Audit 305957

Federal Awarding Agency: U.S. Department of Agriculture Impact Significant Deficiency, Noncompliance AL Number and Title: 10.511 Research and Development Cluster Federal Award Number: NI22SLBCXXXXG054 Applicable Compliance Requirement: Procurement and Suspension and Debarment Condition and Context: During the testing of Suspension and Debarment, one grant from the University of Alaska Fairbanks Campus (UAF) has three covered lease contracts that did not have EPLS checks performed. These were existing vendors who previously were not funded with federal dollars. Once the contracts were funded with federal dollars, an EPLS check was not performed. Cause: UAF did not have a process to review existing contracts for suspension and debarment if they were initially not funded with federal dollars. Criteria: Per Uniform Guidance 2 CFR 180.300 nonfederal entities entering into covered transactions must verify the party is not suspended or debarred from conducting business by the federal government. This can be performed by: Checking SAM exclusions, collecting certification from the party, or adding a clause or condition to the covered transaction. Effect: Potentially suspended or debarred vendors may have been contracted with federal funds. Questions costs: None Recommendation: UAF should perform EPLS checks on all covered transactions paid with federal funds. View of Responsible Officials: Management agrees with this finding.

Prior Year Finding: 2022-031 Federal Awarding Agency: USDA Impact: Material Weakness, Material Noncompliance AL Number and Title: 10.551, 10.561 SNAP Cluster Federal Award Number: 22AK35050292301, 23AK35050292301 Applicable Compliance Requirement: Allowable Costs/Cost Principles, Special Tests and Provisions Condition: DPA management instructed staff to extend SNAP six-month certification periods after an approved waiver expired bypassing required eligibility recertifications. Furthermore, DPA continued to extend six-month certifications for consecutive periods without recertifying eligibility after being notified by the federal award agency that the practice was unallowable. Context: A state must certify each SNAP-eligible household for a definite time period. Alaska households are certified for a six-month period. The first month of the certification period begins in the first month a household is determined eligible to participate. The State is required by federal law to ensure EIS automatically cuts off participation for households that have not been recertified at the end of the certification period. Eligibility must be redetermined before a household receives benefits for a new period. In response to the COVID-19 disaster, USDA’s FNS issued COVID-19 waivers and flexibilities, which included extending SNAP certification periods. In a letter dated April 30, 2021, FNS allowed states to automatically extend benefit certification periods for up to six months. In a subsequent letter dated December 8, 2021, FNS clarified the April 30, 2021, letter directing that state agencies may only extend certification periods for up to six months from the initial expiration date assigned at the last certification or recertification. Consecutive certifications or back-to-back six-month extensions were not allowable. The final FNS COVID-19 waiver allowing certification period extensions expired July 31, 2022. Cause: The EIS control to automatically cut off households from receiving SNAP benefits at the end of the certification period was disabled by DPA management during the COVID-19 public health emergency and was not reactivated until June 2023. DPA management directed staff to automatically extend certification periods to help reduce a backlog of SNAP benefit applications. Criteria: Title 7 CFR 272.10(b) requires the State to use an automated data processing system for SNAP. The system is to be used to determine eligibility and calculate benefits or validate eligibility workers’ calculations by processing and storing all casefile information necessary for the eligibility determination and benefit computation including, but not limited to: all household members’ names, addresses, dates of birth, social security numbers, and individual household members’ earned and unearned income by source, deductions, resources, and household size. Also, the system must be used to redetermine or revalidate eligibility and benefits based on notices of change in households’ circumstances. Title 7 CFR 273.10(f) requires the State to certify each eligible household for a definite period of time. Alaska households are certified for a six-month period per Alaska’s approved SNAP Plan of Operation. Title 7 CFR 273.14(a) prescribes that no household may participate beyond the expiration of the certification period assigned in accordance with 273.10(f) without a determination of eligibility for a new period. Furthermore, the State must establish procedures for notifying households of expiration dates, providing application forms, scheduling interviews, and recertifying eligible households prior to the expiration of certification periods. Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. USDA FNS SNAP guidance, issued December 8, 2021, titled, Extension of SNAP COVID-19 Administrative flexibilities January 2022 and Beyond, provided that States may only extend certification periods for up to six months from the initial expiration date assigned at the last certification or recertification. The guidance reiterated that the State should not extend certification periods consecutively, as it reduces the opportunities for the State to obtain a full understanding of a household’s circumstances and make necessary adjustments. Effect: The lack of regular eligibility recertification increases the likelihood of ineligible recipients receiving unallowable SNAP benefits. Continued extensions of certification periods without accompanying reviews erodes the accuracy and relevance of eligibility data over time. If FNS concludes that the State was negligent in household certification, FNS may invoice the State for an amount equivalent to the benefits issued due to such negligence. Moreover, the adoption of extensive certification period extensions could lead to substantial rises in case processing backlogs when the extensions conclude and the State returns to standard operations. Questioned Costs: AL 10.551: Indeterminate Recommendation: DPA’s director should ensure SNAP benefit recertifications are performed in accordance with federal regulation. View of Responsible Officials: Management agrees with this finding.

Federal Awarding Agency: USDA Impact: Material Weakness, Material Noncompliance AL Number and Title: 10.551, 10.561 SNAP Cluster Federal Award Number: 22AK35050292301, 23AK35050292301 Applicable Compliance Requirement: Allowable Costs/Cost Principles, Special Tests and Provisions Condition: The amount of FY 23 SNAP benefits reported as issued by the State’s EBT contractor was $19,689,126 more than the amount of authorized benefits reported in data from DPA EIS. Context: DPA relies on the legacy eligibility system, EIS, to determine eligibility for SNAP and calculate monthly benefit amounts. Benefit amounts are calculated based on household size, income, and other financial resources of all qualifying members of a household less specific allowable deductions. Each day EIS transmits an issuance batch file, including authorized beneficiaries and benefit amounts to FIS, which maintains accounts for each beneficiary. When an EBT card is utilized by a beneficiary, FIS functions as the intermediary between the State’s U.S. Treasury benefit account and the retailers by settling SNAP benefit transactions with retailers before drawing down federal reimbursement. The State is required to ensure its automated data processing systems accurately and completely process and store all case file information for eligibility determinations and benefit calculations and provide the data necessary to meet federal issuance and reconciliation reporting requirements. A reconciliation of FIS issuance records with EIS authorized beneficiaries and benefit amounts demonstrates the completeness and accuracy of the EBT process. In FY 23, the EIS benefit data provided by DPA could not be reconciled to the amount of SNAP benefits issued per FIS. As a result, the audit could not verify the accuracy and completeness of benefit calculations nor evaluate the eligibility and benefit determination information stored in EIS. Cause: DPA management could not identify the cause of the variance. DPA’s outdated legacy eligibility system and a lack of daily reconciliations (see Finding No. 2023-035) contributed to the inability to maintain adequate supporting records. Criteria: Title 7 CFR 274.1(h) requires that the state agency create and maintain a master issuance file that consolidates records of all certified SNAP households, records participation activity for each household, and supplies all information necessary to fulfill the reporting requirements outlined in Title 7 CFR 274.4. Title 7 CFR 274.4(a)(1) requires the State to reconcile benefits posted to household accounts on the central computer against benefits on the issuance authorization file. Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. Effect: Significant discrepancies between EIS benefit data and the EBT contractor’s issuance records undermines confidence in the eligibility system and may be indicative of significant unidentified processing errors. Inadequate system processing increases the risk of incorrect or ineligible benefits. Questioned Costs: AL 10.551: $19,689,126 Recommendation: DPA’s director should identify the cause of the discrepancies between EBT contractor issuance data and the State’s eligibility system, and take action necessary to ensure SNAP benefit payments are supported by eligibility and benefit data. View of Responsible Officials: Management disagrees with this finding. DPA performs monthly reconciliations and balancing efforts to ensure accuracy with FIS, EIS, and reporting. No discrepancies have been identified by DPA. None of the parties involved in the audit have been able to pinpoint the origin of the discrepancy described in this finding. DPA’s monthly reconciliation processes are rigorous, consistent, and thorough, ensuring accuracy and alignment with USDA data from AMA Bank. The reconciliation efforts encompass federal SNAP reports: FNS 388, FNS 46, and the EIS Balance Issuance report, all of which consistently reconcile. The reconciliation extends to ASAP and AMA batch values, with annual certification further validating accuracy. Monthly, the AMA raw data is meticulously balanced in the 388/46 reports, with only the P-EBT and EA issuances requiring manual entry from the 292B report. With this steadfast commitment to monthly reconciliation and alignment with AMA data, management is confident in the absence of errors or discrepancies. Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. DOH management states that the monthly reconciliation of summary EIS and benefit issuance data suggests the absence of errors or discrepancies; however, DPA management could not demonstrate that eligibility determinations and benefit payment details in EIS supported the benefit issuance data.

Prior Year Finding: 2022-033 Federal Awarding Agency: USDA Impact: Material Weakness, Material Noncompliance AL Number and Title: 10.551, 10.561 SNAP Cluster Federal Award Number: 22AK35050292301, 23AK35050292301 Applicable Compliance Requirement: Special Tests and Provisions Condition: Daily SNAP EBT reconciliations were not performed in FY 23. Context: A state must have a system in place to reconcile, on a daily basis, all of the funds entering into, exiting from, and remaining in the system each day with a state’s US Treasury benefit account, and FIS’s records. States must also have systems in place to reconcile retailer credit activity as reported into the banking system to client transactions maintained by the processor and to the funds drawn down from the EBT benefit account with the US Treasury. The reconciliation process ensures that a state only draws federal funds for authorized transactions. In FY 23, required daily reconciliations were not performed. However, according to DPA management, monthly reconciliations were performed as part of the federal reporting process. Cause: According to DPA management, daily reconciliations were not performed due to staff turnover, inadequate procedures, and the lack of trained staff. In addition, management indicated monthly reconciliations provide sufficient assurance of accurate processing. Criteria: Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant award. Title 7 CFR 274.4(a) requires that State agencies account for all issuance through a reconciliation process. The EBT system must provide reports and documentation pertaining to reconciliation. Reconciliations must be conducted and records kept as follows: • Verification of retailer's credits against deposit information entered into the automated clearinghouse network; and • Reconciliation of total funds entered into, exiting from, and remaining in the system each day. Effect: An inconsistent reconciliation process increases the risk of unidentified processing errors and unallowable costs. States are responsible for efficiently and effectively administering SNAP in accordance with federal laws, regulations, and FNS approved Plan of Operations. A determination by FNS that the State has failed to comply with any of these requirements may result in a suspension or disallowance of the federal share of the State’s administrative funds. Questioned Costs: None Recommendation: DPA’s director should develop and implement daily reconciliation and monitoring procedures, and train staff to ensure daily reconciliations are conducted in accordance with federal regulations. DPA should consult FNS for program guidance regarding reconciliation requirements. View of Responsible Officials: Management agrees with this finding.

Prior Year Finding: 2022-031 Federal Awarding Agency: USDA Impact: Material Weakness, Material Noncompliance AL Number and Title: 10.551, 10.561 SNAP Cluster Federal Award Number: 22AK35050292301, 23AK35050292301 Applicable Compliance Requirement: Allowable Costs/Cost Principles, Special Tests and Provisions Condition: DPA management instructed staff to extend SNAP six-month certification periods after an approved waiver expired bypassing required eligibility recertifications. Furthermore, DPA continued to extend six-month certifications for consecutive periods without recertifying eligibility after being notified by the federal award agency that the practice was unallowable. Context: A state must certify each SNAP-eligible household for a definite time period. Alaska households are certified for a six-month period. The first month of the certification period begins in the first month a household is determined eligible to participate. The State is required by federal law to ensure EIS automatically cuts off participation for households that have not been recertified at the end of the certification period. Eligibility must be redetermined before a household receives benefits for a new period. In response to the COVID-19 disaster, USDA’s FNS issued COVID-19 waivers and flexibilities, which included extending SNAP certification periods. In a letter dated April 30, 2021, FNS allowed states to automatically extend benefit certification periods for up to six months. In a subsequent letter dated December 8, 2021, FNS clarified the April 30, 2021, letter directing that state agencies may only extend certification periods for up to six months from the initial expiration date assigned at the last certification or recertification. Consecutive certifications or back-to-back six-month extensions were not allowable. The final FNS COVID-19 waiver allowing certification period extensions expired July 31, 2022. Cause: The EIS control to automatically cut off households from receiving SNAP benefits at the end of the certification period was disabled by DPA management during the COVID-19 public health emergency and was not reactivated until June 2023. DPA management directed staff to automatically extend certification periods to help reduce a backlog of SNAP benefit applications. Criteria: Title 7 CFR 272.10(b) requires the State to use an automated data processing system for SNAP. The system is to be used to determine eligibility and calculate benefits or validate eligibility workers’ calculations by processing and storing all casefile information necessary for the eligibility determination and benefit computation including, but not limited to: all household members’ names, addresses, dates of birth, social security numbers, and individual household members’ earned and unearned income by source, deductions, resources, and household size. Also, the system must be used to redetermine or revalidate eligibility and benefits based on notices of change in households’ circumstances. Title 7 CFR 273.10(f) requires the State to certify each eligible household for a definite period of time. Alaska households are certified for a six-month period per Alaska’s approved SNAP Plan of Operation. Title 7 CFR 273.14(a) prescribes that no household may participate beyond the expiration of the certification period assigned in accordance with 273.10(f) without a determination of eligibility for a new period. Furthermore, the State must establish procedures for notifying households of expiration dates, providing application forms, scheduling interviews, and recertifying eligible households prior to the expiration of certification periods. Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. USDA FNS SNAP guidance, issued December 8, 2021, titled, Extension of SNAP COVID-19 Administrative flexibilities January 2022 and Beyond, provided that States may only extend certification periods for up to six months from the initial expiration date assigned at the last certification or recertification. The guidance reiterated that the State should not extend certification periods consecutively, as it reduces the opportunities for the State to obtain a full understanding of a household’s circumstances and make necessary adjustments. Effect: The lack of regular eligibility recertification increases the likelihood of ineligible recipients receiving unallowable SNAP benefits. Continued extensions of certification periods without accompanying reviews erodes the accuracy and relevance of eligibility data over time. If FNS concludes that the State was negligent in household certification, FNS may invoice the State for an amount equivalent to the benefits issued due to such negligence. Moreover, the adoption of extensive certification period extensions could lead to substantial rises in case processing backlogs when the extensions conclude and the State returns to standard operations. Questioned Costs: AL 10.551: Indeterminate Recommendation: DPA’s director should ensure SNAP benefit recertifications are performed in accordance with federal regulation. View of Responsible Officials: Management agrees with this finding.

Federal Awarding Agency: USDA Impact: Material Weakness, Material Noncompliance AL Number and Title: 10.551, 10.561 SNAP Cluster Federal Award Number: 22AK35050292301, 23AK35050292301 Applicable Compliance Requirement: Allowable Costs/Cost Principles, Special Tests and Provisions Condition: The amount of FY 23 SNAP benefits reported as issued by the State’s EBT contractor was $19,689,126 more than the amount of authorized benefits reported in data from DPA EIS. Context: DPA relies on the legacy eligibility system, EIS, to determine eligibility for SNAP and calculate monthly benefit amounts. Benefit amounts are calculated based on household size, income, and other financial resources of all qualifying members of a household less specific allowable deductions. Each day EIS transmits an issuance batch file, including authorized beneficiaries and benefit amounts to FIS, which maintains accounts for each beneficiary. When an EBT card is utilized by a beneficiary, FIS functions as the intermediary between the State’s U.S. Treasury benefit account and the retailers by settling SNAP benefit transactions with retailers before drawing down federal reimbursement. The State is required to ensure its automated data processing systems accurately and completely process and store all case file information for eligibility determinations and benefit calculations and provide the data necessary to meet federal issuance and reconciliation reporting requirements. A reconciliation of FIS issuance records with EIS authorized beneficiaries and benefit amounts demonstrates the completeness and accuracy of the EBT process. In FY 23, the EIS benefit data provided by DPA could not be reconciled to the amount of SNAP benefits issued per FIS. As a result, the audit could not verify the accuracy and completeness of benefit calculations nor evaluate the eligibility and benefit determination information stored in EIS. Cause: DPA management could not identify the cause of the variance. DPA’s outdated legacy eligibility system and a lack of daily reconciliations (see Finding No. 2023-035) contributed to the inability to maintain adequate supporting records. Criteria: Title 7 CFR 274.1(h) requires that the state agency create and maintain a master issuance file that consolidates records of all certified SNAP households, records participation activity for each household, and supplies all information necessary to fulfill the reporting requirements outlined in Title 7 CFR 274.4. Title 7 CFR 274.4(a)(1) requires the State to reconcile benefits posted to household accounts on the central computer against benefits on the issuance authorization file. Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. Effect: Significant discrepancies between EIS benefit data and the EBT contractor’s issuance records undermines confidence in the eligibility system and may be indicative of significant unidentified processing errors. Inadequate system processing increases the risk of incorrect or ineligible benefits. Questioned Costs: AL 10.551: $19,689,126 Recommendation: DPA’s director should identify the cause of the discrepancies between EBT contractor issuance data and the State’s eligibility system, and take action necessary to ensure SNAP benefit payments are supported by eligibility and benefit data. View of Responsible Officials: Management disagrees with this finding. DPA performs monthly reconciliations and balancing efforts to ensure accuracy with FIS, EIS, and reporting. No discrepancies have been identified by DPA. None of the parties involved in the audit have been able to pinpoint the origin of the discrepancy described in this finding. DPA’s monthly reconciliation processes are rigorous, consistent, and thorough, ensuring accuracy and alignment with USDA data from AMA Bank. The reconciliation efforts encompass federal SNAP reports: FNS 388, FNS 46, and the EIS Balance Issuance report, all of which consistently reconcile. The reconciliation extends to ASAP and AMA batch values, with annual certification further validating accuracy. Monthly, the AMA raw data is meticulously balanced in the 388/46 reports, with only the P-EBT and EA issuances requiring manual entry from the 292B report. With this steadfast commitment to monthly reconciliation and alignment with AMA data, management is confident in the absence of errors or discrepancies. Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. DOH management states that the monthly reconciliation of summary EIS and benefit issuance data suggests the absence of errors or discrepancies; however, DPA management could not demonstrate that eligibility determinations and benefit payment details in EIS supported the benefit issuance data.

Prior Year Finding: 2022-033 Federal Awarding Agency: USDA Impact: Material Weakness, Material Noncompliance AL Number and Title: 10.551, 10.561 SNAP Cluster Federal Award Number: 22AK35050292301, 23AK35050292301 Applicable Compliance Requirement: Special Tests and Provisions Condition: Daily SNAP EBT reconciliations were not performed in FY 23. Context: A state must have a system in place to reconcile, on a daily basis, all of the funds entering into, exiting from, and remaining in the system each day with a state’s US Treasury benefit account, and FIS’s records. States must also have systems in place to reconcile retailer credit activity as reported into the banking system to client transactions maintained by the processor and to the funds drawn down from the EBT benefit account with the US Treasury. The reconciliation process ensures that a state only draws federal funds for authorized transactions. In FY 23, required daily reconciliations were not performed. However, according to DPA management, monthly reconciliations were performed as part of the federal reporting process. Cause: According to DPA management, daily reconciliations were not performed due to staff turnover, inadequate procedures, and the lack of trained staff. In addition, management indicated monthly reconciliations provide sufficient assurance of accurate processing. Criteria: Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant award. Title 7 CFR 274.4(a) requires that State agencies account for all issuance through a reconciliation process. The EBT system must provide reports and documentation pertaining to reconciliation. Reconciliations must be conducted and records kept as follows: • Verification of retailer's credits against deposit information entered into the automated clearinghouse network; and • Reconciliation of total funds entered into, exiting from, and remaining in the system each day. Effect: An inconsistent reconciliation process increases the risk of unidentified processing errors and unallowable costs. States are responsible for efficiently and effectively administering SNAP in accordance with federal laws, regulations, and FNS approved Plan of Operations. A determination by FNS that the State has failed to comply with any of these requirements may result in a suspension or disallowance of the federal share of the State’s administrative funds. Questioned Costs: None Recommendation: DPA’s director should develop and implement daily reconciliation and monitoring procedures, and train staff to ensure daily reconciliations are conducted in accordance with federal regulations. DPA should consult FNS for program guidance regarding reconciliation requirements. View of Responsible Officials: Management agrees with this finding.

Prior Year Finding: 2022-031 Federal Awarding Agency: USDA Impact: Material Weakness, Material Noncompliance AL Number and Title: 10.551, 10.561 SNAP Cluster Federal Award Number: 22AK35050292301, 23AK35050292301 Applicable Compliance Requirement: Allowable Costs/Cost Principles, Special Tests and Provisions Condition: DPA management instructed staff to extend SNAP six-month certification periods after an approved waiver expired bypassing required eligibility recertifications. Furthermore, DPA continued to extend six-month certifications for consecutive periods without recertifying eligibility after being notified by the federal award agency that the practice was unallowable. Context: A state must certify each SNAP-eligible household for a definite time period. Alaska households are certified for a six-month period. The first month of the certification period begins in the first month a household is determined eligible to participate. The State is required by federal law to ensure EIS automatically cuts off participation for households that have not been recertified at the end of the certification period. Eligibility must be redetermined before a household receives benefits for a new period. In response to the COVID-19 disaster, USDA’s FNS issued COVID-19 waivers and flexibilities, which included extending SNAP certification periods. In a letter dated April 30, 2021, FNS allowed states to automatically extend benefit certification periods for up to six months. In a subsequent letter dated December 8, 2021, FNS clarified the April 30, 2021, letter directing that state agencies may only extend certification periods for up to six months from the initial expiration date assigned at the last certification or recertification. Consecutive certifications or back-to-back six-month extensions were not allowable. The final FNS COVID-19 waiver allowing certification period extensions expired July 31, 2022. Cause: The EIS control to automatically cut off households from receiving SNAP benefits at the end of the certification period was disabled by DPA management during the COVID-19 public health emergency and was not reactivated until June 2023. DPA management directed staff to automatically extend certification periods to help reduce a backlog of SNAP benefit applications. Criteria: Title 7 CFR 272.10(b) requires the State to use an automated data processing system for SNAP. The system is to be used to determine eligibility and calculate benefits or validate eligibility workers’ calculations by processing and storing all casefile information necessary for the eligibility determination and benefit computation including, but not limited to: all household members’ names, addresses, dates of birth, social security numbers, and individual household members’ earned and unearned income by source, deductions, resources, and household size. Also, the system must be used to redetermine or revalidate eligibility and benefits based on notices of change in households’ circumstances. Title 7 CFR 273.10(f) requires the State to certify each eligible household for a definite period of time. Alaska households are certified for a six-month period per Alaska’s approved SNAP Plan of Operation. Title 7 CFR 273.14(a) prescribes that no household may participate beyond the expiration of the certification period assigned in accordance with 273.10(f) without a determination of eligibility for a new period. Furthermore, the State must establish procedures for notifying households of expiration dates, providing application forms, scheduling interviews, and recertifying eligible households prior to the expiration of certification periods. Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. USDA FNS SNAP guidance, issued December 8, 2021, titled, Extension of SNAP COVID-19 Administrative flexibilities January 2022 and Beyond, provided that States may only extend certification periods for up to six months from the initial expiration date assigned at the last certification or recertification. The guidance reiterated that the State should not extend certification periods consecutively, as it reduces the opportunities for the State to obtain a full understanding of a household’s circumstances and make necessary adjustments. Effect: The lack of regular eligibility recertification increases the likelihood of ineligible recipients receiving unallowable SNAP benefits. Continued extensions of certification periods without accompanying reviews erodes the accuracy and relevance of eligibility data over time. If FNS concludes that the State was negligent in household certification, FNS may invoice the State for an amount equivalent to the benefits issued due to such negligence. Moreover, the adoption of extensive certification period extensions could lead to substantial rises in case processing backlogs when the extensions conclude and the State returns to standard operations. Questioned Costs: AL 10.551: Indeterminate Recommendation: DPA’s director should ensure SNAP benefit recertifications are performed in accordance with federal regulation. View of Responsible Officials: Management agrees with this finding.

Federal Awarding Agency: USDA Impact: Material Weakness, Material Noncompliance AL Number and Title: 10.551, 10.561 SNAP Cluster Federal Award Number: 22AK35050292301, 23AK35050292301 Applicable Compliance Requirement: Allowable Costs/Cost Principles, Special Tests and Provisions Condition: The amount of FY 23 SNAP benefits reported as issued by the State’s EBT contractor was $19,689,126 more than the amount of authorized benefits reported in data from DPA EIS. Context: DPA relies on the legacy eligibility system, EIS, to determine eligibility for SNAP and calculate monthly benefit amounts. Benefit amounts are calculated based on household size, income, and other financial resources of all qualifying members of a household less specific allowable deductions. Each day EIS transmits an issuance batch file, including authorized beneficiaries and benefit amounts to FIS, which maintains accounts for each beneficiary. When an EBT card is utilized by a beneficiary, FIS functions as the intermediary between the State’s U.S. Treasury benefit account and the retailers by settling SNAP benefit transactions with retailers before drawing down federal reimbursement. The State is required to ensure its automated data processing systems accurately and completely process and store all case file information for eligibility determinations and benefit calculations and provide the data necessary to meet federal issuance and reconciliation reporting requirements. A reconciliation of FIS issuance records with EIS authorized beneficiaries and benefit amounts demonstrates the completeness and accuracy of the EBT process. In FY 23, the EIS benefit data provided by DPA could not be reconciled to the amount of SNAP benefits issued per FIS. As a result, the audit could not verify the accuracy and completeness of benefit calculations nor evaluate the eligibility and benefit determination information stored in EIS. Cause: DPA management could not identify the cause of the variance. DPA’s outdated legacy eligibility system and a lack of daily reconciliations (see Finding No. 2023-035) contributed to the inability to maintain adequate supporting records. Criteria: Title 7 CFR 274.1(h) requires that the state agency create and maintain a master issuance file that consolidates records of all certified SNAP households, records participation activity for each household, and supplies all information necessary to fulfill the reporting requirements outlined in Title 7 CFR 274.4. Title 7 CFR 274.4(a)(1) requires the State to reconcile benefits posted to household accounts on the central computer against benefits on the issuance authorization file. Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. Effect: Significant discrepancies between EIS benefit data and the EBT contractor’s issuance records undermines confidence in the eligibility system and may be indicative of significant unidentified processing errors. Inadequate system processing increases the risk of incorrect or ineligible benefits. Questioned Costs: AL 10.551: $19,689,126 Recommendation: DPA’s director should identify the cause of the discrepancies between EBT contractor issuance data and the State’s eligibility system, and take action necessary to ensure SNAP benefit payments are supported by eligibility and benefit data. View of Responsible Officials: Management disagrees with this finding. DPA performs monthly reconciliations and balancing efforts to ensure accuracy with FIS, EIS, and reporting. No discrepancies have been identified by DPA. None of the parties involved in the audit have been able to pinpoint the origin of the discrepancy described in this finding. DPA’s monthly reconciliation processes are rigorous, consistent, and thorough, ensuring accuracy and alignment with USDA data from AMA Bank. The reconciliation efforts encompass federal SNAP reports: FNS 388, FNS 46, and the EIS Balance Issuance report, all of which consistently reconcile. The reconciliation extends to ASAP and AMA batch values, with annual certification further validating accuracy. Monthly, the AMA raw data is meticulously balanced in the 388/46 reports, with only the P-EBT and EA issuances requiring manual entry from the 292B report. With this steadfast commitment to monthly reconciliation and alignment with AMA data, management is confident in the absence of errors or discrepancies. Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. DOH management states that the monthly reconciliation of summary EIS and benefit issuance data suggests the absence of errors or discrepancies; however, DPA management could not demonstrate that eligibility determinations and benefit payment details in EIS supported the benefit issuance data.

Prior Year Finding: 2022-033 Federal Awarding Agency: USDA Impact: Material Weakness, Material Noncompliance AL Number and Title: 10.551, 10.561 SNAP Cluster Federal Award Number: 22AK35050292301, 23AK35050292301 Applicable Compliance Requirement: Special Tests and Provisions Condition: Daily SNAP EBT reconciliations were not performed in FY 23. Context: A state must have a system in place to reconcile, on a daily basis, all of the funds entering into, exiting from, and remaining in the system each day with a state’s US Treasury benefit account, and FIS’s records. States must also have systems in place to reconcile retailer credit activity as reported into the banking system to client transactions maintained by the processor and to the funds drawn down from the EBT benefit account with the US Treasury. The reconciliation process ensures that a state only draws federal funds for authorized transactions. In FY 23, required daily reconciliations were not performed. However, according to DPA management, monthly reconciliations were performed as part of the federal reporting process. Cause: According to DPA management, daily reconciliations were not performed due to staff turnover, inadequate procedures, and the lack of trained staff. In addition, management indicated monthly reconciliations provide sufficient assurance of accurate processing. Criteria: Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant award. Title 7 CFR 274.4(a) requires that State agencies account for all issuance through a reconciliation process. The EBT system must provide reports and documentation pertaining to reconciliation. Reconciliations must be conducted and records kept as follows: • Verification of retailer's credits against deposit information entered into the automated clearinghouse network; and • Reconciliation of total funds entered into, exiting from, and remaining in the system each day. Effect: An inconsistent reconciliation process increases the risk of unidentified processing errors and unallowable costs. States are responsible for efficiently and effectively administering SNAP in accordance with federal laws, regulations, and FNS approved Plan of Operations. A determination by FNS that the State has failed to comply with any of these requirements may result in a suspension or disallowance of the federal share of the State’s administrative funds. Questioned Costs: None Recommendation: DPA’s director should develop and implement daily reconciliation and monitoring procedures, and train staff to ensure daily reconciliations are conducted in accordance with federal regulations. DPA should consult FNS for program guidance regarding reconciliation requirements. View of Responsible Officials: Management agrees with this finding.

Federal Awarding Agency: U.S. Department of Agriculture (USDA) Impact: Material Weakness, Material Noncompliance AL Number and Title: 10.542 Pandemic Electronic Benefit Transfer Food Benefits (P-EBT) – COVID-19 Federal Award Number: School Year 2020-21 Applicable Compliance Requirement: Activities Allowed or Unallowed, Eligibility Condition: P-EBT benefit payments were not issued in accordance with the process and timeframes outlined in the federally approved state plan. Testing a sample of 136 payments found 37 issuances (27 percent) were sent to unauthorized or unsupported addresses and one issuance included unauthorized benefits. Additionally, no benefits were issued during FY 23 to Supplemental Nutrition Assistance Program (SNAP)-enrolled children in child care. Context: The Families First Coronavirus Response Act (FFCRA) (P. L. 116-127), authorized a temporary assistance program for households with children without access to meals in school and to certain SNAP-enrolled children in child care during the public health emergency declared January 27, 2020. Under the P-EBT program, school children were eligible for the program if the child would have received free or reduced-price meals at a school through the National School Lunch Program if not for a school’s closure, or reduced attendance or hours, for at least five consecutive days due to the COVID-19 pandemic. P-EBT benefits were to be issued in accordance with a federally approved state plan. The Division of Public Assistance (DPA) and the Department of Education and Early Development’s Child Nutrition Services section (CNS) management developed a joint plan to issue P-EBT benefits to eligible school children for the school year 2020–2021. The State’s P-EBT School Year 2020–21 State Plan (Plan) was approved by USDA’s Food and Nutrition Service (FNS) in June 2021. The Plan required CNS to determine eligibility for school age children and DPA to determine eligibility for children in child care. According to the Plan, benefits for the period August 2020 through December 2020 were to be issued beginning July 2021 and benefits for the period January 2021 through August 2021 were to be issued beginning in August 2021. Additionally, the Plan outlined that benefit issuances to children in child care were to begin 106 days subsequent to state plan approval or September 22, 2021. Pursuant to the Plan, CNS staff instructed participating school districts to report monthly enrollment data, school learning models, and number of operating days for each of the district’s schools. Daily benefit levels for each eligible child were equal to the free reimbursement for a breakfast, a lunch, and a snack for the school year 2020–2021. CNS calculated monthly benefits for each eligible child in the household equal to the daily reimbursement rate ($10.99) multiplied by the number of benefit days calculated, as described in the Plan. Eligible student data and benefit amounts were transferred beginning August 2021 to DPA for electronic benefit transfer (EBT) card processing and issuances. The Plan outlined that DPA was to issue benefits through a batch process that would utilize DPA’s vendor-operated SNAP EBT card system; however, batch processing was not functional until June 2023. Rather than using a batch process, DPA staff manually entered student data and CNS authorized benefits directly into FIS’s system interface, ebtEDGE. The information entered into ebtEdge was not reviewed prior to submission. DPA staff began processing P-EBT school year 2020–2021 payments during June 2022, one year after the end of the 2020–2021 school year. During FY 23, DPA staff processed 58,433 P-EBT benefit transactions totaling $33.7 million based on the CNS eligibility data. No benefits were issued in FY 23 to SNAP-enrolled school children in child care. Of the 38 issuance errors identified by auditors, one issuance included $24 of unauthorized benefits, 30 went to an address that did not match the address provided to auditors by CNS, and six were issued without an address. Cause: DPA management asserted that benefit issuance delays were attributable to untimely receipt of eligibility data from CNS and system limitations that prevented the division from utilizing the Eligibility Information System (EIS) to issue benefits. Due to competing priorities, DPA was unable to establish batch processing procedures with the State’s EBT contractor, Fidelity Information Services (FIS), to efficiently and effectively issue benefits. The lack of batch processing led DPA management to implement a manual process whereby a team of four staff manually entered eligible student information directly via ebtEDGE. Management believed limiting the size of the team issuing benefits mitigated potential risks of data entry errors and unauthorized issuances. However, the manual process and small team significantly delayed the issuance process. Additionally, DPA management did not implement pre or post payment review procedures to ensure errors were prevented or detected. Furthermore, the lack of payments to SNAP-enrolled school children in child care was ascribed to competing priorities and difficulty identifying child care facility closures. Criteria: Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. FFCRA, Pub. L. 116-127, Section 1101 and federal program guidance required that P-EBT benefits be issued in accordance with the state's approved plan. Alaska’s State Plan for Pandemic EBT Children in School and Child Care, 2020-2021, section 7, establishes the framework for initial retroactive payment to eligible children from the beginning of the school year to June 2021. The Plan outlines that benefits for the period of August 2020 through December 2020 be issued beginning July 2021 and benefits for January 2021 through June 2021 be issued beginning August 2021. In FNS’s memo approving the Plan, the federal agency states that benefits should be issued as soon as possible following state plan approval. Effect: The delayed P-EBT payment processing reduced access to food benefits. Significant delays in issuing benefits increased the risk that eligibility data had grown stale and intended recipients did not receive the benefits. DPA management’s noncompliance with the Plan may result in the federal awarding agency issuing sanctions or disallowances. Questioned costs are the total costs associated with the 38 erred issuances. Based on the high error rate, additional questioned costs are likely. Questioned Costs: AL 10.542: $27,387 Recommendation: DOH’s commissioner should allocate the resources necessary to ensure effective systems are in place to properly administer federal programs. View of Responsible Officials: Management partially agrees with this finding. DPA communicated with FNS regarding manual benefit issuance for Alaska expressing timelines would be affected and FNS did not request an updated timeline. Communication with FNS regarding issuance remained consistent, with no indication to alter the issuance plan. Address verifications were conducted at the time of benefit payment, because addresses are subject to change from the date of eligibility. Updates to addresses were made when more recent information became available. DPA has no control over DEED eligibility records including the addresses they have on file. Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. DOH management asserts that the division has no control over Department of Education and Early Development (DEED) eligibility records and that beneficiary addresses were verified at the time of benefit payment. Auditors noted benefit payments were based on DEED eligibility records and DOH did not maintain support for address changes.

Federal Awarding Agency: USDA Impact: Significant Deficiency, Noncompliance AL Number and Title: 10.557 Special Supplemental Nutrition Program for Women, Infants, and Children Federal Award Number: 227AKAK7W1003, 227AKAK7W1006, 237AKAK7W1003, 237AKAK7W1006 Applicable Compliance Requirement: Procurement and Suspension and Debarment Condition: For one of five procurement contracts selected for testing, the State could not provide documentation of the procurement method chosen and the procurement exceeded the threshold required for competitive bidding procedures. Context: The State is required to follow its own procurement policies and procedures as outlined in the Alaska Administrative Manual (AAM) Section AAM 81 “Procurement”. The Alaska Administrative Manual Section AAM 81.020 requires procurements more than $10,000 and less than $50,000 to involve obtaining at least three quotes or informal proposals. Cause: The vendor provided services that were previously under the micro-purchase threshold for procurement, which did not require competitive bidding procedures. The level of activity with the vendor increased and exceeded the threshold for competitive bidding procedures to be completed by the State. Criteria: 2 CFR, Part 200 – Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), Subpart C, §200.317 requires states to follow their procurement policies and procedures. Effect: It is important for the Department to obtain and maintain appropriate documentation to support procurement decisions. Otherwise, a procurement decision would be unsupported and could lead to questioned costs. Questioned Costs: None Recommendation: The State should provide training to employees to ensure that goods and services procured are done so in accordance with the State’s procurement policy. View of Responsible Officials: Management agrees with this finding.

Federal Awarding Agency: Housing and Urban Development (HUD) Impact: Significant Deficiency, Noncompliance AL Number and Title: 14.881 Moving to Work Demonstration Program Federal Award Number: Multiple Applicable Compliance Requirement: Reporting Condition: In our testing of 60 tenants for the Moving to Work program, four instances were noted where the required 50058 report was not submitted to HUD, by AHFC, within the required 60‐day timeline. Context: Nonstatistical sampling was used. Sample size was 60 participants of 250+ participants. No dollar amount is associated. Cause: Internal controls and design are such, that the process for report submission does not always detect the timeliness of those submissions. Criteria: Management should have an internal control system in place designed to provide for the preparation of and submission of required reports in a timely manner in compliance with timelines as defined in the grant agreement and compliance supplement. Effect: Not all required 50058 reports were submitted in a timely manner. Questioned Costs: None reported Recommendation: Management and those charged with governance should analyze the current control system and ensure report submissions are submitted in a timely fashion, in line with relevant compliance requirements.   View of Responsible Officials: Management agrees with this finding.

Federal Awarding Agency: U.S. Department of Interior Impact: Significant Deficiency, Noncompliance AL Number and Title: 15.800 Research and Development Cluster Federal Award Number: G22AC00562-00 Applicable Compliance Requirement: Allowable Costs/Cost Principles Condition and Context: During testing of Indirect Cost Rate calculations, one grant from the University of Alaska Southeast campus (UAS) had one instance of an incorrect indirect cost rate calculation. UAS had two different applicable rates for on-campus and off-campus activity. The campus used the on-campus rate for both activities resulting in a higher calculated indirect cost. Cause: The internal control process for the creation of new funds auto-populated the indirect cost rate incorrectly by using the on-campus rate of 59.7 for both on-campus and off-campus research activities. Criteria: Per 2 CFR 200.414 the indirect cost methodology must be consistent with the cost accounting policy and negotiated rate agreement. Effect: An incorrect indirect cost was calculated and charged to the grant. Questioned Costs: $1,630 Recommendation: UAS should review the indirect cost rates populated for new grant funds to ensure correct rates are used. View of Responsible Officials: Management agrees with this finding.

Federal Awarding Agency: U.S. Department of Labor (USDOL) Impact: Significant Deficiency, Noncompliance AL Number and Title: 17.258, 17.259, 17.278 Workforce Innovation and Opportunity Act (WIOA) cluster Federal Award Number: AA347542055A2, AA363062155A2, AA385152255A2 Applicable Compliance Requirement: Reporting Condition: DLWD staff did not file Federal Funding Accountability and Transparency Act (FFATA) reports for FY 23 WIOA cluster subawards. Context: FFATA requires information on federal awards be made available to the public through a single searchable website (www.usaspending.gov). The FFATA Subaward Reporting System is the reporting tool federal awardees, such as the State of Alaska, use to capture and report subaward and executive compensation data for first-tier subawards. The audit found eight unreported FY 23 WIOA cluster subawards subject to FFATA reporting totaling $3.4 million. Cause: According to DLWD management, the FFATA reports were not filed due to staff turnover and a lack of procedures. Criteria: Title 2 CFR 200.303 requires the State to establish and maintain effective internal control over the federal award that provides reasonable assurance that the State is managing the federal award in compliance with federal statutes, regulations, and terms and conditions of the grant award. Title 2 CFR 170 states federal award recipients are required to report each subaward that obligates $30,000 or more in federal funds. This information must be reported no later than the end of the month following the month in which the obligation was made; include information about each obligating action in accordance with submission instructions; and include the names and total compensation of each of the subrecipient’s five most highly compensated executives if revenue thresholds are met and the executive compensation is not available to the public. Effect: Failure to comply with FFATA reporting requirements reduces transparency, impairs decision-making, and may potentially jeopardize future federal funding. Questioned Costs: None Recommendation: DLWD’s Alaska Workforce Investment Board (AWIB) executive director should develop and implement procedures to ensure compliance with FFATA reporting requirements for WIOA subrecipients. View of Responsible Officials: Management agrees with this finding.

Federal Awarding Agency: USDOL Impact: Significant Deficiency, Noncompliance AL Number and Title: 17.258, 17.259, 17.278 WIOA cluster Federal Award Number: AA347542055A2, AA363062155A2, AA385152255A2 Applicable Compliance Requirement: Subrecipient Monitoring Condition: WIOA cluster FY 23 subaward agreement forms did not identify the subrecipients’ unique entity identifier (UEI) number. Furthermore, one of three subaward agreements tested did not identify the Assistance Listing number associated with the subaward. Context: Effective April 4, 2022, the UEI replaced the Data Universal Numbering System (DUNS) number as the authoritative identifier for entities doing business with the federal government. All federal award recipients are required to have a UEI. When a state enters into a subrecipient relationship with an entity it must communicate required subaward information to subrecipients including, but not limited to, the subrecipient's UEI and the federal award Assistance Listing number. DLWD management provided subawards to eight entities to administer certain WIOA cluster grants. DLWD staff used a standard subaward agreement form to communicate federally required information to subrecipients. The audit reviewed the subaward agreement form for three of the eight subrecipients and determined the form listed a DUNS number instead of the federally required UEI. Additionally, one of the three forms did not include a complete Assistance Listing number. Cause: AWIB staff review of the grant agreement forms during the award process was insufficient to identify the transition to the UEI. According to DLWD management, the subaward agreement forms were not updated when the federal government transitioned from using the DUNS number to using the UEI. The incomplete Assistance Listing number was due to a human error during the subaward process. Criteria: Title 2 CFR 200.303 requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and terms and conditions of the federal award Title 2 CFR 200.332 requires the State to ensure that every subaward is clearly identified to the subrecipient by communicating certain required federal award information. Information to be communicated at the time of subaward includes the subrecipient’s UEI and the Assistance Listing number. Effect: Not providing the required information in the subaward document increases the risk of subrecipient noncompliance with the terms and conditions of the federal award. Questioned Costs: None Recommendation: DLWD’s AWIB executive director should strengthen review procedures and update subaward agreement forms to ensure all required federal award information is communicated to subrecipients. View of Responsible Officials: Management agrees with this finding.

Federal Awarding Agency: U.S. Department of Labor (USDOL) Impact: Significant Deficiency, Noncompliance AL Number and Title: 17.258, 17.259, 17.278 Workforce Innovation and Opportunity Act (WIOA) cluster Federal Award Number: AA347542055A2, AA363062155A2, AA385152255A2 Applicable Compliance Requirement: Reporting Condition: DLWD staff did not file Federal Funding Accountability and Transparency Act (FFATA) reports for FY 23 WIOA cluster subawards. Context: FFATA requires information on federal awards be made available to the public through a single searchable website (www.usaspending.gov). The FFATA Subaward Reporting System is the reporting tool federal awardees, such as the State of Alaska, use to capture and report subaward and executive compensation data for first-tier subawards. The audit found eight unreported FY 23 WIOA cluster subawards subject to FFATA reporting totaling $3.4 million. Cause: According to DLWD management, the FFATA reports were not filed due to staff turnover and a lack of procedures. Criteria: Title 2 CFR 200.303 requires the State to establish and maintain effective internal control over the federal award that provides reasonable assurance that the State is managing the federal award in compliance with federal statutes, regulations, and terms and conditions of the grant award. Title 2 CFR 170 states federal award recipients are required to report each subaward that obligates $30,000 or more in federal funds. This information must be reported no later than the end of the month following the month in which the obligation was made; include information about each obligating action in accordance with submission instructions; and include the names and total compensation of each of the subrecipient’s five most highly compensated executives if revenue thresholds are met and the executive compensation is not available to the public. Effect: Failure to comply with FFATA reporting requirements reduces transparency, impairs decision-making, and may potentially jeopardize future federal funding. Questioned Costs: None Recommendation: DLWD’s Alaska Workforce Investment Board (AWIB) executive director should develop and implement procedures to ensure compliance with FFATA reporting requirements for WIOA subrecipients. View of Responsible Officials: Management agrees with this finding.

Federal Awarding Agency: USDOL Impact: Significant Deficiency, Noncompliance AL Number and Title: 17.258, 17.259, 17.278 WIOA cluster Federal Award Number: AA347542055A2, AA363062155A2, AA385152255A2 Applicable Compliance Requirement: Subrecipient Monitoring Condition: WIOA cluster FY 23 subaward agreement forms did not identify the subrecipients’ unique entity identifier (UEI) number. Furthermore, one of three subaward agreements tested did not identify the Assistance Listing number associated with the subaward. Context: Effective April 4, 2022, the UEI replaced the Data Universal Numbering System (DUNS) number as the authoritative identifier for entities doing business with the federal government. All federal award recipients are required to have a UEI. When a state enters into a subrecipient relationship with an entity it must communicate required subaward information to subrecipients including, but not limited to, the subrecipient's UEI and the federal award Assistance Listing number. DLWD management provided subawards to eight entities to administer certain WIOA cluster grants. DLWD staff used a standard subaward agreement form to communicate federally required information to subrecipients. The audit reviewed the subaward agreement form for three of the eight subrecipients and determined the form listed a DUNS number instead of the federally required UEI. Additionally, one of the three forms did not include a complete Assistance Listing number. Cause: AWIB staff review of the grant agreement forms during the award process was insufficient to identify the transition to the UEI. According to DLWD management, the subaward agreement forms were not updated when the federal government transitioned from using the DUNS number to using the UEI. The incomplete Assistance Listing number was due to a human error during the subaward process. Criteria: Title 2 CFR 200.303 requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and terms and conditions of the federal award Title 2 CFR 200.332 requires the State to ensure that every subaward is clearly identified to the subrecipient by communicating certain required federal award information. Information to be communicated at the time of subaward includes the subrecipient’s UEI and the Assistance Listing number. Effect: Not providing the required information in the subaward document increases the risk of subrecipient noncompliance with the terms and conditions of the federal award. Questioned Costs: None Recommendation: DLWD’s AWIB executive director should strengthen review procedures and update subaward agreement forms to ensure all required federal award information is communicated to subrecipients. View of Responsible Officials: Management agrees with this finding.

Federal Awarding Agency: U.S. Department of Labor (USDOL) Impact: Significant Deficiency, Noncompliance AL Number and Title: 17.258, 17.259, 17.278 Workforce Innovation and Opportunity Act (WIOA) cluster Federal Award Number: AA347542055A2, AA363062155A2, AA385152255A2 Applicable Compliance Requirement: Reporting Condition: DLWD staff did not file Federal Funding Accountability and Transparency Act (FFATA) reports for FY 23 WIOA cluster subawards. Context: FFATA requires information on federal awards be made available to the public through a single searchable website (www.usaspending.gov). The FFATA Subaward Reporting System is the reporting tool federal awardees, such as the State of Alaska, use to capture and report subaward and executive compensation data for first-tier subawards. The audit found eight unreported FY 23 WIOA cluster subawards subject to FFATA reporting totaling $3.4 million. Cause: According to DLWD management, the FFATA reports were not filed due to staff turnover and a lack of procedures. Criteria: Title 2 CFR 200.303 requires the State to establish and maintain effective internal control over the federal award that provides reasonable assurance that the State is managing the federal award in compliance with federal statutes, regulations, and terms and conditions of the grant award. Title 2 CFR 170 states federal award recipients are required to report each subaward that obligates $30,000 or more in federal funds. This information must be reported no later than the end of the month following the month in which the obligation was made; include information about each obligating action in accordance with submission instructions; and include the names and total compensation of each of the subrecipient’s five most highly compensated executives if revenue thresholds are met and the executive compensation is not available to the public. Effect: Failure to comply with FFATA reporting requirements reduces transparency, impairs decision-making, and may potentially jeopardize future federal funding. Questioned Costs: None Recommendation: DLWD’s Alaska Workforce Investment Board (AWIB) executive director should develop and implement procedures to ensure compliance with FFATA reporting requirements for WIOA subrecipients. View of Responsible Officials: Management agrees with this finding.

Federal Awarding Agency: USDOL Impact: Significant Deficiency, Noncompliance AL Number and Title: 17.258, 17.259, 17.278 WIOA cluster Federal Award Number: AA347542055A2, AA363062155A2, AA385152255A2 Applicable Compliance Requirement: Subrecipient Monitoring Condition: WIOA cluster FY 23 subaward agreement forms did not identify the subrecipients’ unique entity identifier (UEI) number. Furthermore, one of three subaward agreements tested did not identify the Assistance Listing number associated with the subaward. Context: Effective April 4, 2022, the UEI replaced the Data Universal Numbering System (DUNS) number as the authoritative identifier for entities doing business with the federal government. All federal award recipients are required to have a UEI. When a state enters into a subrecipient relationship with an entity it must communicate required subaward information to subrecipients including, but not limited to, the subrecipient's UEI and the federal award Assistance Listing number. DLWD management provided subawards to eight entities to administer certain WIOA cluster grants. DLWD staff used a standard subaward agreement form to communicate federally required information to subrecipients. The audit reviewed the subaward agreement form for three of the eight subrecipients and determined the form listed a DUNS number instead of the federally required UEI. Additionally, one of the three forms did not include a complete Assistance Listing number. Cause: AWIB staff review of the grant agreement forms during the award process was insufficient to identify the transition to the UEI. According to DLWD management, the subaward agreement forms were not updated when the federal government transitioned from using the DUNS number to using the UEI. The incomplete Assistance Listing number was due to a human error during the subaward process. Criteria: Title 2 CFR 200.303 requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and terms and conditions of the federal award Title 2 CFR 200.332 requires the State to ensure that every subaward is clearly identified to the subrecipient by communicating certain required federal award information. Information to be communicated at the time of subaward includes the subrecipient’s UEI and the Assistance Listing number. Effect: Not providing the required information in the subaward document increases the risk of subrecipient noncompliance with the terms and conditions of the federal award. Questioned Costs: None Recommendation: DLWD’s AWIB executive director should strengthen review procedures and update subaward agreement forms to ensure all required federal award information is communicated to subrecipients. View of Responsible Officials: Management agrees with this finding.

Federal Awarding Agency: U.S. Department of Transportation (USDOT) Impact: Significant Deficiency, Noncompliance AL Number and Title: 20.106 Airport Improvement Program (AIP) Federal Award Number: Indeterminate Applicable Compliance Requirement: Reporting Condition: One of four randomly selected (25 percent) and two of three judgmentally selected (67 percent) 5100-126 reports tested did not tie to support, resulting in an overstatement of expenditures. One of three judgmentally selected 5100-127 reports tested (33 percent) had multiple lines in error, resulting in overstatements of revenue and net assets. Context: Commercial service airports that enplane 2,500 or more passengers in a calendar year and provided commercial service in the preceding calendar year are required to annually file financial reports with the Federal Aviation Administration (FAA). Each commercial service airport must file: (1) The Financial Government Payment Report, FAA Form 5100-126. The form reports payments the airport makes to government entities, the service the airport performs for governmental entities, and the land and facilities that the airport provides to such entities. (2) The Operating and Financial Summary, FAA Form 5100-127. The form reports airport revenues, expenses, and other financial information. The State of Alaska filed multiple 5100-126 reports for each airport that met the criteria above for payments to governmental entities. Errors on the tested 5100-126 reports included overstatements of expenditures as shown in the table below. [See Schedule of Findings and Questioned Costs for chart/table.] The State of Alaska filed 5100-127 reports for Anchorage International Airport, Fairbanks International Airport, Lake Hood Airport, and an Alaska Consolidated report encompassing all other State-owned airports that met the above criteria. All FY 23 5100-127 reports were tested, except for Lake Hood Airport. Errors were identified on the 5100-127 Alaska Consolidated report as shown below. [See Schedule of Findings and Questioned Costs for chart/table.] Cause: The Alaska Consolidated 5100-126 report expenditure overstatement was due to a clerical error when DOTPF staff added information for an airport that was not previously reported. Supervisory review procedures were insufficient to detect and correct the error. According to Alaska International Airport (AIA) management, a lack of written procedures for the preparation and review of the annual 5100-126 reports and staff turnover resulted in the overreporting of expenditures for the Anchorage and Fairbanks International Airport 5100-126 reports. Additionally, AIA management lacked written procedures for the preparation and review of the annual 5100-127 report. The Alaska Consolidated 5100-127 report overstatement errors were due to insufficient review procedures by DOTPF staff of information provided from an external source for the Ketchikan and Sitka airports, which are State-owned. Criteria: Title 2 CFR 200.328 requires states to report financial information on the forms approved by the federal Office of Management and Budget (OMB), with the frequency required by the terms and conditions of the federal award. Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Effect: The ineffective internal controls resulted in inaccurate federal reporting. Inaccurate federal reporting may impair federal decision-making and may result in the federal awarding agency imposing additional conditions or taking corrective action, including additional reporting requirements or withholding/terminating funding. Questioned Costs: None Recommendation: DOTPF’s DAS director should ensure report preparation procedures are followed and updated to include supervisory review of documentation prior to report submission. AIA’s controller should develop and implement written procedures for the 5100 126 and 5100-127 reports. View of Responsible Officials: Management agrees with this finding. [See Schedule of Findings and Questioned Costs for footnote.]

Federal Awarding Agency: USDOT Impact: Significant Deficiency AL Number and Title: 20.106 AIP Federal Award Number: 270 Federal Award Identification Numbers Applicable Compliance Requirement: Reporting Condition: DOTPF management lacked internal controls to ensure the annual SF-271 equivalent report was supported, accurate, and complete. Context: The annual SF-271 is the outlay and request for reimbursement for construction projects report. Due to the large number of construction projects DOTPF administers and reports, DOTPF does not submit the OMB SF-271 report. Instead, as permitted by the Airport Improvement Program Grant Payment and Sponsor Financial Report Policy issued by the Office of Airport, FAA, December 31, 2015, DOTPF submits an approved equivalent report. The equivalent SF-271 report consists of Excel spreadsheets that are submitted to the FAA. The SF-271 report is supported by the same expenditure and revenue data from IRIS as the SF-425 financial report. However, DOTPF staff perform additional analysis of the SF-425 data to identify revenues by project and expenditures by project and by categories such as planning, design, right of way, utilities, and construction for presentation on the SF-271 equivalent report. Cause: DOTPF management stated that since the data used for the annual SF-271 is the same data that is reported on the SF-425, which is reviewed, approved, and signed by an authorized certifying official, DOTPF management does not believe separate procedures are necessary for the SF 271 equivalent report. Auditors noted that additional analysis is performed on the SF-425 data so that it can be presented on the SF-271 equivalent report, yet no additional supervisory review or approval is performed on the additional analysis. Criteria: Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Effect: Lack of internal controls increases the risk of inaccurate federal reporting, which may impair federal decision-making and could result in reduced transparency. Further, noncompliance with federal regulations may result in the federal awarding agency imposing additional conditions or taking corrective action, including additional reporting requirements or withholding/terminating funding. Questioned Costs: None Recommendation: DOTPF’s DAS director should develop and implement written procedures for the preparation and review of the SF-271 equivalent report to ensure the report is complete, accurate, and reviewed prior to submission. View of Responsible Officials: Management agrees with this finding.

Federal Awarding Agency: USDOT Impact: Significant Deficiency, Noncompliance AL Number and Title: 20.106 AIP Federal Award Number: 3-02-0199-029-2020, 3-02-0199-030-2020, 3-02-0016-201-2021, 3-02-0016-205-2021, 3-02-0029-028-2021, 3-02-0029-029-2021, 3-02-0176-007-2021, 3-02-0150-005-2021, 3-02-0016-216-2022, 3-02-0016-217-2022 Applicable Compliance Requirement: Special Tests and Provisions Condition: Contractor certified payrolls tested for six construction projects were not submitted timely. Late payroll submission dates ranged from eight days to 189 days after the payroll payment date for the 158 certified payrolls tested. Context: All laborers and mechanics employed by contractors or subcontractors who perform work on construction contracts in excess of $2,000 financed by federal funds must be paid wages not less than the prevailing wage rates established for a project’s locality. The rates are established by the Department of Labor and Workforce Development. To ensure compliance with federal regulations, DOTPF requires contractors and subcontractors submit a certified copy of payrolls for each week of contract work within seven days after the regular payment date of the payroll period. Cause: DOTPF procedures to monitor contractors and subcontractors were inadequate to ensure certified payrolls were submitted within seven days after the payroll period. In addition, during FY 20, DOTPF transitioned to a new system for electronic submission of certified payrolls for all contracts awarded after January 1, 2021. DOTPF management stated that inadequate training on the new system contributed to the lack of compliance. Criteria: Title 29 CFR 3.4(a) requires each certified payroll must be delivered by the contractor or subcontractor within 7 days after the regular payment date of the payroll period. Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Effect: Federal agencies may suspend future payments, advances, or guarantee of future funds if a state does not comply with prevailing wage rate requirements. Questioned Costs: None Recommendation: DOTPF’s Division of Statewide Design and Engineering Services director should modify certified payroll monitoring procedures and provide training to ensure project staff perform timely review of contractors and subcontractors’ payroll submission. View of Responsible Officials: Management agrees with this finding.

Federal Awarding Agency: U.S. Department of Transportation (USDOT) Impact: Significant Deficiency, Noncompliance AL Number and Title: 20.106 Airport Improvement Program (AIP) Federal Award Number: Indeterminate Applicable Compliance Requirement: Reporting Condition: One of four randomly selected (25 percent) and two of three judgmentally selected (67 percent) 5100-126 reports tested did not tie to support, resulting in an overstatement of expenditures. One of three judgmentally selected 5100-127 reports tested (33 percent) had multiple lines in error, resulting in overstatements of revenue and net assets. Context: Commercial service airports that enplane 2,500 or more passengers in a calendar year and provided commercial service in the preceding calendar year are required to annually file financial reports with the Federal Aviation Administration (FAA). Each commercial service airport must file: (1) The Financial Government Payment Report, FAA Form 5100-126. The form reports payments the airport makes to government entities, the service the airport performs for governmental entities, and the land and facilities that the airport provides to such entities. (2) The Operating and Financial Summary, FAA Form 5100-127. The form reports airport revenues, expenses, and other financial information. The State of Alaska filed multiple 5100-126 reports for each airport that met the criteria above for payments to governmental entities. Errors on the tested 5100-126 reports included overstatements of expenditures as shown in the table below. [See Schedule of Findings and Questioned Costs for chart/table.] The State of Alaska filed 5100-127 reports for Anchorage International Airport, Fairbanks International Airport, Lake Hood Airport, and an Alaska Consolidated report encompassing all other State-owned airports that met the above criteria. All FY 23 5100-127 reports were tested, except for Lake Hood Airport. Errors were identified on the 5100-127 Alaska Consolidated report as shown below. [See Schedule of Findings and Questioned Costs for chart/table.] Cause: The Alaska Consolidated 5100-126 report expenditure overstatement was due to a clerical error when DOTPF staff added information for an airport that was not previously reported. Supervisory review procedures were insufficient to detect and correct the error. According to Alaska International Airport (AIA) management, a lack of written procedures for the preparation and review of the annual 5100-126 reports and staff turnover resulted in the overreporting of expenditures for the Anchorage and Fairbanks International Airport 5100-126 reports. Additionally, AIA management lacked written procedures for the preparation and review of the annual 5100-127 report. The Alaska Consolidated 5100-127 report overstatement errors were due to insufficient review procedures by DOTPF staff of information provided from an external source for the Ketchikan and Sitka airports, which are State-owned. Criteria: Title 2 CFR 200.328 requires states to report financial information on the forms approved by the federal Office of Management and Budget (OMB), with the frequency required by the terms and conditions of the federal award. Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Effect: The ineffective internal controls resulted in inaccurate federal reporting. Inaccurate federal reporting may impair federal decision-making and may result in the federal awarding agency imposing additional conditions or taking corrective action, including additional reporting requirements or withholding/terminating funding. Questioned Costs: None Recommendation: DOTPF’s DAS director should ensure report preparation procedures are followed and updated to include supervisory review of documentation prior to report submission. AIA’s controller should develop and implement written procedures for the 5100 126 and 5100-127 reports. View of Responsible Officials: Management agrees with this finding. [See Schedule of Findings and Questioned Costs for footnote.]

Federal Awarding Agency: USDOT Impact: Significant Deficiency AL Number and Title: 20.106 AIP Federal Award Number: 270 Federal Award Identification Numbers Applicable Compliance Requirement: Reporting Condition: DOTPF management lacked internal controls to ensure the annual SF-271 equivalent report was supported, accurate, and complete. Context: The annual SF-271 is the outlay and request for reimbursement for construction projects report. Due to the large number of construction projects DOTPF administers and reports, DOTPF does not submit the OMB SF-271 report. Instead, as permitted by the Airport Improvement Program Grant Payment and Sponsor Financial Report Policy issued by the Office of Airport, FAA, December 31, 2015, DOTPF submits an approved equivalent report. The equivalent SF-271 report consists of Excel spreadsheets that are submitted to the FAA. The SF-271 report is supported by the same expenditure and revenue data from IRIS as the SF-425 financial report. However, DOTPF staff perform additional analysis of the SF-425 data to identify revenues by project and expenditures by project and by categories such as planning, design, right of way, utilities, and construction for presentation on the SF-271 equivalent report. Cause: DOTPF management stated that since the data used for the annual SF-271 is the same data that is reported on the SF-425, which is reviewed, approved, and signed by an authorized certifying official, DOTPF management does not believe separate procedures are necessary for the SF 271 equivalent report. Auditors noted that additional analysis is performed on the SF-425 data so that it can be presented on the SF-271 equivalent report, yet no additional supervisory review or approval is performed on the additional analysis. Criteria: Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Effect: Lack of internal controls increases the risk of inaccurate federal reporting, which may impair federal decision-making and could result in reduced transparency. Further, noncompliance with federal regulations may result in the federal awarding agency imposing additional conditions or taking corrective action, including additional reporting requirements or withholding/terminating funding. Questioned Costs: None Recommendation: DOTPF’s DAS director should develop and implement written procedures for the preparation and review of the SF-271 equivalent report to ensure the report is complete, accurate, and reviewed prior to submission. View of Responsible Officials: Management agrees with this finding.

Federal Awarding Agency: USDOT Impact: Significant Deficiency, Noncompliance AL Number and Title: 20.106 AIP Federal Award Number: 3-02-0199-029-2020, 3-02-0199-030-2020, 3-02-0016-201-2021, 3-02-0016-205-2021, 3-02-0029-028-2021, 3-02-0029-029-2021, 3-02-0176-007-2021, 3-02-0150-005-2021, 3-02-0016-216-2022, 3-02-0016-217-2022 Applicable Compliance Requirement: Special Tests and Provisions Condition: Contractor certified payrolls tested for six construction projects were not submitted timely. Late payroll submission dates ranged from eight days to 189 days after the payroll payment date for the 158 certified payrolls tested. Context: All laborers and mechanics employed by contractors or subcontractors who perform work on construction contracts in excess of $2,000 financed by federal funds must be paid wages not less than the prevailing wage rates established for a project’s locality. The rates are established by the Department of Labor and Workforce Development. To ensure compliance with federal regulations, DOTPF requires contractors and subcontractors submit a certified copy of payrolls for each week of contract work within seven days after the regular payment date of the payroll period. Cause: DOTPF procedures to monitor contractors and subcontractors were inadequate to ensure certified payrolls were submitted within seven days after the payroll period. In addition, during FY 20, DOTPF transitioned to a new system for electronic submission of certified payrolls for all contracts awarded after January 1, 2021. DOTPF management stated that inadequate training on the new system contributed to the lack of compliance. Criteria: Title 29 CFR 3.4(a) requires each certified payroll must be delivered by the contractor or subcontractor within 7 days after the regular payment date of the payroll period. Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Effect: Federal agencies may suspend future payments, advances, or guarantee of future funds if a state does not comply with prevailing wage rate requirements. Questioned Costs: None Recommendation: DOTPF’s Division of Statewide Design and Engineering Services director should modify certified payroll monitoring procedures and provide training to ensure project staff perform timely review of contractors and subcontractors’ payroll submission. View of Responsible Officials: Management agrees with this finding.

Federal Awarding Agency: USDOT Impact: Significant Deficiency AL Number and Title: 20.509 Formula Grants for Rural Areas (FGRA) Federal Award Number: AK-2016-008, AK-2018-020, AK-2019-028, AK-2020-027, AK-2020-048, AK-2021-044, AK-2022-006, AK-2022-008, AK-2022-018, AK-2022-019 Applicable Compliance Requirement: Allowable Costs/Cost Principles, Subrecipient Monitoring Condition: DOTPF’s Division of Program Development (DPD) does not have a formal process for managing user access to its transit data management system. Context: The details related to this control weakness and the relevant audit criteria are being withheld from this report to prevent the weakness from being exploited. Pertinent details have been communicated to agency management in a separate confidential document. Cause: Turnover in key positions contributed to the deficiency. Criteria: Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over a federal award that provides reasonable assurance that the State is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the award. State of Alaska (SOA) Information Security Policy 171 requires a formal process for all access requests (e.g. additions, changes, or deletions) to SOA computers, networks, or applications. Access requests to SOA applications must be authorized by a designated data owner and be based on a business need related to the user’s duties. Users must also attest to a written statement of job responsibility and conditions of access. Finally, personnel tasked with network user administration must ensure that changes to user privileges are promptly applied (e.g. hiring, termination, reassignment of users). Effect: Lack of adequate internal controls over user access increases the risk of unauthorized system use, including data manipulation, which may result in ineligible recipients and unallowed expenditures. Questioned Costs: None Recommendation: DPD’s director should develop and implement written procedures for managing user access to the transit data management system. View of Responsible Officials: Management agrees with this finding.

Federal Awarding Agency: USDOT Impact: Noncompliance AL Number and Title: 20.509 FGRA Federal Award Number: AK-2018-020, AK-2019-028, AK-2020-027, AK-2021-044, AK-2022-019, Applicable Compliance Requirement: Subrecipient Monitoring Condition: All five FY 23 FGRA subrecipient subawards tested did not have a quarterly report specific to the subaward as required for monitoring purposes. Context: DOTPF’s Alaska Community Transit (ACT) office enters into subaward grant agreements with subrecipients for the FGRA program, as well as other federal programs. A subrecipient can have multiple open subawards. Each FGRA subaward grant agreement requires quarterly reports to be submitted. Subrecipients submit the required quarterly reports via the BlackCat system and ACT staff use BlackCat to monitor subrecipients. The audit reviewed five of 36 active FY 23 subawards in BlackCat and found that, instead of an individual quarterly report for each FGRA subaward, subrecipients filed one consolidated quarterly report for all subawards. Cause: The BlackCat system limits subrecipients’ ability to file quarterly reports for each subaward. Therefore, subrecipients filed one consolidated quarterly report for all subawards. Criteria: Title 2 CFR 200.332(d) requires the State to monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with federal statutes, regulations, and the terms and conditions of the subaward, and that subaward performance goals are achieved. Pass-through entity monitoring of the subrecipient must include reviewing financial and performance reports required by the pass-through entity. Effect: The lack of quarterly reports for each subaward grant agreement limited ACT staff’s ability to effectively monitor subrecipients to ensure subawards were used for authorized purposes. Questioned Costs: None Recommendation: DPD’s director should implement system changes to BlackCat to allow quarterly reports to be filed for each subaward. View of Responsible Officials: Management agrees with this finding.

Federal Awarding Agency: USDOT Impact: Significant Deficiency, Noncompliance AL Number and Title: 20.509 FGRA Federal Award Number: AK-2022-019 Applicable Compliance Requirement: Subrecipient Monitoring Condition: All five FY 23 FGRA subaward grant agreements tested did not include all federally required information. Context: In FY 23 DPD entered into 15 FGRA subaward grant agreements with 12 subrecipients. The audit reviewed a random sample of five subaward grant agreements. All grant agreements tested did not include the federal award date, assistance listing title, and indirect cost rate. Cause: DPD grant administration staff were unaware of the federal award information required to be included in the subaward grant agreement due to staff turnover and a lack of written procedures. Criteria: Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Title 2 CFR 200.332(a) requires the State to ensure every subaward agreement includes the required federal award information at the time of the subaward. Effect: Not providing the required award information increases the risk of subrecipient noncompliance with the terms and conditions of the federal award. Questioned Costs: None Recommendation: DPD’s director should amend all active FGRA subaward grant agreements to include the missing federally required information. Furthermore, management should develop written procedures to ensure compliance with all subrecipient monitoring requirements applicable to federally funded subawards administered by DOTPF. View of Responsible Officials: Management agrees with this finding.

Federal Awarding Agency: USDOT Impact: Significant Deficiency, Noncompliance AL Number and Title: 20.509 FGRA Federal Award Number: AK-2022-027 Applicable Compliance Requirement: Subrecipient Monitoring Condition: DOTPF management did not issue a management decision for the one single audit finding requiring follow-up in FY 23 within six months as required by federal law. Context: Under federal regulations, pass-through entities are responsible for issuing a management decision for audit findings relating to federal awards provided to subrecipients. The management decision must clearly state whether or not the audit finding is sustained, the reasons for the decision, and the adequacy of the subrecipient’s proposed corrective actions to address the finding. If the subrecipient has not completed corrective action, a timetable for follow-up should be given. Cause: DOTPF has no procedures to ensure a management decision is issued in a timely manner for a subrecipient’s single audit finding. DOTPF management believed it was not necessary to track subrecipients that require single audit follow-up as there was only one subrecipient with a finding during FY 23. Criteria: Title 2 CFR 200.332(d)(3) states that pass-through entities’ monitoring of subrecipients must include issuing a management decision for audit findings that relate to the federal award provided to the subrecipient from the pass-through entity. Title 2 CFR 200.521(d) states a management decision must be issued within six months of acceptance of the audit report by the federal audit clearinghouse. Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Effect: Untimely management decisions may result in the subrecipient not taking appropriate corrective action on findings. Noncompliance with federal regulations may result in the federal awarding agency imposing additional conditions or taking corrective action, including additional reporting requirements or withholding/terminating funding. Questioned Costs: None Recommendation: DOTPF’s Division of Administrative Services (DAS) director should develop and implement procedures to ensure management decisions for all subrecipient single audit findings are issued within six months of the audit report’s acceptance by the federal audit clearinghouse. View of Responsible Officials: Management agrees with this finding.

Federal Awarding Agency: USDOT Impact: Significant Deficiency AL Number and Title: 20.509 Formula Grants for Rural Areas (FGRA) Federal Award Number: AK-2016-008, AK-2018-020, AK-2019-028, AK-2020-027, AK-2020-048, AK-2021-044, AK-2022-006, AK-2022-008, AK-2022-018, AK-2022-019 Applicable Compliance Requirement: Allowable Costs/Cost Principles, Subrecipient Monitoring Condition: DOTPF’s Division of Program Development (DPD) does not have a formal process for managing user access to its transit data management system. Context: The details related to this control weakness and the relevant audit criteria are being withheld from this report to prevent the weakness from being exploited. Pertinent details have been communicated to agency management in a separate confidential document. Cause: Turnover in key positions contributed to the deficiency. Criteria: Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over a federal award that provides reasonable assurance that the State is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the award. State of Alaska (SOA) Information Security Policy 171 requires a formal process for all access requests (e.g. additions, changes, or deletions) to SOA computers, networks, or applications. Access requests to SOA applications must be authorized by a designated data owner and be based on a business need related to the user’s duties. Users must also attest to a written statement of job responsibility and conditions of access. Finally, personnel tasked with network user administration must ensure that changes to user privileges are promptly applied (e.g. hiring, termination, reassignment of users). Effect: Lack of adequate internal controls over user access increases the risk of unauthorized system use, including data manipulation, which may result in ineligible recipients and unallowed expenditures. Questioned Costs: None Recommendation: DPD’s director should develop and implement written procedures for managing user access to the transit data management system. View of Responsible Officials: Management agrees with this finding.

Federal Awarding Agency: USDOT Impact: Noncompliance AL Number and Title: 20.509 FGRA Federal Award Number: AK-2018-020, AK-2019-028, AK-2020-027, AK-2021-044, AK-2022-019, Applicable Compliance Requirement: Subrecipient Monitoring Condition: All five FY 23 FGRA subrecipient subawards tested did not have a quarterly report specific to the subaward as required for monitoring purposes. Context: DOTPF’s Alaska Community Transit (ACT) office enters into subaward grant agreements with subrecipients for the FGRA program, as well as other federal programs. A subrecipient can have multiple open subawards. Each FGRA subaward grant agreement requires quarterly reports to be submitted. Subrecipients submit the required quarterly reports via the BlackCat system and ACT staff use BlackCat to monitor subrecipients. The audit reviewed five of 36 active FY 23 subawards in BlackCat and found that, instead of an individual quarterly report for each FGRA subaward, subrecipients filed one consolidated quarterly report for all subawards. Cause: The BlackCat system limits subrecipients’ ability to file quarterly reports for each subaward. Therefore, subrecipients filed one consolidated quarterly report for all subawards. Criteria: Title 2 CFR 200.332(d) requires the State to monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with federal statutes, regulations, and the terms and conditions of the subaward, and that subaward performance goals are achieved. Pass-through entity monitoring of the subrecipient must include reviewing financial and performance reports required by the pass-through entity. Effect: The lack of quarterly reports for each subaward grant agreement limited ACT staff’s ability to effectively monitor subrecipients to ensure subawards were used for authorized purposes. Questioned Costs: None Recommendation: DPD’s director should implement system changes to BlackCat to allow quarterly reports to be filed for each subaward. View of Responsible Officials: Management agrees with this finding.

Federal Awarding Agency: USDOT Impact: Significant Deficiency, Noncompliance AL Number and Title: 20.509 FGRA Federal Award Number: AK-2022-019 Applicable Compliance Requirement: Subrecipient Monitoring Condition: All five FY 23 FGRA subaward grant agreements tested did not include all federally required information. Context: In FY 23 DPD entered into 15 FGRA subaward grant agreements with 12 subrecipients. The audit reviewed a random sample of five subaward grant agreements. All grant agreements tested did not include the federal award date, assistance listing title, and indirect cost rate. Cause: DPD grant administration staff were unaware of the federal award information required to be included in the subaward grant agreement due to staff turnover and a lack of written procedures. Criteria: Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Title 2 CFR 200.332(a) requires the State to ensure every subaward agreement includes the required federal award information at the time of the subaward. Effect: Not providing the required award information increases the risk of subrecipient noncompliance with the terms and conditions of the federal award. Questioned Costs: None Recommendation: DPD’s director should amend all active FGRA subaward grant agreements to include the missing federally required information. Furthermore, management should develop written procedures to ensure compliance with all subrecipient monitoring requirements applicable to federally funded subawards administered by DOTPF. View of Responsible Officials: Management agrees with this finding.

Federal Awarding Agency: USDOT Impact: Significant Deficiency, Noncompliance AL Number and Title: 20.509 FGRA Federal Award Number: AK-2022-027 Applicable Compliance Requirement: Subrecipient Monitoring Condition: DOTPF management did not issue a management decision for the one single audit finding requiring follow-up in FY 23 within six months as required by federal law. Context: Under federal regulations, pass-through entities are responsible for issuing a management decision for audit findings relating to federal awards provided to subrecipients. The management decision must clearly state whether or not the audit finding is sustained, the reasons for the decision, and the adequacy of the subrecipient’s proposed corrective actions to address the finding. If the subrecipient has not completed corrective action, a timetable for follow-up should be given. Cause: DOTPF has no procedures to ensure a management decision is issued in a timely manner for a subrecipient’s single audit finding. DOTPF management believed it was not necessary to track subrecipients that require single audit follow-up as there was only one subrecipient with a finding during FY 23. Criteria: Title 2 CFR 200.332(d)(3) states that pass-through entities’ monitoring of subrecipients must include issuing a management decision for audit findings that relate to the federal award provided to the subrecipient from the pass-through entity. Title 2 CFR 200.521(d) states a management decision must be issued within six months of acceptance of the audit report by the federal audit clearinghouse. Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Effect: Untimely management decisions may result in the subrecipient not taking appropriate corrective action on findings. Noncompliance with federal regulations may result in the federal awarding agency imposing additional conditions or taking corrective action, including additional reporting requirements or withholding/terminating funding. Questioned Costs: None Recommendation: DOTPF’s Division of Administrative Services (DAS) director should develop and implement procedures to ensure management decisions for all subrecipient single audit findings are issued within six months of the audit report’s acceptance by the federal audit clearinghouse. View of Responsible Officials: Management agrees with this finding.

Prior Year Finding: 2022-083 Federal Awarding Agency: U.S. Department of Education Impact: Significant Deficiency, Noncompliance AL Number and Title: 84.007, 84.038, 84.063, 84.268, 84.379 Student Financial Assistance Cluster Federal Award Number: N/A Applicable Compliance Requirement: Cash Management Condition and Context: UAS had twenty-two stale Title IV checks greater than 240 days. Cause: Staffing issues in the student financial aid office at all three campuses have made it difficult for the student financial aid departments to perform their monthly review of uncashed checks in a timely manner. The delays in this process caused several instances of outstanding checks to age beyond 240 days. Criteria: The Code of Federal Regulations, 34 CFR 668.164(h)(2) states that an institution that attempts to disburse funds by check and the check is not cashed, the institution must return the funds to the Secretary no later than 240 days after the date it issued that check. Effect: Funds are not returned to the Department of Education in a timely manner. Questioned Costs: None Recommendation: UAS should continue working with the Statewide Office of Finance and Accounting to better enforce the monthly review of uncashed checks policy. View of Responsible Officials: Management agrees with this finding.

Prior Year Finding: 2022-083 Federal Awarding Agency: U.S. Department of Education Impact: Significant Deficiency, Noncompliance AL Number and Title: 84.007, 84.038, 84.063, 84.268, 84.379 Student Financial Assistance Cluster Federal Award Number: N/A Applicable Compliance Requirement: Cash Management Condition and Context: UAS had twenty-two stale Title IV checks greater than 240 days. Cause: Staffing issues in the student financial aid office at all three campuses have made it difficult for the student financial aid departments to perform their monthly review of uncashed checks in a timely manner. The delays in this process caused several instances of outstanding checks to age beyond 240 days. Criteria: The Code of Federal Regulations, 34 CFR 668.164(h)(2) states that an institution that attempts to disburse funds by check and the check is not cashed, the institution must return the funds to the Secretary no later than 240 days after the date it issued that check. Effect: Funds are not returned to the Department of Education in a timely manner. Questioned Costs: None Recommendation: UAS should continue working with the Statewide Office of Finance and Accounting to better enforce the monthly review of uncashed checks policy. View of Responsible Officials: Management agrees with this finding.

Prior Year Finding: 2022-083 Federal Awarding Agency: U.S. Department of Education Impact: Significant Deficiency, Noncompliance AL Number and Title: 84.007, 84.038, 84.063, 84.268, 84.379 Student Financial Assistance Cluster Federal Award Number: N/A Applicable Compliance Requirement: Cash Management Condition and Context: UAS had twenty-two stale Title IV checks greater than 240 days. Cause: Staffing issues in the student financial aid office at all three campuses have made it difficult for the student financial aid departments to perform their monthly review of uncashed checks in a timely manner. The delays in this process caused several instances of outstanding checks to age beyond 240 days. Criteria: The Code of Federal Regulations, 34 CFR 668.164(h)(2) states that an institution that attempts to disburse funds by check and the check is not cashed, the institution must return the funds to the Secretary no later than 240 days after the date it issued that check. Effect: Funds are not returned to the Department of Education in a timely manner. Questioned Costs: None Recommendation: UAS should continue working with the Statewide Office of Finance and Accounting to better enforce the monthly review of uncashed checks policy. View of Responsible Officials: Management agrees with this finding.

Prior Year Finding: 2022-083 Federal Awarding Agency: U.S. Department of Education Impact: Significant Deficiency, Noncompliance AL Number and Title: 84.007, 84.038, 84.063, 84.268, 84.379 Student Financial Assistance Cluster Federal Award Number: N/A Applicable Compliance Requirement: Cash Management Condition and Context: UAS had twenty-two stale Title IV checks greater than 240 days. Cause: Staffing issues in the student financial aid office at all three campuses have made it difficult for the student financial aid departments to perform their monthly review of uncashed checks in a timely manner. The delays in this process caused several instances of outstanding checks to age beyond 240 days. Criteria: The Code of Federal Regulations, 34 CFR 668.164(h)(2) states that an institution that attempts to disburse funds by check and the check is not cashed, the institution must return the funds to the Secretary no later than 240 days after the date it issued that check. Effect: Funds are not returned to the Department of Education in a timely manner. Questioned Costs: None Recommendation: UAS should continue working with the Statewide Office of Finance and Accounting to better enforce the monthly review of uncashed checks policy. View of Responsible Officials: Management agrees with this finding.

Prior Year Finding: 2022-026 Federal Awarding Agency: U.S. Department of Education (USED) Impact: Material Weakness, Material Noncompliance AL Number and Title: 84.425D Elementary and Secondary School Emergency Relief Fund – COVID-19 84.425R – Emergency Assistance for Non-Public Schools – COVID-19 84.425U American Rescue Plan – Elementary and Secondary School Emergency Relief Fund – COVID-19 84.425W American Rescue Plan – Homeless Children and Youth – COVID-19 Federal Award Number: S425D210020, S425R210001, S425U210020, S425W210002 Applicable Compliance Requirement: Reporting Federal Awarding Agency: USED Impact: Significant Deficiency, Noncompliance AL Number and Title: 84.010 Title I Grants to Local Educational Agencies (Title I-A) 84.011 Migrant Education State Grant Program (Title I-C) Federal Award Number: S010A220002, S011A220002 Applicable Compliance Requirement: Reporting Condition: DEED did not file Federal Funding Accountability and Transparency Act (FFATA) reports for FY 23 Education Stabilization Fund (ESF) programs, Title I-A, and Title I-C subawards. Context: FFATA requires information on federal awards be made available to the public through a single searchable website (www.usaspending.gov). The FFATA Subaward Reporting System (FSRS) is the reporting tool federal awardees, such as the State of Alaska, use to capture and report subaward and executive compensation data for first-tier subawards. According to DEED procedures, staff prepare a monthly report to be submitted to FSRS within 10 days after the end of the month. DEED has not completed the monthly submission to FSRS since April 2022. The audit found that unreported FY 23 subawards subject to FFATA reporting totaled $19.2 million for ESF programs, $49.3 million for Title I-A, and $20.4 million for Title I-C. Cause: According to DEED staff, uploading reports to FSRS consistently resulted in errors related to the subawardees’ zip codes. The upload errors were time-consuming to resolve and required significant manual input. Due to limited capacity and competing priorities, DEED management instructed staff to disregard procedures and discontinue FFATA reporting until the upload errors could be resolved. According to DEED management, the FSRS help desk was unresponsive in resolving issues with FFATA reporting. Criteria: Title 2 CFR 200.303 requires the State to establish and maintain effective internal control over the federal award that provides reasonable assurance that the State is managing the federal awards in compliance with federal statutes, regulations, and terms and conditions of the grant awards. Title 2 CFR 170 states federal award recipients are required to report each subaward that obligates $30,000 or more in federal funds. This information must be reported no later than the end of the month following the month in which the obligation was made; include information about each obligating action in accordance with submission instructions; and include the names and total compensation of each of the subrecipient’s five most highly compensated executives if revenue thresholds are met and the executive compensation is not available to the public. Effect: Failure to comply with FFATA reporting requirements reduces transparency, impairs decision-making, and may potentially jeopardize future federal funding. Questioned Costs: None Recommendation: DEED's Division of Administrative Services director should continue to work with the appropriate federal contacts to resolve FSRS reporting errors and follow procedures to ensure compliance with FFATA reporting requirements. View of Responsible Officials: Management agrees with this finding.

Prior Year Finding: 2022-026 Federal Awarding Agency: U.S. Department of Education (USED) Impact: Material Weakness, Material Noncompliance AL Number and Title: 84.425D Elementary and Secondary School Emergency Relief Fund – COVID-19 84.425R – Emergency Assistance for Non-Public Schools – COVID-19 84.425U American Rescue Plan – Elementary and Secondary School Emergency Relief Fund – COVID-19 84.425W American Rescue Plan – Homeless Children and Youth – COVID-19 Federal Award Number: S425D210020, S425R210001, S425U210020, S425W210002 Applicable Compliance Requirement: Reporting Federal Awarding Agency: USED Impact: Significant Deficiency, Noncompliance AL Number and Title: 84.010 Title I Grants to Local Educational Agencies (Title I-A) 84.011 Migrant Education State Grant Program (Title I-C) Federal Award Number: S010A220002, S011A220002 Applicable Compliance Requirement: Reporting Condition: DEED did not file Federal Funding Accountability and Transparency Act (FFATA) reports for FY 23 Education Stabilization Fund (ESF) programs, Title I-A, and Title I-C subawards. Context: FFATA requires information on federal awards be made available to the public through a single searchable website (www.usaspending.gov). The FFATA Subaward Reporting System (FSRS) is the reporting tool federal awardees, such as the State of Alaska, use to capture and report subaward and executive compensation data for first-tier subawards. According to DEED procedures, staff prepare a monthly report to be submitted to FSRS within 10 days after the end of the month. DEED has not completed the monthly submission to FSRS since April 2022. The audit found that unreported FY 23 subawards subject to FFATA reporting totaled $19.2 million for ESF programs, $49.3 million for Title I-A, and $20.4 million for Title I-C. Cause: According to DEED staff, uploading reports to FSRS consistently resulted in errors related to the subawardees’ zip codes. The upload errors were time-consuming to resolve and required significant manual input. Due to limited capacity and competing priorities, DEED management instructed staff to disregard procedures and discontinue FFATA reporting until the upload errors could be resolved. According to DEED management, the FSRS help desk was unresponsive in resolving issues with FFATA reporting. Criteria: Title 2 CFR 200.303 requires the State to establish and maintain effective internal control over the federal award that provides reasonable assurance that the State is managing the federal awards in compliance with federal statutes, regulations, and terms and conditions of the grant awards. Title 2 CFR 170 states federal award recipients are required to report each subaward that obligates $30,000 or more in federal funds. This information must be reported no later than the end of the month following the month in which the obligation was made; include information about each obligating action in accordance with submission instructions; and include the names and total compensation of each of the subrecipient’s five most highly compensated executives if revenue thresholds are met and the executive compensation is not available to the public. Effect: Failure to comply with FFATA reporting requirements reduces transparency, impairs decision-making, and may potentially jeopardize future federal funding. Questioned Costs: None Recommendation: DEED's Division of Administrative Services director should continue to work with the appropriate federal contacts to resolve FSRS reporting errors and follow procedures to ensure compliance with FFATA reporting requirements. View of Responsible Officials: Management agrees with this finding.

Prior Year Finding: 2022-026 Federal Awarding Agency: U.S. Department of Education (USED) Impact: Material Weakness, Material Noncompliance AL Number and Title: 84.425D Elementary and Secondary School Emergency Relief Fund – COVID-19 84.425R – Emergency Assistance for Non-Public Schools – COVID-19 84.425U American Rescue Plan – Elementary and Secondary School Emergency Relief Fund – COVID-19 84.425W American Rescue Plan – Homeless Children and Youth – COVID-19 Federal Award Number: S425D210020, S425R210001, S425U210020, S425W210002 Applicable Compliance Requirement: Reporting Federal Awarding Agency: USED Impact: Significant Deficiency, Noncompliance AL Number and Title: 84.010 Title I Grants to Local Educational Agencies (Title I-A) 84.011 Migrant Education State Grant Program (Title I-C) Federal Award Number: S010A220002, S011A220002 Applicable Compliance Requirement: Reporting Condition: DEED did not file Federal Funding Accountability and Transparency Act (FFATA) reports for FY 23 Education Stabilization Fund (ESF) programs, Title I-A, and Title I-C subawards. Context: FFATA requires information on federal awards be made available to the public through a single searchable website (www.usaspending.gov). The FFATA Subaward Reporting System (FSRS) is the reporting tool federal awardees, such as the State of Alaska, use to capture and report subaward and executive compensation data for first-tier subawards. According to DEED procedures, staff prepare a monthly report to be submitted to FSRS within 10 days after the end of the month. DEED has not completed the monthly submission to FSRS since April 2022. The audit found that unreported FY 23 subawards subject to FFATA reporting totaled $19.2 million for ESF programs, $49.3 million for Title I-A, and $20.4 million for Title I-C. Cause: According to DEED staff, uploading reports to FSRS consistently resulted in errors related to the subawardees’ zip codes. The upload errors were time-consuming to resolve and required significant manual input. Due to limited capacity and competing priorities, DEED management instructed staff to disregard procedures and discontinue FFATA reporting until the upload errors could be resolved. According to DEED management, the FSRS help desk was unresponsive in resolving issues with FFATA reporting. Criteria: Title 2 CFR 200.303 requires the State to establish and maintain effective internal control over the federal award that provides reasonable assurance that the State is managing the federal awards in compliance with federal statutes, regulations, and terms and conditions of the grant awards. Title 2 CFR 170 states federal award recipients are required to report each subaward that obligates $30,000 or more in federal funds. This information must be reported no later than the end of the month following the month in which the obligation was made; include information about each obligating action in accordance with submission instructions; and include the names and total compensation of each of the subrecipient’s five most highly compensated executives if revenue thresholds are met and the executive compensation is not available to the public. Effect: Failure to comply with FFATA reporting requirements reduces transparency, impairs decision-making, and may potentially jeopardize future federal funding. Questioned Costs: None Recommendation: DEED's Division of Administrative Services director should continue to work with the appropriate federal contacts to resolve FSRS reporting errors and follow procedures to ensure compliance with FFATA reporting requirements. View of Responsible Officials: Management agrees with this finding.

Federal Awarding Agency: U.S. Department of Education Impact: Significant Deficiency, Noncompliance AL Number and Title: 84.425L Higher Education Emergency Relief Fund Federal Award Number: N/A Applicable Compliance Requirement: Procurement and Suspension and Debarment Condition and Context: During the testing of Suspension and Debarment, UAF has two covered lease contracts that did not have EPLS checks performed. Cause: UAF failed to retain documentation to support the date on which EPLS checks were performed. Criteria: Per Uniform Guidance 2 CFR 180.300 nonfederal entities entering into covered transactions must verify the party is not suspended or debarred from conducting business by the federal government. This can be performed by: Checking SAM exclusions, collecting a certification from the party, or adding a clause or condition to the covered transaction. Effect: Potentially suspended or debarred vendors may have been contracted with federal funds. Questions costs: None Recommendation: UAF should perform EPLS checks on all covered transactions paid with federal funds. View of Responsible Officials: Management agrees with this finding.

Prior Year Finding: 2022-026 Federal Awarding Agency: U.S. Department of Education (USED) Impact: Material Weakness, Material Noncompliance AL Number and Title: 84.425D Elementary and Secondary School Emergency Relief Fund – COVID-19 84.425R – Emergency Assistance for Non-Public Schools – COVID-19 84.425U American Rescue Plan – Elementary and Secondary School Emergency Relief Fund – COVID-19 84.425W American Rescue Plan – Homeless Children and Youth – COVID-19 Federal Award Number: S425D210020, S425R210001, S425U210020, S425W210002 Applicable Compliance Requirement: Reporting Federal Awarding Agency: USED Impact: Significant Deficiency, Noncompliance AL Number and Title: 84.010 Title I Grants to Local Educational Agencies (Title I-A) 84.011 Migrant Education State Grant Program (Title I-C) Federal Award Number: S010A220002, S011A220002 Applicable Compliance Requirement: Reporting Condition: DEED did not file Federal Funding Accountability and Transparency Act (FFATA) reports for FY 23 Education Stabilization Fund (ESF) programs, Title I-A, and Title I-C subawards. Context: FFATA requires information on federal awards be made available to the public through a single searchable website (www.usaspending.gov). The FFATA Subaward Reporting System (FSRS) is the reporting tool federal awardees, such as the State of Alaska, use to capture and report subaward and executive compensation data for first-tier subawards. According to DEED procedures, staff prepare a monthly report to be submitted to FSRS within 10 days after the end of the month. DEED has not completed the monthly submission to FSRS since April 2022. The audit found that unreported FY 23 subawards subject to FFATA reporting totaled $19.2 million for ESF programs, $49.3 million for Title I-A, and $20.4 million for Title I-C. Cause: According to DEED staff, uploading reports to FSRS consistently resulted in errors related to the subawardees’ zip codes. The upload errors were time-consuming to resolve and required significant manual input. Due to limited capacity and competing priorities, DEED management instructed staff to disregard procedures and discontinue FFATA reporting until the upload errors could be resolved. According to DEED management, the FSRS help desk was unresponsive in resolving issues with FFATA reporting. Criteria: Title 2 CFR 200.303 requires the State to establish and maintain effective internal control over the federal award that provides reasonable assurance that the State is managing the federal awards in compliance with federal statutes, regulations, and terms and conditions of the grant awards. Title 2 CFR 170 states federal award recipients are required to report each subaward that obligates $30,000 or more in federal funds. This information must be reported no later than the end of the month following the month in which the obligation was made; include information about each obligating action in accordance with submission instructions; and include the names and total compensation of each of the subrecipient’s five most highly compensated executives if revenue thresholds are met and the executive compensation is not available to the public. Effect: Failure to comply with FFATA reporting requirements reduces transparency, impairs decision-making, and may potentially jeopardize future federal funding. Questioned Costs: None Recommendation: DEED's Division of Administrative Services director should continue to work with the appropriate federal contacts to resolve FSRS reporting errors and follow procedures to ensure compliance with FFATA reporting requirements. View of Responsible Officials: Management agrees with this finding.

Federal Awarding Agency: U.S. Department of Education Impact: Significant Deficiency, Noncompliance AL Number and Title: 84.425L Higher Education Emergency Relief Fund Federal Award Number: N/A Applicable Compliance Requirement: Procurement and Suspension and Debarment Condition and Context: During the testing of Suspension and Debarment, UAF has two covered lease contracts that did not have EPLS checks performed. Cause: UAF failed to retain documentation to support the date on which EPLS checks were performed. Criteria: Per Uniform Guidance 2 CFR 180.300 nonfederal entities entering into covered transactions must verify the party is not suspended or debarred from conducting business by the federal government. This can be performed by: Checking SAM exclusions, collecting a certification from the party, or adding a clause or condition to the covered transaction. Effect: Potentially suspended or debarred vendors may have been contracted with federal funds. Questions costs: None Recommendation: UAF should perform EPLS checks on all covered transactions paid with federal funds. View of Responsible Officials: Management agrees with this finding.

Prior Year Finding: 2022-026 Federal Awarding Agency: U.S. Department of Education (USED) Impact: Material Weakness, Material Noncompliance AL Number and Title: 84.425D Elementary and Secondary School Emergency Relief Fund – COVID-19 84.425R – Emergency Assistance for Non-Public Schools – COVID-19 84.425U American Rescue Plan – Elementary and Secondary School Emergency Relief Fund – COVID-19 84.425W American Rescue Plan – Homeless Children and Youth – COVID-19 Federal Award Number: S425D210020, S425R210001, S425U210020, S425W210002 Applicable Compliance Requirement: Reporting Federal Awarding Agency: USED Impact: Significant Deficiency, Noncompliance AL Number and Title: 84.010 Title I Grants to Local Educational Agencies (Title I-A) 84.011 Migrant Education State Grant Program (Title I-C) Federal Award Number: S010A220002, S011A220002 Applicable Compliance Requirement: Reporting Condition: DEED did not file Federal Funding Accountability and Transparency Act (FFATA) reports for FY 23 Education Stabilization Fund (ESF) programs, Title I-A, and Title I-C subawards. Context: FFATA requires information on federal awards be made available to the public through a single searchable website (www.usaspending.gov). The FFATA Subaward Reporting System (FSRS) is the reporting tool federal awardees, such as the State of Alaska, use to capture and report subaward and executive compensation data for first-tier subawards. According to DEED procedures, staff prepare a monthly report to be submitted to FSRS within 10 days after the end of the month. DEED has not completed the monthly submission to FSRS since April 2022. The audit found that unreported FY 23 subawards subject to FFATA reporting totaled $19.2 million for ESF programs, $49.3 million for Title I-A, and $20.4 million for Title I-C. Cause: According to DEED staff, uploading reports to FSRS consistently resulted in errors related to the subawardees’ zip codes. The upload errors were time-consuming to resolve and required significant manual input. Due to limited capacity and competing priorities, DEED management instructed staff to disregard procedures and discontinue FFATA reporting until the upload errors could be resolved. According to DEED management, the FSRS help desk was unresponsive in resolving issues with FFATA reporting. Criteria: Title 2 CFR 200.303 requires the State to establish and maintain effective internal control over the federal award that provides reasonable assurance that the State is managing the federal awards in compliance with federal statutes, regulations, and terms and conditions of the grant awards. Title 2 CFR 170 states federal award recipients are required to report each subaward that obligates $30,000 or more in federal funds. This information must be reported no later than the end of the month following the month in which the obligation was made; include information about each obligating action in accordance with submission instructions; and include the names and total compensation of each of the subrecipient’s five most highly compensated executives if revenue thresholds are met and the executive compensation is not available to the public. Effect: Failure to comply with FFATA reporting requirements reduces transparency, impairs decision-making, and may potentially jeopardize future federal funding. Questioned Costs: None Recommendation: DEED's Division of Administrative Services director should continue to work with the appropriate federal contacts to resolve FSRS reporting errors and follow procedures to ensure compliance with FFATA reporting requirements. View of Responsible Officials: Management agrees with this finding.

Federal Awarding Agency: U.S. Department of Education Impact: Significant Deficiency, Noncompliance AL Number and Title: 84.425L Higher Education Emergency Relief Fund Federal Award Number: N/A Applicable Compliance Requirement: Procurement and Suspension and Debarment Condition and Context: During the testing of Suspension and Debarment, UAF has two covered lease contracts that did not have EPLS checks performed. Cause: UAF failed to retain documentation to support the date on which EPLS checks were performed. Criteria: Per Uniform Guidance 2 CFR 180.300 nonfederal entities entering into covered transactions must verify the party is not suspended or debarred from conducting business by the federal government. This can be performed by: Checking SAM exclusions, collecting a certification from the party, or adding a clause or condition to the covered transaction. Effect: Potentially suspended or debarred vendors may have been contracted with federal funds. Questions costs: None Recommendation: UAF should perform EPLS checks on all covered transactions paid with federal funds. View of Responsible Officials: Management agrees with this finding.

Prior Year Finding: 2022-026 Federal Awarding Agency: U.S. Department of Education (USED) Impact: Material Weakness, Material Noncompliance AL Number and Title: 84.425D Elementary and Secondary School Emergency Relief Fund – COVID-19 84.425R – Emergency Assistance for Non-Public Schools – COVID-19 84.425U American Rescue Plan – Elementary and Secondary School Emergency Relief Fund – COVID-19 84.425W American Rescue Plan – Homeless Children and Youth – COVID-19 Federal Award Number: S425D210020, S425R210001, S425U210020, S425W210002 Applicable Compliance Requirement: Reporting Federal Awarding Agency: USED Impact: Significant Deficiency, Noncompliance AL Number and Title: 84.010 Title I Grants to Local Educational Agencies (Title I-A) 84.011 Migrant Education State Grant Program (Title I-C) Federal Award Number: S010A220002, S011A220002 Applicable Compliance Requirement: Reporting Condition: DEED did not file Federal Funding Accountability and Transparency Act (FFATA) reports for FY 23 Education Stabilization Fund (ESF) programs, Title I-A, and Title I-C subawards. Context: FFATA requires information on federal awards be made available to the public through a single searchable website (www.usaspending.gov). The FFATA Subaward Reporting System (FSRS) is the reporting tool federal awardees, such as the State of Alaska, use to capture and report subaward and executive compensation data for first-tier subawards. According to DEED procedures, staff prepare a monthly report to be submitted to FSRS within 10 days after the end of the month. DEED has not completed the monthly submission to FSRS since April 2022. The audit found that unreported FY 23 subawards subject to FFATA reporting totaled $19.2 million for ESF programs, $49.3 million for Title I-A, and $20.4 million for Title I-C. Cause: According to DEED staff, uploading reports to FSRS consistently resulted in errors related to the subawardees’ zip codes. The upload errors were time-consuming to resolve and required significant manual input. Due to limited capacity and competing priorities, DEED management instructed staff to disregard procedures and discontinue FFATA reporting until the upload errors could be resolved. According to DEED management, the FSRS help desk was unresponsive in resolving issues with FFATA reporting. Criteria: Title 2 CFR 200.303 requires the State to establish and maintain effective internal control over the federal award that provides reasonable assurance that the State is managing the federal awards in compliance with federal statutes, regulations, and terms and conditions of the grant awards. Title 2 CFR 170 states federal award recipients are required to report each subaward that obligates $30,000 or more in federal funds. This information must be reported no later than the end of the month following the month in which the obligation was made; include information about each obligating action in accordance with submission instructions; and include the names and total compensation of each of the subrecipient’s five most highly compensated executives if revenue thresholds are met and the executive compensation is not available to the public. Effect: Failure to comply with FFATA reporting requirements reduces transparency, impairs decision-making, and may potentially jeopardize future federal funding. Questioned Costs: None Recommendation: DEED's Division of Administrative Services director should continue to work with the appropriate federal contacts to resolve FSRS reporting errors and follow procedures to ensure compliance with FFATA reporting requirements. View of Responsible Officials: Management agrees with this finding.

Federal Awarding Agency: U.S. Department of Education Impact: Significant Deficiency, Noncompliance AL Number and Title: 84.425L Higher Education Emergency Relief Fund Federal Award Number: N/A Applicable Compliance Requirement: Procurement and Suspension and Debarment Condition and Context: During the testing of Suspension and Debarment, UAF has two covered lease contracts that did not have EPLS checks performed. Cause: UAF failed to retain documentation to support the date on which EPLS checks were performed. Criteria: Per Uniform Guidance 2 CFR 180.300 nonfederal entities entering into covered transactions must verify the party is not suspended or debarred from conducting business by the federal government. This can be performed by: Checking SAM exclusions, collecting a certification from the party, or adding a clause or condition to the covered transaction. Effect: Potentially suspended or debarred vendors may have been contracted with federal funds. Questions costs: None Recommendation: UAF should perform EPLS checks on all covered transactions paid with federal funds. View of Responsible Officials: Management agrees with this finding.

Prior Year Finding: 2022-026 Federal Awarding Agency: U.S. Department of Education (USED) Impact: Material Weakness, Material Noncompliance AL Number and Title: 84.425D Elementary and Secondary School Emergency Relief Fund – COVID-19 84.425R – Emergency Assistance for Non-Public Schools – COVID-19 84.425U American Rescue Plan – Elementary and Secondary School Emergency Relief Fund – COVID-19 84.425W American Rescue Plan – Homeless Children and Youth – COVID-19 Federal Award Number: S425D210020, S425R210001, S425U210020, S425W210002 Applicable Compliance Requirement: Reporting Federal Awarding Agency: USED Impact: Significant Deficiency, Noncompliance AL Number and Title: 84.010 Title I Grants to Local Educational Agencies (Title I-A) 84.011 Migrant Education State Grant Program (Title I-C) Federal Award Number: S010A220002, S011A220002 Applicable Compliance Requirement: Reporting Condition: DEED did not file Federal Funding Accountability and Transparency Act (FFATA) reports for FY 23 Education Stabilization Fund (ESF) programs, Title I-A, and Title I-C subawards. Context: FFATA requires information on federal awards be made available to the public through a single searchable website (www.usaspending.gov). The FFATA Subaward Reporting System (FSRS) is the reporting tool federal awardees, such as the State of Alaska, use to capture and report subaward and executive compensation data for first-tier subawards. According to DEED procedures, staff prepare a monthly report to be submitted to FSRS within 10 days after the end of the month. DEED has not completed the monthly submission to FSRS since April 2022. The audit found that unreported FY 23 subawards subject to FFATA reporting totaled $19.2 million for ESF programs, $49.3 million for Title I-A, and $20.4 million for Title I-C. Cause: According to DEED staff, uploading reports to FSRS consistently resulted in errors related to the subawardees’ zip codes. The upload errors were time-consuming to resolve and required significant manual input. Due to limited capacity and competing priorities, DEED management instructed staff to disregard procedures and discontinue FFATA reporting until the upload errors could be resolved. According to DEED management, the FSRS help desk was unresponsive in resolving issues with FFATA reporting. Criteria: Title 2 CFR 200.303 requires the State to establish and maintain effective internal control over the federal award that provides reasonable assurance that the State is managing the federal awards in compliance with federal statutes, regulations, and terms and conditions of the grant awards. Title 2 CFR 170 states federal award recipients are required to report each subaward that obligates $30,000 or more in federal funds. This information must be reported no later than the end of the month following the month in which the obligation was made; include information about each obligating action in accordance with submission instructions; and include the names and total compensation of each of the subrecipient’s five most highly compensated executives if revenue thresholds are met and the executive compensation is not available to the public. Effect: Failure to comply with FFATA reporting requirements reduces transparency, impairs decision-making, and may potentially jeopardize future federal funding. Questioned Costs: None Recommendation: DEED's Division of Administrative Services director should continue to work with the appropriate federal contacts to resolve FSRS reporting errors and follow procedures to ensure compliance with FFATA reporting requirements. View of Responsible Officials: Management agrees with this finding.

Federal Awarding Agency: U.S. Department of Education Impact: Significant Deficiency, Noncompliance AL Number and Title: 84.425L Higher Education Emergency Relief Fund Federal Award Number: N/A Applicable Compliance Requirement: Procurement and Suspension and Debarment Condition and Context: During the testing of Suspension and Debarment, UAF has two covered lease contracts that did not have EPLS checks performed. Cause: UAF failed to retain documentation to support the date on which EPLS checks were performed. Criteria: Per Uniform Guidance 2 CFR 180.300 nonfederal entities entering into covered transactions must verify the party is not suspended or debarred from conducting business by the federal government. This can be performed by: Checking SAM exclusions, collecting a certification from the party, or adding a clause or condition to the covered transaction. Effect: Potentially suspended or debarred vendors may have been contracted with federal funds. Questions costs: None Recommendation: UAF should perform EPLS checks on all covered transactions paid with federal funds. View of Responsible Officials: Management agrees with this finding.

Prior Year Finding: 2022-026 Federal Awarding Agency: U.S. Department of Education (USED) Impact: Material Weakness, Material Noncompliance AL Number and Title: 84.425D Elementary and Secondary School Emergency Relief Fund – COVID-19 84.425R – Emergency Assistance for Non-Public Schools – COVID-19 84.425U American Rescue Plan – Elementary and Secondary School Emergency Relief Fund – COVID-19 84.425W American Rescue Plan – Homeless Children and Youth – COVID-19 Federal Award Number: S425D210020, S425R210001, S425U210020, S425W210002 Applicable Compliance Requirement: Reporting Federal Awarding Agency: USED Impact: Significant Deficiency, Noncompliance AL Number and Title: 84.010 Title I Grants to Local Educational Agencies (Title I-A) 84.011 Migrant Education State Grant Program (Title I-C) Federal Award Number: S010A220002, S011A220002 Applicable Compliance Requirement: Reporting Condition: DEED did not file Federal Funding Accountability and Transparency Act (FFATA) reports for FY 23 Education Stabilization Fund (ESF) programs, Title I-A, and Title I-C subawards. Context: FFATA requires information on federal awards be made available to the public through a single searchable website (www.usaspending.gov). The FFATA Subaward Reporting System (FSRS) is the reporting tool federal awardees, such as the State of Alaska, use to capture and report subaward and executive compensation data for first-tier subawards. According to DEED procedures, staff prepare a monthly report to be submitted to FSRS within 10 days after the end of the month. DEED has not completed the monthly submission to FSRS since April 2022. The audit found that unreported FY 23 subawards subject to FFATA reporting totaled $19.2 million for ESF programs, $49.3 million for Title I-A, and $20.4 million for Title I-C. Cause: According to DEED staff, uploading reports to FSRS consistently resulted in errors related to the subawardees’ zip codes. The upload errors were time-consuming to resolve and required significant manual input. Due to limited capacity and competing priorities, DEED management instructed staff to disregard procedures and discontinue FFATA reporting until the upload errors could be resolved. According to DEED management, the FSRS help desk was unresponsive in resolving issues with FFATA reporting. Criteria: Title 2 CFR 200.303 requires the State to establish and maintain effective internal control over the federal award that provides reasonable assurance that the State is managing the federal awards in compliance with federal statutes, regulations, and terms and conditions of the grant awards. Title 2 CFR 170 states federal award recipients are required to report each subaward that obligates $30,000 or more in federal funds. This information must be reported no later than the end of the month following the month in which the obligation was made; include information about each obligating action in accordance with submission instructions; and include the names and total compensation of each of the subrecipient’s five most highly compensated executives if revenue thresholds are met and the executive compensation is not available to the public. Effect: Failure to comply with FFATA reporting requirements reduces transparency, impairs decision-making, and may potentially jeopardize future federal funding. Questioned Costs: None Recommendation: DEED's Division of Administrative Services director should continue to work with the appropriate federal contacts to resolve FSRS reporting errors and follow procedures to ensure compliance with FFATA reporting requirements. View of Responsible Officials: Management agrees with this finding.

Federal Awarding Agency: U.S. Department of Education Impact: Significant Deficiency, Noncompliance AL Number and Title: 84.425L Higher Education Emergency Relief Fund Federal Award Number: N/A Applicable Compliance Requirement: Procurement and Suspension and Debarment Condition and Context: During the testing of Suspension and Debarment, UAF has two covered lease contracts that did not have EPLS checks performed. Cause: UAF failed to retain documentation to support the date on which EPLS checks were performed. Criteria: Per Uniform Guidance 2 CFR 180.300 nonfederal entities entering into covered transactions must verify the party is not suspended or debarred from conducting business by the federal government. This can be performed by: Checking SAM exclusions, collecting a certification from the party, or adding a clause or condition to the covered transaction. Effect: Potentially suspended or debarred vendors may have been contracted with federal funds. Questions costs: None Recommendation: UAF should perform EPLS checks on all covered transactions paid with federal funds. View of Responsible Officials: Management agrees with this finding.

Prior Year Finding: 2022-026 Federal Awarding Agency: U.S. Department of Education (USED) Impact: Material Weakness, Material Noncompliance AL Number and Title: 84.425D Elementary and Secondary School Emergency Relief Fund – COVID-19 84.425R – Emergency Assistance for Non-Public Schools – COVID-19 84.425U American Rescue Plan – Elementary and Secondary School Emergency Relief Fund – COVID-19 84.425W American Rescue Plan – Homeless Children and Youth – COVID-19 Federal Award Number: S425D210020, S425R210001, S425U210020, S425W210002 Applicable Compliance Requirement: Reporting Federal Awarding Agency: USED Impact: Significant Deficiency, Noncompliance AL Number and Title: 84.010 Title I Grants to Local Educational Agencies (Title I-A) 84.011 Migrant Education State Grant Program (Title I-C) Federal Award Number: S010A220002, S011A220002 Applicable Compliance Requirement: Reporting Condition: DEED did not file Federal Funding Accountability and Transparency Act (FFATA) reports for FY 23 Education Stabilization Fund (ESF) programs, Title I-A, and Title I-C subawards. Context: FFATA requires information on federal awards be made available to the public through a single searchable website (www.usaspending.gov). The FFATA Subaward Reporting System (FSRS) is the reporting tool federal awardees, such as the State of Alaska, use to capture and report subaward and executive compensation data for first-tier subawards. According to DEED procedures, staff prepare a monthly report to be submitted to FSRS within 10 days after the end of the month. DEED has not completed the monthly submission to FSRS since April 2022. The audit found that unreported FY 23 subawards subject to FFATA reporting totaled $19.2 million for ESF programs, $49.3 million for Title I-A, and $20.4 million for Title I-C. Cause: According to DEED staff, uploading reports to FSRS consistently resulted in errors related to the subawardees’ zip codes. The upload errors were time-consuming to resolve and required significant manual input. Due to limited capacity and competing priorities, DEED management instructed staff to disregard procedures and discontinue FFATA reporting until the upload errors could be resolved. According to DEED management, the FSRS help desk was unresponsive in resolving issues with FFATA reporting. Criteria: Title 2 CFR 200.303 requires the State to establish and maintain effective internal control over the federal award that provides reasonable assurance that the State is managing the federal awards in compliance with federal statutes, regulations, and terms and conditions of the grant awards. Title 2 CFR 170 states federal award recipients are required to report each subaward that obligates $30,000 or more in federal funds. This information must be reported no later than the end of the month following the month in which the obligation was made; include information about each obligating action in accordance with submission instructions; and include the names and total compensation of each of the subrecipient’s five most highly compensated executives if revenue thresholds are met and the executive compensation is not available to the public. Effect: Failure to comply with FFATA reporting requirements reduces transparency, impairs decision-making, and may potentially jeopardize future federal funding. Questioned Costs: None Recommendation: DEED's Division of Administrative Services director should continue to work with the appropriate federal contacts to resolve FSRS reporting errors and follow procedures to ensure compliance with FFATA reporting requirements. View of Responsible Officials: Management agrees with this finding.

Federal Awarding Agency: U.S. Department of Education Impact: Significant Deficiency, Noncompliance AL Number and Title: 84.425L Higher Education Emergency Relief Fund Federal Award Number: N/A Applicable Compliance Requirement: Procurement and Suspension and Debarment Condition and Context: During the testing of Suspension and Debarment, UAF has two covered lease contracts that did not have EPLS checks performed. Cause: UAF failed to retain documentation to support the date on which EPLS checks were performed. Criteria: Per Uniform Guidance 2 CFR 180.300 nonfederal entities entering into covered transactions must verify the party is not suspended or debarred from conducting business by the federal government. This can be performed by: Checking SAM exclusions, collecting a certification from the party, or adding a clause or condition to the covered transaction. Effect: Potentially suspended or debarred vendors may have been contracted with federal funds. Questions costs: None Recommendation: UAF should perform EPLS checks on all covered transactions paid with federal funds. View of Responsible Officials: Management agrees with this finding.

Prior Year Finding: 2022-052 Federal Awarding Agency: USDHHS Impact: Significant Deficiency AL Number and Title: 93.767 Children’s Health Insurance Program 93.775, 93.777, 93.778 Medicaid Cluster Federal Award Number: 2205AK5021, 2305AK5021 2205AKMAP, 2305AK5MAP Applicable Compliance Requirement: Eligibility Condition: An examination of the Alaska Resource for Integrated Eligibility Services (ARIES) system during FY 22 identified significant internal control deficiencies. An examination was not performed in FY 23, however certain deficiencies noted in the FY 22 report have not been alleviated in FY 23. Context: ARIES is an eligibility system developed for Medicaid and CHIP. Cause: Details related to the control weaknesses and the relevant audit criteria are being withheld from this report to prevent the weaknesses from being exploited. Pertinent details have been communicated to agency management in a separate confidential document. Criteria: Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over the federal award that provides reasonable assurance that the State is managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. Per Title 45 CFR 155.260(a)(5) the State must monitor, periodically assess, and update the security controls and related system risks to ensure the continued effectiveness of those controls. Effect: The internal control weaknesses increase the risk of noncompliance with State and federal regulations, unauthorized system use (including data manipulation), and incorrect eligibility determinations, which may result in ineligible recipients or unallowed costs. Questioned Costs: None Recommendation: The State should continue to formalize procedures and dedicate the resources necessary to strengthen ARIES system controls. View of Responsible Officials: Management agrees with this finding.

Prior Year Finding: 2022-053 Federal Awarding Agency: USDHHS Impact: Significant Deficiency, Noncompliance AL Number and Title: 93.767 CHIP 93.775, 93.777, 93.778 Medicaid Cluster Federal Award Number: 2205AK5021, 2305AK5021 2205AKMAP, 2305AK5MAP Applicable Compliance Requirement: Eligibility Condition: Sixty Medicaid and sixty CHIP recipients were randomly selected for eligibility testing. Testing revealed the following errors: Medicaid: • Twelve of the sixty recipients tested (20 percent), the State did not process applications in a timely manner or redetermine eligibility. The delays for completion of processing of the applications ranged from 46 days to 279 days as of June 30, 2023. CHIP: • Six of the sixty recipients tested (10 percent), the State did not process applications in a timely manner or redetermine eligibility. The delays for completion of processing of the applications ranged from 56 days to 225 days as of June 30, 2023. • One of the sixty recipients tested (1.6 percent), the beneficiary was due to have eligibility redetermined, however no information was submitted to the State for review and staff did not independently conduct a redetermination. For recipients following the Modified Adjusted Gross Income (MAGI) methodology, the State should have attempted to redetermine eligibility through electronic interfaces. Context: The State is required to ensure applications are reviewed and eligibility determinations are made timely for Medicaid and CHIP recipients. Eligibility is redetermined at least every 12 months or when new information is provided from the recipient. Due to the COVID-19 pandemic, the federal government enacted the FFCRA on March 18, 2020, which required health insurance coverage for individuals validly enrolled on or after this date to continue during the PHE. In accordance with FFCRA, the State is allowed to receive an enhanced reimbursement rate for Medicaid and CHIP and may not terminate Medicaid coverage for most individuals found to no longer meet eligibility requirements until the end of the month in which the PHE ends. The PHE ended during the year ended June 30, 2023. Cause: Staffing and resource shortages adversely impacted application processing timeliness. Also, the State is working through the unwinding of the PHE (public health emergency) flexibilities. Criteria: Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. Title 42 CFR 435.912(c) states the determination of eligibility for any application may not exceed 90 days for applicants who apply for Medicaid on the basis of disability and 45 days for all other applicants. Title 42 CFR 435.916 requires the State to periodically renew Medicaid eligibility. For renewals based on MAGI, a redetermination is required once every 12 months, and no more frequently than once every 12 months. Similarly, for non-MAGI beneficiaries the State is required to make a redetermination of eligibility at least every 12 months. The State is required to take action on information about changes between regular eligibility renewals and promptly redetermine eligibility. Title 42 CFR 435.916(a)(2) states that the agency must make a redetermination of eligibility without requiring information from the individual if able to do so based on reliable information contained in the individual’s account or other more current information available to the agency, including but not limited to information accessed through any databases accessed by the agency. Title 42 CFR 457.340 and 42 CFR 457.343 require the timely determination of eligibility and renewal procedures for Medicaid apply equally in administering CHIP. Effect: Failure to determine Medicaid and CHIP eligibility timely increases the risk that ineligible beneficiaries receive Medicaid and CHIP benefits. Questioned Costs: None Recommendation: The State should dedicate the resources necessary to determine Medicaid and CHIP eligibility in a timely manner and continue to re-instate procedures in place prior to the PHE. View of Responsible Officials: Management agrees with this finding.

Prior Year Finding: 2022-054 Federal Awarding Agency: USDHHS Impact: Significant Deficiency, Noncompliance AL Number and Title: 93.767 CHIP 93.775, 93.777, 93.778 Medicaid Cluster Federal Award Number: 2205AK5021, 2305AK5021 2205AKMAP, 2305AK5MAP Applicable Compliance Requirement: Eligibility, Activities Allowed or Unallowed, Allowable Costs/Cost Principles Condition: Sixty Medicaid and sixty CHIP recipients were randomly selected for eligibility testing. Auditors found inaccurate or unsupported eligibility determinations by State staff for 5 percent of Medicaid cases tested and 6 percent of CHIP cases tested. Testing revealed the following errors: Medicaid: • One case was ineligible for the whole year and benefits were available the whole year. • Two cases lacked documentation supporting the request and use of income and benefit information through the Income Eligibility and Verification System (IEVS) for determining eligibility and benefits. CHIP: • One case’s application hasn’t been processed as of 6/30/2023 but benefits were paid during the year ended June 30, 2023. • One case was a child that had turned 19 in a previous year but benefits continued to be paid during the year ended June 30, 2023. • Two cases had unresolved help desk tickets about how to close a case, which led to the cases remaining open and benefits to be paid for one of the cases during the year ended June 30, 2023. Context: The State is required to ensure only financially needy individuals receive Medicaid or CHIP assistance. DPA is the primary division within DOH responsible for determining Medicaid and CHIP eligibility. DPA’s employees review applications, identify income and financial resources, obtain social security numbers and verify the numbers through a federal database, and make determinations whether the individuals are eligible to receive benefits. DPA has established internal control procedures to help staff determine eligibility in accordance with federal regulations and the State plan. Procedures are documented in the DPA Administrative Procedures Manual and the MAGI Medicaid Eligibility Manual. DPA utilizes an electronic document management system to store the documents that DPA staff obtained to verify eligibility. Cause: The deficiencies were due to staff and resource shortages, inadequate training, human error, and system errors. Criteria: Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. Title 42 CFR 435.914(a) states the agency must include in each application’s case record facts to support the agency’s decision. Title 42 CFR 457.343 requires the renewal procedures for Medicaid apply equally in administering CHIP. Effect: Failure to accurately determine eligibility and maintain complete case records for Medicaid and CHIP increases the risk that ineligible recipients receive Medicaid and CHIP benefits. Questioned Costs: AL 93.767: $ 167 AL 93.778: $ 960 Recommendation: The State should improve eligibility training, ensure procedures are followed for determining Medicaid and CHIP eligibility, and ensure the case management system includes all relevant documentation supporting eligibility decisions. View of Responsible Officials: Management agrees with this finding, but not the questioned costs. CMS has notified the State that financial recoveries based on eligibility errors can only be pursued when identified by programs operating under CMS’s Payment Error Rate Measurement program, under section 1903(u) of the Social Security Act and regulations at 42 CFR Part 431, Subpart Q. Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. Management concurs with the finding, but not the questioned costs, based on communication received from a federal agency indicating the agency will not pursue recovery of the questioned costs for a similar prior year finding. Questioned costs are defined by Title 45 CFR 75.2, which states: Questioned cost means a cost that is questioned by the auditor because of an audit finding: • Which resulted from a violation or possible violation of a statute, regulation, or the terms and conditions of a federal award, including for funds used to match federal funds; • Where the costs, at the time of the audit, are not supported by adequate documentation; or • Where the costs incurred appear unreasonable and do not reflect the actions a prudent person would take in the circumstances. Based on the Uniform Guidance, benefits paid associated with the finding are reported as questioned costs.

Prior Year Finding: 2022-052 Federal Awarding Agency: USDHHS Impact: Significant Deficiency AL Number and Title: 93.767 Children’s Health Insurance Program 93.775, 93.777, 93.778 Medicaid Cluster Federal Award Number: 2205AK5021, 2305AK5021 2205AKMAP, 2305AK5MAP Applicable Compliance Requirement: Eligibility Condition: An examination of the Alaska Resource for Integrated Eligibility Services (ARIES) system during FY 22 identified significant internal control deficiencies. An examination was not performed in FY 23, however certain deficiencies noted in the FY 22 report have not been alleviated in FY 23. Context: ARIES is an eligibility system developed for Medicaid and CHIP. Cause: Details related to the control weaknesses and the relevant audit criteria are being withheld from this report to prevent the weaknesses from being exploited. Pertinent details have been communicated to agency management in a separate confidential document. Criteria: Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over the federal award that provides reasonable assurance that the State is managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. Per Title 45 CFR 155.260(a)(5) the State must monitor, periodically assess, and update the security controls and related system risks to ensure the continued effectiveness of those controls. Effect: The internal control weaknesses increase the risk of noncompliance with State and federal regulations, unauthorized system use (including data manipulation), and incorrect eligibility determinations, which may result in ineligible recipients or unallowed costs. Questioned Costs: None Recommendation: The State should continue to formalize procedures and dedicate the resources necessary to strengthen ARIES system controls. View of Responsible Officials: Management agrees with this finding.

Prior Year Finding: 2022-053 Federal Awarding Agency: USDHHS Impact: Significant Deficiency, Noncompliance AL Number and Title: 93.767 CHIP 93.775, 93.777, 93.778 Medicaid Cluster Federal Award Number: 2205AK5021, 2305AK5021 2205AKMAP, 2305AK5MAP Applicable Compliance Requirement: Eligibility Condition: Sixty Medicaid and sixty CHIP recipients were randomly selected for eligibility testing. Testing revealed the following errors: Medicaid: • Twelve of the sixty recipients tested (20 percent), the State did not process applications in a timely manner or redetermine eligibility. The delays for completion of processing of the applications ranged from 46 days to 279 days as of June 30, 2023. CHIP: • Six of the sixty recipients tested (10 percent), the State did not process applications in a timely manner or redetermine eligibility. The delays for completion of processing of the applications ranged from 56 days to 225 days as of June 30, 2023. • One of the sixty recipients tested (1.6 percent), the beneficiary was due to have eligibility redetermined, however no information was submitted to the State for review and staff did not independently conduct a redetermination. For recipients following the Modified Adjusted Gross Income (MAGI) methodology, the State should have attempted to redetermine eligibility through electronic interfaces. Context: The State is required to ensure applications are reviewed and eligibility determinations are made timely for Medicaid and CHIP recipients. Eligibility is redetermined at least every 12 months or when new information is provided from the recipient. Due to the COVID-19 pandemic, the federal government enacted the FFCRA on March 18, 2020, which required health insurance coverage for individuals validly enrolled on or after this date to continue during the PHE. In accordance with FFCRA, the State is allowed to receive an enhanced reimbursement rate for Medicaid and CHIP and may not terminate Medicaid coverage for most individuals found to no longer meet eligibility requirements until the end of the month in which the PHE ends. The PHE ended during the year ended June 30, 2023. Cause: Staffing and resource shortages adversely impacted application processing timeliness. Also, the State is working through the unwinding of the PHE (public health emergency) flexibilities. Criteria: Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. Title 42 CFR 435.912(c) states the determination of eligibility for any application may not exceed 90 days for applicants who apply for Medicaid on the basis of disability and 45 days for all other applicants. Title 42 CFR 435.916 requires the State to periodically renew Medicaid eligibility. For renewals based on MAGI, a redetermination is required once every 12 months, and no more frequently than once every 12 months. Similarly, for non-MAGI beneficiaries the State is required to make a redetermination of eligibility at least every 12 months. The State is required to take action on information about changes between regular eligibility renewals and promptly redetermine eligibility. Title 42 CFR 435.916(a)(2) states that the agency must make a redetermination of eligibility without requiring information from the individual if able to do so based on reliable information contained in the individual’s account or other more current information available to the agency, including but not limited to information accessed through any databases accessed by the agency. Title 42 CFR 457.340 and 42 CFR 457.343 require the timely determination of eligibility and renewal procedures for Medicaid apply equally in administering CHIP. Effect: Failure to determine Medicaid and CHIP eligibility timely increases the risk that ineligible beneficiaries receive Medicaid and CHIP benefits. Questioned Costs: None Recommendation: The State should dedicate the resources necessary to determine Medicaid and CHIP eligibility in a timely manner and continue to re-instate procedures in place prior to the PHE. View of Responsible Officials: Management agrees with this finding.

Prior Year Finding: 2022-054 Federal Awarding Agency: USDHHS Impact: Significant Deficiency, Noncompliance AL Number and Title: 93.767 CHIP 93.775, 93.777, 93.778 Medicaid Cluster Federal Award Number: 2205AK5021, 2305AK5021 2205AKMAP, 2305AK5MAP Applicable Compliance Requirement: Eligibility, Activities Allowed or Unallowed, Allowable Costs/Cost Principles Condition: Sixty Medicaid and sixty CHIP recipients were randomly selected for eligibility testing. Auditors found inaccurate or unsupported eligibility determinations by State staff for 5 percent of Medicaid cases tested and 6 percent of CHIP cases tested. Testing revealed the following errors: Medicaid: • One case was ineligible for the whole year and benefits were available the whole year. • Two cases lacked documentation supporting the request and use of income and benefit information through the Income Eligibility and Verification System (IEVS) for determining eligibility and benefits. CHIP: • One case’s application hasn’t been processed as of 6/30/2023 but benefits were paid during the year ended June 30, 2023. • One case was a child that had turned 19 in a previous year but benefits continued to be paid during the year ended June 30, 2023. • Two cases had unresolved help desk tickets about how to close a case, which led to the cases remaining open and benefits to be paid for one of the cases during the year ended June 30, 2023. Context: The State is required to ensure only financially needy individuals receive Medicaid or CHIP assistance. DPA is the primary division within DOH responsible for determining Medicaid and CHIP eligibility. DPA’s employees review applications, identify income and financial resources, obtain social security numbers and verify the numbers through a federal database, and make determinations whether the individuals are eligible to receive benefits. DPA has established internal control procedures to help staff determine eligibility in accordance with federal regulations and the State plan. Procedures are documented in the DPA Administrative Procedures Manual and the MAGI Medicaid Eligibility Manual. DPA utilizes an electronic document management system to store the documents that DPA staff obtained to verify eligibility. Cause: The deficiencies were due to staff and resource shortages, inadequate training, human error, and system errors. Criteria: Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. Title 42 CFR 435.914(a) states the agency must include in each application’s case record facts to support the agency’s decision. Title 42 CFR 457.343 requires the renewal procedures for Medicaid apply equally in administering CHIP. Effect: Failure to accurately determine eligibility and maintain complete case records for Medicaid and CHIP increases the risk that ineligible recipients receive Medicaid and CHIP benefits. Questioned Costs: AL 93.767: $ 167 AL 93.778: $ 960 Recommendation: The State should improve eligibility training, ensure procedures are followed for determining Medicaid and CHIP eligibility, and ensure the case management system includes all relevant documentation supporting eligibility decisions. View of Responsible Officials: Management agrees with this finding, but not the questioned costs. CMS has notified the State that financial recoveries based on eligibility errors can only be pursued when identified by programs operating under CMS’s Payment Error Rate Measurement program, under section 1903(u) of the Social Security Act and regulations at 42 CFR Part 431, Subpart Q. Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. Management concurs with the finding, but not the questioned costs, based on communication received from a federal agency indicating the agency will not pursue recovery of the questioned costs for a similar prior year finding. Questioned costs are defined by Title 45 CFR 75.2, which states: Questioned cost means a cost that is questioned by the auditor because of an audit finding: • Which resulted from a violation or possible violation of a statute, regulation, or the terms and conditions of a federal award, including for funds used to match federal funds; • Where the costs, at the time of the audit, are not supported by adequate documentation; or • Where the costs incurred appear unreasonable and do not reflect the actions a prudent person would take in the circumstances. Based on the Uniform Guidance, benefits paid associated with the finding are reported as questioned costs.

Prior Year Finding: 2022-052 Federal Awarding Agency: USDHHS Impact: Significant Deficiency AL Number and Title: 93.767 Children’s Health Insurance Program 93.775, 93.777, 93.778 Medicaid Cluster Federal Award Number: 2205AK5021, 2305AK5021 2205AKMAP, 2305AK5MAP Applicable Compliance Requirement: Eligibility Condition: An examination of the Alaska Resource for Integrated Eligibility Services (ARIES) system during FY 22 identified significant internal control deficiencies. An examination was not performed in FY 23, however certain deficiencies noted in the FY 22 report have not been alleviated in FY 23. Context: ARIES is an eligibility system developed for Medicaid and CHIP. Cause: Details related to the control weaknesses and the relevant audit criteria are being withheld from this report to prevent the weaknesses from being exploited. Pertinent details have been communicated to agency management in a separate confidential document. Criteria: Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over the federal award that provides reasonable assurance that the State is managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. Per Title 45 CFR 155.260(a)(5) the State must monitor, periodically assess, and update the security controls and related system risks to ensure the continued effectiveness of those controls. Effect: The internal control weaknesses increase the risk of noncompliance with State and federal regulations, unauthorized system use (including data manipulation), and incorrect eligibility determinations, which may result in ineligible recipients or unallowed costs. Questioned Costs: None Recommendation: The State should continue to formalize procedures and dedicate the resources necessary to strengthen ARIES system controls. View of Responsible Officials: Management agrees with this finding.

Prior Year Finding: 2022-053 Federal Awarding Agency: USDHHS Impact: Significant Deficiency, Noncompliance AL Number and Title: 93.767 CHIP 93.775, 93.777, 93.778 Medicaid Cluster Federal Award Number: 2205AK5021, 2305AK5021 2205AKMAP, 2305AK5MAP Applicable Compliance Requirement: Eligibility Condition: Sixty Medicaid and sixty CHIP recipients were randomly selected for eligibility testing. Testing revealed the following errors: Medicaid: • Twelve of the sixty recipients tested (20 percent), the State did not process applications in a timely manner or redetermine eligibility. The delays for completion of processing of the applications ranged from 46 days to 279 days as of June 30, 2023. CHIP: • Six of the sixty recipients tested (10 percent), the State did not process applications in a timely manner or redetermine eligibility. The delays for completion of processing of the applications ranged from 56 days to 225 days as of June 30, 2023. • One of the sixty recipients tested (1.6 percent), the beneficiary was due to have eligibility redetermined, however no information was submitted to the State for review and staff did not independently conduct a redetermination. For recipients following the Modified Adjusted Gross Income (MAGI) methodology, the State should have attempted to redetermine eligibility through electronic interfaces. Context: The State is required to ensure applications are reviewed and eligibility determinations are made timely for Medicaid and CHIP recipients. Eligibility is redetermined at least every 12 months or when new information is provided from the recipient. Due to the COVID-19 pandemic, the federal government enacted the FFCRA on March 18, 2020, which required health insurance coverage for individuals validly enrolled on or after this date to continue during the PHE. In accordance with FFCRA, the State is allowed to receive an enhanced reimbursement rate for Medicaid and CHIP and may not terminate Medicaid coverage for most individuals found to no longer meet eligibility requirements until the end of the month in which the PHE ends. The PHE ended during the year ended June 30, 2023. Cause: Staffing and resource shortages adversely impacted application processing timeliness. Also, the State is working through the unwinding of the PHE (public health emergency) flexibilities. Criteria: Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. Title 42 CFR 435.912(c) states the determination of eligibility for any application may not exceed 90 days for applicants who apply for Medicaid on the basis of disability and 45 days for all other applicants. Title 42 CFR 435.916 requires the State to periodically renew Medicaid eligibility. For renewals based on MAGI, a redetermination is required once every 12 months, and no more frequently than once every 12 months. Similarly, for non-MAGI beneficiaries the State is required to make a redetermination of eligibility at least every 12 months. The State is required to take action on information about changes between regular eligibility renewals and promptly redetermine eligibility. Title 42 CFR 435.916(a)(2) states that the agency must make a redetermination of eligibility without requiring information from the individual if able to do so based on reliable information contained in the individual’s account or other more current information available to the agency, including but not limited to information accessed through any databases accessed by the agency. Title 42 CFR 457.340 and 42 CFR 457.343 require the timely determination of eligibility and renewal procedures for Medicaid apply equally in administering CHIP. Effect: Failure to determine Medicaid and CHIP eligibility timely increases the risk that ineligible beneficiaries receive Medicaid and CHIP benefits. Questioned Costs: None Recommendation: The State should dedicate the resources necessary to determine Medicaid and CHIP eligibility in a timely manner and continue to re-instate procedures in place prior to the PHE. View of Responsible Officials: Management agrees with this finding.

Prior Year Finding: 2022-054 Federal Awarding Agency: USDHHS Impact: Significant Deficiency, Noncompliance AL Number and Title: 93.767 CHIP 93.775, 93.777, 93.778 Medicaid Cluster Federal Award Number: 2205AK5021, 2305AK5021 2205AKMAP, 2305AK5MAP Applicable Compliance Requirement: Eligibility, Activities Allowed or Unallowed, Allowable Costs/Cost Principles Condition: Sixty Medicaid and sixty CHIP recipients were randomly selected for eligibility testing. Auditors found inaccurate or unsupported eligibility determinations by State staff for 5 percent of Medicaid cases tested and 6 percent of CHIP cases tested. Testing revealed the following errors: Medicaid: • One case was ineligible for the whole year and benefits were available the whole year. • Two cases lacked documentation supporting the request and use of income and benefit information through the Income Eligibility and Verification System (IEVS) for determining eligibility and benefits. CHIP: • One case’s application hasn’t been processed as of 6/30/2023 but benefits were paid during the year ended June 30, 2023. • One case was a child that had turned 19 in a previous year but benefits continued to be paid during the year ended June 30, 2023. • Two cases had unresolved help desk tickets about how to close a case, which led to the cases remaining open and benefits to be paid for one of the cases during the year ended June 30, 2023. Context: The State is required to ensure only financially needy individuals receive Medicaid or CHIP assistance. DPA is the primary division within DOH responsible for determining Medicaid and CHIP eligibility. DPA’s employees review applications, identify income and financial resources, obtain social security numbers and verify the numbers through a federal database, and make determinations whether the individuals are eligible to receive benefits. DPA has established internal control procedures to help staff determine eligibility in accordance with federal regulations and the State plan. Procedures are documented in the DPA Administrative Procedures Manual and the MAGI Medicaid Eligibility Manual. DPA utilizes an electronic document management system to store the documents that DPA staff obtained to verify eligibility. Cause: The deficiencies were due to staff and resource shortages, inadequate training, human error, and system errors. Criteria: Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. Title 42 CFR 435.914(a) states the agency must include in each application’s case record facts to support the agency’s decision. Title 42 CFR 457.343 requires the renewal procedures for Medicaid apply equally in administering CHIP. Effect: Failure to accurately determine eligibility and maintain complete case records for Medicaid and CHIP increases the risk that ineligible recipients receive Medicaid and CHIP benefits. Questioned Costs: AL 93.767: $ 167 AL 93.778: $ 960 Recommendation: The State should improve eligibility training, ensure procedures are followed for determining Medicaid and CHIP eligibility, and ensure the case management system includes all relevant documentation supporting eligibility decisions. View of Responsible Officials: Management agrees with this finding, but not the questioned costs. CMS has notified the State that financial recoveries based on eligibility errors can only be pursued when identified by programs operating under CMS’s Payment Error Rate Measurement program, under section 1903(u) of the Social Security Act and regulations at 42 CFR Part 431, Subpart Q. Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. Management concurs with the finding, but not the questioned costs, based on communication received from a federal agency indicating the agency will not pursue recovery of the questioned costs for a similar prior year finding. Questioned costs are defined by Title 45 CFR 75.2, which states: Questioned cost means a cost that is questioned by the auditor because of an audit finding: • Which resulted from a violation or possible violation of a statute, regulation, or the terms and conditions of a federal award, including for funds used to match federal funds; • Where the costs, at the time of the audit, are not supported by adequate documentation; or • Where the costs incurred appear unreasonable and do not reflect the actions a prudent person would take in the circumstances. Based on the Uniform Guidance, benefits paid associated with the finding are reported as questioned costs.

Federal Awarding Agency: U.S. Department of Health and Human Services (USDHHS) Impact: Significant Deficiency, Noncompliance AL Number and Title: 93.268 Immunization Cooperative Agreements (ICA) Federal Award Number: NH23IP922592 Applicable Compliance Requirement: Reporting Condition: One of two annual ICA SF-425 Federal Financial Reports tested (50 percent) had inaccurate information reported on two separate line items. Context: The annual SF-425 report includes cumulative federal cash receipts and disbursements, total federal funds authorized, and the federal share of expenditures and unliquidated obligations. USDHHS’s Centers for Disease Control and Prevention requires the submission of an annual SF-425 report for each open grant subaccount. During FY 23, DOH submitted six ICA SF-425 reports, of which two were tested. The audit identified two separate line items on one report that were not supported by the accounting records. DOH staff underreported the federal share of expenditures by $160,471 and the federal share of unliquidated obligations by $2.8 million. Cause: Errors were due to staff turnover and insufficient training. Review procedures were insufficient to identify incorrect data prior to report submission. Criteria: Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over the federal award that provides reasonable assurance that the State is managing the federal awards in compliance with federal statutes, regulations, and terms and conditions of the federal award. Title 45 CFR 75.341 requires states to report financial information on the forms approved by the federal Office of Management and Budget, with the frequency required by the federal award. Effect: Inaccurate federal reporting may impair the federal oversight agency’s ability to properly oversee the program. Questioned Costs: None Recommendation: DOH’s DFMS director should improve training for federal reporting and strengthen review procedures to ensure compliance over ICA financial reporting requirements. View of Responsible Officials: Management agrees with this finding.

Federal Awarding Agency: U.S. Department of Health and Human Services (USDHHS) Impact: Significant Deficiency, Noncompliance AL Number and Title: 93.268 Immunization Cooperative Agreements (ICA) Federal Award Number: NH23IP922592 Applicable Compliance Requirement: Reporting Condition: One of two annual ICA SF-425 Federal Financial Reports tested (50 percent) had inaccurate information reported on two separate line items. Context: The annual SF-425 report includes cumulative federal cash receipts and disbursements, total federal funds authorized, and the federal share of expenditures and unliquidated obligations. USDHHS’s Centers for Disease Control and Prevention requires the submission of an annual SF-425 report for each open grant subaccount. During FY 23, DOH submitted six ICA SF-425 reports, of which two were tested. The audit identified two separate line items on one report that were not supported by the accounting records. DOH staff underreported the federal share of expenditures by $160,471 and the federal share of unliquidated obligations by $2.8 million. Cause: Errors were due to staff turnover and insufficient training. Review procedures were insufficient to identify incorrect data prior to report submission. Criteria: Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over the federal award that provides reasonable assurance that the State is managing the federal awards in compliance with federal statutes, regulations, and terms and conditions of the federal award. Title 45 CFR 75.341 requires states to report financial information on the forms approved by the federal Office of Management and Budget, with the frequency required by the federal award. Effect: Inaccurate federal reporting may impair the federal oversight agency’s ability to properly oversee the program. Questioned Costs: None Recommendation: DOH’s DFMS director should improve training for federal reporting and strengthen review procedures to ensure compliance over ICA financial reporting requirements. View of Responsible Officials: Management agrees with this finding.

Prior Year Finding: 2022-038 Federal Awarding Agency: USDHHS Impact: Significant Deficiency, Noncompliance AL Number and Title: 93.558 Temporary Assistance for Needy Families (TANF) Federal Award Number: 2001AKTANF, 2101AKTANF, 2201AKTANF, 2301AKTANF Applicable Compliance Requirement: Eligibility, Activities Allowed or Unallowed, Allowable Costs/Cost Principles Condition: Two of sixty TANF recipient case files tested lacked documentation supporting the eligibility of the recipient. The following errors were noted: • One case did not include child support documentation in the case file. • One case was for a person who was part of a family who had received assistance under TANF for more than the 60 months in another state and moved to Alaska and continued to receive assistance. Context: The State is required to ensure only financially needy families consisting of a minor child living with a parent or other caretaker relatives receive TANF assistance. The State reviews applications, identifies income and financial resources, and makes a determination whether a family is eligible to receive benefits, including the amount of the benefits. As part of verifying TANF eligibility, the State is required to coordinate data exchanges when making eligibility determinations, including, but not limited to: wage information from the State Wage Information Collection Agency, IEVS, unemployment compensation information from the Department of Labor, all available information from the Social Security Administration, and information from the United States Citizenship and Immigration Services. The State’s TANF manual provides guidance on how to calculate income. Once the information is received, reviewed, and calculated, it is entered into EIS. EIS automatically calculates the monthly benefit amount based on the eligibility factors entered. If eligibility factors are not entered accurately, benefit amounts are paid incorrectly. DOH’s DPA’s Administrative Procedures Manual, Section 109 requires that all public assistance cases have documentation that supports eligibility, ineligibility, and benefit-level determinations. The documentation must be in sufficient detail to allow a reader or reviewer to determine the reasonableness of each action taken, verification used, and contacts made using the online case note screen in EIS or on a Report of Contact sheet maintained in the hard copy case files. Cause: Turnover, staffing shortages, and inadequate training contributed to not performing and/or documenting all required components of eligibility determinations and not accurately terminating benefit amounts. Criteria: Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal control over the federal award that provides reasonable assurance that the State is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the grant award. Title 45 CFR 264.1 stipulates that no State may provide assistance to a family that includes an adult head-of-household or a spouse of the head-of-household who has received Federal assistance for a total of five years (i.e., 60 cumulative months, whether or not consecutive). Title 45 CFR 75.2 defines improper payments to include payments that were made in an incorrect amount under statutory, contractual, administrative, or other legally applicable requirements. Effect: Ineligible recipients may have received benefits. Questioned Costs: $7,909 Recommendation: DOH should improve training and monitoring of staff to ensure staff comply with TANF eligibility and document retention procedures and eligibility determinations are performed accurately and timely. View of Responsible Officials: Management agrees with this finding.

Prior Year Finding: 2022-039 Federal Awarding Agency: USDHHS Impact: Material Weakness, Material Noncompliance AL Number and Title: 93.558 TANF Federal Award Number: 2001AKTANF, 2101AKTANF, 2201AKTANF, 2301AKTANF Applicable Compliance Requirement: Matching, Level of Effort, Earmarking Condition: Auditors could not obtain reliable evidence to verify compliance with TANF’s level of effort and earmarking requirements. Context: The State was unable to provide documentation to show how the State was monitoring the level of effort and earmarking requirements throughout the year. This monitoring is normally done as a part of reporting for the program. Cause: DOH lacked adequate monitoring procedures due to staffing shortages and unreliable data impeded the staff’s ability to monitor compliance with federal requirements. Criteria: Title 45 CFR 263 states that a state must maintain an amount of “qualified state expenditures” for eligible families at least at the applicable percentage of the state’s historic state expenditures. For the Pandemic Emergency Assistance Fund, must only use the funds to supplement and not supplant other federal, state or local funds. It also states that a state may not spend more than 15 percent for administrative purposes, excluding certain types of expenditures, of the total combined amounts available. Title 45 CFR 264.1 states that the average monthly number of families that include an adult head-of-household or a spouse of the head-of-household who has received federal assistance for a total of five years (60 countable months, whether or not consecutive) may not exceed 20 percent of the average monthly number of all families to which the state has provided assistance during the fiscal year or the immediately preceding fiscal year (but not both), as the state may elect. Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. Effect: Lack of monitoring level of effort and earmarking requirements creates a risk that unallowable benefits were paid. Title 45 CFR 264.2 states TANF funding may be reduced by five percent for exceeding the 60-month limit on benefits. Questioned Costs: None Recommendation: DOH should develop procedures to ensure that monitoring procedures are in place for level of effort and earmarking. This may include allocating resources to correct the supporting documentation used to monitor these requirements. View of Responsible Officials: Management agrees with this finding.

Prior Year Finding: 2022-040, 2022-042 Federal Awarding Agency: USDHHS Impact: Significant Deficiency, Noncompliance AL Number and Title: 93.558 TANF Federal Award Number: 2001AKTANF, 2101AKTANF, 2201AKTANF, 2301AKTANF Applicable Compliance Requirement: Reporting, Special Test and Provisions Condition: One of the sixty cases tested (1.6 percent) had reported work activities that could not be supported by appropriate documentation which resulted in these work activities being reported inaccurately in the ACF-199 report. Context: The State reports the work verification data through the quarterly ACF-199 reports. The quarterly ACF-199 report is compiled monthly from information that is either entered in EIS by an ET or interfaced into EIS through the case management system. The information is transmitted to ACF in a data file. ACF uses the transmitted data to determine whether states have met the required work participation rates and to confirm the State is meeting the earmarking requirement that no more than 20 percent of families received more than 60 months of TANF assistance. Cause: The State continues to unwind procedures used during the Public Health Emergency (PHE) and restore monitoring procedures to catch errors in reporting and documentation. Criteria: Title 45 CFR 265.3(a)(1) requires the State to collect on a monthly basis, and file on a quarterly basis, the data specified in the ACF-199 report. Title 45 CFR 265.7(a) and 45 CFR 265.4 further specify the State's quarterly ACF-199 must be complete, accurate, and filed within 45 days, or be subject to a penalty. Title 45 CFR 265.7(a) requires each state’s quarterly reports to be complete and accurate. Federal regulations further state a complete and accurate report means the reported data accurately reflect information available to the state in case records, financial records, and automated data systems. Title 45 CFR 261.60(a) requires a state to report the actual hours that an individual participates in an activity. Furthermore, per 45 CFR 261.61(a) a state must support each individual’s hours of participation through documentation in the case file and 45 CFR 261.62(a)(2) requires a state to ensure the accuracy of the reporting by establishing and employing procedures for determining how to count and verify reported work activities. Additionally, 45 CFR 261.62(a)(4) requires a state to establish and employ internal controls to ensure compliance with procedures. Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. Effect: The State could be subject to a penalty if reported data is not supported by accurate documentation. Questioned Costs: None Recommendation: The State should implement procedures to ensure supporting documentation is complete to support data reported on the ACF-199. View of Responsible Officials: Management agrees with this finding.

Prior Year Finding: 2022-043 Federal Awarding Agency: USDHHS Impact: Significant Deficiency, Noncompliance AL Number and Title: 93.558 TANF Federal Award Number: 2001AKTANF, 2101AKTANF, 2201AKTANF, 2301AKTANF Applicable Compliance Requirement: Special Tests and Provisions Condition: The audit reviewed 60 TANF case files for clients that were not engaged in work activities. Of the 60 cases, there were exceptions noted with 9 of them (15 percent). The following errors were noted: • Five were not assessed a penalty timely even though documentation showed that a penalty should have been assessed. • Two cases lacked sufficient documentation to determine whether a penalty should have been assessed. • Two cases’ benefit payments were incorrectly calculated based on the documentation. Context: The goal of the TANF program is to transition TANF recipients into jobs or other work activities to support families. To attain this goal, the TANF program uses the "work first" approach. TANF recipients are required to look for paid employment. Individuals who cannot find immediate paid employment participate in activities that focus on gaining skills and experience that lead directly to employment, and increase the family’s self-sufficiency. To comply with the work first goal, State staff, with the assistance of contracted case managers, identify the work activities for the TANF recipients to help them move toward obtaining employment. TANF recipients must take part in assigned work activities. TANF recipients who fail to take part in assigned work activities incur a penalty that reduces the assistance payment. Per federal guidance, states can establish good cause or other exemptions for TANF recipients not engaging in work activities. Alaska Temporary Assistance Manual, section 730-2, outlines the following good cause exemptions: caretaker of a baby, caretaker of a disabled child or parent, medical reasons, family hardship, lack of childcare, no childcare funds, or no transportation funds. Where applicable, exemptions must be documented by a physician or other licensed medical professional. Cause: The State’s turnover, shortages and lack of training contributed to the State not issuing penalties. The State is also addressing the unwinding of procedures used when the PHE was in place. Criteria: Title 45 CFR 261.14 requires the State to reduce or terminate the amount of public assistance to families of individuals who refuse to engage in work. Title 45 CFR 75.303(a) requires the State establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of grant awards. Effect: According to 45 CFR 261.54, the State could be subject to a penalty equal to not less than one percent and not more than five percent of the federal grant award for failing to assess penalties when individuals refuse to engage in work activities. Questioned Costs: None Recommendation: DOH should improve training and supervision to ensure TANF recipients’ refusal to work penalties are processed and benefits are adjusted accordingly. View of Responsible Officials: Management agrees with this finding.

Prior Year Finding: 2022-044 Federal Awarding Agency: USDHHS Impact: Material Weakness, Material Noncompliance AL Number and Title: 93.558 TANF Federal Award Number: 2001AKTANF, 2101AKTANF, 2201AKTANF, 2301AKTANF Applicable Compliance Requirement: Reporting Condition: The State could not provide evidence the FFY 22 ACF-204 annual report was completed or submitted to the federal agency. Context: The State must complete and file an annual report containing information on the TANF program and the State’s maintenance of effort (MOE) programs for that year. Cause: DOH experienced staffing shortages and unreliable data impeded the staff’s ability to monitor compliance with federal requirements. Criteria: Title 45 CFR 265.9(a) requires each state to file an annual report containing information on the TANF program and the state’s maintenance of effort program(s) for that year. Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. Effect: Unreliable federal reporting limits transparency and may impair the federal oversight agency’s ability to properly oversee the program. According to 45 CFR 262.1(a)(3), the State could be subject to a penalty of four percent of the federal grant award for each quarter the State fails to submit an accurate, complete, and timely required report. Questioned Costs: None Recommendation: DOH should strengthen reporting procedures to ensure the ACF-204 report is complete and includes all programs for which the State claimed MOE expenditures. View of Responsible Officials: Management agrees with this finding.

Federal Awarding Agency: USDHHS Impact: Significant Deficiency, Noncompliance AL Number and Title: 93.558 TANF Federal Award Number: 2001AKTANF, 2101AKTANF, 2201AKTANF, 2301AKTANF Applicable Compliance Requirement: Special Tests and Provisions Condition: The audit reviewed 25 TANF case files for beneficiaries who were single custodial parents caring for a child who is under 6 years of age and had their benefits reduced or terminated. Of the 25 cases, there were exceptions noted with 4 of them (16 percent). The following errors were noted: • Two were assessed a penalty for too long due to untimely review of the case. • Two cases lacked sufficient documentation to support the penalty decision. Context: The goal of the TANF program is to transition TANF recipients into jobs or other work activities to support families. To attain this goal, the TANF program uses the "work first" approach. TANF recipients are required to look for paid employment. Individuals who cannot find immediate paid employment participate in activities that focus on gaining skills and experience that lead directly to employment, and increase the family’s self-sufficiency. To comply with the work first goal, State staff, with the assistance of contracted case managers, identify the work activities for the TANF recipients to help them move toward obtaining employment. TANF recipients must take part in assigned work activities. TANF recipients who fail to take part in assigned work activities incur a penalty that reduces the assistance payment. Per federal guidance, states can establish good cause or other exemptions for TANF recipients not engaging in work activities. Alaska Temporary Assistance Manual, section 730-2, outlines the following good cause exemptions: caretaker of a baby, caretaker of a disabled child or parent, medical reasons, family hardship, lack of childcare, no childcare funds, or no transportation funds. Where applicable, exemptions must be documented by a physician or other licensed medical professional. Cause: The State’s turnover, shortages and lack of training contributed to the State not issuing penalties. Although the State had procedures for monitoring the case files, this monitoring was not always catching the errors. Criteria: Title 45 CFR 261.15 stipulates that the State may not reduce or terminate the amount of public assistance based on an individual's refusal to engage in required work if the individual is a single custodial parent caring for a child under age six who has a demonstrated inability to obtain needed child care. Title 45 CFR 75.303(a) requires the State establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of grant awards. Effect: According to 45 CFR 261.57, the State could be subject to a penalty by reducing the State Family Assistance Grant payable to the State by no more than five percent for the immediately succeeding fiscal year. Questioned Costs: None Recommendation: DOH should improve training and supervision to ensure TANF recipients’ are not assessed a penalty when such a penalty is not required. View of Responsible Officials: Management agrees with this finding.

Federal Awarding Agency: USDHHS Impact: Significant Deficiency Assistance Listing Number and Title: 93.568 Low-Income Home Energy Assistance Program (LIHEAP) Federal Award Number: 2201AKLIEA, 2301AKLIEA Applicable Compliance Requirement: Eligibility Condition: Internal control weaknesses were identified over logical access to the system used to process energy assistance applications. Context: The details related to this control weakness and relevant audit criteria are being withheld from this report to prevent the weakness from being exploited. Pertinent details have been communicated to agency management in a separate confidential document. Cause: Details related to the cause of the control weaknesses are being withheld from this report to prevent the weaknesses from being exploited. Criteria: Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal award. State of Alaska Information Security Policies provide specific criteria related to the identified deficiencies. Effect: Deficiencies in internal controls increase the risk of unauthorized system use which may lead to inaccurate eligibility determinations or unallowable costs. Questioned Costs: None Recommendation: DPA’s director should strengthen controls over logical access to the system used to process energy assistance applications. View of Responsible Officials: Management agrees with this finding.

Prior Year Finding: 2022-046 Federal Awarding Agency: USDHHS Impact: Material Weakness, Material Noncompliance AL Number and Title: 93.568 LIHEAP Federal Award Number: 2201AKLIEA, 2301AKLIEA Applicable Compliance Requirement: Eligibility Condition: Twenty-two of 60 LIHEAP applicant case files tested (37 percent) had eligibility errors. Some of the cases had more than one of the following errors: • Eight cases (13 percent) had the benefit amount incorrectly calculated based on incorrect data input by an eligibility technician (ET) in the Energy Community Online System (ECOS). The errors resulted in overpayments or underpayments to beneficiaries. In three of the eight cases, system defects caused or contributed to the errors, which were not identified by ETs during processing. • Five cases (eight percent) lacked documentation supporting the income used by an ET to determine eligibility. • Six cases (10 percent) lacked documentation showing the applicant’s income was verified by an ET. • Four cases (seven percent) lacked proof of the applicant’s heating costs. • Five applications (eight percent) could not be located by DPA staff. • Four cases (seven percent) had incorrect income used by an ET when determining eligibility. The four errors did not impact the eligibility determination. Context: The State is required to only make payments to low-income households that pay a high proportion of income for home energy needs. DPA is responsible for determining eligibility for heating assistance payments. DPA employs ETs who review applications; identify and verify income, financial resources, and heating costs; verify identity, residency, citizenship and/or alien status of applicants and household members; and make determinations whether individuals are eligible to receive benefits. DPA has established internal control procedures to help staff determine eligibility in accordance with federal and state regulations. Procedures are documented in the DPA Administrative Procedures Manual and the Heating Assistance Policy (HAP) Manual. A central document repository system stores all documents DPA obtained to verify eligibility in FY 23. Applications are processed by DPA ETs through ECOS. To ensure that the highest level of assistance will be furnished to households with the lowest incomes and highest energy costs in relation to income, ECOS assigns points to applications based on information entered by ETs in ECOS such as income, household size and composition, dwelling type and size, and heating source. The number of points is multiplied by a predetermined rate to determine the heating assistance payment. ETs review and certify the point and payment amount calculated by ECOS. Cause: According to DPA management, deficiencies were due to human error, staffing shortages, inadequate training, and system defects. In addition, the DOH commissioner approved a simplified process to address a backlog of applications, which led ETs to not consistently confirm income and other eligibility requirements. Further, there was no case review quality control process in place during FY 23. Criteria: Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal award. The DPA Administrative Procedures Manual requires that all public assistance cases have documentation that supports eligibility, ineligibility, and benefit-level determinations. The documentation must be in sufficient detail to allow a reader or reviewer to determine the reasonableness and accuracy of the determination. The HAP Manual requires ETs to maintain records, including applications for certification and recertification, worksheets used in the computation of income for eligibility and the basis of issuance, documentation including verification methods used by the ET, and any other data that affects a household’s eligibility or basis of issuance. Title 42 U.S. Code 8624(b)(2)(B) requires states make payments to households with incomes which do not exceed the greater of (i) an amount equal to 150 percent of the poverty level for such state; or (ii) an amount equal to 60 percent of the state median income; except that a state may not exclude a household from eligibility in a fiscal year solely on the basis of household income if such income is less than 110 percent of the poverty level for such state, but the state may give priority to those households with the highest home energy costs or needs in relation to household income. Effect: Inadequate internal controls increase the risk that ineligible recipients received heating assistance payments and that eligible recipients received incorrect payments. Auditors found eight recipients had benefits incorrectly calculated, resulting in overpayments and underpayments. The errors resulted in questioned costs totaling $8,685. Questioned costs for the population are projected to be $1,324,997 based on the dollar of noncompliance observed in the sample projected over the tested population. Questioned Costs: $8,685 Recommendation: DPA’s director should strengthen internal controls by improving employee training, resolving system defects, and implementing a case review process to ensure LIHEAP eligibility determinations are accurate. View of Responsible Officials: Management agrees with this finding.

Prior Year Finding: 2022-047 Federal Awarding Agency: USDHHS Impact: Significant Deficiency AL Number and Title: 93.568 LIHEAP Federal Award Number: 2201AKLIEA Applicable Compliance Requirement: Matching, Level of Effort, Earmarking Condition: DPA did not maintain adequate controls to monitor and ensure compliance with the following earmarking requirements: no more than 10 percent of a state’s LIHEAP funds for a federal award may be used for planning and administrative costs and no more than 15 percent of the greater of the funds allotted or funds available may be used for low-cost residential weatherization or other energy-related home repairs. Context: The federal LIHEAP grant was awarded for a two-year grant period. The State may use an amount not to exceed 10 percent of the funds payable to the State under the award for planning and administering the use of LIHEAP funds. The State may also allocate up to 15 percent of LIHEAP grant funds to weatherization and energy conservation measures. Planning and administrative costs, as well as weatherization costs, not used in the first year may be used in the second year for administrative and weatherization purposes as long as the 10 and 15 percent limits, respectively, are not exceeded, and as long as the costs do not exceed the amount carried over (capped at 10 percent of the award). As of June 30, 2023, DPA had expended more than 10 percent of the FFY 22 grant award for planning and administrative costs. FFY 22 grant awards totaled $11,817,255 and DPA expended $1,759,827 (15 percent) for planning and administration through June 30, 2023. Although the federal grant compliance period for earmarking was outside the audit period, auditors noted that DPA lacked effective internal controls to monitor compliance with the earmarking requirement and there would likely be noncompliance in FY 24. Further, for the FFY 22 grant award, DPA staff reported obligating $1,969,014 (17 percent) for weatherization costs through September 30, 2022. Auditors’ review of accounting records showed the amount reported was incorrect and DPA obligated only $600,000 (five percent). Auditors noted that DPA lacked effective internal controls to monitor compliance with the earmarking requirement. Cause: DPA lacked procedures to monitor and track funds. According to management, the lack of procedures was the result of staff turnover and a lack of training regarding internal control requirements over federal programs. Criteria: Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Per 42 U.S.C. 8624, each state desiring to receive an allotment for Low-Income Home Energy Assistance must submit an application to the Secretary of USDHHS that certifies the state agrees to meet the following: • the state may use for planning and administering the use of funds under this title an amount not to exceed 10 percent of the funds payable to such state under this title for a fiscal year; and the state will pay from non-federal sources the remaining costs of planning and administering the program assisted under this title and will not use federal funds for such remaining cost; and • not more than 15 percent of the greater of the funds allotted to a state under this title for any fiscal year, or the funds available to such state under this title for such fiscal year, may be used by the state for low-cost residential weatherization or other energy-related home repair for low-income households, particularly those low-income households with the lowest incomes that pay a high proportion of household income for home energy. Effect: The lack of procedures to ensure compliance with LIHEAP earmarking requirements could result in unallowable expenditures. Auditors noted the 10 percent threshold for planning and administration for the FFY 22 awards had already been exceed by $578,101 as of June 30, 2023. Funds exceeding the 10 percent threshold will need to be returned to the federal government at the end of the grant period. Further, the lack of procedures could lead to ineffective management of grant awards and increase the risk of noncompliance. Questioned Costs: None Recommendation: DPA’s director should develop and implement procedures and improve staff training to ensure compliance with LIHEAP earmarking requirements. View of Responsible Officials: Management agrees with this finding.

Federal Awarding Agency: USDHHS Impact: Significant Deficiency AL Number and Title: 93.568 LIHEAP Federal Award Number: 2201AKLIEA Applicable Compliance Requirement: Period of Performance Condition: DPA obligated more than 10 percent of the FFY 22 grant award during the second fiscal year of the award. Context: The LIHEAP federal grant award was awarded for a two-year grant period, of which a maximum of 10 percent may be carried over or obligated in the second year. FFY 22 grant awards totaled $11,817,255, of which $1,181,726 (10 percent) was allowed to be carried over to the second year of the award. DPA obligated $1,203,167 during the second year of the award through June 30, 2023, which exceeded the allowable amount by $21,441. Cause: DPA lacked procedures for monitoring and ensuring compliance with period of performance requirements. According to DPA management, the lack of procedures was the result of staff turnover and inadequate oversight. Criteria: Title 45 CFR 96.14(a)(2) establishes the following time period for obligation and expenditure of LIHEAP grant funds: beginning with allotments for fiscal year 1994, a maximum of 10 percent of the amount payable to a grantee may be held available for the next fiscal year. No funds may be obligated after the end of the fiscal year following the fiscal year for which they were allotted. Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Effect: The lack of procedures increases the risk of noncompliance with LIHEAP period of performance requirements, which could result in the federal awarding agency imposing conditions or taking corrective actions, including additional requirements or withholding/terminating funds. Questioned Costs: None Recommendation: DPA’s director should develop and implement procedures and improve oversight to ensure compliance with LIHEAP period of performance requirements. View of Responsible Officials: Management agrees with this finding.

Prior Year Finding: 2022-049 Federal Awarding Agency: USDHHS Impact: Material Weakness, Material Noncompliance AL Number and Title: 93.568 LIHEAP Federal Award Number: 2201AKLIEA Applicable Compliance Requirement: Reporting Condition: Key line items for the FFY 22 LIHEAP Performance Data Form, FFY 22 Annual Report on Households Assisted by LIHEAP, and Quarterly Performance and Management Reports were not accurate or not supported by accounting or other records. In addition, the FFY 22 LIHEAP Carryover and Reallotment Form was not submitted within required timeframes. Context: LIHEAP grant awards include reporting requirements for financial, performance, and special reports. Except for Quarterly Performance and Management Reports, all reports are required to be submitted on an annual basis with varying due dates. The LIHEAP Carryover and Reallotment Form for FFY 22 grant awards was due on December 30, 2022, and submitted by DPA staff in July 2023. DPA staff rely on ECOS data for performance and special reporting. DPA staff’s ability to generate reports from ECOS was limited, necessitating DPA staff to work with the vendor to obtain data necessary for reporting. In FY 23 there were no established procedures to dictate the steps necessary to compile data from ECOS for each reporting line, and to create, review, and submit required reports. Cause: Errors were due to a lack of procedures for preparing the reports, as well as the absence of review by an individual other than the preparer of the reports. Criteria: Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal award. The Low-Income Home Energy Assistance Act of 1981 (Title XXVI of the Omnibus Budget Reconciliation Act of 1981, Public Law 97-35, as amended) section 2610 requires the collection of data, including information concerning home energy consumption, the amount, cost, and type of fuels used for households eligible for assistance under this title, the type of fuel used by various income groups, the number and income levels of households assisted by this title, the number of households that received such assistance and include one or more individuals who are 60 years or older or disabled or include young children and any other information determined to be reasonably necessary to carry out the provisions of this title. Collection of this data is facilitated through the LIHEAP performance data form and quarterly performance and management reports. Title 45 CFR 96.81 requires the State to submit a report by August 1st of each year, containing the amount of funds that the State requests to hold available for obligation in the next (following) fiscal year, not to exceed 10 percent of the funds payable to the grantee; a statement of the reasons that this amount to remain available will not be used in the fiscal year for which it was allotted; a description of the types of assistance to be provided with the amount held available; and the amount of funds, if any, to be subject to reallotment. USDHHS shall make no payment to a state for a fiscal year unless the state has complied with this paragraph with respect to the prior fiscal year. A LIHEAP Action Transmittal issued by USDHHS required grantees to submit estimated and final versions of the FFY 22 Carryover and Reallotment Report by November 1, 2022, and December 30, 2022, respectively. Title 45 CFR 96.82 requires the State to submit data on the number and income levels of households that apply and the number that are assisted with funds for the 12-month period corresponding to the federal fiscal year (October 1–September 30) preceding the fiscal year for which funds are requested. The data shall be reported separately for LIHEAP heating, cooling, crisis, and weatherization assistance. Effect: Inaccurate federal reporting may impair the federal oversight agency’s ability to properly oversee the program. In addition, noncompliance with the LIHEAP reporting requirements could result in the federal awarding agency imposing conditions or taking corrective actions, including additional requirements or withholding/terminating funds. Questioned Costs: None Recommendation: The DPA director should develop and implement procedures to ensure compliance with LIHEAP performance and special reporting requirements. View of Responsible Officials: Management agrees with this finding.

Federal Awarding Agency: USDHHS Impact: Significant Deficiency Assistance Listing Number and Title: 93.568 Low-Income Home Energy Assistance Program (LIHEAP) Federal Award Number: 2201AKLIEA, 2301AKLIEA Applicable Compliance Requirement: Eligibility Condition: Internal control weaknesses were identified over logical access to the system used to process energy assistance applications. Context: The details related to this control weakness and relevant audit criteria are being withheld from this report to prevent the weakness from being exploited. Pertinent details have been communicated to agency management in a separate confidential document. Cause: Details related to the cause of the control weaknesses are being withheld from this report to prevent the weaknesses from being exploited. Criteria: Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal award. State of Alaska Information Security Policies provide specific criteria related to the identified deficiencies. Effect: Deficiencies in internal controls increase the risk of unauthorized system use which may lead to inaccurate eligibility determinations or unallowable costs. Questioned Costs: None Recommendation: DPA’s director should strengthen controls over logical access to the system used to process energy assistance applications. View of Responsible Officials: Management agrees with this finding.

Prior Year Finding: 2022-046 Federal Awarding Agency: USDHHS Impact: Material Weakness, Material Noncompliance AL Number and Title: 93.568 LIHEAP Federal Award Number: 2201AKLIEA, 2301AKLIEA Applicable Compliance Requirement: Eligibility Condition: Twenty-two of 60 LIHEAP applicant case files tested (37 percent) had eligibility errors. Some of the cases had more than one of the following errors: • Eight cases (13 percent) had the benefit amount incorrectly calculated based on incorrect data input by an eligibility technician (ET) in the Energy Community Online System (ECOS). The errors resulted in overpayments or underpayments to beneficiaries. In three of the eight cases, system defects caused or contributed to the errors, which were not identified by ETs during processing. • Five cases (eight percent) lacked documentation supporting the income used by an ET to determine eligibility. • Six cases (10 percent) lacked documentation showing the applicant’s income was verified by an ET. • Four cases (seven percent) lacked proof of the applicant’s heating costs. • Five applications (eight percent) could not be located by DPA staff. • Four cases (seven percent) had incorrect income used by an ET when determining eligibility. The four errors did not impact the eligibility determination. Context: The State is required to only make payments to low-income households that pay a high proportion of income for home energy needs. DPA is responsible for determining eligibility for heating assistance payments. DPA employs ETs who review applications; identify and verify income, financial resources, and heating costs; verify identity, residency, citizenship and/or alien status of applicants and household members; and make determinations whether individuals are eligible to receive benefits. DPA has established internal control procedures to help staff determine eligibility in accordance with federal and state regulations. Procedures are documented in the DPA Administrative Procedures Manual and the Heating Assistance Policy (HAP) Manual. A central document repository system stores all documents DPA obtained to verify eligibility in FY 23. Applications are processed by DPA ETs through ECOS. To ensure that the highest level of assistance will be furnished to households with the lowest incomes and highest energy costs in relation to income, ECOS assigns points to applications based on information entered by ETs in ECOS such as income, household size and composition, dwelling type and size, and heating source. The number of points is multiplied by a predetermined rate to determine the heating assistance payment. ETs review and certify the point and payment amount calculated by ECOS. Cause: According to DPA management, deficiencies were due to human error, staffing shortages, inadequate training, and system defects. In addition, the DOH commissioner approved a simplified process to address a backlog of applications, which led ETs to not consistently confirm income and other eligibility requirements. Further, there was no case review quality control process in place during FY 23. Criteria: Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal award. The DPA Administrative Procedures Manual requires that all public assistance cases have documentation that supports eligibility, ineligibility, and benefit-level determinations. The documentation must be in sufficient detail to allow a reader or reviewer to determine the reasonableness and accuracy of the determination. The HAP Manual requires ETs to maintain records, including applications for certification and recertification, worksheets used in the computation of income for eligibility and the basis of issuance, documentation including verification methods used by the ET, and any other data that affects a household’s eligibility or basis of issuance. Title 42 U.S. Code 8624(b)(2)(B) requires states make payments to households with incomes which do not exceed the greater of (i) an amount equal to 150 percent of the poverty level for such state; or (ii) an amount equal to 60 percent of the state median income; except that a state may not exclude a household from eligibility in a fiscal year solely on the basis of household income if such income is less than 110 percent of the poverty level for such state, but the state may give priority to those households with the highest home energy costs or needs in relation to household income. Effect: Inadequate internal controls increase the risk that ineligible recipients received heating assistance payments and that eligible recipients received incorrect payments. Auditors found eight recipients had benefits incorrectly calculated, resulting in overpayments and underpayments. The errors resulted in questioned costs totaling $8,685. Questioned costs for the population are projected to be $1,324,997 based on the dollar of noncompliance observed in the sample projected over the tested population. Questioned Costs: $8,685 Recommendation: DPA’s director should strengthen internal controls by improving employee training, resolving system defects, and implementing a case review process to ensure LIHEAP eligibility determinations are accurate. View of Responsible Officials: Management agrees with this finding.

Prior Year Finding: 2022-047 Federal Awarding Agency: USDHHS Impact: Significant Deficiency AL Number and Title: 93.568 LIHEAP Federal Award Number: 2201AKLIEA Applicable Compliance Requirement: Matching, Level of Effort, Earmarking Condition: DPA did not maintain adequate controls to monitor and ensure compliance with the following earmarking requirements: no more than 10 percent of a state’s LIHEAP funds for a federal award may be used for planning and administrative costs and no more than 15 percent of the greater of the funds allotted or funds available may be used for low-cost residential weatherization or other energy-related home repairs. Context: The federal LIHEAP grant was awarded for a two-year grant period. The State may use an amount not to exceed 10 percent of the funds payable to the State under the award for planning and administering the use of LIHEAP funds. The State may also allocate up to 15 percent of LIHEAP grant funds to weatherization and energy conservation measures. Planning and administrative costs, as well as weatherization costs, not used in the first year may be used in the second year for administrative and weatherization purposes as long as the 10 and 15 percent limits, respectively, are not exceeded, and as long as the costs do not exceed the amount carried over (capped at 10 percent of the award). As of June 30, 2023, DPA had expended more than 10 percent of the FFY 22 grant award for planning and administrative costs. FFY 22 grant awards totaled $11,817,255 and DPA expended $1,759,827 (15 percent) for planning and administration through June 30, 2023. Although the federal grant compliance period for earmarking was outside the audit period, auditors noted that DPA lacked effective internal controls to monitor compliance with the earmarking requirement and there would likely be noncompliance in FY 24. Further, for the FFY 22 grant award, DPA staff reported obligating $1,969,014 (17 percent) for weatherization costs through September 30, 2022. Auditors’ review of accounting records showed the amount reported was incorrect and DPA obligated only $600,000 (five percent). Auditors noted that DPA lacked effective internal controls to monitor compliance with the earmarking requirement. Cause: DPA lacked procedures to monitor and track funds. According to management, the lack of procedures was the result of staff turnover and a lack of training regarding internal control requirements over federal programs. Criteria: Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Per 42 U.S.C. 8624, each state desiring to receive an allotment for Low-Income Home Energy Assistance must submit an application to the Secretary of USDHHS that certifies the state agrees to meet the following: • the state may use for planning and administering the use of funds under this title an amount not to exceed 10 percent of the funds payable to such state under this title for a fiscal year; and the state will pay from non-federal sources the remaining costs of planning and administering the program assisted under this title and will not use federal funds for such remaining cost; and • not more than 15 percent of the greater of the funds allotted to a state under this title for any fiscal year, or the funds available to such state under this title for such fiscal year, may be used by the state for low-cost residential weatherization or other energy-related home repair for low-income households, particularly those low-income households with the lowest incomes that pay a high proportion of household income for home energy. Effect: The lack of procedures to ensure compliance with LIHEAP earmarking requirements could result in unallowable expenditures. Auditors noted the 10 percent threshold for planning and administration for the FFY 22 awards had already been exceed by $578,101 as of June 30, 2023. Funds exceeding the 10 percent threshold will need to be returned to the federal government at the end of the grant period. Further, the lack of procedures could lead to ineffective management of grant awards and increase the risk of noncompliance. Questioned Costs: None Recommendation: DPA’s director should develop and implement procedures and improve staff training to ensure compliance with LIHEAP earmarking requirements. View of Responsible Officials: Management agrees with this finding.

Federal Awarding Agency: USDHHS Impact: Significant Deficiency AL Number and Title: 93.568 LIHEAP Federal Award Number: 2201AKLIEA Applicable Compliance Requirement: Period of Performance Condition: DPA obligated more than 10 percent of the FFY 22 grant award during the second fiscal year of the award. Context: The LIHEAP federal grant award was awarded for a two-year grant period, of which a maximum of 10 percent may be carried over or obligated in the second year. FFY 22 grant awards totaled $11,817,255, of which $1,181,726 (10 percent) was allowed to be carried over to the second year of the award. DPA obligated $1,203,167 during the second year of the award through June 30, 2023, which exceeded the allowable amount by $21,441. Cause: DPA lacked procedures for monitoring and ensuring compliance with period of performance requirements. According to DPA management, the lack of procedures was the result of staff turnover and inadequate oversight. Criteria: Title 45 CFR 96.14(a)(2) establishes the following time period for obligation and expenditure of LIHEAP grant funds: beginning with allotments for fiscal year 1994, a maximum of 10 percent of the amount payable to a grantee may be held available for the next fiscal year. No funds may be obligated after the end of the fiscal year following the fiscal year for which they were allotted. Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Effect: The lack of procedures increases the risk of noncompliance with LIHEAP period of performance requirements, which could result in the federal awarding agency imposing conditions or taking corrective actions, including additional requirements or withholding/terminating funds. Questioned Costs: None Recommendation: DPA’s director should develop and implement procedures and improve oversight to ensure compliance with LIHEAP period of performance requirements. View of Responsible Officials: Management agrees with this finding.

Prior Year Finding: 2022-049 Federal Awarding Agency: USDHHS Impact: Material Weakness, Material Noncompliance AL Number and Title: 93.568 LIHEAP Federal Award Number: 2201AKLIEA Applicable Compliance Requirement: Reporting Condition: Key line items for the FFY 22 LIHEAP Performance Data Form, FFY 22 Annual Report on Households Assisted by LIHEAP, and Quarterly Performance and Management Reports were not accurate or not supported by accounting or other records. In addition, the FFY 22 LIHEAP Carryover and Reallotment Form was not submitted within required timeframes. Context: LIHEAP grant awards include reporting requirements for financial, performance, and special reports. Except for Quarterly Performance and Management Reports, all reports are required to be submitted on an annual basis with varying due dates. The LIHEAP Carryover and Reallotment Form for FFY 22 grant awards was due on December 30, 2022, and submitted by DPA staff in July 2023. DPA staff rely on ECOS data for performance and special reporting. DPA staff’s ability to generate reports from ECOS was limited, necessitating DPA staff to work with the vendor to obtain data necessary for reporting. In FY 23 there were no established procedures to dictate the steps necessary to compile data from ECOS for each reporting line, and to create, review, and submit required reports. Cause: Errors were due to a lack of procedures for preparing the reports, as well as the absence of review by an individual other than the preparer of the reports. Criteria: Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal award. The Low-Income Home Energy Assistance Act of 1981 (Title XXVI of the Omnibus Budget Reconciliation Act of 1981, Public Law 97-35, as amended) section 2610 requires the collection of data, including information concerning home energy consumption, the amount, cost, and type of fuels used for households eligible for assistance under this title, the type of fuel used by various income groups, the number and income levels of households assisted by this title, the number of households that received such assistance and include one or more individuals who are 60 years or older or disabled or include young children and any other information determined to be reasonably necessary to carry out the provisions of this title. Collection of this data is facilitated through the LIHEAP performance data form and quarterly performance and management reports. Title 45 CFR 96.81 requires the State to submit a report by August 1st of each year, containing the amount of funds that the State requests to hold available for obligation in the next (following) fiscal year, not to exceed 10 percent of the funds payable to the grantee; a statement of the reasons that this amount to remain available will not be used in the fiscal year for which it was allotted; a description of the types of assistance to be provided with the amount held available; and the amount of funds, if any, to be subject to reallotment. USDHHS shall make no payment to a state for a fiscal year unless the state has complied with this paragraph with respect to the prior fiscal year. A LIHEAP Action Transmittal issued by USDHHS required grantees to submit estimated and final versions of the FFY 22 Carryover and Reallotment Report by November 1, 2022, and December 30, 2022, respectively. Title 45 CFR 96.82 requires the State to submit data on the number and income levels of households that apply and the number that are assisted with funds for the 12-month period corresponding to the federal fiscal year (October 1–September 30) preceding the fiscal year for which funds are requested. The data shall be reported separately for LIHEAP heating, cooling, crisis, and weatherization assistance. Effect: Inaccurate federal reporting may impair the federal oversight agency’s ability to properly oversee the program. In addition, noncompliance with the LIHEAP reporting requirements could result in the federal awarding agency imposing conditions or taking corrective actions, including additional requirements or withholding/terminating funds. Questioned Costs: None Recommendation: The DPA director should develop and implement procedures to ensure compliance with LIHEAP performance and special reporting requirements. View of Responsible Officials: Management agrees with this finding.

Prior Year Finding: 2022-052 Federal Awarding Agency: USDHHS Impact: Significant Deficiency AL Number and Title: 93.767 Children’s Health Insurance Program 93.775, 93.777, 93.778 Medicaid Cluster Federal Award Number: 2205AK5021, 2305AK5021 2205AKMAP, 2305AK5MAP Applicable Compliance Requirement: Eligibility Condition: An examination of the Alaska Resource for Integrated Eligibility Services (ARIES) system during FY 22 identified significant internal control deficiencies. An examination was not performed in FY 23, however certain deficiencies noted in the FY 22 report have not been alleviated in FY 23. Context: ARIES is an eligibility system developed for Medicaid and CHIP. Cause: Details related to the control weaknesses and the relevant audit criteria are being withheld from this report to prevent the weaknesses from being exploited. Pertinent details have been communicated to agency management in a separate confidential document. Criteria: Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over the federal award that provides reasonable assurance that the State is managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. Per Title 45 CFR 155.260(a)(5) the State must monitor, periodically assess, and update the security controls and related system risks to ensure the continued effectiveness of those controls. Effect: The internal control weaknesses increase the risk of noncompliance with State and federal regulations, unauthorized system use (including data manipulation), and incorrect eligibility determinations, which may result in ineligible recipients or unallowed costs. Questioned Costs: None Recommendation: The State should continue to formalize procedures and dedicate the resources necessary to strengthen ARIES system controls. View of Responsible Officials: Management agrees with this finding.

Prior Year Finding: 2022-053 Federal Awarding Agency: USDHHS Impact: Significant Deficiency, Noncompliance AL Number and Title: 93.767 CHIP 93.775, 93.777, 93.778 Medicaid Cluster Federal Award Number: 2205AK5021, 2305AK5021 2205AKMAP, 2305AK5MAP Applicable Compliance Requirement: Eligibility Condition: Sixty Medicaid and sixty CHIP recipients were randomly selected for eligibility testing. Testing revealed the following errors: Medicaid: • Twelve of the sixty recipients tested (20 percent), the State did not process applications in a timely manner or redetermine eligibility. The delays for completion of processing of the applications ranged from 46 days to 279 days as of June 30, 2023. CHIP: • Six of the sixty recipients tested (10 percent), the State did not process applications in a timely manner or redetermine eligibility. The delays for completion of processing of the applications ranged from 56 days to 225 days as of June 30, 2023. • One of the sixty recipients tested (1.6 percent), the beneficiary was due to have eligibility redetermined, however no information was submitted to the State for review and staff did not independently conduct a redetermination. For recipients following the Modified Adjusted Gross Income (MAGI) methodology, the State should have attempted to redetermine eligibility through electronic interfaces. Context: The State is required to ensure applications are reviewed and eligibility determinations are made timely for Medicaid and CHIP recipients. Eligibility is redetermined at least every 12 months or when new information is provided from the recipient. Due to the COVID-19 pandemic, the federal government enacted the FFCRA on March 18, 2020, which required health insurance coverage for individuals validly enrolled on or after this date to continue during the PHE. In accordance with FFCRA, the State is allowed to receive an enhanced reimbursement rate for Medicaid and CHIP and may not terminate Medicaid coverage for most individuals found to no longer meet eligibility requirements until the end of the month in which the PHE ends. The PHE ended during the year ended June 30, 2023. Cause: Staffing and resource shortages adversely impacted application processing timeliness. Also, the State is working through the unwinding of the PHE (public health emergency) flexibilities. Criteria: Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. Title 42 CFR 435.912(c) states the determination of eligibility for any application may not exceed 90 days for applicants who apply for Medicaid on the basis of disability and 45 days for all other applicants. Title 42 CFR 435.916 requires the State to periodically renew Medicaid eligibility. For renewals based on MAGI, a redetermination is required once every 12 months, and no more frequently than once every 12 months. Similarly, for non-MAGI beneficiaries the State is required to make a redetermination of eligibility at least every 12 months. The State is required to take action on information about changes between regular eligibility renewals and promptly redetermine eligibility. Title 42 CFR 435.916(a)(2) states that the agency must make a redetermination of eligibility without requiring information from the individual if able to do so based on reliable information contained in the individual’s account or other more current information available to the agency, including but not limited to information accessed through any databases accessed by the agency. Title 42 CFR 457.340 and 42 CFR 457.343 require the timely determination of eligibility and renewal procedures for Medicaid apply equally in administering CHIP. Effect: Failure to determine Medicaid and CHIP eligibility timely increases the risk that ineligible beneficiaries receive Medicaid and CHIP benefits. Questioned Costs: None Recommendation: The State should dedicate the resources necessary to determine Medicaid and CHIP eligibility in a timely manner and continue to re-instate procedures in place prior to the PHE. View of Responsible Officials: Management agrees with this finding.

Prior Year Finding: 2022-054 Federal Awarding Agency: USDHHS Impact: Significant Deficiency, Noncompliance AL Number and Title: 93.767 CHIP 93.775, 93.777, 93.778 Medicaid Cluster Federal Award Number: 2205AK5021, 2305AK5021 2205AKMAP, 2305AK5MAP Applicable Compliance Requirement: Eligibility, Activities Allowed or Unallowed, Allowable Costs/Cost Principles Condition: Sixty Medicaid and sixty CHIP recipients were randomly selected for eligibility testing. Auditors found inaccurate or unsupported eligibility determinations by State staff for 5 percent of Medicaid cases tested and 6 percent of CHIP cases tested. Testing revealed the following errors: Medicaid: • One case was ineligible for the whole year and benefits were available the whole year. • Two cases lacked documentation supporting the request and use of income and benefit information through the Income Eligibility and Verification System (IEVS) for determining eligibility and benefits. CHIP: • One case’s application hasn’t been processed as of 6/30/2023 but benefits were paid during the year ended June 30, 2023. • One case was a child that had turned 19 in a previous year but benefits continued to be paid during the year ended June 30, 2023. • Two cases had unresolved help desk tickets about how to close a case, which led to the cases remaining open and benefits to be paid for one of the cases during the year ended June 30, 2023. Context: The State is required to ensure only financially needy individuals receive Medicaid or CHIP assistance. DPA is the primary division within DOH responsible for determining Medicaid and CHIP eligibility. DPA’s employees review applications, identify income and financial resources, obtain social security numbers and verify the numbers through a federal database, and make determinations whether the individuals are eligible to receive benefits. DPA has established internal control procedures to help staff determine eligibility in accordance with federal regulations and the State plan. Procedures are documented in the DPA Administrative Procedures Manual and the MAGI Medicaid Eligibility Manual. DPA utilizes an electronic document management system to store the documents that DPA staff obtained to verify eligibility. Cause: The deficiencies were due to staff and resource shortages, inadequate training, human error, and system errors. Criteria: Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. Title 42 CFR 435.914(a) states the agency must include in each application’s case record facts to support the agency’s decision. Title 42 CFR 457.343 requires the renewal procedures for Medicaid apply equally in administering CHIP. Effect: Failure to accurately determine eligibility and maintain complete case records for Medicaid and CHIP increases the risk that ineligible recipients receive Medicaid and CHIP benefits. Questioned Costs: AL 93.767: $ 167 AL 93.778: $ 960 Recommendation: The State should improve eligibility training, ensure procedures are followed for determining Medicaid and CHIP eligibility, and ensure the case management system includes all relevant documentation supporting eligibility decisions. View of Responsible Officials: Management agrees with this finding, but not the questioned costs. CMS has notified the State that financial recoveries based on eligibility errors can only be pursued when identified by programs operating under CMS’s Payment Error Rate Measurement program, under section 1903(u) of the Social Security Act and regulations at 42 CFR Part 431, Subpart Q. Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. Management concurs with the finding, but not the questioned costs, based on communication received from a federal agency indicating the agency will not pursue recovery of the questioned costs for a similar prior year finding. Questioned costs are defined by Title 45 CFR 75.2, which states: Questioned cost means a cost that is questioned by the auditor because of an audit finding: • Which resulted from a violation or possible violation of a statute, regulation, or the terms and conditions of a federal award, including for funds used to match federal funds; • Where the costs, at the time of the audit, are not supported by adequate documentation; or • Where the costs incurred appear unreasonable and do not reflect the actions a prudent person would take in the circumstances. Based on the Uniform Guidance, benefits paid associated with the finding are reported as questioned costs.

Federal Awarding Agency: U.S. Department of Homeland Security (USDHS) Impact: Material Weakness, Material Noncompliance AL Number and Title: 97.046 Fire Management Assistance Grant (FMAG) program Federal Award Number: 5282FMAKP00000001, 5287FMAKP00000001, 5290FMAKP00000001 Applicable Compliance Requirement: Reporting Condition: Three FY 23 FMAG SF-425 reports were randomly selected for testing. Two reports had incorrect matching amounts and one report for quarter ending September 2022 was not filed. Context: The SF-425 is a required quarterly federal financial form used for reporting on the financial status of federal grant awards. During FY 23, three fires required quarterly SF-425 reports for a total of 12 reports due. Three of the 12 were selected for testing. Due to incorrect calculations, the matching amounts for two SF-425 reports were understated for the quarters ending December 2022 and March 2023 by $946,691 and $62,388, respectively. Cause: Turnover in staff, inadequate written procedures over report preparation, and insufficient supervisory review resulted in reporting incorrect matching amounts. Lack of staff oversight contributed to the one SF-425 report that was not filed. Criteria: Title 44 CFR 204.51(d)(1) requires the State have an up-to-date State Administrative Plan (plan) that describes the procedures for FMAG program administration. The plan requires the SF-425 be submitted to the Federal Emergency Management Agency (FEMA) within 30 days after the end of each calendar quarter that reflects financial transactions generated from the accounting system. Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over a federal award that provides reasonable assurance that the State is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the award. Effect: The ineffective internal controls resulted in underreported matching amounts in two reports and not filing one report. Inaccurate federal reporting may impair federal decision-making and may result in the federal awarding agency imposing additional conditions or taking corrective action, including additional requirements or withholding/terminating funds. Questioned Costs: None Recommendation: DNR’s Division of Forestry director, in conjunction with the SSD director, should update written procedures for the preparation and review of the SF-425 report to ensure the reports are accurate prior to submission to FEMA and should improve oversight to ensure required reports are filed. View of Responsible Officials: Management agrees with this finding.

Federal Awarding Agency: USDHS Impact: Material Weakness, Material Noncompliance AL Number and Title: 97.046 FMAG Federal Award Number: 5282FMAKP00000001, 5287FMAKP00000001, 5290FMAKP00000001 Applicable Compliance Requirement: Reporting Condition: DNR SSD staff did not file the FY 23 Federal Cash Transaction Reports (FCTR) for quarters ending September 2022, December 2022, and June 2023. The audit reviewed the March 2023 quarterly report filed and determined inaccurate cumulative cash receipts and cash disbursements were reported. Context: As required by federal regulations, DNR uses the U.S. Department of Health and Human Services Payment Management System (PMS) for FMAG cash management. As such, the FCTR reports are required to be submitted in PMS. Each quarter DNR must report FMAG cumulative federal cash disbursements until the State has finished drawing down the FMAG award. Cause: DNR management lacked adequate written procedures over the preparation and review for the FCTR to ensure accurate reporting. According to DNR management, the inaccurate reporting was due to lack of training for new staff. Further, since the data was entered directly in PMS, the system did not allow for review by another staff member to ensure accuracy of the data prior to submission to FEMA. The SSD accountant stated the reports were not filed timely due to human error and uncertainty over which DNR section was responsible for completing and submitting the report. According to DNR management, once the lack of reporting was identified by DNR staff the PMS did not permit delinquent reports to be processed. Criteria: Title 44 CFR 204.51(d)(1) requires the State have an up-to-date State Administrative Plan (plan) that describes the procedures for administration of the FMAG program. The plan requires the FCTR be submitted within 30 days after the end of each calendar quarter. Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over a federal award that provides reasonable assurance that the State is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the award. Effect: The ineffective internal controls resulted in incomplete and inaccurate federal reporting, which may impair federal decision-making and result in the federal awarding agency imposing additional conditions or taking corrective action, including additional requirements or withholding/terminating funds. Questioned Costs: None Recommendation: Division of Forestry’s director, in conjunction with the SSD director, should update written procedures for the preparation and review of the FCTR and properly train new employees on preparation of the FCTR to ensure the data entered into PMS is accurate and reviewed. View of Responsible Officials: Management agrees with this finding.

Federal Awarding Agency: USDHS Impact: Material Weakness, Material Noncompliance AL Number and Title: 97.046 FMAG Federal Award Number: 5282FMAKP00000001, 5287FMAKP00000001, 5290FMAKP00000001 Applicable Compliance Requirement: Reporting Condition: Of the two FY 23 FMAG quarterly progress reports (QPR) selected for testing, one was not filed. Testing of the QPR for quarter ending June 30, 2023, identified incorrect amounts and data. Context: QPRs are required to be submitted to FEMA to track and communicate the progress on all open FMAG projects identified in project worksheets (PW). FEMA sends DNR staff the QPR template with highlighted data fields that require update. Errors on the QPR tested for quarter ending June 30, 2023, included amounts for drawdowns and federal funds disbursed during July 2023 for six of the 10 reported PWs, resulting in an overstatement of $6,375,401. All ten PWs reported in the June 2023 QPR had incorrect approved and projected completion dates. The QPR for quarter ending December 31, 2022, was not filed because DNR staff attached an incorrect quarterly report to the email submitted to FEMA. DNR management did not realize the error until an auditor requested a copy. After recognizing the error, DNR staff filed the report for the quarter ending December 2022 in January 2024. Cause: DNR management lacked adequate written procedures over preparation and review to ensure the QPRs were complete and accurate prior to submission as staff relied on FEMA’s general instructions. Human error resulted in the wrong quarterly report being attached to the email. Criteria: Title 44 CFR 204.51(d)(1) requires the State have an up-to-date State Administrative Plan (plan) that describes the procedures for administration of the FMAG program. The plan requires the QPR be submitted to FEMA within 30 days after the end of each quarter. Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over a federal award that provides reasonable assurance that the State is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the grant award. Effect: Lack of adequate internal controls resulted in a report not being filed and inaccurate data in the filed report. Incomplete and inaccurate federal reporting may impair federal decision-making and may result in federal awarding agency imposing additional conditions or taking corrective action, including additional requirements or withholding/terminating funds. Questioned Costs: None Recommendation: Division of Forestry’s director should improve oversight to ensure reports are filed and should update written procedures for the preparation and review of the QPR to ensure FMAG reports are complete, accurate, and reviewed prior to submission. View of Responsible Officials: Management agrees with this finding.

Federal Awarding Agency: U.S. Department of Agriculture Impact Significant Deficiency, Noncompliance AL Number and Title: 10.511 Research and Development Cluster Federal Award Number: NI22SLBCXXXXG054 Applicable Compliance Requirement: Procurement and Suspension and Debarment Condition and Context: During the testing of Suspension and Debarment, one grant from the University of Alaska Fairbanks Campus (UAF) has three covered lease contracts that did not have EPLS checks performed. These were existing vendors who previously were not funded with federal dollars. Once the contracts were funded with federal dollars, an EPLS check was not performed. Cause: UAF did not have a process to review existing contracts for suspension and debarment if they were initially not funded with federal dollars. Criteria: Per Uniform Guidance 2 CFR 180.300 nonfederal entities entering into covered transactions must verify the party is not suspended or debarred from conducting business by the federal government. This can be performed by: Checking SAM exclusions, collecting certification from the party, or adding a clause or condition to the covered transaction. Effect: Potentially suspended or debarred vendors may have been contracted with federal funds. Questions costs: None Recommendation: UAF should perform EPLS checks on all covered transactions paid with federal funds. View of Responsible Officials: Management agrees with this finding.

Prior Year Finding: 2022-031 Federal Awarding Agency: USDA Impact: Material Weakness, Material Noncompliance AL Number and Title: 10.551, 10.561 SNAP Cluster Federal Award Number: 22AK35050292301, 23AK35050292301 Applicable Compliance Requirement: Allowable Costs/Cost Principles, Special Tests and Provisions Condition: DPA management instructed staff to extend SNAP six-month certification periods after an approved waiver expired bypassing required eligibility recertifications. Furthermore, DPA continued to extend six-month certifications for consecutive periods without recertifying eligibility after being notified by the federal award agency that the practice was unallowable. Context: A state must certify each SNAP-eligible household for a definite time period. Alaska households are certified for a six-month period. The first month of the certification period begins in the first month a household is determined eligible to participate. The State is required by federal law to ensure EIS automatically cuts off participation for households that have not been recertified at the end of the certification period. Eligibility must be redetermined before a household receives benefits for a new period. In response to the COVID-19 disaster, USDA’s FNS issued COVID-19 waivers and flexibilities, which included extending SNAP certification periods. In a letter dated April 30, 2021, FNS allowed states to automatically extend benefit certification periods for up to six months. In a subsequent letter dated December 8, 2021, FNS clarified the April 30, 2021, letter directing that state agencies may only extend certification periods for up to six months from the initial expiration date assigned at the last certification or recertification. Consecutive certifications or back-to-back six-month extensions were not allowable. The final FNS COVID-19 waiver allowing certification period extensions expired July 31, 2022. Cause: The EIS control to automatically cut off households from receiving SNAP benefits at the end of the certification period was disabled by DPA management during the COVID-19 public health emergency and was not reactivated until June 2023. DPA management directed staff to automatically extend certification periods to help reduce a backlog of SNAP benefit applications. Criteria: Title 7 CFR 272.10(b) requires the State to use an automated data processing system for SNAP. The system is to be used to determine eligibility and calculate benefits or validate eligibility workers’ calculations by processing and storing all casefile information necessary for the eligibility determination and benefit computation including, but not limited to: all household members’ names, addresses, dates of birth, social security numbers, and individual household members’ earned and unearned income by source, deductions, resources, and household size. Also, the system must be used to redetermine or revalidate eligibility and benefits based on notices of change in households’ circumstances. Title 7 CFR 273.10(f) requires the State to certify each eligible household for a definite period of time. Alaska households are certified for a six-month period per Alaska’s approved SNAP Plan of Operation. Title 7 CFR 273.14(a) prescribes that no household may participate beyond the expiration of the certification period assigned in accordance with 273.10(f) without a determination of eligibility for a new period. Furthermore, the State must establish procedures for notifying households of expiration dates, providing application forms, scheduling interviews, and recertifying eligible households prior to the expiration of certification periods. Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. USDA FNS SNAP guidance, issued December 8, 2021, titled, Extension of SNAP COVID-19 Administrative flexibilities January 2022 and Beyond, provided that States may only extend certification periods for up to six months from the initial expiration date assigned at the last certification or recertification. The guidance reiterated that the State should not extend certification periods consecutively, as it reduces the opportunities for the State to obtain a full understanding of a household’s circumstances and make necessary adjustments. Effect: The lack of regular eligibility recertification increases the likelihood of ineligible recipients receiving unallowable SNAP benefits. Continued extensions of certification periods without accompanying reviews erodes the accuracy and relevance of eligibility data over time. If FNS concludes that the State was negligent in household certification, FNS may invoice the State for an amount equivalent to the benefits issued due to such negligence. Moreover, the adoption of extensive certification period extensions could lead to substantial rises in case processing backlogs when the extensions conclude and the State returns to standard operations. Questioned Costs: AL 10.551: Indeterminate Recommendation: DPA’s director should ensure SNAP benefit recertifications are performed in accordance with federal regulation. View of Responsible Officials: Management agrees with this finding.

Federal Awarding Agency: USDA Impact: Material Weakness, Material Noncompliance AL Number and Title: 10.551, 10.561 SNAP Cluster Federal Award Number: 22AK35050292301, 23AK35050292301 Applicable Compliance Requirement: Allowable Costs/Cost Principles, Special Tests and Provisions Condition: The amount of FY 23 SNAP benefits reported as issued by the State’s EBT contractor was $19,689,126 more than the amount of authorized benefits reported in data from DPA EIS. Context: DPA relies on the legacy eligibility system, EIS, to determine eligibility for SNAP and calculate monthly benefit amounts. Benefit amounts are calculated based on household size, income, and other financial resources of all qualifying members of a household less specific allowable deductions. Each day EIS transmits an issuance batch file, including authorized beneficiaries and benefit amounts to FIS, which maintains accounts for each beneficiary. When an EBT card is utilized by a beneficiary, FIS functions as the intermediary between the State’s U.S. Treasury benefit account and the retailers by settling SNAP benefit transactions with retailers before drawing down federal reimbursement. The State is required to ensure its automated data processing systems accurately and completely process and store all case file information for eligibility determinations and benefit calculations and provide the data necessary to meet federal issuance and reconciliation reporting requirements. A reconciliation of FIS issuance records with EIS authorized beneficiaries and benefit amounts demonstrates the completeness and accuracy of the EBT process. In FY 23, the EIS benefit data provided by DPA could not be reconciled to the amount of SNAP benefits issued per FIS. As a result, the audit could not verify the accuracy and completeness of benefit calculations nor evaluate the eligibility and benefit determination information stored in EIS. Cause: DPA management could not identify the cause of the variance. DPA’s outdated legacy eligibility system and a lack of daily reconciliations (see Finding No. 2023-035) contributed to the inability to maintain adequate supporting records. Criteria: Title 7 CFR 274.1(h) requires that the state agency create and maintain a master issuance file that consolidates records of all certified SNAP households, records participation activity for each household, and supplies all information necessary to fulfill the reporting requirements outlined in Title 7 CFR 274.4. Title 7 CFR 274.4(a)(1) requires the State to reconcile benefits posted to household accounts on the central computer against benefits on the issuance authorization file. Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. Effect: Significant discrepancies between EIS benefit data and the EBT contractor’s issuance records undermines confidence in the eligibility system and may be indicative of significant unidentified processing errors. Inadequate system processing increases the risk of incorrect or ineligible benefits. Questioned Costs: AL 10.551: $19,689,126 Recommendation: DPA’s director should identify the cause of the discrepancies between EBT contractor issuance data and the State’s eligibility system, and take action necessary to ensure SNAP benefit payments are supported by eligibility and benefit data. View of Responsible Officials: Management disagrees with this finding. DPA performs monthly reconciliations and balancing efforts to ensure accuracy with FIS, EIS, and reporting. No discrepancies have been identified by DPA. None of the parties involved in the audit have been able to pinpoint the origin of the discrepancy described in this finding. DPA’s monthly reconciliation processes are rigorous, consistent, and thorough, ensuring accuracy and alignment with USDA data from AMA Bank. The reconciliation efforts encompass federal SNAP reports: FNS 388, FNS 46, and the EIS Balance Issuance report, all of which consistently reconcile. The reconciliation extends to ASAP and AMA batch values, with annual certification further validating accuracy. Monthly, the AMA raw data is meticulously balanced in the 388/46 reports, with only the P-EBT and EA issuances requiring manual entry from the 292B report. With this steadfast commitment to monthly reconciliation and alignment with AMA data, management is confident in the absence of errors or discrepancies. Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. DOH management states that the monthly reconciliation of summary EIS and benefit issuance data suggests the absence of errors or discrepancies; however, DPA management could not demonstrate that eligibility determinations and benefit payment details in EIS supported the benefit issuance data.

Prior Year Finding: 2022-033 Federal Awarding Agency: USDA Impact: Material Weakness, Material Noncompliance AL Number and Title: 10.551, 10.561 SNAP Cluster Federal Award Number: 22AK35050292301, 23AK35050292301 Applicable Compliance Requirement: Special Tests and Provisions Condition: Daily SNAP EBT reconciliations were not performed in FY 23. Context: A state must have a system in place to reconcile, on a daily basis, all of the funds entering into, exiting from, and remaining in the system each day with a state’s US Treasury benefit account, and FIS’s records. States must also have systems in place to reconcile retailer credit activity as reported into the banking system to client transactions maintained by the processor and to the funds drawn down from the EBT benefit account with the US Treasury. The reconciliation process ensures that a state only draws federal funds for authorized transactions. In FY 23, required daily reconciliations were not performed. However, according to DPA management, monthly reconciliations were performed as part of the federal reporting process. Cause: According to DPA management, daily reconciliations were not performed due to staff turnover, inadequate procedures, and the lack of trained staff. In addition, management indicated monthly reconciliations provide sufficient assurance of accurate processing. Criteria: Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant award. Title 7 CFR 274.4(a) requires that State agencies account for all issuance through a reconciliation process. The EBT system must provide reports and documentation pertaining to reconciliation. Reconciliations must be conducted and records kept as follows: • Verification of retailer's credits against deposit information entered into the automated clearinghouse network; and • Reconciliation of total funds entered into, exiting from, and remaining in the system each day. Effect: An inconsistent reconciliation process increases the risk of unidentified processing errors and unallowable costs. States are responsible for efficiently and effectively administering SNAP in accordance with federal laws, regulations, and FNS approved Plan of Operations. A determination by FNS that the State has failed to comply with any of these requirements may result in a suspension or disallowance of the federal share of the State’s administrative funds. Questioned Costs: None Recommendation: DPA’s director should develop and implement daily reconciliation and monitoring procedures, and train staff to ensure daily reconciliations are conducted in accordance with federal regulations. DPA should consult FNS for program guidance regarding reconciliation requirements. View of Responsible Officials: Management agrees with this finding.

Prior Year Finding: 2022-031 Federal Awarding Agency: USDA Impact: Material Weakness, Material Noncompliance AL Number and Title: 10.551, 10.561 SNAP Cluster Federal Award Number: 22AK35050292301, 23AK35050292301 Applicable Compliance Requirement: Allowable Costs/Cost Principles, Special Tests and Provisions Condition: DPA management instructed staff to extend SNAP six-month certification periods after an approved waiver expired bypassing required eligibility recertifications. Furthermore, DPA continued to extend six-month certifications for consecutive periods without recertifying eligibility after being notified by the federal award agency that the practice was unallowable. Context: A state must certify each SNAP-eligible household for a definite time period. Alaska households are certified for a six-month period. The first month of the certification period begins in the first month a household is determined eligible to participate. The State is required by federal law to ensure EIS automatically cuts off participation for households that have not been recertified at the end of the certification period. Eligibility must be redetermined before a household receives benefits for a new period. In response to the COVID-19 disaster, USDA’s FNS issued COVID-19 waivers and flexibilities, which included extending SNAP certification periods. In a letter dated April 30, 2021, FNS allowed states to automatically extend benefit certification periods for up to six months. In a subsequent letter dated December 8, 2021, FNS clarified the April 30, 2021, letter directing that state agencies may only extend certification periods for up to six months from the initial expiration date assigned at the last certification or recertification. Consecutive certifications or back-to-back six-month extensions were not allowable. The final FNS COVID-19 waiver allowing certification period extensions expired July 31, 2022. Cause: The EIS control to automatically cut off households from receiving SNAP benefits at the end of the certification period was disabled by DPA management during the COVID-19 public health emergency and was not reactivated until June 2023. DPA management directed staff to automatically extend certification periods to help reduce a backlog of SNAP benefit applications. Criteria: Title 7 CFR 272.10(b) requires the State to use an automated data processing system for SNAP. The system is to be used to determine eligibility and calculate benefits or validate eligibility workers’ calculations by processing and storing all casefile information necessary for the eligibility determination and benefit computation including, but not limited to: all household members’ names, addresses, dates of birth, social security numbers, and individual household members’ earned and unearned income by source, deductions, resources, and household size. Also, the system must be used to redetermine or revalidate eligibility and benefits based on notices of change in households’ circumstances. Title 7 CFR 273.10(f) requires the State to certify each eligible household for a definite period of time. Alaska households are certified for a six-month period per Alaska’s approved SNAP Plan of Operation. Title 7 CFR 273.14(a) prescribes that no household may participate beyond the expiration of the certification period assigned in accordance with 273.10(f) without a determination of eligibility for a new period. Furthermore, the State must establish procedures for notifying households of expiration dates, providing application forms, scheduling interviews, and recertifying eligible households prior to the expiration of certification periods. Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. USDA FNS SNAP guidance, issued December 8, 2021, titled, Extension of SNAP COVID-19 Administrative flexibilities January 2022 and Beyond, provided that States may only extend certification periods for up to six months from the initial expiration date assigned at the last certification or recertification. The guidance reiterated that the State should not extend certification periods consecutively, as it reduces the opportunities for the State to obtain a full understanding of a household’s circumstances and make necessary adjustments. Effect: The lack of regular eligibility recertification increases the likelihood of ineligible recipients receiving unallowable SNAP benefits. Continued extensions of certification periods without accompanying reviews erodes the accuracy and relevance of eligibility data over time. If FNS concludes that the State was negligent in household certification, FNS may invoice the State for an amount equivalent to the benefits issued due to such negligence. Moreover, the adoption of extensive certification period extensions could lead to substantial rises in case processing backlogs when the extensions conclude and the State returns to standard operations. Questioned Costs: AL 10.551: Indeterminate Recommendation: DPA’s director should ensure SNAP benefit recertifications are performed in accordance with federal regulation. View of Responsible Officials: Management agrees with this finding.

Federal Awarding Agency: USDA Impact: Material Weakness, Material Noncompliance AL Number and Title: 10.551, 10.561 SNAP Cluster Federal Award Number: 22AK35050292301, 23AK35050292301 Applicable Compliance Requirement: Allowable Costs/Cost Principles, Special Tests and Provisions Condition: The amount of FY 23 SNAP benefits reported as issued by the State’s EBT contractor was $19,689,126 more than the amount of authorized benefits reported in data from DPA EIS. Context: DPA relies on the legacy eligibility system, EIS, to determine eligibility for SNAP and calculate monthly benefit amounts. Benefit amounts are calculated based on household size, income, and other financial resources of all qualifying members of a household less specific allowable deductions. Each day EIS transmits an issuance batch file, including authorized beneficiaries and benefit amounts to FIS, which maintains accounts for each beneficiary. When an EBT card is utilized by a beneficiary, FIS functions as the intermediary between the State’s U.S. Treasury benefit account and the retailers by settling SNAP benefit transactions with retailers before drawing down federal reimbursement. The State is required to ensure its automated data processing systems accurately and completely process and store all case file information for eligibility determinations and benefit calculations and provide the data necessary to meet federal issuance and reconciliation reporting requirements. A reconciliation of FIS issuance records with EIS authorized beneficiaries and benefit amounts demonstrates the completeness and accuracy of the EBT process. In FY 23, the EIS benefit data provided by DPA could not be reconciled to the amount of SNAP benefits issued per FIS. As a result, the audit could not verify the accuracy and completeness of benefit calculations nor evaluate the eligibility and benefit determination information stored in EIS. Cause: DPA management could not identify the cause of the variance. DPA’s outdated legacy eligibility system and a lack of daily reconciliations (see Finding No. 2023-035) contributed to the inability to maintain adequate supporting records. Criteria: Title 7 CFR 274.1(h) requires that the state agency create and maintain a master issuance file that consolidates records of all certified SNAP households, records participation activity for each household, and supplies all information necessary to fulfill the reporting requirements outlined in Title 7 CFR 274.4. Title 7 CFR 274.4(a)(1) requires the State to reconcile benefits posted to household accounts on the central computer against benefits on the issuance authorization file. Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. Effect: Significant discrepancies between EIS benefit data and the EBT contractor’s issuance records undermines confidence in the eligibility system and may be indicative of significant unidentified processing errors. Inadequate system processing increases the risk of incorrect or ineligible benefits. Questioned Costs: AL 10.551: $19,689,126 Recommendation: DPA’s director should identify the cause of the discrepancies between EBT contractor issuance data and the State’s eligibility system, and take action necessary to ensure SNAP benefit payments are supported by eligibility and benefit data. View of Responsible Officials: Management disagrees with this finding. DPA performs monthly reconciliations and balancing efforts to ensure accuracy with FIS, EIS, and reporting. No discrepancies have been identified by DPA. None of the parties involved in the audit have been able to pinpoint the origin of the discrepancy described in this finding. DPA’s monthly reconciliation processes are rigorous, consistent, and thorough, ensuring accuracy and alignment with USDA data from AMA Bank. The reconciliation efforts encompass federal SNAP reports: FNS 388, FNS 46, and the EIS Balance Issuance report, all of which consistently reconcile. The reconciliation extends to ASAP and AMA batch values, with annual certification further validating accuracy. Monthly, the AMA raw data is meticulously balanced in the 388/46 reports, with only the P-EBT and EA issuances requiring manual entry from the 292B report. With this steadfast commitment to monthly reconciliation and alignment with AMA data, management is confident in the absence of errors or discrepancies. Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. DOH management states that the monthly reconciliation of summary EIS and benefit issuance data suggests the absence of errors or discrepancies; however, DPA management could not demonstrate that eligibility determinations and benefit payment details in EIS supported the benefit issuance data.

Prior Year Finding: 2022-033 Federal Awarding Agency: USDA Impact: Material Weakness, Material Noncompliance AL Number and Title: 10.551, 10.561 SNAP Cluster Federal Award Number: 22AK35050292301, 23AK35050292301 Applicable Compliance Requirement: Special Tests and Provisions Condition: Daily SNAP EBT reconciliations were not performed in FY 23. Context: A state must have a system in place to reconcile, on a daily basis, all of the funds entering into, exiting from, and remaining in the system each day with a state’s US Treasury benefit account, and FIS’s records. States must also have systems in place to reconcile retailer credit activity as reported into the banking system to client transactions maintained by the processor and to the funds drawn down from the EBT benefit account with the US Treasury. The reconciliation process ensures that a state only draws federal funds for authorized transactions. In FY 23, required daily reconciliations were not performed. However, according to DPA management, monthly reconciliations were performed as part of the federal reporting process. Cause: According to DPA management, daily reconciliations were not performed due to staff turnover, inadequate procedures, and the lack of trained staff. In addition, management indicated monthly reconciliations provide sufficient assurance of accurate processing. Criteria: Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant award. Title 7 CFR 274.4(a) requires that State agencies account for all issuance through a reconciliation process. The EBT system must provide reports and documentation pertaining to reconciliation. Reconciliations must be conducted and records kept as follows: • Verification of retailer's credits against deposit information entered into the automated clearinghouse network; and • Reconciliation of total funds entered into, exiting from, and remaining in the system each day. Effect: An inconsistent reconciliation process increases the risk of unidentified processing errors and unallowable costs. States are responsible for efficiently and effectively administering SNAP in accordance with federal laws, regulations, and FNS approved Plan of Operations. A determination by FNS that the State has failed to comply with any of these requirements may result in a suspension or disallowance of the federal share of the State’s administrative funds. Questioned Costs: None Recommendation: DPA’s director should develop and implement daily reconciliation and monitoring procedures, and train staff to ensure daily reconciliations are conducted in accordance with federal regulations. DPA should consult FNS for program guidance regarding reconciliation requirements. View of Responsible Officials: Management agrees with this finding.

Prior Year Finding: 2022-031 Federal Awarding Agency: USDA Impact: Material Weakness, Material Noncompliance AL Number and Title: 10.551, 10.561 SNAP Cluster Federal Award Number: 22AK35050292301, 23AK35050292301 Applicable Compliance Requirement: Allowable Costs/Cost Principles, Special Tests and Provisions Condition: DPA management instructed staff to extend SNAP six-month certification periods after an approved waiver expired bypassing required eligibility recertifications. Furthermore, DPA continued to extend six-month certifications for consecutive periods without recertifying eligibility after being notified by the federal award agency that the practice was unallowable. Context: A state must certify each SNAP-eligible household for a definite time period. Alaska households are certified for a six-month period. The first month of the certification period begins in the first month a household is determined eligible to participate. The State is required by federal law to ensure EIS automatically cuts off participation for households that have not been recertified at the end of the certification period. Eligibility must be redetermined before a household receives benefits for a new period. In response to the COVID-19 disaster, USDA’s FNS issued COVID-19 waivers and flexibilities, which included extending SNAP certification periods. In a letter dated April 30, 2021, FNS allowed states to automatically extend benefit certification periods for up to six months. In a subsequent letter dated December 8, 2021, FNS clarified the April 30, 2021, letter directing that state agencies may only extend certification periods for up to six months from the initial expiration date assigned at the last certification or recertification. Consecutive certifications or back-to-back six-month extensions were not allowable. The final FNS COVID-19 waiver allowing certification period extensions expired July 31, 2022. Cause: The EIS control to automatically cut off households from receiving SNAP benefits at the end of the certification period was disabled by DPA management during the COVID-19 public health emergency and was not reactivated until June 2023. DPA management directed staff to automatically extend certification periods to help reduce a backlog of SNAP benefit applications. Criteria: Title 7 CFR 272.10(b) requires the State to use an automated data processing system for SNAP. The system is to be used to determine eligibility and calculate benefits or validate eligibility workers’ calculations by processing and storing all casefile information necessary for the eligibility determination and benefit computation including, but not limited to: all household members’ names, addresses, dates of birth, social security numbers, and individual household members’ earned and unearned income by source, deductions, resources, and household size. Also, the system must be used to redetermine or revalidate eligibility and benefits based on notices of change in households’ circumstances. Title 7 CFR 273.10(f) requires the State to certify each eligible household for a definite period of time. Alaska households are certified for a six-month period per Alaska’s approved SNAP Plan of Operation. Title 7 CFR 273.14(a) prescribes that no household may participate beyond the expiration of the certification period assigned in accordance with 273.10(f) without a determination of eligibility for a new period. Furthermore, the State must establish procedures for notifying households of expiration dates, providing application forms, scheduling interviews, and recertifying eligible households prior to the expiration of certification periods. Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. USDA FNS SNAP guidance, issued December 8, 2021, titled, Extension of SNAP COVID-19 Administrative flexibilities January 2022 and Beyond, provided that States may only extend certification periods for up to six months from the initial expiration date assigned at the last certification or recertification. The guidance reiterated that the State should not extend certification periods consecutively, as it reduces the opportunities for the State to obtain a full understanding of a household’s circumstances and make necessary adjustments. Effect: The lack of regular eligibility recertification increases the likelihood of ineligible recipients receiving unallowable SNAP benefits. Continued extensions of certification periods without accompanying reviews erodes the accuracy and relevance of eligibility data over time. If FNS concludes that the State was negligent in household certification, FNS may invoice the State for an amount equivalent to the benefits issued due to such negligence. Moreover, the adoption of extensive certification period extensions could lead to substantial rises in case processing backlogs when the extensions conclude and the State returns to standard operations. Questioned Costs: AL 10.551: Indeterminate Recommendation: DPA’s director should ensure SNAP benefit recertifications are performed in accordance with federal regulation. View of Responsible Officials: Management agrees with this finding.

Federal Awarding Agency: USDA Impact: Material Weakness, Material Noncompliance AL Number and Title: 10.551, 10.561 SNAP Cluster Federal Award Number: 22AK35050292301, 23AK35050292301 Applicable Compliance Requirement: Allowable Costs/Cost Principles, Special Tests and Provisions Condition: The amount of FY 23 SNAP benefits reported as issued by the State’s EBT contractor was $19,689,126 more than the amount of authorized benefits reported in data from DPA EIS. Context: DPA relies on the legacy eligibility system, EIS, to determine eligibility for SNAP and calculate monthly benefit amounts. Benefit amounts are calculated based on household size, income, and other financial resources of all qualifying members of a household less specific allowable deductions. Each day EIS transmits an issuance batch file, including authorized beneficiaries and benefit amounts to FIS, which maintains accounts for each beneficiary. When an EBT card is utilized by a beneficiary, FIS functions as the intermediary between the State’s U.S. Treasury benefit account and the retailers by settling SNAP benefit transactions with retailers before drawing down federal reimbursement. The State is required to ensure its automated data processing systems accurately and completely process and store all case file information for eligibility determinations and benefit calculations and provide the data necessary to meet federal issuance and reconciliation reporting requirements. A reconciliation of FIS issuance records with EIS authorized beneficiaries and benefit amounts demonstrates the completeness and accuracy of the EBT process. In FY 23, the EIS benefit data provided by DPA could not be reconciled to the amount of SNAP benefits issued per FIS. As a result, the audit could not verify the accuracy and completeness of benefit calculations nor evaluate the eligibility and benefit determination information stored in EIS. Cause: DPA management could not identify the cause of the variance. DPA’s outdated legacy eligibility system and a lack of daily reconciliations (see Finding No. 2023-035) contributed to the inability to maintain adequate supporting records. Criteria: Title 7 CFR 274.1(h) requires that the state agency create and maintain a master issuance file that consolidates records of all certified SNAP households, records participation activity for each household, and supplies all information necessary to fulfill the reporting requirements outlined in Title 7 CFR 274.4. Title 7 CFR 274.4(a)(1) requires the State to reconcile benefits posted to household accounts on the central computer against benefits on the issuance authorization file. Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. Effect: Significant discrepancies between EIS benefit data and the EBT contractor’s issuance records undermines confidence in the eligibility system and may be indicative of significant unidentified processing errors. Inadequate system processing increases the risk of incorrect or ineligible benefits. Questioned Costs: AL 10.551: $19,689,126 Recommendation: DPA’s director should identify the cause of the discrepancies between EBT contractor issuance data and the State’s eligibility system, and take action necessary to ensure SNAP benefit payments are supported by eligibility and benefit data. View of Responsible Officials: Management disagrees with this finding. DPA performs monthly reconciliations and balancing efforts to ensure accuracy with FIS, EIS, and reporting. No discrepancies have been identified by DPA. None of the parties involved in the audit have been able to pinpoint the origin of the discrepancy described in this finding. DPA’s monthly reconciliation processes are rigorous, consistent, and thorough, ensuring accuracy and alignment with USDA data from AMA Bank. The reconciliation efforts encompass federal SNAP reports: FNS 388, FNS 46, and the EIS Balance Issuance report, all of which consistently reconcile. The reconciliation extends to ASAP and AMA batch values, with annual certification further validating accuracy. Monthly, the AMA raw data is meticulously balanced in the 388/46 reports, with only the P-EBT and EA issuances requiring manual entry from the 292B report. With this steadfast commitment to monthly reconciliation and alignment with AMA data, management is confident in the absence of errors or discrepancies. Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. DOH management states that the monthly reconciliation of summary EIS and benefit issuance data suggests the absence of errors or discrepancies; however, DPA management could not demonstrate that eligibility determinations and benefit payment details in EIS supported the benefit issuance data.

Prior Year Finding: 2022-033 Federal Awarding Agency: USDA Impact: Material Weakness, Material Noncompliance AL Number and Title: 10.551, 10.561 SNAP Cluster Federal Award Number: 22AK35050292301, 23AK35050292301 Applicable Compliance Requirement: Special Tests and Provisions Condition: Daily SNAP EBT reconciliations were not performed in FY 23. Context: A state must have a system in place to reconcile, on a daily basis, all of the funds entering into, exiting from, and remaining in the system each day with a state’s US Treasury benefit account, and FIS’s records. States must also have systems in place to reconcile retailer credit activity as reported into the banking system to client transactions maintained by the processor and to the funds drawn down from the EBT benefit account with the US Treasury. The reconciliation process ensures that a state only draws federal funds for authorized transactions. In FY 23, required daily reconciliations were not performed. However, according to DPA management, monthly reconciliations were performed as part of the federal reporting process. Cause: According to DPA management, daily reconciliations were not performed due to staff turnover, inadequate procedures, and the lack of trained staff. In addition, management indicated monthly reconciliations provide sufficient assurance of accurate processing. Criteria: Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant award. Title 7 CFR 274.4(a) requires that State agencies account for all issuance through a reconciliation process. The EBT system must provide reports and documentation pertaining to reconciliation. Reconciliations must be conducted and records kept as follows: • Verification of retailer's credits against deposit information entered into the automated clearinghouse network; and • Reconciliation of total funds entered into, exiting from, and remaining in the system each day. Effect: An inconsistent reconciliation process increases the risk of unidentified processing errors and unallowable costs. States are responsible for efficiently and effectively administering SNAP in accordance with federal laws, regulations, and FNS approved Plan of Operations. A determination by FNS that the State has failed to comply with any of these requirements may result in a suspension or disallowance of the federal share of the State’s administrative funds. Questioned Costs: None Recommendation: DPA’s director should develop and implement daily reconciliation and monitoring procedures, and train staff to ensure daily reconciliations are conducted in accordance with federal regulations. DPA should consult FNS for program guidance regarding reconciliation requirements. View of Responsible Officials: Management agrees with this finding.

Federal Awarding Agency: U.S. Department of Agriculture (USDA) Impact: Material Weakness, Material Noncompliance AL Number and Title: 10.542 Pandemic Electronic Benefit Transfer Food Benefits (P-EBT) – COVID-19 Federal Award Number: School Year 2020-21 Applicable Compliance Requirement: Activities Allowed or Unallowed, Eligibility Condition: P-EBT benefit payments were not issued in accordance with the process and timeframes outlined in the federally approved state plan. Testing a sample of 136 payments found 37 issuances (27 percent) were sent to unauthorized or unsupported addresses and one issuance included unauthorized benefits. Additionally, no benefits were issued during FY 23 to Supplemental Nutrition Assistance Program (SNAP)-enrolled children in child care. Context: The Families First Coronavirus Response Act (FFCRA) (P. L. 116-127), authorized a temporary assistance program for households with children without access to meals in school and to certain SNAP-enrolled children in child care during the public health emergency declared January 27, 2020. Under the P-EBT program, school children were eligible for the program if the child would have received free or reduced-price meals at a school through the National School Lunch Program if not for a school’s closure, or reduced attendance or hours, for at least five consecutive days due to the COVID-19 pandemic. P-EBT benefits were to be issued in accordance with a federally approved state plan. The Division of Public Assistance (DPA) and the Department of Education and Early Development’s Child Nutrition Services section (CNS) management developed a joint plan to issue P-EBT benefits to eligible school children for the school year 2020–2021. The State’s P-EBT School Year 2020–21 State Plan (Plan) was approved by USDA’s Food and Nutrition Service (FNS) in June 2021. The Plan required CNS to determine eligibility for school age children and DPA to determine eligibility for children in child care. According to the Plan, benefits for the period August 2020 through December 2020 were to be issued beginning July 2021 and benefits for the period January 2021 through August 2021 were to be issued beginning in August 2021. Additionally, the Plan outlined that benefit issuances to children in child care were to begin 106 days subsequent to state plan approval or September 22, 2021. Pursuant to the Plan, CNS staff instructed participating school districts to report monthly enrollment data, school learning models, and number of operating days for each of the district’s schools. Daily benefit levels for each eligible child were equal to the free reimbursement for a breakfast, a lunch, and a snack for the school year 2020–2021. CNS calculated monthly benefits for each eligible child in the household equal to the daily reimbursement rate ($10.99) multiplied by the number of benefit days calculated, as described in the Plan. Eligible student data and benefit amounts were transferred beginning August 2021 to DPA for electronic benefit transfer (EBT) card processing and issuances. The Plan outlined that DPA was to issue benefits through a batch process that would utilize DPA’s vendor-operated SNAP EBT card system; however, batch processing was not functional until June 2023. Rather than using a batch process, DPA staff manually entered student data and CNS authorized benefits directly into FIS’s system interface, ebtEDGE. The information entered into ebtEdge was not reviewed prior to submission. DPA staff began processing P-EBT school year 2020–2021 payments during June 2022, one year after the end of the 2020–2021 school year. During FY 23, DPA staff processed 58,433 P-EBT benefit transactions totaling $33.7 million based on the CNS eligibility data. No benefits were issued in FY 23 to SNAP-enrolled school children in child care. Of the 38 issuance errors identified by auditors, one issuance included $24 of unauthorized benefits, 30 went to an address that did not match the address provided to auditors by CNS, and six were issued without an address. Cause: DPA management asserted that benefit issuance delays were attributable to untimely receipt of eligibility data from CNS and system limitations that prevented the division from utilizing the Eligibility Information System (EIS) to issue benefits. Due to competing priorities, DPA was unable to establish batch processing procedures with the State’s EBT contractor, Fidelity Information Services (FIS), to efficiently and effectively issue benefits. The lack of batch processing led DPA management to implement a manual process whereby a team of four staff manually entered eligible student information directly via ebtEDGE. Management believed limiting the size of the team issuing benefits mitigated potential risks of data entry errors and unauthorized issuances. However, the manual process and small team significantly delayed the issuance process. Additionally, DPA management did not implement pre or post payment review procedures to ensure errors were prevented or detected. Furthermore, the lack of payments to SNAP-enrolled school children in child care was ascribed to competing priorities and difficulty identifying child care facility closures. Criteria: Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. FFCRA, Pub. L. 116-127, Section 1101 and federal program guidance required that P-EBT benefits be issued in accordance with the state's approved plan. Alaska’s State Plan for Pandemic EBT Children in School and Child Care, 2020-2021, section 7, establishes the framework for initial retroactive payment to eligible children from the beginning of the school year to June 2021. The Plan outlines that benefits for the period of August 2020 through December 2020 be issued beginning July 2021 and benefits for January 2021 through June 2021 be issued beginning August 2021. In FNS’s memo approving the Plan, the federal agency states that benefits should be issued as soon as possible following state plan approval. Effect: The delayed P-EBT payment processing reduced access to food benefits. Significant delays in issuing benefits increased the risk that eligibility data had grown stale and intended recipients did not receive the benefits. DPA management’s noncompliance with the Plan may result in the federal awarding agency issuing sanctions or disallowances. Questioned costs are the total costs associated with the 38 erred issuances. Based on the high error rate, additional questioned costs are likely. Questioned Costs: AL 10.542: $27,387 Recommendation: DOH’s commissioner should allocate the resources necessary to ensure effective systems are in place to properly administer federal programs. View of Responsible Officials: Management partially agrees with this finding. DPA communicated with FNS regarding manual benefit issuance for Alaska expressing timelines would be affected and FNS did not request an updated timeline. Communication with FNS regarding issuance remained consistent, with no indication to alter the issuance plan. Address verifications were conducted at the time of benefit payment, because addresses are subject to change from the date of eligibility. Updates to addresses were made when more recent information became available. DPA has no control over DEED eligibility records including the addresses they have on file. Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. DOH management asserts that the division has no control over Department of Education and Early Development (DEED) eligibility records and that beneficiary addresses were verified at the time of benefit payment. Auditors noted benefit payments were based on DEED eligibility records and DOH did not maintain support for address changes.

Federal Awarding Agency: USDA Impact: Significant Deficiency, Noncompliance AL Number and Title: 10.557 Special Supplemental Nutrition Program for Women, Infants, and Children Federal Award Number: 227AKAK7W1003, 227AKAK7W1006, 237AKAK7W1003, 237AKAK7W1006 Applicable Compliance Requirement: Procurement and Suspension and Debarment Condition: For one of five procurement contracts selected for testing, the State could not provide documentation of the procurement method chosen and the procurement exceeded the threshold required for competitive bidding procedures. Context: The State is required to follow its own procurement policies and procedures as outlined in the Alaska Administrative Manual (AAM) Section AAM 81 “Procurement”. The Alaska Administrative Manual Section AAM 81.020 requires procurements more than $10,000 and less than $50,000 to involve obtaining at least three quotes or informal proposals. Cause: The vendor provided services that were previously under the micro-purchase threshold for procurement, which did not require competitive bidding procedures. The level of activity with the vendor increased and exceeded the threshold for competitive bidding procedures to be completed by the State. Criteria: 2 CFR, Part 200 – Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), Subpart C, §200.317 requires states to follow their procurement policies and procedures. Effect: It is important for the Department to obtain and maintain appropriate documentation to support procurement decisions. Otherwise, a procurement decision would be unsupported and could lead to questioned costs. Questioned Costs: None Recommendation: The State should provide training to employees to ensure that goods and services procured are done so in accordance with the State’s procurement policy. View of Responsible Officials: Management agrees with this finding.

Federal Awarding Agency: Housing and Urban Development (HUD) Impact: Significant Deficiency, Noncompliance AL Number and Title: 14.881 Moving to Work Demonstration Program Federal Award Number: Multiple Applicable Compliance Requirement: Reporting Condition: In our testing of 60 tenants for the Moving to Work program, four instances were noted where the required 50058 report was not submitted to HUD, by AHFC, within the required 60‐day timeline. Context: Nonstatistical sampling was used. Sample size was 60 participants of 250+ participants. No dollar amount is associated. Cause: Internal controls and design are such, that the process for report submission does not always detect the timeliness of those submissions. Criteria: Management should have an internal control system in place designed to provide for the preparation of and submission of required reports in a timely manner in compliance with timelines as defined in the grant agreement and compliance supplement. Effect: Not all required 50058 reports were submitted in a timely manner. Questioned Costs: None reported Recommendation: Management and those charged with governance should analyze the current control system and ensure report submissions are submitted in a timely fashion, in line with relevant compliance requirements.   View of Responsible Officials: Management agrees with this finding.

Federal Awarding Agency: U.S. Department of Interior Impact: Significant Deficiency, Noncompliance AL Number and Title: 15.800 Research and Development Cluster Federal Award Number: G22AC00562-00 Applicable Compliance Requirement: Allowable Costs/Cost Principles Condition and Context: During testing of Indirect Cost Rate calculations, one grant from the University of Alaska Southeast campus (UAS) had one instance of an incorrect indirect cost rate calculation. UAS had two different applicable rates for on-campus and off-campus activity. The campus used the on-campus rate for both activities resulting in a higher calculated indirect cost. Cause: The internal control process for the creation of new funds auto-populated the indirect cost rate incorrectly by using the on-campus rate of 59.7 for both on-campus and off-campus research activities. Criteria: Per 2 CFR 200.414 the indirect cost methodology must be consistent with the cost accounting policy and negotiated rate agreement. Effect: An incorrect indirect cost was calculated and charged to the grant. Questioned Costs: $1,630 Recommendation: UAS should review the indirect cost rates populated for new grant funds to ensure correct rates are used. View of Responsible Officials: Management agrees with this finding.

Federal Awarding Agency: U.S. Department of Labor (USDOL) Impact: Significant Deficiency, Noncompliance AL Number and Title: 17.258, 17.259, 17.278 Workforce Innovation and Opportunity Act (WIOA) cluster Federal Award Number: AA347542055A2, AA363062155A2, AA385152255A2 Applicable Compliance Requirement: Reporting Condition: DLWD staff did not file Federal Funding Accountability and Transparency Act (FFATA) reports for FY 23 WIOA cluster subawards. Context: FFATA requires information on federal awards be made available to the public through a single searchable website (www.usaspending.gov). The FFATA Subaward Reporting System is the reporting tool federal awardees, such as the State of Alaska, use to capture and report subaward and executive compensation data for first-tier subawards. The audit found eight unreported FY 23 WIOA cluster subawards subject to FFATA reporting totaling $3.4 million. Cause: According to DLWD management, the FFATA reports were not filed due to staff turnover and a lack of procedures. Criteria: Title 2 CFR 200.303 requires the State to establish and maintain effective internal control over the federal award that provides reasonable assurance that the State is managing the federal award in compliance with federal statutes, regulations, and terms and conditions of the grant award. Title 2 CFR 170 states federal award recipients are required to report each subaward that obligates $30,000 or more in federal funds. This information must be reported no later than the end of the month following the month in which the obligation was made; include information about each obligating action in accordance with submission instructions; and include the names and total compensation of each of the subrecipient’s five most highly compensated executives if revenue thresholds are met and the executive compensation is not available to the public. Effect: Failure to comply with FFATA reporting requirements reduces transparency, impairs decision-making, and may potentially jeopardize future federal funding. Questioned Costs: None Recommendation: DLWD’s Alaska Workforce Investment Board (AWIB) executive director should develop and implement procedures to ensure compliance with FFATA reporting requirements for WIOA subrecipients. View of Responsible Officials: Management agrees with this finding.

Federal Awarding Agency: USDOL Impact: Significant Deficiency, Noncompliance AL Number and Title: 17.258, 17.259, 17.278 WIOA cluster Federal Award Number: AA347542055A2, AA363062155A2, AA385152255A2 Applicable Compliance Requirement: Subrecipient Monitoring Condition: WIOA cluster FY 23 subaward agreement forms did not identify the subrecipients’ unique entity identifier (UEI) number. Furthermore, one of three subaward agreements tested did not identify the Assistance Listing number associated with the subaward. Context: Effective April 4, 2022, the UEI replaced the Data Universal Numbering System (DUNS) number as the authoritative identifier for entities doing business with the federal government. All federal award recipients are required to have a UEI. When a state enters into a subrecipient relationship with an entity it must communicate required subaward information to subrecipients including, but not limited to, the subrecipient's UEI and the federal award Assistance Listing number. DLWD management provided subawards to eight entities to administer certain WIOA cluster grants. DLWD staff used a standard subaward agreement form to communicate federally required information to subrecipients. The audit reviewed the subaward agreement form for three of the eight subrecipients and determined the form listed a DUNS number instead of the federally required UEI. Additionally, one of the three forms did not include a complete Assistance Listing number. Cause: AWIB staff review of the grant agreement forms during the award process was insufficient to identify the transition to the UEI. According to DLWD management, the subaward agreement forms were not updated when the federal government transitioned from using the DUNS number to using the UEI. The incomplete Assistance Listing number was due to a human error during the subaward process. Criteria: Title 2 CFR 200.303 requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and terms and conditions of the federal award Title 2 CFR 200.332 requires the State to ensure that every subaward is clearly identified to the subrecipient by communicating certain required federal award information. Information to be communicated at the time of subaward includes the subrecipient’s UEI and the Assistance Listing number. Effect: Not providing the required information in the subaward document increases the risk of subrecipient noncompliance with the terms and conditions of the federal award. Questioned Costs: None Recommendation: DLWD’s AWIB executive director should strengthen review procedures and update subaward agreement forms to ensure all required federal award information is communicated to subrecipients. View of Responsible Officials: Management agrees with this finding.

Federal Awarding Agency: U.S. Department of Labor (USDOL) Impact: Significant Deficiency, Noncompliance AL Number and Title: 17.258, 17.259, 17.278 Workforce Innovation and Opportunity Act (WIOA) cluster Federal Award Number: AA347542055A2, AA363062155A2, AA385152255A2 Applicable Compliance Requirement: Reporting Condition: DLWD staff did not file Federal Funding Accountability and Transparency Act (FFATA) reports for FY 23 WIOA cluster subawards. Context: FFATA requires information on federal awards be made available to the public through a single searchable website (www.usaspending.gov). The FFATA Subaward Reporting System is the reporting tool federal awardees, such as the State of Alaska, use to capture and report subaward and executive compensation data for first-tier subawards. The audit found eight unreported FY 23 WIOA cluster subawards subject to FFATA reporting totaling $3.4 million. Cause: According to DLWD management, the FFATA reports were not filed due to staff turnover and a lack of procedures. Criteria: Title 2 CFR 200.303 requires the State to establish and maintain effective internal control over the federal award that provides reasonable assurance that the State is managing the federal award in compliance with federal statutes, regulations, and terms and conditions of the grant award. Title 2 CFR 170 states federal award recipients are required to report each subaward that obligates $30,000 or more in federal funds. This information must be reported no later than the end of the month following the month in which the obligation was made; include information about each obligating action in accordance with submission instructions; and include the names and total compensation of each of the subrecipient’s five most highly compensated executives if revenue thresholds are met and the executive compensation is not available to the public. Effect: Failure to comply with FFATA reporting requirements reduces transparency, impairs decision-making, and may potentially jeopardize future federal funding. Questioned Costs: None Recommendation: DLWD’s Alaska Workforce Investment Board (AWIB) executive director should develop and implement procedures to ensure compliance with FFATA reporting requirements for WIOA subrecipients. View of Responsible Officials: Management agrees with this finding.

Federal Awarding Agency: USDOL Impact: Significant Deficiency, Noncompliance AL Number and Title: 17.258, 17.259, 17.278 WIOA cluster Federal Award Number: AA347542055A2, AA363062155A2, AA385152255A2 Applicable Compliance Requirement: Subrecipient Monitoring Condition: WIOA cluster FY 23 subaward agreement forms did not identify the subrecipients’ unique entity identifier (UEI) number. Furthermore, one of three subaward agreements tested did not identify the Assistance Listing number associated with the subaward. Context: Effective April 4, 2022, the UEI replaced the Data Universal Numbering System (DUNS) number as the authoritative identifier for entities doing business with the federal government. All federal award recipients are required to have a UEI. When a state enters into a subrecipient relationship with an entity it must communicate required subaward information to subrecipients including, but not limited to, the subrecipient's UEI and the federal award Assistance Listing number. DLWD management provided subawards to eight entities to administer certain WIOA cluster grants. DLWD staff used a standard subaward agreement form to communicate federally required information to subrecipients. The audit reviewed the subaward agreement form for three of the eight subrecipients and determined the form listed a DUNS number instead of the federally required UEI. Additionally, one of the three forms did not include a complete Assistance Listing number. Cause: AWIB staff review of the grant agreement forms during the award process was insufficient to identify the transition to the UEI. According to DLWD management, the subaward agreement forms were not updated when the federal government transitioned from using the DUNS number to using the UEI. The incomplete Assistance Listing number was due to a human error during the subaward process. Criteria: Title 2 CFR 200.303 requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and terms and conditions of the federal award Title 2 CFR 200.332 requires the State to ensure that every subaward is clearly identified to the subrecipient by communicating certain required federal award information. Information to be communicated at the time of subaward includes the subrecipient’s UEI and the Assistance Listing number. Effect: Not providing the required information in the subaward document increases the risk of subrecipient noncompliance with the terms and conditions of the federal award. Questioned Costs: None Recommendation: DLWD’s AWIB executive director should strengthen review procedures and update subaward agreement forms to ensure all required federal award information is communicated to subrecipients. View of Responsible Officials: Management agrees with this finding.

Federal Awarding Agency: U.S. Department of Labor (USDOL) Impact: Significant Deficiency, Noncompliance AL Number and Title: 17.258, 17.259, 17.278 Workforce Innovation and Opportunity Act (WIOA) cluster Federal Award Number: AA347542055A2, AA363062155A2, AA385152255A2 Applicable Compliance Requirement: Reporting Condition: DLWD staff did not file Federal Funding Accountability and Transparency Act (FFATA) reports for FY 23 WIOA cluster subawards. Context: FFATA requires information on federal awards be made available to the public through a single searchable website (www.usaspending.gov). The FFATA Subaward Reporting System is the reporting tool federal awardees, such as the State of Alaska, use to capture and report subaward and executive compensation data for first-tier subawards. The audit found eight unreported FY 23 WIOA cluster subawards subject to FFATA reporting totaling $3.4 million. Cause: According to DLWD management, the FFATA reports were not filed due to staff turnover and a lack of procedures. Criteria: Title 2 CFR 200.303 requires the State to establish and maintain effective internal control over the federal award that provides reasonable assurance that the State is managing the federal award in compliance with federal statutes, regulations, and terms and conditions of the grant award. Title 2 CFR 170 states federal award recipients are required to report each subaward that obligates $30,000 or more in federal funds. This information must be reported no later than the end of the month following the month in which the obligation was made; include information about each obligating action in accordance with submission instructions; and include the names and total compensation of each of the subrecipient’s five most highly compensated executives if revenue thresholds are met and the executive compensation is not available to the public. Effect: Failure to comply with FFATA reporting requirements reduces transparency, impairs decision-making, and may potentially jeopardize future federal funding. Questioned Costs: None Recommendation: DLWD’s Alaska Workforce Investment Board (AWIB) executive director should develop and implement procedures to ensure compliance with FFATA reporting requirements for WIOA subrecipients. View of Responsible Officials: Management agrees with this finding.

Federal Awarding Agency: USDOL Impact: Significant Deficiency, Noncompliance AL Number and Title: 17.258, 17.259, 17.278 WIOA cluster Federal Award Number: AA347542055A2, AA363062155A2, AA385152255A2 Applicable Compliance Requirement: Subrecipient Monitoring Condition: WIOA cluster FY 23 subaward agreement forms did not identify the subrecipients’ unique entity identifier (UEI) number. Furthermore, one of three subaward agreements tested did not identify the Assistance Listing number associated with the subaward. Context: Effective April 4, 2022, the UEI replaced the Data Universal Numbering System (DUNS) number as the authoritative identifier for entities doing business with the federal government. All federal award recipients are required to have a UEI. When a state enters into a subrecipient relationship with an entity it must communicate required subaward information to subrecipients including, but not limited to, the subrecipient's UEI and the federal award Assistance Listing number. DLWD management provided subawards to eight entities to administer certain WIOA cluster grants. DLWD staff used a standard subaward agreement form to communicate federally required information to subrecipients. The audit reviewed the subaward agreement form for three of the eight subrecipients and determined the form listed a DUNS number instead of the federally required UEI. Additionally, one of the three forms did not include a complete Assistance Listing number. Cause: AWIB staff review of the grant agreement forms during the award process was insufficient to identify the transition to the UEI. According to DLWD management, the subaward agreement forms were not updated when the federal government transitioned from using the DUNS number to using the UEI. The incomplete Assistance Listing number was due to a human error during the subaward process. Criteria: Title 2 CFR 200.303 requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and terms and conditions of the federal award Title 2 CFR 200.332 requires the State to ensure that every subaward is clearly identified to the subrecipient by communicating certain required federal award information. Information to be communicated at the time of subaward includes the subrecipient’s UEI and the Assistance Listing number. Effect: Not providing the required information in the subaward document increases the risk of subrecipient noncompliance with the terms and conditions of the federal award. Questioned Costs: None Recommendation: DLWD’s AWIB executive director should strengthen review procedures and update subaward agreement forms to ensure all required federal award information is communicated to subrecipients. View of Responsible Officials: Management agrees with this finding.

Federal Awarding Agency: U.S. Department of Transportation (USDOT) Impact: Significant Deficiency, Noncompliance AL Number and Title: 20.106 Airport Improvement Program (AIP) Federal Award Number: Indeterminate Applicable Compliance Requirement: Reporting Condition: One of four randomly selected (25 percent) and two of three judgmentally selected (67 percent) 5100-126 reports tested did not tie to support, resulting in an overstatement of expenditures. One of three judgmentally selected 5100-127 reports tested (33 percent) had multiple lines in error, resulting in overstatements of revenue and net assets. Context: Commercial service airports that enplane 2,500 or more passengers in a calendar year and provided commercial service in the preceding calendar year are required to annually file financial reports with the Federal Aviation Administration (FAA). Each commercial service airport must file: (1) The Financial Government Payment Report, FAA Form 5100-126. The form reports payments the airport makes to government entities, the service the airport performs for governmental entities, and the land and facilities that the airport provides to such entities. (2) The Operating and Financial Summary, FAA Form 5100-127. The form reports airport revenues, expenses, and other financial information. The State of Alaska filed multiple 5100-126 reports for each airport that met the criteria above for payments to governmental entities. Errors on the tested 5100-126 reports included overstatements of expenditures as shown in the table below. [See Schedule of Findings and Questioned Costs for chart/table.] The State of Alaska filed 5100-127 reports for Anchorage International Airport, Fairbanks International Airport, Lake Hood Airport, and an Alaska Consolidated report encompassing all other State-owned airports that met the above criteria. All FY 23 5100-127 reports were tested, except for Lake Hood Airport. Errors were identified on the 5100-127 Alaska Consolidated report as shown below. [See Schedule of Findings and Questioned Costs for chart/table.] Cause: The Alaska Consolidated 5100-126 report expenditure overstatement was due to a clerical error when DOTPF staff added information for an airport that was not previously reported. Supervisory review procedures were insufficient to detect and correct the error. According to Alaska International Airport (AIA) management, a lack of written procedures for the preparation and review of the annual 5100-126 reports and staff turnover resulted in the overreporting of expenditures for the Anchorage and Fairbanks International Airport 5100-126 reports. Additionally, AIA management lacked written procedures for the preparation and review of the annual 5100-127 report. The Alaska Consolidated 5100-127 report overstatement errors were due to insufficient review procedures by DOTPF staff of information provided from an external source for the Ketchikan and Sitka airports, which are State-owned. Criteria: Title 2 CFR 200.328 requires states to report financial information on the forms approved by the federal Office of Management and Budget (OMB), with the frequency required by the terms and conditions of the federal award. Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Effect: The ineffective internal controls resulted in inaccurate federal reporting. Inaccurate federal reporting may impair federal decision-making and may result in the federal awarding agency imposing additional conditions or taking corrective action, including additional reporting requirements or withholding/terminating funding. Questioned Costs: None Recommendation: DOTPF’s DAS director should ensure report preparation procedures are followed and updated to include supervisory review of documentation prior to report submission. AIA’s controller should develop and implement written procedures for the 5100 126 and 5100-127 reports. View of Responsible Officials: Management agrees with this finding. [See Schedule of Findings and Questioned Costs for footnote.]

Federal Awarding Agency: USDOT Impact: Significant Deficiency AL Number and Title: 20.106 AIP Federal Award Number: 270 Federal Award Identification Numbers Applicable Compliance Requirement: Reporting Condition: DOTPF management lacked internal controls to ensure the annual SF-271 equivalent report was supported, accurate, and complete. Context: The annual SF-271 is the outlay and request for reimbursement for construction projects report. Due to the large number of construction projects DOTPF administers and reports, DOTPF does not submit the OMB SF-271 report. Instead, as permitted by the Airport Improvement Program Grant Payment and Sponsor Financial Report Policy issued by the Office of Airport, FAA, December 31, 2015, DOTPF submits an approved equivalent report. The equivalent SF-271 report consists of Excel spreadsheets that are submitted to the FAA. The SF-271 report is supported by the same expenditure and revenue data from IRIS as the SF-425 financial report. However, DOTPF staff perform additional analysis of the SF-425 data to identify revenues by project and expenditures by project and by categories such as planning, design, right of way, utilities, and construction for presentation on the SF-271 equivalent report. Cause: DOTPF management stated that since the data used for the annual SF-271 is the same data that is reported on the SF-425, which is reviewed, approved, and signed by an authorized certifying official, DOTPF management does not believe separate procedures are necessary for the SF 271 equivalent report. Auditors noted that additional analysis is performed on the SF-425 data so that it can be presented on the SF-271 equivalent report, yet no additional supervisory review or approval is performed on the additional analysis. Criteria: Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Effect: Lack of internal controls increases the risk of inaccurate federal reporting, which may impair federal decision-making and could result in reduced transparency. Further, noncompliance with federal regulations may result in the federal awarding agency imposing additional conditions or taking corrective action, including additional reporting requirements or withholding/terminating funding. Questioned Costs: None Recommendation: DOTPF’s DAS director should develop and implement written procedures for the preparation and review of the SF-271 equivalent report to ensure the report is complete, accurate, and reviewed prior to submission. View of Responsible Officials: Management agrees with this finding.

Federal Awarding Agency: USDOT Impact: Significant Deficiency, Noncompliance AL Number and Title: 20.106 AIP Federal Award Number: 3-02-0199-029-2020, 3-02-0199-030-2020, 3-02-0016-201-2021, 3-02-0016-205-2021, 3-02-0029-028-2021, 3-02-0029-029-2021, 3-02-0176-007-2021, 3-02-0150-005-2021, 3-02-0016-216-2022, 3-02-0016-217-2022 Applicable Compliance Requirement: Special Tests and Provisions Condition: Contractor certified payrolls tested for six construction projects were not submitted timely. Late payroll submission dates ranged from eight days to 189 days after the payroll payment date for the 158 certified payrolls tested. Context: All laborers and mechanics employed by contractors or subcontractors who perform work on construction contracts in excess of $2,000 financed by federal funds must be paid wages not less than the prevailing wage rates established for a project’s locality. The rates are established by the Department of Labor and Workforce Development. To ensure compliance with federal regulations, DOTPF requires contractors and subcontractors submit a certified copy of payrolls for each week of contract work within seven days after the regular payment date of the payroll period. Cause: DOTPF procedures to monitor contractors and subcontractors were inadequate to ensure certified payrolls were submitted within seven days after the payroll period. In addition, during FY 20, DOTPF transitioned to a new system for electronic submission of certified payrolls for all contracts awarded after January 1, 2021. DOTPF management stated that inadequate training on the new system contributed to the lack of compliance. Criteria: Title 29 CFR 3.4(a) requires each certified payroll must be delivered by the contractor or subcontractor within 7 days after the regular payment date of the payroll period. Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Effect: Federal agencies may suspend future payments, advances, or guarantee of future funds if a state does not comply with prevailing wage rate requirements. Questioned Costs: None Recommendation: DOTPF’s Division of Statewide Design and Engineering Services director should modify certified payroll monitoring procedures and provide training to ensure project staff perform timely review of contractors and subcontractors’ payroll submission. View of Responsible Officials: Management agrees with this finding.

Federal Awarding Agency: U.S. Department of Transportation (USDOT) Impact: Significant Deficiency, Noncompliance AL Number and Title: 20.106 Airport Improvement Program (AIP) Federal Award Number: Indeterminate Applicable Compliance Requirement: Reporting Condition: One of four randomly selected (25 percent) and two of three judgmentally selected (67 percent) 5100-126 reports tested did not tie to support, resulting in an overstatement of expenditures. One of three judgmentally selected 5100-127 reports tested (33 percent) had multiple lines in error, resulting in overstatements of revenue and net assets. Context: Commercial service airports that enplane 2,500 or more passengers in a calendar year and provided commercial service in the preceding calendar year are required to annually file financial reports with the Federal Aviation Administration (FAA). Each commercial service airport must file: (1) The Financial Government Payment Report, FAA Form 5100-126. The form reports payments the airport makes to government entities, the service the airport performs for governmental entities, and the land and facilities that the airport provides to such entities. (2) The Operating and Financial Summary, FAA Form 5100-127. The form reports airport revenues, expenses, and other financial information. The State of Alaska filed multiple 5100-126 reports for each airport that met the criteria above for payments to governmental entities. Errors on the tested 5100-126 reports included overstatements of expenditures as shown in the table below. [See Schedule of Findings and Questioned Costs for chart/table.] The State of Alaska filed 5100-127 reports for Anchorage International Airport, Fairbanks International Airport, Lake Hood Airport, and an Alaska Consolidated report encompassing all other State-owned airports that met the above criteria. All FY 23 5100-127 reports were tested, except for Lake Hood Airport. Errors were identified on the 5100-127 Alaska Consolidated report as shown below. [See Schedule of Findings and Questioned Costs for chart/table.] Cause: The Alaska Consolidated 5100-126 report expenditure overstatement was due to a clerical error when DOTPF staff added information for an airport that was not previously reported. Supervisory review procedures were insufficient to detect and correct the error. According to Alaska International Airport (AIA) management, a lack of written procedures for the preparation and review of the annual 5100-126 reports and staff turnover resulted in the overreporting of expenditures for the Anchorage and Fairbanks International Airport 5100-126 reports. Additionally, AIA management lacked written procedures for the preparation and review of the annual 5100-127 report. The Alaska Consolidated 5100-127 report overstatement errors were due to insufficient review procedures by DOTPF staff of information provided from an external source for the Ketchikan and Sitka airports, which are State-owned. Criteria: Title 2 CFR 200.328 requires states to report financial information on the forms approved by the federal Office of Management and Budget (OMB), with the frequency required by the terms and conditions of the federal award. Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Effect: The ineffective internal controls resulted in inaccurate federal reporting. Inaccurate federal reporting may impair federal decision-making and may result in the federal awarding agency imposing additional conditions or taking corrective action, including additional reporting requirements or withholding/terminating funding. Questioned Costs: None Recommendation: DOTPF’s DAS director should ensure report preparation procedures are followed and updated to include supervisory review of documentation prior to report submission. AIA’s controller should develop and implement written procedures for the 5100 126 and 5100-127 reports. View of Responsible Officials: Management agrees with this finding. [See Schedule of Findings and Questioned Costs for footnote.]

Federal Awarding Agency: USDOT Impact: Significant Deficiency AL Number and Title: 20.106 AIP Federal Award Number: 270 Federal Award Identification Numbers Applicable Compliance Requirement: Reporting Condition: DOTPF management lacked internal controls to ensure the annual SF-271 equivalent report was supported, accurate, and complete. Context: The annual SF-271 is the outlay and request for reimbursement for construction projects report. Due to the large number of construction projects DOTPF administers and reports, DOTPF does not submit the OMB SF-271 report. Instead, as permitted by the Airport Improvement Program Grant Payment and Sponsor Financial Report Policy issued by the Office of Airport, FAA, December 31, 2015, DOTPF submits an approved equivalent report. The equivalent SF-271 report consists of Excel spreadsheets that are submitted to the FAA. The SF-271 report is supported by the same expenditure and revenue data from IRIS as the SF-425 financial report. However, DOTPF staff perform additional analysis of the SF-425 data to identify revenues by project and expenditures by project and by categories such as planning, design, right of way, utilities, and construction for presentation on the SF-271 equivalent report. Cause: DOTPF management stated that since the data used for the annual SF-271 is the same data that is reported on the SF-425, which is reviewed, approved, and signed by an authorized certifying official, DOTPF management does not believe separate procedures are necessary for the SF 271 equivalent report. Auditors noted that additional analysis is performed on the SF-425 data so that it can be presented on the SF-271 equivalent report, yet no additional supervisory review or approval is performed on the additional analysis. Criteria: Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Effect: Lack of internal controls increases the risk of inaccurate federal reporting, which may impair federal decision-making and could result in reduced transparency. Further, noncompliance with federal regulations may result in the federal awarding agency imposing additional conditions or taking corrective action, including additional reporting requirements or withholding/terminating funding. Questioned Costs: None Recommendation: DOTPF’s DAS director should develop and implement written procedures for the preparation and review of the SF-271 equivalent report to ensure the report is complete, accurate, and reviewed prior to submission. View of Responsible Officials: Management agrees with this finding.

Federal Awarding Agency: USDOT Impact: Significant Deficiency, Noncompliance AL Number and Title: 20.106 AIP Federal Award Number: 3-02-0199-029-2020, 3-02-0199-030-2020, 3-02-0016-201-2021, 3-02-0016-205-2021, 3-02-0029-028-2021, 3-02-0029-029-2021, 3-02-0176-007-2021, 3-02-0150-005-2021, 3-02-0016-216-2022, 3-02-0016-217-2022 Applicable Compliance Requirement: Special Tests and Provisions Condition: Contractor certified payrolls tested for six construction projects were not submitted timely. Late payroll submission dates ranged from eight days to 189 days after the payroll payment date for the 158 certified payrolls tested. Context: All laborers and mechanics employed by contractors or subcontractors who perform work on construction contracts in excess of $2,000 financed by federal funds must be paid wages not less than the prevailing wage rates established for a project’s locality. The rates are established by the Department of Labor and Workforce Development. To ensure compliance with federal regulations, DOTPF requires contractors and subcontractors submit a certified copy of payrolls for each week of contract work within seven days after the regular payment date of the payroll period. Cause: DOTPF procedures to monitor contractors and subcontractors were inadequate to ensure certified payrolls were submitted within seven days after the payroll period. In addition, during FY 20, DOTPF transitioned to a new system for electronic submission of certified payrolls for all contracts awarded after January 1, 2021. DOTPF management stated that inadequate training on the new system contributed to the lack of compliance. Criteria: Title 29 CFR 3.4(a) requires each certified payroll must be delivered by the contractor or subcontractor within 7 days after the regular payment date of the payroll period. Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Effect: Federal agencies may suspend future payments, advances, or guarantee of future funds if a state does not comply with prevailing wage rate requirements. Questioned Costs: None Recommendation: DOTPF’s Division of Statewide Design and Engineering Services director should modify certified payroll monitoring procedures and provide training to ensure project staff perform timely review of contractors and subcontractors’ payroll submission. View of Responsible Officials: Management agrees with this finding.

Federal Awarding Agency: USDOT Impact: Significant Deficiency AL Number and Title: 20.509 Formula Grants for Rural Areas (FGRA) Federal Award Number: AK-2016-008, AK-2018-020, AK-2019-028, AK-2020-027, AK-2020-048, AK-2021-044, AK-2022-006, AK-2022-008, AK-2022-018, AK-2022-019 Applicable Compliance Requirement: Allowable Costs/Cost Principles, Subrecipient Monitoring Condition: DOTPF’s Division of Program Development (DPD) does not have a formal process for managing user access to its transit data management system. Context: The details related to this control weakness and the relevant audit criteria are being withheld from this report to prevent the weakness from being exploited. Pertinent details have been communicated to agency management in a separate confidential document. Cause: Turnover in key positions contributed to the deficiency. Criteria: Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over a federal award that provides reasonable assurance that the State is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the award. State of Alaska (SOA) Information Security Policy 171 requires a formal process for all access requests (e.g. additions, changes, or deletions) to SOA computers, networks, or applications. Access requests to SOA applications must be authorized by a designated data owner and be based on a business need related to the user’s duties. Users must also attest to a written statement of job responsibility and conditions of access. Finally, personnel tasked with network user administration must ensure that changes to user privileges are promptly applied (e.g. hiring, termination, reassignment of users). Effect: Lack of adequate internal controls over user access increases the risk of unauthorized system use, including data manipulation, which may result in ineligible recipients and unallowed expenditures. Questioned Costs: None Recommendation: DPD’s director should develop and implement written procedures for managing user access to the transit data management system. View of Responsible Officials: Management agrees with this finding.

Federal Awarding Agency: USDOT Impact: Noncompliance AL Number and Title: 20.509 FGRA Federal Award Number: AK-2018-020, AK-2019-028, AK-2020-027, AK-2021-044, AK-2022-019, Applicable Compliance Requirement: Subrecipient Monitoring Condition: All five FY 23 FGRA subrecipient subawards tested did not have a quarterly report specific to the subaward as required for monitoring purposes. Context: DOTPF’s Alaska Community Transit (ACT) office enters into subaward grant agreements with subrecipients for the FGRA program, as well as other federal programs. A subrecipient can have multiple open subawards. Each FGRA subaward grant agreement requires quarterly reports to be submitted. Subrecipients submit the required quarterly reports via the BlackCat system and ACT staff use BlackCat to monitor subrecipients. The audit reviewed five of 36 active FY 23 subawards in BlackCat and found that, instead of an individual quarterly report for each FGRA subaward, subrecipients filed one consolidated quarterly report for all subawards. Cause: The BlackCat system limits subrecipients’ ability to file quarterly reports for each subaward. Therefore, subrecipients filed one consolidated quarterly report for all subawards. Criteria: Title 2 CFR 200.332(d) requires the State to monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with federal statutes, regulations, and the terms and conditions of the subaward, and that subaward performance goals are achieved. Pass-through entity monitoring of the subrecipient must include reviewing financial and performance reports required by the pass-through entity. Effect: The lack of quarterly reports for each subaward grant agreement limited ACT staff’s ability to effectively monitor subrecipients to ensure subawards were used for authorized purposes. Questioned Costs: None Recommendation: DPD’s director should implement system changes to BlackCat to allow quarterly reports to be filed for each subaward. View of Responsible Officials: Management agrees with this finding.

Federal Awarding Agency: USDOT Impact: Significant Deficiency, Noncompliance AL Number and Title: 20.509 FGRA Federal Award Number: AK-2022-019 Applicable Compliance Requirement: Subrecipient Monitoring Condition: All five FY 23 FGRA subaward grant agreements tested did not include all federally required information. Context: In FY 23 DPD entered into 15 FGRA subaward grant agreements with 12 subrecipients. The audit reviewed a random sample of five subaward grant agreements. All grant agreements tested did not include the federal award date, assistance listing title, and indirect cost rate. Cause: DPD grant administration staff were unaware of the federal award information required to be included in the subaward grant agreement due to staff turnover and a lack of written procedures. Criteria: Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Title 2 CFR 200.332(a) requires the State to ensure every subaward agreement includes the required federal award information at the time of the subaward. Effect: Not providing the required award information increases the risk of subrecipient noncompliance with the terms and conditions of the federal award. Questioned Costs: None Recommendation: DPD’s director should amend all active FGRA subaward grant agreements to include the missing federally required information. Furthermore, management should develop written procedures to ensure compliance with all subrecipient monitoring requirements applicable to federally funded subawards administered by DOTPF. View of Responsible Officials: Management agrees with this finding.

Federal Awarding Agency: USDOT Impact: Significant Deficiency, Noncompliance AL Number and Title: 20.509 FGRA Federal Award Number: AK-2022-027 Applicable Compliance Requirement: Subrecipient Monitoring Condition: DOTPF management did not issue a management decision for the one single audit finding requiring follow-up in FY 23 within six months as required by federal law. Context: Under federal regulations, pass-through entities are responsible for issuing a management decision for audit findings relating to federal awards provided to subrecipients. The management decision must clearly state whether or not the audit finding is sustained, the reasons for the decision, and the adequacy of the subrecipient’s proposed corrective actions to address the finding. If the subrecipient has not completed corrective action, a timetable for follow-up should be given. Cause: DOTPF has no procedures to ensure a management decision is issued in a timely manner for a subrecipient’s single audit finding. DOTPF management believed it was not necessary to track subrecipients that require single audit follow-up as there was only one subrecipient with a finding during FY 23. Criteria: Title 2 CFR 200.332(d)(3) states that pass-through entities’ monitoring of subrecipients must include issuing a management decision for audit findings that relate to the federal award provided to the subrecipient from the pass-through entity. Title 2 CFR 200.521(d) states a management decision must be issued within six months of acceptance of the audit report by the federal audit clearinghouse. Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Effect: Untimely management decisions may result in the subrecipient not taking appropriate corrective action on findings. Noncompliance with federal regulations may result in the federal awarding agency imposing additional conditions or taking corrective action, including additional reporting requirements or withholding/terminating funding. Questioned Costs: None Recommendation: DOTPF’s Division of Administrative Services (DAS) director should develop and implement procedures to ensure management decisions for all subrecipient single audit findings are issued within six months of the audit report’s acceptance by the federal audit clearinghouse. View of Responsible Officials: Management agrees with this finding.

Federal Awarding Agency: USDOT Impact: Significant Deficiency AL Number and Title: 20.509 Formula Grants for Rural Areas (FGRA) Federal Award Number: AK-2016-008, AK-2018-020, AK-2019-028, AK-2020-027, AK-2020-048, AK-2021-044, AK-2022-006, AK-2022-008, AK-2022-018, AK-2022-019 Applicable Compliance Requirement: Allowable Costs/Cost Principles, Subrecipient Monitoring Condition: DOTPF’s Division of Program Development (DPD) does not have a formal process for managing user access to its transit data management system. Context: The details related to this control weakness and the relevant audit criteria are being withheld from this report to prevent the weakness from being exploited. Pertinent details have been communicated to agency management in a separate confidential document. Cause: Turnover in key positions contributed to the deficiency. Criteria: Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over a federal award that provides reasonable assurance that the State is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the award. State of Alaska (SOA) Information Security Policy 171 requires a formal process for all access requests (e.g. additions, changes, or deletions) to SOA computers, networks, or applications. Access requests to SOA applications must be authorized by a designated data owner and be based on a business need related to the user’s duties. Users must also attest to a written statement of job responsibility and conditions of access. Finally, personnel tasked with network user administration must ensure that changes to user privileges are promptly applied (e.g. hiring, termination, reassignment of users). Effect: Lack of adequate internal controls over user access increases the risk of unauthorized system use, including data manipulation, which may result in ineligible recipients and unallowed expenditures. Questioned Costs: None Recommendation: DPD’s director should develop and implement written procedures for managing user access to the transit data management system. View of Responsible Officials: Management agrees with this finding.

Federal Awarding Agency: USDOT Impact: Noncompliance AL Number and Title: 20.509 FGRA Federal Award Number: AK-2018-020, AK-2019-028, AK-2020-027, AK-2021-044, AK-2022-019, Applicable Compliance Requirement: Subrecipient Monitoring Condition: All five FY 23 FGRA subrecipient subawards tested did not have a quarterly report specific to the subaward as required for monitoring purposes. Context: DOTPF’s Alaska Community Transit (ACT) office enters into subaward grant agreements with subrecipients for the FGRA program, as well as other federal programs. A subrecipient can have multiple open subawards. Each FGRA subaward grant agreement requires quarterly reports to be submitted. Subrecipients submit the required quarterly reports via the BlackCat system and ACT staff use BlackCat to monitor subrecipients. The audit reviewed five of 36 active FY 23 subawards in BlackCat and found that, instead of an individual quarterly report for each FGRA subaward, subrecipients filed one consolidated quarterly report for all subawards. Cause: The BlackCat system limits subrecipients’ ability to file quarterly reports for each subaward. Therefore, subrecipients filed one consolidated quarterly report for all subawards. Criteria: Title 2 CFR 200.332(d) requires the State to monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with federal statutes, regulations, and the terms and conditions of the subaward, and that subaward performance goals are achieved. Pass-through entity monitoring of the subrecipient must include reviewing financial and performance reports required by the pass-through entity. Effect: The lack of quarterly reports for each subaward grant agreement limited ACT staff’s ability to effectively monitor subrecipients to ensure subawards were used for authorized purposes. Questioned Costs: None Recommendation: DPD’s director should implement system changes to BlackCat to allow quarterly reports to be filed for each subaward. View of Responsible Officials: Management agrees with this finding.

Federal Awarding Agency: USDOT Impact: Significant Deficiency, Noncompliance AL Number and Title: 20.509 FGRA Federal Award Number: AK-2022-019 Applicable Compliance Requirement: Subrecipient Monitoring Condition: All five FY 23 FGRA subaward grant agreements tested did not include all federally required information. Context: In FY 23 DPD entered into 15 FGRA subaward grant agreements with 12 subrecipients. The audit reviewed a random sample of five subaward grant agreements. All grant agreements tested did not include the federal award date, assistance listing title, and indirect cost rate. Cause: DPD grant administration staff were unaware of the federal award information required to be included in the subaward grant agreement due to staff turnover and a lack of written procedures. Criteria: Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Title 2 CFR 200.332(a) requires the State to ensure every subaward agreement includes the required federal award information at the time of the subaward. Effect: Not providing the required award information increases the risk of subrecipient noncompliance with the terms and conditions of the federal award. Questioned Costs: None Recommendation: DPD’s director should amend all active FGRA subaward grant agreements to include the missing federally required information. Furthermore, management should develop written procedures to ensure compliance with all subrecipient monitoring requirements applicable to federally funded subawards administered by DOTPF. View of Responsible Officials: Management agrees with this finding.

Federal Awarding Agency: USDOT Impact: Significant Deficiency, Noncompliance AL Number and Title: 20.509 FGRA Federal Award Number: AK-2022-027 Applicable Compliance Requirement: Subrecipient Monitoring Condition: DOTPF management did not issue a management decision for the one single audit finding requiring follow-up in FY 23 within six months as required by federal law. Context: Under federal regulations, pass-through entities are responsible for issuing a management decision for audit findings relating to federal awards provided to subrecipients. The management decision must clearly state whether or not the audit finding is sustained, the reasons for the decision, and the adequacy of the subrecipient’s proposed corrective actions to address the finding. If the subrecipient has not completed corrective action, a timetable for follow-up should be given. Cause: DOTPF has no procedures to ensure a management decision is issued in a timely manner for a subrecipient’s single audit finding. DOTPF management believed it was not necessary to track subrecipients that require single audit follow-up as there was only one subrecipient with a finding during FY 23. Criteria: Title 2 CFR 200.332(d)(3) states that pass-through entities’ monitoring of subrecipients must include issuing a management decision for audit findings that relate to the federal award provided to the subrecipient from the pass-through entity. Title 2 CFR 200.521(d) states a management decision must be issued within six months of acceptance of the audit report by the federal audit clearinghouse. Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Effect: Untimely management decisions may result in the subrecipient not taking appropriate corrective action on findings. Noncompliance with federal regulations may result in the federal awarding agency imposing additional conditions or taking corrective action, including additional reporting requirements or withholding/terminating funding. Questioned Costs: None Recommendation: DOTPF’s Division of Administrative Services (DAS) director should develop and implement procedures to ensure management decisions for all subrecipient single audit findings are issued within six months of the audit report’s acceptance by the federal audit clearinghouse. View of Responsible Officials: Management agrees with this finding.

Prior Year Finding: 2022-083 Federal Awarding Agency: U.S. Department of Education Impact: Significant Deficiency, Noncompliance AL Number and Title: 84.007, 84.038, 84.063, 84.268, 84.379 Student Financial Assistance Cluster Federal Award Number: N/A Applicable Compliance Requirement: Cash Management Condition and Context: UAS had twenty-two stale Title IV checks greater than 240 days. Cause: Staffing issues in the student financial aid office at all three campuses have made it difficult for the student financial aid departments to perform their monthly review of uncashed checks in a timely manner. The delays in this process caused several instances of outstanding checks to age beyond 240 days. Criteria: The Code of Federal Regulations, 34 CFR 668.164(h)(2) states that an institution that attempts to disburse funds by check and the check is not cashed, the institution must return the funds to the Secretary no later than 240 days after the date it issued that check. Effect: Funds are not returned to the Department of Education in a timely manner. Questioned Costs: None Recommendation: UAS should continue working with the Statewide Office of Finance and Accounting to better enforce the monthly review of uncashed checks policy. View of Responsible Officials: Management agrees with this finding.

Prior Year Finding: 2022-083 Federal Awarding Agency: U.S. Department of Education Impact: Significant Deficiency, Noncompliance AL Number and Title: 84.007, 84.038, 84.063, 84.268, 84.379 Student Financial Assistance Cluster Federal Award Number: N/A Applicable Compliance Requirement: Cash Management Condition and Context: UAS had twenty-two stale Title IV checks greater than 240 days. Cause: Staffing issues in the student financial aid office at all three campuses have made it difficult for the student financial aid departments to perform their monthly review of uncashed checks in a timely manner. The delays in this process caused several instances of outstanding checks to age beyond 240 days. Criteria: The Code of Federal Regulations, 34 CFR 668.164(h)(2) states that an institution that attempts to disburse funds by check and the check is not cashed, the institution must return the funds to the Secretary no later than 240 days after the date it issued that check. Effect: Funds are not returned to the Department of Education in a timely manner. Questioned Costs: None Recommendation: UAS should continue working with the Statewide Office of Finance and Accounting to better enforce the monthly review of uncashed checks policy. View of Responsible Officials: Management agrees with this finding.

Prior Year Finding: 2022-083 Federal Awarding Agency: U.S. Department of Education Impact: Significant Deficiency, Noncompliance AL Number and Title: 84.007, 84.038, 84.063, 84.268, 84.379 Student Financial Assistance Cluster Federal Award Number: N/A Applicable Compliance Requirement: Cash Management Condition and Context: UAS had twenty-two stale Title IV checks greater than 240 days. Cause: Staffing issues in the student financial aid office at all three campuses have made it difficult for the student financial aid departments to perform their monthly review of uncashed checks in a timely manner. The delays in this process caused several instances of outstanding checks to age beyond 240 days. Criteria: The Code of Federal Regulations, 34 CFR 668.164(h)(2) states that an institution that attempts to disburse funds by check and the check is not cashed, the institution must return the funds to the Secretary no later than 240 days after the date it issued that check. Effect: Funds are not returned to the Department of Education in a timely manner. Questioned Costs: None Recommendation: UAS should continue working with the Statewide Office of Finance and Accounting to better enforce the monthly review of uncashed checks policy. View of Responsible Officials: Management agrees with this finding.

Prior Year Finding: 2022-083 Federal Awarding Agency: U.S. Department of Education Impact: Significant Deficiency, Noncompliance AL Number and Title: 84.007, 84.038, 84.063, 84.268, 84.379 Student Financial Assistance Cluster Federal Award Number: N/A Applicable Compliance Requirement: Cash Management Condition and Context: UAS had twenty-two stale Title IV checks greater than 240 days. Cause: Staffing issues in the student financial aid office at all three campuses have made it difficult for the student financial aid departments to perform their monthly review of uncashed checks in a timely manner. The delays in this process caused several instances of outstanding checks to age beyond 240 days. Criteria: The Code of Federal Regulations, 34 CFR 668.164(h)(2) states that an institution that attempts to disburse funds by check and the check is not cashed, the institution must return the funds to the Secretary no later than 240 days after the date it issued that check. Effect: Funds are not returned to the Department of Education in a timely manner. Questioned Costs: None Recommendation: UAS should continue working with the Statewide Office of Finance and Accounting to better enforce the monthly review of uncashed checks policy. View of Responsible Officials: Management agrees with this finding.

Prior Year Finding: 2022-026 Federal Awarding Agency: U.S. Department of Education (USED) Impact: Material Weakness, Material Noncompliance AL Number and Title: 84.425D Elementary and Secondary School Emergency Relief Fund – COVID-19 84.425R – Emergency Assistance for Non-Public Schools – COVID-19 84.425U American Rescue Plan – Elementary and Secondary School Emergency Relief Fund – COVID-19 84.425W American Rescue Plan – Homeless Children and Youth – COVID-19 Federal Award Number: S425D210020, S425R210001, S425U210020, S425W210002 Applicable Compliance Requirement: Reporting Federal Awarding Agency: USED Impact: Significant Deficiency, Noncompliance AL Number and Title: 84.010 Title I Grants to Local Educational Agencies (Title I-A) 84.011 Migrant Education State Grant Program (Title I-C) Federal Award Number: S010A220002, S011A220002 Applicable Compliance Requirement: Reporting Condition: DEED did not file Federal Funding Accountability and Transparency Act (FFATA) reports for FY 23 Education Stabilization Fund (ESF) programs, Title I-A, and Title I-C subawards. Context: FFATA requires information on federal awards be made available to the public through a single searchable website (www.usaspending.gov). The FFATA Subaward Reporting System (FSRS) is the reporting tool federal awardees, such as the State of Alaska, use to capture and report subaward and executive compensation data for first-tier subawards. According to DEED procedures, staff prepare a monthly report to be submitted to FSRS within 10 days after the end of the month. DEED has not completed the monthly submission to FSRS since April 2022. The audit found that unreported FY 23 subawards subject to FFATA reporting totaled $19.2 million for ESF programs, $49.3 million for Title I-A, and $20.4 million for Title I-C. Cause: According to DEED staff, uploading reports to FSRS consistently resulted in errors related to the subawardees’ zip codes. The upload errors were time-consuming to resolve and required significant manual input. Due to limited capacity and competing priorities, DEED management instructed staff to disregard procedures and discontinue FFATA reporting until the upload errors could be resolved. According to DEED management, the FSRS help desk was unresponsive in resolving issues with FFATA reporting. Criteria: Title 2 CFR 200.303 requires the State to establish and maintain effective internal control over the federal award that provides reasonable assurance that the State is managing the federal awards in compliance with federal statutes, regulations, and terms and conditions of the grant awards. Title 2 CFR 170 states federal award recipients are required to report each subaward that obligates $30,000 or more in federal funds. This information must be reported no later than the end of the month following the month in which the obligation was made; include information about each obligating action in accordance with submission instructions; and include the names and total compensation of each of the subrecipient’s five most highly compensated executives if revenue thresholds are met and the executive compensation is not available to the public. Effect: Failure to comply with FFATA reporting requirements reduces transparency, impairs decision-making, and may potentially jeopardize future federal funding. Questioned Costs: None Recommendation: DEED's Division of Administrative Services director should continue to work with the appropriate federal contacts to resolve FSRS reporting errors and follow procedures to ensure compliance with FFATA reporting requirements. View of Responsible Officials: Management agrees with this finding.

Prior Year Finding: 2022-026 Federal Awarding Agency: U.S. Department of Education (USED) Impact: Material Weakness, Material Noncompliance AL Number and Title: 84.425D Elementary and Secondary School Emergency Relief Fund – COVID-19 84.425R – Emergency Assistance for Non-Public Schools – COVID-19 84.425U American Rescue Plan – Elementary and Secondary School Emergency Relief Fund – COVID-19 84.425W American Rescue Plan – Homeless Children and Youth – COVID-19 Federal Award Number: S425D210020, S425R210001, S425U210020, S425W210002 Applicable Compliance Requirement: Reporting Federal Awarding Agency: USED Impact: Significant Deficiency, Noncompliance AL Number and Title: 84.010 Title I Grants to Local Educational Agencies (Title I-A) 84.011 Migrant Education State Grant Program (Title I-C) Federal Award Number: S010A220002, S011A220002 Applicable Compliance Requirement: Reporting Condition: DEED did not file Federal Funding Accountability and Transparency Act (FFATA) reports for FY 23 Education Stabilization Fund (ESF) programs, Title I-A, and Title I-C subawards. Context: FFATA requires information on federal awards be made available to the public through a single searchable website (www.usaspending.gov). The FFATA Subaward Reporting System (FSRS) is the reporting tool federal awardees, such as the State of Alaska, use to capture and report subaward and executive compensation data for first-tier subawards. According to DEED procedures, staff prepare a monthly report to be submitted to FSRS within 10 days after the end of the month. DEED has not completed the monthly submission to FSRS since April 2022. The audit found that unreported FY 23 subawards subject to FFATA reporting totaled $19.2 million for ESF programs, $49.3 million for Title I-A, and $20.4 million for Title I-C. Cause: According to DEED staff, uploading reports to FSRS consistently resulted in errors related to the subawardees’ zip codes. The upload errors were time-consuming to resolve and required significant manual input. Due to limited capacity and competing priorities, DEED management instructed staff to disregard procedures and discontinue FFATA reporting until the upload errors could be resolved. According to DEED management, the FSRS help desk was unresponsive in resolving issues with FFATA reporting. Criteria: Title 2 CFR 200.303 requires the State to establish and maintain effective internal control over the federal award that provides reasonable assurance that the State is managing the federal awards in compliance with federal statutes, regulations, and terms and conditions of the grant awards. Title 2 CFR 170 states federal award recipients are required to report each subaward that obligates $30,000 or more in federal funds. This information must be reported no later than the end of the month following the month in which the obligation was made; include information about each obligating action in accordance with submission instructions; and include the names and total compensation of each of the subrecipient’s five most highly compensated executives if revenue thresholds are met and the executive compensation is not available to the public. Effect: Failure to comply with FFATA reporting requirements reduces transparency, impairs decision-making, and may potentially jeopardize future federal funding. Questioned Costs: None Recommendation: DEED's Division of Administrative Services director should continue to work with the appropriate federal contacts to resolve FSRS reporting errors and follow procedures to ensure compliance with FFATA reporting requirements. View of Responsible Officials: Management agrees with this finding.

Prior Year Finding: 2022-026 Federal Awarding Agency: U.S. Department of Education (USED) Impact: Material Weakness, Material Noncompliance AL Number and Title: 84.425D Elementary and Secondary School Emergency Relief Fund – COVID-19 84.425R – Emergency Assistance for Non-Public Schools – COVID-19 84.425U American Rescue Plan – Elementary and Secondary School Emergency Relief Fund – COVID-19 84.425W American Rescue Plan – Homeless Children and Youth – COVID-19 Federal Award Number: S425D210020, S425R210001, S425U210020, S425W210002 Applicable Compliance Requirement: Reporting Federal Awarding Agency: USED Impact: Significant Deficiency, Noncompliance AL Number and Title: 84.010 Title I Grants to Local Educational Agencies (Title I-A) 84.011 Migrant Education State Grant Program (Title I-C) Federal Award Number: S010A220002, S011A220002 Applicable Compliance Requirement: Reporting Condition: DEED did not file Federal Funding Accountability and Transparency Act (FFATA) reports for FY 23 Education Stabilization Fund (ESF) programs, Title I-A, and Title I-C subawards. Context: FFATA requires information on federal awards be made available to the public through a single searchable website (www.usaspending.gov). The FFATA Subaward Reporting System (FSRS) is the reporting tool federal awardees, such as the State of Alaska, use to capture and report subaward and executive compensation data for first-tier subawards. According to DEED procedures, staff prepare a monthly report to be submitted to FSRS within 10 days after the end of the month. DEED has not completed the monthly submission to FSRS since April 2022. The audit found that unreported FY 23 subawards subject to FFATA reporting totaled $19.2 million for ESF programs, $49.3 million for Title I-A, and $20.4 million for Title I-C. Cause: According to DEED staff, uploading reports to FSRS consistently resulted in errors related to the subawardees’ zip codes. The upload errors were time-consuming to resolve and required significant manual input. Due to limited capacity and competing priorities, DEED management instructed staff to disregard procedures and discontinue FFATA reporting until the upload errors could be resolved. According to DEED management, the FSRS help desk was unresponsive in resolving issues with FFATA reporting. Criteria: Title 2 CFR 200.303 requires the State to establish and maintain effective internal control over the federal award that provides reasonable assurance that the State is managing the federal awards in compliance with federal statutes, regulations, and terms and conditions of the grant awards. Title 2 CFR 170 states federal award recipients are required to report each subaward that obligates $30,000 or more in federal funds. This information must be reported no later than the end of the month following the month in which the obligation was made; include information about each obligating action in accordance with submission instructions; and include the names and total compensation of each of the subrecipient’s five most highly compensated executives if revenue thresholds are met and the executive compensation is not available to the public. Effect: Failure to comply with FFATA reporting requirements reduces transparency, impairs decision-making, and may potentially jeopardize future federal funding. Questioned Costs: None Recommendation: DEED's Division of Administrative Services director should continue to work with the appropriate federal contacts to resolve FSRS reporting errors and follow procedures to ensure compliance with FFATA reporting requirements. View of Responsible Officials: Management agrees with this finding.

Federal Awarding Agency: U.S. Department of Education Impact: Significant Deficiency, Noncompliance AL Number and Title: 84.425L Higher Education Emergency Relief Fund Federal Award Number: N/A Applicable Compliance Requirement: Procurement and Suspension and Debarment Condition and Context: During the testing of Suspension and Debarment, UAF has two covered lease contracts that did not have EPLS checks performed. Cause: UAF failed to retain documentation to support the date on which EPLS checks were performed. Criteria: Per Uniform Guidance 2 CFR 180.300 nonfederal entities entering into covered transactions must verify the party is not suspended or debarred from conducting business by the federal government. This can be performed by: Checking SAM exclusions, collecting a certification from the party, or adding a clause or condition to the covered transaction. Effect: Potentially suspended or debarred vendors may have been contracted with federal funds. Questions costs: None Recommendation: UAF should perform EPLS checks on all covered transactions paid with federal funds. View of Responsible Officials: Management agrees with this finding.

Prior Year Finding: 2022-026 Federal Awarding Agency: U.S. Department of Education (USED) Impact: Material Weakness, Material Noncompliance AL Number and Title: 84.425D Elementary and Secondary School Emergency Relief Fund – COVID-19 84.425R – Emergency Assistance for Non-Public Schools – COVID-19 84.425U American Rescue Plan – Elementary and Secondary School Emergency Relief Fund – COVID-19 84.425W American Rescue Plan – Homeless Children and Youth – COVID-19 Federal Award Number: S425D210020, S425R210001, S425U210020, S425W210002 Applicable Compliance Requirement: Reporting Federal Awarding Agency: USED Impact: Significant Deficiency, Noncompliance AL Number and Title: 84.010 Title I Grants to Local Educational Agencies (Title I-A) 84.011 Migrant Education State Grant Program (Title I-C) Federal Award Number: S010A220002, S011A220002 Applicable Compliance Requirement: Reporting Condition: DEED did not file Federal Funding Accountability and Transparency Act (FFATA) reports for FY 23 Education Stabilization Fund (ESF) programs, Title I-A, and Title I-C subawards. Context: FFATA requires information on federal awards be made available to the public through a single searchable website (www.usaspending.gov). The FFATA Subaward Reporting System (FSRS) is the reporting tool federal awardees, such as the State of Alaska, use to capture and report subaward and executive compensation data for first-tier subawards. According to DEED procedures, staff prepare a monthly report to be submitted to FSRS within 10 days after the end of the month. DEED has not completed the monthly submission to FSRS since April 2022. The audit found that unreported FY 23 subawards subject to FFATA reporting totaled $19.2 million for ESF programs, $49.3 million for Title I-A, and $20.4 million for Title I-C. Cause: According to DEED staff, uploading reports to FSRS consistently resulted in errors related to the subawardees’ zip codes. The upload errors were time-consuming to resolve and required significant manual input. Due to limited capacity and competing priorities, DEED management instructed staff to disregard procedures and discontinue FFATA reporting until the upload errors could be resolved. According to DEED management, the FSRS help desk was unresponsive in resolving issues with FFATA reporting. Criteria: Title 2 CFR 200.303 requires the State to establish and maintain effective internal control over the federal award that provides reasonable assurance that the State is managing the federal awards in compliance with federal statutes, regulations, and terms and conditions of the grant awards. Title 2 CFR 170 states federal award recipients are required to report each subaward that obligates $30,000 or more in federal funds. This information must be reported no later than the end of the month following the month in which the obligation was made; include information about each obligating action in accordance with submission instructions; and include the names and total compensation of each of the subrecipient’s five most highly compensated executives if revenue thresholds are met and the executive compensation is not available to the public. Effect: Failure to comply with FFATA reporting requirements reduces transparency, impairs decision-making, and may potentially jeopardize future federal funding. Questioned Costs: None Recommendation: DEED's Division of Administrative Services director should continue to work with the appropriate federal contacts to resolve FSRS reporting errors and follow procedures to ensure compliance with FFATA reporting requirements. View of Responsible Officials: Management agrees with this finding.

Federal Awarding Agency: U.S. Department of Education Impact: Significant Deficiency, Noncompliance AL Number and Title: 84.425L Higher Education Emergency Relief Fund Federal Award Number: N/A Applicable Compliance Requirement: Procurement and Suspension and Debarment Condition and Context: During the testing of Suspension and Debarment, UAF has two covered lease contracts that did not have EPLS checks performed. Cause: UAF failed to retain documentation to support the date on which EPLS checks were performed. Criteria: Per Uniform Guidance 2 CFR 180.300 nonfederal entities entering into covered transactions must verify the party is not suspended or debarred from conducting business by the federal government. This can be performed by: Checking SAM exclusions, collecting a certification from the party, or adding a clause or condition to the covered transaction. Effect: Potentially suspended or debarred vendors may have been contracted with federal funds. Questions costs: None Recommendation: UAF should perform EPLS checks on all covered transactions paid with federal funds. View of Responsible Officials: Management agrees with this finding.

Prior Year Finding: 2022-026 Federal Awarding Agency: U.S. Department of Education (USED) Impact: Material Weakness, Material Noncompliance AL Number and Title: 84.425D Elementary and Secondary School Emergency Relief Fund – COVID-19 84.425R – Emergency Assistance for Non-Public Schools – COVID-19 84.425U American Rescue Plan – Elementary and Secondary School Emergency Relief Fund – COVID-19 84.425W American Rescue Plan – Homeless Children and Youth – COVID-19 Federal Award Number: S425D210020, S425R210001, S425U210020, S425W210002 Applicable Compliance Requirement: Reporting Federal Awarding Agency: USED Impact: Significant Deficiency, Noncompliance AL Number and Title: 84.010 Title I Grants to Local Educational Agencies (Title I-A) 84.011 Migrant Education State Grant Program (Title I-C) Federal Award Number: S010A220002, S011A220002 Applicable Compliance Requirement: Reporting Condition: DEED did not file Federal Funding Accountability and Transparency Act (FFATA) reports for FY 23 Education Stabilization Fund (ESF) programs, Title I-A, and Title I-C subawards. Context: FFATA requires information on federal awards be made available to the public through a single searchable website (www.usaspending.gov). The FFATA Subaward Reporting System (FSRS) is the reporting tool federal awardees, such as the State of Alaska, use to capture and report subaward and executive compensation data for first-tier subawards. According to DEED procedures, staff prepare a monthly report to be submitted to FSRS within 10 days after the end of the month. DEED has not completed the monthly submission to FSRS since April 2022. The audit found that unreported FY 23 subawards subject to FFATA reporting totaled $19.2 million for ESF programs, $49.3 million for Title I-A, and $20.4 million for Title I-C. Cause: According to DEED staff, uploading reports to FSRS consistently resulted in errors related to the subawardees’ zip codes. The upload errors were time-consuming to resolve and required significant manual input. Due to limited capacity and competing priorities, DEED management instructed staff to disregard procedures and discontinue FFATA reporting until the upload errors could be resolved. According to DEED management, the FSRS help desk was unresponsive in resolving issues with FFATA reporting. Criteria: Title 2 CFR 200.303 requires the State to establish and maintain effective internal control over the federal award that provides reasonable assurance that the State is managing the federal awards in compliance with federal statutes, regulations, and terms and conditions of the grant awards. Title 2 CFR 170 states federal award recipients are required to report each subaward that obligates $30,000 or more in federal funds. This information must be reported no later than the end of the month following the month in which the obligation was made; include information about each obligating action in accordance with submission instructions; and include the names and total compensation of each of the subrecipient’s five most highly compensated executives if revenue thresholds are met and the executive compensation is not available to the public. Effect: Failure to comply with FFATA reporting requirements reduces transparency, impairs decision-making, and may potentially jeopardize future federal funding. Questioned Costs: None Recommendation: DEED's Division of Administrative Services director should continue to work with the appropriate federal contacts to resolve FSRS reporting errors and follow procedures to ensure compliance with FFATA reporting requirements. View of Responsible Officials: Management agrees with this finding.

Federal Awarding Agency: U.S. Department of Education Impact: Significant Deficiency, Noncompliance AL Number and Title: 84.425L Higher Education Emergency Relief Fund Federal Award Number: N/A Applicable Compliance Requirement: Procurement and Suspension and Debarment Condition and Context: During the testing of Suspension and Debarment, UAF has two covered lease contracts that did not have EPLS checks performed. Cause: UAF failed to retain documentation to support the date on which EPLS checks were performed. Criteria: Per Uniform Guidance 2 CFR 180.300 nonfederal entities entering into covered transactions must verify the party is not suspended or debarred from conducting business by the federal government. This can be performed by: Checking SAM exclusions, collecting a certification from the party, or adding a clause or condition to the covered transaction. Effect: Potentially suspended or debarred vendors may have been contracted with federal funds. Questions costs: None Recommendation: UAF should perform EPLS checks on all covered transactions paid with federal funds. View of Responsible Officials: Management agrees with this finding.

Prior Year Finding: 2022-026 Federal Awarding Agency: U.S. Department of Education (USED) Impact: Material Weakness, Material Noncompliance AL Number and Title: 84.425D Elementary and Secondary School Emergency Relief Fund – COVID-19 84.425R – Emergency Assistance for Non-Public Schools – COVID-19 84.425U American Rescue Plan – Elementary and Secondary School Emergency Relief Fund – COVID-19 84.425W American Rescue Plan – Homeless Children and Youth – COVID-19 Federal Award Number: S425D210020, S425R210001, S425U210020, S425W210002 Applicable Compliance Requirement: Reporting Federal Awarding Agency: USED Impact: Significant Deficiency, Noncompliance AL Number and Title: 84.010 Title I Grants to Local Educational Agencies (Title I-A) 84.011 Migrant Education State Grant Program (Title I-C) Federal Award Number: S010A220002, S011A220002 Applicable Compliance Requirement: Reporting Condition: DEED did not file Federal Funding Accountability and Transparency Act (FFATA) reports for FY 23 Education Stabilization Fund (ESF) programs, Title I-A, and Title I-C subawards. Context: FFATA requires information on federal awards be made available to the public through a single searchable website (www.usaspending.gov). The FFATA Subaward Reporting System (FSRS) is the reporting tool federal awardees, such as the State of Alaska, use to capture and report subaward and executive compensation data for first-tier subawards. According to DEED procedures, staff prepare a monthly report to be submitted to FSRS within 10 days after the end of the month. DEED has not completed the monthly submission to FSRS since April 2022. The audit found that unreported FY 23 subawards subject to FFATA reporting totaled $19.2 million for ESF programs, $49.3 million for Title I-A, and $20.4 million for Title I-C. Cause: According to DEED staff, uploading reports to FSRS consistently resulted in errors related to the subawardees’ zip codes. The upload errors were time-consuming to resolve and required significant manual input. Due to limited capacity and competing priorities, DEED management instructed staff to disregard procedures and discontinue FFATA reporting until the upload errors could be resolved. According to DEED management, the FSRS help desk was unresponsive in resolving issues with FFATA reporting. Criteria: Title 2 CFR 200.303 requires the State to establish and maintain effective internal control over the federal award that provides reasonable assurance that the State is managing the federal awards in compliance with federal statutes, regulations, and terms and conditions of the grant awards. Title 2 CFR 170 states federal award recipients are required to report each subaward that obligates $30,000 or more in federal funds. This information must be reported no later than the end of the month following the month in which the obligation was made; include information about each obligating action in accordance with submission instructions; and include the names and total compensation of each of the subrecipient’s five most highly compensated executives if revenue thresholds are met and the executive compensation is not available to the public. Effect: Failure to comply with FFATA reporting requirements reduces transparency, impairs decision-making, and may potentially jeopardize future federal funding. Questioned Costs: None Recommendation: DEED's Division of Administrative Services director should continue to work with the appropriate federal contacts to resolve FSRS reporting errors and follow procedures to ensure compliance with FFATA reporting requirements. View of Responsible Officials: Management agrees with this finding.

Federal Awarding Agency: U.S. Department of Education Impact: Significant Deficiency, Noncompliance AL Number and Title: 84.425L Higher Education Emergency Relief Fund Federal Award Number: N/A Applicable Compliance Requirement: Procurement and Suspension and Debarment Condition and Context: During the testing of Suspension and Debarment, UAF has two covered lease contracts that did not have EPLS checks performed. Cause: UAF failed to retain documentation to support the date on which EPLS checks were performed. Criteria: Per Uniform Guidance 2 CFR 180.300 nonfederal entities entering into covered transactions must verify the party is not suspended or debarred from conducting business by the federal government. This can be performed by: Checking SAM exclusions, collecting a certification from the party, or adding a clause or condition to the covered transaction. Effect: Potentially suspended or debarred vendors may have been contracted with federal funds. Questions costs: None Recommendation: UAF should perform EPLS checks on all covered transactions paid with federal funds. View of Responsible Officials: Management agrees with this finding.

Prior Year Finding: 2022-026 Federal Awarding Agency: U.S. Department of Education (USED) Impact: Material Weakness, Material Noncompliance AL Number and Title: 84.425D Elementary and Secondary School Emergency Relief Fund – COVID-19 84.425R – Emergency Assistance for Non-Public Schools – COVID-19 84.425U American Rescue Plan – Elementary and Secondary School Emergency Relief Fund – COVID-19 84.425W American Rescue Plan – Homeless Children and Youth – COVID-19 Federal Award Number: S425D210020, S425R210001, S425U210020, S425W210002 Applicable Compliance Requirement: Reporting Federal Awarding Agency: USED Impact: Significant Deficiency, Noncompliance AL Number and Title: 84.010 Title I Grants to Local Educational Agencies (Title I-A) 84.011 Migrant Education State Grant Program (Title I-C) Federal Award Number: S010A220002, S011A220002 Applicable Compliance Requirement: Reporting Condition: DEED did not file Federal Funding Accountability and Transparency Act (FFATA) reports for FY 23 Education Stabilization Fund (ESF) programs, Title I-A, and Title I-C subawards. Context: FFATA requires information on federal awards be made available to the public through a single searchable website (www.usaspending.gov). The FFATA Subaward Reporting System (FSRS) is the reporting tool federal awardees, such as the State of Alaska, use to capture and report subaward and executive compensation data for first-tier subawards. According to DEED procedures, staff prepare a monthly report to be submitted to FSRS within 10 days after the end of the month. DEED has not completed the monthly submission to FSRS since April 2022. The audit found that unreported FY 23 subawards subject to FFATA reporting totaled $19.2 million for ESF programs, $49.3 million for Title I-A, and $20.4 million for Title I-C. Cause: According to DEED staff, uploading reports to FSRS consistently resulted in errors related to the subawardees’ zip codes. The upload errors were time-consuming to resolve and required significant manual input. Due to limited capacity and competing priorities, DEED management instructed staff to disregard procedures and discontinue FFATA reporting until the upload errors could be resolved. According to DEED management, the FSRS help desk was unresponsive in resolving issues with FFATA reporting. Criteria: Title 2 CFR 200.303 requires the State to establish and maintain effective internal control over the federal award that provides reasonable assurance that the State is managing the federal awards in compliance with federal statutes, regulations, and terms and conditions of the grant awards. Title 2 CFR 170 states federal award recipients are required to report each subaward that obligates $30,000 or more in federal funds. This information must be reported no later than the end of the month following the month in which the obligation was made; include information about each obligating action in accordance with submission instructions; and include the names and total compensation of each of the subrecipient’s five most highly compensated executives if revenue thresholds are met and the executive compensation is not available to the public. Effect: Failure to comply with FFATA reporting requirements reduces transparency, impairs decision-making, and may potentially jeopardize future federal funding. Questioned Costs: None Recommendation: DEED's Division of Administrative Services director should continue to work with the appropriate federal contacts to resolve FSRS reporting errors and follow procedures to ensure compliance with FFATA reporting requirements. View of Responsible Officials: Management agrees with this finding.

Federal Awarding Agency: U.S. Department of Education Impact: Significant Deficiency, Noncompliance AL Number and Title: 84.425L Higher Education Emergency Relief Fund Federal Award Number: N/A Applicable Compliance Requirement: Procurement and Suspension and Debarment Condition and Context: During the testing of Suspension and Debarment, UAF has two covered lease contracts that did not have EPLS checks performed. Cause: UAF failed to retain documentation to support the date on which EPLS checks were performed. Criteria: Per Uniform Guidance 2 CFR 180.300 nonfederal entities entering into covered transactions must verify the party is not suspended or debarred from conducting business by the federal government. This can be performed by: Checking SAM exclusions, collecting a certification from the party, or adding a clause or condition to the covered transaction. Effect: Potentially suspended or debarred vendors may have been contracted with federal funds. Questions costs: None Recommendation: UAF should perform EPLS checks on all covered transactions paid with federal funds. View of Responsible Officials: Management agrees with this finding.

Prior Year Finding: 2022-026 Federal Awarding Agency: U.S. Department of Education (USED) Impact: Material Weakness, Material Noncompliance AL Number and Title: 84.425D Elementary and Secondary School Emergency Relief Fund – COVID-19 84.425R – Emergency Assistance for Non-Public Schools – COVID-19 84.425U American Rescue Plan – Elementary and Secondary School Emergency Relief Fund – COVID-19 84.425W American Rescue Plan – Homeless Children and Youth – COVID-19 Federal Award Number: S425D210020, S425R210001, S425U210020, S425W210002 Applicable Compliance Requirement: Reporting Federal Awarding Agency: USED Impact: Significant Deficiency, Noncompliance AL Number and Title: 84.010 Title I Grants to Local Educational Agencies (Title I-A) 84.011 Migrant Education State Grant Program (Title I-C) Federal Award Number: S010A220002, S011A220002 Applicable Compliance Requirement: Reporting Condition: DEED did not file Federal Funding Accountability and Transparency Act (FFATA) reports for FY 23 Education Stabilization Fund (ESF) programs, Title I-A, and Title I-C subawards. Context: FFATA requires information on federal awards be made available to the public through a single searchable website (www.usaspending.gov). The FFATA Subaward Reporting System (FSRS) is the reporting tool federal awardees, such as the State of Alaska, use to capture and report subaward and executive compensation data for first-tier subawards. According to DEED procedures, staff prepare a monthly report to be submitted to FSRS within 10 days after the end of the month. DEED has not completed the monthly submission to FSRS since April 2022. The audit found that unreported FY 23 subawards subject to FFATA reporting totaled $19.2 million for ESF programs, $49.3 million for Title I-A, and $20.4 million for Title I-C. Cause: According to DEED staff, uploading reports to FSRS consistently resulted in errors related to the subawardees’ zip codes. The upload errors were time-consuming to resolve and required significant manual input. Due to limited capacity and competing priorities, DEED management instructed staff to disregard procedures and discontinue FFATA reporting until the upload errors could be resolved. According to DEED management, the FSRS help desk was unresponsive in resolving issues with FFATA reporting. Criteria: Title 2 CFR 200.303 requires the State to establish and maintain effective internal control over the federal award that provides reasonable assurance that the State is managing the federal awards in compliance with federal statutes, regulations, and terms and conditions of the grant awards. Title 2 CFR 170 states federal award recipients are required to report each subaward that obligates $30,000 or more in federal funds. This information must be reported no later than the end of the month following the month in which the obligation was made; include information about each obligating action in accordance with submission instructions; and include the names and total compensation of each of the subrecipient’s five most highly compensated executives if revenue thresholds are met and the executive compensation is not available to the public. Effect: Failure to comply with FFATA reporting requirements reduces transparency, impairs decision-making, and may potentially jeopardize future federal funding. Questioned Costs: None Recommendation: DEED's Division of Administrative Services director should continue to work with the appropriate federal contacts to resolve FSRS reporting errors and follow procedures to ensure compliance with FFATA reporting requirements. View of Responsible Officials: Management agrees with this finding.

Federal Awarding Agency: U.S. Department of Education Impact: Significant Deficiency, Noncompliance AL Number and Title: 84.425L Higher Education Emergency Relief Fund Federal Award Number: N/A Applicable Compliance Requirement: Procurement and Suspension and Debarment Condition and Context: During the testing of Suspension and Debarment, UAF has two covered lease contracts that did not have EPLS checks performed. Cause: UAF failed to retain documentation to support the date on which EPLS checks were performed. Criteria: Per Uniform Guidance 2 CFR 180.300 nonfederal entities entering into covered transactions must verify the party is not suspended or debarred from conducting business by the federal government. This can be performed by: Checking SAM exclusions, collecting a certification from the party, or adding a clause or condition to the covered transaction. Effect: Potentially suspended or debarred vendors may have been contracted with federal funds. Questions costs: None Recommendation: UAF should perform EPLS checks on all covered transactions paid with federal funds. View of Responsible Officials: Management agrees with this finding.

Prior Year Finding: 2022-026 Federal Awarding Agency: U.S. Department of Education (USED) Impact: Material Weakness, Material Noncompliance AL Number and Title: 84.425D Elementary and Secondary School Emergency Relief Fund – COVID-19 84.425R – Emergency Assistance for Non-Public Schools – COVID-19 84.425U American Rescue Plan – Elementary and Secondary School Emergency Relief Fund – COVID-19 84.425W American Rescue Plan – Homeless Children and Youth – COVID-19 Federal Award Number: S425D210020, S425R210001, S425U210020, S425W210002 Applicable Compliance Requirement: Reporting Federal Awarding Agency: USED Impact: Significant Deficiency, Noncompliance AL Number and Title: 84.010 Title I Grants to Local Educational Agencies (Title I-A) 84.011 Migrant Education State Grant Program (Title I-C) Federal Award Number: S010A220002, S011A220002 Applicable Compliance Requirement: Reporting Condition: DEED did not file Federal Funding Accountability and Transparency Act (FFATA) reports for FY 23 Education Stabilization Fund (ESF) programs, Title I-A, and Title I-C subawards. Context: FFATA requires information on federal awards be made available to the public through a single searchable website (www.usaspending.gov). The FFATA Subaward Reporting System (FSRS) is the reporting tool federal awardees, such as the State of Alaska, use to capture and report subaward and executive compensation data for first-tier subawards. According to DEED procedures, staff prepare a monthly report to be submitted to FSRS within 10 days after the end of the month. DEED has not completed the monthly submission to FSRS since April 2022. The audit found that unreported FY 23 subawards subject to FFATA reporting totaled $19.2 million for ESF programs, $49.3 million for Title I-A, and $20.4 million for Title I-C. Cause: According to DEED staff, uploading reports to FSRS consistently resulted in errors related to the subawardees’ zip codes. The upload errors were time-consuming to resolve and required significant manual input. Due to limited capacity and competing priorities, DEED management instructed staff to disregard procedures and discontinue FFATA reporting until the upload errors could be resolved. According to DEED management, the FSRS help desk was unresponsive in resolving issues with FFATA reporting. Criteria: Title 2 CFR 200.303 requires the State to establish and maintain effective internal control over the federal award that provides reasonable assurance that the State is managing the federal awards in compliance with federal statutes, regulations, and terms and conditions of the grant awards. Title 2 CFR 170 states federal award recipients are required to report each subaward that obligates $30,000 or more in federal funds. This information must be reported no later than the end of the month following the month in which the obligation was made; include information about each obligating action in accordance with submission instructions; and include the names and total compensation of each of the subrecipient’s five most highly compensated executives if revenue thresholds are met and the executive compensation is not available to the public. Effect: Failure to comply with FFATA reporting requirements reduces transparency, impairs decision-making, and may potentially jeopardize future federal funding. Questioned Costs: None Recommendation: DEED's Division of Administrative Services director should continue to work with the appropriate federal contacts to resolve FSRS reporting errors and follow procedures to ensure compliance with FFATA reporting requirements. View of Responsible Officials: Management agrees with this finding.

Federal Awarding Agency: U.S. Department of Education Impact: Significant Deficiency, Noncompliance AL Number and Title: 84.425L Higher Education Emergency Relief Fund Federal Award Number: N/A Applicable Compliance Requirement: Procurement and Suspension and Debarment Condition and Context: During the testing of Suspension and Debarment, UAF has two covered lease contracts that did not have EPLS checks performed. Cause: UAF failed to retain documentation to support the date on which EPLS checks were performed. Criteria: Per Uniform Guidance 2 CFR 180.300 nonfederal entities entering into covered transactions must verify the party is not suspended or debarred from conducting business by the federal government. This can be performed by: Checking SAM exclusions, collecting a certification from the party, or adding a clause or condition to the covered transaction. Effect: Potentially suspended or debarred vendors may have been contracted with federal funds. Questions costs: None Recommendation: UAF should perform EPLS checks on all covered transactions paid with federal funds. View of Responsible Officials: Management agrees with this finding.

Prior Year Finding: 2022-052 Federal Awarding Agency: USDHHS Impact: Significant Deficiency AL Number and Title: 93.767 Children’s Health Insurance Program 93.775, 93.777, 93.778 Medicaid Cluster Federal Award Number: 2205AK5021, 2305AK5021 2205AKMAP, 2305AK5MAP Applicable Compliance Requirement: Eligibility Condition: An examination of the Alaska Resource for Integrated Eligibility Services (ARIES) system during FY 22 identified significant internal control deficiencies. An examination was not performed in FY 23, however certain deficiencies noted in the FY 22 report have not been alleviated in FY 23. Context: ARIES is an eligibility system developed for Medicaid and CHIP. Cause: Details related to the control weaknesses and the relevant audit criteria are being withheld from this report to prevent the weaknesses from being exploited. Pertinent details have been communicated to agency management in a separate confidential document. Criteria: Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over the federal award that provides reasonable assurance that the State is managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. Per Title 45 CFR 155.260(a)(5) the State must monitor, periodically assess, and update the security controls and related system risks to ensure the continued effectiveness of those controls. Effect: The internal control weaknesses increase the risk of noncompliance with State and federal regulations, unauthorized system use (including data manipulation), and incorrect eligibility determinations, which may result in ineligible recipients or unallowed costs. Questioned Costs: None Recommendation: The State should continue to formalize procedures and dedicate the resources necessary to strengthen ARIES system controls. View of Responsible Officials: Management agrees with this finding.

Prior Year Finding: 2022-053 Federal Awarding Agency: USDHHS Impact: Significant Deficiency, Noncompliance AL Number and Title: 93.767 CHIP 93.775, 93.777, 93.778 Medicaid Cluster Federal Award Number: 2205AK5021, 2305AK5021 2205AKMAP, 2305AK5MAP Applicable Compliance Requirement: Eligibility Condition: Sixty Medicaid and sixty CHIP recipients were randomly selected for eligibility testing. Testing revealed the following errors: Medicaid: • Twelve of the sixty recipients tested (20 percent), the State did not process applications in a timely manner or redetermine eligibility. The delays for completion of processing of the applications ranged from 46 days to 279 days as of June 30, 2023. CHIP: • Six of the sixty recipients tested (10 percent), the State did not process applications in a timely manner or redetermine eligibility. The delays for completion of processing of the applications ranged from 56 days to 225 days as of June 30, 2023. • One of the sixty recipients tested (1.6 percent), the beneficiary was due to have eligibility redetermined, however no information was submitted to the State for review and staff did not independently conduct a redetermination. For recipients following the Modified Adjusted Gross Income (MAGI) methodology, the State should have attempted to redetermine eligibility through electronic interfaces. Context: The State is required to ensure applications are reviewed and eligibility determinations are made timely for Medicaid and CHIP recipients. Eligibility is redetermined at least every 12 months or when new information is provided from the recipient. Due to the COVID-19 pandemic, the federal government enacted the FFCRA on March 18, 2020, which required health insurance coverage for individuals validly enrolled on or after this date to continue during the PHE. In accordance with FFCRA, the State is allowed to receive an enhanced reimbursement rate for Medicaid and CHIP and may not terminate Medicaid coverage for most individuals found to no longer meet eligibility requirements until the end of the month in which the PHE ends. The PHE ended during the year ended June 30, 2023. Cause: Staffing and resource shortages adversely impacted application processing timeliness. Also, the State is working through the unwinding of the PHE (public health emergency) flexibilities. Criteria: Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. Title 42 CFR 435.912(c) states the determination of eligibility for any application may not exceed 90 days for applicants who apply for Medicaid on the basis of disability and 45 days for all other applicants. Title 42 CFR 435.916 requires the State to periodically renew Medicaid eligibility. For renewals based on MAGI, a redetermination is required once every 12 months, and no more frequently than once every 12 months. Similarly, for non-MAGI beneficiaries the State is required to make a redetermination of eligibility at least every 12 months. The State is required to take action on information about changes between regular eligibility renewals and promptly redetermine eligibility. Title 42 CFR 435.916(a)(2) states that the agency must make a redetermination of eligibility without requiring information from the individual if able to do so based on reliable information contained in the individual’s account or other more current information available to the agency, including but not limited to information accessed through any databases accessed by the agency. Title 42 CFR 457.340 and 42 CFR 457.343 require the timely determination of eligibility and renewal procedures for Medicaid apply equally in administering CHIP. Effect: Failure to determine Medicaid and CHIP eligibility timely increases the risk that ineligible beneficiaries receive Medicaid and CHIP benefits. Questioned Costs: None Recommendation: The State should dedicate the resources necessary to determine Medicaid and CHIP eligibility in a timely manner and continue to re-instate procedures in place prior to the PHE. View of Responsible Officials: Management agrees with this finding.

Prior Year Finding: 2022-054 Federal Awarding Agency: USDHHS Impact: Significant Deficiency, Noncompliance AL Number and Title: 93.767 CHIP 93.775, 93.777, 93.778 Medicaid Cluster Federal Award Number: 2205AK5021, 2305AK5021 2205AKMAP, 2305AK5MAP Applicable Compliance Requirement: Eligibility, Activities Allowed or Unallowed, Allowable Costs/Cost Principles Condition: Sixty Medicaid and sixty CHIP recipients were randomly selected for eligibility testing. Auditors found inaccurate or unsupported eligibility determinations by State staff for 5 percent of Medicaid cases tested and 6 percent of CHIP cases tested. Testing revealed the following errors: Medicaid: • One case was ineligible for the whole year and benefits were available the whole year. • Two cases lacked documentation supporting the request and use of income and benefit information through the Income Eligibility and Verification System (IEVS) for determining eligibility and benefits. CHIP: • One case’s application hasn’t been processed as of 6/30/2023 but benefits were paid during the year ended June 30, 2023. • One case was a child that had turned 19 in a previous year but benefits continued to be paid during the year ended June 30, 2023. • Two cases had unresolved help desk tickets about how to close a case, which led to the cases remaining open and benefits to be paid for one of the cases during the year ended June 30, 2023. Context: The State is required to ensure only financially needy individuals receive Medicaid or CHIP assistance. DPA is the primary division within DOH responsible for determining Medicaid and CHIP eligibility. DPA’s employees review applications, identify income and financial resources, obtain social security numbers and verify the numbers through a federal database, and make determinations whether the individuals are eligible to receive benefits. DPA has established internal control procedures to help staff determine eligibility in accordance with federal regulations and the State plan. Procedures are documented in the DPA Administrative Procedures Manual and the MAGI Medicaid Eligibility Manual. DPA utilizes an electronic document management system to store the documents that DPA staff obtained to verify eligibility. Cause: The deficiencies were due to staff and resource shortages, inadequate training, human error, and system errors. Criteria: Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. Title 42 CFR 435.914(a) states the agency must include in each application’s case record facts to support the agency’s decision. Title 42 CFR 457.343 requires the renewal procedures for Medicaid apply equally in administering CHIP. Effect: Failure to accurately determine eligibility and maintain complete case records for Medicaid and CHIP increases the risk that ineligible recipients receive Medicaid and CHIP benefits. Questioned Costs: AL 93.767: $ 167 AL 93.778: $ 960 Recommendation: The State should improve eligibility training, ensure procedures are followed for determining Medicaid and CHIP eligibility, and ensure the case management system includes all relevant documentation supporting eligibility decisions. View of Responsible Officials: Management agrees with this finding, but not the questioned costs. CMS has notified the State that financial recoveries based on eligibility errors can only be pursued when identified by programs operating under CMS’s Payment Error Rate Measurement program, under section 1903(u) of the Social Security Act and regulations at 42 CFR Part 431, Subpart Q. Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. Management concurs with the finding, but not the questioned costs, based on communication received from a federal agency indicating the agency will not pursue recovery of the questioned costs for a similar prior year finding. Questioned costs are defined by Title 45 CFR 75.2, which states: Questioned cost means a cost that is questioned by the auditor because of an audit finding: • Which resulted from a violation or possible violation of a statute, regulation, or the terms and conditions of a federal award, including for funds used to match federal funds; • Where the costs, at the time of the audit, are not supported by adequate documentation; or • Where the costs incurred appear unreasonable and do not reflect the actions a prudent person would take in the circumstances. Based on the Uniform Guidance, benefits paid associated with the finding are reported as questioned costs.

Prior Year Finding: 2022-052 Federal Awarding Agency: USDHHS Impact: Significant Deficiency AL Number and Title: 93.767 Children’s Health Insurance Program 93.775, 93.777, 93.778 Medicaid Cluster Federal Award Number: 2205AK5021, 2305AK5021 2205AKMAP, 2305AK5MAP Applicable Compliance Requirement: Eligibility Condition: An examination of the Alaska Resource for Integrated Eligibility Services (ARIES) system during FY 22 identified significant internal control deficiencies. An examination was not performed in FY 23, however certain deficiencies noted in the FY 22 report have not been alleviated in FY 23. Context: ARIES is an eligibility system developed for Medicaid and CHIP. Cause: Details related to the control weaknesses and the relevant audit criteria are being withheld from this report to prevent the weaknesses from being exploited. Pertinent details have been communicated to agency management in a separate confidential document. Criteria: Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over the federal award that provides reasonable assurance that the State is managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. Per Title 45 CFR 155.260(a)(5) the State must monitor, periodically assess, and update the security controls and related system risks to ensure the continued effectiveness of those controls. Effect: The internal control weaknesses increase the risk of noncompliance with State and federal regulations, unauthorized system use (including data manipulation), and incorrect eligibility determinations, which may result in ineligible recipients or unallowed costs. Questioned Costs: None Recommendation: The State should continue to formalize procedures and dedicate the resources necessary to strengthen ARIES system controls. View of Responsible Officials: Management agrees with this finding.

Prior Year Finding: 2022-053 Federal Awarding Agency: USDHHS Impact: Significant Deficiency, Noncompliance AL Number and Title: 93.767 CHIP 93.775, 93.777, 93.778 Medicaid Cluster Federal Award Number: 2205AK5021, 2305AK5021 2205AKMAP, 2305AK5MAP Applicable Compliance Requirement: Eligibility Condition: Sixty Medicaid and sixty CHIP recipients were randomly selected for eligibility testing. Testing revealed the following errors: Medicaid: • Twelve of the sixty recipients tested (20 percent), the State did not process applications in a timely manner or redetermine eligibility. The delays for completion of processing of the applications ranged from 46 days to 279 days as of June 30, 2023. CHIP: • Six of the sixty recipients tested (10 percent), the State did not process applications in a timely manner or redetermine eligibility. The delays for completion of processing of the applications ranged from 56 days to 225 days as of June 30, 2023. • One of the sixty recipients tested (1.6 percent), the beneficiary was due to have eligibility redetermined, however no information was submitted to the State for review and staff did not independently conduct a redetermination. For recipients following the Modified Adjusted Gross Income (MAGI) methodology, the State should have attempted to redetermine eligibility through electronic interfaces. Context: The State is required to ensure applications are reviewed and eligibility determinations are made timely for Medicaid and CHIP recipients. Eligibility is redetermined at least every 12 months or when new information is provided from the recipient. Due to the COVID-19 pandemic, the federal government enacted the FFCRA on March 18, 2020, which required health insurance coverage for individuals validly enrolled on or after this date to continue during the PHE. In accordance with FFCRA, the State is allowed to receive an enhanced reimbursement rate for Medicaid and CHIP and may not terminate Medicaid coverage for most individuals found to no longer meet eligibility requirements until the end of the month in which the PHE ends. The PHE ended during the year ended June 30, 2023. Cause: Staffing and resource shortages adversely impacted application processing timeliness. Also, the State is working through the unwinding of the PHE (public health emergency) flexibilities. Criteria: Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. Title 42 CFR 435.912(c) states the determination of eligibility for any application may not exceed 90 days for applicants who apply for Medicaid on the basis of disability and 45 days for all other applicants. Title 42 CFR 435.916 requires the State to periodically renew Medicaid eligibility. For renewals based on MAGI, a redetermination is required once every 12 months, and no more frequently than once every 12 months. Similarly, for non-MAGI beneficiaries the State is required to make a redetermination of eligibility at least every 12 months. The State is required to take action on information about changes between regular eligibility renewals and promptly redetermine eligibility. Title 42 CFR 435.916(a)(2) states that the agency must make a redetermination of eligibility without requiring information from the individual if able to do so based on reliable information contained in the individual’s account or other more current information available to the agency, including but not limited to information accessed through any databases accessed by the agency. Title 42 CFR 457.340 and 42 CFR 457.343 require the timely determination of eligibility and renewal procedures for Medicaid apply equally in administering CHIP. Effect: Failure to determine Medicaid and CHIP eligibility timely increases the risk that ineligible beneficiaries receive Medicaid and CHIP benefits. Questioned Costs: None Recommendation: The State should dedicate the resources necessary to determine Medicaid and CHIP eligibility in a timely manner and continue to re-instate procedures in place prior to the PHE. View of Responsible Officials: Management agrees with this finding.

Prior Year Finding: 2022-054 Federal Awarding Agency: USDHHS Impact: Significant Deficiency, Noncompliance AL Number and Title: 93.767 CHIP 93.775, 93.777, 93.778 Medicaid Cluster Federal Award Number: 2205AK5021, 2305AK5021 2205AKMAP, 2305AK5MAP Applicable Compliance Requirement: Eligibility, Activities Allowed or Unallowed, Allowable Costs/Cost Principles Condition: Sixty Medicaid and sixty CHIP recipients were randomly selected for eligibility testing. Auditors found inaccurate or unsupported eligibility determinations by State staff for 5 percent of Medicaid cases tested and 6 percent of CHIP cases tested. Testing revealed the following errors: Medicaid: • One case was ineligible for the whole year and benefits were available the whole year. • Two cases lacked documentation supporting the request and use of income and benefit information through the Income Eligibility and Verification System (IEVS) for determining eligibility and benefits. CHIP: • One case’s application hasn’t been processed as of 6/30/2023 but benefits were paid during the year ended June 30, 2023. • One case was a child that had turned 19 in a previous year but benefits continued to be paid during the year ended June 30, 2023. • Two cases had unresolved help desk tickets about how to close a case, which led to the cases remaining open and benefits to be paid for one of the cases during the year ended June 30, 2023. Context: The State is required to ensure only financially needy individuals receive Medicaid or CHIP assistance. DPA is the primary division within DOH responsible for determining Medicaid and CHIP eligibility. DPA’s employees review applications, identify income and financial resources, obtain social security numbers and verify the numbers through a federal database, and make determinations whether the individuals are eligible to receive benefits. DPA has established internal control procedures to help staff determine eligibility in accordance with federal regulations and the State plan. Procedures are documented in the DPA Administrative Procedures Manual and the MAGI Medicaid Eligibility Manual. DPA utilizes an electronic document management system to store the documents that DPA staff obtained to verify eligibility. Cause: The deficiencies were due to staff and resource shortages, inadequate training, human error, and system errors. Criteria: Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. Title 42 CFR 435.914(a) states the agency must include in each application’s case record facts to support the agency’s decision. Title 42 CFR 457.343 requires the renewal procedures for Medicaid apply equally in administering CHIP. Effect: Failure to accurately determine eligibility and maintain complete case records for Medicaid and CHIP increases the risk that ineligible recipients receive Medicaid and CHIP benefits. Questioned Costs: AL 93.767: $ 167 AL 93.778: $ 960 Recommendation: The State should improve eligibility training, ensure procedures are followed for determining Medicaid and CHIP eligibility, and ensure the case management system includes all relevant documentation supporting eligibility decisions. View of Responsible Officials: Management agrees with this finding, but not the questioned costs. CMS has notified the State that financial recoveries based on eligibility errors can only be pursued when identified by programs operating under CMS’s Payment Error Rate Measurement program, under section 1903(u) of the Social Security Act and regulations at 42 CFR Part 431, Subpart Q. Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. Management concurs with the finding, but not the questioned costs, based on communication received from a federal agency indicating the agency will not pursue recovery of the questioned costs for a similar prior year finding. Questioned costs are defined by Title 45 CFR 75.2, which states: Questioned cost means a cost that is questioned by the auditor because of an audit finding: • Which resulted from a violation or possible violation of a statute, regulation, or the terms and conditions of a federal award, including for funds used to match federal funds; • Where the costs, at the time of the audit, are not supported by adequate documentation; or • Where the costs incurred appear unreasonable and do not reflect the actions a prudent person would take in the circumstances. Based on the Uniform Guidance, benefits paid associated with the finding are reported as questioned costs.

Prior Year Finding: 2022-052 Federal Awarding Agency: USDHHS Impact: Significant Deficiency AL Number and Title: 93.767 Children’s Health Insurance Program 93.775, 93.777, 93.778 Medicaid Cluster Federal Award Number: 2205AK5021, 2305AK5021 2205AKMAP, 2305AK5MAP Applicable Compliance Requirement: Eligibility Condition: An examination of the Alaska Resource for Integrated Eligibility Services (ARIES) system during FY 22 identified significant internal control deficiencies. An examination was not performed in FY 23, however certain deficiencies noted in the FY 22 report have not been alleviated in FY 23. Context: ARIES is an eligibility system developed for Medicaid and CHIP. Cause: Details related to the control weaknesses and the relevant audit criteria are being withheld from this report to prevent the weaknesses from being exploited. Pertinent details have been communicated to agency management in a separate confidential document. Criteria: Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over the federal award that provides reasonable assurance that the State is managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. Per Title 45 CFR 155.260(a)(5) the State must monitor, periodically assess, and update the security controls and related system risks to ensure the continued effectiveness of those controls. Effect: The internal control weaknesses increase the risk of noncompliance with State and federal regulations, unauthorized system use (including data manipulation), and incorrect eligibility determinations, which may result in ineligible recipients or unallowed costs. Questioned Costs: None Recommendation: The State should continue to formalize procedures and dedicate the resources necessary to strengthen ARIES system controls. View of Responsible Officials: Management agrees with this finding.

Prior Year Finding: 2022-053 Federal Awarding Agency: USDHHS Impact: Significant Deficiency, Noncompliance AL Number and Title: 93.767 CHIP 93.775, 93.777, 93.778 Medicaid Cluster Federal Award Number: 2205AK5021, 2305AK5021 2205AKMAP, 2305AK5MAP Applicable Compliance Requirement: Eligibility Condition: Sixty Medicaid and sixty CHIP recipients were randomly selected for eligibility testing. Testing revealed the following errors: Medicaid: • Twelve of the sixty recipients tested (20 percent), the State did not process applications in a timely manner or redetermine eligibility. The delays for completion of processing of the applications ranged from 46 days to 279 days as of June 30, 2023. CHIP: • Six of the sixty recipients tested (10 percent), the State did not process applications in a timely manner or redetermine eligibility. The delays for completion of processing of the applications ranged from 56 days to 225 days as of June 30, 2023. • One of the sixty recipients tested (1.6 percent), the beneficiary was due to have eligibility redetermined, however no information was submitted to the State for review and staff did not independently conduct a redetermination. For recipients following the Modified Adjusted Gross Income (MAGI) methodology, the State should have attempted to redetermine eligibility through electronic interfaces. Context: The State is required to ensure applications are reviewed and eligibility determinations are made timely for Medicaid and CHIP recipients. Eligibility is redetermined at least every 12 months or when new information is provided from the recipient. Due to the COVID-19 pandemic, the federal government enacted the FFCRA on March 18, 2020, which required health insurance coverage for individuals validly enrolled on or after this date to continue during the PHE. In accordance with FFCRA, the State is allowed to receive an enhanced reimbursement rate for Medicaid and CHIP and may not terminate Medicaid coverage for most individuals found to no longer meet eligibility requirements until the end of the month in which the PHE ends. The PHE ended during the year ended June 30, 2023. Cause: Staffing and resource shortages adversely impacted application processing timeliness. Also, the State is working through the unwinding of the PHE (public health emergency) flexibilities. Criteria: Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. Title 42 CFR 435.912(c) states the determination of eligibility for any application may not exceed 90 days for applicants who apply for Medicaid on the basis of disability and 45 days for all other applicants. Title 42 CFR 435.916 requires the State to periodically renew Medicaid eligibility. For renewals based on MAGI, a redetermination is required once every 12 months, and no more frequently than once every 12 months. Similarly, for non-MAGI beneficiaries the State is required to make a redetermination of eligibility at least every 12 months. The State is required to take action on information about changes between regular eligibility renewals and promptly redetermine eligibility. Title 42 CFR 435.916(a)(2) states that the agency must make a redetermination of eligibility without requiring information from the individual if able to do so based on reliable information contained in the individual’s account or other more current information available to the agency, including but not limited to information accessed through any databases accessed by the agency. Title 42 CFR 457.340 and 42 CFR 457.343 require the timely determination of eligibility and renewal procedures for Medicaid apply equally in administering CHIP. Effect: Failure to determine Medicaid and CHIP eligibility timely increases the risk that ineligible beneficiaries receive Medicaid and CHIP benefits. Questioned Costs: None Recommendation: The State should dedicate the resources necessary to determine Medicaid and CHIP eligibility in a timely manner and continue to re-instate procedures in place prior to the PHE. View of Responsible Officials: Management agrees with this finding.