Payroll Distribution Criteria – The Uniform Guidance, Part 200.430(i), states “Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed.” These records must “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.” Also, “Budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards, but may be used for interim accounting purposes, provided that: The system for establishing the estimates produces reasonable approximations of the activity actually performed; significant changes in the corresponding work activity (as defined by the non-Federal entity’s written policies) are identified and entered into the records in a timely manner. Short term (such as one or two months) fluctuation between workload categories need not be considered as long as the distribution of salaries and wages is reasonable over the long term; and the non-Federal entity’s system of internal controls includes processes to review after-the-fact interim charges made to a Federal award based on budget estimates. All necessary adjustments must be made such that the final amount charged to the Federal award is accurate, allowable, and properly allocated.”Condition – The Department uses budget estimates to establish interim rates to allocate payroll costs to be used for Department budgeting and to provide employees with an estimate of time which is expected of them for their assigned programs. The Department has informed employees they are to report the actual time worked on each program code associated with a specific Federal, non-Federal, indirect or cost allocation program. Although the employees reported their actual time on assigned programs in the state time reporting system, corrective disbursement entries were not consistently prepared in the state accounting system to adjust the estimated time by program to the actual time as reported in the time reporting system. Cause – The Department transitioned to a new payroll and time tracking system. A feature of the system was to allow for time entries to directly charge the respective grant or function within the accounting ledger. This feature was not consistently implemented into the payroll and time tracking system, as a result the Department established policies and procedures to require actual hours worked on program codes be assigned to their respective program codes in the state accounting system. Due to staff turnover, corrective entries were not performed for part of the fiscal year. Effect – Payroll costs could be charged to the incorrect program code resulting in allocating costs incorrectly to all programs, including federal programs. The effect on individual programs is undeterminable. Recommendation – The Department should review time reporting for all pay periods and determine if corrective disbursement entries are needed for all programs, including the federal programs. In addition, the Department should implement policies and procedures to ensure proper distribution of salaries and wages and these policies and procedures should be followed. Response and Corrective Action Planned – The Department has implemented a payroll policy and procedure, that requires staff to enter a work reporting code for time worked and addresses timelines in which correcting entries must be completed. The Department will review all pay periods during the time frame to determine if corrective disbursement entries need to be made to properly allocate actual time reported to their respective program codes. The Department began the process in October 2023. Conclusion – Response accepted.
Payroll Distribution Criteria – The Uniform Guidance, Part 200.430(i), states “Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed.” These records must “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.” Also, “Budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards, but may be used for interim accounting purposes, provided that: The system for establishing the estimates produces reasonable approximations of the activity actually performed; significant changes in the corresponding work activity (as defined by the non-Federal entity’s written policies) are identified and entered into the records in a timely manner. Short term (such as one or two months) fluctuation between workload categories need not be considered as long as the distribution of salaries and wages is reasonable over the long term; and the non-Federal entity’s system of internal controls includes processes to review after-the-fact interim charges made to a Federal award based on budget estimates. All necessary adjustments must be made such that the final amount charged to the Federal award is accurate, allowable, and properly allocated.”Condition – The Department uses budget estimates to establish interim rates to allocate payroll costs to be used for Department budgeting and to provide employees with an estimate of time which is expected of them for their assigned programs. The Department has informed employees they are to report the actual time worked on each program code associated with a specific Federal, non-Federal, indirect or cost allocation program. Although the employees reported their actual time on assigned programs in the state time reporting system, corrective disbursement entries were not consistently prepared in the state accounting system to adjust the estimated time by program to the actual time as reported in the time reporting system. Cause – The Department transitioned to a new payroll and time tracking system. A feature of the system was to allow for time entries to directly charge the respective grant or function within the accounting ledger. This feature was not consistently implemented into the payroll and time tracking system, as a result the Department established policies and procedures to require actual hours worked on program codes be assigned to their respective program codes in the state accounting system. Due to staff turnover, corrective entries were not performed for part of the fiscal year. Effect – Payroll costs could be charged to the incorrect program code resulting in allocating costs incorrectly to all programs, including federal programs. The effect on individual programs is undeterminable. Recommendation – The Department should review time reporting for all pay periods and determine if corrective disbursement entries are needed for all programs, including the federal programs. In addition, the Department should implement policies and procedures to ensure proper distribution of salaries and wages and these policies and procedures should be followed. Response and Corrective Action Planned – The Department has implemented a payroll policy and procedure, that requires staff to enter a work reporting code for time worked and addresses timelines in which correcting entries must be completed. The Department will review all pay periods during the time frame to determine if corrective disbursement entries need to be made to properly allocate actual time reported to their respective program codes. The Department began the process in October 2023. Conclusion – Response accepted.
Allocable Costs Criteria – The Uniform Guidance, Part 200.405(a), states “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: is incurred specifically for the Federal award; 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 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.” Uniform Guidance, Part 200.405(a) states, “Direct cost allocation principles: 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 the costs may be allocated or transferred to benefitted projects on any reasonable documented basis.”Condition – The Department has established program codes to allocate costs to both Federal and non-Federal programs. The allocation of the expenditures charged to these program codes is based on a combination of square footage and actual time reported on Federal and non-Federal programs. The rates were not updated quarterly after December 14, 2021, for fiscal year ending June 30, 2023. Department policies require rates to be updated quarterly. Cause – The Department transitioned to a new payroll system and policies and procedures to identify time reporting requirements for staff and report capabilities were not in place to properly allocate costs. In addition, due to staff turnover, staff were not available to review rates and compare allocated costs to time entries. Effect – Allocable costs could be charged to the incorrect program code, resulting in allocating costs incorrectly to all programs, including federal programs. The effect on individual programs is undeterminable. Recommendation – The Department should follow policies and procedures and review the allocable rates used during the period and determine if corrective disbursement entries are needed for all programs, including federal programs. Response and Corrective Action Planned – The Department will review allocable rates during the time frame to determine if corrective disbursement entries are needed to their respective program codes. The Department began the process in October 2023. The Department will also revise, and update policies and procedures related to allocable costs based on time entries. Conclusion – Response accepted.
Allocable Costs Criteria – The Uniform Guidance, Part 200.405(a), states “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: is incurred specifically for the Federal award; 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 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.” Uniform Guidance, Part 200.405(a) states, “Direct cost allocation principles: 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 the costs may be allocated or transferred to benefitted projects on any reasonable documented basis.”Condition – The Department has established program codes to allocate costs to both Federal and non-Federal programs. The allocation of the expenditures charged to these program codes is based on a combination of square footage and actual time reported on Federal and non-Federal programs. The rates were not updated quarterly after December 14, 2021, for fiscal year ending June 30, 2023. Department policies require rates to be updated quarterly. Cause – The Department transitioned to a new payroll system and policies and procedures to identify time reporting requirements for staff and report capabilities were not in place to properly allocate costs. In addition, due to staff turnover, staff were not available to review rates and compare allocated costs to time entries. Effect – Allocable costs could be charged to the incorrect program code, resulting in allocating costs incorrectly to all programs, including federal programs. The effect on individual programs is undeterminable. Recommendation – The Department should follow policies and procedures and review the allocable rates used during the period and determine if corrective disbursement entries are needed for all programs, including federal programs. Response and Corrective Action Planned – The Department will review allocable rates during the time frame to determine if corrective disbursement entries are needed to their respective program codes. The Department began the process in October 2023. The Department will also revise, and update policies and procedures related to allocable costs based on time entries. Conclusion – Response accepted.
IRS 940 Match Criteria – Uniform Guidance Compliance Supplement states, “States are required to annually certify for each taxpayer the total amount of contributions required to be paid under state law for the calendar year and the amounts and dates of such payments in order for the taxpayer to be allowed the credit against the FUTA (Federal Unemployment Tax Act) tax (26 CFR sections 31.3302(a)-3(a)). In order to accomplish this certification, states annually perform a match of employer tax payments with credit claimed for these payments on the employer’s IRS 940 FUTA tax form.” The Internal Revenue Service (IRS) sends the Department a secure file typically in October of each year following the prior calendar year. Taxes received for calendar year ending December 31, 2021, were received in October 2022. IWD must certify and respond to each Federal Employer Identification Number even if there is no discrepancy. The Department is also required to send back to the IRS the Federal Non-Filers file. This file lists all employers that filed with the state but did not file an IRS 940 FUTA tax form. Both the Certification file and the Non-Filers file must be sent back to the Internal Revenue Service by January 31, 2023. The Certification file is used to assign discrepancies to field auditors to determine the disposition of the discrepancy identified. The Department’s policy is designed to review each individual case within 180 days. Condition – The Department had 27 of 58 discrepancies from the secure file received in October 2022 resolved this was past the 180-day period to resolve. For the file received in October 2021, 17 of 58 cases were not resolved at the time of testing and the date was past the 180-day period to resolve. Cause – Due to a massive influx of claims beginning March of 2020 through December 2021, staff members from all bureaus, including investigations and field audit, were directed to assist with pandemic related claims. This included claims processing, answering phone calls on the customer service line and conducting two party fact-findings, and assisting in completing employer registrations. Because investigations staff were required to work these areas, normal investigations work, including monitoring the IRS 940 match report, was delayed. Effect – The Department did not resolve discrepancies in a timely manner. Recommendation – The Department should follow the established policies and procedures to ensure discrepancies are followed up and resolved within 180 days. Response and Corrective Action Planned – The Department will follow policies and procedures in place for fiscal year 2023, to certify the amounts contributed annually and ensure discrepancies are followed up within 180 days. Conclusion: Response accepted.
IRS 940 Match Criteria – Uniform Guidance Compliance Supplement states, “States are required to annually certify for each taxpayer the total amount of contributions required to be paid under state law for the calendar year and the amounts and dates of such payments in order for the taxpayer to be allowed the credit against the FUTA (Federal Unemployment Tax Act) tax (26 CFR sections 31.3302(a)-3(a)). In order to accomplish this certification, states annually perform a match of employer tax payments with credit claimed for these payments on the employer’s IRS 940 FUTA tax form.” The Internal Revenue Service (IRS) sends the Department a secure file typically in October of each year following the prior calendar year. Taxes received for calendar year ending December 31, 2021, were received in October 2022. IWD must certify and respond to each Federal Employer Identification Number even if there is no discrepancy. The Department is also required to send back to the IRS the Federal Non-Filers file. This file lists all employers that filed with the state but did not file an IRS 940 FUTA tax form. Both the Certification file and the Non-Filers file must be sent back to the Internal Revenue Service by January 31, 2023. The Certification file is used to assign discrepancies to field auditors to determine the disposition of the discrepancy identified. The Department’s policy is designed to review each individual case within 180 days. Condition – The Department had 27 of 58 discrepancies from the secure file received in October 2022 resolved this was past the 180-day period to resolve. For the file received in October 2021, 17 of 58 cases were not resolved at the time of testing and the date was past the 180-day period to resolve. Cause – Due to a massive influx of claims beginning March of 2020 through December 2021, staff members from all bureaus, including investigations and field audit, were directed to assist with pandemic related claims. This included claims processing, answering phone calls on the customer service line and conducting two party fact-findings, and assisting in completing employer registrations. Because investigations staff were required to work these areas, normal investigations work, including monitoring the IRS 940 match report, was delayed. Effect – The Department did not resolve discrepancies in a timely manner. Recommendation – The Department should follow the established policies and procedures to ensure discrepancies are followed up and resolved within 180 days. Response and Corrective Action Planned – The Department will follow policies and procedures in place for fiscal year 2023, to certify the amounts contributed annually and ensure discrepancies are followed up within 180 days. Conclusion: Response accepted.
Cash Management Improvement Act Criteria – Effective cash management procedures provide for minimizing the amount of time between the drawdown/request for federal funds and the disbursement of those funds by the Department. Effective cash management also minimizes the amount of state and other federal funds used to supplant programs until federal funds are received. Generally, a maximum of three days is considered acceptable between the receipt of federal funds and the disbursement of those funds. Condition – A review of the Department’s records identified cash balances averaged approximately $25.7 million and were greater than a significant amount of approximately $9.7 million for the fiscal year. Cause – Although procedures have been established to draw federal funds only in amounts sufficient to cover current needs, the Department did not review or update procedures to account for federal draws associated with pandemic related administrative programs and unemployment benefits. Effect – Failure to follow procedures resulted in Department employees not detecting the error in the normal course of performing their assigned duties. Recommendation – The Department should follow established procedures to ensure federal funds are drawn only in amounts sufficient to cover current needs and are disbursed in a timely manner without carrying excessive daily balances. Response and Corrective Action Planned – The Department implemented a revised cash management policy for federal programs. Included in the policy and procedure are review of ledger activity, instances in which federal programs reflect excess cash on hand, immediate review of the programs revenues and expenditures is performed. In addition, federal funds drawn that exceed defined thresholds require additional approval from the Accounting and Finance Bureau Chiefs and or the Department’s Chief Financial Officer. Conclusion – Response accepted.
Cash Management Improvement Act Criteria – Effective cash management procedures provide for minimizing the amount of time between the drawdown/request for federal funds and the disbursement of those funds by the Department. Effective cash management also minimizes the amount of state and other federal funds used to supplant programs until federal funds are received. Generally, a maximum of three days is considered acceptable between the receipt of federal funds and the disbursement of those funds. Condition – A review of the Department’s records identified cash balances averaged approximately $25.7 million and were greater than a significant amount of approximately $9.7 million for the fiscal year. Cause – Although procedures have been established to draw federal funds only in amounts sufficient to cover current needs, the Department did not review or update procedures to account for federal draws associated with pandemic related administrative programs and unemployment benefits. Effect – Failure to follow procedures resulted in Department employees not detecting the error in the normal course of performing their assigned duties. Recommendation – The Department should follow established procedures to ensure federal funds are drawn only in amounts sufficient to cover current needs and are disbursed in a timely manner without carrying excessive daily balances. Response and Corrective Action Planned – The Department implemented a revised cash management policy for federal programs. Included in the policy and procedure are review of ledger activity, instances in which federal programs reflect excess cash on hand, immediate review of the programs revenues and expenditures is performed. In addition, federal funds drawn that exceed defined thresholds require additional approval from the Accounting and Finance Bureau Chiefs and or the Department’s Chief Financial Officer. Conclusion – Response accepted.
Employment and Training Administration (ETA) Reports Criteria – The Uniform Guidance, Part 200.303, requires the Department establish and maintain effective internal control over the federal award which provides reasonable assurance the Department is managing the federal award in compliance with federal statutes, regulations and the terms of the federal award. The ETA 191 report, “Statement of Expenditures and Financial Adjustments of Federal Funds for Unemployment Compensation for Federal Employees and ExService members”, is the quarterly summary of unemployment compensation expenditures and adjustments and the total amount of benefits paid to claimants of each federal and military agency. Unemployment Insurance (UI) Reports Handbook No. 401 requires the report to be submitted electronically to the Employment and Training Administration of the U.S. Department of Labor by the 25th of the month following the close of the quarter. Condition – One of the four quarterly reports was submitted one day late. Cause – Department procedures were not established in fiscal year 2023 to ensure reports are submitted timely. The Department also utilizes a database to identify unemployment compensation paid to Federal Employees and Ex-Service members. Effect – The lack of established policies and procedures resulted in the late submission of the quarterly report. Recommendation – The Department should establish policies and procedures to ensure reports are submitted timely in accordance with UI Reports Handbook. Response and Corrective Action Planned – A policy and procedure has been established for reporting and filing the ETA 191. Included in the procedure is a requirement to submit the report to the Chief Financial Officer or Comptroller for review and approval. Evidence of review and transmittal is documented via email confirmation to the Accountant 3 responsible for preparing the ETA 191. Review and approval of the ETA 191 is required to be completed prior to the reports due date. After transmittal to DOL of the ETA 191; a copy with supporting documentation is made available to the Unemployment Division Administrator. Conclusion – Response accepted.
Employment and Training Administration (ETA) Reports Criteria – The Uniform Guidance, Part 200.303, requires the Department establish and maintain effective internal control over the federal award which provides reasonable assurance the Department is managing the federal award in compliance with federal statutes, regulations and the terms of the federal award. The ETA 191 report, “Statement of Expenditures and Financial Adjustments of Federal Funds for Unemployment Compensation for Federal Employees and ExService members”, is the quarterly summary of unemployment compensation expenditures and adjustments and the total amount of benefits paid to claimants of each federal and military agency. Unemployment Insurance (UI) Reports Handbook No. 401 requires the report to be submitted electronically to the Employment and Training Administration of the U.S. Department of Labor by the 25th of the month following the close of the quarter. Condition – One of the four quarterly reports was submitted one day late. Cause – Department procedures were not established in fiscal year 2023 to ensure reports are submitted timely. The Department also utilizes a database to identify unemployment compensation paid to Federal Employees and Ex-Service members. Effect – The lack of established policies and procedures resulted in the late submission of the quarterly report. Recommendation – The Department should establish policies and procedures to ensure reports are submitted timely in accordance with UI Reports Handbook. Response and Corrective Action Planned – A policy and procedure has been established for reporting and filing the ETA 191. Included in the procedure is a requirement to submit the report to the Chief Financial Officer or Comptroller for review and approval. Evidence of review and transmittal is documented via email confirmation to the Accountant 3 responsible for preparing the ETA 191. Review and approval of the ETA 191 is required to be completed prior to the reports due date. After transmittal to DOL of the ETA 191; a copy with supporting documentation is made available to the Unemployment Division Administrator. Conclusion – Response accepted.
Employment and Training Administration (ETA) Reports Criteria – The Uniform Guidance, Part 200.303, requires the Department establish and maintain effective internal control over the federal award which provides reasonable assurance the Department is managing the federal award in compliance with federal statutes, regulations and the terms of the federal award. The ETA 9050 report, “Time Lapse of All First Payments Except Workshare”, provides information on the time it takes, states to pay benefits to claimants for the first compensable week of unemployment. The ETA 9052 report, “Nonmonetary Determination Time Lapse Detection”, provides information on the time it takes, states to issue nonmonetary determinations from the date the issues are first detected by the Department. The ETA 9055 report, “Appeals Case Aging”, provides information on the inventory of lower authority and higher authority single claimant appeals cases that have been filed but not decided. Appeals case aging provides information about the number of days from the date an appeal was filed through the end of the month covered by the report. Also included are the average and median ages of the pending single claimant appeals cases. The UI Reports Handbook No. 401 requires the reports to be submitted on the 20th of the month following the month to which the data relates. Condition – Supporting documentation for the monthly reports was not retained. Reports submitted were not reviewed and approved by an independent person for propriety prior to submission for one of 12 months. Cause – Department procedures have not been established to retain supporting documentation for the data fields in the report. In addition, Department procedures have not been established to require documentation the reports were independently reviewed and approved. Effect – The lack of supporting documentation and a documented review of these reports increases the risk for undetected reporting errors or misstatements. Recommendation – The Department should establish policies and procedures to ensure reports are submitted timely and the support for the preparation of the report is retained. The policies established should also ensure the quarterly reports are reviewed and approved by an independent person who is knowledgeable about the program and are submitted by the due date. This independent review should be documented by the reviewer’s signature or initials and date of review prior to submission. Response and Corrective Action Planned – Procedures have been established for transmitting the ET 9050, 9052 and 9055 reports. Included in the procedures where to retain the supporting data file and review of the report by the Division Administrator or Deputy Division Administrator prior to final transmission. The report must be returned with a signature and date prior to submitting the finalized reports to the Department of Labor within the reporting deadline. Conclusion – Response accepted.
Employment and Training Administration (ETA) Reports Criteria – The Uniform Guidance, Part 200.303, requires the Department establish and maintain effective internal control over the federal award which provides reasonable assurance the Department is managing the federal award in compliance with federal statutes, regulations and the terms of the federal award. The ETA 9050 report, “Time Lapse of All First Payments Except Workshare”, provides information on the time it takes, states to pay benefits to claimants for the first compensable week of unemployment. The ETA 9052 report, “Nonmonetary Determination Time Lapse Detection”, provides information on the time it takes, states to issue nonmonetary determinations from the date the issues are first detected by the Department. The ETA 9055 report, “Appeals Case Aging”, provides information on the inventory of lower authority and higher authority single claimant appeals cases that have been filed but not decided. Appeals case aging provides information about the number of days from the date an appeal was filed through the end of the month covered by the report. Also included are the average and median ages of the pending single claimant appeals cases. The UI Reports Handbook No. 401 requires the reports to be submitted on the 20th of the month following the month to which the data relates. Condition – Supporting documentation for the monthly reports was not retained. Reports submitted were not reviewed and approved by an independent person for propriety prior to submission for one of 12 months. Cause – Department procedures have not been established to retain supporting documentation for the data fields in the report. In addition, Department procedures have not been established to require documentation the reports were independently reviewed and approved. Effect – The lack of supporting documentation and a documented review of these reports increases the risk for undetected reporting errors or misstatements. Recommendation – The Department should establish policies and procedures to ensure reports are submitted timely and the support for the preparation of the report is retained. The policies established should also ensure the quarterly reports are reviewed and approved by an independent person who is knowledgeable about the program and are submitted by the due date. This independent review should be documented by the reviewer’s signature or initials and date of review prior to submission. Response and Corrective Action Planned – Procedures have been established for transmitting the ET 9050, 9052 and 9055 reports. Included in the procedures where to retain the supporting data file and review of the report by the Division Administrator or Deputy Division Administrator prior to final transmission. The report must be returned with a signature and date prior to submitting the finalized reports to the Department of Labor within the reporting deadline. Conclusion – Response accepted.
Employment and Training Administration (ETA) Reports Criteria – The Uniform Guidance, Part 200.303, requires the Department establish and maintain effective internal control over the federal award which provides reasonable assurance the Department is managing the federal award in compliance with federal statutes, regulation and the terms of the federal award. The ETA 2112 report, “UI Financial Transaction Summary”, is a monthly summary of transactions in a state unemployment fund which consists of the 8405 Clearing Account Unemployment Trust Fund (UTF) Account, and Benefit Payment Account. UI Reports Handbook No. 401 requires the report to be submitted to the Employment and Training Administration of the U.S. Department of Labor monthly, by the first day of the second month following the month of reference. Condition – Short Time Compensation (STC) is an alternative to layoffs for employers experiencing a reduction in available work, STC allows employers to reduce the hours of work rather than laying off some employees. The Federal Employee Compensation Act (FECA) provides workers' compensation coverage for employment-related injuries and occupational diseases. The Department did not report Short Time Compensation and FECA benefit payments on the transaction summaries throughout the fiscal year. There were unexplained variances between the prior year ending balance and current year beginning balances. The Department’s UC Benefit payment account did not include FECA benefit draws and Unemployment Compensation for Ex-Servicemembers (UCX) benefit draws throughout the fiscal year. In addition, the January 2023 ETA 8405 Clearing Account’s prior months balance is understated by $11,825,764 and the March 2023 ETA 2112 Total Iowa Benefits was understated by $8,774,147. The ETA 8405 Clearing Account was established for all employer contributions and payments in lieu of contributions to be deposited into and transferred immediately upon availability to the Unemployment Trust Fund. The ETA 8405 Report totals the ending balance of each day in the month, when manually entering the beginning daily ledger balance for January 2023, the Department entered the incorrect prior month ending balance resulting in the ledger balance amount being understated. The Department indicated the ETA 2112 reports submitted during fiscal year 2023 were reviewed and approved; however, this review was not documented for 2 of 12 months, and 6 of 12 monthly reports were submitted between 2 and 27 days late. Cause – The Department utilizes an external accounting system for the processing of Unemployment Insurance (UI) benefit payments to claimants. The benefit claimant system processes the claims, then communicates the information to the State’s accounting system, the Integrated Information for Iowa (I/3) system, for payment. The benefit claimant system identifies benefit payments by State Unemployment and Federal Unemployment programs, including Federal Unemployment claims covered under various Acts enacted during the pandemic.The Department has developed a process to reconcile benefit payments by type and in total between the Department’s benefit claimant system and I/3 daily to ensure benefit payments are accurately recorded for financial reporting purposes. Although the Department performed the reconciliations, variances were identified and remained uncorrected at the time of reporting for the ETA 2112 reports. In addition, Department procedures have not been established to ensure reports are submitted timely and Department procedures have not been established to require the independent review and approval of the ETA 2112 reports be documented and retained. Effect – Incorrect supporting documentation, such as the ETA 8405 report and accounting ledgers, resulted in undetected reporting errors and misstatements and the lack of a documented review of these reports resulted in the errors being undetected and increases the risk for further undetected reporting errors or misstatements. In addition, the lack of established policies and procedures resulted in the late submission of six monthly reports. Recommendation – The Department should follow policies and procedures already established to ensure variances in the reconciliation process are investigated and corrected immediately. If errors are noted on the ETA 2112 reports after initial submission, the Department should amend the completed report to agree with the corrected supporting documentation. The Department should establish policies and procedures to ensure the monthly reports are reviewed and approved by an independent person who is knowledgeable about the program. This independent review should be documented by the reviewer’s signature or initials and date of review prior to submission. In addition, The Department should establish policies and procedures to ensure reports are submitted timely. Response and Corrective Action Planned – The Department will review with staff and retrain as necessary to follow existing policies and procedures to ensure variances identified during the reconciliation process are corrected. The Department is also modifying policies and procedures related to the ETA 2112 report. In addition, management will review ETA 2112 reports for accuracy and to identify if an amended report should be filed. Conclusion – Response accepted.
Employment and Training Administration (ETA) Reports Criteria – The Uniform Guidance, Part 200.303, requires the Department establish and maintain effective internal control over the federal award which provides reasonable assurance the Department is managing the federal award in compliance with federal statutes, regulation and the terms of the federal award. The ETA 2112 report, “UI Financial Transaction Summary”, is a monthly summary of transactions in a state unemployment fund which consists of the 8405 Clearing Account Unemployment Trust Fund (UTF) Account, and Benefit Payment Account. UI Reports Handbook No. 401 requires the report to be submitted to the Employment and Training Administration of the U.S. Department of Labor monthly, by the first day of the second month following the month of reference. Condition – Short Time Compensation (STC) is an alternative to layoffs for employers experiencing a reduction in available work, STC allows employers to reduce the hours of work rather than laying off some employees. The Federal Employee Compensation Act (FECA) provides workers' compensation coverage for employment-related injuries and occupational diseases. The Department did not report Short Time Compensation and FECA benefit payments on the transaction summaries throughout the fiscal year. There were unexplained variances between the prior year ending balance and current year beginning balances. The Department’s UC Benefit payment account did not include FECA benefit draws and Unemployment Compensation for Ex-Servicemembers (UCX) benefit draws throughout the fiscal year. In addition, the January 2023 ETA 8405 Clearing Account’s prior months balance is understated by $11,825,764 and the March 2023 ETA 2112 Total Iowa Benefits was understated by $8,774,147. The ETA 8405 Clearing Account was established for all employer contributions and payments in lieu of contributions to be deposited into and transferred immediately upon availability to the Unemployment Trust Fund. The ETA 8405 Report totals the ending balance of each day in the month, when manually entering the beginning daily ledger balance for January 2023, the Department entered the incorrect prior month ending balance resulting in the ledger balance amount being understated. The Department indicated the ETA 2112 reports submitted during fiscal year 2023 were reviewed and approved; however, this review was not documented for 2 of 12 months, and 6 of 12 monthly reports were submitted between 2 and 27 days late. Cause – The Department utilizes an external accounting system for the processing of Unemployment Insurance (UI) benefit payments to claimants. The benefit claimant system processes the claims, then communicates the information to the State’s accounting system, the Integrated Information for Iowa (I/3) system, for payment. The benefit claimant system identifies benefit payments by State Unemployment and Federal Unemployment programs, including Federal Unemployment claims covered under various Acts enacted during the pandemic.The Department has developed a process to reconcile benefit payments by type and in total between the Department’s benefit claimant system and I/3 daily to ensure benefit payments are accurately recorded for financial reporting purposes. Although the Department performed the reconciliations, variances were identified and remained uncorrected at the time of reporting for the ETA 2112 reports. In addition, Department procedures have not been established to ensure reports are submitted timely and Department procedures have not been established to require the independent review and approval of the ETA 2112 reports be documented and retained. Effect – Incorrect supporting documentation, such as the ETA 8405 report and accounting ledgers, resulted in undetected reporting errors and misstatements and the lack of a documented review of these reports resulted in the errors being undetected and increases the risk for further undetected reporting errors or misstatements. In addition, the lack of established policies and procedures resulted in the late submission of six monthly reports. Recommendation – The Department should follow policies and procedures already established to ensure variances in the reconciliation process are investigated and corrected immediately. If errors are noted on the ETA 2112 reports after initial submission, the Department should amend the completed report to agree with the corrected supporting documentation. The Department should establish policies and procedures to ensure the monthly reports are reviewed and approved by an independent person who is knowledgeable about the program. This independent review should be documented by the reviewer’s signature or initials and date of review prior to submission. In addition, The Department should establish policies and procedures to ensure reports are submitted timely. Response and Corrective Action Planned – The Department will review with staff and retrain as necessary to follow existing policies and procedures to ensure variances identified during the reconciliation process are corrected. The Department is also modifying policies and procedures related to the ETA 2112 report. In addition, management will review ETA 2112 reports for accuracy and to identify if an amended report should be filed. Conclusion – Response accepted.
Employment and Training Administration (ETA) Reports Criteria – The Uniform Guidance, Part 200.303, requires the Department establish and maintain effective internal control over the federal award which provides reasonable assurance the Department is managing the federal award in compliance with federal statutes, regulation and the terms of the federal award. The ETA 2208A report, “Quarterly UI Contingency Report”, provides information on the number of staff years worked and paid for various UI program categories, and provides the basis for determining above-base entitlements. UI Reports Handbook No. 336 requires the report to be submitted electronically for each calendar quarter to the Employment and Training Administration of the U.S. Department of Labor within 30 days after the end of the reporting quarter to which it relates. Condition – Three of four quarterly reports were submitted one day late. In addition, the Department indicated the reports were reviewed and approved; however, this review was not documented for four out of four quarterly reports. Cause – Department procedures have not been established to ensure reports are submitted timely and require the independent review and approval of the reports be documented. Effect – The lack of a documented review of these reports increases the risk for undetected reporting errors or misstatements. In addition, the lack of established policies and procedures resulted in the late submission of the three reports. Recommendation – The Department should establish policies and procedures to ensure reports are submitted timely in accordance with UI Reports Handbook. The policies established should also ensure the quarterly reports are reviewed and approved by an independent person who is knowledgeable about the program. This independent review should be documented by the reviewer’s signature or initials and date of review prior to submission.Response and Corrective Action Planned – The Department established policies and procedures to ensure evidence of an independent review is documented by the reviewer and date of the review prior to submission, within the reporting deadline. The ETA 2208A report will be reviewed by the Chief Financial Officer or Comptroller and will be evidenced by email approval prior to any future ETA 2208A submissions to the ETA. The Department began this process September 2023. Conclusion – Response accepted.
Employment and Training Administration (ETA) Reports Criteria – The Uniform Guidance, Part 200.303, requires the Department establish and maintain effective internal control over the federal award which provides reasonable assurance the Department is managing the federal award in compliance with federal statutes, regulation and the terms of the federal award. The ETA 2208A report, “Quarterly UI Contingency Report”, provides information on the number of staff years worked and paid for various UI program categories, and provides the basis for determining above-base entitlements. UI Reports Handbook No. 336 requires the report to be submitted electronically for each calendar quarter to the Employment and Training Administration of the U.S. Department of Labor within 30 days after the end of the reporting quarter to which it relates. Condition – Three of four quarterly reports were submitted one day late. In addition, the Department indicated the reports were reviewed and approved; however, this review was not documented for four out of four quarterly reports. Cause – Department procedures have not been established to ensure reports are submitted timely and require the independent review and approval of the reports be documented. Effect – The lack of a documented review of these reports increases the risk for undetected reporting errors or misstatements. In addition, the lack of established policies and procedures resulted in the late submission of the three reports. Recommendation – The Department should establish policies and procedures to ensure reports are submitted timely in accordance with UI Reports Handbook. The policies established should also ensure the quarterly reports are reviewed and approved by an independent person who is knowledgeable about the program. This independent review should be documented by the reviewer’s signature or initials and date of review prior to submission.Response and Corrective Action Planned – The Department established policies and procedures to ensure evidence of an independent review is documented by the reviewer and date of the review prior to submission, within the reporting deadline. The ETA 2208A report will be reviewed by the Chief Financial Officer or Comptroller and will be evidenced by email approval prior to any future ETA 2208A submissions to the ETA. The Department began this process September 2023. Conclusion – Response accepted.
Indirect Costs Criteria – The Department negotiates an indirect cost rate with the U.S. Department of Labor in accordance with Title 2 of the Code of Federal Regulations, Part 200 for nonprofit and state/local entities. Indirect costs are expenditures that have been incurred for common or joint objectives and cannot be readily identified with a particular final cost objective. The Department allocates these indirect costs to federal programs using the negotiated indirect cost rates. The Department cannot charge more than the maximum negotiated indirect costs or rates. Condition – The Department exceeded the maximum allowable amount for indirect cost by $117,275. Cause – The Department has not established policies and procedures to ensure the maximum allowable amount is not exceeded. Effect – The cumulative indirect cost for all programs in fiscal year 2023 exceeded the maximum allowable amount. Recommendation – The Department should establish policies and procedures to ensure the maximum allowable amount is not exceeded. Response and Corrective Action Planned – The Department will establish policies to track and control indirect costs so that it doesn’t exceed the maximum allowable to be collected per U.S. Department of Labor approvals and individual federal award limitations. We will work with the Department of Labor to resolve this issue. Conclusion – Response accepted.
Indirect Costs Criteria – The Department negotiates an indirect cost rate with the U.S. Department of Labor in accordance with Title 2 of the Code of Federal Regulations, Part 200 for nonprofit and state/local entities. Indirect costs are expenditures that have been incurred for common or joint objectives and cannot be readily identified with a particular final cost objective. The Department allocates these indirect costs to federal programs using the negotiated indirect cost rates. The Department cannot charge more than the maximum negotiated indirect costs or rates. Condition – The Department exceeded the maximum allowable amount for indirect cost by $117,275. Cause – The Department has not established policies and procedures to ensure the maximum allowable amount is not exceeded. Effect – The cumulative indirect cost for all programs in fiscal year 2023 exceeded the maximum allowable amount. Recommendation – The Department should establish policies and procedures to ensure the maximum allowable amount is not exceeded. Response and Corrective Action Planned – The Department will establish policies to track and control indirect costs so that it doesn’t exceed the maximum allowable to be collected per U.S. Department of Labor approvals and individual federal award limitations. We will work with the Department of Labor to resolve this issue. Conclusion – Response accepted.
Awards to Subrecipients Criteria – During fiscal year 2022, the Governor allocated Coronavirus State and Local Recovery Funds to the Department for Summer Youth Internship Projects to provide internship opportunities in high-demand fields for youth with barriers and/or at risk of not graduating. All projects include recruitment of youth at risk of not graduating and youth from underrepresented communities and/or from low-income households. The primary supported occupations include healthcare, construction-related trades, information technology, advanced manufacturing and energy. The Healthy Childhood Environments: Child Care Challenge project was to create new childcare slots across the State and help communities improve their childcare options and bolster opportunities for Iowans to reenter the workforce. All the projects are designed to address childcare shortages and alleviate local childcare need. The Uniform Guidance, Part 200.332 states, “All pass-through entities must: 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. When some of this information is not available, the pass-through entity must provide the best information available to describe the Federal award and subaward.” Required information includes, in part, subrecipient's unique entity identifier, federal award identification number (FAIN), subaward budget period start and end date, identification of whether the award is research and development (R&D) and the indirect cost rate for the federal award (including if the de minimis rate is charged) per Part 200.414. Condition – For the subawards provided, the Department did not include the subrecipient's unique entity identifier, FAIN, the federal award project description as required to be responsive to the Federal Funding Accountability and Transparency Act (FFATA), identification of whether the award is R&D and the indirect cost rate for the federal award (including if the de minimis rate is charged) per Part 200.414. Cause – The Department has not established policies and procedures to ensure all required information is included in the subaward to the subrecipients. Effect – The information required in the subaward to subrecipients was not included due to the lack of policies and procedures. Recommendation – The Department should establish policies and procedures to ensure all required information is included in the subaward to subrecipients as required by Uniform Guidance, Part 200.332. Response and Corrective Action Planned – Effective August 2023; new sub-awards and pass thru grant agreements have elements specified in the respective agreement as required by Uniform Guidance, Part 200.332. Conclusion – Response accepted.
Activities Allowed and Unallowed Criteria – Title II Part A, Elementary and Secondary Education Act (ESEA) section 2101 (C)(1) and (3) requires each state receiving an allotment to reserve not less than 95 percent to make subgrants to local educational agencies. Of the 95 percent allocated to local educational agencies the state educational agency may reserve not more than 3% for one or more of the activities for principals or other school leaders. According to the ESEA, a paraprofessional is not a school leader. School leaders are defined by ESEA 8101(44) as “a principal, assistant principal, or other individual who is an employee or officer of an elementary school or secondary school, local educational agency, or other entity operating an elementary school or secondary school; and is responsible for the daily instructional leadership and managerial operations in the elementary school or secondary school building”. Section 8101.37 defines paraprofessional as an “educational assistant o instructional assistant”. Condition – Allocations awarded to the State for federal fiscal years (FFY) 2020, 2021, 2022 were active and being spent during state fiscal year ended June 30, 2023. The maximum 3% reservation for principals and school leaders which could have been allocated by the Iowa Department of Education, was approximately $430,000, $455,000 and $455,000 for FY20 through FY22 respectively, totaling approximately $1,340,000. During the year ended June 30, 2023, $1,215,607 was awarded to community colleges and area education agencies for paraeducator programs. For the year ended June 30, 2023 $840,672 was spent on the paraeducator programs. Since paraeducators do not meet the “school leaders” criteria, the costs of the awards are considered unallowable under ESEA section 2101(C)(4) for the 3% reserved from LEA subgrants. Cause – Although procedures have been established to earmark and allocate funds properly, the Department’s final review procedures did not detect the error in the normal course of performing their assigned duties. Effect – The Department improperly allocated funds and had expenditures which were earmarked for school leaders to paraeducator programs, resulting in questioned costs of $840,672. Recommendation – The Department should contact the U.S. Department of Education for resolution. The Department should also follow established procedures to ensure federal funds are earmarked and spent in accordance with federal requirements for allowable purposes. Response and Corrective Action Planned – As stated by the Office of the Auditor of the State, the Iowa Department of Education has established procedures to earmark and allocate funds properly. When the decision was made in 2022 to use Title IIA school leader 3% allocation for paraeducator certification, the Department relied upon internal legal guidance stating the decision was legally permissible. Guidance from the U.S. Department of Education states the other Title IIA state set aside funds may be used for any State activity under ESEA section 2101(c)(4), some of which involve paraprofessionals. However, the allowable uses of other Title IIA state set aside funds are distinct from the allowable uses of Title IIA school leader 3% allocation. At this time, the Department is working to engage and identify appropriate next steps with the U.S. Department of Education. Please note the use of the Title IIA school leader 3% allocation for paraeducator certification concluded at the end of FY23; Title IIA school leader 3% funds were not used for this purpose in FY24 beginning July 1, 2023 under current leadership. To continue to build Department capacity in the administration of funds under ESEA, Department leadership directed ESEA and federal grants management training for the Bureau of Federal Programs and all other relevant Department staff, which will be provided by the Council for Chief State School Officer’s Federal Education Group beginning in April 2024. Additionally, Department leadership directed additional expectations in its spending oversight procedures, including that all program fund managers and accounting budget analysts review and approve all uses in which their funding is involved. Conclusion – Response accepted.
Computer Match – Family Investment Program (FIP) Criteria - The Department operates FIP utilizing federal funds provided for in the Temporary Assistance for Needy Families (TANF) block grant. Title 4-C-39 of the Employees’ Manual provides, in part, “A participant whose needs are included in a FIP grant cannot receive at the same time a grant from any other public assistance program administered by the Department, including foster care and subsidized adoption.” Title 17-F-14 of the Employees’ Manual provides, in part, “A child shall not concurrently receive subsidized adoption maintenance payments and FIP.” However, the Department allows a participant to receive both FIP and foster care or FIP and subsidized adoption for the month the child is removed from the home to enter foster care or for the month the child begins receiving subsidized adoption payments. In addition, although Title 4-C-39 of the Employees’ Manual states a participant cannot receive both FIP and foster care assistance, a Title IV-E program, at the same time, a letter dated February 14, 2014 from the Administration for Children and Families (ACF) stated, “Federal TANF regulations allow for concurrent TANF and Title IV-E benefits only if the situation involves a Foster Care placement with a relative. If the placement is with a non-relative, concurrent payment of benefits is only allowable in limited circumstances.” Condition - A computer match of payment data was performed for cases receiving both FIP and foster care payments during fiscal year 2023. We reviewed 53 cases receiving both FIP and foster care payments during the same month of service. Of the 53 cases reviewed, four children, or 7.55%, received both FIP and foster care payments for an additional one to two months after entering foster care with a non-relative. Although these payments are not in compliance with the Employees’ Manual, it is unclear if they meet the exception allowed by the federal government, as stated in the letter from ACF dated February 14, 2014. A computer match of payment data was performed for cases receiving both FIP and subsidized adoption payments during fiscal year 2023. We reviewed 63 cases receiving both FIP and subsidized adoption payments during the same month of service. Of the 63 cases reviewed, four cases, or 6.3%, improperly received both FIP and subsidized adoption payments for an additional one to two months after entering subsidized adoption. The unallowable FIP payments for these four cases totaled $3,278. Cause – The Department has established policies regarding the payment of both FIP and foster care assistance payments for the same period; however, documentation was not on file to support whether the payment is an exception to the established policy of if the policies were not followed. Although the Department has established policies regarding the payment of both FIP and subsidized adoption payments during the same period, those procedures were not always followed. Effect – The lack of documentation regarding whether a FIP and foster care payment is an exception to the policy may result in the Department not identifying and recouping overpayments. Also, not following the established policies for the payment of FIP and subsidized adoption assistance may result in the Department overpaying either FIP or subsidized adoption assistance. Recommendation – The Department should review its policies and establish procedures pertaining to compliance with federal regulations and establish additional oversight procedures to ensure compliance federal regulations pertaining to identifying concurrent FIP and foster care payments and concurrent FIP and subsidized adoption payments. The Department should review cases identified and determine if recoupment should be performed. Response and Corrective Action Planned – For FIP/Adoption Subsidy – 3 of the cases had errors all completed by the same worker. The worker correctly closed down the case when acting on the alert but neglected to establish the overpayment. The worker will be retrained on when an overpayment is needed. For the FIP/Foster Care – The four workers will be retrained on when to cancel a case, what to look for in the system when an alert is received about a child entering foster care, and when a recoupment is needed. We will also provide a reminder to all Income Maintenance staff providing the policies and procedures for duplicate benefits in these situations. This reminder will be emailed out and also discussed at team staff meetings. Conclusion – Response accepted.
Payroll Distribution Criteria – The Uniform Guidance, Part 200.430(i), states “Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed.” These records must “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.” Also, “Budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards, but may be used for interim accounting purposes, provided that: The system for establishing the estimates produces reasonable approximations of the activity actually performed; significant changes in the corresponding work activity (as defined by the non-Federal entity’s written policies) are identified and entered into the records in a timely manner. Short term (such as one or two months) fluctuation between workload categories need not be considered as long as the distribution of salaries and wages is reasonable over the long term; and the non-Federal entity’s system of internal controls includes processes to review after-the-fact interim charges made to a Federal award based on budget estimates. All necessary adjustments must be made such that the final amount charged to the Federal award is accurate, allowable, and properly allocated.”Condition – The Department uses budget estimates to establish interim rates to allocate payroll costs to be used for Department budgeting and to provide employees with an estimate of time which is expected of them for their assigned programs. The Department has informed employees they are to report the actual time worked on each program code associated with a specific Federal, non-Federal, indirect or cost allocation program. Although the employees reported their actual time on assigned programs in the state time reporting system, corrective disbursement entries were not consistently prepared in the state accounting system to adjust the estimated time by program to the actual time as reported in the time reporting system. Cause – The Department transitioned to a new payroll and time tracking system. A feature of the system was to allow for time entries to directly charge the respective grant or function within the accounting ledger. This feature was not consistently implemented into the payroll and time tracking system, as a result the Department established policies and procedures to require actual hours worked on program codes be assigned to their respective program codes in the state accounting system. Due to staff turnover, corrective entries were not performed for part of the fiscal year. Effect – Payroll costs could be charged to the incorrect program code resulting in allocating costs incorrectly to all programs, including federal programs. The effect on individual programs is undeterminable. Recommendation – The Department should review time reporting for all pay periods and determine if corrective disbursement entries are needed for all programs, including the federal programs. In addition, the Department should implement policies and procedures to ensure proper distribution of salaries and wages and these policies and procedures should be followed. Response and Corrective Action Planned – The Department has implemented a payroll policy and procedure, that requires staff to enter a work reporting code for time worked and addresses timelines in which correcting entries must be completed. The Department will review all pay periods during the time frame to determine if corrective disbursement entries need to be made to properly allocate actual time reported to their respective program codes. The Department began the process in October 2023. Conclusion – Response accepted.
Payroll Distribution Criteria – The Uniform Guidance, Part 200.430(i), states “Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed.” These records must “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.” Also, “Budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards, but may be used for interim accounting purposes, provided that: The system for establishing the estimates produces reasonable approximations of the activity actually performed; significant changes in the corresponding work activity (as defined by the non-Federal entity’s written policies) are identified and entered into the records in a timely manner. Short term (such as one or two months) fluctuation between workload categories need not be considered as long as the distribution of salaries and wages is reasonable over the long term; and the non-Federal entity’s system of internal controls includes processes to review after-the-fact interim charges made to a Federal award based on budget estimates. All necessary adjustments must be made such that the final amount charged to the Federal award is accurate, allowable, and properly allocated.”Condition – The Department uses budget estimates to establish interim rates to allocate payroll costs to be used for Department budgeting and to provide employees with an estimate of time which is expected of them for their assigned programs. The Department has informed employees they are to report the actual time worked on each program code associated with a specific Federal, non-Federal, indirect or cost allocation program. Although the employees reported their actual time on assigned programs in the state time reporting system, corrective disbursement entries were not consistently prepared in the state accounting system to adjust the estimated time by program to the actual time as reported in the time reporting system. Cause – The Department transitioned to a new payroll and time tracking system. A feature of the system was to allow for time entries to directly charge the respective grant or function within the accounting ledger. This feature was not consistently implemented into the payroll and time tracking system, as a result the Department established policies and procedures to require actual hours worked on program codes be assigned to their respective program codes in the state accounting system. Due to staff turnover, corrective entries were not performed for part of the fiscal year. Effect – Payroll costs could be charged to the incorrect program code resulting in allocating costs incorrectly to all programs, including federal programs. The effect on individual programs is undeterminable. Recommendation – The Department should review time reporting for all pay periods and determine if corrective disbursement entries are needed for all programs, including the federal programs. In addition, the Department should implement policies and procedures to ensure proper distribution of salaries and wages and these policies and procedures should be followed. Response and Corrective Action Planned – The Department has implemented a payroll policy and procedure, that requires staff to enter a work reporting code for time worked and addresses timelines in which correcting entries must be completed. The Department will review all pay periods during the time frame to determine if corrective disbursement entries need to be made to properly allocate actual time reported to their respective program codes. The Department began the process in October 2023. Conclusion – Response accepted.
Allocable Costs Criteria – The Uniform Guidance, Part 200.405(a), states “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: is incurred specifically for the Federal award; 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 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.” Uniform Guidance, Part 200.405(a) states, “Direct cost allocation principles: 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 the costs may be allocated or transferred to benefitted projects on any reasonable documented basis.”Condition – The Department has established program codes to allocate costs to both Federal and non-Federal programs. The allocation of the expenditures charged to these program codes is based on a combination of square footage and actual time reported on Federal and non-Federal programs. The rates were not updated quarterly after December 14, 2021, for fiscal year ending June 30, 2023. Department policies require rates to be updated quarterly. Cause – The Department transitioned to a new payroll system and policies and procedures to identify time reporting requirements for staff and report capabilities were not in place to properly allocate costs. In addition, due to staff turnover, staff were not available to review rates and compare allocated costs to time entries. Effect – Allocable costs could be charged to the incorrect program code, resulting in allocating costs incorrectly to all programs, including federal programs. The effect on individual programs is undeterminable. Recommendation – The Department should follow policies and procedures and review the allocable rates used during the period and determine if corrective disbursement entries are needed for all programs, including federal programs. Response and Corrective Action Planned – The Department will review allocable rates during the time frame to determine if corrective disbursement entries are needed to their respective program codes. The Department began the process in October 2023. The Department will also revise, and update policies and procedures related to allocable costs based on time entries. Conclusion – Response accepted.
Allocable Costs Criteria – The Uniform Guidance, Part 200.405(a), states “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: is incurred specifically for the Federal award; 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 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.” Uniform Guidance, Part 200.405(a) states, “Direct cost allocation principles: 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 the costs may be allocated or transferred to benefitted projects on any reasonable documented basis.”Condition – The Department has established program codes to allocate costs to both Federal and non-Federal programs. The allocation of the expenditures charged to these program codes is based on a combination of square footage and actual time reported on Federal and non-Federal programs. The rates were not updated quarterly after December 14, 2021, for fiscal year ending June 30, 2023. Department policies require rates to be updated quarterly. Cause – The Department transitioned to a new payroll system and policies and procedures to identify time reporting requirements for staff and report capabilities were not in place to properly allocate costs. In addition, due to staff turnover, staff were not available to review rates and compare allocated costs to time entries. Effect – Allocable costs could be charged to the incorrect program code, resulting in allocating costs incorrectly to all programs, including federal programs. The effect on individual programs is undeterminable. Recommendation – The Department should follow policies and procedures and review the allocable rates used during the period and determine if corrective disbursement entries are needed for all programs, including federal programs. Response and Corrective Action Planned – The Department will review allocable rates during the time frame to determine if corrective disbursement entries are needed to their respective program codes. The Department began the process in October 2023. The Department will also revise, and update policies and procedures related to allocable costs based on time entries. Conclusion – Response accepted.
IRS 940 Match Criteria – Uniform Guidance Compliance Supplement states, “States are required to annually certify for each taxpayer the total amount of contributions required to be paid under state law for the calendar year and the amounts and dates of such payments in order for the taxpayer to be allowed the credit against the FUTA (Federal Unemployment Tax Act) tax (26 CFR sections 31.3302(a)-3(a)). In order to accomplish this certification, states annually perform a match of employer tax payments with credit claimed for these payments on the employer’s IRS 940 FUTA tax form.” The Internal Revenue Service (IRS) sends the Department a secure file typically in October of each year following the prior calendar year. Taxes received for calendar year ending December 31, 2021, were received in October 2022. IWD must certify and respond to each Federal Employer Identification Number even if there is no discrepancy. The Department is also required to send back to the IRS the Federal Non-Filers file. This file lists all employers that filed with the state but did not file an IRS 940 FUTA tax form. Both the Certification file and the Non-Filers file must be sent back to the Internal Revenue Service by January 31, 2023. The Certification file is used to assign discrepancies to field auditors to determine the disposition of the discrepancy identified. The Department’s policy is designed to review each individual case within 180 days. Condition – The Department had 27 of 58 discrepancies from the secure file received in October 2022 resolved this was past the 180-day period to resolve. For the file received in October 2021, 17 of 58 cases were not resolved at the time of testing and the date was past the 180-day period to resolve. Cause – Due to a massive influx of claims beginning March of 2020 through December 2021, staff members from all bureaus, including investigations and field audit, were directed to assist with pandemic related claims. This included claims processing, answering phone calls on the customer service line and conducting two party fact-findings, and assisting in completing employer registrations. Because investigations staff were required to work these areas, normal investigations work, including monitoring the IRS 940 match report, was delayed. Effect – The Department did not resolve discrepancies in a timely manner. Recommendation – The Department should follow the established policies and procedures to ensure discrepancies are followed up and resolved within 180 days. Response and Corrective Action Planned – The Department will follow policies and procedures in place for fiscal year 2023, to certify the amounts contributed annually and ensure discrepancies are followed up within 180 days. Conclusion: Response accepted.
IRS 940 Match Criteria – Uniform Guidance Compliance Supplement states, “States are required to annually certify for each taxpayer the total amount of contributions required to be paid under state law for the calendar year and the amounts and dates of such payments in order for the taxpayer to be allowed the credit against the FUTA (Federal Unemployment Tax Act) tax (26 CFR sections 31.3302(a)-3(a)). In order to accomplish this certification, states annually perform a match of employer tax payments with credit claimed for these payments on the employer’s IRS 940 FUTA tax form.” The Internal Revenue Service (IRS) sends the Department a secure file typically in October of each year following the prior calendar year. Taxes received for calendar year ending December 31, 2021, were received in October 2022. IWD must certify and respond to each Federal Employer Identification Number even if there is no discrepancy. The Department is also required to send back to the IRS the Federal Non-Filers file. This file lists all employers that filed with the state but did not file an IRS 940 FUTA tax form. Both the Certification file and the Non-Filers file must be sent back to the Internal Revenue Service by January 31, 2023. The Certification file is used to assign discrepancies to field auditors to determine the disposition of the discrepancy identified. The Department’s policy is designed to review each individual case within 180 days. Condition – The Department had 27 of 58 discrepancies from the secure file received in October 2022 resolved this was past the 180-day period to resolve. For the file received in October 2021, 17 of 58 cases were not resolved at the time of testing and the date was past the 180-day period to resolve. Cause – Due to a massive influx of claims beginning March of 2020 through December 2021, staff members from all bureaus, including investigations and field audit, were directed to assist with pandemic related claims. This included claims processing, answering phone calls on the customer service line and conducting two party fact-findings, and assisting in completing employer registrations. Because investigations staff were required to work these areas, normal investigations work, including monitoring the IRS 940 match report, was delayed. Effect – The Department did not resolve discrepancies in a timely manner. Recommendation – The Department should follow the established policies and procedures to ensure discrepancies are followed up and resolved within 180 days. Response and Corrective Action Planned – The Department will follow policies and procedures in place for fiscal year 2023, to certify the amounts contributed annually and ensure discrepancies are followed up within 180 days. Conclusion: Response accepted.
Cash Management Improvement Act Criteria – Effective cash management procedures provide for minimizing the amount of time between the drawdown/request for federal funds and the disbursement of those funds by the Department. Effective cash management also minimizes the amount of state and other federal funds used to supplant programs until federal funds are received. Generally, a maximum of three days is considered acceptable between the receipt of federal funds and the disbursement of those funds. Condition – A review of the Department’s records identified cash balances averaged approximately $25.7 million and were greater than a significant amount of approximately $9.7 million for the fiscal year. Cause – Although procedures have been established to draw federal funds only in amounts sufficient to cover current needs, the Department did not review or update procedures to account for federal draws associated with pandemic related administrative programs and unemployment benefits. Effect – Failure to follow procedures resulted in Department employees not detecting the error in the normal course of performing their assigned duties. Recommendation – The Department should follow established procedures to ensure federal funds are drawn only in amounts sufficient to cover current needs and are disbursed in a timely manner without carrying excessive daily balances. Response and Corrective Action Planned – The Department implemented a revised cash management policy for federal programs. Included in the policy and procedure are review of ledger activity, instances in which federal programs reflect excess cash on hand, immediate review of the programs revenues and expenditures is performed. In addition, federal funds drawn that exceed defined thresholds require additional approval from the Accounting and Finance Bureau Chiefs and or the Department’s Chief Financial Officer. Conclusion – Response accepted.
Cash Management Improvement Act Criteria – Effective cash management procedures provide for minimizing the amount of time between the drawdown/request for federal funds and the disbursement of those funds by the Department. Effective cash management also minimizes the amount of state and other federal funds used to supplant programs until federal funds are received. Generally, a maximum of three days is considered acceptable between the receipt of federal funds and the disbursement of those funds. Condition – A review of the Department’s records identified cash balances averaged approximately $25.7 million and were greater than a significant amount of approximately $9.7 million for the fiscal year. Cause – Although procedures have been established to draw federal funds only in amounts sufficient to cover current needs, the Department did not review or update procedures to account for federal draws associated with pandemic related administrative programs and unemployment benefits. Effect – Failure to follow procedures resulted in Department employees not detecting the error in the normal course of performing their assigned duties. Recommendation – The Department should follow established procedures to ensure federal funds are drawn only in amounts sufficient to cover current needs and are disbursed in a timely manner without carrying excessive daily balances. Response and Corrective Action Planned – The Department implemented a revised cash management policy for federal programs. Included in the policy and procedure are review of ledger activity, instances in which federal programs reflect excess cash on hand, immediate review of the programs revenues and expenditures is performed. In addition, federal funds drawn that exceed defined thresholds require additional approval from the Accounting and Finance Bureau Chiefs and or the Department’s Chief Financial Officer. Conclusion – Response accepted.
Employment and Training Administration (ETA) Reports Criteria – The Uniform Guidance, Part 200.303, requires the Department establish and maintain effective internal control over the federal award which provides reasonable assurance the Department is managing the federal award in compliance with federal statutes, regulations and the terms of the federal award. The ETA 191 report, “Statement of Expenditures and Financial Adjustments of Federal Funds for Unemployment Compensation for Federal Employees and ExService members”, is the quarterly summary of unemployment compensation expenditures and adjustments and the total amount of benefits paid to claimants of each federal and military agency. Unemployment Insurance (UI) Reports Handbook No. 401 requires the report to be submitted electronically to the Employment and Training Administration of the U.S. Department of Labor by the 25th of the month following the close of the quarter. Condition – One of the four quarterly reports was submitted one day late. Cause – Department procedures were not established in fiscal year 2023 to ensure reports are submitted timely. The Department also utilizes a database to identify unemployment compensation paid to Federal Employees and Ex-Service members. Effect – The lack of established policies and procedures resulted in the late submission of the quarterly report. Recommendation – The Department should establish policies and procedures to ensure reports are submitted timely in accordance with UI Reports Handbook. Response and Corrective Action Planned – A policy and procedure has been established for reporting and filing the ETA 191. Included in the procedure is a requirement to submit the report to the Chief Financial Officer or Comptroller for review and approval. Evidence of review and transmittal is documented via email confirmation to the Accountant 3 responsible for preparing the ETA 191. Review and approval of the ETA 191 is required to be completed prior to the reports due date. After transmittal to DOL of the ETA 191; a copy with supporting documentation is made available to the Unemployment Division Administrator. Conclusion – Response accepted.
Employment and Training Administration (ETA) Reports Criteria – The Uniform Guidance, Part 200.303, requires the Department establish and maintain effective internal control over the federal award which provides reasonable assurance the Department is managing the federal award in compliance with federal statutes, regulations and the terms of the federal award. The ETA 191 report, “Statement of Expenditures and Financial Adjustments of Federal Funds for Unemployment Compensation for Federal Employees and ExService members”, is the quarterly summary of unemployment compensation expenditures and adjustments and the total amount of benefits paid to claimants of each federal and military agency. Unemployment Insurance (UI) Reports Handbook No. 401 requires the report to be submitted electronically to the Employment and Training Administration of the U.S. Department of Labor by the 25th of the month following the close of the quarter. Condition – One of the four quarterly reports was submitted one day late. Cause – Department procedures were not established in fiscal year 2023 to ensure reports are submitted timely. The Department also utilizes a database to identify unemployment compensation paid to Federal Employees and Ex-Service members. Effect – The lack of established policies and procedures resulted in the late submission of the quarterly report. Recommendation – The Department should establish policies and procedures to ensure reports are submitted timely in accordance with UI Reports Handbook. Response and Corrective Action Planned – A policy and procedure has been established for reporting and filing the ETA 191. Included in the procedure is a requirement to submit the report to the Chief Financial Officer or Comptroller for review and approval. Evidence of review and transmittal is documented via email confirmation to the Accountant 3 responsible for preparing the ETA 191. Review and approval of the ETA 191 is required to be completed prior to the reports due date. After transmittal to DOL of the ETA 191; a copy with supporting documentation is made available to the Unemployment Division Administrator. Conclusion – Response accepted.
Employment and Training Administration (ETA) Reports Criteria – The Uniform Guidance, Part 200.303, requires the Department establish and maintain effective internal control over the federal award which provides reasonable assurance the Department is managing the federal award in compliance with federal statutes, regulations and the terms of the federal award. The ETA 9050 report, “Time Lapse of All First Payments Except Workshare”, provides information on the time it takes, states to pay benefits to claimants for the first compensable week of unemployment. The ETA 9052 report, “Nonmonetary Determination Time Lapse Detection”, provides information on the time it takes, states to issue nonmonetary determinations from the date the issues are first detected by the Department. The ETA 9055 report, “Appeals Case Aging”, provides information on the inventory of lower authority and higher authority single claimant appeals cases that have been filed but not decided. Appeals case aging provides information about the number of days from the date an appeal was filed through the end of the month covered by the report. Also included are the average and median ages of the pending single claimant appeals cases. The UI Reports Handbook No. 401 requires the reports to be submitted on the 20th of the month following the month to which the data relates. Condition – Supporting documentation for the monthly reports was not retained. Reports submitted were not reviewed and approved by an independent person for propriety prior to submission for one of 12 months. Cause – Department procedures have not been established to retain supporting documentation for the data fields in the report. In addition, Department procedures have not been established to require documentation the reports were independently reviewed and approved. Effect – The lack of supporting documentation and a documented review of these reports increases the risk for undetected reporting errors or misstatements. Recommendation – The Department should establish policies and procedures to ensure reports are submitted timely and the support for the preparation of the report is retained. The policies established should also ensure the quarterly reports are reviewed and approved by an independent person who is knowledgeable about the program and are submitted by the due date. This independent review should be documented by the reviewer’s signature or initials and date of review prior to submission. Response and Corrective Action Planned – Procedures have been established for transmitting the ET 9050, 9052 and 9055 reports. Included in the procedures where to retain the supporting data file and review of the report by the Division Administrator or Deputy Division Administrator prior to final transmission. The report must be returned with a signature and date prior to submitting the finalized reports to the Department of Labor within the reporting deadline. Conclusion – Response accepted.
Employment and Training Administration (ETA) Reports Criteria – The Uniform Guidance, Part 200.303, requires the Department establish and maintain effective internal control over the federal award which provides reasonable assurance the Department is managing the federal award in compliance with federal statutes, regulations and the terms of the federal award. The ETA 9050 report, “Time Lapse of All First Payments Except Workshare”, provides information on the time it takes, states to pay benefits to claimants for the first compensable week of unemployment. The ETA 9052 report, “Nonmonetary Determination Time Lapse Detection”, provides information on the time it takes, states to issue nonmonetary determinations from the date the issues are first detected by the Department. The ETA 9055 report, “Appeals Case Aging”, provides information on the inventory of lower authority and higher authority single claimant appeals cases that have been filed but not decided. Appeals case aging provides information about the number of days from the date an appeal was filed through the end of the month covered by the report. Also included are the average and median ages of the pending single claimant appeals cases. The UI Reports Handbook No. 401 requires the reports to be submitted on the 20th of the month following the month to which the data relates. Condition – Supporting documentation for the monthly reports was not retained. Reports submitted were not reviewed and approved by an independent person for propriety prior to submission for one of 12 months. Cause – Department procedures have not been established to retain supporting documentation for the data fields in the report. In addition, Department procedures have not been established to require documentation the reports were independently reviewed and approved. Effect – The lack of supporting documentation and a documented review of these reports increases the risk for undetected reporting errors or misstatements. Recommendation – The Department should establish policies and procedures to ensure reports are submitted timely and the support for the preparation of the report is retained. The policies established should also ensure the quarterly reports are reviewed and approved by an independent person who is knowledgeable about the program and are submitted by the due date. This independent review should be documented by the reviewer’s signature or initials and date of review prior to submission. Response and Corrective Action Planned – Procedures have been established for transmitting the ET 9050, 9052 and 9055 reports. Included in the procedures where to retain the supporting data file and review of the report by the Division Administrator or Deputy Division Administrator prior to final transmission. The report must be returned with a signature and date prior to submitting the finalized reports to the Department of Labor within the reporting deadline. Conclusion – Response accepted.
Employment and Training Administration (ETA) Reports Criteria – The Uniform Guidance, Part 200.303, requires the Department establish and maintain effective internal control over the federal award which provides reasonable assurance the Department is managing the federal award in compliance with federal statutes, regulation and the terms of the federal award. The ETA 2112 report, “UI Financial Transaction Summary”, is a monthly summary of transactions in a state unemployment fund which consists of the 8405 Clearing Account Unemployment Trust Fund (UTF) Account, and Benefit Payment Account. UI Reports Handbook No. 401 requires the report to be submitted to the Employment and Training Administration of the U.S. Department of Labor monthly, by the first day of the second month following the month of reference. Condition – Short Time Compensation (STC) is an alternative to layoffs for employers experiencing a reduction in available work, STC allows employers to reduce the hours of work rather than laying off some employees. The Federal Employee Compensation Act (FECA) provides workers' compensation coverage for employment-related injuries and occupational diseases. The Department did not report Short Time Compensation and FECA benefit payments on the transaction summaries throughout the fiscal year. There were unexplained variances between the prior year ending balance and current year beginning balances. The Department’s UC Benefit payment account did not include FECA benefit draws and Unemployment Compensation for Ex-Servicemembers (UCX) benefit draws throughout the fiscal year. In addition, the January 2023 ETA 8405 Clearing Account’s prior months balance is understated by $11,825,764 and the March 2023 ETA 2112 Total Iowa Benefits was understated by $8,774,147. The ETA 8405 Clearing Account was established for all employer contributions and payments in lieu of contributions to be deposited into and transferred immediately upon availability to the Unemployment Trust Fund. The ETA 8405 Report totals the ending balance of each day in the month, when manually entering the beginning daily ledger balance for January 2023, the Department entered the incorrect prior month ending balance resulting in the ledger balance amount being understated. The Department indicated the ETA 2112 reports submitted during fiscal year 2023 were reviewed and approved; however, this review was not documented for 2 of 12 months, and 6 of 12 monthly reports were submitted between 2 and 27 days late. Cause – The Department utilizes an external accounting system for the processing of Unemployment Insurance (UI) benefit payments to claimants. The benefit claimant system processes the claims, then communicates the information to the State’s accounting system, the Integrated Information for Iowa (I/3) system, for payment. The benefit claimant system identifies benefit payments by State Unemployment and Federal Unemployment programs, including Federal Unemployment claims covered under various Acts enacted during the pandemic.The Department has developed a process to reconcile benefit payments by type and in total between the Department’s benefit claimant system and I/3 daily to ensure benefit payments are accurately recorded for financial reporting purposes. Although the Department performed the reconciliations, variances were identified and remained uncorrected at the time of reporting for the ETA 2112 reports. In addition, Department procedures have not been established to ensure reports are submitted timely and Department procedures have not been established to require the independent review and approval of the ETA 2112 reports be documented and retained. Effect – Incorrect supporting documentation, such as the ETA 8405 report and accounting ledgers, resulted in undetected reporting errors and misstatements and the lack of a documented review of these reports resulted in the errors being undetected and increases the risk for further undetected reporting errors or misstatements. In addition, the lack of established policies and procedures resulted in the late submission of six monthly reports. Recommendation – The Department should follow policies and procedures already established to ensure variances in the reconciliation process are investigated and corrected immediately. If errors are noted on the ETA 2112 reports after initial submission, the Department should amend the completed report to agree with the corrected supporting documentation. The Department should establish policies and procedures to ensure the monthly reports are reviewed and approved by an independent person who is knowledgeable about the program. This independent review should be documented by the reviewer’s signature or initials and date of review prior to submission. In addition, The Department should establish policies and procedures to ensure reports are submitted timely. Response and Corrective Action Planned – The Department will review with staff and retrain as necessary to follow existing policies and procedures to ensure variances identified during the reconciliation process are corrected. The Department is also modifying policies and procedures related to the ETA 2112 report. In addition, management will review ETA 2112 reports for accuracy and to identify if an amended report should be filed. Conclusion – Response accepted.
Employment and Training Administration (ETA) Reports Criteria – The Uniform Guidance, Part 200.303, requires the Department establish and maintain effective internal control over the federal award which provides reasonable assurance the Department is managing the federal award in compliance with federal statutes, regulation and the terms of the federal award. The ETA 2112 report, “UI Financial Transaction Summary”, is a monthly summary of transactions in a state unemployment fund which consists of the 8405 Clearing Account Unemployment Trust Fund (UTF) Account, and Benefit Payment Account. UI Reports Handbook No. 401 requires the report to be submitted to the Employment and Training Administration of the U.S. Department of Labor monthly, by the first day of the second month following the month of reference. Condition – Short Time Compensation (STC) is an alternative to layoffs for employers experiencing a reduction in available work, STC allows employers to reduce the hours of work rather than laying off some employees. The Federal Employee Compensation Act (FECA) provides workers' compensation coverage for employment-related injuries and occupational diseases. The Department did not report Short Time Compensation and FECA benefit payments on the transaction summaries throughout the fiscal year. There were unexplained variances between the prior year ending balance and current year beginning balances. The Department’s UC Benefit payment account did not include FECA benefit draws and Unemployment Compensation for Ex-Servicemembers (UCX) benefit draws throughout the fiscal year. In addition, the January 2023 ETA 8405 Clearing Account’s prior months balance is understated by $11,825,764 and the March 2023 ETA 2112 Total Iowa Benefits was understated by $8,774,147. The ETA 8405 Clearing Account was established for all employer contributions and payments in lieu of contributions to be deposited into and transferred immediately upon availability to the Unemployment Trust Fund. The ETA 8405 Report totals the ending balance of each day in the month, when manually entering the beginning daily ledger balance for January 2023, the Department entered the incorrect prior month ending balance resulting in the ledger balance amount being understated. The Department indicated the ETA 2112 reports submitted during fiscal year 2023 were reviewed and approved; however, this review was not documented for 2 of 12 months, and 6 of 12 monthly reports were submitted between 2 and 27 days late. Cause – The Department utilizes an external accounting system for the processing of Unemployment Insurance (UI) benefit payments to claimants. The benefit claimant system processes the claims, then communicates the information to the State’s accounting system, the Integrated Information for Iowa (I/3) system, for payment. The benefit claimant system identifies benefit payments by State Unemployment and Federal Unemployment programs, including Federal Unemployment claims covered under various Acts enacted during the pandemic.The Department has developed a process to reconcile benefit payments by type and in total between the Department’s benefit claimant system and I/3 daily to ensure benefit payments are accurately recorded for financial reporting purposes. Although the Department performed the reconciliations, variances were identified and remained uncorrected at the time of reporting for the ETA 2112 reports. In addition, Department procedures have not been established to ensure reports are submitted timely and Department procedures have not been established to require the independent review and approval of the ETA 2112 reports be documented and retained. Effect – Incorrect supporting documentation, such as the ETA 8405 report and accounting ledgers, resulted in undetected reporting errors and misstatements and the lack of a documented review of these reports resulted in the errors being undetected and increases the risk for further undetected reporting errors or misstatements. In addition, the lack of established policies and procedures resulted in the late submission of six monthly reports. Recommendation – The Department should follow policies and procedures already established to ensure variances in the reconciliation process are investigated and corrected immediately. If errors are noted on the ETA 2112 reports after initial submission, the Department should amend the completed report to agree with the corrected supporting documentation. The Department should establish policies and procedures to ensure the monthly reports are reviewed and approved by an independent person who is knowledgeable about the program. This independent review should be documented by the reviewer’s signature or initials and date of review prior to submission. In addition, The Department should establish policies and procedures to ensure reports are submitted timely. Response and Corrective Action Planned – The Department will review with staff and retrain as necessary to follow existing policies and procedures to ensure variances identified during the reconciliation process are corrected. The Department is also modifying policies and procedures related to the ETA 2112 report. In addition, management will review ETA 2112 reports for accuracy and to identify if an amended report should be filed. Conclusion – Response accepted.
Employment and Training Administration (ETA) Reports Criteria – The Uniform Guidance, Part 200.303, requires the Department establish and maintain effective internal control over the federal award which provides reasonable assurance the Department is managing the federal award in compliance with federal statutes, regulation and the terms of the federal award. The ETA 2208A report, “Quarterly UI Contingency Report”, provides information on the number of staff years worked and paid for various UI program categories, and provides the basis for determining above-base entitlements. UI Reports Handbook No. 336 requires the report to be submitted electronically for each calendar quarter to the Employment and Training Administration of the U.S. Department of Labor within 30 days after the end of the reporting quarter to which it relates. Condition – Three of four quarterly reports were submitted one day late. In addition, the Department indicated the reports were reviewed and approved; however, this review was not documented for four out of four quarterly reports. Cause – Department procedures have not been established to ensure reports are submitted timely and require the independent review and approval of the reports be documented. Effect – The lack of a documented review of these reports increases the risk for undetected reporting errors or misstatements. In addition, the lack of established policies and procedures resulted in the late submission of the three reports. Recommendation – The Department should establish policies and procedures to ensure reports are submitted timely in accordance with UI Reports Handbook. The policies established should also ensure the quarterly reports are reviewed and approved by an independent person who is knowledgeable about the program. This independent review should be documented by the reviewer’s signature or initials and date of review prior to submission.Response and Corrective Action Planned – The Department established policies and procedures to ensure evidence of an independent review is documented by the reviewer and date of the review prior to submission, within the reporting deadline. The ETA 2208A report will be reviewed by the Chief Financial Officer or Comptroller and will be evidenced by email approval prior to any future ETA 2208A submissions to the ETA. The Department began this process September 2023. Conclusion – Response accepted.
Employment and Training Administration (ETA) Reports Criteria – The Uniform Guidance, Part 200.303, requires the Department establish and maintain effective internal control over the federal award which provides reasonable assurance the Department is managing the federal award in compliance with federal statutes, regulation and the terms of the federal award. The ETA 2208A report, “Quarterly UI Contingency Report”, provides information on the number of staff years worked and paid for various UI program categories, and provides the basis for determining above-base entitlements. UI Reports Handbook No. 336 requires the report to be submitted electronically for each calendar quarter to the Employment and Training Administration of the U.S. Department of Labor within 30 days after the end of the reporting quarter to which it relates. Condition – Three of four quarterly reports were submitted one day late. In addition, the Department indicated the reports were reviewed and approved; however, this review was not documented for four out of four quarterly reports. Cause – Department procedures have not been established to ensure reports are submitted timely and require the independent review and approval of the reports be documented. Effect – The lack of a documented review of these reports increases the risk for undetected reporting errors or misstatements. In addition, the lack of established policies and procedures resulted in the late submission of the three reports. Recommendation – The Department should establish policies and procedures to ensure reports are submitted timely in accordance with UI Reports Handbook. The policies established should also ensure the quarterly reports are reviewed and approved by an independent person who is knowledgeable about the program. This independent review should be documented by the reviewer’s signature or initials and date of review prior to submission.Response and Corrective Action Planned – The Department established policies and procedures to ensure evidence of an independent review is documented by the reviewer and date of the review prior to submission, within the reporting deadline. The ETA 2208A report will be reviewed by the Chief Financial Officer or Comptroller and will be evidenced by email approval prior to any future ETA 2208A submissions to the ETA. The Department began this process September 2023. Conclusion – Response accepted.
Indirect Costs Criteria – The Department negotiates an indirect cost rate with the U.S. Department of Labor in accordance with Title 2 of the Code of Federal Regulations, Part 200 for nonprofit and state/local entities. Indirect costs are expenditures that have been incurred for common or joint objectives and cannot be readily identified with a particular final cost objective. The Department allocates these indirect costs to federal programs using the negotiated indirect cost rates. The Department cannot charge more than the maximum negotiated indirect costs or rates. Condition – The Department exceeded the maximum allowable amount for indirect cost by $117,275. Cause – The Department has not established policies and procedures to ensure the maximum allowable amount is not exceeded. Effect – The cumulative indirect cost for all programs in fiscal year 2023 exceeded the maximum allowable amount. Recommendation – The Department should establish policies and procedures to ensure the maximum allowable amount is not exceeded. Response and Corrective Action Planned – The Department will establish policies to track and control indirect costs so that it doesn’t exceed the maximum allowable to be collected per U.S. Department of Labor approvals and individual federal award limitations. We will work with the Department of Labor to resolve this issue. Conclusion – Response accepted.
Indirect Costs Criteria – The Department negotiates an indirect cost rate with the U.S. Department of Labor in accordance with Title 2 of the Code of Federal Regulations, Part 200 for nonprofit and state/local entities. Indirect costs are expenditures that have been incurred for common or joint objectives and cannot be readily identified with a particular final cost objective. The Department allocates these indirect costs to federal programs using the negotiated indirect cost rates. The Department cannot charge more than the maximum negotiated indirect costs or rates. Condition – The Department exceeded the maximum allowable amount for indirect cost by $117,275. Cause – The Department has not established policies and procedures to ensure the maximum allowable amount is not exceeded. Effect – The cumulative indirect cost for all programs in fiscal year 2023 exceeded the maximum allowable amount. Recommendation – The Department should establish policies and procedures to ensure the maximum allowable amount is not exceeded. Response and Corrective Action Planned – The Department will establish policies to track and control indirect costs so that it doesn’t exceed the maximum allowable to be collected per U.S. Department of Labor approvals and individual federal award limitations. We will work with the Department of Labor to resolve this issue. Conclusion – Response accepted.
Awards to Subrecipients Criteria – During fiscal year 2022, the Governor allocated Coronavirus State and Local Recovery Funds to the Department for Summer Youth Internship Projects to provide internship opportunities in high-demand fields for youth with barriers and/or at risk of not graduating. All projects include recruitment of youth at risk of not graduating and youth from underrepresented communities and/or from low-income households. The primary supported occupations include healthcare, construction-related trades, information technology, advanced manufacturing and energy. The Healthy Childhood Environments: Child Care Challenge project was to create new childcare slots across the State and help communities improve their childcare options and bolster opportunities for Iowans to reenter the workforce. All the projects are designed to address childcare shortages and alleviate local childcare need. The Uniform Guidance, Part 200.332 states, “All pass-through entities must: 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. When some of this information is not available, the pass-through entity must provide the best information available to describe the Federal award and subaward.” Required information includes, in part, subrecipient's unique entity identifier, federal award identification number (FAIN), subaward budget period start and end date, identification of whether the award is research and development (R&D) and the indirect cost rate for the federal award (including if the de minimis rate is charged) per Part 200.414. Condition – For the subawards provided, the Department did not include the subrecipient's unique entity identifier, FAIN, the federal award project description as required to be responsive to the Federal Funding Accountability and Transparency Act (FFATA), identification of whether the award is R&D and the indirect cost rate for the federal award (including if the de minimis rate is charged) per Part 200.414. Cause – The Department has not established policies and procedures to ensure all required information is included in the subaward to the subrecipients. Effect – The information required in the subaward to subrecipients was not included due to the lack of policies and procedures. Recommendation – The Department should establish policies and procedures to ensure all required information is included in the subaward to subrecipients as required by Uniform Guidance, Part 200.332. Response and Corrective Action Planned – Effective August 2023; new sub-awards and pass thru grant agreements have elements specified in the respective agreement as required by Uniform Guidance, Part 200.332. Conclusion – Response accepted.
Activities Allowed and Unallowed Criteria – Title II Part A, Elementary and Secondary Education Act (ESEA) section 2101 (C)(1) and (3) requires each state receiving an allotment to reserve not less than 95 percent to make subgrants to local educational agencies. Of the 95 percent allocated to local educational agencies the state educational agency may reserve not more than 3% for one or more of the activities for principals or other school leaders. According to the ESEA, a paraprofessional is not a school leader. School leaders are defined by ESEA 8101(44) as “a principal, assistant principal, or other individual who is an employee or officer of an elementary school or secondary school, local educational agency, or other entity operating an elementary school or secondary school; and is responsible for the daily instructional leadership and managerial operations in the elementary school or secondary school building”. Section 8101.37 defines paraprofessional as an “educational assistant o instructional assistant”. Condition – Allocations awarded to the State for federal fiscal years (FFY) 2020, 2021, 2022 were active and being spent during state fiscal year ended June 30, 2023. The maximum 3% reservation for principals and school leaders which could have been allocated by the Iowa Department of Education, was approximately $430,000, $455,000 and $455,000 for FY20 through FY22 respectively, totaling approximately $1,340,000. During the year ended June 30, 2023, $1,215,607 was awarded to community colleges and area education agencies for paraeducator programs. For the year ended June 30, 2023 $840,672 was spent on the paraeducator programs. Since paraeducators do not meet the “school leaders” criteria, the costs of the awards are considered unallowable under ESEA section 2101(C)(4) for the 3% reserved from LEA subgrants. Cause – Although procedures have been established to earmark and allocate funds properly, the Department’s final review procedures did not detect the error in the normal course of performing their assigned duties. Effect – The Department improperly allocated funds and had expenditures which were earmarked for school leaders to paraeducator programs, resulting in questioned costs of $840,672. Recommendation – The Department should contact the U.S. Department of Education for resolution. The Department should also follow established procedures to ensure federal funds are earmarked and spent in accordance with federal requirements for allowable purposes. Response and Corrective Action Planned – As stated by the Office of the Auditor of the State, the Iowa Department of Education has established procedures to earmark and allocate funds properly. When the decision was made in 2022 to use Title IIA school leader 3% allocation for paraeducator certification, the Department relied upon internal legal guidance stating the decision was legally permissible. Guidance from the U.S. Department of Education states the other Title IIA state set aside funds may be used for any State activity under ESEA section 2101(c)(4), some of which involve paraprofessionals. However, the allowable uses of other Title IIA state set aside funds are distinct from the allowable uses of Title IIA school leader 3% allocation. At this time, the Department is working to engage and identify appropriate next steps with the U.S. Department of Education. Please note the use of the Title IIA school leader 3% allocation for paraeducator certification concluded at the end of FY23; Title IIA school leader 3% funds were not used for this purpose in FY24 beginning July 1, 2023 under current leadership. To continue to build Department capacity in the administration of funds under ESEA, Department leadership directed ESEA and federal grants management training for the Bureau of Federal Programs and all other relevant Department staff, which will be provided by the Council for Chief State School Officer’s Federal Education Group beginning in April 2024. Additionally, Department leadership directed additional expectations in its spending oversight procedures, including that all program fund managers and accounting budget analysts review and approve all uses in which their funding is involved. Conclusion – Response accepted.
Computer Match – Family Investment Program (FIP) Criteria - The Department operates FIP utilizing federal funds provided for in the Temporary Assistance for Needy Families (TANF) block grant. Title 4-C-39 of the Employees’ Manual provides, in part, “A participant whose needs are included in a FIP grant cannot receive at the same time a grant from any other public assistance program administered by the Department, including foster care and subsidized adoption.” Title 17-F-14 of the Employees’ Manual provides, in part, “A child shall not concurrently receive subsidized adoption maintenance payments and FIP.” However, the Department allows a participant to receive both FIP and foster care or FIP and subsidized adoption for the month the child is removed from the home to enter foster care or for the month the child begins receiving subsidized adoption payments. In addition, although Title 4-C-39 of the Employees’ Manual states a participant cannot receive both FIP and foster care assistance, a Title IV-E program, at the same time, a letter dated February 14, 2014 from the Administration for Children and Families (ACF) stated, “Federal TANF regulations allow for concurrent TANF and Title IV-E benefits only if the situation involves a Foster Care placement with a relative. If the placement is with a non-relative, concurrent payment of benefits is only allowable in limited circumstances.” Condition - A computer match of payment data was performed for cases receiving both FIP and foster care payments during fiscal year 2023. We reviewed 53 cases receiving both FIP and foster care payments during the same month of service. Of the 53 cases reviewed, four children, or 7.55%, received both FIP and foster care payments for an additional one to two months after entering foster care with a non-relative. Although these payments are not in compliance with the Employees’ Manual, it is unclear if they meet the exception allowed by the federal government, as stated in the letter from ACF dated February 14, 2014. A computer match of payment data was performed for cases receiving both FIP and subsidized adoption payments during fiscal year 2023. We reviewed 63 cases receiving both FIP and subsidized adoption payments during the same month of service. Of the 63 cases reviewed, four cases, or 6.3%, improperly received both FIP and subsidized adoption payments for an additional one to two months after entering subsidized adoption. The unallowable FIP payments for these four cases totaled $3,278. Cause – The Department has established policies regarding the payment of both FIP and foster care assistance payments for the same period; however, documentation was not on file to support whether the payment is an exception to the established policy of if the policies were not followed. Although the Department has established policies regarding the payment of both FIP and subsidized adoption payments during the same period, those procedures were not always followed. Effect – The lack of documentation regarding whether a FIP and foster care payment is an exception to the policy may result in the Department not identifying and recouping overpayments. Also, not following the established policies for the payment of FIP and subsidized adoption assistance may result in the Department overpaying either FIP or subsidized adoption assistance. Recommendation – The Department should review its policies and establish procedures pertaining to compliance with federal regulations and establish additional oversight procedures to ensure compliance federal regulations pertaining to identifying concurrent FIP and foster care payments and concurrent FIP and subsidized adoption payments. The Department should review cases identified and determine if recoupment should be performed. Response and Corrective Action Planned – For FIP/Adoption Subsidy – 3 of the cases had errors all completed by the same worker. The worker correctly closed down the case when acting on the alert but neglected to establish the overpayment. The worker will be retrained on when an overpayment is needed. For the FIP/Foster Care – The four workers will be retrained on when to cancel a case, what to look for in the system when an alert is received about a child entering foster care, and when a recoupment is needed. We will also provide a reminder to all Income Maintenance staff providing the policies and procedures for duplicate benefits in these situations. This reminder will be emailed out and also discussed at team staff meetings. Conclusion – Response accepted.