, report. The State reported cumulative obligations of $6,893,694. The Nebraska Game & Parks Commission was the agency responsible for administering this project. The supporting documentation provided by Game & Parks showed that only $6,786,249 was obligated at June 30, 2023. Additionally, a change order for $61,362 during the quarter was not included with the current-period obligations, resulting in current-period obligations being underreported. Capital Expenditures We noted five projects that either did not properly report expected capital expenditures, or the required written justification was not on file. • Project 72652021.1.12 (Mental Health Services) – The State reported no expected capital expenditures for this project. The project is comprised of four $10 million awards that DED made to entities for the purpose of expanding behavioral health services. Originally, when reporting this project, DED considered these payments to be beneficiary payments to the behavioral health service providers, not capital expenditures. After further discussion with DED, it was determined that these should have been treated as subawards, and expected capital expenditures should have been reported. Even though the expected capital expenditures were not reported correctly, DED did have written justification on file for capital expenditures of the project. • Project 25580005 (Improve Infrastructure) – The State reported $4,856,106 in expected capital expenditures for this project. However, the Department of Health and Human Services (DHHS) treated each subaward under this project separately when determining if written justification was required. As no single subaward was for $1 million or more, DHHS did not document any written justification. • Project U5991971490 (NE Rural Healthcare Education) – The State reported $0 in expected capital expenditures for this project, which was for the construction of a new rural healthcare education building. DAS stated that this was reported in error, and the actual amount of expected capital expenditures would be $50,000,000. Even though the expected capital expenditures were not reported correctly, written justification was on file for the capital expenditures of this project. • Project 48697142 (Workforce Development Center at Northeast) was reported as having no expected capital expenditures. Through discussion with the Coordinating Commission on Post-Secondary Education, the project had at least $1 million in expected capital expenditures and should have been reported as such on the quarterly report. Written justification for the capital expenditures of the project was on file. Cause: Individual agencies were responsible for reporting to DAS what should be reported on the Quarterly Project and Expenditure Report. Not all information reported by the agencies was accurate. Effect: Without adequate procedures, there is increased risk that the quarterly project and expenditure reports will be materially misstated, and required written justification will not be on file. Recommendation: We recommend the Agency strengthen procedures to ensure that all quarterly project and expenditure reports are complete and accurate, and any required written justification is maintained on file. Management Response: As of the reporting period ended December 31, 2023, DED obligations under the Shovel Ready project are reflected as $100 million, which agrees to federal ARPA funds appropriated by the Legislature. State Park System Lagoon Project obligations are provided by Game and Parks for each quarterly report. DHHS partially agrees with the finding. We have the written justification but did not provide to the APA timely for the audit.

Program: AL 93.558 – Temporary Assistance for Needy Families; AL 93.563 – Child Support Enforcement; AL 93.568 – Low Income Home Energy Assistance (LIHEAP); AL 93.575 – Child Care and Development Block Grant; AL 93.658 – Foster Care Title IV-E; AL 93.778 – Medical Assistance Program; AL 10.561 – State Administrative Matching Grants for the Supplemental Nutrition Assistance Program – Allowable Costs/Cost Principles Grant Number & Year: 2001NETANF, FFY 2020; 2301NECSES, FFY 2023; 2301NELIEA, FFY 2023; 2301NECCDD, FFY 2023; 2301NEFOST, FFY 2023; 2305NE5ADM, FFY 2023; 233NE406S2514, FFY 2023 Federal Grantor Agency: U.S. Department of Health and Human Services and U.S. Department of Agriculture Criteria: 45 CFR § 75.405(a) (October 1, 2022) and 2 CFR § 200.405 (January 1, 2023) state, in part, the following: A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. 45 CFR § 75.403 (October 1, 2022) and 2 CFR § 200.403 (January 1, 2023) provide the following, in relevant part: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. * * * * (g) Be adequately documented. See also §§ 75.300 through 75.309. Per 45 CFR § 75.303 (October 1, 2022) and 2 CFR § 200.303 (January 1, 2023), The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Title 45 CFR § 75.302 (October 1, 2022) and 2 CFR § 200.302 (January 1, 2023) require financial management systems of the State sufficient to permit preparation of required reports and permit the tracing of funds to expenditures adequate to establish the use of these funds were in accordance with applicable regulations. EnterpriseOne is the official accounting system for the State of Nebraska, and all expenditures are generated from it. Good internal control requires procedures to ensure that amounts charged to Federal funds are proper. Condition: Procedures to ensure journal entries and adjustments to the Public Assistance Cost Allocation Plan (PACAP) were not adequate, resulting in multiple Federal programs being overcharged. Repeat Finding: No Questioned Costs: $581,496 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: Each quarter, as the PACAP is prepared, the Agency makes multiple adjustments for costs that either were charged to Federal funds and should not have been, or costs that were not charged to Federal funds but are claimable to a Federal grant. We tested five adjustments between two quarters. One adjustment tested for the quarter ended December 31, 2022, was recorded to charge the Foster Care grant for allowable costs incurred by the Foster Care Review Office (FCRO), a separate agency. The amounts provided by FCRO erroneously included payroll charges from a previous quarter, inflating the amount charged. The FCRO later caught the mistake and adjusted the internal spreadsheet but did not alert the Agency to the error, so a correcting adjustment was never made to the PACAP. The amount charged was $353,984; however, the adjustment should have been $212,725, a difference of $141,259. Foster Care is matched at 50%, so the grant was overcharged $70,629, which are questioned costs. Due to this error, we reviewed a second Foster Care adjustment for the quarter ending March 31, 2023, and noted the Agency’s calculation included amounts for a State funded program that should have been removed, resulting in the grant being overcharged an additional $1,561. We also tested six journal entries that moved costs between cost centers to determine any impact on the PACAP and if those journal entries were appropriate. We noted three improper journal entries that the Agency had not corrected as of the end of the fiscal year: • A journal entry for $526,487 was performed in November 2022 to temporarily move postage costs of multiple programs from State funds to the Child Support Enforcement (CSE) grant until new coding could be created in the State’s accounting system to track expenses from one fiscal year to another. The intent was to reverse the entry as soon as the new coding was completed; however, the reversing entry was never performed. Since the Agency performs a quarterly adjustment for the CSE grant to charge indirect costs identified by the Agency’s PACAP to the grant, the CSE grant was overcharged a total of $263,628. No correcting entry had been made as of September 30, 2023. These are considered questioned costs. • A journal entry for $207,369 was performed in December 2022 to move expenses to allow payroll to post. The intent was to reverse the entry before the end of the fiscal year; however, that was not done. The expenses were moved from Medicaid administration and were charged to the Central Services and Supplies Cost Center, which is then allocated to numerous other Cost Centers that are further allocated or charged directly to Federal programs such as TANF and Child Care. Due to the intricacies of PACAP allocations, exact questioned costs are unknown. No correcting entry was made as of September 30, 2023. • A journal entry for $5,317,640 was done in February 2023 to move Premium Pay to the Coronavirus State and Local Fiscal Recovery Funds (CSLFRF) grant as additional pay for certain job roles allowed under that grant. However, the entry performed included some lines that were miscoded, most significantly a line for $764,187 that was supposed to move money within the same Cost Center (CC 25C21910 – Field Office Administration); however, it pulled costs out of Cost Center 25C21780 - Protection and Safety Policy Chief instead. Additionally, we confirmed with the Agency that the costs charged to CC 25C21910 under the CSLFRF grant were also allocated to other Federal programs through the PACAP, essentially charging Federal programs twice. Due to the intricacies of the PACAP allocations, total questioned costs are unknown; however, we were able to determine that this error caused Medicaid to be overcharged $149,478, LIHEAP to be overcharged $33,447, SNAP to be overcharged $44,984, Child Care to be overcharged $10,412, and TANF to be overcharged $7,357. Cause: Inadequate procedures to ensure that adjustments to the PACAP are proper and that journal entries are appropriate for each program. Effect: Unallowable expenditures were charged to Federal funds and there is an increased risk for errors, fraud, and non-compliance with Federal regulations. Recommendation: We recommend the Agency strengthen procedures to ensure adjusting entries are complete and accurate. We further recommend the Agency strengthen procedures to ensure compliance with Federal regulations. Management Response: The Agency agrees.

Program: AL 93.658 - Foster Care Title IV-E; AL 10.561 - State Administrative Matching Grants for the Supplemental Nutrition Assistance Program; AL 93.659 - Adoption Assistance – Allowable Costs/Cost Principles Grant Number & Year: 2301NEFOST, FFY 2023; 202323S251443, FFY 2023; 2301NEADPT, FFY 2023 Federal Grantor Agency: U.S. Department of Health and Human Services and U.S. Department of Agriculture Criteria: 45 CFR § 75.405(a) (October 1, 2022) and 2 CFR § 200.405 (January 1, 2023) state, in part, the following: A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. 45 CFR § 75.403 (October 1, 2022) and 2 CFR § 200.403 (January 1, 2023) provide the following, in relevant part: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. * * * * (g) Be adequately documented. See also §§ 75.300 through 75.309. Per 45 CFR § 75.303 (October 1, 2022) and 2 CFR § 200.303 (January 1, 2023), The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Per the CAP’s RMTS Time Study Design/Coding Structure: [P]articipants are asked whether they are working on an activity that is client related. If they select “Yes” to this question, they are asked to identify the Case ID and type of case . . . . Per the CAP’s RMTS Survey Validation: The contractor and the NE DHHS staff review subsample responses to ensure the activity selected matches the description provided. If the activity and description do not match, the participant is notified and the moment is considered invalid. Per the CAP’s RMTS Response Time/Non-Responses: Participants have two (2) calendar days to respond to each moment. The two (2) day response time allows workers who may spend time outside of their office location and away from email the opportunity to respond to the moment before it expires. The two (2) day period is inclusive of calendar hours and not business days . . . . Good internal control and sound accounting practices require procedures to ensure that staff know how to complete accurate random moment time studies, which are used to allocate costs to Federal programs. Condition: The Agency did not have adequate procedures to ensure payroll charges were proper. Repeat Finding: 2022-024 Questioned Costs: $55,666 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: The Random Moment Time Study (RMTS) is conducted on an ongoing basis to provide data for the allocations of direct and indirect costs to various programs. The objective is to identify employee efforts directly related to programs administered by the Agency. We tested 55 RMTS surveys and noted 18 errors resulting in questioned costs as follows: • For 10 of 15 surveys tested, the workers erroneously reported they were working on a Foster Care IV-E (Federally funded) case when the survey should have been reported as Foster Care Non IV-E; therefore, Foster Care was overcharged. o For two surveys, the cases had previously been IV-E Foster Care cases but were changed to Non IV-E cases the month prior to the surveys submitted by the Child and Family Services Specialists. o For one survey, the worker completed the survey three calendar days after the RMTS was generated and the activity described on the survey form was for the date submitted, not when the RMTS was generated. • For 7 of 19 Supplemental Nutrition Assistance Program (SNAP) surveys tested, the RMTS survey form appeared to have been completed incorrectly. o For two surveys, the workers selected SNAP; however, per the case files, the case worker appeared to be working on Low Income Home Energy Assistance (LIHEAP) and not on SNAP. o For one survey, the worker stated on the survey form they were working on a case activity for SNAP; however, no case file name or identification case number was given to identify what case was being worked. o For three surveys, the workers selected the SNAP program; however, we could not confirm from the documentation on file what the worker was working on, and the questioned costs are unknown. o For one survey, the case worker selected the SNAP program; however, per the case files, the case worker appeared to be working on other programs along with SNAP at the time of the survey. • For one of seven Adoption IV-E surveys tested, the worker erroneously reported that they were working on an Adoption IV-E case when the survey should have been reported as Foster Care IV-E; therefore, Adoption IV-E was overcharged. Total known Federal payment errors, amount tested, error rate (amount of errors/amount tested), total dollars charged via RMTS, and potential dollars at risk (dollar rate multiplied by the population total dollars charged) are summarized below by program: See Schedule of Findings and Questioned Costs for chart/table. Cause: The Agency’s training of staff and supervisor reviews of RMTS surveys were not sufficient to ensure the surveys were accurately completed. Effect: Random moment sampling is based on the laws of probability, which state, in essence, that there is a high probability that a relatively small number of random surveys will yield an accurate depiction of the overall characteristics of the population for which the sample was taken. If RMTS surveys are not accurate, there is an increased risk costs will be allocated incorrectly between programs. Recommendation: We recommend the Agency improve procedures to ensure that random moment surveys are accurate and adequately reviewed. Management Response: The Agency agrees.

Program: AL 10.553 – School Breakfast Program; AL 10.555 – National School Lunch Program; AL 10.556 – Special Milk Program for Children; AL 10.559 – Summer Food Service Program for Children; and AL 10.582 – Fresh Fruit and Vegetable Program – Reporting Grant Number & Year: Various, including 233NE308N1199, FFY 2023; and 233NE377L1603, FFY 2023 Federal Grantor Agency: U.S. Department of Agriculture Criteria: 2 CFR § 170, Appendix A I. (January 1, 2023) states, in part, the following: a. Reporting of first-tier subawards. Applicability. Unless you are exempt as provided in paragraph d. of this award term, you must report each action that equals or exceeds $30,000 in Federal funds for a subaward to a non-Federal entity or Federal agency . . . . 2. Where and when to report. i. The non-Federal entity or Federal agency must report each obligating action described in paragraph a.1. of this award term to http://www.fsrs.gov. ii. For subaward information, report no later than the end of the month following the month in which the obligation was made. Good internal control requires procedures to ensure all required reports are submitted on time. Condition: Federal Funding Accountability and Transparency Act (FFATA) reporting for the Child Nutrition programs has not been completed since December 2020. Repeat Finding: No Questioned Costs: None Statistical Sample: No Context: For fiscal year ended June 30, 2023, the Agency paid subrecipients from the Child Nutrition programs $148,896,593. As explained to the APA, however, the Agency has been unable to submit the required FFATA reporting since December 2020. The Agency had submitted a ticket to the U.S. General Service Administration’s Federal Service Desk (FSD) and reached out to other state agencies for assistance but has been unable to resolve the issue. Cause: The Agency has attempted to complete FFATA submissions but has been unable to do so. It is unknown why the submissions are unsuccessful. Effect: Without adequate procedures to ensure that FFATA reports are submitted in a timely manner, there is an increased risk of the State not being in compliance with Federal regulations. Recommendation: We recommend the Agency continue to reach out to the FSD to resolve this issue and complete FFATA reporting as soon as possible. Management Response: The NDE disagrees with this audit finding for the following reasons: NDE Nutrition Services has made several attempts to resolve the FFATA reporting issue in the FSRS by contacting the FSRS help desk dating back to August 2021. These attempts have not produced a resolution; instead, the unresolved ticket has been closed by FSRS staff and has been requested to be re-opened by NDE Nutrition Services staff. The NDE has also made contact with the Branch Chief of the MPRO Grants Management team to request support to resolve the reporting issue. This did not help resolve the issue. APA Response: The Agency is responsible for completing the required FFATA reporting. Regardless of the reasons for failing to do so, the fact remains that no such reporting has occurred since December 2020.

Program: AL 10.553 – School Breakfast Program; AL 10.555 – National School Lunch Program; AL 10.556 – Special Milk Program for Children; AL 10.559 – Summer Food Service Program for Children; and AL 10.582 – Fresh Fruit and Vegetable Program – Reporting Grant Number & Year: Various, including 233NE308N1199, FFY 2023; and 233NE377L1603, FFY 2023 Federal Grantor Agency: U.S. Department of Agriculture Criteria: 2 CFR § 170, Appendix A I. (January 1, 2023) states, in part, the following: a. Reporting of first-tier subawards. Applicability. Unless you are exempt as provided in paragraph d. of this award term, you must report each action that equals or exceeds $30,000 in Federal funds for a subaward to a non-Federal entity or Federal agency . . . . 2. Where and when to report. i. The non-Federal entity or Federal agency must report each obligating action described in paragraph a.1. of this award term to http://www.fsrs.gov. ii. For subaward information, report no later than the end of the month following the month in which the obligation was made. Good internal control requires procedures to ensure all required reports are submitted on time. Condition: Federal Funding Accountability and Transparency Act (FFATA) reporting for the Child Nutrition programs has not been completed since December 2020. Repeat Finding: No Questioned Costs: None Statistical Sample: No Context: For fiscal year ended June 30, 2023, the Agency paid subrecipients from the Child Nutrition programs $148,896,593. As explained to the APA, however, the Agency has been unable to submit the required FFATA reporting since December 2020. The Agency had submitted a ticket to the U.S. General Service Administration’s Federal Service Desk (FSD) and reached out to other state agencies for assistance but has been unable to resolve the issue. Cause: The Agency has attempted to complete FFATA submissions but has been unable to do so. It is unknown why the submissions are unsuccessful. Effect: Without adequate procedures to ensure that FFATA reports are submitted in a timely manner, there is an increased risk of the State not being in compliance with Federal regulations. Recommendation: We recommend the Agency continue to reach out to the FSD to resolve this issue and complete FFATA reporting as soon as possible. Management Response: The NDE disagrees with this audit finding for the following reasons: NDE Nutrition Services has made several attempts to resolve the FFATA reporting issue in the FSRS by contacting the FSRS help desk dating back to August 2021. These attempts have not produced a resolution; instead, the unresolved ticket has been closed by FSRS staff and has been requested to be re-opened by NDE Nutrition Services staff. The NDE has also made contact with the Branch Chief of the MPRO Grants Management team to request support to resolve the reporting issue. This did not help resolve the issue. APA Response: The Agency is responsible for completing the required FFATA reporting. Regardless of the reasons for failing to do so, the fact remains that no such reporting has occurred since December 2020.

Program: AL 10.555 – National School Lunch Program – Allowability Grant Number & Year: 233NE308N1199, FFY 2023 Federal Grantor Agency: U.S. Department of Agriculture Criteria: 7 CFR § 210.18(f) (January 1, 2023) states, in relevant part, the following: During the course of an administrative review for the National School Lunch Program and the School Breakfast Program, the State agency must monitor compliance with the critical and general areas in paragraphs (g) and (h) of this section, respectively. 7 CFR § 210.18(g)(1)(ii) (January 1, 2023) provides the following, as is relevant: The State agency must gather information and conduct an on-site visit to ensure that the processes used by the school food authority and reviewed school(s) to count, record, consolidate, and report the number of reimbursable meals/snacks served to eligible students by category (i.e., free, reduced price or paid meal) are in compliance with program requirements and yield correct claims. The State agency must determine whether: (A) The daily meal counts, by type, for the review period are more than the product of the number of children determined by the school/school food authority to be eligible for free, reduced price, and paid meals for the review period times an attendance factor. If the meal count, for any type, appears questionable or significantly exceeds the product of the number of eligibles, for that type, times an attendance factor, documentation showing good cause must be available for review by the State agency. * * * * (C) For each school selected for review, all meals are correctly counted, recorded, consolidated and reported for the day they are served. Good internal control requires procedures to ensure reviews of programs include a review of a claim to ensure the correct number of meals is claimed. Condition: For one of 26 school food authorities (SFA) tested, the Agency’s administrative review did not include a review of a claim to ensure the correct number of meals was claimed by the SFA for each category (free, reduced, paid). Repeat Finding: No Questioned Costs: $1,061 known Statistical Sample: No Context: The Agency relies on administrative reviews completed for each SFA to ensure that the SFAs are claiming the correct number of meals. For one SFA tested, the administrative review completed for school year 2022-2023 did not include a review of a claim to ensure that the correct number of meals was claimed by the SFA. After the APA’s inquiry into the matter, the Agency reviewed a claim for February 2023 and noted an overpayment of $1,061. The Agency subsequently requested that the overpayment be reimbursed. The total amount of the February 2023 claim was $11,304, and this SFA claimed $107,337 for school year 2022-2023. The APA performed an overview of the other claims for this SFA during the year, noting that the month of February 2023 was an outlier and had claimed over 70 meals per day more than any other month during the school year. Additionally, the Agency’s procedure for when an error is found on a claim is to review the prior month’s claim to determine if there is a systematic issue. However, documentation could not be provided to support that the prior month’s claim was reviewed. Cause: Inadequate review and monitoring procedures. Effect: Without adequate review procedures, there is an increased risk of not only costs failing to comply with Federal regulations but also loss of Federal funds due to error or fraud. Recommendation: We recommend the Agency implement procedures to ensure that administrative reviews performed by the Agency include a review of meals claimed, and documentation is maintained to support that such reviews were performed. Management Response: The Administrative Review that was found to not verify a claim for reimbursement was addressed by reviewing the claim submitted for the school’s review month – February 2023. The review identified a claiming error of 1,248 Paid price meals. This information was completed in the 300 series on-site review forms in the CNP system. A follow-up review letter was also issued. The February 2023 edit check document was used to validate and correct the claim. Finally, NDE Central Accounting received a check from the SFA to cover the overclaimed amount. APA Response: The Agency did not complete its review of the February 2023 claim until after it was brought to its attention by the APA, which then resulted in the Agency seeking reimbursement for the overclaimed amount.

Program: AL 10.553 – School Breakfast Program; AL 10.555 – National School Lunch Program; AL 10.556 – Special Milk Program for Children; AL 10.559 – Summer Food Service Program for Children; and AL 10.582 – Fresh Fruit and Vegetable Program – Reporting Grant Number & Year: Various, including 233NE308N1199, FFY 2023; and 233NE377L1603, FFY 2023 Federal Grantor Agency: U.S. Department of Agriculture Criteria: 2 CFR § 170, Appendix A I. (January 1, 2023) states, in part, the following: a. Reporting of first-tier subawards. Applicability. Unless you are exempt as provided in paragraph d. of this award term, you must report each action that equals or exceeds $30,000 in Federal funds for a subaward to a non-Federal entity or Federal agency . . . . 2. Where and when to report. i. The non-Federal entity or Federal agency must report each obligating action described in paragraph a.1. of this award term to http://www.fsrs.gov. ii. For subaward information, report no later than the end of the month following the month in which the obligation was made. Good internal control requires procedures to ensure all required reports are submitted on time. Condition: Federal Funding Accountability and Transparency Act (FFATA) reporting for the Child Nutrition programs has not been completed since December 2020. Repeat Finding: No Questioned Costs: None Statistical Sample: No Context: For fiscal year ended June 30, 2023, the Agency paid subrecipients from the Child Nutrition programs $148,896,593. As explained to the APA, however, the Agency has been unable to submit the required FFATA reporting since December 2020. The Agency had submitted a ticket to the U.S. General Service Administration’s Federal Service Desk (FSD) and reached out to other state agencies for assistance but has been unable to resolve the issue. Cause: The Agency has attempted to complete FFATA submissions but has been unable to do so. It is unknown why the submissions are unsuccessful. Effect: Without adequate procedures to ensure that FFATA reports are submitted in a timely manner, there is an increased risk of the State not being in compliance with Federal regulations. Recommendation: We recommend the Agency continue to reach out to the FSD to resolve this issue and complete FFATA reporting as soon as possible. Management Response: The NDE disagrees with this audit finding for the following reasons: NDE Nutrition Services has made several attempts to resolve the FFATA reporting issue in the FSRS by contacting the FSRS help desk dating back to August 2021. These attempts have not produced a resolution; instead, the unresolved ticket has been closed by FSRS staff and has been requested to be re-opened by NDE Nutrition Services staff. The NDE has also made contact with the Branch Chief of the MPRO Grants Management team to request support to resolve the reporting issue. This did not help resolve the issue. APA Response: The Agency is responsible for completing the required FFATA reporting. Regardless of the reasons for failing to do so, the fact remains that no such reporting has occurred since December 2020.

Program: AL 10.553 – School Breakfast Program; AL 10.555 – National School Lunch Program; AL 10.556 – Special Milk Program for Children; AL 10.559 – Summer Food Service Program for Children; and AL 10.582 – Fresh Fruit and Vegetable Program – Reporting Grant Number & Year: Various, including 233NE308N1199, FFY 2023; and 233NE377L1603, FFY 2023 Federal Grantor Agency: U.S. Department of Agriculture Criteria: 2 CFR § 170, Appendix A I. (January 1, 2023) states, in part, the following: a. Reporting of first-tier subawards. Applicability. Unless you are exempt as provided in paragraph d. of this award term, you must report each action that equals or exceeds $30,000 in Federal funds for a subaward to a non-Federal entity or Federal agency . . . . 2. Where and when to report. i. The non-Federal entity or Federal agency must report each obligating action described in paragraph a.1. of this award term to http://www.fsrs.gov. ii. For subaward information, report no later than the end of the month following the month in which the obligation was made. Good internal control requires procedures to ensure all required reports are submitted on time. Condition: Federal Funding Accountability and Transparency Act (FFATA) reporting for the Child Nutrition programs has not been completed since December 2020. Repeat Finding: No Questioned Costs: None Statistical Sample: No Context: For fiscal year ended June 30, 2023, the Agency paid subrecipients from the Child Nutrition programs $148,896,593. As explained to the APA, however, the Agency has been unable to submit the required FFATA reporting since December 2020. The Agency had submitted a ticket to the U.S. General Service Administration’s Federal Service Desk (FSD) and reached out to other state agencies for assistance but has been unable to resolve the issue. Cause: The Agency has attempted to complete FFATA submissions but has been unable to do so. It is unknown why the submissions are unsuccessful. Effect: Without adequate procedures to ensure that FFATA reports are submitted in a timely manner, there is an increased risk of the State not being in compliance with Federal regulations. Recommendation: We recommend the Agency continue to reach out to the FSD to resolve this issue and complete FFATA reporting as soon as possible. Management Response: The NDE disagrees with this audit finding for the following reasons: NDE Nutrition Services has made several attempts to resolve the FFATA reporting issue in the FSRS by contacting the FSRS help desk dating back to August 2021. These attempts have not produced a resolution; instead, the unresolved ticket has been closed by FSRS staff and has been requested to be re-opened by NDE Nutrition Services staff. The NDE has also made contact with the Branch Chief of the MPRO Grants Management team to request support to resolve the reporting issue. This did not help resolve the issue. APA Response: The Agency is responsible for completing the required FFATA reporting. Regardless of the reasons for failing to do so, the fact remains that no such reporting has occurred since December 2020.

Program: AL 10.553 – School Breakfast Program; AL 10.555 – National School Lunch Program; AL 10.556 – Special Milk Program for Children; AL 10.559 – Summer Food Service Program for Children; and AL 10.582 – Fresh Fruit and Vegetable Program – Reporting Grant Number & Year: Various, including 233NE308N1199, FFY 2023; and 233NE377L1603, FFY 2023 Federal Grantor Agency: U.S. Department of Agriculture Criteria: 2 CFR § 170, Appendix A I. (January 1, 2023) states, in part, the following: a. Reporting of first-tier subawards. Applicability. Unless you are exempt as provided in paragraph d. of this award term, you must report each action that equals or exceeds $30,000 in Federal funds for a subaward to a non-Federal entity or Federal agency . . . . 2. Where and when to report. i. The non-Federal entity or Federal agency must report each obligating action described in paragraph a.1. of this award term to http://www.fsrs.gov. ii. For subaward information, report no later than the end of the month following the month in which the obligation was made. Good internal control requires procedures to ensure all required reports are submitted on time. Condition: Federal Funding Accountability and Transparency Act (FFATA) reporting for the Child Nutrition programs has not been completed since December 2020. Repeat Finding: No Questioned Costs: None Statistical Sample: No Context: For fiscal year ended June 30, 2023, the Agency paid subrecipients from the Child Nutrition programs $148,896,593. As explained to the APA, however, the Agency has been unable to submit the required FFATA reporting since December 2020. The Agency had submitted a ticket to the U.S. General Service Administration’s Federal Service Desk (FSD) and reached out to other state agencies for assistance but has been unable to resolve the issue. Cause: The Agency has attempted to complete FFATA submissions but has been unable to do so. It is unknown why the submissions are unsuccessful. Effect: Without adequate procedures to ensure that FFATA reports are submitted in a timely manner, there is an increased risk of the State not being in compliance with Federal regulations. Recommendation: We recommend the Agency continue to reach out to the FSD to resolve this issue and complete FFATA reporting as soon as possible. Management Response: The NDE disagrees with this audit finding for the following reasons: NDE Nutrition Services has made several attempts to resolve the FFATA reporting issue in the FSRS by contacting the FSRS help desk dating back to August 2021. These attempts have not produced a resolution; instead, the unresolved ticket has been closed by FSRS staff and has been requested to be re-opened by NDE Nutrition Services staff. The NDE has also made contact with the Branch Chief of the MPRO Grants Management team to request support to resolve the reporting issue. This did not help resolve the issue. APA Response: The Agency is responsible for completing the required FFATA reporting. Regardless of the reasons for failing to do so, the fact remains that no such reporting has occurred since December 2020.

Program: AL 12.401 – National Guard Military Operations and Maintenance (O&M) Projects – Cash Management & Reporting Grant Number & Year: Appendices – W91243-21-2-1001, FFY 2021; W91243-22-2-1001, FFY 2022; W91243-22-2-1002, FFY 2022; W91243-22-2-1005, FFY 2022; W91243-22-2-1007, FFY 2022; W91243-22-2-1021, FFY 2022; W91243-22-2-1023, FFY 2022; W91243-22-2-1031, FFY 2022; W91243-23-2-1001, FFY 2023; W91243-23-2-1003, FFY 2023; W91243-23-2-1005, FFY 2023; W91243-23-2-1010, FFY 2023; W91243-23-2-1021, FFY 2023; W91243-23-2-1023, FFY 2023; W91243-23-2-1024, FFY 2023; W91243-23-2-1031, FFY 2023. Federal Grantor Agency: U.S. Department of Defense Criteria: Per 2 CFR § 1128.100 and 2 CFR § 1128.200 (January 1, 2023), the Department of Defense adopted the Uniform Administrative Requirements, Cost Principles, and Audit Requirements set forth at 2 CFR parts 200.302, 200.303, and 200.305. Per 2 CFR § 200.303 (January 1, 2023): The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Title 2 CFR § 200.302 (January 1, 2023) requires financial management systems of the State be sufficient to permit both the preparation of required reports and tracing of funds to expenditures adequate to establish that the use of these funds was in accordance with applicable regulations. EnterpriseOne is the official accounting system for the State of Nebraska, and all expenditures are generated from it. Title 2 CFR § 200.305(a) (January 1, 2023) states, in part, “For states, payments are governed by Treasury-State Cash Management Improvement Act (CMIA) agreements and default procedures codified at 31 CFR part 205 . . . .” Title 31 CFR Part 205 (July 1, 2022) implements the CMIA and requires State recipients to enter into agreements that document accepted funding techniques for Federal assistance programs. The CMIA Agreement between the State of Nebraska, Secretary of the Treasury, and U.S. Department of the Treasury, for the period July 1, 2022, through June 30, 2023, allows the program to request Federal funds in accordance with the monthly draw funding technique, which bases the amount requested on costs estimated to be incurred in the next month. Master Cooperative Agreement (October 2022), Article V – Payment, Section 503, Payment by Advance Method, states, “The advance payment method shall be according to procedures established in current NGB-AQ policy, NGR 5-1 Chapter 11 or successor CNGB I & M, and 2 CFR §200.305.” National Guard Policy (NG Policy) 5-1, National Guard Grants and Cooperative Agreements, Section 11-5, Advance Payment Method, Section (5), states, in part, “[T]he grantee agrees to minimize the time elapsing between the transfer of funds from the U.S. Treasury and their disbursement by the State. (no more than 45 days).” GCAPL 20-02 AQ-A Policy (February 4, 2020) turned NGR 5-1 into NG Policy 5-1. It generally maintained the principles and operational aspects of NGR 5-1, except as provisions of the document were adjusted in the AQ-A Policy. The AQ-A Policy did not make any changes to the 45-day requirement found in NGR 5-1. Instructions for OMB Standard Form 270 (REV. 1/2016) include the following for line 11a, “Enter program outlays to date (net of refunds, rebates, and discounts), in the appropriate columns. For requests prepared on a cash basis, outlays are the sum of actual cash disbursements for goods and services, the amount of indirect expenses charged, the value of in- kind contributions applied, and the amount of cash advances and payments made to subcontractors and subrecipients.” Title 2 CFR § 200.511(b) (January 1, 2023) states in relevant part, the following: The summary schedule of prior audit findings must report the status of all audit findings included in the prior audit’s schedule of findings and questioned costs. . . . * * * * (2) When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding's recurrence and planned corrective action, and any partial corrective action taken. When corrective action taken is significantly different from corrective action previously reported in a corrective action plan or in the Federal agency's or pass-through entity's management decision, the summary schedule must provide an explanation. A good internal control plan would include procedures to ensure that the times between the drawdown of Federal funds and the disbursements thereof are minimized and in compliance with State of Nebraska CMIA Agreement and National Guard Regulations. Condition: The Agency was not in compliance with the Federal cash management requirements during the fiscal year and did not properly report program outlays on the OMB Standard Form (SF) 270. A similar finding was noted in the prior audit. Repeat Finding: 2022-050 Questioned Costs: None Statistical Sample: No Context: We tested 25 drawdowns of Federal funds to support the Agency’s operations and noted the following: • Eleven drawdowns were not in compliance with NG Policy 5-1. The draws were expended from 48 to 166 days after the drawdown of Federal funds. The table below provides a summary of the 11 draws: See Schedule of Findings and Questioned Costs for chart/table. • In addition, five draws were not in compliance with CMIA Agreement requirements. Advance amounts were requested based on estimated costs to be incurred during the month covered by the requests. To determine the reasonableness of the estimates, the APA determined the time it took the Agency to expend amounts advanced (without consideration of any cash on hand). Five draws were expended between 48 and 111 days after the drawdown of Federal funds. • For 23 of 25 SF-270’s tested, the Agency did not properly report total program outlays on the OMB SF-270 report. The Agency reported the total drawdowns for the program to date, rather than actual cash disbursements, as total program outlays. The variance between what was reported and what should have been reported ranged from an underreporting of $45,247 to an overreporting of $1,143,496, with a net total overreporting of expenditures by $5,104,828 for the 25 reports tested. A similar finding was noted during the previous audit. In the Summary Schedule of Prior Audit Findings, the Agency stated the following as a reason for the recurrence: The requirement per the CMIA Agreement which requires the program to request Federal funds in accordance with the pre-issuance funding technique and that such funds are to be requested and deposited in a state account not more than three business days prior to disbursement of funds is not a reasonable standard for the National Guard Military Operations and Maintenance Program. The Agency stated further that it will seek a modification to the CMIA Agreement. However, under the State’s fiscal year 2022 and 2023 CMIA Agreements, the program is no longer required to follow the pre-issuance funding technique and instead follows the monthly draw funding technique. Thus, the Summary Schedule of Prior Audit Findings is not accurate. Cause: Inadequate procedures for estimating cash needs for the upcoming month. Regarding SF-270 reporting, the Agency stated that it did not plan to implement corrective action until State fiscal year 2024. Effect: The Agency is not in compliance with Federal cash management and reporting requirements, which could result in sanctions. Additionally, there is an increased risk for the loss of Federal funding. Recommendation: We recommend the Agency ensure the amount of time between the Federal draw and the disbursement of funds by the State is minimized and in compliance with the State of Nebraska CMIA Agreement and National Guard requirements. We also recommend the Agency report total program outlays in compliance with Federal requirements. Management Response: The Agency agrees with the finding. The drawdown timeline is a partial result of the variances in federal reimbursement functionalities and advance state requirement functionalities. The State Services Support Division has simultaneously been prioritizing workloads due to staffing shortages persistent through the first quarter end of fiscal year 2023-2024.

Program: Various, including AL 84.027 – Special Education Grants to States; AL 84.173 – COVID-19 Special Education Preschool Grants; AL 84.425D – COVID-19 Education Stabilization Fund – Elementary and Secondary School Emergency Relief Fund (ESSER I and ESSER II); AL 84.425U – COVID-19 Education Stabilization Fund – American Rescue Plan – Elementary and Secondary School Emergency Relief Fund (ARP ESSER) – Subrecipient Monitoring Grant Number & Year: Various, including H027A210079, FFY 2022; H173X210077, FFY 2022; S425D200048, grant period ending 9/30/2022; S425D210048, grant period ending 9/30/2023; S425U210048, grant period ending 9/30/2024. Federal Grantor Agency: U.S. Department of Education Criteria: Per 2 CFR § 3474.1 (January 1, 2023), the U.S. Department of Education adopted the OMB Uniform Guidance in 2 CFR part 200, except for 2 CFR § 200.102(a) and 200.207(a). Per 2 CFR § 200.403 (January 1, 2023), allowable costs must be necessary, reasonable, and adequately documented. 2 CFR § 200.332 (January 1, 2023) states, in relevant part, the following: All pass-through entities must: * * * * (d) Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. * * * * (2) Following-up and ensuring that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the Federal award provided to the subrecipient from the pass-through entity detected through audits, on-site reviews, and written confirmation from the subrecipient, highlighting the status of actions planned or taken to address Single Audit findings related to the particular subaward. (3) Issuing a management decision for applicable audit findings pertaining only to the Federal award provided to the subrecipient from the pass-through entity as required by § 200.521. (4) The pass-through entity is responsible for resolving audit findings specifically related to the subaward[.] * * * * (f) Verify that every subrecipient is audited as required by Subpart F of this part when it is expected that the subrecipient's Federal awards expended during the respective fiscal year equaled or exceeded the threshold set forth in § 200.501. 2 CFR § 200.521 (January 1, 2023) states, in relevant part, the following: (c) Pass-through entity. As provided in § 200.332(d), the pass-through entity must be responsible for issuing a management decision for audit findings that relate to Federal awards it makes to subrecipients. (d) Time requirements. The Federal awarding agency or pass-through entity responsible for issuing a management decision must do so within six months of acceptance of the audit report by the FAC. Good internal control requires procedures to ensure that subrecipients are using grant funds for allowable purposes. Good internal control also requires procedures to ensure that subrecipient Single Audit reports are being reviewed, and management decision letters are being issued in a timely manner to ensure that corrective action is being implemented. Condition: For 3 of 27 subrecipients tested that received Federal funds from the Special Education Cluster, the Agency did not perform adequate subrecipient monitoring to ensure that funds were used for allowable purposes. For seven subrecipients tested that received Federal funds from the Education Stabilization Fund and/or Special Education Cluster, the Agency did not issue a management decision letter within the time requirement for five subrecipients and did not issue a management decision letter for two subrecipients. The Agency also failed to track and review the Single Audit report for one subrecipient. Repeat Finding: No Questioned Costs: Unknown Statistical Sample: No Context: The Agency performs various subrecipient monitoring activities during the year to ensure that subrecipients are using funds for an allowable purpose. These activities include reviewing a sample of expenditures from all reimbursement requests, tracking subrecipient audit requirements and reviewing Single Audit reports, and performing fiscal monitoring on a three-year basis. During review of reimbursement requests, the Agency does not perform procedures to ensure that salary and benefits allocated to the Special Education (SPED) grants are adequately supported by underlying documentation for a majority of its subrecipients. Rather the Agency relies on the fiscal monitoring to test that payroll is being properly allocated to grants, and the subrecipients have procedures in place to comply with Uniform Guidance Requirements. During testing of 27 subrecipients that received SPED grants, we noted the following for three subrecipients: • For the first subrecipient, the Agency had never completed a fiscal monitoring review. The Agency indicated that it was currently conducting fiscal monitoring of the school, but the subrecipient had been slow to provide documentation, resulting in delays. • The second subrecipient also did not have a fiscal monitoring review. At the time of the reimbursement, moreover, the Agency did not review any underlying documentation to support the costs allocated to the grant. The Agency stated that it relied on the entity’s annual audit to ensure costs were allocated properly; however, the subrecipient had not had a recent Single Audit in which the Special Education Cluster was a major program. • The third subrecipient had a fiscal monitoring review of payroll costs, but there was no documentation to show that the Agency had reviewed other purchased services at the time of reimbursement or during the fiscal monitoring. During review of the Agency’s procedures for reviewing subrecipient Single Audits, we noted the following: • For two subrecipients tested, their Single Audits noted significant deficiencies and material weaknesses, including one instance of questioned costs totaling $105,273; however, the Agency did not issue a management decision letter on the findings or provide documentation of any follow-up performed. • For five subrecipients tested, the management decision letter was issued eight to nine months after the audit was made available on the Federal Audit Clearinghouse (FAC). • One subrecipient was not being tracked by the Agency. This subrecipient had received $939,358 in Federal funds from the Agency. After the APA pointed this out, the Agency obtained a copy of the subrecipient’s Single Audit report, which noted no findings. Cause: Inadequate subrecipient monitoring procedures. The Agency stated it had other priorities during the year that delayed its review of the subrecipients’ Single Audit reports. Effect: Without adequate procedures, there is increased risk of noncompliance with Federal regulations, audit findings of subrecipients not being corrected, and an increased risk of loss or misuse of funds. Recommendation: We recommend the Agency review its procedures for reimbursements and fiscal monitoring to ensure subrecipients are operating in compliance with Federal requirements. We also recommend the Agency improve procedures to ensure that all subrecipients are being tracked for Single Audit requirements, and management decisions are issued in response to all findings in a timely manner. Management Response: First SPED subrecipient – The first recipient’s fiscal monitoring review is part of the current annual group of recipients being monitored; set to close June 30, 2024. Second SPED subrecipient – As part of the FY2020 federal Single Audit testing conducted by KPMG, determined the after-the-fact verification as a method to certify that the payment received on a project is reasonable in relation to the amount of work performed. Third SPED subrecipient – Purchased services and supplies were reviewed during fiscal monitoring, but the documentation was in paper form, not electronic, and was not initially provided to the auditors when requested. It was provided on March 4, 2024, when located. Single Audits – Due to extensive time commitment to State audit facilitation and Education Stabilization Fund Annual Performance Reporting, some management decision letters were not issued or were issued late. The NDE staff member performing the annual audit reviews was not aware of an additional subrecipient that needed reviewed. APA Response: The Special Education Cluster was not a major program for the second subrecipient in FY2020. For the third subrecipient, we originally requested the Agency’s fiscal monitoring documentation on December 21, 2023. Neb. Rev. Stat. § 84-305(2) (Cum. Supp. 2022) requires compliance with such a request to occur within “three business days after actual receipt of the request.” The only exceptions to that three-day response requirement are if there is “a legal basis for refusal to comply with the request” or “the entire request cannot with reasonable good faith efforts be fulfilled within three business days after actual receipt of the request due to the significant difficulty or the extensiveness of the request.” In either instance, § 84-305(2) requires the recipient of the request to take specific action in claiming the exception. The Agency failed to do so, clearly violating § 84-305(2). In no case not involving a legal basis for noncompliance, moreover, may the required compliance “exceed three calendar weeks after actual receipt of such request by any public entity.” Nevertheless, the additional documentation was not provided until over 11 weeks after being requested, which is another clear violation of § 84-305(2).

Program: Various, including AL 84.027 – Special Education Grants to States; AL 84.173 – COVID-19 Special Education Preschool Grants; AL 84.425D – COVID-19 Education Stabilization Fund – Elementary and Secondary School Emergency Relief Fund (ESSER I and ESSER II); AL 84.425U – COVID-19 Education Stabilization Fund – American Rescue Plan – Elementary and Secondary School Emergency Relief Fund (ARP ESSER) – Subrecipient Monitoring Grant Number & Year: Various, including H027A210079, FFY 2022; H173X210077, FFY 2022; S425D200048, grant period ending 9/30/2022; S425D210048, grant period ending 9/30/2023; S425U210048, grant period ending 9/30/2024. Federal Grantor Agency: U.S. Department of Education Criteria: Per 2 CFR § 3474.1 (January 1, 2023), the U.S. Department of Education adopted the OMB Uniform Guidance in 2 CFR part 200, except for 2 CFR § 200.102(a) and 200.207(a). Per 2 CFR § 200.403 (January 1, 2023), allowable costs must be necessary, reasonable, and adequately documented. 2 CFR § 200.332 (January 1, 2023) states, in relevant part, the following: All pass-through entities must: * * * * (d) Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. * * * * (2) Following-up and ensuring that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the Federal award provided to the subrecipient from the pass-through entity detected through audits, on-site reviews, and written confirmation from the subrecipient, highlighting the status of actions planned or taken to address Single Audit findings related to the particular subaward. (3) Issuing a management decision for applicable audit findings pertaining only to the Federal award provided to the subrecipient from the pass-through entity as required by § 200.521. (4) The pass-through entity is responsible for resolving audit findings specifically related to the subaward[.] * * * * (f) Verify that every subrecipient is audited as required by Subpart F of this part when it is expected that the subrecipient's Federal awards expended during the respective fiscal year equaled or exceeded the threshold set forth in § 200.501. 2 CFR § 200.521 (January 1, 2023) states, in relevant part, the following: (c) Pass-through entity. As provided in § 200.332(d), the pass-through entity must be responsible for issuing a management decision for audit findings that relate to Federal awards it makes to subrecipients. (d) Time requirements. The Federal awarding agency or pass-through entity responsible for issuing a management decision must do so within six months of acceptance of the audit report by the FAC. Good internal control requires procedures to ensure that subrecipients are using grant funds for allowable purposes. Good internal control also requires procedures to ensure that subrecipient Single Audit reports are being reviewed, and management decision letters are being issued in a timely manner to ensure that corrective action is being implemented. Condition: For 3 of 27 subrecipients tested that received Federal funds from the Special Education Cluster, the Agency did not perform adequate subrecipient monitoring to ensure that funds were used for allowable purposes. For seven subrecipients tested that received Federal funds from the Education Stabilization Fund and/or Special Education Cluster, the Agency did not issue a management decision letter within the time requirement for five subrecipients and did not issue a management decision letter for two subrecipients. The Agency also failed to track and review the Single Audit report for one subrecipient. Repeat Finding: No Questioned Costs: Unknown Statistical Sample: No Context: The Agency performs various subrecipient monitoring activities during the year to ensure that subrecipients are using funds for an allowable purpose. These activities include reviewing a sample of expenditures from all reimbursement requests, tracking subrecipient audit requirements and reviewing Single Audit reports, and performing fiscal monitoring on a three-year basis. During review of reimbursement requests, the Agency does not perform procedures to ensure that salary and benefits allocated to the Special Education (SPED) grants are adequately supported by underlying documentation for a majority of its subrecipients. Rather the Agency relies on the fiscal monitoring to test that payroll is being properly allocated to grants, and the subrecipients have procedures in place to comply with Uniform Guidance Requirements. During testing of 27 subrecipients that received SPED grants, we noted the following for three subrecipients: • For the first subrecipient, the Agency had never completed a fiscal monitoring review. The Agency indicated that it was currently conducting fiscal monitoring of the school, but the subrecipient had been slow to provide documentation, resulting in delays. • The second subrecipient also did not have a fiscal monitoring review. At the time of the reimbursement, moreover, the Agency did not review any underlying documentation to support the costs allocated to the grant. The Agency stated that it relied on the entity’s annual audit to ensure costs were allocated properly; however, the subrecipient had not had a recent Single Audit in which the Special Education Cluster was a major program. • The third subrecipient had a fiscal monitoring review of payroll costs, but there was no documentation to show that the Agency had reviewed other purchased services at the time of reimbursement or during the fiscal monitoring. During review of the Agency’s procedures for reviewing subrecipient Single Audits, we noted the following: • For two subrecipients tested, their Single Audits noted significant deficiencies and material weaknesses, including one instance of questioned costs totaling $105,273; however, the Agency did not issue a management decision letter on the findings or provide documentation of any follow-up performed. • For five subrecipients tested, the management decision letter was issued eight to nine months after the audit was made available on the Federal Audit Clearinghouse (FAC). • One subrecipient was not being tracked by the Agency. This subrecipient had received $939,358 in Federal funds from the Agency. After the APA pointed this out, the Agency obtained a copy of the subrecipient’s Single Audit report, which noted no findings. Cause: Inadequate subrecipient monitoring procedures. The Agency stated it had other priorities during the year that delayed its review of the subrecipients’ Single Audit reports. Effect: Without adequate procedures, there is increased risk of noncompliance with Federal regulations, audit findings of subrecipients not being corrected, and an increased risk of loss or misuse of funds. Recommendation: We recommend the Agency review its procedures for reimbursements and fiscal monitoring to ensure subrecipients are operating in compliance with Federal requirements. We also recommend the Agency improve procedures to ensure that all subrecipients are being tracked for Single Audit requirements, and management decisions are issued in response to all findings in a timely manner. Management Response: First SPED subrecipient – The first recipient’s fiscal monitoring review is part of the current annual group of recipients being monitored; set to close June 30, 2024. Second SPED subrecipient – As part of the FY2020 federal Single Audit testing conducted by KPMG, determined the after-the-fact verification as a method to certify that the payment received on a project is reasonable in relation to the amount of work performed. Third SPED subrecipient – Purchased services and supplies were reviewed during fiscal monitoring, but the documentation was in paper form, not electronic, and was not initially provided to the auditors when requested. It was provided on March 4, 2024, when located. Single Audits – Due to extensive time commitment to State audit facilitation and Education Stabilization Fund Annual Performance Reporting, some management decision letters were not issued or were issued late. The NDE staff member performing the annual audit reviews was not aware of an additional subrecipient that needed reviewed. APA Response: The Special Education Cluster was not a major program for the second subrecipient in FY2020. For the third subrecipient, we originally requested the Agency’s fiscal monitoring documentation on December 21, 2023. Neb. Rev. Stat. § 84-305(2) (Cum. Supp. 2022) requires compliance with such a request to occur within “three business days after actual receipt of the request.” The only exceptions to that three-day response requirement are if there is “a legal basis for refusal to comply with the request” or “the entire request cannot with reasonable good faith efforts be fulfilled within three business days after actual receipt of the request due to the significant difficulty or the extensiveness of the request.” In either instance, § 84-305(2) requires the recipient of the request to take specific action in claiming the exception. The Agency failed to do so, clearly violating § 84-305(2). In no case not involving a legal basis for noncompliance, moreover, may the required compliance “exceed three calendar weeks after actual receipt of such request by any public entity.” Nevertheless, the additional documentation was not provided until over 11 weeks after being requested, which is another clear violation of § 84-305(2).

Program: AL 84.287 – Twenty-First Century Community Learning Centers – Subrecipient Monitoring Grant Number & Year: S287C210027, FFY 2022 Federal Grantor Agency: U.S. Department of Education Criteria: Per 2 CFR § 3474.1 (January 1, 2023), the U.S. Department of Education adopted the OMB Uniform Guidance in 2 CFR part 200, except for 2 CFR § 200.102(a) and 200.207(a). 2 CFR § 200.332 (January 1, 2023) states, in relevant part, the following: All pass-through entities must: * * * * (d) Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. 2 CFR § 200.508 (January 1, 2023) states, in relevant part, the following: The auditee must: * * * * (d) Provide the auditor with access to personnel, accounts, books, records, supporting documentation, and other information as needed for the auditor to perform the audit required by this part. Neb. Rev. Stat. § 84-305(2) (Cum. Supp. 2022) states, in relevant part, the following: Upon receipt of a written request by the Auditor of Public Accounts for access to any information or records, the public entity shall provide to the auditor as soon as is practicable and without delay, but not more than three business days after actual receipt of the request, either (a) the requested materials or (b)(i) if there is a legal basis for refusal to comply with the request, a written denial of the request together with the information specified in subsection (1) of this section or (ii) if the entire request cannot with reasonable good faith efforts be fulfilled within three business days after actual receipt of the request due to the significant difficulty or the extensiveness of the request, a written explanation, including the earliest practicable date for fulfilling the request, and an opportunity for the auditor to modify or prioritize the items within the request. No delay due to the significant difficulty or the extensiveness of any request for access to information or records shall exceed three calendar weeks after actual receipt of such request by any public entity. (Emphasis added.) A proper system of internal control includes procedures to ensure the Department’s fiscal monitoring polices are followed. Good internal control also requires procedures to ensure audit information is provided promptly in accordance with State and Federal requirements. Condition: The Agency failed to perform fiscal monitoring of one subrecipient tested for the Twenty-First Century Community Learning Centers grant. Contrary to § 84-305(2), moreover, the Agency failed to respond promptly to requests for information. Repeat Finding: No Questioned Costs: None Statistical Sample: No Context: The Agency performed a review of a reimbursement request for $183,825, where staff compared the amount claimed to the school-provided accounting records and payroll reports with employee names. The Agency’s policy then requires further fiscal monitoring on at least a three-year rotational basis for all school districts. As part of this process, a more detailed review of time and effort documentation is supposed to be completed. According to Agency staff, fiscal monitoring was scheduled for October 2022; however, school district staff stated that the timing would not work for them. The Agency began its review in December 2022, but the process had yet to be completed – more than a year later – due to a lack of responsiveness from the school district. Fiscal monitoring of the school district was last performed in fiscal year 2020. Additionally, the APA asked the Agency on January 11, 2024, for documentation to support the payroll expenses on the reimbursement request. On January 12, 2024, the Agency presented the APA with the documentation from the school district; however, this was the same documentation provided previously to the Agency at the time of reimbursement. This documentation was insufficient to support the payroll expenses questioned. On March 1, 2024, seven weeks after the APA’s request, the Agency produced the additional information to support the payroll expenses. Cause: Inadequate subrecipient monitoring procedures. Effect: Without adequate monitoring procedures, there is an increased risk for the payment of unallowable Federal expenses. Recommendation: We recommend the Agency strengthen its procedures for ensuring that fiscal monitoring is completed in accordance with the Agency’s policies. We further recommend the Agency implement procedures to ensure compliance with both 2 CFR § 200.508 and § 84-305(2). Management Response: The Grants Compliance Section is the Agency’s internal control function performing the requirements within 2 CFR 200.332, applying risk assessment to determine the annual fiscal monitoring base cadence and sequential sampling; non-probability sampling ensuring all recipients are subject to fiscal monitoring efforts in a three-year cycle at a minimum. As education subrecipients have received a significant influx of subawards to mitigate post-COVID supports for Nebraska education with limited staff capacity, the Department has remained mindful of these conditions and completed fiscal monitoring activities and issued an exit letter on September 5, 2023. APA Response: This finding was included as Comment 4 in the Annual Comprehensive Financial Report (ACFR) management letter dated December 13, 2023. The Agency responded, in part, “Fiscal monitoring of Lexington Public Schools was being performed in 2023 but was not completed as of the time of the ACFR audit.” When the Single Audit team requested the payroll documentation, the Agency did not inform the APA that monitoring was completed until March 5, 2024, which is well past the time requirements set out in § 84-305(2). Regardless, the fiscal monitoring was not completed within three years.

Program: Various, including AL 84.027 – Special Education Grants to States; AL 84.173 – COVID-19 Special Education Preschool Grants; AL 84.425D – COVID-19 Education Stabilization Fund – Elementary and Secondary School Emergency Relief Fund (ESSER I and ESSER II); AL 84.425U – COVID-19 Education Stabilization Fund – American Rescue Plan – Elementary and Secondary School Emergency Relief Fund (ARP ESSER) – Subrecipient Monitoring Grant Number & Year: Various, including H027A210079, FFY 2022; H173X210077, FFY 2022; S425D200048, grant period ending 9/30/2022; S425D210048, grant period ending 9/30/2023; S425U210048, grant period ending 9/30/2024. Federal Grantor Agency: U.S. Department of Education Criteria: Per 2 CFR § 3474.1 (January 1, 2023), the U.S. Department of Education adopted the OMB Uniform Guidance in 2 CFR part 200, except for 2 CFR § 200.102(a) and 200.207(a). Per 2 CFR § 200.403 (January 1, 2023), allowable costs must be necessary, reasonable, and adequately documented. 2 CFR § 200.332 (January 1, 2023) states, in relevant part, the following: All pass-through entities must: * * * * (d) Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. * * * * (2) Following-up and ensuring that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the Federal award provided to the subrecipient from the pass-through entity detected through audits, on-site reviews, and written confirmation from the subrecipient, highlighting the status of actions planned or taken to address Single Audit findings related to the particular subaward. (3) Issuing a management decision for applicable audit findings pertaining only to the Federal award provided to the subrecipient from the pass-through entity as required by § 200.521. (4) The pass-through entity is responsible for resolving audit findings specifically related to the subaward[.] * * * * (f) Verify that every subrecipient is audited as required by Subpart F of this part when it is expected that the subrecipient's Federal awards expended during the respective fiscal year equaled or exceeded the threshold set forth in § 200.501. 2 CFR § 200.521 (January 1, 2023) states, in relevant part, the following: (c) Pass-through entity. As provided in § 200.332(d), the pass-through entity must be responsible for issuing a management decision for audit findings that relate to Federal awards it makes to subrecipients. (d) Time requirements. The Federal awarding agency or pass-through entity responsible for issuing a management decision must do so within six months of acceptance of the audit report by the FAC. Good internal control requires procedures to ensure that subrecipients are using grant funds for allowable purposes. Good internal control also requires procedures to ensure that subrecipient Single Audit reports are being reviewed, and management decision letters are being issued in a timely manner to ensure that corrective action is being implemented. Condition: For 3 of 27 subrecipients tested that received Federal funds from the Special Education Cluster, the Agency did not perform adequate subrecipient monitoring to ensure that funds were used for allowable purposes. For seven subrecipients tested that received Federal funds from the Education Stabilization Fund and/or Special Education Cluster, the Agency did not issue a management decision letter within the time requirement for five subrecipients and did not issue a management decision letter for two subrecipients. The Agency also failed to track and review the Single Audit report for one subrecipient. Repeat Finding: No Questioned Costs: Unknown Statistical Sample: No Context: The Agency performs various subrecipient monitoring activities during the year to ensure that subrecipients are using funds for an allowable purpose. These activities include reviewing a sample of expenditures from all reimbursement requests, tracking subrecipient audit requirements and reviewing Single Audit reports, and performing fiscal monitoring on a three-year basis. During review of reimbursement requests, the Agency does not perform procedures to ensure that salary and benefits allocated to the Special Education (SPED) grants are adequately supported by underlying documentation for a majority of its subrecipients. Rather the Agency relies on the fiscal monitoring to test that payroll is being properly allocated to grants, and the subrecipients have procedures in place to comply with Uniform Guidance Requirements. During testing of 27 subrecipients that received SPED grants, we noted the following for three subrecipients: • For the first subrecipient, the Agency had never completed a fiscal monitoring review. The Agency indicated that it was currently conducting fiscal monitoring of the school, but the subrecipient had been slow to provide documentation, resulting in delays. • The second subrecipient also did not have a fiscal monitoring review. At the time of the reimbursement, moreover, the Agency did not review any underlying documentation to support the costs allocated to the grant. The Agency stated that it relied on the entity’s annual audit to ensure costs were allocated properly; however, the subrecipient had not had a recent Single Audit in which the Special Education Cluster was a major program. • The third subrecipient had a fiscal monitoring review of payroll costs, but there was no documentation to show that the Agency had reviewed other purchased services at the time of reimbursement or during the fiscal monitoring. During review of the Agency’s procedures for reviewing subrecipient Single Audits, we noted the following: • For two subrecipients tested, their Single Audits noted significant deficiencies and material weaknesses, including one instance of questioned costs totaling $105,273; however, the Agency did not issue a management decision letter on the findings or provide documentation of any follow-up performed. • For five subrecipients tested, the management decision letter was issued eight to nine months after the audit was made available on the Federal Audit Clearinghouse (FAC). • One subrecipient was not being tracked by the Agency. This subrecipient had received $939,358 in Federal funds from the Agency. After the APA pointed this out, the Agency obtained a copy of the subrecipient’s Single Audit report, which noted no findings. Cause: Inadequate subrecipient monitoring procedures. The Agency stated it had other priorities during the year that delayed its review of the subrecipients’ Single Audit reports. Effect: Without adequate procedures, there is increased risk of noncompliance with Federal regulations, audit findings of subrecipients not being corrected, and an increased risk of loss or misuse of funds. Recommendation: We recommend the Agency review its procedures for reimbursements and fiscal monitoring to ensure subrecipients are operating in compliance with Federal requirements. We also recommend the Agency improve procedures to ensure that all subrecipients are being tracked for Single Audit requirements, and management decisions are issued in response to all findings in a timely manner. Management Response: First SPED subrecipient – The first recipient’s fiscal monitoring review is part of the current annual group of recipients being monitored; set to close June 30, 2024. Second SPED subrecipient – As part of the FY2020 federal Single Audit testing conducted by KPMG, determined the after-the-fact verification as a method to certify that the payment received on a project is reasonable in relation to the amount of work performed. Third SPED subrecipient – Purchased services and supplies were reviewed during fiscal monitoring, but the documentation was in paper form, not electronic, and was not initially provided to the auditors when requested. It was provided on March 4, 2024, when located. Single Audits – Due to extensive time commitment to State audit facilitation and Education Stabilization Fund Annual Performance Reporting, some management decision letters were not issued or were issued late. The NDE staff member performing the annual audit reviews was not aware of an additional subrecipient that needed reviewed. APA Response: The Special Education Cluster was not a major program for the second subrecipient in FY2020. For the third subrecipient, we originally requested the Agency’s fiscal monitoring documentation on December 21, 2023. Neb. Rev. Stat. § 84-305(2) (Cum. Supp. 2022) requires compliance with such a request to occur within “three business days after actual receipt of the request.” The only exceptions to that three-day response requirement are if there is “a legal basis for refusal to comply with the request” or “the entire request cannot with reasonable good faith efforts be fulfilled within three business days after actual receipt of the request due to the significant difficulty or the extensiveness of the request.” In either instance, § 84-305(2) requires the recipient of the request to take specific action in claiming the exception. The Agency failed to do so, clearly violating § 84-305(2). In no case not involving a legal basis for noncompliance, moreover, may the required compliance “exceed three calendar weeks after actual receipt of such request by any public entity.” Nevertheless, the additional documentation was not provided until over 11 weeks after being requested, which is another clear violation of § 84-305(2).

Program: Various, including AL 84.027 – Special Education Grants to States; AL 84.173 – COVID-19 Special Education Preschool Grants; AL 84.425D – COVID-19 Education Stabilization Fund – Elementary and Secondary School Emergency Relief Fund (ESSER I and ESSER II); AL 84.425U – COVID-19 Education Stabilization Fund – American Rescue Plan – Elementary and Secondary School Emergency Relief Fund (ARP ESSER) – Subrecipient Monitoring Grant Number & Year: Various, including H027A210079, FFY 2022; H173X210077, FFY 2022; S425D200048, grant period ending 9/30/2022; S425D210048, grant period ending 9/30/2023; S425U210048, grant period ending 9/30/2024. Federal Grantor Agency: U.S. Department of Education Criteria: Per 2 CFR § 3474.1 (January 1, 2023), the U.S. Department of Education adopted the OMB Uniform Guidance in 2 CFR part 200, except for 2 CFR § 200.102(a) and 200.207(a). Per 2 CFR § 200.403 (January 1, 2023), allowable costs must be necessary, reasonable, and adequately documented. 2 CFR § 200.332 (January 1, 2023) states, in relevant part, the following: All pass-through entities must: * * * * (d) Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. * * * * (2) Following-up and ensuring that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the Federal award provided to the subrecipient from the pass-through entity detected through audits, on-site reviews, and written confirmation from the subrecipient, highlighting the status of actions planned or taken to address Single Audit findings related to the particular subaward. (3) Issuing a management decision for applicable audit findings pertaining only to the Federal award provided to the subrecipient from the pass-through entity as required by § 200.521. (4) The pass-through entity is responsible for resolving audit findings specifically related to the subaward[.] * * * * (f) Verify that every subrecipient is audited as required by Subpart F of this part when it is expected that the subrecipient's Federal awards expended during the respective fiscal year equaled or exceeded the threshold set forth in § 200.501. 2 CFR § 200.521 (January 1, 2023) states, in relevant part, the following: (c) Pass-through entity. As provided in § 200.332(d), the pass-through entity must be responsible for issuing a management decision for audit findings that relate to Federal awards it makes to subrecipients. (d) Time requirements. The Federal awarding agency or pass-through entity responsible for issuing a management decision must do so within six months of acceptance of the audit report by the FAC. Good internal control requires procedures to ensure that subrecipients are using grant funds for allowable purposes. Good internal control also requires procedures to ensure that subrecipient Single Audit reports are being reviewed, and management decision letters are being issued in a timely manner to ensure that corrective action is being implemented. Condition: For 3 of 27 subrecipients tested that received Federal funds from the Special Education Cluster, the Agency did not perform adequate subrecipient monitoring to ensure that funds were used for allowable purposes. For seven subrecipients tested that received Federal funds from the Education Stabilization Fund and/or Special Education Cluster, the Agency did not issue a management decision letter within the time requirement for five subrecipients and did not issue a management decision letter for two subrecipients. The Agency also failed to track and review the Single Audit report for one subrecipient. Repeat Finding: No Questioned Costs: Unknown Statistical Sample: No Context: The Agency performs various subrecipient monitoring activities during the year to ensure that subrecipients are using funds for an allowable purpose. These activities include reviewing a sample of expenditures from all reimbursement requests, tracking subrecipient audit requirements and reviewing Single Audit reports, and performing fiscal monitoring on a three-year basis. During review of reimbursement requests, the Agency does not perform procedures to ensure that salary and benefits allocated to the Special Education (SPED) grants are adequately supported by underlying documentation for a majority of its subrecipients. Rather the Agency relies on the fiscal monitoring to test that payroll is being properly allocated to grants, and the subrecipients have procedures in place to comply with Uniform Guidance Requirements. During testing of 27 subrecipients that received SPED grants, we noted the following for three subrecipients: • For the first subrecipient, the Agency had never completed a fiscal monitoring review. The Agency indicated that it was currently conducting fiscal monitoring of the school, but the subrecipient had been slow to provide documentation, resulting in delays. • The second subrecipient also did not have a fiscal monitoring review. At the time of the reimbursement, moreover, the Agency did not review any underlying documentation to support the costs allocated to the grant. The Agency stated that it relied on the entity’s annual audit to ensure costs were allocated properly; however, the subrecipient had not had a recent Single Audit in which the Special Education Cluster was a major program. • The third subrecipient had a fiscal monitoring review of payroll costs, but there was no documentation to show that the Agency had reviewed other purchased services at the time of reimbursement or during the fiscal monitoring. During review of the Agency’s procedures for reviewing subrecipient Single Audits, we noted the following: • For two subrecipients tested, their Single Audits noted significant deficiencies and material weaknesses, including one instance of questioned costs totaling $105,273; however, the Agency did not issue a management decision letter on the findings or provide documentation of any follow-up performed. • For five subrecipients tested, the management decision letter was issued eight to nine months after the audit was made available on the Federal Audit Clearinghouse (FAC). • One subrecipient was not being tracked by the Agency. This subrecipient had received $939,358 in Federal funds from the Agency. After the APA pointed this out, the Agency obtained a copy of the subrecipient’s Single Audit report, which noted no findings. Cause: Inadequate subrecipient monitoring procedures. The Agency stated it had other priorities during the year that delayed its review of the subrecipients’ Single Audit reports. Effect: Without adequate procedures, there is increased risk of noncompliance with Federal regulations, audit findings of subrecipients not being corrected, and an increased risk of loss or misuse of funds. Recommendation: We recommend the Agency review its procedures for reimbursements and fiscal monitoring to ensure subrecipients are operating in compliance with Federal requirements. We also recommend the Agency improve procedures to ensure that all subrecipients are being tracked for Single Audit requirements, and management decisions are issued in response to all findings in a timely manner. Management Response: First SPED subrecipient – The first recipient’s fiscal monitoring review is part of the current annual group of recipients being monitored; set to close June 30, 2024. Second SPED subrecipient – As part of the FY2020 federal Single Audit testing conducted by KPMG, determined the after-the-fact verification as a method to certify that the payment received on a project is reasonable in relation to the amount of work performed. Third SPED subrecipient – Purchased services and supplies were reviewed during fiscal monitoring, but the documentation was in paper form, not electronic, and was not initially provided to the auditors when requested. It was provided on March 4, 2024, when located. Single Audits – Due to extensive time commitment to State audit facilitation and Education Stabilization Fund Annual Performance Reporting, some management decision letters were not issued or were issued late. The NDE staff member performing the annual audit reviews was not aware of an additional subrecipient that needed reviewed. APA Response: The Special Education Cluster was not a major program for the second subrecipient in FY2020. For the third subrecipient, we originally requested the Agency’s fiscal monitoring documentation on December 21, 2023. Neb. Rev. Stat. § 84-305(2) (Cum. Supp. 2022) requires compliance with such a request to occur within “three business days after actual receipt of the request.” The only exceptions to that three-day response requirement are if there is “a legal basis for refusal to comply with the request” or “the entire request cannot with reasonable good faith efforts be fulfilled within three business days after actual receipt of the request due to the significant difficulty or the extensiveness of the request.” In either instance, § 84-305(2) requires the recipient of the request to take specific action in claiming the exception. The Agency failed to do so, clearly violating § 84-305(2). In no case not involving a legal basis for noncompliance, moreover, may the required compliance “exceed three calendar weeks after actual receipt of such request by any public entity.” Nevertheless, the additional documentation was not provided until over 11 weeks after being requested, which is another clear violation of § 84-305(2).

Program: Various, including AL 84.027 – Special Education Grants to States; AL 84.173 – COVID-19 Special Education Preschool Grants; AL 84.425D – COVID-19 Education Stabilization Fund – Elementary and Secondary School Emergency Relief Fund (ESSER I and ESSER II); AL 84.425U – COVID-19 Education Stabilization Fund – American Rescue Plan – Elementary and Secondary School Emergency Relief Fund (ARP ESSER) – Subrecipient Monitoring Grant Number & Year: Various, including H027A210079, FFY 2022; H173X210077, FFY 2022; S425D200048, grant period ending 9/30/2022; S425D210048, grant period ending 9/30/2023; S425U210048, grant period ending 9/30/2024. Federal Grantor Agency: U.S. Department of Education Criteria: Per 2 CFR § 3474.1 (January 1, 2023), the U.S. Department of Education adopted the OMB Uniform Guidance in 2 CFR part 200, except for 2 CFR § 200.102(a) and 200.207(a). Per 2 CFR § 200.403 (January 1, 2023), allowable costs must be necessary, reasonable, and adequately documented. 2 CFR § 200.332 (January 1, 2023) states, in relevant part, the following: All pass-through entities must: * * * * (d) Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. * * * * (2) Following-up and ensuring that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the Federal award provided to the subrecipient from the pass-through entity detected through audits, on-site reviews, and written confirmation from the subrecipient, highlighting the status of actions planned or taken to address Single Audit findings related to the particular subaward. (3) Issuing a management decision for applicable audit findings pertaining only to the Federal award provided to the subrecipient from the pass-through entity as required by § 200.521. (4) The pass-through entity is responsible for resolving audit findings specifically related to the subaward[.] * * * * (f) Verify that every subrecipient is audited as required by Subpart F of this part when it is expected that the subrecipient's Federal awards expended during the respective fiscal year equaled or exceeded the threshold set forth in § 200.501. 2 CFR § 200.521 (January 1, 2023) states, in relevant part, the following: (c) Pass-through entity. As provided in § 200.332(d), the pass-through entity must be responsible for issuing a management decision for audit findings that relate to Federal awards it makes to subrecipients. (d) Time requirements. The Federal awarding agency or pass-through entity responsible for issuing a management decision must do so within six months of acceptance of the audit report by the FAC. Good internal control requires procedures to ensure that subrecipients are using grant funds for allowable purposes. Good internal control also requires procedures to ensure that subrecipient Single Audit reports are being reviewed, and management decision letters are being issued in a timely manner to ensure that corrective action is being implemented. Condition: For 3 of 27 subrecipients tested that received Federal funds from the Special Education Cluster, the Agency did not perform adequate subrecipient monitoring to ensure that funds were used for allowable purposes. For seven subrecipients tested that received Federal funds from the Education Stabilization Fund and/or Special Education Cluster, the Agency did not issue a management decision letter within the time requirement for five subrecipients and did not issue a management decision letter for two subrecipients. The Agency also failed to track and review the Single Audit report for one subrecipient. Repeat Finding: No Questioned Costs: Unknown Statistical Sample: No Context: The Agency performs various subrecipient monitoring activities during the year to ensure that subrecipients are using funds for an allowable purpose. These activities include reviewing a sample of expenditures from all reimbursement requests, tracking subrecipient audit requirements and reviewing Single Audit reports, and performing fiscal monitoring on a three-year basis. During review of reimbursement requests, the Agency does not perform procedures to ensure that salary and benefits allocated to the Special Education (SPED) grants are adequately supported by underlying documentation for a majority of its subrecipients. Rather the Agency relies on the fiscal monitoring to test that payroll is being properly allocated to grants, and the subrecipients have procedures in place to comply with Uniform Guidance Requirements. During testing of 27 subrecipients that received SPED grants, we noted the following for three subrecipients: • For the first subrecipient, the Agency had never completed a fiscal monitoring review. The Agency indicated that it was currently conducting fiscal monitoring of the school, but the subrecipient had been slow to provide documentation, resulting in delays. • The second subrecipient also did not have a fiscal monitoring review. At the time of the reimbursement, moreover, the Agency did not review any underlying documentation to support the costs allocated to the grant. The Agency stated that it relied on the entity’s annual audit to ensure costs were allocated properly; however, the subrecipient had not had a recent Single Audit in which the Special Education Cluster was a major program. • The third subrecipient had a fiscal monitoring review of payroll costs, but there was no documentation to show that the Agency had reviewed other purchased services at the time of reimbursement or during the fiscal monitoring. During review of the Agency’s procedures for reviewing subrecipient Single Audits, we noted the following: • For two subrecipients tested, their Single Audits noted significant deficiencies and material weaknesses, including one instance of questioned costs totaling $105,273; however, the Agency did not issue a management decision letter on the findings or provide documentation of any follow-up performed. • For five subrecipients tested, the management decision letter was issued eight to nine months after the audit was made available on the Federal Audit Clearinghouse (FAC). • One subrecipient was not being tracked by the Agency. This subrecipient had received $939,358 in Federal funds from the Agency. After the APA pointed this out, the Agency obtained a copy of the subrecipient’s Single Audit report, which noted no findings. Cause: Inadequate subrecipient monitoring procedures. The Agency stated it had other priorities during the year that delayed its review of the subrecipients’ Single Audit reports. Effect: Without adequate procedures, there is increased risk of noncompliance with Federal regulations, audit findings of subrecipients not being corrected, and an increased risk of loss or misuse of funds. Recommendation: We recommend the Agency review its procedures for reimbursements and fiscal monitoring to ensure subrecipients are operating in compliance with Federal requirements. We also recommend the Agency improve procedures to ensure that all subrecipients are being tracked for Single Audit requirements, and management decisions are issued in response to all findings in a timely manner. Management Response: First SPED subrecipient – The first recipient’s fiscal monitoring review is part of the current annual group of recipients being monitored; set to close June 30, 2024. Second SPED subrecipient – As part of the FY2020 federal Single Audit testing conducted by KPMG, determined the after-the-fact verification as a method to certify that the payment received on a project is reasonable in relation to the amount of work performed. Third SPED subrecipient – Purchased services and supplies were reviewed during fiscal monitoring, but the documentation was in paper form, not electronic, and was not initially provided to the auditors when requested. It was provided on March 4, 2024, when located. Single Audits – Due to extensive time commitment to State audit facilitation and Education Stabilization Fund Annual Performance Reporting, some management decision letters were not issued or were issued late. The NDE staff member performing the annual audit reviews was not aware of an additional subrecipient that needed reviewed. APA Response: The Special Education Cluster was not a major program for the second subrecipient in FY2020. For the third subrecipient, we originally requested the Agency’s fiscal monitoring documentation on December 21, 2023. Neb. Rev. Stat. § 84-305(2) (Cum. Supp. 2022) requires compliance with such a request to occur within “three business days after actual receipt of the request.” The only exceptions to that three-day response requirement are if there is “a legal basis for refusal to comply with the request” or “the entire request cannot with reasonable good faith efforts be fulfilled within three business days after actual receipt of the request due to the significant difficulty or the extensiveness of the request.” In either instance, § 84-305(2) requires the recipient of the request to take specific action in claiming the exception. The Agency failed to do so, clearly violating § 84-305(2). In no case not involving a legal basis for noncompliance, moreover, may the required compliance “exceed three calendar weeks after actual receipt of such request by any public entity.” Nevertheless, the additional documentation was not provided until over 11 weeks after being requested, which is another clear violation of § 84-305(2).

Program: AL 84.425U – COVID-19 Education Stabilization Fund – American Rescue Plan – Elementary and Secondary School Emergency Relief Fund (ARP ESSER) – Reporting Grant Number & Year: S425U210048, grant period ending 9/30/2024 Federal Grantor Agency: U.S. Department of Education Criteria: 2 CFR § 170, Appendix A I. (January 1, 2023) states, in part, the following: a. Reporting of first-tier subawards. Applicability. Unless you are exempt as provided in paragraph d. of this award term, you must report each action that equals or exceeds $30,000 in Federal funds for a subaward to a non-Federal entity or Federal agency . . . . 2. Where and when to report. i. The non-Federal entity or Federal agency must report each obligating action described in paragraph a.1. of this award term to http://www.fsrs.gov. ii. For subaward information, report no later than the end of the month following the month in which the obligation was made. Good internal control requires procedures to ensure all subawards subject to Federal Funding Accountability and Transparency Act (FFATA) reporting are submitted on time. Condition: FFATA reporting was not submitted for 2 of 11 subawards tested. Additionally, two other subawards were not submitted timely. Repeat Finding: No Questioned Costs: None Statistical Sample: No Context: The Agency had 104 subawards obligated during the fiscal year ended June 30, 2023. We tested 11 of the subawards. Two of those subawards were not reported in FFATA Subaward Reporting System (FSRS) as of February 7, 2024. The subawards should have been reported by September 30, 2022, and April 30, 2023. Additionally, the Agency did not submit two other subawards tested timely. The subawards were both reported 122 days late. See Schedule of Findings and Questioned Costs for chart/table. Cause: Inadequate review and reporting procedures. Effect: Without adequate procedures, there is an increased risk of noncompliance with Federal regulations. Recommendation: We recommend the Agency review its procedures for FFATA reporting to ensure compliance with Federal Requirements. Management Response: For the two subawards not reported, the NDE staff completing the FFATA reporting was not aware these subawards were issued. Regarding untimely reporting, the NDE staff was trying a new method to streamline reporting, but it was determined some amendments were missed. These subawards were reported at the time the error was found, which was a few months late.

Program: AL 93.069 – Public Health Emergency Preparedness (PHEP); AL 93.889 – National Bioterrorism Hospital Preparedness Program (HPP) – Allowability & Subrecipient Monitoring Grant Number & Year: NU90TP922039, Project Period through June 30, 2024; U3REP190555, Project Period through June 30, 2024 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR § 75.352(d) (October 1, 2022) requires a pass-through entity to: “Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved.” 45 CFR § 75.302(a) (October 1, 2022) requires the State to have accounting procedures sufficient to allow for “the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award.” 45 CFR § 75.403 (October 1, 2022) requires costs to be reasonable, necessary, and adequately documented. A good internal control plan requires procedures to ensure subrecipients comply with applicable cost principles. 45 CFR § 75.405(a) (October 1, 2022) states, in part, the following: A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. This standard is met if the cost: (1) Is incurred specifically for the Federal award; (2) Benefits both the Federal award and other work of the non-Federal entity and can be distributed in proportions that may be approximated using reasonable methods; and (3) Is necessary to the overall operation of the non-Federal entity and is assignable in part to the Federal award in accordance with the principles in this subpart. 45 CFR § 75.430(i)(1) (October 1, 2022) states, in part, the following: Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; * * * * (vii) Support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. (viii) Budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards . . . . 45 CFR § 75.431(b) (October 1, 2022) states the following: The cost of fringe benefits in the form of regular compensation paid to employees during periods of authorized absences from the job, such as for annual leave, family-related leave, sick leave, holidays, court leave, military leave, administrative leave, and other similar benefits, are allowable if all of the following criteria are met: * * * * (3) The accounting basis (cash or accrual) selected for costing each type of leave is consistently followed by the non-Federal entity or specified grouping of employees. * * * * (ii) The accrual basis may be only used for those types of leave for which a liability as defined by GAAP exists when the leave is earned. When a non-Federal entity uses the accrual basis of accounting, allowable leave costs are the lesser of the amount accrued or funded. 45 CFR § 75.431(c) (October 1, 2022) states the following: The cost of fringe benefits in the form of employer contributions or expenses for social security; employee life, health, unemployment, and worker's compensation insurance (except as indicated in § 75.447); pension plan costs (see paragraph (i) of this section); and other similar benefits are allowable, provided such benefits are granted under established written policies. Such benefits, must be allocated to Federal awards and all other activities in a manner consistent with the pattern of benefits attributable to the individuals or group(s) of employees whose salaries and wages are chargeable to such Federal awards and other activities, and charged as direct or indirect costs in accordance with the non-Federal entity's accounting practices. A good internal control plan requires procedures to ensure salaries and wages charged to subawards are properly documented, and payments made to subrecipients apply to work performed under the subaward project description. 45 CFR § 75.406(a) (October 1, 2022) says the following: Applicable credits refer to those receipts or reduction-of-expenditure-type transactions that offset or reduce expense items allocable to the Federal award as direct or indirect (F&A) costs. Examples of such transactions are: Purchase discounts, rebates or allowances, recoveries or indemnities on losses, insurance refunds or rebates, and adjustments of overpayments or erroneous charges. To the extent that such credits accruing to or received by the non-Federal entity relate to allowable costs, they must be credited to the Federal award either as a cost reduction or cash refund, as appropriate. Condition: Subrecipient monitoring procedures were inadequate. A similar finding has been noted in prior audits since 2014. Repeat Finding: 2022-025 Questioned Costs: $13,025 known (NU90TP922039) Statistical Sample: No Context: The Agency made 161 aid payments, totaling $5,353,085, during fiscal year ended June 30, 2023. This included payments to 34 subrecipients. Subrecipient reimbursement requests included an invoice and budget workbook showing expenses by category; however, no source documentation, such as invoices and timesheets, were submitted. The Agency has subrecipient monitoring procedures that include financial monitoring, such as desk reviews; however, desk reviews were performed for only 12 of 34 subrecipients during the fiscal year. The Agency did not perform any desk reviews for the HPP program. We selected a sample of 16 payments, totaling $360,772, which included eight subrecipients with desk reviews. When a desk review was not completed or not adequate, we offered the Agency the opportunity to gather supporting documentation from subrecipients. Documentation submitted was inadequate for 5 of 16 payments tested. All five of these subrecipients had Agency desk reviews. We initially allowed the Agency four weeks to provide support. After we reviewed that support, we allowed the Agency an additional two weeks to provide further support. We noted the following after considering all support provided: • Two payments did not have adequate documentation to support that fringe benefits charged to the grant were allowable and in accordance with Federal cost principles. In one case, the subrecipient was charging accrued leave to the subaward, while its financial statements were being prepared on a cash basis. In the other case, the personnel costs were calculated based on projected or budgeted hours devoted to the subaward, rather than actual hours worked. • Six payments did not have adequate documentation to support non-payroll charges. o Allocated costs for facilities, phones, and other charges did not have adequate support for the amount charged to the grant. For example, the full cost of two phone lines was charged for two employees; however, neither employee worked 100% on the program. Also, multiple subrecipients allocated costs based on estimated hours worked on the program, rather than the actual time worked. o One subrecipient was using reward points earned from purchasing supplies for seemingly personal benefit. The reward points could be used for discounts on future purchases or for free office supplies that would further benefit the program; instead, we noted invoices showing that reward points were used for such items as Millennium Falcon blankets, a luxury robe and spa set, deluxe slippers, a traveler's toiletry set, and a travel cooler set. o One subrecipient was reimbursed for sales tax; however, the entity was tax exempt. Subrecipient aid payments for the fiscal year ended June 30, 2023, totaled $5,353,085. Federal payment errors noted were $13,025. The total sample tested was $360,772. The dollar error rate for the sample was 3.61%. This estimates the potential dollars at risk for the fiscal year to be $193,246 (dollar error rate multiplied by the population). Cause: Inadequate procedures and staff turnover. Effect: Without adequate subrecipient monitoring procedures, there is an increased risk for the misuse of Federal funds and noncompliance with Federal regulations. Recommendation: We recommend the Agency perform adequate subrecipient monitoring to ensure costs are allowable and Federal regulations are adhered to. Management Response: The Agency partially agrees. The agency agrees with a portion of questioned costs. Notably, sales tax paid by an exempt entity. The agency partially disagrees with allocated costs not being supported by documentation. In one instance, it appears allocated costs were undercharged to the award rather than overcharged. The agency disagrees with APA's contention that the phone lines noted in the finding were not allocated appropriately. As provided by the subrecipient, but for the preparedness funds, these staff would not have these lines and both staff are listed as part of the local health department's emergency response plan. APA notes a use of reward points being used for seemingly personal benefit. The agency disagrees. The subrecipient used the rewards points to purchase items for an employee recognition event. The use of these points appears consistent with the subrecipient's policy regarding compliance with the Nebraska Local Government Miscellaneous Expenditure Act. APA Response: Documentation provided to the auditors was inadequate to support the allocation of costs charged. The Agency could not support that the two phone lines were used exclusively for the program; moreover, the employees did not work 100% on the program. As noted, Federal cost principles require costs to be charged based on the relative benefits received. Additionally, we were not provided the subrecipient’s policy regarding employee recognition.

Program: AL 93.069 – Public Health Emergency Preparedness (PHEP); AL 93.889 – National Bioterrorism Hospital Preparedness Program (HPP) – Matching and Reporting Grant Number & Year: NU90TP922039, Budget period through June 30, 2022; U3REP190555, Budget period through June 30, 2022 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR § 75.302(a) (October 1, 2022) states the following: Each state must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state's own funds. In addition, the state's and the other non-Federal entity's financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. Per 45 CFR Appendix VII to Part 75: Provisional rate means a temporary indirect cost rate applicable to a specified period which is used for funding, interim reimbursement, and reporting indirect costs on Federal awards pending the establishment of a “final” rate for that period. 45 CFR § 75.306 (October 1, 2022) states, in part, the following: (b) For all Federal awards, any shared costs or matching funds and all contributions, including cash and third party in-kind contributions, must be accepted as part of the non-Federal entity’s cost sharing or matching when such contributions meet all of the following criteria: (1) Are verifiable from the non-Federal entity's records; (2) Are not included as contributions for any other Federal award; (3) Are necessary and reasonable for accomplishment of project or program objectives; (4) Are allowable under subpart E of this part; * * * * (f) When a third-party organization furnishes the services of an employee, these services must be valued at the employee's regular rate of pay plus an amount of fringe benefits that is reasonable, necessary, allocable, and otherwise allowable, and indirect costs at either the third-party organization's approved federally negotiated indirect cost rate or, a rate in accordance with § 75.414(f), provided these services employ the same skill(s) for which the employee is normally paid. Where donated services are treated as indirect costs, indirect cost rates will separate the value of the donated services so that reimbursement for the donated services will not be made. 45 CFR § 75.403(a) requires costs to be “necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles.” A good internal control plan requires procedures to ensure documentation is adequate to support that matching funds are in accordance with Federal requirements. Condition: The Agency did not have adequate documentation to support the amount of matching funds provided and reported on the annual Federal Financial Report. A similar finding was noted in the prior audit. We also noted the Agency did not use the final approved indirect cost rate (IDCR) to report indirect costs (IDC). Repeat Finding: 2022-026 Questioned Costs: Unknown Statistical Sample: No Context: We tested the annual reports for PHEP and HPP for the budget period ended June 30, 2022. The reports included PHEP expenditures through September 21, 2022, and HPP expenditures through October 21, 2022. We noted the following: • Both reports used the interim indirect cost rate rather than the final approved indirect cost rate. The final indirect cost rate was approved on August 22, 2022, prior to the submission of both reports. See Schedule of Findings and Questioned Costs for chart/table. • The Agency reported $93,374 in State matching expenditures for the HPP grant, which included $87,300 of third-party in-kind match. However, only $1,905 was adequately supported and verifiable. Cause: Inadequate procedures. Effect: Noncompliance with Federal requirements, which could lead to Federal sanctions. Recommendation: We recommend the Agency implement procedures to ensure matching amounts are adequately supported and in accordance with Federal requirements. Management Response: The Agency partially agrees. In the reporting period under review, locally-provided match was insufficiently reported. However, the agency will substantiate additional match within the period of the cooperative agreement budget cycle so that total match over the five year period is sufficient to meet federal requirements.

Program: AL 93.069 – Public Health Emergency Preparedness (PHEP); AL 93.889 – National Bioterrorism Hospital Preparedness Program (HPP) – Allowability & Subrecipient Monitoring Grant Number & Year: NU90TP922039, Project Period through June 30, 2024; U3REP190555, Project Period through June 30, 2024 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR § 75.352(d) (October 1, 2022) requires a pass-through entity to: “Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved.” 45 CFR § 75.302(a) (October 1, 2022) requires the State to have accounting procedures sufficient to allow for “the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award.” 45 CFR § 75.403 (October 1, 2022) requires costs to be reasonable, necessary, and adequately documented. A good internal control plan requires procedures to ensure subrecipients comply with applicable cost principles. 45 CFR § 75.405(a) (October 1, 2022) states, in part, the following: A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. This standard is met if the cost: (1) Is incurred specifically for the Federal award; (2) Benefits both the Federal award and other work of the non-Federal entity and can be distributed in proportions that may be approximated using reasonable methods; and (3) Is necessary to the overall operation of the non-Federal entity and is assignable in part to the Federal award in accordance with the principles in this subpart. 45 CFR § 75.430(i)(1) (October 1, 2022) states, in part, the following: Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; * * * * (vii) Support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. (viii) Budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards . . . . 45 CFR § 75.431(b) (October 1, 2022) states the following: The cost of fringe benefits in the form of regular compensation paid to employees during periods of authorized absences from the job, such as for annual leave, family-related leave, sick leave, holidays, court leave, military leave, administrative leave, and other similar benefits, are allowable if all of the following criteria are met: * * * * (3) The accounting basis (cash or accrual) selected for costing each type of leave is consistently followed by the non-Federal entity or specified grouping of employees. * * * * (ii) The accrual basis may be only used for those types of leave for which a liability as defined by GAAP exists when the leave is earned. When a non-Federal entity uses the accrual basis of accounting, allowable leave costs are the lesser of the amount accrued or funded. 45 CFR § 75.431(c) (October 1, 2022) states the following: The cost of fringe benefits in the form of employer contributions or expenses for social security; employee life, health, unemployment, and worker's compensation insurance (except as indicated in § 75.447); pension plan costs (see paragraph (i) of this section); and other similar benefits are allowable, provided such benefits are granted under established written policies. Such benefits, must be allocated to Federal awards and all other activities in a manner consistent with the pattern of benefits attributable to the individuals or group(s) of employees whose salaries and wages are chargeable to such Federal awards and other activities, and charged as direct or indirect costs in accordance with the non-Federal entity's accounting practices. A good internal control plan requires procedures to ensure salaries and wages charged to subawards are properly documented, and payments made to subrecipients apply to work performed under the subaward project description. 45 CFR § 75.406(a) (October 1, 2022) says the following: Applicable credits refer to those receipts or reduction-of-expenditure-type transactions that offset or reduce expense items allocable to the Federal award as direct or indirect (F&A) costs. Examples of such transactions are: Purchase discounts, rebates or allowances, recoveries or indemnities on losses, insurance refunds or rebates, and adjustments of overpayments or erroneous charges. To the extent that such credits accruing to or received by the non-Federal entity relate to allowable costs, they must be credited to the Federal award either as a cost reduction or cash refund, as appropriate. Condition: Subrecipient monitoring procedures were inadequate. A similar finding has been noted in prior audits since 2014. Repeat Finding: 2022-025 Questioned Costs: $13,025 known (NU90TP922039) Statistical Sample: No Context: The Agency made 161 aid payments, totaling $5,353,085, during fiscal year ended June 30, 2023. This included payments to 34 subrecipients. Subrecipient reimbursement requests included an invoice and budget workbook showing expenses by category; however, no source documentation, such as invoices and timesheets, were submitted. The Agency has subrecipient monitoring procedures that include financial monitoring, such as desk reviews; however, desk reviews were performed for only 12 of 34 subrecipients during the fiscal year. The Agency did not perform any desk reviews for the HPP program. We selected a sample of 16 payments, totaling $360,772, which included eight subrecipients with desk reviews. When a desk review was not completed or not adequate, we offered the Agency the opportunity to gather supporting documentation from subrecipients. Documentation submitted was inadequate for 5 of 16 payments tested. All five of these subrecipients had Agency desk reviews. We initially allowed the Agency four weeks to provide support. After we reviewed that support, we allowed the Agency an additional two weeks to provide further support. We noted the following after considering all support provided: • Two payments did not have adequate documentation to support that fringe benefits charged to the grant were allowable and in accordance with Federal cost principles. In one case, the subrecipient was charging accrued leave to the subaward, while its financial statements were being prepared on a cash basis. In the other case, the personnel costs were calculated based on projected or budgeted hours devoted to the subaward, rather than actual hours worked. • Six payments did not have adequate documentation to support non-payroll charges. o Allocated costs for facilities, phones, and other charges did not have adequate support for the amount charged to the grant. For example, the full cost of two phone lines was charged for two employees; however, neither employee worked 100% on the program. Also, multiple subrecipients allocated costs based on estimated hours worked on the program, rather than the actual time worked. o One subrecipient was using reward points earned from purchasing supplies for seemingly personal benefit. The reward points could be used for discounts on future purchases or for free office supplies that would further benefit the program; instead, we noted invoices showing that reward points were used for such items as Millennium Falcon blankets, a luxury robe and spa set, deluxe slippers, a traveler's toiletry set, and a travel cooler set. o One subrecipient was reimbursed for sales tax; however, the entity was tax exempt. Subrecipient aid payments for the fiscal year ended June 30, 2023, totaled $5,353,085. Federal payment errors noted were $13,025. The total sample tested was $360,772. The dollar error rate for the sample was 3.61%. This estimates the potential dollars at risk for the fiscal year to be $193,246 (dollar error rate multiplied by the population). Cause: Inadequate procedures and staff turnover. Effect: Without adequate subrecipient monitoring procedures, there is an increased risk for the misuse of Federal funds and noncompliance with Federal regulations. Recommendation: We recommend the Agency perform adequate subrecipient monitoring to ensure costs are allowable and Federal regulations are adhered to. Management Response: The Agency partially agrees. The agency agrees with a portion of questioned costs. Notably, sales tax paid by an exempt entity. The agency partially disagrees with allocated costs not being supported by documentation. In one instance, it appears allocated costs were undercharged to the award rather than overcharged. The agency disagrees with APA's contention that the phone lines noted in the finding were not allocated appropriately. As provided by the subrecipient, but for the preparedness funds, these staff would not have these lines and both staff are listed as part of the local health department's emergency response plan. APA notes a use of reward points being used for seemingly personal benefit. The agency disagrees. The subrecipient used the rewards points to purchase items for an employee recognition event. The use of these points appears consistent with the subrecipient's policy regarding compliance with the Nebraska Local Government Miscellaneous Expenditure Act. APA Response: Documentation provided to the auditors was inadequate to support the allocation of costs charged. The Agency could not support that the two phone lines were used exclusively for the program; moreover, the employees did not work 100% on the program. As noted, Federal cost principles require costs to be charged based on the relative benefits received. Additionally, we were not provided the subrecipient’s policy regarding employee recognition.

Program: AL 93.069 – Public Health Emergency Preparedness (PHEP); AL 93.889 – National Bioterrorism Hospital Preparedness Program (HPP) – Matching and Reporting Grant Number & Year: NU90TP922039, Budget period through June 30, 2022; U3REP190555, Budget period through June 30, 2022 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR § 75.302(a) (October 1, 2022) states the following: Each state must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state's own funds. In addition, the state's and the other non-Federal entity's financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. Per 45 CFR Appendix VII to Part 75: Provisional rate means a temporary indirect cost rate applicable to a specified period which is used for funding, interim reimbursement, and reporting indirect costs on Federal awards pending the establishment of a “final” rate for that period. 45 CFR § 75.306 (October 1, 2022) states, in part, the following: (b) For all Federal awards, any shared costs or matching funds and all contributions, including cash and third party in-kind contributions, must be accepted as part of the non-Federal entity’s cost sharing or matching when such contributions meet all of the following criteria: (1) Are verifiable from the non-Federal entity's records; (2) Are not included as contributions for any other Federal award; (3) Are necessary and reasonable for accomplishment of project or program objectives; (4) Are allowable under subpart E of this part; * * * * (f) When a third-party organization furnishes the services of an employee, these services must be valued at the employee's regular rate of pay plus an amount of fringe benefits that is reasonable, necessary, allocable, and otherwise allowable, and indirect costs at either the third-party organization's approved federally negotiated indirect cost rate or, a rate in accordance with § 75.414(f), provided these services employ the same skill(s) for which the employee is normally paid. Where donated services are treated as indirect costs, indirect cost rates will separate the value of the donated services so that reimbursement for the donated services will not be made. 45 CFR § 75.403(a) requires costs to be “necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles.” A good internal control plan requires procedures to ensure documentation is adequate to support that matching funds are in accordance with Federal requirements. Condition: The Agency did not have adequate documentation to support the amount of matching funds provided and reported on the annual Federal Financial Report. A similar finding was noted in the prior audit. We also noted the Agency did not use the final approved indirect cost rate (IDCR) to report indirect costs (IDC). Repeat Finding: 2022-026 Questioned Costs: Unknown Statistical Sample: No Context: We tested the annual reports for PHEP and HPP for the budget period ended June 30, 2022. The reports included PHEP expenditures through September 21, 2022, and HPP expenditures through October 21, 2022. We noted the following: • Both reports used the interim indirect cost rate rather than the final approved indirect cost rate. The final indirect cost rate was approved on August 22, 2022, prior to the submission of both reports. See Schedule of Findings and Questioned Costs for chart/table. • The Agency reported $93,374 in State matching expenditures for the HPP grant, which included $87,300 of third-party in-kind match. However, only $1,905 was adequately supported and verifiable. Cause: Inadequate procedures. Effect: Noncompliance with Federal requirements, which could lead to Federal sanctions. Recommendation: We recommend the Agency implement procedures to ensure matching amounts are adequately supported and in accordance with Federal requirements. Management Response: The Agency partially agrees. In the reporting period under review, locally-provided match was insufficiently reported. However, the agency will substantiate additional match within the period of the cooperative agreement budget cycle so that total match over the five year period is sufficient to meet federal requirements.

Program: AL 93.268 - Immunization Cooperative Agreements; AL 93.323 - Epidemiology and Laboratory Capacity for Infectious Diseases (ELC); AL 93.558 - Temporary Assistance for Needy Families (TANF); AL 93.563 - Child Support Enforcement; AL 93.778 - Medical Assistance Program – Allowable Cost/Cost Principles Grant Number & Year: 19NH23IP922589, FFY 2022; 19NU50CK000547; FFY 2023; 2001NETANF, FFY 2020; 2201NECSES, FFY 2022; 2301NECSES, FFY 2023; 2305NE5ADM, FFY 2023 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR § 75.405(a) (October 1, 2022) states, in part, the following: A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. 45 CFR § 75.403 (October 1, 2022) provides the following, in relevant part: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. * * * * (g) Be adequately documented. See also §§ 75.300 through 75.309. Per 45 CFR § 75.303 (October 1, 2022): The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. 45 CFR § 75.430(i) (October 1, 2022) requires payroll expenses charged to Federal awards be based on official records that accurately reflect the work performed. Good internal control and sound accounting practices require policies and procedures to ensure that all payroll costs are properly recorded within the State Accounting System and allocated to the proper funding source for activities performed. Condition: The Agency did not have adequate procedures to ensure payroll charges were proper. Repeat Finding: No Questioned Costs: $91,150 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: We selected 31 employee paychecks paid with Federal funds. Twelve of the 31 tested had payroll charged to Child Support Enforcement. One employee tested was a Child Support Enforcement Worker through September 25, 2022, and changed positions to a Youth Security Specialist II on September 26, 2022. The employee’s payroll costs were not updated to be charged to cost center 25C40360 Youth Rehabilitation and Treatment Centers, which only records costs to the General fund. Instead, the employee’s payroll costs continued to be charged to cost center 25C21750 Child Support Operations. As a result, for the pay period tested, Child Support Enforcement was overcharged by $2,206. During the fiscal year, this employee had an additional $25,726 incorrectly charged to Child Support Enforcement. A Program Accuracy Specialist was recorded to the 25C43060 Child Support Enforcement cost center; however, the supervisor the employee worked with was not charged to this cost center. According to the supervisor, no employees under their management were assigned to read child support enforcement cases. As a result, for the pay period tested, Child Support Enforcement was overcharged by $1,704. During the fiscal year, this employee had an additional $27,976 incorrectly charged to Child Support Enforcement. We noted another Program Accuracy Specialist with this same supervisor also recorded to Child Support Enforcement. During the fiscal year, this employee had $30,670 incorrectly charged to Child Support Enforcement. We tested $20,143 Federal payroll charges to Child Support Enforcement and noted $3,910 in sampled questioned costs and $84,372 additional questioned costs. Federal payroll charges for Child Support Enforcement totaled $3,920,653. Six of the 31 employees tested had payroll charged to TANF. One employee was a Contract Procurement Manager whose payroll expense was split between State funds, TANF and Medicaid. The payroll costs were to be allocated based on a time study; however, the Agency had not completed a revised time study. Therefore, we were unable to ensure the grants were correctly charged. The Agency indicated no time study was done for the entirety of fiscal year 2023. We tested $9,557 Federal payroll charges to TANF and noted $99 in questioned costs. We tested $3,482 in Medicaid payroll charges and noted $197 in questioned costs. We tested the April 19, 2023, paycheck for an Epidemiology Surveillance Coordinator. Payroll expenses were allocated with 75% to the ELC grant and 25% to the Immunization grant. The Agency did not provide documentation to support how this split was determined. An email was provided on July 28, 2023, with a breakdown of the activities and hours the employee worked for each grant; however, the number of hours in the email did not agree to the hours worked per the paycheck. Additionally, to charge payroll expenses to a Federal grant, a timesheet or other official record that accurately reflects the work performed is required. We tested $3,692 Federal payroll charges to ELC and noted $1,929 in questioned costs. We tested $3,659 in Federal payroll charges to Immunization and noted $643 in questioned costs. Cause: Inadequate policies and procedures for review and documentation of payroll expenses. Additionally, the Agency did not change the cost center for one employee who changed positions. Effect: Without adequate documentation to support the allocation of costs, there is an increased risk of programs not being charged the proper amounts. Recommendation: We recommend the Agency improve procedures to ensure that employee pay is recorded correctly in the State Accounting System, and those costs are properly allocated and charged. Management Response: The Agency agrees.

Program: AL 93.268 - Immunization Cooperative Agreements; AL 93.323 - Epidemiology and Laboratory Capacity for Infectious Diseases (ELC); AL 93.558 - Temporary Assistance for Needy Families (TANF); AL 93.563 - Child Support Enforcement; AL 93.778 - Medical Assistance Program – Allowable Cost/Cost Principles Grant Number & Year: 19NH23IP922589, FFY 2022; 19NU50CK000547; FFY 2023; 2001NETANF, FFY 2020; 2201NECSES, FFY 2022; 2301NECSES, FFY 2023; 2305NE5ADM, FFY 2023 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR § 75.405(a) (October 1, 2022) states, in part, the following: A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. 45 CFR § 75.403 (October 1, 2022) provides the following, in relevant part: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. * * * * (g) Be adequately documented. See also §§ 75.300 through 75.309. Per 45 CFR § 75.303 (October 1, 2022): The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. 45 CFR § 75.430(i) (October 1, 2022) requires payroll expenses charged to Federal awards be based on official records that accurately reflect the work performed. Good internal control and sound accounting practices require policies and procedures to ensure that all payroll costs are properly recorded within the State Accounting System and allocated to the proper funding source for activities performed. Condition: The Agency did not have adequate procedures to ensure payroll charges were proper. Repeat Finding: No Questioned Costs: $91,150 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: We selected 31 employee paychecks paid with Federal funds. Twelve of the 31 tested had payroll charged to Child Support Enforcement. One employee tested was a Child Support Enforcement Worker through September 25, 2022, and changed positions to a Youth Security Specialist II on September 26, 2022. The employee’s payroll costs were not updated to be charged to cost center 25C40360 Youth Rehabilitation and Treatment Centers, which only records costs to the General fund. Instead, the employee’s payroll costs continued to be charged to cost center 25C21750 Child Support Operations. As a result, for the pay period tested, Child Support Enforcement was overcharged by $2,206. During the fiscal year, this employee had an additional $25,726 incorrectly charged to Child Support Enforcement. A Program Accuracy Specialist was recorded to the 25C43060 Child Support Enforcement cost center; however, the supervisor the employee worked with was not charged to this cost center. According to the supervisor, no employees under their management were assigned to read child support enforcement cases. As a result, for the pay period tested, Child Support Enforcement was overcharged by $1,704. During the fiscal year, this employee had an additional $27,976 incorrectly charged to Child Support Enforcement. We noted another Program Accuracy Specialist with this same supervisor also recorded to Child Support Enforcement. During the fiscal year, this employee had $30,670 incorrectly charged to Child Support Enforcement. We tested $20,143 Federal payroll charges to Child Support Enforcement and noted $3,910 in sampled questioned costs and $84,372 additional questioned costs. Federal payroll charges for Child Support Enforcement totaled $3,920,653. Six of the 31 employees tested had payroll charged to TANF. One employee was a Contract Procurement Manager whose payroll expense was split between State funds, TANF and Medicaid. The payroll costs were to be allocated based on a time study; however, the Agency had not completed a revised time study. Therefore, we were unable to ensure the grants were correctly charged. The Agency indicated no time study was done for the entirety of fiscal year 2023. We tested $9,557 Federal payroll charges to TANF and noted $99 in questioned costs. We tested $3,482 in Medicaid payroll charges and noted $197 in questioned costs. We tested the April 19, 2023, paycheck for an Epidemiology Surveillance Coordinator. Payroll expenses were allocated with 75% to the ELC grant and 25% to the Immunization grant. The Agency did not provide documentation to support how this split was determined. An email was provided on July 28, 2023, with a breakdown of the activities and hours the employee worked for each grant; however, the number of hours in the email did not agree to the hours worked per the paycheck. Additionally, to charge payroll expenses to a Federal grant, a timesheet or other official record that accurately reflects the work performed is required. We tested $3,692 Federal payroll charges to ELC and noted $1,929 in questioned costs. We tested $3,659 in Federal payroll charges to Immunization and noted $643 in questioned costs. Cause: Inadequate policies and procedures for review and documentation of payroll expenses. Additionally, the Agency did not change the cost center for one employee who changed positions. Effect: Without adequate documentation to support the allocation of costs, there is an increased risk of programs not being charged the proper amounts. Recommendation: We recommend the Agency improve procedures to ensure that employee pay is recorded correctly in the State Accounting System, and those costs are properly allocated and charged. Management Response: The Agency agrees.

Program: AL 93.323 – COVID-19 Epidemiology & Laboratory Capacity for Infectious Diseases – Allowability & Subrecipient Monitoring Grant Number & Year: NU50CK000547, period ending July 31, 2024 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Good internal control requires procedures to ensure payments are allowable and in accordance with Federal requirements. 45 CFR § 75.403 (October 1, 2022) requires costs to be reasonable, necessary, and adequately documented. 45 CFR § 75.404 (October 1, 2022) states, in part, the following: A cost is reasonable if, in its nature and amount, it does not exceed that which would be incurred by a prudent person under the circumstances prevailing at the time the decision was made to incur the cost. 45 CFR § 75.302(a) (October 1, 2022) requires the State to have accounting procedures sufficient to allow for “the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award.” 45 CFR § 75.352(d) (October 1, 2022) requires a pass-through entity to: “Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved.” 45 CFR § 75.511(b) (October 1, 2022) states, in relevant part, the following: The summary schedule of prior audit findings must report the status of all audit findings included in the prior audit’s schedule of findings and questioned costs. . . . * * * * (2) When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding’s recurrence and planned corrective action, and any partial corrective action taken. When corrective action taken is significantly different from corrective action previously reported in a corrective action plan or in the Federal agency’s or pass-through entity’s management decision, the summary schedule must provide an explanation. Neb. Rev. Stat. § 84-305(2) (Cum. Supp. 2022) states, in relevant part, the following: Upon receipt of a written request by the Auditor of Public Accounts for access to any information or records, the public entity shall provide to the auditor as soon as is practicable and without delay, but not more than three business days after actual receipt of the request, either (a) the requested materials or (b)(i) if there is a legal basis for refusal to comply with the request, a written denial of the request together with the information specified in subsection (1) of this section or (ii) if the entire request cannot with reasonable good faith efforts be fulfilled within three business days after actual receipt of the request due to the significant difficulty or the extensiveness of the request, a written explanation, including the earliest practicable date for fulfilling the request, and an opportunity for the auditor to modify or prioritize the items within the request. No delay due to the significant difficulty or the extensiveness of any request for access to information or records shall exceed three calendar weeks after actual receipt of such request by any public entity. (Emphasis added.) Condition: The Agency lacked adequate documentation to support that Epidemiology & Laboratory Capacity for Infectious Diseases (ELC) expenditures were allowable and in accordance with Federal requirements. A similar finding was noted in the prior audit. The Summary Schedule of Prior Audit Findings lists the status as complete. Repeat Finding: 2022-027 Questioned Costs: $236,188 known Statistical Sample: No Context: ELC expenditures for the fiscal year totaled $24,568,124. Of that amount, $11,575,904 comprised payments to subrecipients. We tested the three largest payments to subrecipients, totaling $2,935,844. We also tested the largest journal entry. We noted the following: • One subrecipient payment tested, totaling $747,489, lacked adequate documentation to ensure costs were in accordance with Federal cost principles. We noted questioned costs of $236,188. o Payments related to call center services did not have a contract, and there was no support for the percentage charged to the subaward. We requested information from the Agency on November 17, 2023, for the contract and allocation basis; however, as of January 31, 2024, no contract or additional information had been received. o Contract payments to a doctor to “furnish the full range of primary and preventive health care services” did not have support for the percentage charged to the subaward. The doctor was paid $27,052 monthly for a minimum of 14 days per month, and 50-60% of the payment was charged to the subaward. o Payroll and fringe benefits were not adequately supported, including $6,000 that appears to have been related to a loan reimbursement lacking adequate support that the amount was allowable or related to the subaward. Also, various fringe benefits were not adequately supported. The subrecipient was paid $1,645,791 during the fiscal year. • We tested a journal entry for $2,993,082 related to air purifiers and filters that were shipped directly to daycares and schools across the State. After the orders were placed in December 2022, the Agency completed no procedures to ensure that the entities received the items ordered until October 2023. A total of 1,978 air purifiers and 2,934 filters were ordered by 231 daycares and schools. We reviewed the orders and, on December 8, 2023, requested documentation to support that the 15 largest orders were received in full. The Agency provided us with emails confirming that 11 of those 15 orders were received. The emails did not provide any details about how many items were ordered or received, only that items were received. The 15 orders totaled $794,962 of the $2,993,082 journal entry, and the 4 orders not confirmed totaled $230,242. Initially, we questioned the costs of the orders for which the Agency was unable to confirm receipt. Then, on February 7, 2024, eight weeks after our original request, the Agency provided us with four additional emails, dated February 7, 2024, (13 months after the orders were received) indicating that the four recipients related to the questioned costs did receive their orders. Again, none of the emails contained details of how many items were, in fact, ordered or received. Cause: Inadequate procedures. Effect: Without adequate controls, there is an increased risk for misuse of funds and abuse or fraud to occur. Recommendation: We recommend the Agency implement procedures to ensure that costs are necessary, reasonable, and in accordance with Federal requirements and contract provisions. We further recommend implementing procedures to track orders that are paid by the Agency to ensure ordered items are received in full. Lastly, we recommend the Agency implement procedures to ensure compliance with § 84-305. Management Response: The Agency agrees.

Program: Various, including AL 93.575, 93.596 – CCDF Cluster; AL 93.558 – Temporary Assistance for Needy Families –– Reporting Grant Number & Year: Various, including 2301NECCDF, FFY 2023; 2101NETANF, FFY 2021 Federal Grantor Agency: Various, including U.S. Department of Health and Human Services Criteria: A good internal control plan requires: 1) adequate procedures to ensure the Schedule of Expenditures of Federal Awards (SEFA) is properly presented; and 2) the auditee to reconcile the SEFA to the financial statements to ensure the schedule is complete and accurate. Title 45 CFR § 75.510(b) (October 1, 2022) and Title 2 CFR § 200.510(b) (January 1, 2023) state in part: The auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee's financial statements which must include the total Federal awards expended . . . . At a minimum, the schedule must: * * * * (3) Provide total Federal awards expended for each individual Federal program . . . (4) Include the total amount provided to subrecipients from each Federal program. Neb. Rev. Stat. § 81-1111(1) (Reissue 2014) states, in part, the following: Subject to the supervision of the Director of Administrative Services, the Accounting Administrator shall have the authority to prescribe the system of accounts and accounting to be maintained by the state and its departments and agencies, develop necessary accounting policies and procedures, coordinate and approve all proposed financial systems, and manage all accounting matters of the state's central system. EnterpriseOne is the official accounting system of the State. Title 45 CFR § 75.511(a) (October 1, 2022) and 2 CFR § 200.511 (January 1, 2023) require the auditee to prepare a summary schedule of prior audit findings. Subsection (b)(2) of both regulations provides the following, as is relevant: When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding’s recurrence and planned corrective action, and any partial corrective action taken. Condition: Several programs did not have expenditures or the amount provided to subrecipients accurately reported on the SEFA. We notified Administrative Services of the errors, and the SEFA was subsequently adjusted. The Summary Schedule of Prior Audit Findings lists the status as “completed.” A similar finding was noted in the prior audit. Repeat Finding: 2022-018 Questioned Costs: None Statistical Sample: No Context: Administrative Services is responsible for managing the accounting matters of the State and certifies the data collection form for the Statewide Single Audit. Administrative Services compiles the SEFA from information provided by the individual agencies and submits it to the auditor. During our review, we noted the following: The Department of Health and Human Services (DHHS) did not accurately report expenditures for several programs, including underreporting AL 93.575 by $3,909,201, underreporting AL 93.596 by $7,416,246, and overreporting AL 93.558 by $11,325,447. The Department of Military underreported AL 21.027 by $920,874. The Department of Labor underreported AL 17.225 by $3,696,585. Twenty-three programs for various State agencies needed correction. The total expenditures and amounts provided to subrecipients originally reported and per the final SEFA were as follows: See Schedule of Findings and Questioned Costs for chart/table. Cause: Administrative Services did not have adequate procedures to ensure the accuracy of amounts not pulled directly from the accounting system. Administrative Services established a specific account code for aid to subrecipients, but not all agencies utilized this account code. Effect: Increased risk for the SEFA to be inaccurate, which could lead to Federal sanctions or programs not audited that should be. Recommendation: We recommend Administrative Services improve procedures to ensure the SEFA is complete and accurate. Management Response: We will continue to work with State teammates to ensure the SEFA is accurate and complete. The original total SEFA expenditures were 99.98% accurate. APA Response: We agree that SEFA adjustments were not significant in total. However, errors amounting to millions of dollars for individual programs are unquestionably significant to those programs. Such errors could result, moreover, in a program not being audited as a major program when it should be.

Program: AL 93.558 – Temporary Assistance for Needy Families; AL 93.563 – Child Support Enforcement; AL 93.568 – Low Income Home Energy Assistance (LIHEAP); AL 93.575 – Child Care and Development Block Grant; AL 93.658 – Foster Care Title IV-E; AL 93.778 – Medical Assistance Program; AL 10.561 – State Administrative Matching Grants for the Supplemental Nutrition Assistance Program – Allowable Costs/Cost Principles Grant Number & Year: 2001NETANF, FFY 2020; 2301NECSES, FFY 2023; 2301NELIEA, FFY 2023; 2301NECCDD, FFY 2023; 2301NEFOST, FFY 2023; 2305NE5ADM, FFY 2023; 233NE406S2514, FFY 2023 Federal Grantor Agency: U.S. Department of Health and Human Services and U.S. Department of Agriculture Criteria: 45 CFR § 75.405(a) (October 1, 2022) and 2 CFR § 200.405 (January 1, 2023) state, in part, the following: A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. 45 CFR § 75.403 (October 1, 2022) and 2 CFR § 200.403 (January 1, 2023) provide the following, in relevant part: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. * * * * (g) Be adequately documented. See also §§ 75.300 through 75.309. Per 45 CFR § 75.303 (October 1, 2022) and 2 CFR § 200.303 (January 1, 2023), The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Title 45 CFR § 75.302 (October 1, 2022) and 2 CFR § 200.302 (January 1, 2023) require financial management systems of the State sufficient to permit preparation of required reports and permit the tracing of funds to expenditures adequate to establish the use of these funds were in accordance with applicable regulations. EnterpriseOne is the official accounting system for the State of Nebraska, and all expenditures are generated from it. Good internal control requires procedures to ensure that amounts charged to Federal funds are proper. Condition: Procedures to ensure journal entries and adjustments to the Public Assistance Cost Allocation Plan (PACAP) were not adequate, resulting in multiple Federal programs being overcharged. Repeat Finding: No Questioned Costs: $581,496 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: Each quarter, as the PACAP is prepared, the Agency makes multiple adjustments for costs that either were charged to Federal funds and should not have been, or costs that were not charged to Federal funds but are claimable to a Federal grant. We tested five adjustments between two quarters. One adjustment tested for the quarter ended December 31, 2022, was recorded to charge the Foster Care grant for allowable costs incurred by the Foster Care Review Office (FCRO), a separate agency. The amounts provided by FCRO erroneously included payroll charges from a previous quarter, inflating the amount charged. The FCRO later caught the mistake and adjusted the internal spreadsheet but did not alert the Agency to the error, so a correcting adjustment was never made to the PACAP. The amount charged was $353,984; however, the adjustment should have been $212,725, a difference of $141,259. Foster Care is matched at 50%, so the grant was overcharged $70,629, which are questioned costs. Due to this error, we reviewed a second Foster Care adjustment for the quarter ending March 31, 2023, and noted the Agency’s calculation included amounts for a State funded program that should have been removed, resulting in the grant being overcharged an additional $1,561. We also tested six journal entries that moved costs between cost centers to determine any impact on the PACAP and if those journal entries were appropriate. We noted three improper journal entries that the Agency had not corrected as of the end of the fiscal year: • A journal entry for $526,487 was performed in November 2022 to temporarily move postage costs of multiple programs from State funds to the Child Support Enforcement (CSE) grant until new coding could be created in the State’s accounting system to track expenses from one fiscal year to another. The intent was to reverse the entry as soon as the new coding was completed; however, the reversing entry was never performed. Since the Agency performs a quarterly adjustment for the CSE grant to charge indirect costs identified by the Agency’s PACAP to the grant, the CSE grant was overcharged a total of $263,628. No correcting entry had been made as of September 30, 2023. These are considered questioned costs. • A journal entry for $207,369 was performed in December 2022 to move expenses to allow payroll to post. The intent was to reverse the entry before the end of the fiscal year; however, that was not done. The expenses were moved from Medicaid administration and were charged to the Central Services and Supplies Cost Center, which is then allocated to numerous other Cost Centers that are further allocated or charged directly to Federal programs such as TANF and Child Care. Due to the intricacies of PACAP allocations, exact questioned costs are unknown. No correcting entry was made as of September 30, 2023. • A journal entry for $5,317,640 was done in February 2023 to move Premium Pay to the Coronavirus State and Local Fiscal Recovery Funds (CSLFRF) grant as additional pay for certain job roles allowed under that grant. However, the entry performed included some lines that were miscoded, most significantly a line for $764,187 that was supposed to move money within the same Cost Center (CC 25C21910 – Field Office Administration); however, it pulled costs out of Cost Center 25C21780 - Protection and Safety Policy Chief instead. Additionally, we confirmed with the Agency that the costs charged to CC 25C21910 under the CSLFRF grant were also allocated to other Federal programs through the PACAP, essentially charging Federal programs twice. Due to the intricacies of the PACAP allocations, total questioned costs are unknown; however, we were able to determine that this error caused Medicaid to be overcharged $149,478, LIHEAP to be overcharged $33,447, SNAP to be overcharged $44,984, Child Care to be overcharged $10,412, and TANF to be overcharged $7,357. Cause: Inadequate procedures to ensure that adjustments to the PACAP are proper and that journal entries are appropriate for each program. Effect: Unallowable expenditures were charged to Federal funds and there is an increased risk for errors, fraud, and non-compliance with Federal regulations. Recommendation: We recommend the Agency strengthen procedures to ensure adjusting entries are complete and accurate. We further recommend the Agency strengthen procedures to ensure compliance with Federal regulations. Management Response: The Agency agrees.

Program: AL 93.268 - Immunization Cooperative Agreements; AL 93.323 - Epidemiology and Laboratory Capacity for Infectious Diseases (ELC); AL 93.558 - Temporary Assistance for Needy Families (TANF); AL 93.563 - Child Support Enforcement; AL 93.778 - Medical Assistance Program – Allowable Cost/Cost Principles Grant Number & Year: 19NH23IP922589, FFY 2022; 19NU50CK000547; FFY 2023; 2001NETANF, FFY 2020; 2201NECSES, FFY 2022; 2301NECSES, FFY 2023; 2305NE5ADM, FFY 2023 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR § 75.405(a) (October 1, 2022) states, in part, the following: A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. 45 CFR § 75.403 (October 1, 2022) provides the following, in relevant part: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. * * * * (g) Be adequately documented. See also §§ 75.300 through 75.309. Per 45 CFR § 75.303 (October 1, 2022): The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. 45 CFR § 75.430(i) (October 1, 2022) requires payroll expenses charged to Federal awards be based on official records that accurately reflect the work performed. Good internal control and sound accounting practices require policies and procedures to ensure that all payroll costs are properly recorded within the State Accounting System and allocated to the proper funding source for activities performed. Condition: The Agency did not have adequate procedures to ensure payroll charges were proper. Repeat Finding: No Questioned Costs: $91,150 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: We selected 31 employee paychecks paid with Federal funds. Twelve of the 31 tested had payroll charged to Child Support Enforcement. One employee tested was a Child Support Enforcement Worker through September 25, 2022, and changed positions to a Youth Security Specialist II on September 26, 2022. The employee’s payroll costs were not updated to be charged to cost center 25C40360 Youth Rehabilitation and Treatment Centers, which only records costs to the General fund. Instead, the employee’s payroll costs continued to be charged to cost center 25C21750 Child Support Operations. As a result, for the pay period tested, Child Support Enforcement was overcharged by $2,206. During the fiscal year, this employee had an additional $25,726 incorrectly charged to Child Support Enforcement. A Program Accuracy Specialist was recorded to the 25C43060 Child Support Enforcement cost center; however, the supervisor the employee worked with was not charged to this cost center. According to the supervisor, no employees under their management were assigned to read child support enforcement cases. As a result, for the pay period tested, Child Support Enforcement was overcharged by $1,704. During the fiscal year, this employee had an additional $27,976 incorrectly charged to Child Support Enforcement. We noted another Program Accuracy Specialist with this same supervisor also recorded to Child Support Enforcement. During the fiscal year, this employee had $30,670 incorrectly charged to Child Support Enforcement. We tested $20,143 Federal payroll charges to Child Support Enforcement and noted $3,910 in sampled questioned costs and $84,372 additional questioned costs. Federal payroll charges for Child Support Enforcement totaled $3,920,653. Six of the 31 employees tested had payroll charged to TANF. One employee was a Contract Procurement Manager whose payroll expense was split between State funds, TANF and Medicaid. The payroll costs were to be allocated based on a time study; however, the Agency had not completed a revised time study. Therefore, we were unable to ensure the grants were correctly charged. The Agency indicated no time study was done for the entirety of fiscal year 2023. We tested $9,557 Federal payroll charges to TANF and noted $99 in questioned costs. We tested $3,482 in Medicaid payroll charges and noted $197 in questioned costs. We tested the April 19, 2023, paycheck for an Epidemiology Surveillance Coordinator. Payroll expenses were allocated with 75% to the ELC grant and 25% to the Immunization grant. The Agency did not provide documentation to support how this split was determined. An email was provided on July 28, 2023, with a breakdown of the activities and hours the employee worked for each grant; however, the number of hours in the email did not agree to the hours worked per the paycheck. Additionally, to charge payroll expenses to a Federal grant, a timesheet or other official record that accurately reflects the work performed is required. We tested $3,692 Federal payroll charges to ELC and noted $1,929 in questioned costs. We tested $3,659 in Federal payroll charges to Immunization and noted $643 in questioned costs. Cause: Inadequate policies and procedures for review and documentation of payroll expenses. Additionally, the Agency did not change the cost center for one employee who changed positions. Effect: Without adequate documentation to support the allocation of costs, there is an increased risk of programs not being charged the proper amounts. Recommendation: We recommend the Agency improve procedures to ensure that employee pay is recorded correctly in the State Accounting System, and those costs are properly allocated and charged. Management Response: The Agency agrees.

Program: AL 93.558 – Temporary Assistance for Needy Families (TANF) – Allowability & Eligibility Grant Number & Year: 2001NETANF, FFY 2020; 2101NETANF, FFY 2021 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 45 CFR § 75.403 (October 1, 2022), costs must be necessary, reasonable, and adequately documented. Per Nebraska’s Combined State Plan (Program Years 2020-2023): DHHS will use TANF funds to support an array services to assist needy families with children so that children can be cared for in their own homes . . . . The eligibility criteria will be needs based as indicated by the family’s program eligibility status for Aid to Dependent Children (ADC), Supplemental Nutrition Assistance Program (SNAP), SSI or Medicaid. Medicaid eligibility will be based on parent income and not state ward status of an identified child. Per 45 CFR § 75.302(a) (October 1, 2022): Each state must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state's own funds. In addition, the state's and the other non- Federal entity's financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. Per 45 CFR § 75.303(a) (October 1, 2022) the non-Federal agency must do the following: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Good internal control requires procedures to ensure compliance with Federal regulations. Condition: Child welfare claims paid with TANF funds were not in accordance with State and Federal requirements. A similar finding was noted in the prior audit. Repeat Finding: 2022-029 Questioned Costs: $3,426 known (2001NETANF, $2,853; 2101NETANF, $573) Statistical Sample: No Context: The State Plan allows for payment of certain child welfare costs from Federal TANF funds. To identify eligible claims, the Agency performs a query of the NFOCUS system to pull claims for certain services (e.g., family support services, intensive family preservations and drug testing) for families in an active TANF, SNAP, or Medicaid case or an SSI recipient. The Agency transferred $4,203,769 from State general funds to Federal TANF funds during fiscal year 2023. We reviewed the NFOCUS detail and noted 3,571 claims totaling $1,011,922 charged to TANF identified as no active TANF, SNAP, or Medicaid case. We selected 10 of these claims, totaling $3,426, and reviewed the case eligibility information on NFOCUS. For all 10 claims tested, there was no active TANF, SNAP, or Medicaid case or SSI for the family and/or no child in the home at the time of service; therefore, per the State Plan, these claims were not eligible. The known questioned costs for claims tested was $3,426. The potential dollars at risk is $1,011,922 identified as no active TANF, SNAP, or Medicaid case. Cause: Inadequate review procedures. The NFOCUS detailed active program cases, but the Agency failed to exclude those cases that were not active for TANF, SNAP, or Medicaid. Effect: Without adequate controls to ensure claims are paid per Federal requirements, there is an increased risk for loss or misuse of funds. Recommendation: We recommend the Agency improve procedures to ensure compliance with the Federal requirements. Management Response: The Agency agrees.

Program: AL 93.558 – Temporary Assistance for Needy Families (TANF) – Allowability & Eligibility Grant Number & Year: 2001NETANF, FFY 2020; 2101NETANF, FFY 2021 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 45 CFR § 75.403 (October 1, 2022), costs must be necessary, reasonable, and adequately documented. Per 42 U.S.C. § 608(a)(4), “A State . . . shall not use any part of the grant to provide assistance to an individual who has not attained 18 years of age, is not married, has a minor child at least 12 weeks of age in his or her care, and has not successfully completed a high-school education (or its equivalent), if the individual does not participate in – (A) educational activities directed toward the attainment of a high school diploma or its equivalent; or (B) an alternative educational or training program that has been approved by the State.” The Nebraska State Plan for TANF, effective from July 1, 2020 to June 30, 2024, states, “Failure of a dependent child age 16, 17, or 18 to attend school without participating in any other Employment First approved work activity results in removal of the child’s needs from the ADC unit.” Title 468 NAC 4-002.01(D) states that a work-eligible individual includes “A dependent child age 16, 17, or 18 who quits school or reduces hours under full-time status according to the educational institution’s standards. This dependent child remains a work-eligible individual even if he or she returns to school.” Per Title 468 NAC 4-002.02(F), a "dependent child age 16, 17, or 18” may be excluded as a work-eligible individual if he or she is “a full-time student and regularly attending an elementary or secondary school according to the educational institution’s standards . . . . If the child is enrolled full-time for the next school term, the child’s attendance in the first month of the school term must be verified.” Title 465 NAC 2-001.02A, states, in relevant part, the following: The applicant or client must request a fair hearing within 90 days following the date the notice of adverse action is mailed. . . . If the client submits a request for a hearing within ten days following the date the notice is mailed, the staff shall not take the adverse action until a fair hearing decision is rendered. Per Title 468 NAC 4-010.02(A), “If the parent fails or refuses to participate in Employment First without good cause, the result is the loss of Aid to Dependent Children cash assistance for the entire family.” Title 468 NAC 4-010.02(A)(i)(1) outlines the length of each sanction: If the individual who has failed or refused to participate in EF is a parent, the sanctions will be as follows: (i) The first imposition of a sanction will last one month or until the failure to participate ceases, whichever is longer. (ii) The second sanction will last for three months or until the failure to participate ceases, whichever is longer. (iii) The third and subsequent sanctions must not be imposed without a second-level supervisory review. This sanction will last for a minimum of 12 months or until the failure to participate ceases, whichever is longer. Per Title 468 NAC 3-008.05(B)(ii), “All overpayments, regardless of cause, must be recouped if there is an active Aid to Dependent Children grant case or a recovery must be attempted from a closed grant case, if the outstanding overpayment amount is $35 or more.” A good internal control plan requires eligibility determinations and payments to be accurate. Condition: Three of 25 TANF cash assistance payments tested were not in compliance with State and Federal requirements. Repeat Finding: 2022-030 Questioned Costs: $1,216 known (2001NETANF, $654; 2101NETANF, $562) Statistical Sample: No Context: For two cases tested, the Agency failed to verify that a dependent child was a full-time student regularly attending school. The dependent child should have been removed from the family unit until such verification was received. For one case, the school status for a 17-year-old dependent was not verified, resulting in questioned costs of $77 for the January 2023 benefit payment tested and an additional $346 in questioned costs for benefit payments for August 2022 through December 2022. For the second case, the school status for a 16-year-old dependent was not verified, resulting in questioned costs of $77 for the February 2023 benefit payment tested and an additional $308 in questioned costs for benefit payments for November 2022 through January 2023 and March 2023. For another case tested, the March 2023 benefit payment should not have been issued to the client, resulting in questioned costs of $408. A third Employment First sanction was imposed on February 10, 2023, effective March 1, 2023, and the case was closed. The Notice of Action regarding the adverse action was mailed to the client on February 13, 2023. The client appealed the sanction; however, the request for fair hearing form was not received by the Agency until March 6, 2023 – 21 days after the Notice of Action was mailed. The worker processed the March 2023 benefit payment on March 7, 2023, even though the appeal request form was not submitted in 10 days. The error was identified by the Agency on March 8, 2023, and the case was closed again as of April 1, 2023. The appeal hearing was held on April 3, 2023, and on April 7, 2023, the Employment First sanction was affirmed, and the case remained closed. As of end of fieldwork on October 25, 2023, no overpayment has been established. Federal payment errors noted in the sample were $562 with additional out-of-sample questioned costs of $654. The Federal sample tested was $10,028, and the total Federal cash assistance expenditures during the fiscal year were $13,140,182. Based on the sample tested, the case error rate was 12% (3/25). The dollar error rate was 5.6% ($562/$10,028), which projects the potential dollars at risk for fiscal year 2023 to be $735,850. Cause: Worker error. Effect: Increased risk that Federal funds will be paid to ineligible individuals. Recommendation: We recommend that the Agency implement procedures to ensure compliance with State and Federal regulations. Management Response: The Agency agrees.

Program: AL 93.558 – Temporary Assistance for Needy Families (TANF) – Reporting Grant Number & Year: 2101NETANF, FFY 2021; 2201NETANF, FFY 2022 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 45 CFR § 75.302(a) (October 1, 2022): Each state must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state's own funds. In addition, the state's and the other non- Federal entity's financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. Per 42 USC § 611, each State must “collect on a monthly basis, and report to the Secretary on a quarterly basis,” case record information on the families receiving TANF assistance. 45 CFR § 265.3(a) (October 1, 2022) states the following: (1) Each State must collect on a monthly basis, and file on a quarterly basis, the data specified in the TANF Data Report and the TANF Financial Report (or, as applicable, the Territorial Financial Report). (2) Each State that claims MOE expenditures for a separate State program(s) must collect on a monthly basis, and file on a quarterly basis, the data specified in the SSP-MOE Data Report. 45 CFR § 265.7(a) (October 1, 2022) states the following: Each State's quarterly reports (the TANF Data Report, the TANF Financial Report (or Territorial Financial Report), and the SSP-MOE Data Report) must be complete and accurate and filed by the due date. The TANF Data Report instructions contain the following: For purposes of completing this report, include all TANF eligible families receiving assistance (i.e., families funded under the TANF block grant and State MOE funded TANF families) as families receiving assistance under the State (Tribal) TANF Program. All counts of families and recipients should be unduplicated monthly totals. * * * * Instruction: Enter the number of families receiving assistance under the State (Tribal) TANF Program for each month of the quarter. A. First Month: B. Second Month: C. Third Month: Good internal control requires procedures to ensure reports are accurate, and any issues are resolved in a timely manner. Condition: The Agency was unable to provide a detail of cases to support the Section Three Total Number of SSP-MOE Families. Also, issues noted during the Agency’s review were not resolved timely. A similar finding was noted in the prior audit. Repeat Finding: 2022-031 Questioned Costs: None Statistical Sample: No Context: We tested the total number of families reported on the ACF-199 and ACF-209 reports for September 2022 and February 2023. We asked the Agency to provide the detail of unduplicated families for those months. The Agency provided four Notepad text files for each month. The auditor copied the files to Excel and removed duplicate cases; however, the number of families per the Notepad files did not agree to the number of families reported for the ACF-209 reports. September 2022 Total SSP-MOE families reported was 310, and the number of families per the Notepad files was 388. February 2023 Total SSP-MOE families reported was 1,111, and the number of families per the Notepad files was 412. Program staff review a sample each month of three 199 reports and three 209 reports. Issues noted were sent to the Agency IT staff. One of the issues noted was that closed cases appeared on the reports. This issue was noted prior to May 2021 but had not been resolved by the IT staff as of October 31, 2023. Cause: Adequate resources were not devoted to correcting reporting errors noted. Effect: Increased risk for inaccurate reporting and non-compliance with Federal requirements. Recommendation: We recommend the Agency implement procedures to ensure reports are accurate, and any system issues are resolved in a timely manner. Management Response: The Agency agrees.

Program: AL 93.558 – Temporary Assistance for Needy Families (TANF) – Allowability & Subrecipient Monitoring Grant Number & Year: 2001NETANF, FFY 2020 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR § 75.352 (October 1, 2022) requires a pass-through entity to do the following: (d) Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; . . . * * * * (f) Verify that every subrecipient is audited as required by subpart F of this part when it is expected that the subrecipient's Federal awards expended during the respective fiscal year equaled or exceeded the threshold set forth in § 75.501. 45 CFR § 75.403 (October 1, 2022) requires costs be reasonable, necessary, determined in accordance with generally accepted accounting principles (GAAP) and adequately documented. 45 CFR § 75.430(i)(1) (October 1, 2022) provides the following, in relevant part: (1) Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-Federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non-Federal entity, not exceeding 100% of compensated activities (for IHE, this per the IHE's definition of IBS); (iv) Encompass both federally assisted and all other activities compensated by the non-Federal entity on an integrated basis, but may include the use of subsidiary records as defined in the non-Federal entity's written policy; * * * * (vii) Support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. (viii) Budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards . . . [.] Per 45 CFR § 75.431(c) (October 1, 2022): The cost of fringe benefits . . . must be allocated to Federal awards and all other activities in a manner consistent with the pattern of benefits attributable to the individuals or group(s) of employees whose salaries and wages are chargeable to such Federal awards and other activities, and charged as direct or indirect costs in accordance with the non-Federal entity's accounting practices. Per the subaward agreement, “Under this Subaward, DHHS shall only pay for actual and allowable costs.” Good internal control requires procedures to ensure State and Federal requirements are met. Condition: Subrecipient monitoring procedures should be improved. Repeat Finding: No Questioned Costs: $10,921 known Statistical Sample: No Context: We requested the financial monitoring files for two subrecipients. The Agency performed financial desk reviews for subrecipients; however, the reviews tested were not adequate. When desk reviews did not maintain adequate documentation, we provided the Agency with the opportunity to obtain additional support from the subrecipient. We tested one payment for each of the two subrecipients and noted the following: • One payment did not have adequate support for salaries and benefits. Time records did not reflect the total activity for employees. Additionally, fringe benefits were based on budgeted amounts, not actual costs. The payment tested was $110,492, and we question $2,963. The subrecipient was paid $1,750,753 during the fiscal year. We further noted this subrecipient should have had a Single audit submitted for fiscal year ended June 30, 2022, by March 31, 2023; however, none had been submitted. After our inquiry, the Agency followed up with the subrecipient on October 25, 2023, and the subrecipient stated the fiscal year 2022 audit had not yet been completed. • A second payment tested did not have adequate support. Time records did not reflect the total activity for employees, and there was not adequate support for employees who worked on more than one activity. Also, an overbilling was not corrected. The payment tested was for $114,895, and we question $7,958. The subrecipient was paid $1,426,186 during the fiscal year. Fourteen subrecipients were paid a total of $15,223,886 during the fiscal year. Cause: Inadequate review and staff turnover. Effect: Noncompliance with Federal regulations and increased risk for fraud or errors to occur. Recommendation: We recommend the Agency improve procedures to ensure compliance with Federal regulations, including cost principles. We further recommend the Agency improve procedures to ensure that subrecipients have a Single audit completed and submitted, as required. Management Response: The Agency agrees.

Program: Various, including AL 93.778 – Medical Assistance Program (Medicaid), and AL 93.563 – Child Support Enforcement – Allowable Costs/Cost Principles Grant Number & Year: Various, including 2205NE5ADM, FFY 2022; 2201NECSES, FFY 2022 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 2 CFR § 200.403 (January 1, 2023) and 45 CFR § 75.403 (October 1, 2022) state, in relevant part, the following: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: * * * * (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. * * * * (g) Be adequately documented. 2 CFR § 200.405(b) (January 1, 2023) and 45 CFR § 75.405(b) (October 1, 2022) state, in relevant part, the following: All activities which benefit from the non-Federal entity’s indirect (F&A) cost, including unallowable activities and donated services by the non-Federal entity or third parties, will receive an appropriate allocation of indirect costs. 2 CFR § 200, Appendix V, subsection (G)(2), (January 1, 2023) and 45 CFR § 75 Appendix V, subsection (G)(2), (October 1, 2022) state the following: Internal service funds are dependent upon a reasonable level of working capital reserve to operate from one billing cycle to the next. Charges by an internal service activity to provide for the establishment and maintenance of a reasonable level of working capital reserve, in addition to the full recovery of costs, are allowable. A working capital reserve as part of retained earnings of up to 60 calendar days cash expenses for normal operating purposes is considered reasonable. A working capital reserve exceeding 60 calendar days may be approved by the cognizant agency for indirect costs in exceptional cases. 2 CFR § 200, Appendix V, subsection (G)(4), (January 1, 2023) and 45 CFR § 75 Appendix V, subsection (G)(4), (October 1, 2022) state, in relevant part, the following: Billing rates used to charge Federal awards must be based on the estimated costs of providing the services, including an estimate of the allocable central service costs. A comparison of the revenues generated by each billed service (including revenues whether or not billed or collected) to the actual allowable costs of the service will be made at least annually and an adjustment will be made for the difference between the revenue and the allowable costs. Neb. Rev Stat. § 81-1120.22 (Cum. Supp. 2022) states the following: The Director of Communications shall develop a system of equitable billings and charges for communications services provided in any consolidated or joint-use system of communications. Such system of charges shall reflect, as nearly as may be practical, the actual share of costs incurred on behalf of or for services to each department, agency, or political subdivision provided communications services. Using agencies shall pay for such services out of appropriated or available funds. Beginning July 1, 2011, all payments shall be credited to the Communications Revolving Fund. Beginning July 1, 2011, all collections for payment of telephone expenses shall be credited to the Communications Revolving Fund. 2 CFR § 200.444(a) (January 1, 2023) and 45 CFR § 75.444(a) (October 1, 2022) state, in relevant part, the following: For states . . . the general costs of government are unallowable . . . . Unallowable costs include: (1) Salaries and expenses of the Office of the Governor of a state . . . . (2) Salaries and other expenses of a state legislature . . . . A good internal control plan requires: • Procedures to ensure rate charges are equitable, reflect actual costs incurred, and are reviewed periodically to ensure charges are appropriate for the services provided. • Adequate documentation is maintained to support both rates charged and the approval of those rates. Condition: The Agency did not have adequate documentation to support the allocation of information services and communications costs in developing rates charged by the Office of the Chief Information Officer (OCIO). Additionally, the OCIO did not maintain adequate documentation to support that charges were reasonable, equitable, and consistently applied. We also noted the Agency did not have adequate documentation to support the allocation of security costs in developing building rental rates, and the Agency’s Materiel Division did not maintain adequate documentation to support that charges were reasonable, equitable, and consistently applied. A similar finding has been noted in prior audits since 2015. Repeat Finding: 2022-017 Questioned Costs: Unknown Statistical Sample: No Context: We noted the following: Office of the Chief Information Officer (OCIO) For 6 of 14 OCIO rates selected for testing, documentation provided by the division was not adequate to support the rate charged. • Five of the rates selected utilized an employee time allocation spreadsheet prepared by the OCIO. The spreadsheet was prepared by supervisors utilizing an estimate of how much time each year every employee spends on services provided by the division. During testing, it was noted that these estimates are not backed by a time study, nor is a review of actual hours worked on each service completed by the division. • For one rate selected, we identified variances between the total for networking equipment used in the calculation of the rate charged and the totals per the supporting documentation provided, netting to $1,313,693. When asked about the variances, the OCIO was unable to explain why the amounts did not agree. • For one rate tested, the rate included equipment and maintenance costs incurred by the University of Nebraska (University). The fee was related to the network operated and maintained by Network Nebraska (a collaborative aggregation partnership between the OCIO, the University, and the Nebraska Educational Telecommunications commission). The OCIO receipts funds from the services provided to participants on the network. However, it was noted during testing that the OCIO does not pay the University for its portion of costs incurred for this fee. Per documentation provided to support the calculation of the rate charged, the University incurs $582,049 of the total annual costs of $788,510. For 8 of 14 OCIO rates selected for testing, the rate charged was not reasonable or was improper. • For the six rates previously mentioned above, we were unable to determine if the rate was proper due to the lack of supporting documentation. • For one rate tested, we noted that actual costs incurred for the service provided recalculated to 40 cents per unit. The OCIO charged 22 cents per unit for the service. Total units sold for the service in calendar year 2022 were 39,348,448, resulting in an expected loss of $7,165,169. • For one rate tested, we noted that the rate calculation included employee salaries as a base for costs incurred. Per the calculation, the OCIO utilized salaries that were effective as of January 1, 2018. We compared the hourly compensation for a sample of employees at January 1, 2018, and as of July 1, 2021. During this period, we noted an average pay increase of 9.1% for the employees selected; thus, the rate charged is inappropriate per the actual costs incurred for providing the service. For 3 of 15 OCIO receipts tested, documentation provided was not adequate to support the rate charged. • For one receipt tested, we noted that the OCIO did not charge from an outside communications provider at the same rate that was shown on the invoice from the provider. These rates were “Re-rated” by the OCIO and then charged to the agency. The OCIO could not provide support for how the re-rates were determined. The APA selected seven rates from the OCIO billing to trace to support, and five of those rates could not be traced back to the provider invoice. Of the total payment of $116,175, $11,397 was charged at a rate that could not be traced to support. • For one receipt tested, we noted that the amount charged for a monthly Supreme Court retainer fee of $56,250 is determined by a rate calculated by the OCIO, but the OCIO could not provide support for the amounts used in the calculation. • For one receipt tested, $9,057 was charged for IT Support. This was based on an employee’s annual salary being paid 90% by the agency and 10% by the OCIO. The OCIO could not provide supporting documentation for how the 90/10 split was determined. In addition to the testing mentioned previously, we asked the OCIO how rates are calculated and what procedures are performed to ensure that the rates are appropriate. Most of the rates selected for testing were last updated in 2020. The staff that created these rates are no longer with the OCIO due to turnover. The OCIO reviews each rate on a yearly basis to determine if the amount charged is appropriate based on actual costs incurred. However, no documentation on the individual rate setting processes was developed or maintained when the rates were initially created.  The APA reviewed the OCIO’s fund balances and found them to be compliant with Federal regulations. However, because some rates charged are improper or inadequately supported, there is a risk of some Federal programs being overcharged and some being undercharged. The OCIO receipted $36,684,244 in Federal dollars for services performed for Federal programs. Of this amount, $16,480,956 was charged to Medicaid, and $4,597,226 was charged to Child Support Enforcement. Building Division The rental rate charged to agencies for building space includes an allocation for indirect administrative costs, grounds keeping, security, and energy management. We noted that security costs were allocated for neither the Capitol nor the Governor’s residence, even though security is provided at those locations. Because those locations were not allocated any security costs, Federal programs could be overcharged. Additionally, security costs for the Capitol and the Governor’s residence are general costs of government and, therefore, not allowable. The fiscal year 2023 indirect allocations for security were $785,709. Print Shop As noted in prior audits, the Print Shop lacked adequate support for service rates charged. The Agency was in the process of developing new rates using a new methodology, but no changes were made for fiscal year 2023. Receipts from sales for fiscal year 2023 totaled $3,058,910. Cause: Inadequate procedures. Per the Agency, the methodology used to allocate the security allocation is based on a management decision; however, management cannot simply choose to disregard Federal regulations. Effect: When information services and communications costs are not allocated to all agencies in an equitable manner, there is an increased risk that Federal programs will not be charged in accordance with Federal cost principles. Additionally, without adequate controls and procedures to ensure rates are equitable and based on actual costs, there is an increased risk that Federal programs or State agencies will be overcharged for services. When security costs are not allocated to all buildings in an equitable manner, Federal programs will not be charged in accordance with Federal cost principles. Recommendation: We recommend the Agency review its allocation of information and communications costs to ensure that the costs are allocated in an equitable manner to all activities that benefit from the services. Additionally, we recommend the Agency maintain adequate documentation to support charges and ensure rates are equitable and reflect the actual costs incurred for services. We also recommend the Agency improve procedures to ensure that published rates are the actual rates charged. Lastly, we recommend the Agency review its allocation of security costs to ensure that the costs are allocated in an equitable manner to all activities that benefit from the services, in accordance with Federal regulations. Management Response: The OCIO agrees with the findings as identified by the APA. The Building and Grounds security allocation is based on a management business decision. The Print Shop lacked the data needed to substantiate published rates at the individual service line level. In response to prior findings, the Print Shop purchased a Cost Rate Advisor license to support future rate setting methodology at the individual service line level. That tool is currently being utilized to build Print Shop rates for the fiscal year 2026 - 2027 biennium. APA Response: As noted above, security costs for the Capitol and the Governor’s residence are general costs of government; therefore, despite any management business decision, such costs are not allowable.

Program: AL 93.558 – Temporary Assistance for Needy Families; AL 93.563 – Child Support Enforcement; AL 93.568 – Low Income Home Energy Assistance (LIHEAP); AL 93.575 – Child Care and Development Block Grant; AL 93.658 – Foster Care Title IV-E; AL 93.778 – Medical Assistance Program; AL 10.561 – State Administrative Matching Grants for the Supplemental Nutrition Assistance Program – Allowable Costs/Cost Principles Grant Number & Year: 2001NETANF, FFY 2020; 2301NECSES, FFY 2023; 2301NELIEA, FFY 2023; 2301NECCDD, FFY 2023; 2301NEFOST, FFY 2023; 2305NE5ADM, FFY 2023; 233NE406S2514, FFY 2023 Federal Grantor Agency: U.S. Department of Health and Human Services and U.S. Department of Agriculture Criteria: 45 CFR § 75.405(a) (October 1, 2022) and 2 CFR § 200.405 (January 1, 2023) state, in part, the following: A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. 45 CFR § 75.403 (October 1, 2022) and 2 CFR § 200.403 (January 1, 2023) provide the following, in relevant part: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. * * * * (g) Be adequately documented. See also §§ 75.300 through 75.309. Per 45 CFR § 75.303 (October 1, 2022) and 2 CFR § 200.303 (January 1, 2023), The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Title 45 CFR § 75.302 (October 1, 2022) and 2 CFR § 200.302 (January 1, 2023) require financial management systems of the State sufficient to permit preparation of required reports and permit the tracing of funds to expenditures adequate to establish the use of these funds were in accordance with applicable regulations. EnterpriseOne is the official accounting system for the State of Nebraska, and all expenditures are generated from it. Good internal control requires procedures to ensure that amounts charged to Federal funds are proper. Condition: Procedures to ensure journal entries and adjustments to the Public Assistance Cost Allocation Plan (PACAP) were not adequate, resulting in multiple Federal programs being overcharged. Repeat Finding: No Questioned Costs: $581,496 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: Each quarter, as the PACAP is prepared, the Agency makes multiple adjustments for costs that either were charged to Federal funds and should not have been, or costs that were not charged to Federal funds but are claimable to a Federal grant. We tested five adjustments between two quarters. One adjustment tested for the quarter ended December 31, 2022, was recorded to charge the Foster Care grant for allowable costs incurred by the Foster Care Review Office (FCRO), a separate agency. The amounts provided by FCRO erroneously included payroll charges from a previous quarter, inflating the amount charged. The FCRO later caught the mistake and adjusted the internal spreadsheet but did not alert the Agency to the error, so a correcting adjustment was never made to the PACAP. The amount charged was $353,984; however, the adjustment should have been $212,725, a difference of $141,259. Foster Care is matched at 50%, so the grant was overcharged $70,629, which are questioned costs. Due to this error, we reviewed a second Foster Care adjustment for the quarter ending March 31, 2023, and noted the Agency’s calculation included amounts for a State funded program that should have been removed, resulting in the grant being overcharged an additional $1,561. We also tested six journal entries that moved costs between cost centers to determine any impact on the PACAP and if those journal entries were appropriate. We noted three improper journal entries that the Agency had not corrected as of the end of the fiscal year: • A journal entry for $526,487 was performed in November 2022 to temporarily move postage costs of multiple programs from State funds to the Child Support Enforcement (CSE) grant until new coding could be created in the State’s accounting system to track expenses from one fiscal year to another. The intent was to reverse the entry as soon as the new coding was completed; however, the reversing entry was never performed. Since the Agency performs a quarterly adjustment for the CSE grant to charge indirect costs identified by the Agency’s PACAP to the grant, the CSE grant was overcharged a total of $263,628. No correcting entry had been made as of September 30, 2023. These are considered questioned costs. • A journal entry for $207,369 was performed in December 2022 to move expenses to allow payroll to post. The intent was to reverse the entry before the end of the fiscal year; however, that was not done. The expenses were moved from Medicaid administration and were charged to the Central Services and Supplies Cost Center, which is then allocated to numerous other Cost Centers that are further allocated or charged directly to Federal programs such as TANF and Child Care. Due to the intricacies of PACAP allocations, exact questioned costs are unknown. No correcting entry was made as of September 30, 2023. • A journal entry for $5,317,640 was done in February 2023 to move Premium Pay to the Coronavirus State and Local Fiscal Recovery Funds (CSLFRF) grant as additional pay for certain job roles allowed under that grant. However, the entry performed included some lines that were miscoded, most significantly a line for $764,187 that was supposed to move money within the same Cost Center (CC 25C21910 – Field Office Administration); however, it pulled costs out of Cost Center 25C21780 - Protection and Safety Policy Chief instead. Additionally, we confirmed with the Agency that the costs charged to CC 25C21910 under the CSLFRF grant were also allocated to other Federal programs through the PACAP, essentially charging Federal programs twice. Due to the intricacies of the PACAP allocations, total questioned costs are unknown; however, we were able to determine that this error caused Medicaid to be overcharged $149,478, LIHEAP to be overcharged $33,447, SNAP to be overcharged $44,984, Child Care to be overcharged $10,412, and TANF to be overcharged $7,357. Cause: Inadequate procedures to ensure that adjustments to the PACAP are proper and that journal entries are appropriate for each program. Effect: Unallowable expenditures were charged to Federal funds and there is an increased risk for errors, fraud, and non-compliance with Federal regulations. Recommendation: We recommend the Agency strengthen procedures to ensure adjusting entries are complete and accurate. We further recommend the Agency strengthen procedures to ensure compliance with Federal regulations. Management Response: The Agency agrees.

Program: AL 93.268 - Immunization Cooperative Agreements; AL 93.323 - Epidemiology and Laboratory Capacity for Infectious Diseases (ELC); AL 93.558 - Temporary Assistance for Needy Families (TANF); AL 93.563 - Child Support Enforcement; AL 93.778 - Medical Assistance Program – Allowable Cost/Cost Principles Grant Number & Year: 19NH23IP922589, FFY 2022; 19NU50CK000547; FFY 2023; 2001NETANF, FFY 2020; 2201NECSES, FFY 2022; 2301NECSES, FFY 2023; 2305NE5ADM, FFY 2023 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR § 75.405(a) (October 1, 2022) states, in part, the following: A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. 45 CFR § 75.403 (October 1, 2022) provides the following, in relevant part: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. * * * * (g) Be adequately documented. See also §§ 75.300 through 75.309. Per 45 CFR § 75.303 (October 1, 2022): The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. 45 CFR § 75.430(i) (October 1, 2022) requires payroll expenses charged to Federal awards be based on official records that accurately reflect the work performed. Good internal control and sound accounting practices require policies and procedures to ensure that all payroll costs are properly recorded within the State Accounting System and allocated to the proper funding source for activities performed. Condition: The Agency did not have adequate procedures to ensure payroll charges were proper. Repeat Finding: No Questioned Costs: $91,150 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: We selected 31 employee paychecks paid with Federal funds. Twelve of the 31 tested had payroll charged to Child Support Enforcement. One employee tested was a Child Support Enforcement Worker through September 25, 2022, and changed positions to a Youth Security Specialist II on September 26, 2022. The employee’s payroll costs were not updated to be charged to cost center 25C40360 Youth Rehabilitation and Treatment Centers, which only records costs to the General fund. Instead, the employee’s payroll costs continued to be charged to cost center 25C21750 Child Support Operations. As a result, for the pay period tested, Child Support Enforcement was overcharged by $2,206. During the fiscal year, this employee had an additional $25,726 incorrectly charged to Child Support Enforcement. A Program Accuracy Specialist was recorded to the 25C43060 Child Support Enforcement cost center; however, the supervisor the employee worked with was not charged to this cost center. According to the supervisor, no employees under their management were assigned to read child support enforcement cases. As a result, for the pay period tested, Child Support Enforcement was overcharged by $1,704. During the fiscal year, this employee had an additional $27,976 incorrectly charged to Child Support Enforcement. We noted another Program Accuracy Specialist with this same supervisor also recorded to Child Support Enforcement. During the fiscal year, this employee had $30,670 incorrectly charged to Child Support Enforcement. We tested $20,143 Federal payroll charges to Child Support Enforcement and noted $3,910 in sampled questioned costs and $84,372 additional questioned costs. Federal payroll charges for Child Support Enforcement totaled $3,920,653. Six of the 31 employees tested had payroll charged to TANF. One employee was a Contract Procurement Manager whose payroll expense was split between State funds, TANF and Medicaid. The payroll costs were to be allocated based on a time study; however, the Agency had not completed a revised time study. Therefore, we were unable to ensure the grants were correctly charged. The Agency indicated no time study was done for the entirety of fiscal year 2023. We tested $9,557 Federal payroll charges to TANF and noted $99 in questioned costs. We tested $3,482 in Medicaid payroll charges and noted $197 in questioned costs. We tested the April 19, 2023, paycheck for an Epidemiology Surveillance Coordinator. Payroll expenses were allocated with 75% to the ELC grant and 25% to the Immunization grant. The Agency did not provide documentation to support how this split was determined. An email was provided on July 28, 2023, with a breakdown of the activities and hours the employee worked for each grant; however, the number of hours in the email did not agree to the hours worked per the paycheck. Additionally, to charge payroll expenses to a Federal grant, a timesheet or other official record that accurately reflects the work performed is required. We tested $3,692 Federal payroll charges to ELC and noted $1,929 in questioned costs. We tested $3,659 in Federal payroll charges to Immunization and noted $643 in questioned costs. Cause: Inadequate policies and procedures for review and documentation of payroll expenses. Additionally, the Agency did not change the cost center for one employee who changed positions. Effect: Without adequate documentation to support the allocation of costs, there is an increased risk of programs not being charged the proper amounts. Recommendation: We recommend the Agency improve procedures to ensure that employee pay is recorded correctly in the State Accounting System, and those costs are properly allocated and charged. Management Response: The Agency agrees.

Program: AL 93.566 – Refugee and Entrant Assistance State/Replacement Designee Administered Programs – Allowability & Eligibility Grant Number & Year: 2201NERCMA, FFY 2022; 2301NERCMA, FFY 2023 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 45 CFR § 75.303 (October 1, 2022), The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Per the U.S. Department of Health and Human Services’ Office of Refugee Resettlement (ORR) guidance, published in the Federal Register on March 28, 2022, at 87 FR 17312: In accordance with ORR regulations, the Director of ORR is announcing the expansion of the Refugee Cash Assistance (RCA) and Refugee Medical Assistance (RMA) eligibility period from 8 months to 12 months of assistance for participants whose date of eligibility for ORR benefits is on or after October 1, 2021. Per 45 CFR § 400.66(e) (October 1, 2022), “The State agency may use the date of application as the date refugee cash assistance begins in order to provide payments quickly to newly arrived refugees.” Title 470 NAC 2-002 states, in part, the following: Eligibility begins with the date of arrival in the United States, if the refugee meets all eligibility requirements. For asylees, victims of severe forms of trafficking, and Cuban and Haitian Parolees eligibility begins with the date of granted status. The time limit is applied to each refugee separately, not to the unit as a whole. If the refugee applies after the date of arrival in the United States, they may receive assistance for the remaining months of their eligibility period. Per Title 470 NAC 1-010, “Eligibility is redetermined at six months. Eligibility may be redetermined in less than six months to coordinate review dates for more than one program. An application is required as part of the eligibility review and to establish a new eligibility period.” Title 45 CFR § 400.2 (October 1, 2022) defines refugee cash assistance (RCA) as “cash assistance provided under section 412(e) of the Act to refugees who are ineligible for TANF [Temporary Assistance for Needy Families], OAA [Old Age Assistance], AB [Aid to the Blind], APTD [Aid to the Permanently and Totally Disabled], AABD [Aid to the Aged, Blind, and Disabled], or SSI [Supplemental Security Income].” Title 45 CFR § 400.2 defines refugee medical assistance (RMA) as, “(a) Medical assistance provided under section 412(e) of the Act to refugees who are ineligible for the Medicaid program[.]” Title 468 NAC 2-001 explains the eligibility requirements for Nebraska’s TANF program, including “(B) United States citizenship or alien status; (C) Nebraska residence; . . . (F) Age requirement for a dependent child; . . . .” Title 477 NAC 2-001 provides, in relevant part, the following: To be eligible for Medicaid, an individual must satisfy the requirements of the following eligibility criteria, as applicable: 1. Application; 2. U.S. citizenship or alien status (see Appendix 477-000-003 and 477-000-004); 3. Nebraska residence; 4. Social Security number; 5. Age (limited to ABD, Former Foster Care, Children, 599 CHIP, Former Ward, Women’s Cancer Program)[.] Title 45 CFR § 401.2 (October 1, 2022) states the following: For purposes of this part a Cuban and Haitian entrant or entrant is defined as: (a) Any individual granted parole status as a Cuban/Haitian Entrant (Status Pending) or granted any other special status subsequently established under the immigration laws for nationals of Cuba or Haiti, regardless of the status of the individual at the time assistance or services are provided; and (b) Any other national of Cuba or Haiti (1) Who: (i) Was paroled into the United States and has not acquired any other status under the Immigration and Nationality Act; (ii) Is the subject of exclusion or deportation proceedings under the Immigration and Nationality Act; or (iii) Has an application for asylum pending with the Immigration and Naturalization Service; and (2) With respect to whom a final, nonappealable, and legally enforceable order of deportation or exclusion has not been entered. The Agency utilizes SAVE (Systematic Alien Verification for Entitlements) to determine an applicant’s status. SAVE is an online service that allows Federal, State, and local benefit-granting agencies to verify a benefit applicant’s immigration status or naturalized/derived citizenship. SAVE is administered by U.S. Citizenship and Immigration Services, a component of the Department of Homeland Security. Good internal control requires procedures to maintain SAVE documentation used to verify an applicant’s status and ensure the applicant is not under an active order of deportation. Condition: Refugee assistance payments were not in compliance with State and Federal requirements. Repeat Finding: No Questioned Costs: $9,092 known (2201NERCMA, $1,957; 2301NERCMA, $7,135) Statistical Sample: No Context: The Refugee and Entrant Assistance program provides aid payments both directly to individuals who are deemed eligible for cash assistance (RCA) and also medical assistance (RMA) through the managed care program. We tested 25 RCA payments and 25 RMA payments to a total of 35 recipients. (For 15 of these recipients, we tested both RCA and RMA payments.) We noted the following: • One recipient tested, who received both RCA and RMA, was over the age of 65 and may have qualified for other assistance programs before refugee assistance; however, a referral to other programs was not completed. Refugee assistance is not allowable for individuals eligible for other programs, such as Medicaid and OAA. • Another recipient, who received both RCA and RMA, had been in the U.S. for over 12 months and had, in fact, became a permanent resident in August 2013. Therefore, she was ineligible for Refugee assistance. • We tested 25 recipients to determine whether eligibility had been redetermined at six months, as required. o One recipient tested entered the United States on January 30, 2022, and applied for assistance on February 25, 2022, making his eligibility redetermination due on or about August 26, 2022. We reviewed all support for the recipient’s case and were unable to verify that a redetermination of eligibility, including a new application, was completed. The Agency confirmed that no documentation was on file to support completion of the redetermination. The recipient continued to receive benefits until January 2023, when his 12-month eligibility period had expired. o Another recipient tested entered the United States on June 25, 2022, and applied for assistance on July 5, 2022, making her eligibility redetermination due on or about January 3, 2023. We observed that an eligibility redetermination was recorded to the recipient’s case on December 15, 2022; however, the Agency did not receive a new application at that time. The Agency was unable to verify that an application was provided before eligibility was redetermined. The recipient continued to receive benefits until May 2023, when her 12-month eligibility period had expired. • For 25 of 35 recipients, adequate documentation was not on file to support that the Agency had verified, using the SAVE system, that the individual was not under an active order of deportation prior to starting benefit payments. In some cases, we were unable to verify if a SAVE system query had been completed at all. One of the recipients had a SAVE response of “No Status,” which indicates an immigration status was not found for the applicant, and updated documents were required for a new search. After our inquiry, the Agency requested new SAVE responses; therefore, we did not question costs related to SAVE documentation. Refugee Cash Assistance payments for the fiscal year totaled $6,924,438. The Federal sample tested was $8,099, and Federal payment errors noted for the RCA sample tested were $331. The dollar error rate for the sample was 4.09% ($331/8,099), which estimates the potential dollars at risk for fiscal year 2023 to be $283,210 (dollar rate multiplied by the population). Refugee Medical Assistance payments for the fiscal year totaled $5,058,730. The Federal sample tested was $3,949, and Federal payment errors noted for the RMA sample tested were $327. The dollar error rate for the sample was 8.28% ($327/3,949), which estimates the potential dollars at risk for the fiscal year 2023 to be $418,863 (dollar rate multiplied by the population). In addition to the $658 Federal questioned costs noted on the sample items tested, we noted $3,133 of Federal questioned costs on other cash assistance payments to the recipients noted above during the fiscal year and $5,301 of Federal questioned costs for other medical assistance payments on behalf of these recipients. Cause: Ineffective controls. Written procedures are in place but not consistently followed. Effect: Increased risk for loss or misuse of funds. Recommendation: We recommend the Agency strengthen procedures to ensure payments are adequately supported and in accordance with State and Federal regulations. We further recommend the Agency ensure that SAVE documentation is maintained on file. Management Response: The Agency agrees.

Program: AL 93.566 – Refugee and Entrant Assistance State/Replacement Designee Administered Programs – Allowability & Subrecipient Monitoring Grant Number & Year: 2101NERSSS, FFY 2021; 2201NERSSS, FFY 2022 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR § 75.352(d) (October 1, 2022) requires a pass-through entity to: “Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved.” 45 CFR § 75.302(a) (October 1, 2022) requires the State to have accounting procedures sufficient to allow for “the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award.” 45 CFR § 75.403 (October 1, 2022) requires costs to be reasonable, necessary, and adequately documented. 45 CFR § 75.405(a) (October 1, 2022) states the following: A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. This standard is met if the cost: (1) Is incurred specifically for the Federal award; (2) Benefits both the Federal award and other work of the non-Federal entity and can be distributed in proportions that may be approximated using reasonable methods; and (3) Is necessary to the overall operation of the non-Federal entity and is assignable in part to the Federal award in accordance with the principles in this subpart. 45 CFR § 75.430(i)(1) (October 1, 2022) states, in part, the following: Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; * * * * (vii) Support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. (viii) Budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards . . . . 45 CFR § 75.431(c) (October 1, 2022) states the following: The cost of fringe benefits in the form of employer contributions or expenses for social security; employee life, health, unemployment, and worker's compensation insurance (except as indicated in § 75.447); pension plan costs (see paragraph (i) of this section); and other similar benefits are allowable, provided such benefits are granted under established written policies. Such benefits, must be allocated to Federal awards and all other activities in a manner consistent with the pattern of benefits attributable to the individuals or group(s) of employees whose salaries and wages are chargeable to such Federal awards and other activities, and charged as direct or indirect costs in accordance with the non-Federal entity's accounting practices. 45 CFR § 75.2 (October 1, 2022) defines general purpose equipment as follows: [E]quipment which is not limited to research, medical, scientific or other technical activities. Examples include office equipment and furnishings, modular offices, telephone networks, information technology equipment and systems, air conditioning equipment, reproduction and printing equipment, and motor vehicles. 45 CFR § 75.2 (October 1, 2022) defines capital assets as follows: [T]angible or intangible assets used in operations having a useful life of more than one year which are capitalized in accordance with GAAP. Capital assets include: (1) Land, buildings (facilities), equipment, and intellectual property (including software) whether acquired by purchase, construction, manufacture, lease-purchase, exchange, or through capital leases . . . . 45 CFR § 75.439(b)(1) (October 1, 2022) states, "Capital expenditures for general purpose equipment, buildings, and land are unallowable as direct charges, except with the prior written approval of the HHS awarding agency or pass-through entity." A good internal control plan requires procedures to ensure that subrecipient expenditures are properly documented, in accordance with Federal regulations, and apply to work performed under the subaward project description. Condition: Subrecipient monitoring procedures were inadequate. Repeat Finding: No Questioned Costs: $400,864 known (2101NERSSS, $154; 2201NERSSS, $400,710) Statistical Sample: No Context: The Agency paid 14 subrecipients a total of $5,212,322 during the fiscal year ended June 30, 2023, for the Refugee and Entrant Assistance program (Program). Subrecipients provide employment services, social support services, and legal assistance to refugees. Subrecipient reimbursement requests are submitted quarterly with a summarized invoice of costs incurred and a Budget Workbook showing expenses by category; however, no source documentation, such as invoices and timesheets, are required at the time of reimbursement. Program staff were unable to provide any program-specific procedures; however, they eventually did provide Agency-wide procedures for subrecipient monitoring and noted that program-specific procedures were being written. These Agency-wide procedures indicate that each reimbursement invoice should include timesheets or time studies, paystubs, and receipts, among other documentation, to support that expenses are allowable. Program staff also provided a schedule used to review one quarter of reimbursed expenses for each subrecipient, throughout the year, looking at three subrecipients each quarter. We selected the four highest-paid subrecipients of the fiscal year and requested the support that the Program obtained from its review of the scheduled quarter. The Agency obtained minimal invoice support for the desk reviews and did not request any documentation to support personnel costs, such as paystubs and timesheets, nor any underlying support for amounts used for allocated expenses. Due to the inadequacy of desk review documentation, we offered the Agency the opportunity to gather supporting documentation from the subrecipients. We allowed the Agency three weeks to obtain support and an additional week after our review. However, the support provided was not adequate for any of the four subrecipients tested. We noted the following: • Documentation was not adequate to support that personnel charges were allowable and in accordance with Federal cost principles. Time records were missing or did not agree to time charged or were not in accordance with 45 CFR § 75.430(i). We also noted personnel costs charged using budgeted amounts, which is not allowable. We further noted fringe benefits were not adequately supported. • Documentation was not adequate to support the percentage of non-payroll expenses charged to the Program. Numerous charges were based on allocations, which are allowable only if distributed using reasonable methods in accordance with relative benefits received. Support was not adequate to determine the allocation was proper, for example: o One subrecipient had a finance agreement that appeared to be for equipment with a principal amount of $153,028 and monthly payments of $5,390. The subaward was charged $1,250 per month, but there was no support for how this amount was determined or that it was reasonably distributed in accordance with benefits received. In addition, this appears to be a capital expenditure for general purpose equipment, and prior written approval was not on file. Also, there was no support detailing the items purchased to determine if allowable per the grant and Federal cost principles. o One subrecipient charged 92% of workers’ compensation insurance to the grant, but documentation was not adequate to support this percentage agreed to staff time worked on the grant. o One subrecipient did not have support for the percentage of rent charged to the grant. o One subrecipient had accounting fees charged each month on varying percentages, but the basis for those percentages was not supported. • Indirect costs were not calculated correctly on one reimbursement tested. Below is a summary of amounts paid and support reviewed by the Agency for those four subrecipients. See Schedule of Findings and Questioned Costs for chart/table. Cause: Inadequate procedures. Effect: Without adequate subrecipient monitoring procedures, there is an increased risk for the misuse of Federal funds and noncompliance with Federal regulations. Recommendation: We recommend the Agency perform adequate subrecipient monitoring to ensure both the allowability of costs and adherence to Federal regulations. Management Response: The Agency agrees.

Program: AL 93.558 – Temporary Assistance for Needy Families; AL 93.563 – Child Support Enforcement; AL 93.568 – Low Income Home Energy Assistance (LIHEAP); AL 93.575 – Child Care and Development Block Grant; AL 93.658 – Foster Care Title IV-E; AL 93.778 – Medical Assistance Program; AL 10.561 – State Administrative Matching Grants for the Supplemental Nutrition Assistance Program – Allowable Costs/Cost Principles Grant Number & Year: 2001NETANF, FFY 2020; 2301NECSES, FFY 2023; 2301NELIEA, FFY 2023; 2301NECCDD, FFY 2023; 2301NEFOST, FFY 2023; 2305NE5ADM, FFY 2023; 233NE406S2514, FFY 2023 Federal Grantor Agency: U.S. Department of Health and Human Services and U.S. Department of Agriculture Criteria: 45 CFR § 75.405(a) (October 1, 2022) and 2 CFR § 200.405 (January 1, 2023) state, in part, the following: A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. 45 CFR § 75.403 (October 1, 2022) and 2 CFR § 200.403 (January 1, 2023) provide the following, in relevant part: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. * * * * (g) Be adequately documented. See also §§ 75.300 through 75.309. Per 45 CFR § 75.303 (October 1, 2022) and 2 CFR § 200.303 (January 1, 2023), The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Title 45 CFR § 75.302 (October 1, 2022) and 2 CFR § 200.302 (January 1, 2023) require financial management systems of the State sufficient to permit preparation of required reports and permit the tracing of funds to expenditures adequate to establish the use of these funds were in accordance with applicable regulations. EnterpriseOne is the official accounting system for the State of Nebraska, and all expenditures are generated from it. Good internal control requires procedures to ensure that amounts charged to Federal funds are proper. Condition: Procedures to ensure journal entries and adjustments to the Public Assistance Cost Allocation Plan (PACAP) were not adequate, resulting in multiple Federal programs being overcharged. Repeat Finding: No Questioned Costs: $581,496 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: Each quarter, as the PACAP is prepared, the Agency makes multiple adjustments for costs that either were charged to Federal funds and should not have been, or costs that were not charged to Federal funds but are claimable to a Federal grant. We tested five adjustments between two quarters. One adjustment tested for the quarter ended December 31, 2022, was recorded to charge the Foster Care grant for allowable costs incurred by the Foster Care Review Office (FCRO), a separate agency. The amounts provided by FCRO erroneously included payroll charges from a previous quarter, inflating the amount charged. The FCRO later caught the mistake and adjusted the internal spreadsheet but did not alert the Agency to the error, so a correcting adjustment was never made to the PACAP. The amount charged was $353,984; however, the adjustment should have been $212,725, a difference of $141,259. Foster Care is matched at 50%, so the grant was overcharged $70,629, which are questioned costs. Due to this error, we reviewed a second Foster Care adjustment for the quarter ending March 31, 2023, and noted the Agency’s calculation included amounts for a State funded program that should have been removed, resulting in the grant being overcharged an additional $1,561. We also tested six journal entries that moved costs between cost centers to determine any impact on the PACAP and if those journal entries were appropriate. We noted three improper journal entries that the Agency had not corrected as of the end of the fiscal year: • A journal entry for $526,487 was performed in November 2022 to temporarily move postage costs of multiple programs from State funds to the Child Support Enforcement (CSE) grant until new coding could be created in the State’s accounting system to track expenses from one fiscal year to another. The intent was to reverse the entry as soon as the new coding was completed; however, the reversing entry was never performed. Since the Agency performs a quarterly adjustment for the CSE grant to charge indirect costs identified by the Agency’s PACAP to the grant, the CSE grant was overcharged a total of $263,628. No correcting entry had been made as of September 30, 2023. These are considered questioned costs. • A journal entry for $207,369 was performed in December 2022 to move expenses to allow payroll to post. The intent was to reverse the entry before the end of the fiscal year; however, that was not done. The expenses were moved from Medicaid administration and were charged to the Central Services and Supplies Cost Center, which is then allocated to numerous other Cost Centers that are further allocated or charged directly to Federal programs such as TANF and Child Care. Due to the intricacies of PACAP allocations, exact questioned costs are unknown. No correcting entry was made as of September 30, 2023. • A journal entry for $5,317,640 was done in February 2023 to move Premium Pay to the Coronavirus State and Local Fiscal Recovery Funds (CSLFRF) grant as additional pay for certain job roles allowed under that grant. However, the entry performed included some lines that were miscoded, most significantly a line for $764,187 that was supposed to move money within the same Cost Center (CC 25C21910 – Field Office Administration); however, it pulled costs out of Cost Center 25C21780 - Protection and Safety Policy Chief instead. Additionally, we confirmed with the Agency that the costs charged to CC 25C21910 under the CSLFRF grant were also allocated to other Federal programs through the PACAP, essentially charging Federal programs twice. Due to the intricacies of the PACAP allocations, total questioned costs are unknown; however, we were able to determine that this error caused Medicaid to be overcharged $149,478, LIHEAP to be overcharged $33,447, SNAP to be overcharged $44,984, Child Care to be overcharged $10,412, and TANF to be overcharged $7,357. Cause: Inadequate procedures to ensure that adjustments to the PACAP are proper and that journal entries are appropriate for each program. Effect: Unallowable expenditures were charged to Federal funds and there is an increased risk for errors, fraud, and non-compliance with Federal regulations. Recommendation: We recommend the Agency strengthen procedures to ensure adjusting entries are complete and accurate. We further recommend the Agency strengthen procedures to ensure compliance with Federal regulations. Management Response: The Agency agrees.

Program: AL 93.568 – Low-Income Home Energy Assistance (LIHEAP) – Reporting Grant Number & Year: 2201NELIEA, FFY 2022 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR § 96.30(a) (October 1, 2022) requires “fiscal control and accounting procedures must be sufficient to (a) permit preparation of reports required by the statute authorizing the block grant . . . .” 45 CFR § 96.82(a) (October 1, 2022) states the following: Each grantee which is a State or an insular area which receives an annual allotment of at least $200,000 shall submit to the Department, as part of its LIHEAP grant application, the data required by section 2605(c)(1)(G) of Public Law 97–35 (42 U.S.C. 8624(c)(1)(G)) for the 12-month period corresponding to the Federal fiscal year (October 1–September 30) preceding the fiscal year for which funds are requested. The data shall be reported separately for LIHEAP heating, cooling, crisis, and weatherization assistance. 42 U.S.C. § 8624(c)(1)(G) requires a plan that does the following: [S]tates, with respect to the 12-month period specified by the Secretary, the number and income levels of households which apply and the number which are assisted with funds provided under this subchapter, and the number of households so assisted with- (i) one or more members who had attained 60 years of age; (ii) one or more members who were disabled; and (iii) one or more young children; . . . . The Instructions for the LIHEAP Household Report, published November 30, 2022, by the U.S. Division of Energy Assistance, contains the following: Concept of Unduplicated Household Counts * * * * The concept of unduplicated counts means that an item, such as a household, is counted only once for a specific data variable. However, unduplicated counting becomes complex when there are multiple data variables. Such counting requires the use of computerized data systems and tracking of households across a state’s entire LIHEAP program, including households receiving weatherization through LIHEAP funds. Unduplicated household data must be reported separately for EACH type of LIHEAP assistance and for ANY type of LIHEAP assistance, as described in “Unduplicated Household Counts” under Section II of these instructions. * * * * Section II - Assisted Households by Poverty Intervals for Each Type of LIHEAP Assistance Household poverty levels must be reported according to the specified percent intervals. The number of assisted and applicant households are to be counted by poverty level for EACH Type of LIHEAP Assistance and each line, but not for applicant and assisted households that received ANY Type of LIHEAP Assistance. . . . * * * * Uniform Counting and Reporting Annual gross household incomes, adjusted by the number of household members (household size), are to be used in computing household poverty percentages, using the 2021 HHS Poverty Guidelines that were in effect at the beginning of FFY 2022 (October 1, 2021). Gross Household Income Adjusted by Household Size * * * * A household's gross annual income and/or household size can change during the fiscal year. If a household received two benefits or services under the same type of LIHEAP assistance, use that household's gross annual income and household size at the time of the initial determination of benefits or services in calculating that household's poverty level for statistical reporting. Condition: The Agency lacked adequate procedures to ensure that Household Report information was complete and accurate. A similar finding was noted in the prior audit. Repeat Finding: 2022-033 Questioned Costs: None Statistical Sample: No Context: In its LIHEAP Household Report for FFY 2022, the Agency reported 762 applicant households for the weatherization program. This information for weatherization applicant households was provided by the Nebraska Department of Environment and Energy (NDEE), which obtained the figures from its subrecipients. NDEE forwarded the information to the Agency for reporting. We noted the following: • The report logic and formulas to count households by poverty level was inaccurate, resulting in 103 households not being included. • Duplicates were noted within the data provided by the subrecipients. Only one line should be reported per household; however, 46 lines were observed to be duplicates. The applicants reported by poverty level, and the correct numbers after considering the errors noted are listed in the table below: See Schedule of Findings and Questioned Costs for chart/table. We selected a sample of 10 households included on the FFY 2022 Household Report as LIHEAP assisted households, LIHEAP applicant households, or weatherization-assisted households. Two of the 10 households tested were reported or classified improperly, as follows: • One household was reported at the “Under 75% Poverty” income level. However, based on the Agency’s calculation of annual income of $15,872/year for a household size of two, this is 91% of the 2021 Federal poverty level for a household of two, which was $17,420. • One household was reported at the “Under 75% Poverty” income level. However, based on the Agency’s calculation of annual income of $11,352/year for a household size of one, this is 88% of the 2021 Federal poverty level for a household of one, which was $12,880. Cause: Inadequate review procedures. The logic error noted in the prior audit has not been corrected. Effect: Without adequate procedures to ensure reports contain accurate information, there is increased risk of noncompliance with Federal regulations. Recommendation: We recommend the Agency strengthen its procedures to ensure all participants of the LIHEAP program are reflected properly in the Household Report. Management Response: The Agency agrees.

Program: Various, including AL 93.575, 93.596 – CCDF Cluster; AL 93.558 – Temporary Assistance for Needy Families –– Reporting Grant Number & Year: Various, including 2301NECCDF, FFY 2023; 2101NETANF, FFY 2021 Federal Grantor Agency: Various, including U.S. Department of Health and Human Services Criteria: A good internal control plan requires: 1) adequate procedures to ensure the Schedule of Expenditures of Federal Awards (SEFA) is properly presented; and 2) the auditee to reconcile the SEFA to the financial statements to ensure the schedule is complete and accurate. Title 45 CFR § 75.510(b) (October 1, 2022) and Title 2 CFR § 200.510(b) (January 1, 2023) state in part: The auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee's financial statements which must include the total Federal awards expended . . . . At a minimum, the schedule must: * * * * (3) Provide total Federal awards expended for each individual Federal program . . . (4) Include the total amount provided to subrecipients from each Federal program. Neb. Rev. Stat. § 81-1111(1) (Reissue 2014) states, in part, the following: Subject to the supervision of the Director of Administrative Services, the Accounting Administrator shall have the authority to prescribe the system of accounts and accounting to be maintained by the state and its departments and agencies, develop necessary accounting policies and procedures, coordinate and approve all proposed financial systems, and manage all accounting matters of the state's central system. EnterpriseOne is the official accounting system of the State. Title 45 CFR § 75.511(a) (October 1, 2022) and 2 CFR § 200.511 (January 1, 2023) require the auditee to prepare a summary schedule of prior audit findings. Subsection (b)(2) of both regulations provides the following, as is relevant: When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding’s recurrence and planned corrective action, and any partial corrective action taken. Condition: Several programs did not have expenditures or the amount provided to subrecipients accurately reported on the SEFA. We notified Administrative Services of the errors, and the SEFA was subsequently adjusted. The Summary Schedule of Prior Audit Findings lists the status as “completed.” A similar finding was noted in the prior audit. Repeat Finding: 2022-018 Questioned Costs: None Statistical Sample: No Context: Administrative Services is responsible for managing the accounting matters of the State and certifies the data collection form for the Statewide Single Audit. Administrative Services compiles the SEFA from information provided by the individual agencies and submits it to the auditor. During our review, we noted the following: The Department of Health and Human Services (DHHS) did not accurately report expenditures for several programs, including underreporting AL 93.575 by $3,909,201, underreporting AL 93.596 by $7,416,246, and overreporting AL 93.558 by $11,325,447. The Department of Military underreported AL 21.027 by $920,874. The Department of Labor underreported AL 17.225 by $3,696,585. Twenty-three programs for various State agencies needed correction. The total expenditures and amounts provided to subrecipients originally reported and per the final SEFA were as follows: See Schedule of Findings and Questioned Costs for chart/table. Cause: Administrative Services did not have adequate procedures to ensure the accuracy of amounts not pulled directly from the accounting system. Administrative Services established a specific account code for aid to subrecipients, but not all agencies utilized this account code. Effect: Increased risk for the SEFA to be inaccurate, which could lead to Federal sanctions or programs not audited that should be. Recommendation: We recommend Administrative Services improve procedures to ensure the SEFA is complete and accurate. Management Response: We will continue to work with State teammates to ensure the SEFA is accurate and complete. The original total SEFA expenditures were 99.98% accurate. APA Response: We agree that SEFA adjustments were not significant in total. However, errors amounting to millions of dollars for individual programs are unquestionably significant to those programs. Such errors could result, moreover, in a program not being audited as a major program when it should be.

Program: AL 93.558 – Temporary Assistance for Needy Families; AL 93.563 – Child Support Enforcement; AL 93.568 – Low Income Home Energy Assistance (LIHEAP); AL 93.575 – Child Care and Development Block Grant; AL 93.658 – Foster Care Title IV-E; AL 93.778 – Medical Assistance Program; AL 10.561 – State Administrative Matching Grants for the Supplemental Nutrition Assistance Program – Allowable Costs/Cost Principles Grant Number & Year: 2001NETANF, FFY 2020; 2301NECSES, FFY 2023; 2301NELIEA, FFY 2023; 2301NECCDD, FFY 2023; 2301NEFOST, FFY 2023; 2305NE5ADM, FFY 2023; 233NE406S2514, FFY 2023 Federal Grantor Agency: U.S. Department of Health and Human Services and U.S. Department of Agriculture Criteria: 45 CFR § 75.405(a) (October 1, 2022) and 2 CFR § 200.405 (January 1, 2023) state, in part, the following: A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. 45 CFR § 75.403 (October 1, 2022) and 2 CFR § 200.403 (January 1, 2023) provide the following, in relevant part: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. * * * * (g) Be adequately documented. See also §§ 75.300 through 75.309. Per 45 CFR § 75.303 (October 1, 2022) and 2 CFR § 200.303 (January 1, 2023), The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Title 45 CFR § 75.302 (October 1, 2022) and 2 CFR § 200.302 (January 1, 2023) require financial management systems of the State sufficient to permit preparation of required reports and permit the tracing of funds to expenditures adequate to establish the use of these funds were in accordance with applicable regulations. EnterpriseOne is the official accounting system for the State of Nebraska, and all expenditures are generated from it. Good internal control requires procedures to ensure that amounts charged to Federal funds are proper. Condition: Procedures to ensure journal entries and adjustments to the Public Assistance Cost Allocation Plan (PACAP) were not adequate, resulting in multiple Federal programs being overcharged. Repeat Finding: No Questioned Costs: $581,496 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: Each quarter, as the PACAP is prepared, the Agency makes multiple adjustments for costs that either were charged to Federal funds and should not have been, or costs that were not charged to Federal funds but are claimable to a Federal grant. We tested five adjustments between two quarters. One adjustment tested for the quarter ended December 31, 2022, was recorded to charge the Foster Care grant for allowable costs incurred by the Foster Care Review Office (FCRO), a separate agency. The amounts provided by FCRO erroneously included payroll charges from a previous quarter, inflating the amount charged. The FCRO later caught the mistake and adjusted the internal spreadsheet but did not alert the Agency to the error, so a correcting adjustment was never made to the PACAP. The amount charged was $353,984; however, the adjustment should have been $212,725, a difference of $141,259. Foster Care is matched at 50%, so the grant was overcharged $70,629, which are questioned costs. Due to this error, we reviewed a second Foster Care adjustment for the quarter ending March 31, 2023, and noted the Agency’s calculation included amounts for a State funded program that should have been removed, resulting in the grant being overcharged an additional $1,561. We also tested six journal entries that moved costs between cost centers to determine any impact on the PACAP and if those journal entries were appropriate. We noted three improper journal entries that the Agency had not corrected as of the end of the fiscal year: • A journal entry for $526,487 was performed in November 2022 to temporarily move postage costs of multiple programs from State funds to the Child Support Enforcement (CSE) grant until new coding could be created in the State’s accounting system to track expenses from one fiscal year to another. The intent was to reverse the entry as soon as the new coding was completed; however, the reversing entry was never performed. Since the Agency performs a quarterly adjustment for the CSE grant to charge indirect costs identified by the Agency’s PACAP to the grant, the CSE grant was overcharged a total of $263,628. No correcting entry had been made as of September 30, 2023. These are considered questioned costs. • A journal entry for $207,369 was performed in December 2022 to move expenses to allow payroll to post. The intent was to reverse the entry before the end of the fiscal year; however, that was not done. The expenses were moved from Medicaid administration and were charged to the Central Services and Supplies Cost Center, which is then allocated to numerous other Cost Centers that are further allocated or charged directly to Federal programs such as TANF and Child Care. Due to the intricacies of PACAP allocations, exact questioned costs are unknown. No correcting entry was made as of September 30, 2023. • A journal entry for $5,317,640 was done in February 2023 to move Premium Pay to the Coronavirus State and Local Fiscal Recovery Funds (CSLFRF) grant as additional pay for certain job roles allowed under that grant. However, the entry performed included some lines that were miscoded, most significantly a line for $764,187 that was supposed to move money within the same Cost Center (CC 25C21910 – Field Office Administration); however, it pulled costs out of Cost Center 25C21780 - Protection and Safety Policy Chief instead. Additionally, we confirmed with the Agency that the costs charged to CC 25C21910 under the CSLFRF grant were also allocated to other Federal programs through the PACAP, essentially charging Federal programs twice. Due to the intricacies of the PACAP allocations, total questioned costs are unknown; however, we were able to determine that this error caused Medicaid to be overcharged $149,478, LIHEAP to be overcharged $33,447, SNAP to be overcharged $44,984, Child Care to be overcharged $10,412, and TANF to be overcharged $7,357. Cause: Inadequate procedures to ensure that adjustments to the PACAP are proper and that journal entries are appropriate for each program. Effect: Unallowable expenditures were charged to Federal funds and there is an increased risk for errors, fraud, and non-compliance with Federal regulations. Recommendation: We recommend the Agency strengthen procedures to ensure adjusting entries are complete and accurate. We further recommend the Agency strengthen procedures to ensure compliance with Federal regulations. Management Response: The Agency agrees.

Program: AL 93.575 and 93.596 – CCDF Cluster – Allowability & Eligibility Grant Number & Year: 2201NETANF, FFY 2022; 2001NECCDF, FFY 2020; 2301NECCDM, FFY 2023; 2301NECCDF, FFY 2023; 2101NECCC5, FFY 2021 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR § 75.403 (October 1, 2022) provides the following, in relevant part: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. * * * * (g) Be adequately documented. See also §§ 75.300 through 75.309. Per 45 CFR § 75.303 (October 1, 2022): The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. 42 USC § 9858k(b) states, “With regard to services provided to students enrolled in grades 1 through 12, no financial assistance provided under this subchapter shall be expended for— (1) any services provided to such students during the regular school day[.]” 45 CFR § 98.67(a) (October 1, 2022) states, “Lead Agencies shall expend and account for CCDF [Child Care and Development Fund] funds in accordance with their own laws and procedures for expending and accounting for their own funds.” To be eligible for services, 45 CFR § 98.20 (October 1, 2022) requires a child to be under 13 years of age, a citizen, and residing with a family whose income does not exceed 85% of the State’s median income. Title 392 of the Nebraska Administrative Code (NAC) 2-013.03(A) (Eff. 9/15/2020) states, “A recipient is limited to a maximum of sixty hours of Child Care Subsidy per week. A week is defined as the seven day period from Sunday through Saturday.” Title 392 NAC 3-004.01(A) (Eff. 9/15/2020) states, “The Department pays by attendance, not enrollment." Title 392 NAC 3-004.01(A)(i) (Eff. 9/15/2020) states, “The provider may bill the full authorized amount for times that the child is absent on a scheduled day, up to five times per month.” Title 392 NAC 3-001.02(D) (Eff. 9/15/2020) states, “The recipient and child care provider must ensure that the services are delivered as authorized.” Title 392 NAC 4-001 (Eff. 9/15/2020) states, in relevant part, “In order for a child care provider to participate in the subsidy program: . . . (F) Service provider enrollments are in effect for up to 12 months, are not back-dated, and must be completed and signed by all parties on or before the effective date.” Title 392 NAC 4-002 (Eff. 9/15/2020) states, in relevant part, “Before furnishing any service, each provider must sign an enrollment form agreeing: (A) No payments will be made for child care provided to a child before the service authorization date; (B) To provide service only as authorized, in accordance with the Department’s standards; . . . (G) To retain authorizations, billing documents, and attendance records for four years to support and document all claims[.]” The Child Care Provider Handbook (Handbook), dated January 2008, Section IV.C., states, in relevant part, “You must complete the Attendance Calendar to accurately reflect the dates on which child care services were provided as well as the exact number of hours of service provided. For each day, partial hours of service provided should be rounded up to the next quarter hour[.]” Additionally, the Handbook Section I, defines a “Full Day of Care” as “Five hours and 46 minutes (6 hours) through 9 hours (9 hours and 59 minutes) unless the child care program defines its day as more than 9 hours.” Section IV.A., of the Handbook goes on to state, “K.1. Authorized Units. Hourly or daily units listed on the Authorization are for the total time frame of the Authorization period - less than 6 hours are hourly units - 6 hours or more are daily units[.]” EnterpriseOne is the official accounting system for the State of Nebraska, and all expenditures are generated from it. Good internal control requires procedures to ensure that payments are in accordance with Federal and State requirements. Condition: Child care payments did not comply with Federal and State requirements. A similar finding has been noted in our previous audit reports since 2007. Repeat Finding: 2022-034 Questioned Costs: $163,622 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: We noted claims that lacked support and/or did not agree to support, services billed more than authorized, and duplicate claims charged, as detailed below. Random Sample We tested 30 child care claims paid with Federal funds. We noted 11 claims with errors. Some payments had more than one type of error. • For eight claims tested, there were discrepancies between the attendance sheet and the claim billed: o For one claim, the Agency was unable to obtain the attendance calendar from a provider who had closed in October 2022. With no attendance calendar, we were unable to verify the accuracy of the claim amount. o For two claims, two providers were authorized to provide care for the same child at the same time. We requested the attendance calendars from the second provider and found overlapping claims where both providers were billing for the same time period.  For one claim, there were two days with a total 5.75 overlapping hours of care.  For another claim we noted 17 hours and seven days of overlapping care. o For five claims, the providers billed for more hours and/or days than what was recorded on the child’s attendance sheet:  One provider billed a day with 9 hours and 53 minutes of care as one day plus one hour. Per the NAC, the additional time over a day unit is not billed until the care has reached 10 hours.  One provider billed for 19 days of child care, while the attendance calendar for the child showed only 18 days of care.  One provider billed 12 days and one hour of child care. The attendance calendar showed 7 days and four hours of care.  One provider billed for 19 days of child care, while the attendance sheet showed only 16 days of care.  One provider billed for four days and 60 hours of child care. The attendance sheet showed 65 hours of care, but no days. • For two claims tested, the providers provided care for a child over the authorized amount. o One provider was authorized to provide child care to a child for up to 18 hours per week while the father was working as a self-employed maintenance worker, which is the equivalent of three days of care. The provider claimed four days of care (totaling 31 hours). o One provider was authorized to provide child care up to 27 hours per week – equivalent to four days at one day unit each (more than six hours each). The provider claimed five to six day units each week in the month tested. Weekly hours provided ranged from 32 to 45 hours. • For three claims tested, the School Age Care claimed did not agree to the school schedule of the child. School Age Care is authorized for before and after school and on days school is not in attendance. o Two providers were recording the child’s “out” time each morning at 9:00 a.m. and the “in” time in the afternoon at 4:00 p.m. The school day started at 8:50 a.m. and ended at 4:05 p.m. While the NAC does allow for rounding to the nearest quarter hour for each day’s total time of services, the “in” and “out” times should not be rounded. It would not be possible for the child to leave daycare at 9:00 a.m. and arrive at school at 8:50 a.m., or to leave school at 4:05 p.m. and arrive at daycare at 4:00 p.m. The Agency agreed that this practice was adding an extra 15 minutes or quarter hour to each day. o For one claim, the provider charged a full day of care on a school day during which the child would have been in school. The Agency could not explain why a full day of care was being charged on a day that school was in session. • For one claim, the Agency could not provide a birth record or birth certificate for the child; therefore, we could not verify that the child was under 13 years old. • For one claim, the Agency was unable to provide the agreement between the Agency and the provider that would have been valid at the time of service. Federal payment errors noted for the sample tested were $1,458. The total Federal sample tested was $10,095, and total child care Federal assistance claims for the fiscal year were $45,598,523. Based on the sample tested, the case error rate was 36.67% (11/30). The dollar error rate for the sample was 14.44% ($1,458/10,095), which estimates the potential dollars at risk for the fiscal year 2023 to be $6,584,427 (dollar rate multiplied by the population). In addition to the $1,458 questioned costs noted on the sample items tested, we noted $695 of questioned costs on other line items of the claims reviewed, which resulted from missing and inaccurate documentation and service authorizations being exceeded. Unusual Claims Tested We reviewed the detail of child care claims for unusual items, such as excessive hours billed in a month. Four of five claims tested were improper.  One provider billed 348 hours for School Age care provided during one month. We reviewed the attendance calendar, which showed that care was provided from 6:00 a.m. to 6:00 p.m. or 9:00 p.m. every day but Sundays. This is not reasonable, as it includes hours when the School Age child should have been in school. We also noted the provider billed over the authorized hours of care. The provider was authorized to provide care up to 53 hours per week; however, during the last two weeks of the month, the provider claimed 60 hours of care. After identifying the dates and times that the child would have been attending school, we then recalculated attendance with reasonable in and out times, up to the authorized hours per week, and determined that the provider overbilled by $906. We consider these questioned costs.  One provider billed 240 hours at a rate of $5.50/hour for School Age care provided during one month. We reviewed the attendance calendar, and the care was overnight from 7:00 p.m. to 7:00 a.m. (12 hours), so the provider should have been billing for one day unit (up to 10 hours) plus 2 additional hourly units for each day of care. We recalculated what the claim should have been with 20 day units at $34/day and 40 hourly units at $5.50/hour and question the difference, or $460.  One provider billed care of one School Age child between the dates of May 1, 2021, and May 17, 2021, for 231 hours at a rate of $2.25/hour and 17 days at a rate of $15/day. We requested the attendance records to verify the claim, but the Agency was unable to provide the documentation because the provider had closed. Without the attendance calendar needed to verify the propriety of these units, we question the $775 paid.  One provider billed 240 hours of overtime during one month. We requested the attendance records to verify the claim, but the Agency was unable to provide the documentation. The provider responded to the Agency that she would not be sending in an attendance calendar because she had thrown away all the documentation when the Agency closed her down. Without the attendance calendar to verify the reasonableness of these units, we question the $997 paid. Duplicate Claims Child care claims are initially paid from State funds. Journal entries are then performed throughout the year to transfer costs to Federal funds. A detailed listing of claims accompanies these journal entries to show which claims are included in the amounts moved from State funds to Federal funds. We reviewed the detailed claim listings for each journal entry completed during the fiscal year and found that duplicate claims were included in two journal entries. The journal entry in March 2023 included 428 claims, totaling $158,331, that had been charged to Federal funds in September 2022; therefore, $158,331 is considered questioned costs. Cause: Ineffective review. The Agency does not have automated procedures to ensure: 1) attendance records agree to billing documents; 2) service authorizations are not exceeded; and 3) claims are in accordance with regulations. Effect: Ineffective review of claims increases the risk for errors and misuse of State and Federal funds. Recommendation: We recommend the Agency implement procedures to ensure payments are allowable, adequately supported, and in accordance with State and Federal regulations. We further recommend the Agency ensure billing documents agree with attendance sheets. We also recommend the Agency implement procedures to ensure journal entries do not charge duplicate claims. Finally, we recommend the Agency take the necessary action to recover the overpayments. Management Response: The Agency agrees.

Program: AL 93.575 and 93.596 – CCDF Cluster – Special Tests and Provisions Grant Number & Year: Various, including 2301NECCDF, FFY 2023 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 45 CFR § 98.41 (October 1, 2022), the State must have requirements to protect the health and safety of children, including the prevention and control of infectious diseases, building and physical premises safety, and health and safety training. Per 391 NAC 3-005.09A and NAC 4-005.09A: The Department will make a fire inspection referral when: . . . 2. Every two years following the initial fire inspection[.] Per 391 NAC 3-005.09B: The Department will make a sanitation inspection referral when: . . . 2. Every two years following the initial sanitation inspection . . . [.] A good internal control plan requires that adequate documentation be maintained to support compliance with health and safety requirements. Condition: The Agency lacked adequate procedures for ensuring that health and safety requirements were met for child care providers. A similar finding was noted in the prior audit. Repeat Finding: 2022-035 Questioned Costs: None Statistical Sample: No Context: We tested 17 child care centers subject to fire and sanitation inspections. For six child care centers tested, a required inspection had not been performed as of fieldwork on November 13, 2023. The Agency has made referrals for the fire and sanitation inspections; however, the inspections are overdue, and the Agency is ultimately responsible for ensuring that these inspections are performed. See Schedule of Findings and Questioned Costs for chart/table. Cause: Depending on the city or county, the Agency relies on local fire departments or the State Fire Marshal to conduct fire inspections for child care centers. The Agency makes a referral to the fire department when an inspection is due, but the Agency does not pay for these inspections and cannot control the timing of the inspections. Effect: Without adequate procedures to ensure health and safety requirements are met, there is an increased risk of noncompliance with Federal regulations and the possibility of children being cared for in unsafe facilities. Recommendation: We recommend the Agency implement procedures to ensure all health and safety requirements are met for child care centers. These procedures should include regular follow-up with the Fire Marshall or local fire departments and local health departments or the Environmental Health Agency to ensure the inspections are completed timely. This also should include establishing a documented review of inspection requirements for school-age-only child care centers as well as child care centers located in a school. Management Response: The Agency partially agrees. It is agreed that some sanitation and fire inspections have not been conducted every 2 years. These inspections are conducted by entities external to DHHS. Resources are an issue for these entities, which contributes to not meeting the regulatory timeframes for DHHS Children's Services Licensing. The Agency disagrees with the finding, in part, because DHHS has policy and procedure for making timely referrals, as required by regulations. DHHS has had extensive documented communication and follow up with these entities after the policy and procedure changes in 2020, 2021, 2022 and 2023; however, DHHS has no authority to require these entities to complete the inspections more promptly or release completed inspections when the licensee has not paid for the fire or sanitation inspection. DHHS will continue to implement policies and procedures: File Review by Child Care Licensing Supervisors and Fire and Sanitation Inspection Referrals. It is accurate that "per 45 CFR § 98.41 (October 1, 2020), the State must have requirements to protect the health and safety of children, including the prevention and control of infectious diseases, building and physical premises safety, and health and safety training." DHHS disagrees that: "The Agency did not have adequate procedures in place to ensure health and safety requirements were met for child care providers." Regulations 391 NAC 1-5 include robust requirements to address a healthy and safe environment that includes: environmental services and safety, physical plant standards, communicable diseases, children excluded due to illness, medications, food safety, emergency preparedness, safety training and nutrition and food service training. Child Care Inspection Specialists conduct inspections pursuant to these regulations, checking on compliance in the areas listed above, and these inspections are conducted once or twice annually as required by statute. It is important to note that if serious fire safety and sanitation concerns are observed at any inspection that may endanger the health and safety of children in care, it is standard practice to work with the appropriate authority to request an immediate inspection. Fire and sanitation have always responded timely to these requests. This has been a long-standing policy and procedure in Children's Services Licensing specific to Family Child Care Homes I and II and is part of the child care licensing regulations. 391 NAC Chapters 1-5: 1-005.08 Inspection by Other Entities 2-005.09 Inspection by Other Entities 3-005.09 Inspections by Other Entities 4-005.09 Inspections by Other Entities 5-005.09 Inspections by Other Entities APA Response: The Agency is the recipient of the Federal funds and is, therefore, ultimately responsible to ensure that fire and sanitation inspections are performed. Without such inspections, there is an increased risk of children being cared for in unsafe facilities.

Program: AL 93.575 – Child Care and Development Block Grant – Period of Performance Grant Number & Year: 2101NECCDD, FFY 2021 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 45 CFR § 98.60(d) (October 1, 2022): The following obligation and liquidation provisions apply to States and Territories: (1) Discretionary Fund allotments shall be obligated in the fiscal year in which funds are awarded or in the succeeding fiscal year. Unliquidated obligations as of the end of the succeeding fiscal year shall be liquidated within one year. * * * * (5) Obligations may include subgrants or contracts that require the payment of funds to a third party (e.g., subgrantee or contractor). However, the following are not considered third party subgrantees or contractors: (i) A local office of the Lead Agency; (ii) Another entity at the same level of government as the Lead Agency; or (iii) A local office of another entity at the same level of government as the Lead Agency. According to 45 CFR § 75.511(a) (October 1, 2022), “The auditee is responsible for follow-up and corrective action on all audit findings. As part of this responsibility, the auditee must prepare a summary schedule of prior audit findings.” Per 45 CFR § 75.511(b), “The summary schedule of prior audit findings must report the status of all audit findings included in the prior audit’s schedule of findings and questioned costs.” 45 CFR § 75.511(b)(1) adds, “When audit findings were fully corrected, the summary schedule need only list the audit findings and state that corrective action was taken.” Finally, 45 CFR § 75.511(b)(2) provides, “When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding’s recurrence and planned corrective action, and any partial corrective action taken.” A good internal control plan requires procedures to ensure compliance with Federal regulations. Condition: Expenditures were charged to the FFY 2021 grant after the period of performance. A similar finding was noted in the prior audit. The Summary Schedule of Prior Findings lists the status as complete. Repeat Finding: 2022-036 Questioned Costs: $1,939,538 known Statistical Sample: No Context: The FFY 2021 Child Care Discretionary grant must be obligated by September 30, 2022. We noted $1,939,538 paid from October 5, 2022, through June 28, 2023, for Agency employee payroll. Cause: Ineffective control procedures. Effect: Noncompliance with Federal regulations. Recommendation: We recommend the Agency improve procedures to ensure expenditures charged are within the allowed time period. Management Response: The Agency agrees.

Program: AL 93.575 – COVID-19 Child Care and Development Block Grant – Allowability Grant Number & Year: 2101NECCC5, FFY 2021 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR § 98.67(a) (October 1, 2022) states, “Lead Agencies shall expend and account for CCDF [Child Care and Development Fund] funds in accordance with their own laws and procedures for expending and accounting for their own funds.” The Contractor’s “4.1a Payment Processing Manual v2.0” provides a summary of the payment criteria for the Workforce Recognition Retention Stipend Grants (WRRS) and Loan Repayment and Debt Reduction Grants (LRDR), as follows: • WRRS grant: Base Award $2,500; $750 for Full-Time and $0 for Part-Time; $500 for 5+ years of tenure and $250 for 1-5 years of tenure; $1,000 for Teachers and Assistant Teachers and $0 for all other roles; $500 for Night (9pm to 6am) and Weekend Shift Workers and $0 for Day Shift Workers; and a $1,750 bonus for Family Home Child Care I and II facilities. • LRDR grant: Base award up to $20,000 but not to exceed total eligible student loan debt. Additional $5,000 bonus was made available for teachers and assistant teachers and $5,000 bonus was made available to applicants with master’s degrees. Good internal control requires procedures to ensure that State and Federal requirements are met. Good internal control also requires procedures to ensure that grant applications are accurate, and amounts awarded are adequately supported. Condition: The Agency did not have adequate procedures to ensure that grant applications were accurate, or funds paid to child care providers were spent properly. Repeat Finding: No Questioned Costs: $32,000 known Statistical Sample: No Context: Section 2201 of the American Rescue Plan Act (ARPA) of 2021 provided Federal funding to increase provider rates and workforce compensation so that child care providers can retain a skilled workforce and deliver higher-quality care to children receiving subsidies. Secondarily, states were to implement policies to build the supply of child care in low-income communities and underserved populations. The Coronavirus Response and Relief Supplemental Appropriations (CRRSA) Act (Public Law 116-260), signed into law on December 27, 2020, provides states with supplemental child care funds to address the immediate needs of families struggling to pay for child care and child care providers facing financial uncertainty due to the COVID-19 pandemic, including supporting the stability of the child care sector. The Agency entered into an emergency contract on September 7, 2022, with a contractor to manage applications, program requirements, and distribution of over $60 million in ARPA and CRRSA funds for three grants defined by the Agency. These grants were: 1. Business and Child Care Partnership Grants (BCC) to increase child care capacity throughout the State of Nebraska. This funding would help individuals, businesses, and organizations create new child care programs and enable existing licensed child care programs to increase their license capacity. 2. Workforce Recognition Retention Stipend Grants (WRRS) to support and recognize Nebraska’s child care workforce quickly and efficiently and to help workers improve their financial well-being and, more broadly, shape the future of child care and early education in the state by incentivizing workers to stay in the field. 3. Loan Repayment and Debt Reduction Grants (LRDR) to increase economic stability for child care providers with student loans by decreasing their debt burden and to help workers improve their financial well-being and, more broadly, shape the future of child care and early education in the state by incentivizing workers to stay in the field. We tested a total of 33 grants paid and noted the following: BCC We tested 13 of 125 BCC grants. Total BCC grants paid to recipients in the fiscal year totaled $23,303,985. Individual grants ranged from $4,611 to $1,506,362 with 11 applicants receiving over $500,000 each. Payments were made to grant recipients beginning in March 2023; however, recipients had until July 2023 to spend the funds. This deadline was then extended to December 31, 2023. We noted 7 of 17 locations (among the 13 recipients tested) had increased license capacity as of testing on October 12, 2023. However, there was no support that the other locations had increased license capacity. The remaining recipients would have until December 31, 2023, to increase capacity, which was after our audit period. The Agency indicated staff would review licensing requirements after December. The Agency’s contractor requested support from 10% of the grantees, reviewing 20 grantees and $2,916,561 of expenditures. The Agency did not have procedures to perform any further sampling of the remaining 105 grants or over $20 million in expenditures to ensure expenditures were in accordance with the purpose of the Federal grants. We tested 13 grants to determine that the purpose was to increase child care capacity, and the recipient was eligible; however, as the recipient had until December 31, 2023, to spend the funds, we were unable to determine if all funds were spent in accordance with Federal and State requirements. According to the Agency, if any recipients have not spent funds fully by December 31, 2023, staff will inform them and direct the unspent funds to be returned to the State. WRRS and LRDR We tested 10 of 5,148 WRRS grants and 10 of 744 LRDR grants. Total WRRS grants paid to recipients in the fiscal year totaled $23,477,750. Individual grants ranged from $2,500 to $7,250. Total LRDR grants paid to recipients in the fiscal year totaled $12,377,871. Individual grants ranged from $592 to $30,000. The Agency created a grant funding formula based on various factors for the WRRS and LRDR grants. We noted that documentation was inadequate to support the grant amount. • For 11 applicants, the Agency was unable to provide documentation to support that it verified what was reported on the grantee’s application. Grantees received additional funds over the base grant if they reported meeting certain criteria. o Seven applicants received an additional $1,000 on top of the WRRS Base grant for being a teacher or teacher’s assistant. o Four applicants received an additional $5,000 in student loan reduction (i.e., the LRDR grant) for being a teacher or teacher’s assistant. o One of the four applicants also received an additional $5,000 in student loan reduction (i.e., the LRDR grant) for having her master’s degree in a field related to child care. The support provided showed that she had yet to complete the process of obtaining her degree; in fact, no classes were completed after 2012. Federal payment errors noted for the sample tested were $32,000 ($7,000 WRRS; $25,000 LRDR). The total sample tested for WRRS was $44,250, and the total WRRS grant payments for the fiscal year were $23,477,750. The WRRS dollar error rate for the sample was 15.82% ($7,000/$44,250), which estimates the potential dollars at risk for fiscal year 2023 to be $3,714,180 (dollar rate multiplied by the population). The total sample tested for LRDR was $195,673, and the total LRDR grant payments for the fiscal year were $12,357,871. The LRDR dollar error rate for the sample was 12.78% ($25,000/$195,673), which estimates the potential dollars at risk for fiscal year 2023 to be $1,579,336 (dollar rate multiplied by the population). Cause: Inadequate procedures to ensure applications were accurate. Effect: A lack of adequate supporting documentation increases the risk of payments not being in accordance with State and Federal requirements, leading to a loss of Federal funds. Recommendation: We recommend the Agency implement procedures to ensure payments are allowable, adequately supported, and in accordance with State and Federal regulations. Management Response: The Agency agrees.

Program: Various, including AL 93.575, 93.596 – CCDF Cluster; AL 93.558 – Temporary Assistance for Needy Families –– Reporting Grant Number & Year: Various, including 2301NECCDF, FFY 2023; 2101NETANF, FFY 2021 Federal Grantor Agency: Various, including U.S. Department of Health and Human Services Criteria: A good internal control plan requires: 1) adequate procedures to ensure the Schedule of Expenditures of Federal Awards (SEFA) is properly presented; and 2) the auditee to reconcile the SEFA to the financial statements to ensure the schedule is complete and accurate. Title 45 CFR § 75.510(b) (October 1, 2022) and Title 2 CFR § 200.510(b) (January 1, 2023) state in part: The auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee's financial statements which must include the total Federal awards expended . . . . At a minimum, the schedule must: * * * * (3) Provide total Federal awards expended for each individual Federal program . . . (4) Include the total amount provided to subrecipients from each Federal program. Neb. Rev. Stat. § 81-1111(1) (Reissue 2014) states, in part, the following: Subject to the supervision of the Director of Administrative Services, the Accounting Administrator shall have the authority to prescribe the system of accounts and accounting to be maintained by the state and its departments and agencies, develop necessary accounting policies and procedures, coordinate and approve all proposed financial systems, and manage all accounting matters of the state's central system. EnterpriseOne is the official accounting system of the State. Title 45 CFR § 75.511(a) (October 1, 2022) and 2 CFR § 200.511 (January 1, 2023) require the auditee to prepare a summary schedule of prior audit findings. Subsection (b)(2) of both regulations provides the following, as is relevant: When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding’s recurrence and planned corrective action, and any partial corrective action taken. Condition: Several programs did not have expenditures or the amount provided to subrecipients accurately reported on the SEFA. We notified Administrative Services of the errors, and the SEFA was subsequently adjusted. The Summary Schedule of Prior Audit Findings lists the status as “completed.” A similar finding was noted in the prior audit. Repeat Finding: 2022-018 Questioned Costs: None Statistical Sample: No Context: Administrative Services is responsible for managing the accounting matters of the State and certifies the data collection form for the Statewide Single Audit. Administrative Services compiles the SEFA from information provided by the individual agencies and submits it to the auditor. During our review, we noted the following: The Department of Health and Human Services (DHHS) did not accurately report expenditures for several programs, including underreporting AL 93.575 by $3,909,201, underreporting AL 93.596 by $7,416,246, and overreporting AL 93.558 by $11,325,447. The Department of Military underreported AL 21.027 by $920,874. The Department of Labor underreported AL 17.225 by $3,696,585. Twenty-three programs for various State agencies needed correction. The total expenditures and amounts provided to subrecipients originally reported and per the final SEFA were as follows: See Schedule of Findings and Questioned Costs for chart/table. Cause: Administrative Services did not have adequate procedures to ensure the accuracy of amounts not pulled directly from the accounting system. Administrative Services established a specific account code for aid to subrecipients, but not all agencies utilized this account code. Effect: Increased risk for the SEFA to be inaccurate, which could lead to Federal sanctions or programs not audited that should be. Recommendation: We recommend Administrative Services improve procedures to ensure the SEFA is complete and accurate. Management Response: We will continue to work with State teammates to ensure the SEFA is accurate and complete. The original total SEFA expenditures were 99.98% accurate. APA Response: We agree that SEFA adjustments were not significant in total. However, errors amounting to millions of dollars for individual programs are unquestionably significant to those programs. Such errors could result, moreover, in a program not being audited as a major program when it should be.

Program: AL 93.575 and 93.596 – CCDF Cluster – Allowability & Eligibility Grant Number & Year: 2201NETANF, FFY 2022; 2001NECCDF, FFY 2020; 2301NECCDM, FFY 2023; 2301NECCDF, FFY 2023; 2101NECCC5, FFY 2021 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR § 75.403 (October 1, 2022) provides the following, in relevant part: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. * * * * (g) Be adequately documented. See also §§ 75.300 through 75.309. Per 45 CFR § 75.303 (October 1, 2022): The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. 42 USC § 9858k(b) states, “With regard to services provided to students enrolled in grades 1 through 12, no financial assistance provided under this subchapter shall be expended for— (1) any services provided to such students during the regular school day[.]” 45 CFR § 98.67(a) (October 1, 2022) states, “Lead Agencies shall expend and account for CCDF [Child Care and Development Fund] funds in accordance with their own laws and procedures for expending and accounting for their own funds.” To be eligible for services, 45 CFR § 98.20 (October 1, 2022) requires a child to be under 13 years of age, a citizen, and residing with a family whose income does not exceed 85% of the State’s median income. Title 392 of the Nebraska Administrative Code (NAC) 2-013.03(A) (Eff. 9/15/2020) states, “A recipient is limited to a maximum of sixty hours of Child Care Subsidy per week. A week is defined as the seven day period from Sunday through Saturday.” Title 392 NAC 3-004.01(A) (Eff. 9/15/2020) states, “The Department pays by attendance, not enrollment." Title 392 NAC 3-004.01(A)(i) (Eff. 9/15/2020) states, “The provider may bill the full authorized amount for times that the child is absent on a scheduled day, up to five times per month.” Title 392 NAC 3-001.02(D) (Eff. 9/15/2020) states, “The recipient and child care provider must ensure that the services are delivered as authorized.” Title 392 NAC 4-001 (Eff. 9/15/2020) states, in relevant part, “In order for a child care provider to participate in the subsidy program: . . . (F) Service provider enrollments are in effect for up to 12 months, are not back-dated, and must be completed and signed by all parties on or before the effective date.” Title 392 NAC 4-002 (Eff. 9/15/2020) states, in relevant part, “Before furnishing any service, each provider must sign an enrollment form agreeing: (A) No payments will be made for child care provided to a child before the service authorization date; (B) To provide service only as authorized, in accordance with the Department’s standards; . . . (G) To retain authorizations, billing documents, and attendance records for four years to support and document all claims[.]” The Child Care Provider Handbook (Handbook), dated January 2008, Section IV.C., states, in relevant part, “You must complete the Attendance Calendar to accurately reflect the dates on which child care services were provided as well as the exact number of hours of service provided. For each day, partial hours of service provided should be rounded up to the next quarter hour[.]” Additionally, the Handbook Section I, defines a “Full Day of Care” as “Five hours and 46 minutes (6 hours) through 9 hours (9 hours and 59 minutes) unless the child care program defines its day as more than 9 hours.” Section IV.A., of the Handbook goes on to state, “K.1. Authorized Units. Hourly or daily units listed on the Authorization are for the total time frame of the Authorization period - less than 6 hours are hourly units - 6 hours or more are daily units[.]” EnterpriseOne is the official accounting system for the State of Nebraska, and all expenditures are generated from it. Good internal control requires procedures to ensure that payments are in accordance with Federal and State requirements. Condition: Child care payments did not comply with Federal and State requirements. A similar finding has been noted in our previous audit reports since 2007. Repeat Finding: 2022-034 Questioned Costs: $163,622 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: We noted claims that lacked support and/or did not agree to support, services billed more than authorized, and duplicate claims charged, as detailed below. Random Sample We tested 30 child care claims paid with Federal funds. We noted 11 claims with errors. Some payments had more than one type of error. • For eight claims tested, there were discrepancies between the attendance sheet and the claim billed: o For one claim, the Agency was unable to obtain the attendance calendar from a provider who had closed in October 2022. With no attendance calendar, we were unable to verify the accuracy of the claim amount. o For two claims, two providers were authorized to provide care for the same child at the same time. We requested the attendance calendars from the second provider and found overlapping claims where both providers were billing for the same time period.  For one claim, there were two days with a total 5.75 overlapping hours of care.  For another claim we noted 17 hours and seven days of overlapping care. o For five claims, the providers billed for more hours and/or days than what was recorded on the child’s attendance sheet:  One provider billed a day with 9 hours and 53 minutes of care as one day plus one hour. Per the NAC, the additional time over a day unit is not billed until the care has reached 10 hours.  One provider billed for 19 days of child care, while the attendance calendar for the child showed only 18 days of care.  One provider billed 12 days and one hour of child care. The attendance calendar showed 7 days and four hours of care.  One provider billed for 19 days of child care, while the attendance sheet showed only 16 days of care.  One provider billed for four days and 60 hours of child care. The attendance sheet showed 65 hours of care, but no days. • For two claims tested, the providers provided care for a child over the authorized amount. o One provider was authorized to provide child care to a child for up to 18 hours per week while the father was working as a self-employed maintenance worker, which is the equivalent of three days of care. The provider claimed four days of care (totaling 31 hours). o One provider was authorized to provide child care up to 27 hours per week – equivalent to four days at one day unit each (more than six hours each). The provider claimed five to six day units each week in the month tested. Weekly hours provided ranged from 32 to 45 hours. • For three claims tested, the School Age Care claimed did not agree to the school schedule of the child. School Age Care is authorized for before and after school and on days school is not in attendance. o Two providers were recording the child’s “out” time each morning at 9:00 a.m. and the “in” time in the afternoon at 4:00 p.m. The school day started at 8:50 a.m. and ended at 4:05 p.m. While the NAC does allow for rounding to the nearest quarter hour for each day’s total time of services, the “in” and “out” times should not be rounded. It would not be possible for the child to leave daycare at 9:00 a.m. and arrive at school at 8:50 a.m., or to leave school at 4:05 p.m. and arrive at daycare at 4:00 p.m. The Agency agreed that this practice was adding an extra 15 minutes or quarter hour to each day. o For one claim, the provider charged a full day of care on a school day during which the child would have been in school. The Agency could not explain why a full day of care was being charged on a day that school was in session. • For one claim, the Agency could not provide a birth record or birth certificate for the child; therefore, we could not verify that the child was under 13 years old. • For one claim, the Agency was unable to provide the agreement between the Agency and the provider that would have been valid at the time of service. Federal payment errors noted for the sample tested were $1,458. The total Federal sample tested was $10,095, and total child care Federal assistance claims for the fiscal year were $45,598,523. Based on the sample tested, the case error rate was 36.67% (11/30). The dollar error rate for the sample was 14.44% ($1,458/10,095), which estimates the potential dollars at risk for the fiscal year 2023 to be $6,584,427 (dollar rate multiplied by the population). In addition to the $1,458 questioned costs noted on the sample items tested, we noted $695 of questioned costs on other line items of the claims reviewed, which resulted from missing and inaccurate documentation and service authorizations being exceeded. Unusual Claims Tested We reviewed the detail of child care claims for unusual items, such as excessive hours billed in a month. Four of five claims tested were improper.  One provider billed 348 hours for School Age care provided during one month. We reviewed the attendance calendar, which showed that care was provided from 6:00 a.m. to 6:00 p.m. or 9:00 p.m. every day but Sundays. This is not reasonable, as it includes hours when the School Age child should have been in school. We also noted the provider billed over the authorized hours of care. The provider was authorized to provide care up to 53 hours per week; however, during the last two weeks of the month, the provider claimed 60 hours of care. After identifying the dates and times that the child would have been attending school, we then recalculated attendance with reasonable in and out times, up to the authorized hours per week, and determined that the provider overbilled by $906. We consider these questioned costs.  One provider billed 240 hours at a rate of $5.50/hour for School Age care provided during one month. We reviewed the attendance calendar, and the care was overnight from 7:00 p.m. to 7:00 a.m. (12 hours), so the provider should have been billing for one day unit (up to 10 hours) plus 2 additional hourly units for each day of care. We recalculated what the claim should have been with 20 day units at $34/day and 40 hourly units at $5.50/hour and question the difference, or $460.  One provider billed care of one School Age child between the dates of May 1, 2021, and May 17, 2021, for 231 hours at a rate of $2.25/hour and 17 days at a rate of $15/day. We requested the attendance records to verify the claim, but the Agency was unable to provide the documentation because the provider had closed. Without the attendance calendar needed to verify the propriety of these units, we question the $775 paid.  One provider billed 240 hours of overtime during one month. We requested the attendance records to verify the claim, but the Agency was unable to provide the documentation. The provider responded to the Agency that she would not be sending in an attendance calendar because she had thrown away all the documentation when the Agency closed her down. Without the attendance calendar to verify the reasonableness of these units, we question the $997 paid. Duplicate Claims Child care claims are initially paid from State funds. Journal entries are then performed throughout the year to transfer costs to Federal funds. A detailed listing of claims accompanies these journal entries to show which claims are included in the amounts moved from State funds to Federal funds. We reviewed the detailed claim listings for each journal entry completed during the fiscal year and found that duplicate claims were included in two journal entries. The journal entry in March 2023 included 428 claims, totaling $158,331, that had been charged to Federal funds in September 2022; therefore, $158,331 is considered questioned costs. Cause: Ineffective review. The Agency does not have automated procedures to ensure: 1) attendance records agree to billing documents; 2) service authorizations are not exceeded; and 3) claims are in accordance with regulations. Effect: Ineffective review of claims increases the risk for errors and misuse of State and Federal funds. Recommendation: We recommend the Agency implement procedures to ensure payments are allowable, adequately supported, and in accordance with State and Federal regulations. We further recommend the Agency ensure billing documents agree with attendance sheets. We also recommend the Agency implement procedures to ensure journal entries do not charge duplicate claims. Finally, we recommend the Agency take the necessary action to recover the overpayments. Management Response: The Agency agrees.

Program: AL 93.575 and 93.596 – CCDF Cluster – Special Tests and Provisions Grant Number & Year: Various, including 2301NECCDF, FFY 2023 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 45 CFR § 98.41 (October 1, 2022), the State must have requirements to protect the health and safety of children, including the prevention and control of infectious diseases, building and physical premises safety, and health and safety training. Per 391 NAC 3-005.09A and NAC 4-005.09A: The Department will make a fire inspection referral when: . . . 2. Every two years following the initial fire inspection[.] Per 391 NAC 3-005.09B: The Department will make a sanitation inspection referral when: . . . 2. Every two years following the initial sanitation inspection . . . [.] A good internal control plan requires that adequate documentation be maintained to support compliance with health and safety requirements. Condition: The Agency lacked adequate procedures for ensuring that health and safety requirements were met for child care providers. A similar finding was noted in the prior audit. Repeat Finding: 2022-035 Questioned Costs: None Statistical Sample: No Context: We tested 17 child care centers subject to fire and sanitation inspections. For six child care centers tested, a required inspection had not been performed as of fieldwork on November 13, 2023. The Agency has made referrals for the fire and sanitation inspections; however, the inspections are overdue, and the Agency is ultimately responsible for ensuring that these inspections are performed. See Schedule of Findings and Questioned Costs for chart/table. Cause: Depending on the city or county, the Agency relies on local fire departments or the State Fire Marshal to conduct fire inspections for child care centers. The Agency makes a referral to the fire department when an inspection is due, but the Agency does not pay for these inspections and cannot control the timing of the inspections. Effect: Without adequate procedures to ensure health and safety requirements are met, there is an increased risk of noncompliance with Federal regulations and the possibility of children being cared for in unsafe facilities. Recommendation: We recommend the Agency implement procedures to ensure all health and safety requirements are met for child care centers. These procedures should include regular follow-up with the Fire Marshall or local fire departments and local health departments or the Environmental Health Agency to ensure the inspections are completed timely. This also should include establishing a documented review of inspection requirements for school-age-only child care centers as well as child care centers located in a school. Management Response: The Agency partially agrees. It is agreed that some sanitation and fire inspections have not been conducted every 2 years. These inspections are conducted by entities external to DHHS. Resources are an issue for these entities, which contributes to not meeting the regulatory timeframes for DHHS Children's Services Licensing. The Agency disagrees with the finding, in part, because DHHS has policy and procedure for making timely referrals, as required by regulations. DHHS has had extensive documented communication and follow up with these entities after the policy and procedure changes in 2020, 2021, 2022 and 2023; however, DHHS has no authority to require these entities to complete the inspections more promptly or release completed inspections when the licensee has not paid for the fire or sanitation inspection. DHHS will continue to implement policies and procedures: File Review by Child Care Licensing Supervisors and Fire and Sanitation Inspection Referrals. It is accurate that "per 45 CFR § 98.41 (October 1, 2020), the State must have requirements to protect the health and safety of children, including the prevention and control of infectious diseases, building and physical premises safety, and health and safety training." DHHS disagrees that: "The Agency did not have adequate procedures in place to ensure health and safety requirements were met for child care providers." Regulations 391 NAC 1-5 include robust requirements to address a healthy and safe environment that includes: environmental services and safety, physical plant standards, communicable diseases, children excluded due to illness, medications, food safety, emergency preparedness, safety training and nutrition and food service training. Child Care Inspection Specialists conduct inspections pursuant to these regulations, checking on compliance in the areas listed above, and these inspections are conducted once or twice annually as required by statute. It is important to note that if serious fire safety and sanitation concerns are observed at any inspection that may endanger the health and safety of children in care, it is standard practice to work with the appropriate authority to request an immediate inspection. Fire and sanitation have always responded timely to these requests. This has been a long-standing policy and procedure in Children's Services Licensing specific to Family Child Care Homes I and II and is part of the child care licensing regulations. 391 NAC Chapters 1-5: 1-005.08 Inspection by Other Entities 2-005.09 Inspection by Other Entities 3-005.09 Inspections by Other Entities 4-005.09 Inspections by Other Entities 5-005.09 Inspections by Other Entities APA Response: The Agency is the recipient of the Federal funds and is, therefore, ultimately responsible to ensure that fire and sanitation inspections are performed. Without such inspections, there is an increased risk of children being cared for in unsafe facilities.

Program: AL 93.558 – Temporary Assistance for Needy Families; AL 93.563 – Child Support Enforcement; AL 93.568 – Low Income Home Energy Assistance (LIHEAP); AL 93.575 – Child Care and Development Block Grant; AL 93.658 – Foster Care Title IV-E; AL 93.778 – Medical Assistance Program; AL 10.561 – State Administrative Matching Grants for the Supplemental Nutrition Assistance Program – Allowable Costs/Cost Principles Grant Number & Year: 2001NETANF, FFY 2020; 2301NECSES, FFY 2023; 2301NELIEA, FFY 2023; 2301NECCDD, FFY 2023; 2301NEFOST, FFY 2023; 2305NE5ADM, FFY 2023; 233NE406S2514, FFY 2023 Federal Grantor Agency: U.S. Department of Health and Human Services and U.S. Department of Agriculture Criteria: 45 CFR § 75.405(a) (October 1, 2022) and 2 CFR § 200.405 (January 1, 2023) state, in part, the following: A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. 45 CFR § 75.403 (October 1, 2022) and 2 CFR § 200.403 (January 1, 2023) provide the following, in relevant part: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. * * * * (g) Be adequately documented. See also §§ 75.300 through 75.309. Per 45 CFR § 75.303 (October 1, 2022) and 2 CFR § 200.303 (January 1, 2023), The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Title 45 CFR § 75.302 (October 1, 2022) and 2 CFR § 200.302 (January 1, 2023) require financial management systems of the State sufficient to permit preparation of required reports and permit the tracing of funds to expenditures adequate to establish the use of these funds were in accordance with applicable regulations. EnterpriseOne is the official accounting system for the State of Nebraska, and all expenditures are generated from it. Good internal control requires procedures to ensure that amounts charged to Federal funds are proper. Condition: Procedures to ensure journal entries and adjustments to the Public Assistance Cost Allocation Plan (PACAP) were not adequate, resulting in multiple Federal programs being overcharged. Repeat Finding: No Questioned Costs: $581,496 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: Each quarter, as the PACAP is prepared, the Agency makes multiple adjustments for costs that either were charged to Federal funds and should not have been, or costs that were not charged to Federal funds but are claimable to a Federal grant. We tested five adjustments between two quarters. One adjustment tested for the quarter ended December 31, 2022, was recorded to charge the Foster Care grant for allowable costs incurred by the Foster Care Review Office (FCRO), a separate agency. The amounts provided by FCRO erroneously included payroll charges from a previous quarter, inflating the amount charged. The FCRO later caught the mistake and adjusted the internal spreadsheet but did not alert the Agency to the error, so a correcting adjustment was never made to the PACAP. The amount charged was $353,984; however, the adjustment should have been $212,725, a difference of $141,259. Foster Care is matched at 50%, so the grant was overcharged $70,629, which are questioned costs. Due to this error, we reviewed a second Foster Care adjustment for the quarter ending March 31, 2023, and noted the Agency’s calculation included amounts for a State funded program that should have been removed, resulting in the grant being overcharged an additional $1,561. We also tested six journal entries that moved costs between cost centers to determine any impact on the PACAP and if those journal entries were appropriate. We noted three improper journal entries that the Agency had not corrected as of the end of the fiscal year: • A journal entry for $526,487 was performed in November 2022 to temporarily move postage costs of multiple programs from State funds to the Child Support Enforcement (CSE) grant until new coding could be created in the State’s accounting system to track expenses from one fiscal year to another. The intent was to reverse the entry as soon as the new coding was completed; however, the reversing entry was never performed. Since the Agency performs a quarterly adjustment for the CSE grant to charge indirect costs identified by the Agency’s PACAP to the grant, the CSE grant was overcharged a total of $263,628. No correcting entry had been made as of September 30, 2023. These are considered questioned costs. • A journal entry for $207,369 was performed in December 2022 to move expenses to allow payroll to post. The intent was to reverse the entry before the end of the fiscal year; however, that was not done. The expenses were moved from Medicaid administration and were charged to the Central Services and Supplies Cost Center, which is then allocated to numerous other Cost Centers that are further allocated or charged directly to Federal programs such as TANF and Child Care. Due to the intricacies of PACAP allocations, exact questioned costs are unknown. No correcting entry was made as of September 30, 2023. • A journal entry for $5,317,640 was done in February 2023 to move Premium Pay to the Coronavirus State and Local Fiscal Recovery Funds (CSLFRF) grant as additional pay for certain job roles allowed under that grant. However, the entry performed included some lines that were miscoded, most significantly a line for $764,187 that was supposed to move money within the same Cost Center (CC 25C21910 – Field Office Administration); however, it pulled costs out of Cost Center 25C21780 - Protection and Safety Policy Chief instead. Additionally, we confirmed with the Agency that the costs charged to CC 25C21910 under the CSLFRF grant were also allocated to other Federal programs through the PACAP, essentially charging Federal programs twice. Due to the intricacies of the PACAP allocations, total questioned costs are unknown; however, we were able to determine that this error caused Medicaid to be overcharged $149,478, LIHEAP to be overcharged $33,447, SNAP to be overcharged $44,984, Child Care to be overcharged $10,412, and TANF to be overcharged $7,357. Cause: Inadequate procedures to ensure that adjustments to the PACAP are proper and that journal entries are appropriate for each program. Effect: Unallowable expenditures were charged to Federal funds and there is an increased risk for errors, fraud, and non-compliance with Federal regulations. Recommendation: We recommend the Agency strengthen procedures to ensure adjusting entries are complete and accurate. We further recommend the Agency strengthen procedures to ensure compliance with Federal regulations. Management Response: The Agency agrees.

Program: AL 93.658 - Foster Care Title IV-E; AL 10.561 - State Administrative Matching Grants for the Supplemental Nutrition Assistance Program; AL 93.659 - Adoption Assistance – Allowable Costs/Cost Principles Grant Number & Year: 2301NEFOST, FFY 2023; 202323S251443, FFY 2023; 2301NEADPT, FFY 2023 Federal Grantor Agency: U.S. Department of Health and Human Services and U.S. Department of Agriculture Criteria: 45 CFR § 75.405(a) (October 1, 2022) and 2 CFR § 200.405 (January 1, 2023) state, in part, the following: A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. 45 CFR § 75.403 (October 1, 2022) and 2 CFR § 200.403 (January 1, 2023) provide the following, in relevant part: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. * * * * (g) Be adequately documented. See also §§ 75.300 through 75.309. Per 45 CFR § 75.303 (October 1, 2022) and 2 CFR § 200.303 (January 1, 2023), The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Per the CAP’s RMTS Time Study Design/Coding Structure: [P]articipants are asked whether they are working on an activity that is client related. If they select “Yes” to this question, they are asked to identify the Case ID and type of case . . . . Per the CAP’s RMTS Survey Validation: The contractor and the NE DHHS staff review subsample responses to ensure the activity selected matches the description provided. If the activity and description do not match, the participant is notified and the moment is considered invalid. Per the CAP’s RMTS Response Time/Non-Responses: Participants have two (2) calendar days to respond to each moment. The two (2) day response time allows workers who may spend time outside of their office location and away from email the opportunity to respond to the moment before it expires. The two (2) day period is inclusive of calendar hours and not business days . . . . Good internal control and sound accounting practices require procedures to ensure that staff know how to complete accurate random moment time studies, which are used to allocate costs to Federal programs. Condition: The Agency did not have adequate procedures to ensure payroll charges were proper. Repeat Finding: 2022-024 Questioned Costs: $55,666 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: The Random Moment Time Study (RMTS) is conducted on an ongoing basis to provide data for the allocations of direct and indirect costs to various programs. The objective is to identify employee efforts directly related to programs administered by the Agency. We tested 55 RMTS surveys and noted 18 errors resulting in questioned costs as follows: • For 10 of 15 surveys tested, the workers erroneously reported they were working on a Foster Care IV-E (Federally funded) case when the survey should have been reported as Foster Care Non IV-E; therefore, Foster Care was overcharged. o For two surveys, the cases had previously been IV-E Foster Care cases but were changed to Non IV-E cases the month prior to the surveys submitted by the Child and Family Services Specialists. o For one survey, the worker completed the survey three calendar days after the RMTS was generated and the activity described on the survey form was for the date submitted, not when the RMTS was generated. • For 7 of 19 Supplemental Nutrition Assistance Program (SNAP) surveys tested, the RMTS survey form appeared to have been completed incorrectly. o For two surveys, the workers selected SNAP; however, per the case files, the case worker appeared to be working on Low Income Home Energy Assistance (LIHEAP) and not on SNAP. o For one survey, the worker stated on the survey form they were working on a case activity for SNAP; however, no case file name or identification case number was given to identify what case was being worked. o For three surveys, the workers selected the SNAP program; however, we could not confirm from the documentation on file what the worker was working on, and the questioned costs are unknown. o For one survey, the case worker selected the SNAP program; however, per the case files, the case worker appeared to be working on other programs along with SNAP at the time of the survey. • For one of seven Adoption IV-E surveys tested, the worker erroneously reported that they were working on an Adoption IV-E case when the survey should have been reported as Foster Care IV-E; therefore, Adoption IV-E was overcharged. Total known Federal payment errors, amount tested, error rate (amount of errors/amount tested), total dollars charged via RMTS, and potential dollars at risk (dollar rate multiplied by the population total dollars charged) are summarized below by program: See Schedule of Findings and Questioned Costs for chart/table. Cause: The Agency’s training of staff and supervisor reviews of RMTS surveys were not sufficient to ensure the surveys were accurately completed. Effect: Random moment sampling is based on the laws of probability, which state, in essence, that there is a high probability that a relatively small number of random surveys will yield an accurate depiction of the overall characteristics of the population for which the sample was taken. If RMTS surveys are not accurate, there is an increased risk costs will be allocated incorrectly between programs. Recommendation: We recommend the Agency improve procedures to ensure that random moment surveys are accurate and adequately reviewed. Management Response: The Agency agrees.

Program: AL 93.658 – Foster Care Title IV-E – Reporting Grant Number & Year: 2201NEFOST, FFY 2022; 2301NEFOST, FFY 2023 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: A good internal control plan requires procedures to ensure that reports are accurate and complete and reconcile to the accounting system. 45 CFR § 75.302 (October 1, 2022) states, in part, the following: (a) Each state must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state's own funds. In addition, the state's and the other non- Federal entity's financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. See also §75.450. (b) The financial management system of each non-Federal entity must provide for . . . (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements . . . . Per 45 CFR § 1356.60(a) (October 1, 2022), Federal matching funds for foster care maintenance payments are available at the Federal medical assistance percentage. Per 45 CFR § 1356.60(c), Federal financial participation is 50% for administrative expenditures. Condition: The Agency lacked adequate procedures to ensure the accuracy of Federal Financial Reports (FFRs). Repeat Finding: No Questioned Costs: Unknown Statistical Sample: No Context: We tested the FFRs for the quarters ended September 2022 and March 2023 and noted the following: • Part I, Line 1a, Maintenance Payments – Foster Family Home, current quarter claims for the September 2022 report included $4,765,533 related to prior-period administration expenses that should have been reported as a prior-period adjustment. The total maintenance on Line 1a was overstated by $4,765,533, and administration adjustments were understated by that amount. As maintenance is matched at 64% and administration at 50%, the total Federal share was overreported by $667,175. • The supporting worksheets for the March 2023 report contained a clerical error. As a result, administrative costs were understated by $16,904, with the Federal share understated by $8,452. Cause: Clerical errors and inadequate review. Effect: Increased risk for errors and non-compliance with Federal requirements. Recommendation: We recommend the Agency implement procedures to ensure that Federal reports are accurate and reconcile to the accounting system. Management Response: The Agency agrees

Program: AL 93.658 – Foster Care Title IV-E; AL 93.658 – COVID-19 Foster Care Title IV-E – Allowability Grant Number & Year: 2301NEFOST, FFY 2023 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 45 CFR § 75.403 (October 1, 2022), costs must be necessary, reasonable, and adequately documented. Per 45 § CFR 75.303(a) (October 1, 2022), the Agency must do the following: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. 45 CFR § 75.302(a) (October 1, 2022) states the following: Each state must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state's own funds. In addition, the state's and the other non- Federal entity's financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. Title 392 NAC 4-002. (Eff. 9/15/2020) states, in relevant part, “Before furnishing any service, each provider must sign an enrollment form agreeing: (A) No payments will be made for child care provided to a child before the service authorization date; (B) To provide service only as authorized, in accordance with the Department’s standards;” and “(G) To retain authorizations, billing documents, and attendance records for four years to support and document all claims[.]” The Child Care Provider Handbook (Handbook), dated January 2008, states, in relevant part, “You must complete the Attendance Calendar to accurately reflect the dates on which child care services were provided as well as the exact number of hours of service provided. For each day, partial hours of service provided should be rounded up to the next quarter hour[.]” Condition: The Agency did not have adequate documentation on file to support Foster Care payments for childcare services. Repeat Finding: No Questioned Costs: $577 known (2301NEFOST, $521; 2301NEFOST-COVID-19, $56) Statistical Sample: No Context: For 1 of 25 claims tested, the Agency was unable to obtain the childcare attendance calendar from the provider. With no attendance calendar, we were unable to verify that the payment amount was accurate, resulting in questioned costs of $577. Federal payment errors noted in the sample were $577. The Federal sample tested was $13,527, and the total Federal Foster Care maintenance payments during the fiscal year were $5,401,586. Based on the sample tested, the case error rate was 4% (1/25). The dollar error rate was 4.27% ($577/$13,527), which estimates the potential dollars at risk for fiscal year 2023 to be $230,648 (dollar rate multiplied by population). Cause: Employee oversight; inadequate procedures to ensure documentation was on file. Effect: When adequate support is not on file, there is an increased risk of both non-compliance with State and Federal requirements and improper payments. Recommendation: We recommend the Agency implement procedures to ensure the maintenance of adequate documentation for supporting that expenditures are allowable and proper in accordance with State and Federal regulations. Management Response: The Agency agrees

Program: AL 93.658 – Foster Care Title IV-E; AL 93.658 – COVID-19 Foster Care Title IV-E – Allowability Grant Number & Year: 2301NEFOST, FFY 2023 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 45 CFR § 75.403 (October 1, 2022), costs must be necessary, reasonable, and adequately documented. Per 45 § CFR 75.303(a) (October 1, 2022), the Agency must do the following: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. 45 CFR § 75.302(a) (October 1, 2022) states the following: Each state must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state's own funds. In addition, the state's and the other non- Federal entity's financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. Title 392 NAC 4-002. (Eff. 9/15/2020) states, in relevant part, “Before furnishing any service, each provider must sign an enrollment form agreeing: (A) No payments will be made for child care provided to a child before the service authorization date; (B) To provide service only as authorized, in accordance with the Department’s standards;” and “(G) To retain authorizations, billing documents, and attendance records for four years to support and document all claims[.]” The Child Care Provider Handbook (Handbook), dated January 2008, states, in relevant part, “You must complete the Attendance Calendar to accurately reflect the dates on which child care services were provided as well as the exact number of hours of service provided. For each day, partial hours of service provided should be rounded up to the next quarter hour[.]” Condition: The Agency did not have adequate documentation on file to support Foster Care payments for childcare services. Repeat Finding: No Questioned Costs: $577 known (2301NEFOST, $521; 2301NEFOST-COVID-19, $56) Statistical Sample: No Context: For 1 of 25 claims tested, the Agency was unable to obtain the childcare attendance calendar from the provider. With no attendance calendar, we were unable to verify that the payment amount was accurate, resulting in questioned costs of $577. Federal payment errors noted in the sample were $577. The Federal sample tested was $13,527, and the total Federal Foster Care maintenance payments during the fiscal year were $5,401,586. Based on the sample tested, the case error rate was 4% (1/25). The dollar error rate was 4.27% ($577/$13,527), which estimates the potential dollars at risk for fiscal year 2023 to be $230,648 (dollar rate multiplied by population). Cause: Employee oversight; inadequate procedures to ensure documentation was on file. Effect: When adequate support is not on file, there is an increased risk of both non-compliance with State and Federal requirements and improper payments. Recommendation: We recommend the Agency implement procedures to ensure the maintenance of adequate documentation for supporting that expenditures are allowable and proper in accordance with State and Federal regulations. Management Response: The Agency agrees

Program: AL 93.658 - Foster Care Title IV-E; AL 10.561 - State Administrative Matching Grants for the Supplemental Nutrition Assistance Program; AL 93.659 - Adoption Assistance – Allowable Costs/Cost Principles Grant Number & Year: 2301NEFOST, FFY 2023; 202323S251443, FFY 2023; 2301NEADPT, FFY 2023 Federal Grantor Agency: U.S. Department of Health and Human Services and U.S. Department of Agriculture Criteria: 45 CFR § 75.405(a) (October 1, 2022) and 2 CFR § 200.405 (January 1, 2023) state, in part, the following: A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. 45 CFR § 75.403 (October 1, 2022) and 2 CFR § 200.403 (January 1, 2023) provide the following, in relevant part: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. * * * * (g) Be adequately documented. See also §§ 75.300 through 75.309. Per 45 CFR § 75.303 (October 1, 2022) and 2 CFR § 200.303 (January 1, 2023), The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Per the CAP’s RMTS Time Study Design/Coding Structure: [P]articipants are asked whether they are working on an activity that is client related. If they select “Yes” to this question, they are asked to identify the Case ID and type of case . . . . Per the CAP’s RMTS Survey Validation: The contractor and the NE DHHS staff review subsample responses to ensure the activity selected matches the description provided. If the activity and description do not match, the participant is notified and the moment is considered invalid. Per the CAP’s RMTS Response Time/Non-Responses: Participants have two (2) calendar days to respond to each moment. The two (2) day response time allows workers who may spend time outside of their office location and away from email the opportunity to respond to the moment before it expires. The two (2) day period is inclusive of calendar hours and not business days . . . . Good internal control and sound accounting practices require procedures to ensure that staff know how to complete accurate random moment time studies, which are used to allocate costs to Federal programs. Condition: The Agency did not have adequate procedures to ensure payroll charges were proper. Repeat Finding: 2022-024 Questioned Costs: $55,666 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: The Random Moment Time Study (RMTS) is conducted on an ongoing basis to provide data for the allocations of direct and indirect costs to various programs. The objective is to identify employee efforts directly related to programs administered by the Agency. We tested 55 RMTS surveys and noted 18 errors resulting in questioned costs as follows: • For 10 of 15 surveys tested, the workers erroneously reported they were working on a Foster Care IV-E (Federally funded) case when the survey should have been reported as Foster Care Non IV-E; therefore, Foster Care was overcharged. o For two surveys, the cases had previously been IV-E Foster Care cases but were changed to Non IV-E cases the month prior to the surveys submitted by the Child and Family Services Specialists. o For one survey, the worker completed the survey three calendar days after the RMTS was generated and the activity described on the survey form was for the date submitted, not when the RMTS was generated. • For 7 of 19 Supplemental Nutrition Assistance Program (SNAP) surveys tested, the RMTS survey form appeared to have been completed incorrectly. o For two surveys, the workers selected SNAP; however, per the case files, the case worker appeared to be working on Low Income Home Energy Assistance (LIHEAP) and not on SNAP. o For one survey, the worker stated on the survey form they were working on a case activity for SNAP; however, no case file name or identification case number was given to identify what case was being worked. o For three surveys, the workers selected the SNAP program; however, we could not confirm from the documentation on file what the worker was working on, and the questioned costs are unknown. o For one survey, the case worker selected the SNAP program; however, per the case files, the case worker appeared to be working on other programs along with SNAP at the time of the survey. • For one of seven Adoption IV-E surveys tested, the worker erroneously reported that they were working on an Adoption IV-E case when the survey should have been reported as Foster Care IV-E; therefore, Adoption IV-E was overcharged. Total known Federal payment errors, amount tested, error rate (amount of errors/amount tested), total dollars charged via RMTS, and potential dollars at risk (dollar rate multiplied by the population total dollars charged) are summarized below by program: See Schedule of Findings and Questioned Costs for chart/table. Cause: The Agency’s training of staff and supervisor reviews of RMTS surveys were not sufficient to ensure the surveys were accurately completed. Effect: Random moment sampling is based on the laws of probability, which state, in essence, that there is a high probability that a relatively small number of random surveys will yield an accurate depiction of the overall characteristics of the population for which the sample was taken. If RMTS surveys are not accurate, there is an increased risk costs will be allocated incorrectly between programs. Recommendation: We recommend the Agency improve procedures to ensure that random moment surveys are accurate and adequately reviewed. Management Response: The Agency agrees.

Program: AL 93.659 – Adoption Assistance – Reporting Grant Number & Year: 2201NEADPT, FFY 2022; 2301NEADPT, FFY 2023 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: A good internal control plan requires procedures to ensure that reports are accurate and complete and reconcile to the accounting system. EnterpriseOne is the official accounting system of the State. 45 CFR § 75.302 (October 1, 2022) states, in part, the following: (a) Each state must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state's own funds. In addition, the state's and the other non- Federal entity's financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. See also §75.450. (b) The financial management system of each non-Federal entity must provide for… (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements… Per Instructions for Completion of Form CB – 496 Part 4: Line 9. Prior Reported FFYs - Total Cumulative Expenditure of Calculated Adoption Savings (Line 1 Amount) – This line includes the cumulative total of calculated adoption savings that were expended and reported on Form CB-496 Part 4 in those Part 4 reporting periods consisting of all prior FFYs. An entry is made only in Column B since this line does not contain any amounts sourced from the current FFY. The entry must be taken directly from the amount reported on the CB-496 Part 4 for the immediately prior FFY on line 14, Column C. Title IV-E agencies are required to enter into an adoption assistance agreement with the prospective adoptive parents of any child who meets specified criteria by applying differing, and less restrictive, program eligibility criteria. This results in some number of children who, under previously applied program eligibility criteria, would not have been determined as Title IV-E eligible, but who will now be determined as Title IV-E eligible for adoption assistance. Each Title IV-E agency is required to calculate and spend an amount equal to any savings in Title IV-E agency expenditures as a result of applying the differing program eligibility criteria for a Federal fiscal year (FFY) for services permitted under Title IV-B or IV-E. These non-Federal funds are referred to as “adoption savings.” The State is required to spend an amount equal to any adoption savings in State expenditures for a fiscal year for any services that may be provided under Title IV-B or IV-E. Per 42 U.S. Code § 673(a)(8)(D)(ii) “Any State spending required under clause (i) shall be used to supplement, and not supplant, any Federal or non-Federal funds used to provide any service under part B or this part.” Condition: The Agency lacked adequate procedures for ensuring the accuracy of Federal Financial Reports (FFRs). Repeat Finding: No Questioned Costs: Unknown Statistical Sample: No Context: We tested the FFRs for the quarters ended December 2022 and March 2023 and noted the following: • For both reports tested, Line 20, Adoption Assistance Payments, was incorrect. The Line 20 total for December was understated by $679,601, and the Federal share was understated by $435,420. The Line 20 total for March was understated by $643,861, and the Federal share was understated by $412,522. This was due to reducing expenditures for the Federal debit side of a journal entry but including the General Fund credit side. Both sides of journal entries should be considered. We reviewed the September 2022 and June 2023 reports for this issue and noted similar errors with the Federal share being understated by $417,414 and $41,971 respectively. • For both reports tested, the Federal and State shares of expenditures reported did not agree to the EnterpriseOne accounting system. For December, the Agency did not include all allowable General Fund expenditures. For March, the Agency performed a journal entry that moved $1 million from Federal funds to State General funds. This entry was meant to be temporary but was not reversed. As a result, the Federal Share reported was $1 million more than the accounting system, and the State Share reported was $1 million less than the accounting system. • A reconciliation of the reports to the accounting system was not done each quarter. The Agency indicated its intention to do a reconciliation annually; however, due to staff turnover, it was not performed. As of the date of fieldwork, November 29, 2023, the reconciliation had not been completed. We also tested Part 4 of the September 2022 report for the Annual Adoption Savings Calculation and Accounting Report. • Line 9b, Cumulative Calculated Adoption Savings, was reported as $25,184,469 but should have been reported as $28,490,558 to agree with Line 14c of the previous report. • Line 12a, Expenditures of Adoption Savings on Other Title IV-B or IV-E Allowable Services, reported $868,963, but these expenditures should not have been included. These expenditures were paid with Federal funds and State matching funds and, therefore, are not allowable uses of Adoption Savings. • Line 11a, Expenditures for Children at Risk of Foster Care, was reported as $962,268 but was overstated by $134,722 due to including expenditures paid with Federal funds. Cause: Inadequate review and staff turnover. Effect: Increased risk for errors and non-compliance with Federal requirements. Recommendation: We recommend the Agency implement procedures to ensure Federal reports are accurate and reconcile to the accounting system. Management Response: The Agency agrees

Program: AL 93.778 – Medical Assistance Program; AL 93.767 – Children’s Health Insurance Program (CHIP) – Special Tests and Provisions Grant Number & Year: All open, including 2305NE5MAP, FFY 2023 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per Title 42 CFR § 455.104(b)(4) (October 1, 2022), the State Medicaid Agency must require the disclosing entity provide the following disclosures: The name, address, date of birth, and Social Security Number of any managing employee of the disclosing entity (or fiscal agent or managed care entity). Per 42 CFR § 455.101 (October 1, 2022): Managing employee means a general manager, business manager, administrator, director, or other individual who exercises operational or managerial control over, or who directly or indirectly conducts the day-to-day operation of an institution, organization, or agency. Per the Medicaid Provider Enrollment Compendium (MPEC) (3/22/21) Section 1.4.1C: There are not exceptions to the managing employee disclosure requirement. To the extent any individual meets the definition of “managing employee” under § 455.101, their information is required to be disclosed. MPEC Section 1.4.1C states further the following: However, if a non-profit entity has managing employees, to the extent these individuals meet the definition of “managing employee” under § 455.101; they would have to be disclosed as such. In addition, as discussed further below, entities, including non-profit entities, that are organized as corporations must provide disclosures regarding their officers and directors . . . . If a corporation has, for instance, a Director of Finance who is not a member of the board of directors, he/she would not need to be disclosed as a director/board member. However, as discussed in section C., below, to the extent he/she meets the definition of “managing employee” under § 455.101; he/she would have to be disclosed as a “managing employee.” Per 42 CFR § 455.436 (October 1, 2022), the State Medicaid Agency must do the following: (a) Confirm the identity and determine the exclusion status of providers and any person with an ownership or control interest or who is an agent or managing employee of the provider through routine checks of Federal databases. (b) Check the Social Security Administration’s Death Master File, the National Plan and Provider Enumeration System (NPPES), the List of Excluded Individuals/Entities (LEIE), the Excluded Parties List System (EPLS), and any such other databases as the Secretary may prescribe. (c)(1) Consult appropriate databases to confirm identity upon enrollment and reenrollment; and (2) Check the LEIE and EPLS no less frequently than monthly. 45 CFR § 75.303 (October 1, 2022) requires the Agency to “[e]stablish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award.” Good internal control requires procedures to ensure that all required disclosures are provided. Condition: Two of 25 providers tested did not include disclosure requirements for managing employees. Repeat Finding: 2022-042 Questioned Costs: Unknown Statistical Sample: No Context: We tested screening and enrollment for 25 Medicaid/CHIP providers. We noted that two providers, both non-profit corporations, failed to disclose any managing employee. Therefore, no screenings for managing employees were performed for these two providers. Cause: The Agency relies on each provider’s disclosure to be complete, true, and accurate. The provider is allowed to complete the enrollment process even if an owner or managing employee is not disclosed. Effect: Without adequate procedures to ensure providers are screened, and disclosures are complete, there is an increased risk of provider ineligibility, which could result in unallowable costs or potential harm to patients. Recommendation: We recommend the Agency obtain disclosures and screen providers as required by Federal regulations. Management Response: The Agency agrees.

Program: Various, including AL 93.778 – Medical Assistance Program (Medicaid), and AL 93.563 – Child Support Enforcement – Allowable Costs/Cost Principles Grant Number & Year: Various, including 2205NE5ADM, FFY 2022; 2201NECSES, FFY 2022 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 2 CFR § 200.403 (January 1, 2023) and 45 CFR § 75.403 (October 1, 2022) state, in relevant part, the following: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: * * * * (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. * * * * (g) Be adequately documented. 2 CFR § 200.405(b) (January 1, 2023) and 45 CFR § 75.405(b) (October 1, 2022) state, in relevant part, the following: All activities which benefit from the non-Federal entity’s indirect (F&A) cost, including unallowable activities and donated services by the non-Federal entity or third parties, will receive an appropriate allocation of indirect costs. 2 CFR § 200, Appendix V, subsection (G)(2), (January 1, 2023) and 45 CFR § 75 Appendix V, subsection (G)(2), (October 1, 2022) state the following: Internal service funds are dependent upon a reasonable level of working capital reserve to operate from one billing cycle to the next. Charges by an internal service activity to provide for the establishment and maintenance of a reasonable level of working capital reserve, in addition to the full recovery of costs, are allowable. A working capital reserve as part of retained earnings of up to 60 calendar days cash expenses for normal operating purposes is considered reasonable. A working capital reserve exceeding 60 calendar days may be approved by the cognizant agency for indirect costs in exceptional cases. 2 CFR § 200, Appendix V, subsection (G)(4), (January 1, 2023) and 45 CFR § 75 Appendix V, subsection (G)(4), (October 1, 2022) state, in relevant part, the following: Billing rates used to charge Federal awards must be based on the estimated costs of providing the services, including an estimate of the allocable central service costs. A comparison of the revenues generated by each billed service (including revenues whether or not billed or collected) to the actual allowable costs of the service will be made at least annually and an adjustment will be made for the difference between the revenue and the allowable costs. Neb. Rev Stat. § 81-1120.22 (Cum. Supp. 2022) states the following: The Director of Communications shall develop a system of equitable billings and charges for communications services provided in any consolidated or joint-use system of communications. Such system of charges shall reflect, as nearly as may be practical, the actual share of costs incurred on behalf of or for services to each department, agency, or political subdivision provided communications services. Using agencies shall pay for such services out of appropriated or available funds. Beginning July 1, 2011, all payments shall be credited to the Communications Revolving Fund. Beginning July 1, 2011, all collections for payment of telephone expenses shall be credited to the Communications Revolving Fund. 2 CFR § 200.444(a) (January 1, 2023) and 45 CFR § 75.444(a) (October 1, 2022) state, in relevant part, the following: For states . . . the general costs of government are unallowable . . . . Unallowable costs include: (1) Salaries and expenses of the Office of the Governor of a state . . . . (2) Salaries and other expenses of a state legislature . . . . A good internal control plan requires: • Procedures to ensure rate charges are equitable, reflect actual costs incurred, and are reviewed periodically to ensure charges are appropriate for the services provided. • Adequate documentation is maintained to support both rates charged and the approval of those rates. Condition: The Agency did not have adequate documentation to support the allocation of information services and communications costs in developing rates charged by the Office of the Chief Information Officer (OCIO). Additionally, the OCIO did not maintain adequate documentation to support that charges were reasonable, equitable, and consistently applied. We also noted the Agency did not have adequate documentation to support the allocation of security costs in developing building rental rates, and the Agency’s Materiel Division did not maintain adequate documentation to support that charges were reasonable, equitable, and consistently applied. A similar finding has been noted in prior audits since 2015. Repeat Finding: 2022-017 Questioned Costs: Unknown Statistical Sample: No Context: We noted the following: Office of the Chief Information Officer (OCIO) For 6 of 14 OCIO rates selected for testing, documentation provided by the division was not adequate to support the rate charged. • Five of the rates selected utilized an employee time allocation spreadsheet prepared by the OCIO. The spreadsheet was prepared by supervisors utilizing an estimate of how much time each year every employee spends on services provided by the division. During testing, it was noted that these estimates are not backed by a time study, nor is a review of actual hours worked on each service completed by the division. • For one rate selected, we identified variances between the total for networking equipment used in the calculation of the rate charged and the totals per the supporting documentation provided, netting to $1,313,693. When asked about the variances, the OCIO was unable to explain why the amounts did not agree. • For one rate tested, the rate included equipment and maintenance costs incurred by the University of Nebraska (University). The fee was related to the network operated and maintained by Network Nebraska (a collaborative aggregation partnership between the OCIO, the University, and the Nebraska Educational Telecommunications commission). The OCIO receipts funds from the services provided to participants on the network. However, it was noted during testing that the OCIO does not pay the University for its portion of costs incurred for this fee. Per documentation provided to support the calculation of the rate charged, the University incurs $582,049 of the total annual costs of $788,510. For 8 of 14 OCIO rates selected for testing, the rate charged was not reasonable or was improper. • For the six rates previously mentioned above, we were unable to determine if the rate was proper due to the lack of supporting documentation. • For one rate tested, we noted that actual costs incurred for the service provided recalculated to 40 cents per unit. The OCIO charged 22 cents per unit for the service. Total units sold for the service in calendar year 2022 were 39,348,448, resulting in an expected loss of $7,165,169. • For one rate tested, we noted that the rate calculation included employee salaries as a base for costs incurred. Per the calculation, the OCIO utilized salaries that were effective as of January 1, 2018. We compared the hourly compensation for a sample of employees at January 1, 2018, and as of July 1, 2021. During this period, we noted an average pay increase of 9.1% for the employees selected; thus, the rate charged is inappropriate per the actual costs incurred for providing the service. For 3 of 15 OCIO receipts tested, documentation provided was not adequate to support the rate charged. • For one receipt tested, we noted that the OCIO did not charge from an outside communications provider at the same rate that was shown on the invoice from the provider. These rates were “Re-rated” by the OCIO and then charged to the agency. The OCIO could not provide support for how the re-rates were determined. The APA selected seven rates from the OCIO billing to trace to support, and five of those rates could not be traced back to the provider invoice. Of the total payment of $116,175, $11,397 was charged at a rate that could not be traced to support. • For one receipt tested, we noted that the amount charged for a monthly Supreme Court retainer fee of $56,250 is determined by a rate calculated by the OCIO, but the OCIO could not provide support for the amounts used in the calculation. • For one receipt tested, $9,057 was charged for IT Support. This was based on an employee’s annual salary being paid 90% by the agency and 10% by the OCIO. The OCIO could not provide supporting documentation for how the 90/10 split was determined. In addition to the testing mentioned previously, we asked the OCIO how rates are calculated and what procedures are performed to ensure that the rates are appropriate. Most of the rates selected for testing were last updated in 2020. The staff that created these rates are no longer with the OCIO due to turnover. The OCIO reviews each rate on a yearly basis to determine if the amount charged is appropriate based on actual costs incurred. However, no documentation on the individual rate setting processes was developed or maintained when the rates were initially created.  The APA reviewed the OCIO’s fund balances and found them to be compliant with Federal regulations. However, because some rates charged are improper or inadequately supported, there is a risk of some Federal programs being overcharged and some being undercharged. The OCIO receipted $36,684,244 in Federal dollars for services performed for Federal programs. Of this amount, $16,480,956 was charged to Medicaid, and $4,597,226 was charged to Child Support Enforcement. Building Division The rental rate charged to agencies for building space includes an allocation for indirect administrative costs, grounds keeping, security, and energy management. We noted that security costs were allocated for neither the Capitol nor the Governor’s residence, even though security is provided at those locations. Because those locations were not allocated any security costs, Federal programs could be overcharged. Additionally, security costs for the Capitol and the Governor’s residence are general costs of government and, therefore, not allowable. The fiscal year 2023 indirect allocations for security were $785,709. Print Shop As noted in prior audits, the Print Shop lacked adequate support for service rates charged. The Agency was in the process of developing new rates using a new methodology, but no changes were made for fiscal year 2023. Receipts from sales for fiscal year 2023 totaled $3,058,910. Cause: Inadequate procedures. Per the Agency, the methodology used to allocate the security allocation is based on a management decision; however, management cannot simply choose to disregard Federal regulations. Effect: When information services and communications costs are not allocated to all agencies in an equitable manner, there is an increased risk that Federal programs will not be charged in accordance with Federal cost principles. Additionally, without adequate controls and procedures to ensure rates are equitable and based on actual costs, there is an increased risk that Federal programs or State agencies will be overcharged for services. When security costs are not allocated to all buildings in an equitable manner, Federal programs will not be charged in accordance with Federal cost principles. Recommendation: We recommend the Agency review its allocation of information and communications costs to ensure that the costs are allocated in an equitable manner to all activities that benefit from the services. Additionally, we recommend the Agency maintain adequate documentation to support charges and ensure rates are equitable and reflect the actual costs incurred for services. We also recommend the Agency improve procedures to ensure that published rates are the actual rates charged. Lastly, we recommend the Agency review its allocation of security costs to ensure that the costs are allocated in an equitable manner to all activities that benefit from the services, in accordance with Federal regulations. Management Response: The OCIO agrees with the findings as identified by the APA. The Building and Grounds security allocation is based on a management business decision. The Print Shop lacked the data needed to substantiate published rates at the individual service line level. In response to prior findings, the Print Shop purchased a Cost Rate Advisor license to support future rate setting methodology at the individual service line level. That tool is currently being utilized to build Print Shop rates for the fiscal year 2026 - 2027 biennium. APA Response: As noted above, security costs for the Capitol and the Governor’s residence are general costs of government; therefore, despite any management business decision, such costs are not allowable.

Program: AL 93.558 – Temporary Assistance for Needy Families; AL 93.563 – Child Support Enforcement; AL 93.568 – Low Income Home Energy Assistance (LIHEAP); AL 93.575 – Child Care and Development Block Grant; AL 93.658 – Foster Care Title IV-E; AL 93.778 – Medical Assistance Program; AL 10.561 – State Administrative Matching Grants for the Supplemental Nutrition Assistance Program – Allowable Costs/Cost Principles Grant Number & Year: 2001NETANF, FFY 2020; 2301NECSES, FFY 2023; 2301NELIEA, FFY 2023; 2301NECCDD, FFY 2023; 2301NEFOST, FFY 2023; 2305NE5ADM, FFY 2023; 233NE406S2514, FFY 2023 Federal Grantor Agency: U.S. Department of Health and Human Services and U.S. Department of Agriculture Criteria: 45 CFR § 75.405(a) (October 1, 2022) and 2 CFR § 200.405 (January 1, 2023) state, in part, the following: A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. 45 CFR § 75.403 (October 1, 2022) and 2 CFR § 200.403 (January 1, 2023) provide the following, in relevant part: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. * * * * (g) Be adequately documented. See also §§ 75.300 through 75.309. Per 45 CFR § 75.303 (October 1, 2022) and 2 CFR § 200.303 (January 1, 2023), The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Title 45 CFR § 75.302 (October 1, 2022) and 2 CFR § 200.302 (January 1, 2023) require financial management systems of the State sufficient to permit preparation of required reports and permit the tracing of funds to expenditures adequate to establish the use of these funds were in accordance with applicable regulations. EnterpriseOne is the official accounting system for the State of Nebraska, and all expenditures are generated from it. Good internal control requires procedures to ensure that amounts charged to Federal funds are proper. Condition: Procedures to ensure journal entries and adjustments to the Public Assistance Cost Allocation Plan (PACAP) were not adequate, resulting in multiple Federal programs being overcharged. Repeat Finding: No Questioned Costs: $581,496 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: Each quarter, as the PACAP is prepared, the Agency makes multiple adjustments for costs that either were charged to Federal funds and should not have been, or costs that were not charged to Federal funds but are claimable to a Federal grant. We tested five adjustments between two quarters. One adjustment tested for the quarter ended December 31, 2022, was recorded to charge the Foster Care grant for allowable costs incurred by the Foster Care Review Office (FCRO), a separate agency. The amounts provided by FCRO erroneously included payroll charges from a previous quarter, inflating the amount charged. The FCRO later caught the mistake and adjusted the internal spreadsheet but did not alert the Agency to the error, so a correcting adjustment was never made to the PACAP. The amount charged was $353,984; however, the adjustment should have been $212,725, a difference of $141,259. Foster Care is matched at 50%, so the grant was overcharged $70,629, which are questioned costs. Due to this error, we reviewed a second Foster Care adjustment for the quarter ending March 31, 2023, and noted the Agency’s calculation included amounts for a State funded program that should have been removed, resulting in the grant being overcharged an additional $1,561. We also tested six journal entries that moved costs between cost centers to determine any impact on the PACAP and if those journal entries were appropriate. We noted three improper journal entries that the Agency had not corrected as of the end of the fiscal year: • A journal entry for $526,487 was performed in November 2022 to temporarily move postage costs of multiple programs from State funds to the Child Support Enforcement (CSE) grant until new coding could be created in the State’s accounting system to track expenses from one fiscal year to another. The intent was to reverse the entry as soon as the new coding was completed; however, the reversing entry was never performed. Since the Agency performs a quarterly adjustment for the CSE grant to charge indirect costs identified by the Agency’s PACAP to the grant, the CSE grant was overcharged a total of $263,628. No correcting entry had been made as of September 30, 2023. These are considered questioned costs. • A journal entry for $207,369 was performed in December 2022 to move expenses to allow payroll to post. The intent was to reverse the entry before the end of the fiscal year; however, that was not done. The expenses were moved from Medicaid administration and were charged to the Central Services and Supplies Cost Center, which is then allocated to numerous other Cost Centers that are further allocated or charged directly to Federal programs such as TANF and Child Care. Due to the intricacies of PACAP allocations, exact questioned costs are unknown. No correcting entry was made as of September 30, 2023. • A journal entry for $5,317,640 was done in February 2023 to move Premium Pay to the Coronavirus State and Local Fiscal Recovery Funds (CSLFRF) grant as additional pay for certain job roles allowed under that grant. However, the entry performed included some lines that were miscoded, most significantly a line for $764,187 that was supposed to move money within the same Cost Center (CC 25C21910 – Field Office Administration); however, it pulled costs out of Cost Center 25C21780 - Protection and Safety Policy Chief instead. Additionally, we confirmed with the Agency that the costs charged to CC 25C21910 under the CSLFRF grant were also allocated to other Federal programs through the PACAP, essentially charging Federal programs twice. Due to the intricacies of the PACAP allocations, total questioned costs are unknown; however, we were able to determine that this error caused Medicaid to be overcharged $149,478, LIHEAP to be overcharged $33,447, SNAP to be overcharged $44,984, Child Care to be overcharged $10,412, and TANF to be overcharged $7,357. Cause: Inadequate procedures to ensure that adjustments to the PACAP are proper and that journal entries are appropriate for each program. Effect: Unallowable expenditures were charged to Federal funds and there is an increased risk for errors, fraud, and non-compliance with Federal regulations. Recommendation: We recommend the Agency strengthen procedures to ensure adjusting entries are complete and accurate. We further recommend the Agency strengthen procedures to ensure compliance with Federal regulations. Management Response: The Agency agrees.

Program: Various, including AL 93.778 – Medical Assistance Program – Allowable Costs/Cost Principles Grant Number & Year: Various, including 2305NE5ADM, FFY 2023 Federal Grantor Agency: Various, including U.S. Department of Health and Human Services Criteria: 45 CFR § 75.303 (October 1, 2022) states, in relevant part, the following: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. 45 CFR § 75.403 (October 1, 2022) requires costs to be necessary, reasonable, and adequately documented. 45 CFR § 75.302 (October 1, 2022) requires financial management systems of the State be sufficient to permit both preparation of required reports and tracing of funds to expenditures adequate to establish that the use of those funds was in accordance with applicable regulations. 45 CFR § 75.405(a) (October 1, 2022) states, in part, the following: A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. Good internal control requires procedures to ensure that amounts charged to Federal programs are proper. Condition: The Agency did not properly charge Federal programs for twelve allocations tested. A similar finding was noted in the prior audit. Repeat Finding: 2022-023 Questioned Costs: $498,214 known Statistical Sample: No Context: We tested 23 PACAP allocations. We noted errors for 12 of 23 allocations tested, resulting in various programs undercharged or overcharged. The net effect of errors noted resulted in $498,214 overcharged for the Medicaid program, which are considered questioned costs, with undercharges to other various Federal programs ranging from $7,505 to $125,868. We noted the following: Time and Effort Report Allocations • We tested the allocation of cost center 25C21940 Field Office Resource Development for quarter ended December 31, 2022, which allocated $1,516,328 of administration costs, based on Time & Effort reports. The payroll costs for 92 employees were charged to the cost center; however, four of the employees’ payroll costs should not have been charged to the cost center. The four employees tested included a Child and Family Services Specialist Supervisor, a Program Accuracy Specialist, and two Program Specialists. All these employees were, at one time, Resource Developers; however, when their roles changed, their pay source was not updated. As a result of these employees being charged to the Resource Development cost center instead of their appropriate cost centers, numerous programs were not charged correctly, ranging from undercharges of $837 to overcharges of $1,808. Medicaid was overcharged $538. Additionally, we were unable to determine how the payroll costs of $17,095 to one of the Program Specialists should have been allocated. RMTS Allocations • We tested the allocation of cost center 25C21960 Field Office Social Services Casework for quarter ended December 31, 2022, which allocated $7,682,207 of administration costs, based on Random Moment Time Study (RMTS) results. There were several errors found in the sorting process of the RMTS results to Federal programs, resulting in several programs undercharged or overcharged. Medicaid was overcharged $2,644. • We tested the allocation of cost center 25C21920 Field Office Child Protection & Safety Services for the quarter ended March 31, 2023, which allocated $14,187,156 in administration costs based on RMTS results. Below are the issues noted: o RMTS observations for Trial Home Visits were not included in the allocation. As a result, State programs were undercharged, and Federal programs were overcharged. o The RMTS observations for Child Protection Initial Assessment were not properly allocated. As a result, Foster Care was overcharged, and Adoption Assistance and Guardianship Assistance were undercharged. o The RMTS Observation coded as “Non-Court/Child Protection Initial Assessment/Alternative Response (AR)” was misallocated to both State and Federal programs, causing Guardianship Assistance to be overcharged and Adoption Assistance and Foster Care to be undercharged. Labor Hours Statistics • We tested six allocations based on labor hours statistics. All six allocations were calculated incorrectly. Labor hours statistics are gathered by using an Agency-wide report of all employee time, and then filtering that report for specific pay type codes (e.g., regular pay, holiday pay, sick pay, etc.) and specific programs and divisions within the Agency. Below is a summary of allocations tested: See Schedule of Findings and Questioned Costs for chart/table. We noted the following during testing: o Cost center 25C21910 is allocated based on a formatted Labor Hours report, which should only include field offices.  For the quarter ended December 31, 2022, the Agency did not remove irrelevant pay type codes (such as overtime, shift differentials, and termination payouts), and included labor hours for two programs that were not related to field office employees.  For the quarter ended March 31, 2023, the Agency was unable to provide the Labor Hours report it used to calculate the allocation percentages. We recalculated both quarters using the report formatting instructions provided by the Agency and found that the Agency’s errors caused numerous programs to be undercharged by as much as $17,670, while overcharging the Medicaid grant by $301,485. o Cost centers 25C20960 and 25C20975 are allocated based on all Agency hours worked (i.e., does not include paid leave) and excludes two thirds of the labor hours from 24-hour facilities. The Agency did not properly format any of the quarterly Labor Hours reports by removing irrelevant pay type codes (such as Shift Differentials and Sick and Vacation leave paid) and dividing the hours in the 24-hours facilities by three. These repeated errors skewed the data used for the allocations in all three quarters tested. We were able to identify undercharges to Medicaid of $117,611; however, due to the intricacies of these PACAP allocations, we were unable to determine total questioned costs. The largest variances are listed below: See Schedule of Findings and Questioned Costs for chart/table. Recipient Counts • We tested the allocation of cost center 25C20990 IST Application NFOCUS Applications for the quarter ended March 31, 2023, which allocated $6,672,560 in administration costs, based on recipient counts per NFOCUS/MMIS reports. NFOCUS and MMIS are databases used to manage various programs such as SNAP, Child Care, TANF, and Medicaid. We noted that the recipient counts used in the allocation did not agree to support. The Miscellaneous State programs did not include 1,653 recipients, resulting in the State being undercharged and all other programs being overcharged, such as Medicaid for $5,939. Additionally, we were unable to trace the recipient counts to documentation that supported allocating $3,857,377 to Medicaid and $486,931 to CHIP. The Agency did not maintain the recipient count reports used at the time of the allocation. The Agency was able to generate a historical report; however, while the report amounts were similar, they did not agree with the counts used in the allocation. The Agency did maintain system summary reports at the time of the allocation, and the total counts on the summary reports did agree to amounts used for the allocation. However, as the summary reports used did not maintain the detail of members counted, we could not verify the accuracy of the reports used. • We tested the allocation of cost center 25C23006 Expansion Call Center for quarter ended March 31, 2023, which allocated $2,934,314 in administration costs, based on recipient counts per NFOCUS/MMIS reports. It was determined that the same allocation numbers had been used since at least the quarter ended December 31, 2020, and were not being updated each quarter to account for actual benefiting programs. The Agency agreed that the allocation should have been updated each quarter, and it will start doing so as of the June 30, 2023, quarter end. We recalculated what the allocation should have been for each benefiting program and noted variances to numerous programs including overcharges to Medicaid of $305,219. Other • We tested the allocation of cost center 25C23823 iServe IAPD H971 – Shared for quarter ended December 31, 2022, which allocated $3,457,879 in project costs based on the project’s cost allocation plan. The Agency is developing the new iServe Nebraska Portal, which is an application for Nebraskans to apply for benefits from Federal and State programs. This application will be replacing ACCESSNebraska, the current application used by Nebraskans to apply for benefits. For the implementation phase of the project, the Agency was only allocating costs to the following four programs: LIHEAP, TANF, SNAP, and Medicaid. However, there are other Federal and State programs that will utilize the iServe application. We reviewed documentation obtained in the prior year, including correspondence from the Agency’s Federal contacts, which stated, “As long as SNAP, Medicaid, LIHEAP, and TANF are the only benefiting programs for the State’s iServe Nebraska Portal project, the State may just include these four programs in the development of its cost allocation plan. If/when the State decides to add other Federal programs that will benefit from enhancements to the portal, it will need to revisit and adjust its cost allocation plan.” We asked again this year for documentation to support that only the four programs being charged were benefiting from this stage of the project, such as internal planning documents. The Agency was still unable to provide adequate documentation to support our request. We were unable to calculate questioned costs as we were not able to determine which Federal and State programs should receive an allocation, and the basis for how the costs would be allocated to these programs. See table below for how the costs were allocated. See Schedule of Findings and Questioned Costs for chart/table. Cause: Inadequate procedures to ensure that system reports were set up and formatted correctly, employees coded their time correctly, and that allocations were adequately supported and calculated correctly. Effect: Without adequate documentation to support the allocation of costs, there is increased risk of programs not being charged the proper amounts. Recommendation: We recommend the Agency improve procedures to ensure that employee pay is recorded correctly in E1, that system reports are set up correctly and formatting instructions are followed, and that costs are properly allocated and charged, based on supporting documentation. Management Response: The Agency partially agrees. The Agency provided the federally approved Cost Allocation Management (CAM) Toolkit that was used to develop and explain all aspects of the iServe methodology. Premise for this finding is based upon locking DHHS into conversations had with the Federal Government in very early-on planning stages of the APD, prior to APD submission and approval. All communication between DHHS and the Federal Government regarding iServe has been clear and concise, and the Federal Government has agreed with DHHS’s approach, as is evidenced in the communication that has been provided as well as the APD methodology approval that has been received. APA Response: As noted above, correspondence from the Agency’s Federal contacts stated, “As long as SNAP, Medicaid, LIHEAP, and TANF are the only benefiting programs for the State’s iServe Nebraska Portal project, the State may just include these four programs in the development of its cost allocation plan. If/when the State decides to add other Federal programs that will benefit from enhancements to the portal, it will need to revisit and adjust its cost allocation plan.” We asked again this year for documentation to support that only the four programs being charged were benefiting from this stage of the project, such as internal planning documents. The Agency was still unable to provide adequate documentation to support our request.

Program: AL 93.268 - Immunization Cooperative Agreements; AL 93.323 - Epidemiology and Laboratory Capacity for Infectious Diseases (ELC); AL 93.558 - Temporary Assistance for Needy Families (TANF); AL 93.563 - Child Support Enforcement; AL 93.778 - Medical Assistance Program – Allowable Cost/Cost Principles Grant Number & Year: 19NH23IP922589, FFY 2022; 19NU50CK000547; FFY 2023; 2001NETANF, FFY 2020; 2201NECSES, FFY 2022; 2301NECSES, FFY 2023; 2305NE5ADM, FFY 2023 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR § 75.405(a) (October 1, 2022) states, in part, the following: A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. 45 CFR § 75.403 (October 1, 2022) provides the following, in relevant part: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. * * * * (g) Be adequately documented. See also §§ 75.300 through 75.309. Per 45 CFR § 75.303 (October 1, 2022): The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. 45 CFR § 75.430(i) (October 1, 2022) requires payroll expenses charged to Federal awards be based on official records that accurately reflect the work performed. Good internal control and sound accounting practices require policies and procedures to ensure that all payroll costs are properly recorded within the State Accounting System and allocated to the proper funding source for activities performed. Condition: The Agency did not have adequate procedures to ensure payroll charges were proper. Repeat Finding: No Questioned Costs: $91,150 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: We selected 31 employee paychecks paid with Federal funds. Twelve of the 31 tested had payroll charged to Child Support Enforcement. One employee tested was a Child Support Enforcement Worker through September 25, 2022, and changed positions to a Youth Security Specialist II on September 26, 2022. The employee’s payroll costs were not updated to be charged to cost center 25C40360 Youth Rehabilitation and Treatment Centers, which only records costs to the General fund. Instead, the employee’s payroll costs continued to be charged to cost center 25C21750 Child Support Operations. As a result, for the pay period tested, Child Support Enforcement was overcharged by $2,206. During the fiscal year, this employee had an additional $25,726 incorrectly charged to Child Support Enforcement. A Program Accuracy Specialist was recorded to the 25C43060 Child Support Enforcement cost center; however, the supervisor the employee worked with was not charged to this cost center. According to the supervisor, no employees under their management were assigned to read child support enforcement cases. As a result, for the pay period tested, Child Support Enforcement was overcharged by $1,704. During the fiscal year, this employee had an additional $27,976 incorrectly charged to Child Support Enforcement. We noted another Program Accuracy Specialist with this same supervisor also recorded to Child Support Enforcement. During the fiscal year, this employee had $30,670 incorrectly charged to Child Support Enforcement. We tested $20,143 Federal payroll charges to Child Support Enforcement and noted $3,910 in sampled questioned costs and $84,372 additional questioned costs. Federal payroll charges for Child Support Enforcement totaled $3,920,653. Six of the 31 employees tested had payroll charged to TANF. One employee was a Contract Procurement Manager whose payroll expense was split between State funds, TANF and Medicaid. The payroll costs were to be allocated based on a time study; however, the Agency had not completed a revised time study. Therefore, we were unable to ensure the grants were correctly charged. The Agency indicated no time study was done for the entirety of fiscal year 2023. We tested $9,557 Federal payroll charges to TANF and noted $99 in questioned costs. We tested $3,482 in Medicaid payroll charges and noted $197 in questioned costs. We tested the April 19, 2023, paycheck for an Epidemiology Surveillance Coordinator. Payroll expenses were allocated with 75% to the ELC grant and 25% to the Immunization grant. The Agency did not provide documentation to support how this split was determined. An email was provided on July 28, 2023, with a breakdown of the activities and hours the employee worked for each grant; however, the number of hours in the email did not agree to the hours worked per the paycheck. Additionally, to charge payroll expenses to a Federal grant, a timesheet or other official record that accurately reflects the work performed is required. We tested $3,692 Federal payroll charges to ELC and noted $1,929 in questioned costs. We tested $3,659 in Federal payroll charges to Immunization and noted $643 in questioned costs. Cause: Inadequate policies and procedures for review and documentation of payroll expenses. Additionally, the Agency did not change the cost center for one employee who changed positions. Effect: Without adequate documentation to support the allocation of costs, there is an increased risk of programs not being charged the proper amounts. Recommendation: We recommend the Agency improve procedures to ensure that employee pay is recorded correctly in the State Accounting System, and those costs are properly allocated and charged. Management Response: The Agency agrees.

Program: AL 93.778 – Medical Assistance Program; AL 93.778 – COVID-19 Medical Assistance Program - Allowability Grant Number & Year: 2305NE5MAP, FFY 2023; 2205NE5MAP, FFY 2022 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 45 CFR § 75.302(a) (October 1, 2022), “Each state must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state's own funds.” Per 45 CFR § 75.403 (October 1, 2022), costs must be necessary, reasonable, and adequately documented. Title 471 NAC 15-003.02(H) requires that the provider perform the personal assistance services noted on the service plan, accurately documenting services provided in the Electronic Visit Verification (EVV) system and confirming that services were received as authorized according to Agency procedures. Title 471 NAC 15-005.02(A) states, “Providers cannot provide services to more than one client at a time.” That same regulation says also, “Medicaid will not pay for services that were not performed during the actual hours noted by the provider in the Electronic Visit Verification (EVV) system.” A good internal control plan requires procedures to ensure that services provided agree to the service needs assessment. Section 1903(l)(5)(A) of the Social Security Act states the following: The term “electronic visit verification system” means, with respect to personal care services or home health care services, a system under which visits conducted as part of such services are electronically verified with respect to – (i) the type of service performed; (ii) the individual receiving the service; (iii) the date of the service; (iv) the location of service delivery; (v) the individual providing the service; and (vi) the time the service begins and ends. Public Law 114-255, § 12006 (December 13, 2016) (“21st Century Cures Act”) provides, as is relevant, the following: (a) Section 1903 of the Social Security Act (42 U.S.C. 1396b) is amended by inserting after subsection (k) the following new subsection: ‘‘(l)(1) Subject to paragraphs (3) and (4), with respect to any amount expended for personal care services or home health care services requiring an in-home visit by a provider that are provided under a State plan under this title (or under a waiver of the plan) and furnished in a calendar quarter beginning on or after January 1, 2019 (or, in the case of home health care services, on or after January 1, 2023), unless a State requires the use of an electronic visit verification system for such services furnished in such quarter under the plan or such waiver, the Federal medical assistance percentage shall be reduced— ‘‘(A) in the case of personal care services— ‘‘(i) for calendar quarters in 2019 and 2020, by .25 percentage points; ‘‘(ii) for calendar quarters in 2021, by .5 percentage points; ‘‘(iii) for calendar quarters in 2022, by .75 percentage points; and ‘‘(iv) for calendar quarters in 2023 and each year thereafter, by 1 percentage point[.] 42 CFR § 440.167(a)(2) (October 1, 2022) states, in part, that personal care services are those provided “by an individual who is qualified to provide such services and who is not a member of the individual's family[.]” 42 CFR § 440.167(b) adds, “For purposes of this section, family member means a legally responsible relative.” Neb. Rev. Stat. § 28-512 (Reissue 2016) creates the offense of “theft by deception.” That statute says the following, in relevant part: A person commits theft if he obtains property of another by deception. A person deceives if he intentionally: (1) Creates or reinforces a false impression, including false impressions as to law, value, intention, or other state of mind; but deception as to a person's intention to perform a promise shall not be inferred from the fact alone that he did not subsequently perform the promise; or (2) Prevents another from acquiring information which would affect his judgment of a transaction; or (3) Fails to correct a false impression which the deceiver previously created or reinforced, or which the deceiver knows to be influencing another to whom he stands in a fiduciary or confidential relationship[.] Further, Neb. Rev. Stat. § 28-911 (Reissue 2016) prohibits “abuse of public records,” as follows: (1) A person commits abuse of public records, if: (a) He knowingly makes a false entry in or falsely alters any public record; or (b) Knowing he lacks the authority to do so, he intentionally destroys, mutilates, conceals, removes, or impairs the availability of any public record; or (c) Knowing he lacks the authority to retain the record, he refuses to deliver up a public record in his possession upon proper request of any person lawfully entitled to receive such record; or (d) He makes, presents, or uses any record, document, or thing, knowing it to be false, and with the intention that it be taken as a genuine part of the public record. (2) As used in this section, the term public record includes all official books, papers, or records created, received, or used by or in any governmental office or agency. (3) Abuse of public records is a Class II misdemeanor. Condition: During testing of personal assistance service (PAS) claims, we noted the following: • Personal assistance services appeared to be claimed at the same time that the provider was working at another job or at other activities, resulting in apparent fraudulent billings and payments. • Services provided lacked adequate supporting documentation. This included providers being able to submit claims without verifying the location where those services were provided. • Services billed exceeded the number of hours authorized under the service needs assessments. • Providers billed for unreasonable amounts of time – including, among other things, for more daily hours than are in a 24-hour period and for unfeasible scenarios, such as the supposed performance of a week’s worth of duties for one client in only three days. • Providers received overtime pay for unauthorized services, meaning that they were compensated at an increased rate for services ineligible for payment in the first place. • Client guardians or parents were paid for providing services, which violates governing regulations prohibiting such arrangements. A similar finding has been noted in prior audits since 2014. Repeat Finding: 2022-039 Questioned Costs: $53,758 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: The Agency offers PAS (assistance with hygiene, mobility, housekeeping, etc.) to Medicaid recipients with disabilities and chronic conditions. The services to be provided are based on individual needs and criteria that must be determined in a written service needs assessment (SNA). The Agency implemented an EVV system for PAS providers on January 3, 2021, as required by Section 12006(a) of the 21st Century Cures Act, passed by Congress in 2016. The EVV system electronically captures and verifies provider visit information, and providers were required to submit claims to the Agency electronically through this application. We initially selected five provider payments for testing – and, from those, one week of services submitted through the EVV system. A week of service billed by the provider may include multiple claims and clients. Due to the numerous issues identified with the billings, we expanded testing and randomly selected an additional five provider payments for testing, and one week of services. We noted issues with 9 of 10 providers tested. In addition to the billing issues identified for the weeks tested, we also noted that three of these providers had outside employment or participated in activities that conflicted with the PAS hours billed. We obtained more documentation for additional weeks. Based on the documentation obtained, we identified $14,397 in potentially fraudulent payments made to the providers during fiscal year 2023. See Schedule of Findings and Questioned Costs for chart/table. In addition to the potentially fraudulent payments related to hours claimed while at another job or activity, we noted $44,534 in Federal payment errors related to other issues, for total Federal questioned costs of $53,758. The Federal share of payments tested totaled $81,926. The total Federal share of PAS claims for the fiscal year was $5,416,039, and the State share was $3,814,632. Federal payment errors noted in the random sample totaled $268. The total Federal sample tested for the random sample was $979. The total dollar error rate was 27.37%, which estimates the potential dollars at risk for fiscal year 2023 to be $1,482,370 (dollar rate multiplied by the population). The following details issues with each provider. Provider #1 This provider was authorized a total of 87.25 hours of service per week for three different clients. For the week tested, the provider manually created the claims for payment and did not use the EVV system to create a visit form; therefore, the claims did not capture client signatures or verify the location of the visit through the Global Positioning System (GPS). Likewise, there was no listing of the activities performed to ensure compliance with the SNA. We requested the claim detail for a second week of services and, again, the provider manually created the claims and did not enter a visit in the EVV system. Consequently, we questioned all of the claims selected for testing. We noted further that the provider exceeded the SNA by 12 hours and billed 24.5 hours of service on one day, which is impossible. We reviewed three additional weeks of claims and noted also that the provider exceeded the SNA by .25 to 2 hours each week, resulting in additional questioned costs. Most concerning was the fact that the provider worked two additional jobs during the time that she billed for personal assistance services. The provider worked as a dental hygienist and as a pharmacy technician. The provider billed personal assistance services beginning at 6:00 a.m. every day until at least 5:30 p.m. The dental office with which the provider was employed was open only from 8:00 a.m. to 5:00 p.m., Monday through Friday. During the week of February 5, 2023, the provider claimed 87 hours for PAS, of which 43.75 hours were claimed to have been provided between 8:00 a.m. and 5:00 p.m., Monday through Friday. As the provider did not use the EVV, it is unknown where she was at the times the services were claimed; however, considering the provider’s other employment, it is possible that fraud may have occurred. We obtained the pharmacy technician employment records for the provider and compared the PAS billings to those records from July 2022 through January 2023. We identified 101 days during which PAS hours billed overlapped with times that the provider was working as a pharmacy technician. In determining these overlapped hours, we did not factor in any travel time that may have occurred between client homes and the provider’s place of employment; therefore, the possibility of additional fraudulent payments exists. The provider billed 1,200 hours of personal assistance services during this time period, and more than half of these hours could not have been provided. We questioned 770 hours as potential fraud, totaling $8,678. We also noted that the provider did not complete all of the PAS visits through a device using GPS; therefore, additional questioned costs resulted from not using the GPS verification method. Given that many of the visits completed with GPS verification overlapped with the times that the provider was working at the pharmacy, another individual appears to have aided the provider in falsely claiming that personal assistance services were provided. The employment records for the provider included the exact time punched in and out for the shifts worked. Below are a few examples of the hours billed by the provider and the hours the provider worked at the pharmacy. Clients 1 and 2 live at the same residence, and Client 3 is the provider’s mother. See Schedule of Findings and Questioned Costs for chart/table. In addition to the apparent fraudulent hours billed, the provider received overtime pay for the weeks reviewed. Providers are paid at time and one-half for services in excess of 40 hours each week. The provider evidently received overtime pay, in part, due to the apparent fraudulent billing. The provider was paid overtime for 21 weeks from July 2022 through December 2022. This resulted in additional questioned costs of $3,140 for potential fraud. Federal questioned costs not related to other employment totaled $3,604. Provider #2 This provider was authorized a total of 116.75 hours of service per week for four different clients. For the week tested of December 18, 2022, through December 24, 2022, the provider billed 121.25 hours of service. This provider manually completed visits; consequently, there was no location verification, and no client signatures were captured. Therefore, we questioned the claims for the week tested. We also identified other issues for the week tested. We noted the provider billed a total of 32 hours of service for the four clients on December 22, 2022, which is impossible. Also, for one client, the visit forms for this day supported only 2.75 hours, but the provider billed 20 hours for the client. The provider also exceeded the service authorization by 75 quarterly units or 18.75 hours for the week. Due to the issues noted, we reviewed additional weeks and claims of service. This resulted in more questioned costs for the provider exceeding the SNA. The provider exceeded the SNA for 8 of the 15 weeks reviewed, ranging from .25 to 11.5 hours overbilled. Per documentation in the case file, the provider was involved in a court case pertaining to her own child. On December 2, 2022, a law enforcement raid was conducted at the provider’s home, which revealed Fentanyl and firearms. The provider was not present at the time and, when contacted later, claimed to be on vacation; however, the provider billed for 14.5 hours of services that day. Despite appearing in court on December 20, 2022, at 11:30 a.m., the provider billed for client services that same day from 10:15 a.m. to 1:30 p.m. Based on these discrepancies, we requested the EVV records for the remaining days billed in December 2022. None of the additional visit forms were completed through a device using GPS to track the location, and no signatures were obtained; therefore, we questioned these claims. The case file also included documentation of supervised visits that occurred between the provider and the provider’s child at the provider’s home. Reviewing the EVV records for the days that the visits occurred, we noted that the times the provider billed for PAS services overlapped with the times of these supervised visits. The provider could not have provided the majority of PAS services billed on these days. Again, the visit forms did not contain verification of the location where the services were provided. We questioned the hours billed for each of these days. See Schedule of Findings and Questioned Costs for chart/table. Lastly, the provider had other employment as a medical assistant and a student bus driver. It is likely that the hours of other employment conflicted with the PAS hours billed. We requested the provider’s employment records for July 2022 through December 2022. While comparing the employment records to the days and hours billed for PAS services, we identified 40 days from June 27, 2022, through November 16, 2022, during which hours worked overlapped with times billed for PAS services. We questioned any PAS hours billed that overlapped with the provider’s employment hours as potential fraud. In determining these overlapped hours, we did not factor in any travel time that may have occurred between client homes and the provider’s place of employment; therefore, the possibility of additional fraudulent payments exists. We also noted the provider did not complete the PAS visits through a device using GPS; therefore, any times billed on these 40 days were also questioned for inadequate documentation. Apparent fraudulent PAS hours billed totaled $1,383. Overlapping times ranged from 1.25 hours to 5.25 hours per day. The table below contains a few examples of overlapping hours billed by the provider: See Schedule of Findings and Questioned Costs for chart/table. In addition to the apparent fraudulent overlapped hours, the provider was paid for overtime for the weeks reviewed. The provider received overtime, in part, due to the apparent fraudulent billing. All overtime hours paid during fiscal year 2023 were questioned, either due to the fraudulent hours billed for the week, or for inadequate documentation for not using the GPS verification method. This resulted in additional questioned costs of $204 for potential fraud. Federal questioned costs not related to employment issues totaled $6,671. Provider #3 This provider was authorized a total of 97.5 hours of service per week for four clients. For the week initially tested, six visit forms were entered through a personal computer, so there was no location verification and no client signature. Five of these visits occurred in the evening, from 7:00 p.m. to 10:15 p.m., for 3.25 hours. The provider incorrectly billed 4 hours for one of these visits. The visits with no location verification were questioned. We also noted mileage variances on the visit forms entered through a mobile device when GPS tracking was utilized. There were two visits with a 20-mile variance from the location of the client and where the provider apparently ended the visit. There are unknown questioned costs for these mileage variances. The service authorizations for each of the clients included some services to be performed every day of the week; however, only two of the four clients were billed daily for services. For example, if a client was authorized for a bath seven times per week, but the provider performed the service on only three days, we considered the hours charged for four baths to be overbilled. We reviewed additional weeks during the fiscal year, and there were additional questioned costs based on the frequency of the task authorized. This provider also received overtime pay for several of the weeks reviewed. Therefore, the provider was not only overpaid due to billing for tasks that were not provided as authorized but also received overtime pay based upon some of those overbillings, resulting in additional questioned costs. Federal questioned costs for issues not related to other employment and activities totaled $880. The provider was also receiving wages from a home health care company during fiscal year 2023. Based on the wages earned there, the provider appears to have been working full-time, and hours claimed for PAS likely overlapped with hours worked at the home health care company. We requested the provider’s employment records from the home health care company, and the employer responded that the provider was a salaried employee and did not have a set schedule. The provider also stated that a timesheet was not kept. We performed a social media search and found several posts on Facebook that depicted the provider being out of-state on several weekends during fiscal year 2023. We compared those apparent out-of-state dates to the dates of billed services. The provider billed at least nine days that conflicted with these trips outside of Nebraska. The provider billed 94.25 hours during these days, resulting in potential fraud of $992. Four of the nine days billed did not use the GPS verification method for any of the clients. Based on the Facebook posts, however, the provider was attending an event in Indianapolis, Indiana, on March 11 and 12, 2023, but billed 8.25 hours of services for each of these days. On March 31, 2023, the provider billed 15.75 hours; however, she appeared to be in Arizona. No GPS verification was used on June 6, 2023, and the provider billed 10.75 hours, but appeared to be in Arizona. For the remaining five days, the hours billed did not agree to the times logged through GPS. Additionally, times overlapped between services, and travel time between client homes was unreasonable, or part of the hours billed did not use the GPS verification method. For those visit forms that indicated GPS verification was used, another individual may have entered information into the verification system. The table below contains examples of some of the discrepancies noted: See Schedule of Findings and Questioned Costs for chart/table. Provider #4 The Agency authorized this provider to provide 118 hours of service per week (approximately 40 hours for each of 3 clients). It is not reasonable to authorize this many hours of service for one provider, as it would take over 17 hours every day of the week in order to perform all the tasks noted on the SNA. For the week tested, the provider billed 454 quarterly units or 113.5 hours. This included billing 9.5 hours on November 18, 2022, from 7:10 p.m. to 12:04 a.m., even though this is only 5 hours, and then an additional 23.75 hours on November 19, 2022, from 12:06 a.m. to 11:57 p.m. Each SNA of these clients included some services to be performed every day of the week. The provider billed for tasks authorized for seven days per week but did not provide services on each of those seven days for all clients. For example, if a client was authorized for a bath seven times for the week, but the provider performed services on only three days, we considered the hours charged for four baths to be overbilled. We reviewed an additional two weeks of services and found more errors for not following the SNA. There were $757 Federal questioned costs for not following the SNA. It should be noted that only these three weeks were reviewed, so there may be additional questioned costs for other weeks based on the frequency of the task authorized. See Schedule of Findings and Questioned Costs for chart/table. The provider also received overtime pay for these three weeks. In addition to being overpaid due to billing for tasks that were not provided as authorized, the provider received overtime pay for this overbilling, resulting in an additional $269 in Federal questioned costs. Providers are paid at time and one-half for services in excess of 40 hours each week. Per the Agency, a claims overtime team reviews the service authorizations to ensure they are not exceeded. For the three weeks reviewed alone, the provider was paid for 60.82, 73.86 and 61.65 hours of overtime. This provider has had similar findings in prior audits since 2021, with no changes to the number of hours authorized by the Agency. Provider #5 Per documentation provided from the EVV system for the week tested, the provider used a personal computer to clock in and out, so there was no GPS verification of the visit location. The visit forms noted that the provider was unable to clock in with a cell phone; however, the services were being provided at the provider’s home. On April 14, 2023, the Agency notified the provider by letter that using a personal computer that did not have GPS to verify location was not compliant with either the Cures Act or Agency EVV guidelines. This letter gave the provider 90 days to achieve compliance. The Agency sent a second noncompliance letter to the provider on August 30, 2023, giving her an additional 30 days to comply. The claims tested are questioned due to the provider’s failure to comply with Federal regulations. We noted also that the provider was the parent and co-guardian of the two clients to whom services were provided. Per 42 CFR § 440.167, personal care services cannot be provided by a member of the individual’s family. A family member is defined as “a legally responsible relative.” As the co-guardian, the provider was a legally responsible relative of the clients and, therefore, not allowed to be paid for those services. Thus, all payments made during fiscal year 2023 are questioned. The Federal share was $32,083. Provider #6 The provider used a device with GPS tracking to record her visits. Although the visit form supported only 3.75 hours of services, the provider billed 5 hours, resulting in Federal questioned costs of $9. Provider #7 This provider was authorized for up to 107 quarterly hour units or up to 26.75 hours of PAS services per week. For the week tested, the provider used a personal computer to complete visits in the EVV system, resulting in the location not being verified through GPS tracking and no client signatures being obtained. Therefore, we question the claims, resulting in Federal questioned costs of $202. We also noted that the provider performed personal care services for two additional clients under the Aged and Disabled Waiver. One of these clients also lived with the client to whom PAS services were provided. Because the provider did not use a device with GPS tracking, it is possible that she could have provided services for these two clients during the same time, which is not allowable. For the week tested, the provider billed a total of 116 hours of service for all three clients. The provider also exceeded the authorization for the week tested by 1.25 hours. We noted that the Agency sent a letter to the provider in April 2023 about the overbilling of 1.25 hours for the week tested; however, the accounts receivable was not established until September 30, 2023, after we inquired about the overbilling. The Agency also sent a letter to the provider on April 14, 2023, giving her 90 days to comply with the EVV regulations. No changes were made, so the Agency sent a second letter to the provider on August 30, 2023, giving the provider an additional 30 days to come into compliance. A third letter was sent on September 29, 2023, giving the provider an additional 30 days to comply. It is unreasonable to allow a provider who is not compliant with EVV regulations to continue billing for five months of services. The provider was also paid for overtime hours for the week tested. The provider received $351 in Federal share overtime pay for 74.75 hours of overtime. The overtime was paid under the PAS program. However, only 26.75 hours were related to PAS, and 88 hours were billed under the Aged and Disabled (AD) Waiver; therefore, the overtime should have been charge under the AD Waiver. Per the Agency, the overtime was paid under the PAS program because the Federal share reimbursement is higher, which is not reasonable. Provider #8 This provider was authorized for up to 164 quarterly hour units or up to 41 hours per week for two clients living in the same household. The provider exceeded the service authorization for both clients by .25 hours each, resulting in Federal questioned costs of $4. The service authorization for both clients included some services to be performed every day of the week; however, services performed were not reasonable based on the times the provider billed. For example, one client was authorized for reminding or coaxing to eat three times a day for seven days a week. The provider billed from 6:00 a.m. to 9:30 a.m. every day for this client. It is not reasonable that the client would be eating only in the morning. We allowed the hours charged for one meal. Additionally, both clients were authorized for the administration of medication three times a day for seven days; however, based on the time during which the provider was providing services, the administration of medication appears to have occurred only once per day. This resulted in additional Federal questioned costs of $51. Provider #9 The provider used a device with GPS tracking to record her visits; however, the provider exceeded the SNA by two quarterly units or .5 hours for one client resulting in Federal questioned costs of $4. Cause: Procedures were inadequate to prevent and/or detect errors. Effect: An inadequate review of PAS claims increases the risk of services provided not being in accordance with the recipient’s needs, as well as a risk of services being billed but not provided. There is a significant risk for fraud or abuse to occur and not be detected. State and Federal funds appear to have been misspent. Recommendation: We recommend the Agency implement procedures to ensure payments are allowable, adequately supported, and in accordance with State and Federal regulations. We further recommend the Agency immediately discontinue paying claims that are not in accordance with EVV/GPS requirements. Additionally, because this comment gives rise to concerns regarding possible violations of State statute, we are forwarding the information herein to the Nebraska Attorney General for further review. Management Response: The Agency agrees.

Program: AL 93.778 – Medical Assistance Program; AL 93.778 – COVID-19 Medical Assistance Program – Allowability & Eligibility Grant Number & Year: 2205NE5MAP, FFY 2022; 2305NE5MAP, FFY 2023 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 45 CFR § 75.303 (October 1, 2022): The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Per 45 CFR § 75.302(a) (October 1, 2022), “Each state must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state’s own funds.” 45 CFR § 75.403(g) requires costs to be adequately documented. Per 477 NAC 23-003.01: The total equity value of available non-excluded resources of the client . . . is determined and compared with the established maximum for available resources the client may own and still be considered eligible. If the total equity value of available non-excluded resources exceeds the established maximum, the client is ineligible. Per 477 NAC 23-003.10, the established maximum for available resources which a client may own and still be eligible is $4,000 for a one-member unit. 477 NAC 23-003.04(A) defines a “deprivation of resources” as follows: Any action taken by the applicant or client, or any other person or entity, which reduces or eliminates the applicant’s, client’s, or spouse’s recorded ownership or control of the asset for less than fair market value is a deprivation of resources. The fair market value of a resource at the time the resource was disposed of must be verified and the equity value of the resource must be determined by taking into consideration any encumbrances against the resource. . . . 477 NAC 23-003.04(G) states the following, in relevant part: “To determine if a client or his or her spouse deprived himself or herself of a resource to qualify for Medicaid, the Department must look back 60 months before the month of application.” 471 NAC 12-006 states the following, in relevant part: When an individual requests admission to or continuous residence in a Medicaid-certified nursing facility (NF), the facility must implement the preadmission screening and resident review (PASRR) as defined in this chapter. An individual who has an indication or diagnosis of serious mental illness, intellectual disability or a related condition, or a dual diagnosis may be admitted to a nursing facility (NF) or continue to reside in a nursing facility (NF) only when the individual is determined to be appropriate for nursing facility (NF) services through the preadmission screening and resident review (PASRR). Title 42 CFR § 433.400(b) (October 1, 2022) states the following, in relevant part: “A beneficiary is not validly enrolled if the agency determines the eligibility was erroneously granted at the most recent determination . . . because of agency error or fraud . . . .” 42 CFR § 435.916(b) (October 1, 2022) requires the Agency to make a redetermination of eligibility in accordance with provisions of paragraph (a)(2) of that section, which states, “The agency must make a redetermination of eligibility without requiring information from the individual if able to do so based on reliable information contained in the individual’s account or other more current information available to the agency, including but not limited to information accessed through any data bases accessed by the agency . . . .” A good internal control plan requires procedures to ensure that income and resources are updated for changes timely, adequately documented, and verified. Title 45 CFR § 75.511(a) (October 1, 2022) requires the auditee to prepare a summary schedule of prior audit findings. Per subsection (b)(2) of that same regulation, “When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding’s recurrence and planned corrective action, and any partial corrective action taken.” Condition: The Agency did not adequately verify the income and resources of individuals residing in long- term care facilities to ensure limits were not exceeded, and the individuals were eligible. Additionally, one nursing facility payment tested was paid prior to the preadmission screening and resident review being completed. The Summary Schedule of Prior Audit Findings state the corrective action is complete. A similar finding was noted in the prior audit. Repeat Finding: 2022-040 Questioned Costs: $20,153 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: We tested 25 long-term care facility payments and noted the following issues: The budgets for two recipients used the wrong living arrangement, causing the share of cost to be understated. • For one nursing home recipient, the Medicaid benefit was determined as if the recipient was living in an apartment or house. For the June 2022 budget, the recipient received an unearned income disregard of $20 and a standard of need of $392. The standard of need should have been $60 with no unearned income disregard. This resulted in questioned costs of $87. There were additional out-of-sample questioned costs for July 2022 through September 2022 benefits totaling $261. • For another nursing home recipient, the September 2022 budget included an unearned income disregard of $20 and a $1,133 standard of need. The standard of need should have been $60 with no unearned income disregard. This resulted in questioned costs of $665. The Medicaid budgets used the incorrect living arrangement the entire fiscal year resulting in additional out-of-sample questioned costs of $7,313. The countable resources for two recipients were not calculated correctly. • For one recipient, the budget for February 2023 did not include the correct bank balances. There was a $2,000 transfer between two bank accounts the recipient owned that was not accounted for in the balances. If the $2,000 had been included, the recipient would have been over resources by $1,589, resulting in questioned costs of $1,018. • Proper verification of life insurance policies was not obtained for one recipient. The worker approved the recipient for Medicaid prior to obtaining adequate documentation to support the amount of life insurance declared on the application. The worker initially received one policy statement that supported a portion of the premiums being withdrawn from the checking account and a portion of the declared policy value. After Medicaid was approved on February 8, 2022, verification was obtained on March 22, 2022, for two additional policies showing the countable value exceeded the $4,000 resource limit. The Agency did not close the Medicaid case, citing the continued enrollment requirement during the COVID-19 Public Health Emergency. However, per the DHHS COVID-19 FAQ document and Title 42 CFR § 433.400(b), if an individual was enrolled due to agency error, that individual was not validly enrolled, and the case should close. For the claim tested for May 2023 services, the recipient was over resources by $1,545. The entire claim is questioned, resulting in questioned costs of $4,045. Additionally, for this recipient, the May 2023 budget included the railroad retirement amount for calendar year 2022. The Agency did not obtain verification of the amount for calendar year 2023. An increase in income would increase the share of cost and lower the amount paid by Medicaid. For one recipient, the payment of seven days of nursing home care was made prior to the completion of the Level II preadmission screening and resident review (PASRR). The recipient entered the nursing facility on June 22, 2022, and the Level II PASRR was not completed until June 29, 2022. The days paid from June 22, 2022, through June 28, 2022, were not allowable, resulting in questioned costs of $532. For one recipient who entered a nursing home in January 2023, the Agency did not complete the required five-year look back for potential deprivation of resources. According to documentation provided by the Agency, only two years were reviewed. The applications submitted in December 2022 and February 2023 for the recipient denied that any substantial property was sold in the last five years. However, information received from the Douglas County assessor website noted that the recipient sold a home for $144,000 in May 2018. Since the Agency did not review the required five years of bank balances, no information was obtained regarding the sale of the house and where any proceeds from the sale were deposited and how the funds were spent to ensure there was no deprivation of resources. The entire claim is questioned resulting in questioned costs of $6,232. Federal payment errors noted in the sample were $12,579 and additional out-of-sample questioned costs of $7,574. The Federal sample tested was $118,651, and the total Federal long-term care facility expenditures during the fiscal year were $299,652,791. Based on the sample tested, the case error rate was 24% (6/25). The dollar error rate was 10.6% ($12,579/$118,651), which estimates the potential dollars at risk for fiscal year 2023 to be $31,763,196 (dollar error rate multiplied by population). Cause: Worker error and inadequate review. Effect: If income and resources are not adequately verified, there is an increased risk recipients will be inappropriately determined eligible for Medicaid or determined eligible with an incorrect share of cost. Recommendation: We recommend the Agency implement procedures to ensure all resources are identified, verified, and adequately documented. We further recommend the Agency improve procedures to ensure adherence to State and Federal regulations. Management Response: The Agency agrees.

Program: AL 93.778 – Medical Assistance Program – Special Tests and Provisions Grant Number & Year: All open, including 2305NE5MAP, FFY 2023 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Title 42 CFR § 447.253(b)(1)(i) (October 1, 2022) provides the following: The Medicaid agency pays for inpatient hospital services and long-term care facility services through the use of rates that are reasonable and adequate to meet the costs that must be incurred by efficiently and economically operated providers to provide services in conformity with applicable State and Federal laws, regulations, and quality and safety standards. According to 42 CFR § 447.253(g) (October 1, 2022), “The Medicaid agency must provide for periodic audits of the financial and statistical records of participating providers.” The Nebraska Medicaid State Plan, Attachment 4.19-D, 12-011.11 (Audits), says the following: The Department will perform at least one initial desk audit and may perform subsequent desk audits and/or a periodic field audit of each cost report. Selection of subsequent desk audits and field audits will be made as determined necessary by the Department to maintain the integrity of the Nebraska Medical Assistance Program. The Department may retain an outside independent public accounting firm, licensed to do business in Nebraska or the state where the financial records are maintained, to perform the audits. Audit reports must be completed on all field audits and desk audits. American Institute of Certified Public Accountants (AICPA) Professional Standards AU-C Section 520.07 states, “If analytical procedures performed in accordance with this section identify fluctuations or relationships that are inconsistent with other relevant information or that differ from expected values by a significant amount, the auditor should investigate such differences by a. inquiring of management and obtaining appropriate audit evidence relevant to management's responses and b. performing other audit procedures as necessary in the circumstances.” AICPA Professional Standards AU-C Section 500 states that audit evidence obtained directly by the auditor is more reliable than audit evidence obtained indirectly or by inference, and using electronic information may require the auditor to perform additional audit procedures to establish reliability. A good internal control plan requires desk audits to include testing a sample of expenses to supporting documentation. Condition: Desk audit procedures could be improved. A similar finding was noted in the prior audit. Repeat Finding: 2022-041 Questioned Costs: Unknown Statistical Sample: No Context: Agency procedures require a desk audit on each annual cost report provided by long-term care facilities that receive Medicaid funding and a field audit on facilities identified by the Agency as high risk. The Agency contracted with an accounting firm to complete the desk audits of nearly all facilities in Nebraska and any necessary field audits. The contractor completed 16 field audits on cost reports from 2018 through 2021. As of June 30, 2023, the contractor had not yet completed the risk assessments for the 2022 cost reports or identified high-risk facilities for 2022. We reviewed 20 desk audits and noted that limited procedures were performed. Costs were traced to the facilities’ trial balance, but no underlying supporting documentation was obtained for significant costs, such as salaries, food, or supplies. In many of the desk audits, large increases in costs were attributed to the COVID-19 health emergency, without gaining any additional support to verify the higher costs. The contractor did request verbal explanations for large variances; however, appropriate audit evidence was not requested to verify the explanations. For example, one facility had a 31% increase in "Other" costs for $608,641, which was explained as supply cost and engineering contract increases, while another facility had an increase of 451% or $1,328,713 in Purchase Services - Direct care, which was explained as due to a decrease in direct staff; however, direct staffing costs decreased only $603,499. In neither example did the contractor obtain any underlying invoices to determine if the increased costs for supplies and services were accurate, nor any documentation to support that the number of direct staff had decreased. Additionally, looking at variances alone would not support that expenses are accurate and not misstated from year to year. This is especially critical on the fiscal year 2022 cost reports, as these reports will be used to base rates for the next four years, starting with fiscal year 2024 rates. The total Federal share of long-term care facility expenditures during fiscal year 2023 was over $299 million. Cause: The contract does not require the accounting firm to obtain underlying support for expenses. Effect: When facilities do not have adequate desk audits performed, there is an increased risk for submitted cost reports to contain errors or fraud. Recommendation: We recommend the Agency ensure desk audits provide reasonable assurance that cost reports are accurate. Management Response: The Agency agrees.

Program: AL 93.778 – Medical Assistance Program; AL 93.767 – Children’s Health Insurance Program (CHIP) – Special Tests and Provisions Grant Number & Year: All open, including 2305NE5MAP, FFY 2023 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per Title 42 CFR § 455.104(b)(4) (October 1, 2022), the State Medicaid Agency must require the disclosing entity provide the following disclosures: The name, address, date of birth, and Social Security Number of any managing employee of the disclosing entity (or fiscal agent or managed care entity). Per 42 CFR § 455.101 (October 1, 2022): Managing employee means a general manager, business manager, administrator, director, or other individual who exercises operational or managerial control over, or who directly or indirectly conducts the day-to-day operation of an institution, organization, or agency. Per the Medicaid Provider Enrollment Compendium (MPEC) (3/22/21) Section 1.4.1C: There are not exceptions to the managing employee disclosure requirement. To the extent any individual meets the definition of “managing employee” under § 455.101, their information is required to be disclosed. MPEC Section 1.4.1C states further the following: However, if a non-profit entity has managing employees, to the extent these individuals meet the definition of “managing employee” under § 455.101; they would have to be disclosed as such. In addition, as discussed further below, entities, including non-profit entities, that are organized as corporations must provide disclosures regarding their officers and directors . . . . If a corporation has, for instance, a Director of Finance who is not a member of the board of directors, he/she would not need to be disclosed as a director/board member. However, as discussed in section C., below, to the extent he/she meets the definition of “managing employee” under § 455.101; he/she would have to be disclosed as a “managing employee.” Per 42 CFR § 455.436 (October 1, 2022), the State Medicaid Agency must do the following: (a) Confirm the identity and determine the exclusion status of providers and any person with an ownership or control interest or who is an agent or managing employee of the provider through routine checks of Federal databases. (b) Check the Social Security Administration’s Death Master File, the National Plan and Provider Enumeration System (NPPES), the List of Excluded Individuals/Entities (LEIE), the Excluded Parties List System (EPLS), and any such other databases as the Secretary may prescribe. (c)(1) Consult appropriate databases to confirm identity upon enrollment and reenrollment; and (2) Check the LEIE and EPLS no less frequently than monthly. 45 CFR § 75.303 (October 1, 2022) requires the Agency to “[e]stablish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award.” Good internal control requires procedures to ensure that all required disclosures are provided. Condition: Two of 25 providers tested did not include disclosure requirements for managing employees. Repeat Finding: 2022-042 Questioned Costs: Unknown Statistical Sample: No Context: We tested screening and enrollment for 25 Medicaid/CHIP providers. We noted that two providers, both non-profit corporations, failed to disclose any managing employee. Therefore, no screenings for managing employees were performed for these two providers. Cause: The Agency relies on each provider’s disclosure to be complete, true, and accurate. The provider is allowed to complete the enrollment process even if an owner or managing employee is not disclosed. Effect: Without adequate procedures to ensure providers are screened, and disclosures are complete, there is an increased risk of provider ineligibility, which could result in unallowable costs or potential harm to patients. Recommendation: We recommend the Agency obtain disclosures and screen providers as required by Federal regulations. Management Response: The Agency agrees.

Program: AL 93.778 – Medical Assistance Program – Special Tests and Provisions Grant Number & Year: 2305NE5MAP, FFY 2023 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 42 CFR § 438.3(m) (October 1, 2022), “The contract must require MCOs [managed care organizations], PIHPs [prepaid inpatient health plans], and PAHPs [prepaid ambulatory health plans] to submit audited financial reports specific to the Medicaid contract on an annual basis. The audit must be conducted in accordance with generally accepted accounting principles and generally accepted auditing standards.” A good internal control plan requires policies and procedures to ensure that mandatory financial audits are completed in accordance with Federal regulations. Condition: The Agency does not have adequate policies and procedures to ensure that required managed care financial audits are completed in accordance with Federal regulations. The MCO and PAHP audited financial reports for year ended December 31, 2022, were not conducted in accordance with generally accepted accounting principles (GAAP). A similar finding was noted in the prior audit. Repeat Finding: 2022-044 Questioned Costs: Unknown Statistical Sample: No Context: Nebraska Total Care, Inc., Community Care Health Plan of Nebraska, Inc., United Healthcare of the Midlands, Inc., and MCNA Insurance Company had audits performed in accordance with generally accepted auditing standards; however, the financial statements were not in accordance with GAAP. The financial statements for the MCOs were prepared using “accounting practices prescribed or permitted by the Nebraska Department of Insurance, which is a basis of accounting other than U.S. generally accepted accounting principles.” The PAHP audit was prepared using “accounting practices prescribed or permitted by the Texas Department of Insurance . . . .” The Department of Insurance has adopted the Statement of Statutory Accounting Principles (SSAP) found in the National Association of Insurance Commissioners’ (NAIC) manual. Cause: The MCO and PAHP audited financial reports are completed for the Nebraska Department of Insurance, which does not require the audit to be conducted in accordance with GAAP. Amendments to the contracts have been drafted to incorporate GAAP requirements and should be in place prior to January 1, 2024. Effect: When the financial audits completed by the MCOs and PAHP are not conducted according to GAAP, the Agency is not in compliance with Federal regulations, and there is an increased risk for fraud or errors. Recommendation: We recommend the Agency require the MCO and PAHP financial audits to be conducted in accordance with GAAP. Management Response: The Agency agrees.

Program: AL 93.778 – Medical Assistance Program – Special Tests and Provisions Grant Number & Year: All open, including 2305NE5MAP, FFY 2023 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Title 42 CFR § 455.1 (October 1, 2022) sets forth requirements for a State fraud detection and investigation program, including a method to verify whether services reimbursed by Medicaid were actually furnished to beneficiaries. The Agency’s Program Integrity (PI) and Special Investigations Units (SIU) perform these functions. Per 42 CFR § 455.14 (October 1, 2022): If the agency receives a complaint of Medicaid fraud or abuse from any source or identifies any questionable practices, it must conduct a preliminary investigation to determine whether there is sufficient basis to warrant a full investigation. The Nebraska Medicaid State Plan, Section 4.5 (Medicaid Agency Fraud Detection and Investigation Program), states, “The Medicaid agency has established and will maintain methods, criteria and procedures that meet all requirements of 42 CFR 455.13 through 455.21 and 455.23 for prevention and control of program fraud and abuse.” Under Program Integrity’s Policies and Procedures: Preliminary Investigations • Preliminary investigations of referrals will be completed within 70 days of the opening of the case. • Preliminary investigations of cases identified through exception profiling will be completed within 90 days of the opening of the case. • Preliminary investigations of cases identified through projects will be completed within 120 days of the opening of the case. This includes cases that are sourced from another case. Full investigations • Each month, investigators will review their cases and use their professional judgment to determine the prioritization of their active cases. The following guidelines will be considered in this review: o The investigation of a provider for termination due to a finding on annual or monthly screening is a HIGH priority o Client health & safety influences the priority of a case o Definitive interpretation of regulations influences the priority of a case o Cases in the preliminary investigation phase are of a moderate priority A good internal control plan requires procedures to ensure cases are reviewed, adequately collected on, and appropriate dispositions are made in a timely manner. Condition: Procedures should be improved to ensure cases are investigated timely, and steps taken are adequately documented. Repeat Finding: 2022-045 Questioned Costs: Unknown Statistical Sample: No Context: Program Integrity (PI) is tasked with, among other things, investigating cases of potential provider fraud in the Medicaid Program. Cases received are delegated to investigators who track their activity notes and documentation in one central Investigative Case Management system (ICM). Substantial cases with a large amount of money that may be due back will be referred to the Attorney General’s Medicaid Fraud and Patient Abuse Unit (MFPAU). In cases that are not referred and accepted by MFPAU, PI can sanction a provider, request a refund, provide education, and/or terminate the provider from the Medicaid Program. The Special Investigations Unit (SIU) investigates allegations of suspected recipient fraud. We tested 20 PI cases and 6 SIU cases and noted the following: • One SIU case did not get assigned to an investigator when it was initially received. The original reporter mentioned both Medicaid and Medicare, so it was assumed that the case was for Medicare fraud. However, there was no support to show that any review was done to confirm Medicaid was not involved, nor any support to show that the case was referred to Medicare. Medicaid paid $8,824 in managed care capitation payments for the recipient during the fiscal year. After APA discussed this with SIU, a case was opened. • Four PI cases did not have adequate and timely follow-ups once they were opened: o Based on a brief review, the Federal Bureau of Investigation (FBI) brought one case to the Nebraska Attorney General regarding a counseling office that may have been overbilling. The PI investigator declined to interview the source of the referral and reviewed only claim data to see if there was any obvious overbilling for one provider at the counseling office. No other investigative work was done. No documentation was requested from the provider to support the charges billed, such as time sheets to show when providers were working to agree to hours and dates billed. o One case was opened in June 2022 for a provider billing for Applied Behavioral Analysis (ABA) services and services for children under three years of age, when the provider did not have appropriately licensed practitioners for such services. The opening notes on the case indicated the investigator was going to educate the provider and request a refund; however, neither of those steps had been taken as of July 2023 because the investigator was waiting to see if the State legislature passed a bill related to ABA services. No real actions had occurred on the case for nearly seven months. o One case was referred to PI by a Managed Care Organization (MCO) for a provider potentially overbilling for Mental Health services and concerns of crossing boundaries with a patient. It was unclear if Medicaid claims were reviewed to see if the Provider was overbilling other MCOs. It was also unclear if the proper authorities, such as the Licensure Unit, were notified about the allegation for crossing boundaries with a patient, so a proper investigation could take place. o One case was opened in December 2022 regarding a provider billing for Personal Care and Companion Services that were allegedly not being rendered. The client reported to have text messages supporting that services were not provided. The investigator requested the text messages in February 2023, but no further follow up was completed on the case until we asked about it in August 2023. According to the program administrator, this case was not a high priority due to no risk of health and safety. Medicaid paid the provider $2,996,377 for claimed services in fiscal year 2023. Additionally, we noted that PI was not following current policies and procedures for identifying potential fraud, waste, and abuse. Its policies and procedures indicated it would review the statewide SURS (surveillance and utilization review subsystem) report quarterly and “a minimum of three provider and three recipient cases will be opened from the SURS Ranking Reports.” After December 2022, no cases were opened from the SURS report. The Agency confirmed this and stated, “One of the issues the Program Integrity Team has been facing for the past two years is vacant positions. With the number of staff decreased, focusing on cases based on allegations and NMEP removals was prioritized. Those are cases that had a greater concern for patient health and safety. . . . The procedures will be updated." Cause: The Agency did not follow proper procedures, including supervisor reviews of cases, to ensure Medicaid cases were properly and timely worked. The Program is understaffed. Effect: When potential fraud cases are not adequately and timely pursued, there is an increased risk for misuse of funds and potential harm to individuals receiving services. Recommendation: We recommend the Agency strengthen procedures to ensure cases are properly and timely reviewed, and appropriate dispositions are made. Management Response: The Agency agrees.

Program: AL 93.778 – Medical Assistance Program; AL 93.778 – COVID-19 Medical Assistance Program - Allowability Grant Number & Year: 2305NE5MAP, FFY 2023; 2205NE5MAP, FFY 2022 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 45 CFR § 75.302(a) (October 1, 2022), “Each state must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state's own funds.” Per 45 CFR § 75.403 (October 1, 2022), costs must be necessary, reasonable, and adequately documented. Title 471 NAC 15-003.02(H) requires that the provider perform the personal assistance services noted on the service plan, accurately documenting services provided in the Electronic Visit Verification (EVV) system and confirming that services were received as authorized according to Agency procedures. Title 471 NAC 15-005.02(A) states, “Providers cannot provide services to more than one client at a time.” That same regulation says also, “Medicaid will not pay for services that were not performed during the actual hours noted by the provider in the Electronic Visit Verification (EVV) system.” A good internal control plan requires procedures to ensure that services provided agree to the service needs assessment. Section 1903(l)(5)(A) of the Social Security Act states the following: The term “electronic visit verification system” means, with respect to personal care services or home health care services, a system under which visits conducted as part of such services are electronically verified with respect to – (i) the type of service performed; (ii) the individual receiving the service; (iii) the date of the service; (iv) the location of service delivery; (v) the individual providing the service; and (vi) the time the service begins and ends. Public Law 114-255, § 12006 (December 13, 2016) (“21st Century Cures Act”) provides, as is relevant, the following: (a) Section 1903 of the Social Security Act (42 U.S.C. 1396b) is amended by inserting after subsection (k) the following new subsection: ‘‘(l)(1) Subject to paragraphs (3) and (4), with respect to any amount expended for personal care services or home health care services requiring an in-home visit by a provider that are provided under a State plan under this title (or under a waiver of the plan) and furnished in a calendar quarter beginning on or after January 1, 2019 (or, in the case of home health care services, on or after January 1, 2023), unless a State requires the use of an electronic visit verification system for such services furnished in such quarter under the plan or such waiver, the Federal medical assistance percentage shall be reduced— ‘‘(A) in the case of personal care services— ‘‘(i) for calendar quarters in 2019 and 2020, by .25 percentage points; ‘‘(ii) for calendar quarters in 2021, by .5 percentage points; ‘‘(iii) for calendar quarters in 2022, by .75 percentage points; and ‘‘(iv) for calendar quarters in 2023 and each year thereafter, by 1 percentage point[.] 42 CFR § 440.167(a)(2) (October 1, 2022) states, in part, that personal care services are those provided “by an individual who is qualified to provide such services and who is not a member of the individual's family[.]” 42 CFR § 440.167(b) adds, “For purposes of this section, family member means a legally responsible relative.” Neb. Rev. Stat. § 28-512 (Reissue 2016) creates the offense of “theft by deception.” That statute says the following, in relevant part: A person commits theft if he obtains property of another by deception. A person deceives if he intentionally: (1) Creates or reinforces a false impression, including false impressions as to law, value, intention, or other state of mind; but deception as to a person's intention to perform a promise shall not be inferred from the fact alone that he did not subsequently perform the promise; or (2) Prevents another from acquiring information which would affect his judgment of a transaction; or (3) Fails to correct a false impression which the deceiver previously created or reinforced, or which the deceiver knows to be influencing another to whom he stands in a fiduciary or confidential relationship[.] Further, Neb. Rev. Stat. § 28-911 (Reissue 2016) prohibits “abuse of public records,” as follows: (1) A person commits abuse of public records, if: (a) He knowingly makes a false entry in or falsely alters any public record; or (b) Knowing he lacks the authority to do so, he intentionally destroys, mutilates, conceals, removes, or impairs the availability of any public record; or (c) Knowing he lacks the authority to retain the record, he refuses to deliver up a public record in his possession upon proper request of any person lawfully entitled to receive such record; or (d) He makes, presents, or uses any record, document, or thing, knowing it to be false, and with the intention that it be taken as a genuine part of the public record. (2) As used in this section, the term public record includes all official books, papers, or records created, received, or used by or in any governmental office or agency. (3) Abuse of public records is a Class II misdemeanor. Condition: During testing of personal assistance service (PAS) claims, we noted the following: • Personal assistance services appeared to be claimed at the same time that the provider was working at another job or at other activities, resulting in apparent fraudulent billings and payments. • Services provided lacked adequate supporting documentation. This included providers being able to submit claims without verifying the location where those services were provided. • Services billed exceeded the number of hours authorized under the service needs assessments. • Providers billed for unreasonable amounts of time – including, among other things, for more daily hours than are in a 24-hour period and for unfeasible scenarios, such as the supposed performance of a week’s worth of duties for one client in only three days. • Providers received overtime pay for unauthorized services, meaning that they were compensated at an increased rate for services ineligible for payment in the first place. • Client guardians or parents were paid for providing services, which violates governing regulations prohibiting such arrangements. A similar finding has been noted in prior audits since 2014. Repeat Finding: 2022-039 Questioned Costs: $53,758 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: The Agency offers PAS (assistance with hygiene, mobility, housekeeping, etc.) to Medicaid recipients with disabilities and chronic conditions. The services to be provided are based on individual needs and criteria that must be determined in a written service needs assessment (SNA). The Agency implemented an EVV system for PAS providers on January 3, 2021, as required by Section 12006(a) of the 21st Century Cures Act, passed by Congress in 2016. The EVV system electronically captures and verifies provider visit information, and providers were required to submit claims to the Agency electronically through this application. We initially selected five provider payments for testing – and, from those, one week of services submitted through the EVV system. A week of service billed by the provider may include multiple claims and clients. Due to the numerous issues identified with the billings, we expanded testing and randomly selected an additional five provider payments for testing, and one week of services. We noted issues with 9 of 10 providers tested. In addition to the billing issues identified for the weeks tested, we also noted that three of these providers had outside employment or participated in activities that conflicted with the PAS hours billed. We obtained more documentation for additional weeks. Based on the documentation obtained, we identified $14,397 in potentially fraudulent payments made to the providers during fiscal year 2023. See Schedule of Findings and Questioned Costs for chart/table. In addition to the potentially fraudulent payments related to hours claimed while at another job or activity, we noted $44,534 in Federal payment errors related to other issues, for total Federal questioned costs of $53,758. The Federal share of payments tested totaled $81,926. The total Federal share of PAS claims for the fiscal year was $5,416,039, and the State share was $3,814,632. Federal payment errors noted in the random sample totaled $268. The total Federal sample tested for the random sample was $979. The total dollar error rate was 27.37%, which estimates the potential dollars at risk for fiscal year 2023 to be $1,482,370 (dollar rate multiplied by the population). The following details issues with each provider. Provider #1 This provider was authorized a total of 87.25 hours of service per week for three different clients. For the week tested, the provider manually created the claims for payment and did not use the EVV system to create a visit form; therefore, the claims did not capture client signatures or verify the location of the visit through the Global Positioning System (GPS). Likewise, there was no listing of the activities performed to ensure compliance with the SNA. We requested the claim detail for a second week of services and, again, the provider manually created the claims and did not enter a visit in the EVV system. Consequently, we questioned all of the claims selected for testing. We noted further that the provider exceeded the SNA by 12 hours and billed 24.5 hours of service on one day, which is impossible. We reviewed three additional weeks of claims and noted also that the provider exceeded the SNA by .25 to 2 hours each week, resulting in additional questioned costs. Most concerning was the fact that the provider worked two additional jobs during the time that she billed for personal assistance services. The provider worked as a dental hygienist and as a pharmacy technician. The provider billed personal assistance services beginning at 6:00 a.m. every day until at least 5:30 p.m. The dental office with which the provider was employed was open only from 8:00 a.m. to 5:00 p.m., Monday through Friday. During the week of February 5, 2023, the provider claimed 87 hours for PAS, of which 43.75 hours were claimed to have been provided between 8:00 a.m. and 5:00 p.m., Monday through Friday. As the provider did not use the EVV, it is unknown where she was at the times the services were claimed; however, considering the provider’s other employment, it is possible that fraud may have occurred. We obtained the pharmacy technician employment records for the provider and compared the PAS billings to those records from July 2022 through January 2023. We identified 101 days during which PAS hours billed overlapped with times that the provider was working as a pharmacy technician. In determining these overlapped hours, we did not factor in any travel time that may have occurred between client homes and the provider’s place of employment; therefore, the possibility of additional fraudulent payments exists. The provider billed 1,200 hours of personal assistance services during this time period, and more than half of these hours could not have been provided. We questioned 770 hours as potential fraud, totaling $8,678. We also noted that the provider did not complete all of the PAS visits through a device using GPS; therefore, additional questioned costs resulted from not using the GPS verification method. Given that many of the visits completed with GPS verification overlapped with the times that the provider was working at the pharmacy, another individual appears to have aided the provider in falsely claiming that personal assistance services were provided. The employment records for the provider included the exact time punched in and out for the shifts worked. Below are a few examples of the hours billed by the provider and the hours the provider worked at the pharmacy. Clients 1 and 2 live at the same residence, and Client 3 is the provider’s mother. See Schedule of Findings and Questioned Costs for chart/table. In addition to the apparent fraudulent hours billed, the provider received overtime pay for the weeks reviewed. Providers are paid at time and one-half for services in excess of 40 hours each week. The provider evidently received overtime pay, in part, due to the apparent fraudulent billing. The provider was paid overtime for 21 weeks from July 2022 through December 2022. This resulted in additional questioned costs of $3,140 for potential fraud. Federal questioned costs not related to other employment totaled $3,604. Provider #2 This provider was authorized a total of 116.75 hours of service per week for four different clients. For the week tested of December 18, 2022, through December 24, 2022, the provider billed 121.25 hours of service. This provider manually completed visits; consequently, there was no location verification, and no client signatures were captured. Therefore, we questioned the claims for the week tested. We also identified other issues for the week tested. We noted the provider billed a total of 32 hours of service for the four clients on December 22, 2022, which is impossible. Also, for one client, the visit forms for this day supported only 2.75 hours, but the provider billed 20 hours for the client. The provider also exceeded the service authorization by 75 quarterly units or 18.75 hours for the week. Due to the issues noted, we reviewed additional weeks and claims of service. This resulted in more questioned costs for the provider exceeding the SNA. The provider exceeded the SNA for 8 of the 15 weeks reviewed, ranging from .25 to 11.5 hours overbilled. Per documentation in the case file, the provider was involved in a court case pertaining to her own child. On December 2, 2022, a law enforcement raid was conducted at the provider’s home, which revealed Fentanyl and firearms. The provider was not present at the time and, when contacted later, claimed to be on vacation; however, the provider billed for 14.5 hours of services that day. Despite appearing in court on December 20, 2022, at 11:30 a.m., the provider billed for client services that same day from 10:15 a.m. to 1:30 p.m. Based on these discrepancies, we requested the EVV records for the remaining days billed in December 2022. None of the additional visit forms were completed through a device using GPS to track the location, and no signatures were obtained; therefore, we questioned these claims. The case file also included documentation of supervised visits that occurred between the provider and the provider’s child at the provider’s home. Reviewing the EVV records for the days that the visits occurred, we noted that the times the provider billed for PAS services overlapped with the times of these supervised visits. The provider could not have provided the majority of PAS services billed on these days. Again, the visit forms did not contain verification of the location where the services were provided. We questioned the hours billed for each of these days. See Schedule of Findings and Questioned Costs for chart/table. Lastly, the provider had other employment as a medical assistant and a student bus driver. It is likely that the hours of other employment conflicted with the PAS hours billed. We requested the provider’s employment records for July 2022 through December 2022. While comparing the employment records to the days and hours billed for PAS services, we identified 40 days from June 27, 2022, through November 16, 2022, during which hours worked overlapped with times billed for PAS services. We questioned any PAS hours billed that overlapped with the provider’s employment hours as potential fraud. In determining these overlapped hours, we did not factor in any travel time that may have occurred between client homes and the provider’s place of employment; therefore, the possibility of additional fraudulent payments exists. We also noted the provider did not complete the PAS visits through a device using GPS; therefore, any times billed on these 40 days were also questioned for inadequate documentation. Apparent fraudulent PAS hours billed totaled $1,383. Overlapping times ranged from 1.25 hours to 5.25 hours per day. The table below contains a few examples of overlapping hours billed by the provider: See Schedule of Findings and Questioned Costs for chart/table. In addition to the apparent fraudulent overlapped hours, the provider was paid for overtime for the weeks reviewed. The provider received overtime, in part, due to the apparent fraudulent billing. All overtime hours paid during fiscal year 2023 were questioned, either due to the fraudulent hours billed for the week, or for inadequate documentation for not using the GPS verification method. This resulted in additional questioned costs of $204 for potential fraud. Federal questioned costs not related to employment issues totaled $6,671. Provider #3 This provider was authorized a total of 97.5 hours of service per week for four clients. For the week initially tested, six visit forms were entered through a personal computer, so there was no location verification and no client signature. Five of these visits occurred in the evening, from 7:00 p.m. to 10:15 p.m., for 3.25 hours. The provider incorrectly billed 4 hours for one of these visits. The visits with no location verification were questioned. We also noted mileage variances on the visit forms entered through a mobile device when GPS tracking was utilized. There were two visits with a 20-mile variance from the location of the client and where the provider apparently ended the visit. There are unknown questioned costs for these mileage variances. The service authorizations for each of the clients included some services to be performed every day of the week; however, only two of the four clients were billed daily for services. For example, if a client was authorized for a bath seven times per week, but the provider performed the service on only three days, we considered the hours charged for four baths to be overbilled. We reviewed additional weeks during the fiscal year, and there were additional questioned costs based on the frequency of the task authorized. This provider also received overtime pay for several of the weeks reviewed. Therefore, the provider was not only overpaid due to billing for tasks that were not provided as authorized but also received overtime pay based upon some of those overbillings, resulting in additional questioned costs. Federal questioned costs for issues not related to other employment and activities totaled $880. The provider was also receiving wages from a home health care company during fiscal year 2023. Based on the wages earned there, the provider appears to have been working full-time, and hours claimed for PAS likely overlapped with hours worked at the home health care company. We requested the provider’s employment records from the home health care company, and the employer responded that the provider was a salaried employee and did not have a set schedule. The provider also stated that a timesheet was not kept. We performed a social media search and found several posts on Facebook that depicted the provider being out of-state on several weekends during fiscal year 2023. We compared those apparent out-of-state dates to the dates of billed services. The provider billed at least nine days that conflicted with these trips outside of Nebraska. The provider billed 94.25 hours during these days, resulting in potential fraud of $992. Four of the nine days billed did not use the GPS verification method for any of the clients. Based on the Facebook posts, however, the provider was attending an event in Indianapolis, Indiana, on March 11 and 12, 2023, but billed 8.25 hours of services for each of these days. On March 31, 2023, the provider billed 15.75 hours; however, she appeared to be in Arizona. No GPS verification was used on June 6, 2023, and the provider billed 10.75 hours, but appeared to be in Arizona. For the remaining five days, the hours billed did not agree to the times logged through GPS. Additionally, times overlapped between services, and travel time between client homes was unreasonable, or part of the hours billed did not use the GPS verification method. For those visit forms that indicated GPS verification was used, another individual may have entered information into the verification system. The table below contains examples of some of the discrepancies noted: See Schedule of Findings and Questioned Costs for chart/table. Provider #4 The Agency authorized this provider to provide 118 hours of service per week (approximately 40 hours for each of 3 clients). It is not reasonable to authorize this many hours of service for one provider, as it would take over 17 hours every day of the week in order to perform all the tasks noted on the SNA. For the week tested, the provider billed 454 quarterly units or 113.5 hours. This included billing 9.5 hours on November 18, 2022, from 7:10 p.m. to 12:04 a.m., even though this is only 5 hours, and then an additional 23.75 hours on November 19, 2022, from 12:06 a.m. to 11:57 p.m. Each SNA of these clients included some services to be performed every day of the week. The provider billed for tasks authorized for seven days per week but did not provide services on each of those seven days for all clients. For example, if a client was authorized for a bath seven times for the week, but the provider performed services on only three days, we considered the hours charged for four baths to be overbilled. We reviewed an additional two weeks of services and found more errors for not following the SNA. There were $757 Federal questioned costs for not following the SNA. It should be noted that only these three weeks were reviewed, so there may be additional questioned costs for other weeks based on the frequency of the task authorized. See Schedule of Findings and Questioned Costs for chart/table. The provider also received overtime pay for these three weeks. In addition to being overpaid due to billing for tasks that were not provided as authorized, the provider received overtime pay for this overbilling, resulting in an additional $269 in Federal questioned costs. Providers are paid at time and one-half for services in excess of 40 hours each week. Per the Agency, a claims overtime team reviews the service authorizations to ensure they are not exceeded. For the three weeks reviewed alone, the provider was paid for 60.82, 73.86 and 61.65 hours of overtime. This provider has had similar findings in prior audits since 2021, with no changes to the number of hours authorized by the Agency. Provider #5 Per documentation provided from the EVV system for the week tested, the provider used a personal computer to clock in and out, so there was no GPS verification of the visit location. The visit forms noted that the provider was unable to clock in with a cell phone; however, the services were being provided at the provider’s home. On April 14, 2023, the Agency notified the provider by letter that using a personal computer that did not have GPS to verify location was not compliant with either the Cures Act or Agency EVV guidelines. This letter gave the provider 90 days to achieve compliance. The Agency sent a second noncompliance letter to the provider on August 30, 2023, giving her an additional 30 days to comply. The claims tested are questioned due to the provider’s failure to comply with Federal regulations. We noted also that the provider was the parent and co-guardian of the two clients to whom services were provided. Per 42 CFR § 440.167, personal care services cannot be provided by a member of the individual’s family. A family member is defined as “a legally responsible relative.” As the co-guardian, the provider was a legally responsible relative of the clients and, therefore, not allowed to be paid for those services. Thus, all payments made during fiscal year 2023 are questioned. The Federal share was $32,083. Provider #6 The provider used a device with GPS tracking to record her visits. Although the visit form supported only 3.75 hours of services, the provider billed 5 hours, resulting in Federal questioned costs of $9. Provider #7 This provider was authorized for up to 107 quarterly hour units or up to 26.75 hours of PAS services per week. For the week tested, the provider used a personal computer to complete visits in the EVV system, resulting in the location not being verified through GPS tracking and no client signatures being obtained. Therefore, we question the claims, resulting in Federal questioned costs of $202. We also noted that the provider performed personal care services for two additional clients under the Aged and Disabled Waiver. One of these clients also lived with the client to whom PAS services were provided. Because the provider did not use a device with GPS tracking, it is possible that she could have provided services for these two clients during the same time, which is not allowable. For the week tested, the provider billed a total of 116 hours of service for all three clients. The provider also exceeded the authorization for the week tested by 1.25 hours. We noted that the Agency sent a letter to the provider in April 2023 about the overbilling of 1.25 hours for the week tested; however, the accounts receivable was not established until September 30, 2023, after we inquired about the overbilling. The Agency also sent a letter to the provider on April 14, 2023, giving her 90 days to comply with the EVV regulations. No changes were made, so the Agency sent a second letter to the provider on August 30, 2023, giving the provider an additional 30 days to come into compliance. A third letter was sent on September 29, 2023, giving the provider an additional 30 days to comply. It is unreasonable to allow a provider who is not compliant with EVV regulations to continue billing for five months of services. The provider was also paid for overtime hours for the week tested. The provider received $351 in Federal share overtime pay for 74.75 hours of overtime. The overtime was paid under the PAS program. However, only 26.75 hours were related to PAS, and 88 hours were billed under the Aged and Disabled (AD) Waiver; therefore, the overtime should have been charge under the AD Waiver. Per the Agency, the overtime was paid under the PAS program because the Federal share reimbursement is higher, which is not reasonable. Provider #8 This provider was authorized for up to 164 quarterly hour units or up to 41 hours per week for two clients living in the same household. The provider exceeded the service authorization for both clients by .25 hours each, resulting in Federal questioned costs of $4. The service authorization for both clients included some services to be performed every day of the week; however, services performed were not reasonable based on the times the provider billed. For example, one client was authorized for reminding or coaxing to eat three times a day for seven days a week. The provider billed from 6:00 a.m. to 9:30 a.m. every day for this client. It is not reasonable that the client would be eating only in the morning. We allowed the hours charged for one meal. Additionally, both clients were authorized for the administration of medication three times a day for seven days; however, based on the time during which the provider was providing services, the administration of medication appears to have occurred only once per day. This resulted in additional Federal questioned costs of $51. Provider #9 The provider used a device with GPS tracking to record her visits; however, the provider exceeded the SNA by two quarterly units or .5 hours for one client resulting in Federal questioned costs of $4. Cause: Procedures were inadequate to prevent and/or detect errors. Effect: An inadequate review of PAS claims increases the risk of services provided not being in accordance with the recipient’s needs, as well as a risk of services being billed but not provided. There is a significant risk for fraud or abuse to occur and not be detected. State and Federal funds appear to have been misspent. Recommendation: We recommend the Agency implement procedures to ensure payments are allowable, adequately supported, and in accordance with State and Federal regulations. We further recommend the Agency immediately discontinue paying claims that are not in accordance with EVV/GPS requirements. Additionally, because this comment gives rise to concerns regarding possible violations of State statute, we are forwarding the information herein to the Nebraska Attorney General for further review. Management Response: The Agency agrees.

Program: AL 93.778 – Medical Assistance Program; AL 93.778 – COVID-19 Medical Assistance Program – Allowability & Eligibility Grant Number & Year: 2205NE5MAP, FFY 2022; 2305NE5MAP, FFY 2023 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 45 CFR § 75.303 (October 1, 2022): The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Per 45 CFR § 75.302(a) (October 1, 2022), “Each state must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state’s own funds.” 45 CFR § 75.403(g) requires costs to be adequately documented. Per 477 NAC 23-003.01: The total equity value of available non-excluded resources of the client . . . is determined and compared with the established maximum for available resources the client may own and still be considered eligible. If the total equity value of available non-excluded resources exceeds the established maximum, the client is ineligible. Per 477 NAC 23-003.10, the established maximum for available resources which a client may own and still be eligible is $4,000 for a one-member unit. 477 NAC 23-003.04(A) defines a “deprivation of resources” as follows: Any action taken by the applicant or client, or any other person or entity, which reduces or eliminates the applicant’s, client’s, or spouse’s recorded ownership or control of the asset for less than fair market value is a deprivation of resources. The fair market value of a resource at the time the resource was disposed of must be verified and the equity value of the resource must be determined by taking into consideration any encumbrances against the resource. . . . 477 NAC 23-003.04(G) states the following, in relevant part: “To determine if a client or his or her spouse deprived himself or herself of a resource to qualify for Medicaid, the Department must look back 60 months before the month of application.” 471 NAC 12-006 states the following, in relevant part: When an individual requests admission to or continuous residence in a Medicaid-certified nursing facility (NF), the facility must implement the preadmission screening and resident review (PASRR) as defined in this chapter. An individual who has an indication or diagnosis of serious mental illness, intellectual disability or a related condition, or a dual diagnosis may be admitted to a nursing facility (NF) or continue to reside in a nursing facility (NF) only when the individual is determined to be appropriate for nursing facility (NF) services through the preadmission screening and resident review (PASRR). Title 42 CFR § 433.400(b) (October 1, 2022) states the following, in relevant part: “A beneficiary is not validly enrolled if the agency determines the eligibility was erroneously granted at the most recent determination . . . because of agency error or fraud . . . .” 42 CFR § 435.916(b) (October 1, 2022) requires the Agency to make a redetermination of eligibility in accordance with provisions of paragraph (a)(2) of that section, which states, “The agency must make a redetermination of eligibility without requiring information from the individual if able to do so based on reliable information contained in the individual’s account or other more current information available to the agency, including but not limited to information accessed through any data bases accessed by the agency . . . .” A good internal control plan requires procedures to ensure that income and resources are updated for changes timely, adequately documented, and verified. Title 45 CFR § 75.511(a) (October 1, 2022) requires the auditee to prepare a summary schedule of prior audit findings. Per subsection (b)(2) of that same regulation, “When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding’s recurrence and planned corrective action, and any partial corrective action taken.” Condition: The Agency did not adequately verify the income and resources of individuals residing in long- term care facilities to ensure limits were not exceeded, and the individuals were eligible. Additionally, one nursing facility payment tested was paid prior to the preadmission screening and resident review being completed. The Summary Schedule of Prior Audit Findings state the corrective action is complete. A similar finding was noted in the prior audit. Repeat Finding: 2022-040 Questioned Costs: $20,153 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: We tested 25 long-term care facility payments and noted the following issues: The budgets for two recipients used the wrong living arrangement, causing the share of cost to be understated. • For one nursing home recipient, the Medicaid benefit was determined as if the recipient was living in an apartment or house. For the June 2022 budget, the recipient received an unearned income disregard of $20 and a standard of need of $392. The standard of need should have been $60 with no unearned income disregard. This resulted in questioned costs of $87. There were additional out-of-sample questioned costs for July 2022 through September 2022 benefits totaling $261. • For another nursing home recipient, the September 2022 budget included an unearned income disregard of $20 and a $1,133 standard of need. The standard of need should have been $60 with no unearned income disregard. This resulted in questioned costs of $665. The Medicaid budgets used the incorrect living arrangement the entire fiscal year resulting in additional out-of-sample questioned costs of $7,313. The countable resources for two recipients were not calculated correctly. • For one recipient, the budget for February 2023 did not include the correct bank balances. There was a $2,000 transfer between two bank accounts the recipient owned that was not accounted for in the balances. If the $2,000 had been included, the recipient would have been over resources by $1,589, resulting in questioned costs of $1,018. • Proper verification of life insurance policies was not obtained for one recipient. The worker approved the recipient for Medicaid prior to obtaining adequate documentation to support the amount of life insurance declared on the application. The worker initially received one policy statement that supported a portion of the premiums being withdrawn from the checking account and a portion of the declared policy value. After Medicaid was approved on February 8, 2022, verification was obtained on March 22, 2022, for two additional policies showing the countable value exceeded the $4,000 resource limit. The Agency did not close the Medicaid case, citing the continued enrollment requirement during the COVID-19 Public Health Emergency. However, per the DHHS COVID-19 FAQ document and Title 42 CFR § 433.400(b), if an individual was enrolled due to agency error, that individual was not validly enrolled, and the case should close. For the claim tested for May 2023 services, the recipient was over resources by $1,545. The entire claim is questioned, resulting in questioned costs of $4,045. Additionally, for this recipient, the May 2023 budget included the railroad retirement amount for calendar year 2022. The Agency did not obtain verification of the amount for calendar year 2023. An increase in income would increase the share of cost and lower the amount paid by Medicaid. For one recipient, the payment of seven days of nursing home care was made prior to the completion of the Level II preadmission screening and resident review (PASRR). The recipient entered the nursing facility on June 22, 2022, and the Level II PASRR was not completed until June 29, 2022. The days paid from June 22, 2022, through June 28, 2022, were not allowable, resulting in questioned costs of $532. For one recipient who entered a nursing home in January 2023, the Agency did not complete the required five-year look back for potential deprivation of resources. According to documentation provided by the Agency, only two years were reviewed. The applications submitted in December 2022 and February 2023 for the recipient denied that any substantial property was sold in the last five years. However, information received from the Douglas County assessor website noted that the recipient sold a home for $144,000 in May 2018. Since the Agency did not review the required five years of bank balances, no information was obtained regarding the sale of the house and where any proceeds from the sale were deposited and how the funds were spent to ensure there was no deprivation of resources. The entire claim is questioned resulting in questioned costs of $6,232. Federal payment errors noted in the sample were $12,579 and additional out-of-sample questioned costs of $7,574. The Federal sample tested was $118,651, and the total Federal long-term care facility expenditures during the fiscal year were $299,652,791. Based on the sample tested, the case error rate was 24% (6/25). The dollar error rate was 10.6% ($12,579/$118,651), which estimates the potential dollars at risk for fiscal year 2023 to be $31,763,196 (dollar error rate multiplied by population). Cause: Worker error and inadequate review. Effect: If income and resources are not adequately verified, there is an increased risk recipients will be inappropriately determined eligible for Medicaid or determined eligible with an incorrect share of cost. Recommendation: We recommend the Agency implement procedures to ensure all resources are identified, verified, and adequately documented. We further recommend the Agency improve procedures to ensure adherence to State and Federal regulations. Management Response: The Agency agrees.

Program: AL 97.036 – Disaster Grants - Public Assistance (Presidentially Declared Disasters) – Subrecipient Monitoring Grant Number & Year: All open, including 4420-DR-NE, declared March 21, 2019 Federal Grantor Agency: U.S. Department of Homeland Security Criteria: 2 CFR § 200.332 (January 1, 2023) states, in relevant part, the following: All pass-through entities must: * * * * (d) Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. Pass-through entity monitoring of the subrecipient must include: (1) Reviewing financial and performance reports required by the pass-through entity. (2) Following-up and ensuring that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the Federal award provided to the subrecipient from the pass-through entity detected through audits, on-site reviews, and written confirmation from the subrecipient, highlighting the status of actions planned or taken to address Single Audit findings related to the particular subaward. (3) Issuing a management decision for applicable audit findings pertaining only to the Federal award provided to the subrecipient from the pass-through entity as required by § 200.521. * * * * (f) Verify that every subrecipient is audited as required by Subpart F of this part when it is expected that the subrecipient’s Federal awards expended during the respective fiscal year equaled or exceeded the threshold set forth in §200.501 2 CFR § 200.501(b) (January 1, 2023) states, in relevant part, the following: “A non-Federal entity that expends $750,000 or more during the non-Federal entity’s fiscal year in Federal awards must have a single audit conducted in accordance with § 200.514 . . .” Per Chapter VII, Section B, of the Agency’s 2023 Annual Administrative Plan for the Public Assistance Program, it is the State’s responsibility to review Single audits completed by subrecipients and to ensure appropriate action is taken for adverse findings. A good internal control plan requires procedures to ensure subrecipient audits are reviewed timely. Condition: The Agency did not ensure subrecipient Single Audits were obtained timely. Repeat Finding: No Questioned Costs: None Statistical Sample: No Context: The Agency utilizes a spreadsheet to track whether subrecipients obtain Single Audits when required. Additionally, the Agency sends letters to all subrecipients requiring them to respond on whether they were required to obtain a Single Audit. However, the Agency did not complete these processes during fiscal year 2023. We selected six subrecipients for testing that would have required a Single Audit be issued during State fiscal year 2023 based on the amount of funds they received from the Agency. For all six subrecipients tested, the Agency had not verified whether or not the subrecipients obtained Single Audits prior to our inquiry in December 2023. One of the six subrecipients appears to have required a Single Audit because it received $1,261,565 in disaster grant funds passed through the Agency during fiscal year 2022, but it did not obtain one. Cause: According to Agency representatives, the process was not completed due to a severe lack of staffing. Effect: Without adequate monitoring procedures, there is an increased risk that Federal awards could be used for unallowable costs. Recommendation: We recommend the Agency implement procedures to ensure subrecipient audits are reviewed timely. Management Response: Due to the Agency’s extreme staffing shortage which has persisted for two years, NEMA has had to prioritize workload. This has been particularly acute with Federal Aid Administrators to whom the tasks of subrecipient monitoring fall. Several projects slipped the normal timeframes for completion.

Program: AL 97.036 – Disaster Grants - Public Assistance (Presidentially Declared Disasters) – Reporting Grant Number & Year: 4420-DR-NE, declared March 21, 2019; 4521-DR-NE, declared April 4, 2020; 4641-DR-NE, declared February 23, 2022; 4662-DR-NE, declared July 27, 2022 Federal Grantor Agency: U.S. Department of Homeland Security Criteria: 2 CFR § 170, Appendix A I. (January 1, 2023) states, in relevant part, the following: a. Reporting of first-tier subawards. Applicability. Unless you are exempt as provided in paragraph d. of this award term, you must report each action that equals or exceeds $30,000 in Federal funds for a subaward to a non-Federal entity or Federal agency . . . . 2. Where and when to report. i. The non-Federal entity or Federal agency must report each obligating action described in paragraph a.1. of this award term to http://www.fsrs.gov. ii. For subaward information, report no later than the end of the month following the month in which the obligation was made. Good internal control requires procedures to ensure that all subawards subject to Federal Funding Accountability and Transparency Act (FFATA) reporting are submitted on time. Condition: FFATA reporting was not submitted for one of 22 subawards tested. FFATA reporting was not submitted timely for 21 of 22 subawards tested. Repeat Finding: No Questioned Costs: None Statistical Sample: No Context: The Agency had 215 subawards obligated during the fiscal year ended June 30, 2023. We tested 22 of the subawards. One of those subawards was not reported as of January 30, 2024. The subaward should have been reported by February 28, 2023. The subrecipient has not obtained a unique identifying number. The Agency first followed up with the subrecipient regarding the need to register for a unique identifying number over 10 months after funds were obligated to the subrecipient. Additionally, the Agency did not submit the other 21 subawards tested timely. The subawards were reported between 105 and 435 days late. See Schedule of Findings and Questioned Costs for chart/table. Cause: Procedures were not properly implemented to ensure that all subawards were reported as required. Effect: Without adequate procedures, there is an increased risk that subawards will not be reported timely, if at all. Recommendation: We recommend the Agency improve its procedures to ensure that all subawards are reported as required. Management Response: Due to the Agency’s extreme staffing shortage which has persisted for two years, NEMA has had to prioritize workload. This has been particularly acute with Federal Aid Administrators to whom the tasks of subrecipient monitoring fall. Several projects slipped the normal timeframes for completion.

Program: AL 14.228 – Community Development Block Grants – Reporting Grant Number & Year: B-20-DW-31-0001, grant period 6/15/2020 to 6/15/2026; B-22-DC-31-0001, grant period 7/1/2022 to 9/1/2029 Federal Grantor Agency: U.S. Department of Housing & Urban Development Criteria: 2 CFR § 170, Appendix A I. (January 1, 2023) states, in relevant part, the following: a. Reporting of first-tier subawards. Applicability. Unless you are exempt as provided in paragraph d. of this award term, you must report each action that equals or exceeds $30,000 in Federal funds for a subaward to a non-Federal entity or Federal agency . . . . 2. Where and when to report. i. The non-Federal entity or Federal agency must report each obligating action described in paragraph a.1. of this award term to http://www.fsrs.gov. ii. For subaward information, report no later than the end of the month following the month in which the obligation was made. Good internal control requires procedures to ensure all subawards subject to FFATA reporting are submitted on time. Condition: FFATA reporting was not submitted for three of nine subawards tested. Repeat Finding: No Questioned Costs: None Statistical Sample: No Context: The Agency had 43 subawards obligated during the fiscal year ended June 30, 2023. We tested nine of the subawards, and three of those subawards were not reported in the Federal Funding Accountability and Transparency Act (FFATA) Subaward Reporting System (FSRS) as of December 21, 2023. One subaward should have been reported by April 30, 2023, and two subawards should have been reported by June 30, 2023. See Schedule of Findings and Questioned Costs for chart/table. Cause: Procedures were not properly implemented to ensure that all subawards were reported as required. Effect: Without adequate procedures, there is an increased risk that subawards will not be reported timely. Recommendation: We recommend the Agency improve its procedures to ensure that all subawards are reported in FSRS as required. Management Response: DED acknowledges that the FFATA information for some of its subawards were not reported in FSRS in a timely manner.

Program: AL 17.225 – Unemployment Insurance – State – Allowability & Eligibility Grant Number & Year: N/A Federal Grantor Agency: U.S. Department of Labor Repeat Finding: 2022-046 Questioned Costs: $36,869 Statistical Sample: No Summary: Audit Finding 2023-014, included in Part II of this report, relates to both the financial statements and Federal awards. The APA performed a random sample of benefit payments and tested payments to State employees, individuals with high wages, and other payments. Our procedures revealed adjudication issues, improper payments to claimants, and other issues. The APA randomly selected 40 claimant benefit payments. The total sample tested was $22,178, and questioned costs for payments tested were $4,493. Total benefit payments for the fiscal year ended June 30, 2023, were $62,550,014. Based on the sample tested, the dollar error rate for the sample was 20.26% ($4,493/$22,178), which estimates the potential dollars at risk for fiscal year 2023 to be $12,672,633 (dollar error rate multiplied by population). We noted additional questioned costs during testing, totaling $32,376. A similar finding was noted in the prior audit. The Summary Schedule of Prior Audit Findings lists the status as completed. Recommendation: We recommend the Agency implement procedures to prevent the payment of improper Unemployment Insurance (UI) benefits by ensuring compliance with applicable State and Federal requirements. At a minimum, those procedures should ensure the following: 1) proper adjudication actions – including wage crossmatches, investigations into suspect separation from employment information, and separation information requests being sent to employers – are undertaken; and 2) neither ineligible State employees nor other ineligible claimants receive benefit payments. Management Response: The Department acknowledges the finding but notes that the funds at issue are comprised entirely of unemployment benefit overpayments. The Department questions the categorization of benefit overpayments as Questioned or Disallowed Costs. Regular state unemployment benefit payments are made from Nebraska taxes collected by the Department as part of the unemployment program and deposited to the federal Unemployment Trust Fund (UTF) for the payment of state unemployment benefits. Those UTF monies are never intermingled with administrative grant funds awarded to the Department for the administration of the Nebraska unemployment program. Previous final determinations of the United States Department of Labor have found the errant payment of benefits to be disallowed but not subject to Federal debt collection. The Department understands the importance of quality unemployment insurance adjudication and is taking to steps to correct the findings noted above. APA Response: State unemployment tax revenues must be deposited to the Unemployment Trust Fund in the U.S. Treasury. Therefore, as noted in the OMB Compliance Supplement, expenditures from State UI funds must be included with Federal funds on the Schedule of Expenditures of Federal Awards (SEFA). Costs included on the SEFA that are not supported at the time of the audit or are a result of a violation or possible violation of a statute are considered questioned costs, as defined by the Uniform Guidance at 2 CFR § 200.1.

Program: AL 20.509 – Formula Grants for Rural Areas – Allowability & Subrecipient Monitoring Grant Number & Year: NE-2019-013-00, Performance End FFY 2023; NE-2022-019-00, Performance End FFY 2024 Federal Grantor Agency: U.S. Department of Transportation Criteria: Per 2 CFR § 1201.1 (January 1, 2023), the U.S. Department of Transportation adopted the Uniform Administrative Requirements, Cost Principles, and Audit Requirements set forth at Title 2 CFR part 200. 2 CFR § 200.403 (January 1, 2023) requires costs to be reasonable, necessary, and adequately documented. A good internal control plan requires procedures to be in place to ensure compliance with Federal and State requirements. 2 CFR § 200.332(d) (January 1, 2023) requires the pass-through entity to do the following: Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. 2 CFR § 200.430(i)(1) (January 1, 2023) states the following, in relevant part: Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; * * * * (vii) Support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. (viii) Budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards . . . . 2 CFR § 200.431(b) (January 1, 2023) states the following, in relevant part: Leave. The cost of fringe benefits in the form of regular compensation paid to employees during periods of authorized absences from the job, such as for annual leave, family-related leave, sick leave, holidays, court leave, military leave, administrative leave, and other similar benefits, are allowable if all of the following criteria are met: * * * * (2) The costs are equitably allocated to all related activities, including Federal awards . . . . 2 CFR § 200.467 (January 1, 2023) states the following: Costs of selling and marketing any products or services of the non-Federal entity (unless allowed under § 200.421) are unallowable, except as direct costs, with prior approval by the Federal awarding agency when necessary for the performance of the Federal award. Per 2 CFR § 200.405(a) (January 1, 2023), “A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received.” Condition: The Agency lacked adequate documentation to support that payments were for allowable activities and in accordance with allowable cost principles. A similar finding was noted in the prior audit. Repeat Finding: 2022-057 Questioned Costs: $82,967 known (NE-2019-013-00 $82,121; NE-2022-019-00 $846) Statistical Sample: No Context: During the fiscal year, the Agency paid 58 subrecipients a total of $10,974,293. We selected 24 payments to subrecipients for testing. The Agency performed financial reviews for subrecipients; however, the reviews tested did not always include all necessary supporting documentation. When additional documentation was needed, we gave the Agency the opportunity to obtain additional support from the subrecipient; however, adequate support was not always obtained or able to be provided. Our random sample included an operating assistance reimbursement to North Fork Area Transit (NFAT). As identified in both the prior Single audit and a separate letter sent to the Agency, dated August 7, 2023, reimbursements for questionable expenditures were made to NFAT during the period April 1, 2022, to November 30, 2022. The former NFAT director was alleged to have committed fraud during this period. Our current testing included the reimbursement for NFAT’s August 2022 expenditures. The payment tested reimbursed NFAT $201,438 in Federal dollars. Of that amount, $78,348 was questioned, as follows: • NFAT was reimbursed $21,665 for nonoperating personnel when the timesheets supporting the time worked were all copies of the same timesheet. • NFAT was reimbursed $29,072 for operating personnel hours worked that did not appear reasonable. We noted nine employees whose hours for the four-week period were between 234.6 to 321.12 hours. This averages from 58.65 to 80.28 hours per week for each employee. Such large weekly averages give rise to concerns about not only the reasonableness and necessity of these payments but also possible compliance issues with labor standards – not to mention safety issues for riders. This was also identified in the letter dated August 7, 2023, in which employees were identified as working excessive overtime. An additional $376 was questioned, as the number of work hours for which one employee received compensation did not agree to those listed on his timesheet. • NFAT was reimbursed $12,874 for vendor payments that never appear to have cleared the bank. Invoices and checks were provided to support the maintenance expenses reimbursed; however, the checks provided never cleared the bank. This was also identified in the letter dated August 7, 2023, which noted that the Director appeared to have written the checks but not paid the vendors. • NFAT was reimbursed $14,361 for a duplicate payment. An invoice and check were provided to support the reimbursement of an insurance expense; however, this same expense was also submitted and reimbursed by the Agency in NFAT’s September 2022 request for reimbursement. We also noted issues with 12 of the 24 subrecipient payments tested, amounting to $4,619 in questioned costs, due to the following: • For eight subrecipients tested, documentation was inadequate to support that personnel charges were allowable and in accordance with Federal cost principles, resulting in questioned costs of $2,705. Specifically, we noted the following: o Payments for employee leave was not equitably allocated based on time worked. o One subrecipient had wages reimbursed based on budgeted amounts. o One subrecipient was reimbursed for health insurance for two employees who had elected to receive wages in lieu of such insurance. o One subrecipient requested reimbursement for wages that did not agree with the amount paid to employees. • For six subrecipients tested, questioned costs of $1,914 were identified due to inadequate support for capital and nonoperating costs. Questioned costs included the following: o One subrecipient was reimbursed for carpet adhesive that was later returned to the store. The subrecipient reimbursed the Director for the purchase of the carpet adhesive on her personal credit card, but the Agency was unable to identify a subsequent reimbursement request that reduced the amount sought for the returned items. Additionally, the subrecipient paid the Director for travel to another state to purchase the carpet adhesive, which not only could have been obtained from a more nearby merchant but also was ultimately returned. o Unreasonable travel reimbursements were noted. Among those was reimbursement for costs incurred by the subrecipient’s Director to travel to a meeting of an unaffiliated organization’s Board of Directors upon which she served as a member. That travel to attend a separate Board meeting was unrelated to the transit program. o A subrecipient was reimbursed for fees related to obtaining a trademark, which appears to have been a marketing expense that was not approved by the Federal awarding agency. o One subrecipient was reimbursed for an administrative fee that was not supported. The payment tested included a 7% administrative fee that was not specified in the agreement. o One subrecipient was reimbursed for unreasonable items, such as Christmas décor and Christmas candy. o One subrecipient was reimbursed for bookkeeping expenses; however, the subrecipient did not provide documentation to support that the amount allocated for that purpose was reasonable. Based on the sample tested, we estimate the potential dollars at risk for the fiscal year to be $501,670, as detailed below: See Schedule of Findings and Questioned Costs for chart/table. Cause: Procedures were inadequate to ensure that costs were in accordance with Federal requirements. Effect: Increased risk for errors or misuse of funds. Recommendation: We recommend the Agency strengthen subrecipient monitoring procedures. We further recommend the Agency improve procedures to ensure expenditures are allowable and in accordance with Federal regulations. Management Response: NDOT concurs with the findings and has revised reimbursement guidelines for subrecipients, clarifying allowed expenses and required documentation. Over the next 6-12 months, NDOT will conduct training sessions with subrecipients and collaborate with internal auditors on compliance matters. The establishment of the “Federal Oversight” unit within the Transit Section aims to improve monitoring, consistency, and compliance with federal requirements for all subrecipients.

Program: AL 20.509 – Formula Grants for Rural Areas – Subrecipient Monitoring Grant Number & Year: NE-2021-011-00, Performance End FFY 2024; NE-2022-019-00, Performance End FFY 2024 Federal Grantor Agency: U.S. Department of Transportation Criteria: Per 2 CFR § 1201.1 (January 1, 2023), the U.S. Department of Transportation adopted the Uniform Administrative Requirements, Cost Principles, and Audit Requirements set forth at Title 2 CFR part 200. 2 CFR § 200.332 (January 1, 2023) requires all pass-through entities to do the following: (a) Ensure that every subaward is clearly identified to the subrecipient as a subaward and includes the following information at the time of the subaward and if any of these data elements change, include the changes in subsequent subaward modification. . . . Required information includes: (1) Federal award identification. * * * * (iii) Federal Award Identification Number (FAIN); (iv) Federal Award Date (see the definition of Federal award date in § 200.1 of this part) of award to the recipient by the Federal agency; (v) Subaward Period of Performance Start and End Date[.] Good internal control requires procedures to ensure that subrecipients are informed of all required information. Condition: The Agency did not communicate all required information to subrecipients. Repeat Finding: No Questioned Costs: None Statistical Sample: No Context: During the fiscal year, 58 subrecipients received Federal funding. We tested six subrecipients and noted that the Agency did not properly communicate to them the FAIN, the Federal award date, or the subaward period of performance start and end dates. For the six subrecipients tested, the Agency provided a supplemental agreement that identified the availability of new Federal funding; however, the supplemental agreement did not communicate all necessary Federal award information. Subrecipient expenditures totaled $10,974,293 during the fiscal year. Cause: The supplemental agreement sent to all subrecipients did not include the FAIN, the Federal award date, or the subaward period of performance start and end dates. Effect: When subrecipients are not informed of all required information, there is an increased risk for subrecipient noncompliance, including with audit requirements. Recommendation: We recommend the Agency strengthen subrecipient agreements to ensure that subrecipient program agreements include all information required to be communicated. Management Response: NDOT acknowledges all findings and has incorporated Federal Identification details into the updated supplemental agreement template, intending to include all FAIN information in future supplemental agreements.

Program: AL 21.023 – COVID-19 Emergency Rental Assistance – Allowability & Eligibility & Period of Performance Grant Number & Year: N/A Federal Grantor Agency: U.S. Department of the Treasury Criteria: Per 2 CFR § 1000.10 (January 1, 2023), the U.S. Department of the Treasury adopted the Uniform Administrative Requirements, Cost Principles, and Audit Requirements set forth at 2 CFR part 200. Per 2 CFR § 200.303 (January 1, 2023): The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. 2 CFR § 200.403 (January 1, 2023) states, in part, the following: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. * * * * (g) Be adequately documented. 2 CFR § 200.405(d) (January 1, 2023) states the following, in relevant part: If a cost benefits two or more projects or activities in proportions that can be determined without undue effort or cost, the cost must be allocated to the projects based on the proportional benefit. If a cost benefits two or more projects or activities in proportions that cannot be determined because of the interrelationship of the work involved, then, notwithstanding paragraph (c) of this section, the costs may be allocated or transferred to benefitted projects on any reasonable documented basis. Per 2 CFR § 1108.285 (January 1, 2023): Period of performance means the time during which a recipient or subrecipient may incur new obligations to carry out the work authorized under an award or subaward, respectively. Question 7 in the Frequently Asked Questions (FAQ) guidance document (Revised July 27, 2022), issued by the U.S. Department of the Treasury, for the Emergency Rental Assistance program, states the following: For both ERA1 and ERA2, other expenses related to housing include relocation expenses (including prospective relocation expenses), such as rental security deposits, and rental fees, which may include application or screening fees. It can also include reasonable accrued late fees (if not included in rental or utility arrears), and Internet service provided to the rental unit. . . . All payments for housing-related expenses must be supported by documentary evidence such as a bill, invoice, or evidence of payment to the provider of the service. Question 4 of the same FAQ guidance document also states the following: The statute establishing ERA1 provides that grantees may determine income eligibility based on either (i) the household’s total income for calendar year 2020, or (ii) sufficient confirmation of the household’s monthly income at the time of application, as determined by the Secretary of the Treasury (Secretary). . . . In order to provide assistance rapidly, during the public health emergency related to COVID-19 the grantee may rely on a self-attestation of household income without further verification if the applicant confirms in their application or other document that they are unable to provide documentation of their income. If a written attestation without further verification is relied on to document the majority of the applicant’s income, the grantee must reassess the household’s income every three months, by obtaining appropriate documentation or a new self-attestation. The Emergency Rental Assistance (ERA1): Closeout Resource (September 16, 2022), also promulgated by the U.S. Department of the Treasury, contains the following: The end date of the award period of performance is the last day for a grantee to obligate funds for ERA1 activities (September 30, 2022 for award funds received pursuant to the grantee’s initial allocation and December 29, 2022 for reallocated funds). Funds statutorily available for administrative costs are not considered to be “automatically” obligated; therefore, grantees must obligate award funds by the end of the award period of performance to cover their administrative costs for closeout activities. Good internal control requires procedures to ensure that adequate supporting documentation is obtained and utilized during the application review process. Good internal control also requires procedures to ensure compliance with Federal regulations. Condition: Procedures were inadequate to ensure that payments were allowable, and individuals were eligible for assistance. A similar finding was noted in the prior audit. For one contract payment tested, the costs had neither been obligated nor occurred prior to the end of the period of performance for the ERA1 program. Additionally, the costs were associated with multiple programs but charged only to the ERA1 program. Repeat Finding: 2022-052 Questioned Costs: $172,809 known Statistical Sample: No Context: We noted that 7 of 25 assistance payments tested had errors or inadequate support, as follows: • One payment lacked documentation to support the tenant’s 2020 income or monthly income at the time of the application. • Five payments were for rent assistance for October and/or November 2022, which is after the period of performance. • One payment was for late fees; however, the lease agreement provided did not contain a late fee clause. Federal payment errors for the sample tested were $7,809. The total sample tested was $35,575, and assistance payments for the fiscal year totaled $4,678,044. Based on the sample tested, the dollar error rate for the sample was 21.95% ($7,809/$35,575), which estimates the potential dollars at risk for fiscal year 2023 to be $1,026,831 (dollar rate multiplied by the population). We tested three contract payments made after January 1, 2023. One payment for $165,000 was to obtain licenses to access ServiceNow for the period October 7, 2023, to January 31, 2026. This item was added to the contract on January 13, 2023. Additionally, it was noted that this access was purchased to access information related to other programs, along with ERA1. Therefore, these costs were not incurred or obligated prior to the end of the period of performance for ERA1, and the costs were not allocated to all benefitting programs as required. Cause: Inadequate review. Effect: Increased risk of loss or misuse of funds and non-compliance with Federal guidelines. Recommendation: We recommend the Agency improve procedures to ensure expenditures charged are within the allowed time period, adequately documented, and comply with Federal requirements. Management Response: Coordination with the contractor is ongoing. Audit findings are shared and revised as training and management attention was discussed. There are many checks and balance steps that continue to be discussed and revised on a weekly basis during call in monitoring and reporting session.

Program: AL 21.026 – COVID-19 Homeowner Assistance Fund – Subrecipient Monitoring Grant Number & Year: N/A Federal Grantor Agency: U.S. Department of the Treasury Criteria: Per 2 CFR § 1000.10 (January 1, 2023) the U.S. Department of the Treasury adopted the Uniform Administrative Requirements, Cost Principles, and Audit Requirements set forth at 2 CFR part 200. 2 CFR § 200.331 (January 1, 2023) states the following, in relevant part: The non-Federal entity may concurrently receive Federal awards as a recipient, a subrecipient, and a contractor, depending on the substance of its agreements with Federal awarding agencies and pass-through entities. Therefore, a pass-through entity must make case-by-case determinations whether each agreement it makes for the disbursement of Federal program funds casts the party receiving the funds in the role of a subrecipient or a contractor. The Federal awarding agency may supply and require recipients to comply with additional guidance to support these determinations provided such guidance does not conflict with this section. (a) Subrecipients. A subaward is for the purpose of carrying out a portion of a Federal award and creates a Federal assistance relationship with the subrecipient. See definition of Subaward in § 200.1 of this part. Characteristics which support the classification of the non-Federal entity as a subrecipient include when the non-Federal entity: (1) Determines who is eligible to receive what Federal assistance; (2) Has its performance measured in relation to whether objectives of a Federal program were met; (3) Has responsibility for programmatic decision-making; (4) Is responsible for adherence to applicable Federal program requirements specified in the Federal award; and (5) In accordance with its agreement, uses the Federal funds to carry out a program for a public purpose specified in authorizing statute, as opposed to providing goods or services for the benefit of the pass-through entity. (b) Contractors. A contract is for the purpose of obtaining goods and services for the non-Federal entity’s own use and creates a procurement relationship with the contractor. See the definition of contract in § 200.1 of this part. Characteristics indicative of a procurement relationship between the non-Federal entity and a contractor are when the contractor: (1) Provides the goods and services within normal business operations; (2) Provides similar goods or services to many different purchasers; (3) Normally operates in a competitive environment; (4) Provides goods or services that are ancillary to the operation of the Federal program; and (5) Is not subject to compliance requirements of the Federal program as a result of the agreement, though similar requirements may apply for other reasons. (c) Use of judgment in making determination. In determining whether an agreement between a pass-through entity and another non-Federal entity casts the latter as a subrecipient or a contractor, the substance of the relationship is more important than the form of the agreement. All of the characteristics listed above may not be present in all cases, and the pass-through entity must use judgment in classifying each agreement as a subaward or a procurement contract. 2 CFR § 200.511(b) (January 1, 2023) states, as is relevant, the following: The summary schedule of prior audit findings must report the status of all audit findings included in the prior audit's schedule of findings and questioned costs. . . . (2) When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding's recurrence and planned corrective action, and any partial corrective action taken. When corrective action taken is significantly different from corrective action previously reported in a corrective action plan or in the Federal agency's or pass-through entity's management decision, the summary schedule must provide an explanation. (3) When the auditee believes the audit findings are no longer valid or do not warrant further action, the reasons for this position must be described in the summary schedule. Condition: The Agency did not properly consider the Nebraska Investment Finance Authority (NIFA) to be a subrecipient. Additionally, the Agency did not properly complete the Summary Schedule of Prior Audit Findings. Repeat Finding: 2022-055 Questioned Costs: None Statistical Sample: No Context: In the previous fiscal year, the Agency considered NIFA to be a subrecipient and reported $451,581 in subrecipient expenditures on the Schedule of Expenditures of Federal Awards (SEFA). During the fiscal year ended June 30, 2023, the Agency paid NIFA $92,255 for ongoing Homeowner Assistance Fund (HAF) program administration. These payments were not reported as subrecipient expenditures because the Agency changed its determination and now considers NIFA to be a contractor rather than a subrecipient of the program. The APA disagrees with the Agency’s position that NIFA should be considered a contractor, as NIFA determines, to a substantial degree, the eligibility of applicants and, through that determination, informs State Accounting of which assistance payments are to be made and to whom. Additionally, NIFA is required to adhere to applicable Federal program requirements in the Federal award, and NIFA is administering the HAF program for a public purpose, not for the benefit of the Agency. Further, the position that NIFA is a contractor, rather than a subrecipient, of the HAF program does not reflect the Agency’s position in the Summary Schedule of Prior Audit Findings. The Schedule notes the following partial action taken: The Military Department will use subrecipient policies and procedures it has in place to continue to monitor the performance of NIFA and ensure that Federal guidelines are followed, and requirements are met. The Schedule also noted the following corrective action planned: The Military Department will modify the memorandum of Understanding between the parties to identify NIFA as a subrecipient and advise them of any additional requirements. The Agency’s position that NIFA is not a subrecipient of the HAF program was not properly communicated in the Summary Schedule of Prior Audit Findings as required by 2 CFR § 200.511(b)(2). Cause: Agency oversight. Effect: Noncompliance with Federal guidelines. Recommendation: We recommend the Agency implement procedures to review Federal guidelines to ensure subrecipients are properly identified, and that the Summary Schedule of Prior Audit Findings is completed properly. Management Response: Due to the Agency’s turnover recently, the response to this audit finding was in error. We agree with the finding and consider NIFA to be a Sub-Recipient.

Program: AL 21.026 – COVID-19 Homeowner Assistance Fund – Allowability Grant Number & Year: N/A Federal Grantor Agency: U.S. Department of the Treasury Criteria: Per 2 CFR § 1000.10 (January 1, 2023), the U.S. Department of the Treasury adopted the Uniform Administrative Requirements, Cost Principles, and Audit Requirements set forth at 2 CFR part 200. Per 2 CFR § 200.303 (January 1, 2023) states, in part, the following: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. . . . 2 CFR § 200.403 (January 1, 2023) states, in relevant part, the following: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: * * * * (g) Be adequately documented. Condition: The Agency lacked adequate procedures for ensuring that payments were allowable. Repeat Finding: No Questioned Costs: $215 known Statistical Sample: No Context: We tested 25 assistance payments. One payment tested was for the incorrect amount. Per supporting documentation reviewed, the applicant owed $257 in past due utilities; however, a payment of $472 was issued to pay this outstanding balance, resulting in an overpayment of $215. The total sample tested was $50,612, and total assistance payments for the fiscal year were $27,300,898. Based on the sample tested, the case error rate was 4% (1/25). The dollar error rate for the sample was 0.42% ($215/50,612), which estimates the potential dollars at risk for fiscal year 2023 to be $114,664 (dollar rate multiplied by the population). Cause: Staff errors and inadequate review. Effect: Increased risk for errors or fraud. Recommendation: We recommend the Agency improve procedures for ensuring that payments are proper. Management Response: The agency recognizes the findings and agree with staff errors.

Program: AL 21.027 – COVID-19 – Coronavirus State and Local Fiscal Recovery Funds – Allowability & Subrecipient Monitoring Grant Number & Year: SLFRP1965, March 3, 2021, through December 31, 2024 Federal Grantor Agency: U.S. Department of the Treasury Criteria: 31 CFR § 35.6(b) (July 1, 2022) states, in relevant part, the following: A recipient may use funds to respond to the public health emergency or its negative economic impacts if the use meets the criteria provided in paragraph (b)(1) of this section or is enumerated in paragraph (b)(3) of this section; provided that, in case of a use of funds for a capital expenditure under paragraph (b)(1) or (b)(3) of this section, the use of funds must also meet the criteria provided in paragraph (b)(4) of this section. Treasury may also articulate additional eligible programs, services, or capital expenditures from time to time that satisfy the eligibility criteria of this paragraph (b), which shall be eligible under this paragraph (b). (1) Identifying eligible responses to the public health emergency or its negative economic impacts. (i) A program, service, or capital expenditure is eligible under this paragraph (b)(1) if a recipient identifies a harm or impact to a beneficiary or class of beneficiaries caused or exacerbated by the public health emergency or its negative economic impacts and the program, service, or capital expenditure responds to such harm. (ii) A program, service, or capital expenditure responds to a harm or impact experienced by an identified beneficiary or class of beneficiaries if it is reasonably designed to benefit the beneficiary or class of beneficiaries that experienced the harm or impact and is related and reasonably proportional to the extent and type of harm or impact experienced. * * * * (3) A recipient may use funds to respond to the public health emergency or its negative economic impacts on a beneficiary or class of beneficiaries for one or more of the following purposes unless such use is grossly disproportionate to the harm caused or exacerbated by the public health emergency or its negative economic impacts: * * * * (ii) Responding to the negative economic impacts of the public health emergency for purposes including: * * * * (C) Assistance to nonprofit organizations including programs, services, or capital expenditures, including loans or grants to mitigate financial hardship such as declines in revenues or increased costs, or technical assistance[.] 31 CFR § 35.6(c) (July 1, 2022) states the following: A recipient may use funds to provide premium pay to eligible workers of the recipient who perform essential work or to provide grants to eligible employers that have eligible workers who perform essential work, provided that any premium pay or grants provided under this paragraph (c) must respond to eligible workers performing essential work during the COVID–19 public health emergency. A recipient uses premium pay or grants provided under this paragraph (c) to respond to eligible workers performing essential work during the COVID–19 public health emergency if: (1) The eligible worker's total wages and remuneration, including the premium pay, is less than or equal to 150 percent of the greater of such eligible worker's residing State's or county's average annual wage for all occupations as defined by the Bureau of Labor Statistics' Occupational Employment and Wage Statistics; (2) The eligible worker is not exempt from the Fair Labor Standards Act overtime provisions (29 U.S.C. 207); or (3) The recipient has submitted to the Secretary a written justification that explains how providing premium pay to the eligible worker is responsive to the eligible worker performing essential work during the COVID–19 public health emergency (such as a description of the eligible workers' duties, health, or financial risks faced due to COVID–19, and why the recipient determined that the premium pay was responsive despite the worker's higher income). 31 CFR § 35.3 (July 1, 2022) defines “premium pay,” in relevant part, as follows: Premium pay means an amount of up to $13 per hour that is paid to an eligible worker, in addition to wages or remuneration the eligible worker otherwise receives, for all work performed by the eligible worker during the COVID–19 public health emergency. Such amount may not exceed $25,000 in total over the period of performance with respect to any single eligible worker. Additionally, the “Final Rule” was released by the U.S. Department of the Treasury on January 6, 2022. The Final Rule, Section II. Eligible Uses, A. Public Health and Negative Economic Impacts, 1. General Provisions: Structure and Standards, a. Standards for Identifying a Public Health or Negative Economic Impact, Standards: Designating a Negative Economic Impact, states the following, in relevant part: (Page 4344) First, there must be a negative economic impact, or an economic harm, experienced by an individual or a class. The recipient should assess whether, and the extent to which, there has been an economic harm, such as loss of earnings or revenue, that resulted from the COVID-19 public health emergency. A recipient should first consider whether an economic harm exists and then whether this harm was caused or made worse by the COVID-19 public health emergency. * * * * Second, the response must be designed to address the identified economic harm or impact resulting from or exacerbated by the public health emergency. In selecting responses, the recipient must assess whether, and the extent to which, the use would respond to or address this harm or impact. * * * * Responses must be reasonably designed to benefit the individual or class that experienced the negative economic impact or harm. Uses of funds should be assessed based on their responsiveness to their intended beneficiary and the ability of the response to address the impact or harm experienced by that beneficiary. Responses must also be related and reasonably proportional to the extent and type of harm experienced. The Final Rule, Section II. Eligible Uses, A. Public Health and Negative Economic Impacts, 3. Negative Economic Impacts, c. Assistance to Nonprofits, states the following, in relevant part: (Page 4380) The interim final rule provided for, and the final rule maintains, the ability for recipients to provide direct assistance to nonprofits that experienced public health or negative economic impacts of the pandemic. Specifically, recipients may provide direct assistance to nonprofits if the nonprofit has experienced a public health or negative economic impact as a result of the pandemic. For example, if a nonprofit organization experienced impacts like decreased revenues or increased costs (e.g., through reduced contributions or uncompensated increases in service need), and a recipient provides funds to address that impact, then it is providing direct assistance to the nonprofit as a beneficiary under Subsection (c)(1) of Sections 602 and 603. Direct assistance may take the form of loans, grants, in-kind assistance, technical assistance, or other services that respond to the negative economic impacts of the COVID–19 public health emergency. The Final Rule, Section II. Eligible Uses, A. Public Health and Negative Economic Impacts, 4. General Provisions: Other, a. Public Sector Capacity and Workforce, states the following, in relevant part: (Page 4386) The final rule allows for an expanded set of eligible uses to restore and support public sector employment. Eligible uses include hiring up to a pre-pandemic baseline that is adjusted for historic underinvestment in the public sector, providing additional funds for employees who experienced pay cuts or were furloughed, avoiding layoffs, providing worker retention incentives, and paying for ancillary administrative costs related to hiring. * * * * The final rule provides two options to restore pre-pandemic employment, depending on recipient’s needs. Under the first and simpler option, recipients may use SLFRF funds to rehire staff for pre-pandemic positions that were unfilled or were eliminated due the pandemic without undergoing further analysis. Under the second option, the final rule provides recipients an option to hire above the pre-pandemic baseline, by adjusting the pre-pandemic baseline for historical growth in public sector employment over time, as well as flexibility on roles for hire. * * * * To pursue the second option, recipients should undergo the analysis provided below. In short, this option allows recipients to pay for payroll and covered benefits associated with the recipient increasing its number of budgeted full-time equivalent employees (FTEs) up to 7.5 percent above its pre-pandemic employment baseline, which adjusts for the continued underinvestment in state and local governments since the Great Recession. * * * * Funds may be used to maintain current compensation levels, with adjustments for inflation, in order to prevent layoffs that would otherwise be necessary. Recipients must be able to substantiate that layoffs were likely in the absence of SLFRF funds and would be substantially due to the public health emergency or its negative economic impacts (e.g., fiscal pressures on state and local budgets) and should document their assessment. * * * * Funds may be used to provide worker retention incentives, which are designed to persuade employees to remain with the employer as compared to other employment options. Recipients must be able to substantiate that the employees were likely to leave employment in the absence of the retention incentive and should document their assessment. * * * * All worker retention incentives must be narrowly tailored to need and should not exceed incentives traditionally offered by the recipient or compensation that alternative employers may offer to compete for the employees. Further, because retention incentives are intended to provide additional incentive to remain with the employer, they must be entirely additive to an employee’s regular rate of wages and other remuneration and may not be used to reduce or substitute for an employee’s normal earnings. Treasury will presume that retention incentives that are less than 25 percent of the rate of base pay for an individual employee or 10 percent for a group or category of employees are reasonably proportional to the need to retain employees, as long as the other requirements are met. The Final Rule, Section II. Eligible Uses, A. Public Health and Negative Economic Impacts, 4. General Provisions: Other, b. Capital Expenditures, Overview of General Standards, states the following, in relevant part: (Page 4391) Large capital expenditures intended for general economic development or to aid the travel, tourism, and hospitality industries—such as convention centers and stadiums—are, on balance, generally not reasonably proportional to addressing the negative economic impacts of the pandemic, as the efficacy of a large capital expenditure intended for general economic development in remedying pandemic harms may be very limited compared to its cost. The Final Rule, Footnote 230, states the following, in relevant part: (Page 4379) Ultimately, recipients must comply with the eligible use requirements and any other applicable laws or requirements and are responsible for the actions of their subrecipients or beneficiaries. Per 2 CFR § 1000.10 (January 1, 2023), “[T]he Department of the Treasury adopts the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, set forth at 2 CFR part 200.” 2 CFR § 200.332 (January 1, 2023) states, in relevant part, the following: All pass-through entities must: * * * * (d) Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. 2 CFR § 200.430(i)(1) (January 1, 2023) states, in relevant part, the following: Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: * * * * (vii) Support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non- Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. 2 CFR § 200.303 (January 1, 2023) states, in relevant part, the following: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Per 2 CFR § 200.403 (January 1, 2023), costs must be necessary, reasonable, and adequately documented. Good internal control and sound business practices requires procedures for ensuring that: 1) grants issued to beneficiaries are reasonable and proportional to the harm identified; 2) premium pay is correctly calculated; and 3) all expenditures of funds are for allowable purposes. Condition: The State lacked procedures for ensuring that grants issued to beneficiaries for worker retention and incentives were used for such purposes. The State lacked both procedures and the requisite knowledge to ensure that the premium charged to the grant was allowable. The State lacked procedures to ensure that grants to nonprofits were proportional to the negative economic harm incurred. The State lacked subrecipient monitoring procedures. The State possibly made fraudulent payments under the State’s nursing scholarship program. Repeat Finding: No Questioned Costs: $23,452,594 Known Statistical Sample: No Context: We noted the following: Payments to Developmental Disability Providers, Assisted-Living Facilities, and Nursing Facilities for Employee Retention and Recruitment Nebraska Legislative Bill (LB) 1014 (2022), section 23, appropriated $20,000,000 from the Coronavirus State and Local Fiscal Recovery Funds (CSLFRF) grant to the Department of Health and Human Services (DHHS) for state fiscal year 2023 to be used for Developmental Disability (DD) provider rate increases for the purpose of enhancing employee retention and recruitment at the DD providers. DHHS implemented a 9% rate increase for select DD services in state fiscal year 2023. During the fiscal year, DD claims were paid out using State and Federal funds in accordance with the applicable Federal matching percentage (FMAP). In June 2023, DHHS made a journal entry to transfer $19,995,679 in expenditures from the State and Federal General Funds to the CSLFRF grant in accordance with the FMAP rates. LB 1014, section 27, appropriated $5,462,800 from the CSLFRF grant to DHHS for State fiscal year 2023 to be paid out to assisted-living facilities for the following: 1) “Incentives for staff members employed by the licensed assisted-living facility in order to enhance employee recruitment and retention”; and 2) “Assistance with costs for supplies and equipment purchased by the licensed assisted-living facility.” DHHS paid out $5,068,000 to assisted-living facilities during state fiscal year 2023. LB 1014, section 28, appropriated $20,000,000 from the CSLFRF grant to DHHS for state fiscal year 2023 to be paid out to Medicaid-certified nursing facilities. The funds were to be used to provide supplemental incentive payments for direct care staff members employed at the nursing facilities. DHHS paid out $20,000,000 to nursing facilities during state fiscal year 2023. During a testing of a random sample of 25 CSLFRF payments, we tested seven payments to nursing facilities, totaling $1,304,915. We asked for documentation of how DHHS ensured that the payments were used for allowable employee retention and recruitment programs, and for any documented assessments that were required by the Final Rule for worker incentive programs. According to DHHS, the funds were paid out in accordance with the requirements of LB 1014; however, DHHS acknowledged lacking procedures to ensure that the beneficiaries were using the funds for eligible recruitment and retention purposes. Additionally, DHHS failed to provide the required documented assessments per the Final Rule. Given the lack of procedures to support that funds were being used for allowable purposes, all seven payments of the $1,304,915 tested are considered questioned costs. Additionally, the entire $20,000,000 paid out during the fiscal year are considered potential dollars at risk. Additionally, we tested one $110,400 payment to an assisted-living facility under LB 1014, Section 27. Similar to the nursing facility payments tested, DHHS lacked procedures for ensuring that the assisted-living facilities were using the funds for eligible recruitment and retention purposes. Therefore, the $110,400 payment tested is considered a questioned cost. Lastly, we tested the journal entries transferring $19,995,679 in expenditures to the CSLFRF grant for DD provider rate increases. Again, DHHS lacked procedures for ensuring that the DD providers were using the funds for eligible recruitment and retention purposes. Therefore, the journal entries tested for $19,995,679 are considered questioned costs. We also noted that, due to an oversight error, one nursing facility that had certified Medicaid beds did not receive its proportional allocation of $43,138. Instead, that amount was split among the other nursing facilities that received payments. Premium Pay LB 1014, section 12, appropriated $3,546,602 to the Department of Veterans’ Affairs (DVA) from the CSLFRF grant to be used for premium pay. In September 2022, the DVA posted journal entries to move payroll costs of $3,546,602 to the CSLFRF grant. However, we noted that the DVA did not review the premium pay eligibility requirements, which resulted in the following errors: • The DVA moved $357,039 of payroll costs associated with individuals who had earnings of more than 150% of the applicable average wage for all occupations and were not exempt from the Fair Labor Standards Act overtime provisions, which is not allowable. • $145,205 of the payroll costs moved were for premium pay that exceeded $25,000 per person, which is not allowable. • The DVA moved payroll costs that were not for premium pay and were not in addition to wages the workers were already receiving. From a detail test of 25 employees, $371,683 out of $585,901 of payroll costs were not related to premium pay. After the errors noted above were communicated to the DVA, the DVA recalculated the amount to charge the CSLFRF grant for premium pay, and the DVA calculated that only $1,518,092 should have been charged to the CSLFRF grant. We verified that, for the 25 employees previously tested, the DVA’s revised calculation agreed to our calculation. We verified also that the DVA’s revised calculation excluded individuals whose wages exceeded 150% of the applicable average wage for all occupations, and premium pay was capped at $25,000 for each employee. Therefore, the $2,028,510 difference between the $3,546,602 charged to the grant and the revised calculation of $1,518,092 is considered a questioned cost. Assistance to Nonprofits LB 1014, section 46, appropriated $100,000,000 to the Department of Economic Development (DED) from the CSLFRF grant to be used to provide grants to qualified nonprofit organizations to assist with capital projects that have been delayed due to COVID-19. In order to receive a grant, a nonprofit had to submit a grant application attesting to have experienced negative economic harm due to the public health emergency. During our testing, we noted that DED did not require nonprofits to submit documentation to substantiate having experienced a negative economic impact due to the pandemic that was equivalent or reasonably proportional to the grant award. We also noted that, for two of the nonprofit payments selected for testing, the two nonprofits received grant awards of $12,664,600 each to be used solely for the purpose of construction and development of sports complexes for competitive sports and economic growth. Per the CSLFRF Final Rule, large capital projects intended for general economic growth are not generally proportional responses to negative harm. Therefore, if the nonprofits had not suffered an economic harm due to COVID-19, these projects would otherwise not be an eligible use of CSLFRF funds. We gave DED the opportunity to obtain documentation from the nonprofits to support that they experienced a negative economic impact proportional to the amount awarded. In all instances, DED was able to obtain documentation substantiating the negative economic harm in excess of the grant amounts awarded. University of Nebraska The University of Nebraska (University) was awarded $86,650,000 in a subaward to be used for a number of projects, including increasing the capacity of behavioral health care and rural health care. To monitor this subaward, the Military Department (Military) received and reviewed reports from the University and would have monthly meetings to discuss updates and whether deadlines were being met. Military stated that, beyond these monthly meetings, there were no planned procedures for reviewing any expenditures to ensure they were for allowable purposes and met the requirements of the Uniform Guidance, which is set out under 2 CFR Part 200 to establish uniform administrative requirements, cost principles, and audit requirements for Federal awards to non-Federal entities. We selected one CSLFRF expenditure recorded by the University. The payment was for $116,670 and made to a subrecipient of the University. The subrecipient was a behavioral health provider and was used to increase telehealth capacity. During review of supporting documentation, we noted that adequate documentation was not on file to support the salary and fringe benefits charged to the CSLFRF grant for the two subrecipient employees tested. The employees’ salary and fringe benefits had been allocated to the CSLFRF grant based on historical data and “prior experience with similar programs.” As noted in 2 CFR § 200.430(h)(8)(viii), however, “Budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards . . . .” Consequently, we consider the $8,090 in salary and benefits charged for the two employees to be questioned costs. The total salary and fringe benefits reimbursed on the payment tested amounted to $29,277. Nursing Scholarships During testing procedures, DHHS reported to us $5,000 in payments that were made due to fraudulent nursing scholarship applications submitted to, and accepted by, DHHS. Per DHHS’s subsequent review, the applicant fraudulently claimed on her application that she was enrolled in a nursing program during the spring and summer 2023 terms. DHHS has reported this to the U.S. Department of the Treasury. These $5,000 payments are considered questioned costs. Cause: The State had inadequate procedures to ensure that the grant was used for allowable purposes, and staff had inadequate knowledge of the requirements of the CSLFRF. Effect: Without adequate supporting documentation and review procedures, there is an increased risk that Federal awards could be used for unallowable costs. Recommendation: We recommend the State strengthen procedures for ensuring that all Federal funds are used for intended and allowable purposes. We further recommend that the State take steps to recoup any payments for which either the beneficiary cannot support the proper use of the grant funds received or to the economic harm experienced. Management Response: Payments to Developmental Disability Providers, Assisted-Living Facilities, and Nursing Facilities for Employee Retention and Recruitment: Department of Health and Human Services (DHHS) disagrees with questioned costs of $21,410,994 ($1,304,915 Nursing Facilities, $110,400 Assisted Living Facilities, $19,995,679 Developmental Disabilities Providers). Payments made to Developmental Disability Providers, Assisted-Living Facilities, and Nursing Facilities followed federal regulations and were accurately distributed as directed by the legislature and signed legislation, LB1014. Payments to each facility were based on approved amounts in the legislative bill. In addition, DHHS properly passed requirements and regulatory information on to the providers. DHHS issued the following guidance document (as required by the legislation as well) https://dhhs.ne.gov/Grants%20and%20Contract%20Opportunity%20Docs/LB1014%20Guidance%20Document_DHHS%20DL%206-13-22.pdf#search=LB1014. If DHHS becomes aware of known unallowable activities, we will recoup applicable funds. Premium Pay: As noted in the Auditors Comments, NDVA made the necessary corrections to their workbooks to comply with these guidelines. However, the amounts reflected in the Auditors comments were only for eligible expenses through September of 2022 and did not take into consideration the entire Fiscal Year 2023. NDVA’s eligible expenses as of June 30, 2023, were $3,695,625, which exceeded the $3,546,602 appropriated in LB 1014 by approximately $148,460. Assistance to Nonprofits: DED acknowledges that with respect to its American Rescue Plan Act Shovel-Ready program in some cases it did not collect sufficient documentation to show the nonprofit organization suffered an economic harm related to and reasonably proportionate to DED’s award. University of Nebraska: NEMA continues to monitor the University of Nebraska (University) subaward through the review of reports and monthly progress meetings. APA Response: Per the CSLFRF final rule, the recipient, which is the State, must comply with the eligible use requirements and is ultimately responsible for the actions of its beneficiaries. No documentation was provided to support that the funds granted to Developmental Disability Providers, Assisted-Living Facilities, and Nursing Facilities were spent on allowable retention and recruitment efforts or that any applicable pre-analysis required by the CSLFRF final rule was completed. The journal entry prepared by NDVA was done in September 2022. It covers the premium pay given in November 2021 to June 2022. We were not provided a spreadsheet with updated calculations, nor did the Agency make any adjustments in the accounting system to show this as an offset of fiscal year 2023 expenses.

Program: AL 21.027 – COVID-19 – Coronavirus State and Local Fiscal Recovery Funds – Reporting Grant Number & Year: SLFRP1965, March 3, 2021, through December 31, 2024 Federal Grantor Agency: U.S. Department of the Treasury Criteria: 31 CFR § 35.6(b)(4) (July 1, 2022) states, in relevant part, the following: A recipient, other than a Tribal government, must prepare a written justification for certain capital expenditures according to Table 1 to paragraph (b)(4) of this section. Such written justification must include the following elements: (i) Describe the harm or need to be addressed; (ii) Explain why a capital expenditure is appropriate; and (iii) Compare the proposed capital expenditure to at least two alternative capital expenditures and demonstrate why the proposed capital expenditure is superior. See Schedule of Findings and Questioned Costs for chart/table. Good internal control and sound business practices require policies and procedures to ensure that all CSLFRF reporting requirements are met, including the maintenance of written justification on file for projects with expected capital expenditures of more than $1 million. Condition: The Department of Administrative Services (DAS) was responsible for preparing the Quarterly Project and Expenditure Reports. DAS lacked procedures to ensure that CSLFRF obligations were reported accurately on the Quarterly Project and Expenditure Reports, or written justification was on file for all projects with expected capital expenditures over $1 million. Repeat Finding: No Questioned Costs: None Statistical Sample: No Context: We tested the quarters ending December 31, 2022, and June 30, 2023, Project and Expenditure Reports. We noted the following: Current and Cumulative Obligations Reported We selected for testing two of 21 projects from the quarter ending December 31, 2022, report and six of 57 projects from the quarter ending June 30, 2023. Two of the projects tested did not have current obligations or cumulative obligations reported correctly. The State reported cumulative obligations of $116,897,124 under project 72652020 (Shovel Ready). The Department of Economic Development (DED) was the agency responsible for administering this project. DED provided documentation showing that cumulative obligations were only $113,411,816 at December 31, 2022. Consequently, the December report was overstated by $3,485,308. However, we also noted that the State Legislature appropriated only $100 million in CSLFRF funds to be used on the Shovel Ready projects. Per discussion with DED, the difference between the amount of obligation and the amount of CSLFRF appropriations will be covered by State funds. Therefore, only $100 million in CSLFRF funds were obligated to the Shovel Ready project, so the report was overstated by a total of $16,897,124. We also reviewed the June 2023 report and noted that cumulative obligations were still being overstated by $13,503,516. Additionally, DED had obligated the funds for this project prior to October 1, 2022; however, the report incorrectly showed all these funds as obligated during the current period. Current period obligations were properly reported as $0 on the quarter ending June 30, 2023, report. We also noted that the cumulative obligations and current period obligations for Project 33209901 (State Park System Lagoon Projects) were not properly reported on the quarter ending June 30, 2023, report. The State reported cumulative obligations of $6,893,694. The Nebraska Game & Parks Commission was the agency responsible for administering this project. The supporting documentation provided by Game & Parks showed that only $6,786,249 was obligated at June 30, 2023. Additionally, a change order for $61,362 during the quarter was not included with the current-period obligations, resulting in current-period obligations being underreported. Capital Expenditures We noted five projects that either did not properly report expected capital expenditures, or the required written justification was not on file. • Project 72652021.1.12 (Mental Health Services) – The State reported no expected capital expenditures for this project. The project is comprised of four $10 million awards that DED made to entities for the purpose of expanding behavioral health services. Originally, when reporting this project, DED considered these payments to be beneficiary payments to the behavioral health service providers, not capital expenditures. After further discussion with DED, it was determined that these should have been treated as subawards, and expected capital expenditures should have been reported. Even though the expected capital expenditures were not reported correctly, DED did have written justification on file for capital expenditures of the project. • Project 25580005 (Improve Infrastructure) – The State reported $4,856,106 in expected capital expenditures for this project. However, the Department of Health and Human Services (DHHS) treated each subaward under this project separately when determining if written justification was required. As no single subaward was for $1 million or more, DHHS did not document any written justification. • Project U5991971490 (NE Rural Healthcare Education) – The State reported $0 in expected capital expenditures for this project, which was for the construction of a new rural healthcare education building. DAS stated that this was reported in error, and the actual amount of expected capital expenditures would be $50,000,000. Even though the expected capital expenditures were not reported correctly, written justification was on file for the capital expenditures of this project. • Project 48697142 (Workforce Development Center at Northeast) was reported as having no expected capital expenditures. Through discussion with the Coordinating Commission on Post-Secondary Education, the project had at least $1 million in expected capital expenditures and should have been reported as such on the quarterly report. Written justification for the capital expenditures of the project was on file. Cause: Individual agencies were responsible for reporting to DAS what should be reported on the Quarterly Project and Expenditure Report. Not all information reported by the agencies was accurate. Effect: Without adequate procedures, there is increased risk that the quarterly project and expenditure reports will be materially misstated, and required written justification will not be on file. Recommendation: We recommend the Agency strengthen procedures to ensure that all quarterly project and expenditure reports are complete and accurate, and any required written justification is maintained on file. Management Response: As of the reporting period ended December 31, 2023, DED obligations under the Shovel Ready project are reflected as $100 million, which agrees to federal ARPA funds appropriated by the Legislature. State Park System Lagoon Project obligations are provided by Game and Parks for each quarterly report. DHHS partially agrees with the finding. We have the written justification but did not provide to the APA timely for the audit.