2023-002 Activities Allowed or Unallowed and Allowable Costs/Cost Principles
Prior Year Finding Number: 2022-003
Year of Finding Origination: 2022
Type of Finding: Internal Control Over Compliance and Compliance
Severity of Deficiency: Material Weakness and Modified Opinion
Federal Agency: U.S. Department of Health and Human Services
Program: 93.563 Child Support Enforcement
Award Number and Year: 2301MNCEST and 2301MNCSES, 2023
Pass-Through Agency: Minnesota Department of Human Services
Criteria: Title 2 U.S. Code of Federal Regulations § 200.303 states that the auditee must establish and maintain effective internal control over the federal award that provides reasonable assurance that the auditee is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award.
Administrative program costs for Child Support Enforcement are submitted to the Minnesota Department of Human Services (DHS) through the DHS Income Maintenance DHS-2550 report on a quarterly basis. DHS provides reporting instructions, including information regarding eligible and ineligible costs.
Condition: The following exceptions were noted in a sample of 40 expenditures tested:
• One claim related to employee appreciation and another claim for meals at an all-staff meeting were included in the DHS-2550 report as eligible expenditures but were not eligible for federal reimbursement.
• Portions of four claims that were not direct expenditures were incorrectly allocated to Child Support Enforcement.
• For three timesheets tested, the payroll costs were incorrectly allocated among programs based on individual job duties rather than the full-time equivalent (FTE) allocation method described by DHS.
Questioned Costs: Questioned costs identified were less than $25,000.
Context: DHS relies on accurate identification and reporting of program costs to ensure grant funds paid to the Health and Human Services are for allowable federal program activities/costs and provide detailed information necessary for maintaining proper oversight over federal programs.
The sample sizes were based on the guidance from Chapter 11 of the AICPA Audit Guide, Government Auditing Standards and Single Audits.
Effect: Errors in the identification and reporting of costs on the quarterly reports can impair DHS’ ability to provide required oversight over federal programs and result in the Heath and Human Services receiving either more or less federal funds than justified based on the actual underlying activity.
Cause: The Health and Human Services’ controls over the identification of allowable activities and costs, preparation of the quarterly reports, and maintenance of payroll allocations in the accounting system were not sufficient to identify these errors.
Recommendation: We recommend the Health and Human Services implement controls to ensure activities allowed and allowable costs are appropriately identified and reported to DHS in accordance with federal program guidance and DHS instructions. We also recommend reports submitted with unallowable activities or costs or costs allocated incorrectly are corrected and resubmitted.
View of Responsible Official: Acknowledge
2023-002 Activities Allowed or Unallowed and Allowable Costs/Cost Principles
Prior Year Finding Number: 2022-003
Year of Finding Origination: 2022
Type of Finding: Internal Control Over Compliance and Compliance
Severity of Deficiency: Material Weakness and Modified Opinion
Federal Agency: U.S. Department of Health and Human Services
Program: 93.563 Child Support Enforcement
Award Number and Year: 2301MNCEST and 2301MNCSES, 2023
Pass-Through Agency: Minnesota Department of Human Services
Criteria: Title 2 U.S. Code of Federal Regulations § 200.303 states that the auditee must establish and maintain effective internal control over the federal award that provides reasonable assurance that the auditee is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award.
Administrative program costs for Child Support Enforcement are submitted to the Minnesota Department of Human Services (DHS) through the DHS Income Maintenance DHS-2550 report on a quarterly basis. DHS provides reporting instructions, including information regarding eligible and ineligible costs.
Condition: The following exceptions were noted in a sample of 40 expenditures tested:
• One claim related to employee appreciation and another claim for meals at an all-staff meeting were included in the DHS-2550 report as eligible expenditures but were not eligible for federal reimbursement.
• Portions of four claims that were not direct expenditures were incorrectly allocated to Child Support Enforcement.
• For three timesheets tested, the payroll costs were incorrectly allocated among programs based on individual job duties rather than the full-time equivalent (FTE) allocation method described by DHS.
Questioned Costs: Questioned costs identified were less than $25,000.
Context: DHS relies on accurate identification and reporting of program costs to ensure grant funds paid to the Health and Human Services are for allowable federal program activities/costs and provide detailed information necessary for maintaining proper oversight over federal programs.
The sample sizes were based on the guidance from Chapter 11 of the AICPA Audit Guide, Government Auditing Standards and Single Audits.
Effect: Errors in the identification and reporting of costs on the quarterly reports can impair DHS’ ability to provide required oversight over federal programs and result in the Heath and Human Services receiving either more or less federal funds than justified based on the actual underlying activity.
Cause: The Health and Human Services’ controls over the identification of allowable activities and costs, preparation of the quarterly reports, and maintenance of payroll allocations in the accounting system were not sufficient to identify these errors.
Recommendation: We recommend the Health and Human Services implement controls to ensure activities allowed and allowable costs are appropriately identified and reported to DHS in accordance with federal program guidance and DHS instructions. We also recommend reports submitted with unallowable activities or costs or costs allocated incorrectly are corrected and resubmitted.
View of Responsible Official: Acknowledge
2023-003 Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Reporting
Prior Year Finding Number: 2022-003
Year of Finding Origination: 2022
Type of Finding: Internal Control Over Compliance and Compliance
Severity of Deficiency: Material Weakness and Modified Opinion
Federal Agency: U.S. Department of Health and Human Services
Program: 93.778 Medical Assistance Program
Award Number and Year: 2305MN5ADM and 2305MN5MAP, 2023
Pass-Through Agency: Minnesota Department of Human Services
Criteria: Title 2 U.S. Code of Federal Regulations § 200.303 states that the auditee must establish and maintain effective internal control over the federal award that provides reasonable assurance that the auditee is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award.
Administrative program costs for the Medical Assistance Program are submitted to DHS through the DHS Income Maintenance (DHS-2550) report, the Social Service Fund Report (DHS-2556), and the Local Collaborative Time Study Cost Schedule Report (DHS-3220) on a quarterly basis. DHS provides reporting instructions, including information regarding eligible and ineligible costs.
Condition: The following exceptions were noted in the sample of 40 expenditures tested for activities allowed or unallowed and allowable costs/cost principles, which resulted in the overstatement or understatement of expenditures reported:
• One claim related to employee appreciation and another claim for meals at an all-staff meeting were included in the DHS-2550 and DHS-2556 reports as eligible expenditures but were not eligible for federal reimbursement.
• Three claims were incorrectly allocated in the DHS-2550 report, which resulted in an understatement of Income Maintenance Administrative Overhead expense.
• One claim included costs eligible for reimbursement, but the Health and Human Services did not include the costs in the DHS-2550 or DHS-2556 reports.
• For two timesheets tested, the payroll costs were incorrectly allocated among programs based on individual job duties rather than the FTE allocation method described by DHS.
In addition, the following exceptions were noted in the DHS reports tested for reporting:
• The second and fourth quarter DHS-2550 reports were submitted with expenditures reported in incorrect reporting sections, incorrect categories of expenditures (including those that distinguish between eligible and not eligible expenditures), and payroll expenditures that should have been reported in the subsequent quarterly report.
• The second and fourth quarter DHS-2556 reports were submitted with overstated revenues due to an ineligible investment revenue, expenditures reported in the incorrect category of expenditures, and expenditures that should have been reported in the previous quarterly report.
• The fourth quarter DHS-3220 report excluded direct charges that were eligible expenditures.
Questioned Costs: Questioned costs identified were less than $25,000.
Context: DHS relies on accurate identification and reporting of program costs to ensure grant funds paid to the Health and Human Services are for allowable federal program activities/costs and provide detailed information necessary for maintaining proper oversight over federal programs.
The sample sizes were based on the guidance from Chapter 11 of the AICPA Audit Guide, Government Auditing Standards and Single Audits.
Effect: Errors in the identification and reporting of costs on the quarterly reports can impair DHS’ ability to provide required oversight over federal programs and result in the Health and Human Services receiving either more or less federal funds than justified based on the actual underlying activity.
Cause: The Health and Human Services’ controls over the identification of allowable activities and costs, preparation and review of the quarterly reports, and maintenance of payroll allocations in the accounting system were not sufficient to identify these errors.
Recommendation: We recommend the Health and Human Services implement controls to ensure activities allowed and allowable costs are appropriately identified and accurately reported to DHS in accordance with federal program guidance and DHS instructions. We also recommend reports submitted with unallowable activities or costs, costs allocated incorrectly, or activity reported incorrectly are corrected and resubmitted.
View of Responsible Official: Acknowledge
2023-003 Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Reporting
Prior Year Finding Number: 2022-003
Year of Finding Origination: 2022
Type of Finding: Internal Control Over Compliance and Compliance
Severity of Deficiency: Material Weakness and Modified Opinion
Federal Agency: U.S. Department of Health and Human Services
Program: 93.778 Medical Assistance Program
Award Number and Year: 2305MN5ADM and 2305MN5MAP, 2023
Pass-Through Agency: Minnesota Department of Human Services
Criteria: Title 2 U.S. Code of Federal Regulations § 200.303 states that the auditee must establish and maintain effective internal control over the federal award that provides reasonable assurance that the auditee is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award.
Administrative program costs for the Medical Assistance Program are submitted to DHS through the DHS Income Maintenance (DHS-2550) report, the Social Service Fund Report (DHS-2556), and the Local Collaborative Time Study Cost Schedule Report (DHS-3220) on a quarterly basis. DHS provides reporting instructions, including information regarding eligible and ineligible costs.
Condition: The following exceptions were noted in the sample of 40 expenditures tested for activities allowed or unallowed and allowable costs/cost principles, which resulted in the overstatement or understatement of expenditures reported:
• One claim related to employee appreciation and another claim for meals at an all-staff meeting were included in the DHS-2550 and DHS-2556 reports as eligible expenditures but were not eligible for federal reimbursement.
• Three claims were incorrectly allocated in the DHS-2550 report, which resulted in an understatement of Income Maintenance Administrative Overhead expense.
• One claim included costs eligible for reimbursement, but the Health and Human Services did not include the costs in the DHS-2550 or DHS-2556 reports.
• For two timesheets tested, the payroll costs were incorrectly allocated among programs based on individual job duties rather than the FTE allocation method described by DHS.
In addition, the following exceptions were noted in the DHS reports tested for reporting:
• The second and fourth quarter DHS-2550 reports were submitted with expenditures reported in incorrect reporting sections, incorrect categories of expenditures (including those that distinguish between eligible and not eligible expenditures), and payroll expenditures that should have been reported in the subsequent quarterly report.
• The second and fourth quarter DHS-2556 reports were submitted with overstated revenues due to an ineligible investment revenue, expenditures reported in the incorrect category of expenditures, and expenditures that should have been reported in the previous quarterly report.
• The fourth quarter DHS-3220 report excluded direct charges that were eligible expenditures.
Questioned Costs: Questioned costs identified were less than $25,000.
Context: DHS relies on accurate identification and reporting of program costs to ensure grant funds paid to the Health and Human Services are for allowable federal program activities/costs and provide detailed information necessary for maintaining proper oversight over federal programs.
The sample sizes were based on the guidance from Chapter 11 of the AICPA Audit Guide, Government Auditing Standards and Single Audits.
Effect: Errors in the identification and reporting of costs on the quarterly reports can impair DHS’ ability to provide required oversight over federal programs and result in the Health and Human Services receiving either more or less federal funds than justified based on the actual underlying activity.
Cause: The Health and Human Services’ controls over the identification of allowable activities and costs, preparation and review of the quarterly reports, and maintenance of payroll allocations in the accounting system were not sufficient to identify these errors.
Recommendation: We recommend the Health and Human Services implement controls to ensure activities allowed and allowable costs are appropriately identified and accurately reported to DHS in accordance with federal program guidance and DHS instructions. We also recommend reports submitted with unallowable activities or costs, costs allocated incorrectly, or activity reported incorrectly are corrected and resubmitted.
View of Responsible Official: Acknowledge
2023-004 Eligibility – MAXIS
Prior Year Finding Number: 2022-002
Repeat Finding Since: 2011
Type of Finding: Internal Control Over Compliance and Compliance
Severity of Deficiency: Material Weakness and Modified Opinion
Federal Agency: U.S. Department of Health and Human Services
Program: 93.778 Medical Assistance Program
Award Number and Year: 2305MN5ADM; 2023
Pass-Through Agency: Minnesota Department of Human Services
Criteria: Title 2 U.S. Code of Federal Regulations § 200.303 states that the auditee must establish and maintain effective internal control over the federal award that provides reasonable assurance that the auditee is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award.
Condition: DHS maintains the computer system, MAXIS, which is used by the Health and Human Services to support the eligibility determination process. While periodic supervisory case reviews are performed to monitor compliance with grant requirements for eligibility, not all documentation was available, updated, or input correctly to support participant eligibility. The following exceptions were noted in the sample of 40 case files tested:
• Four case files included amounts for client accounts (assets) that were not properly updated and/or supported for the most recent application/certification prior to being automatically renewed during the COVID-19 pandemic.
• Four case files did not include support for the income listed in MAXIS.
• One case file did not meet the application requirements such as requesting and obtaining the case file information from the previous agency.
• One case file did not meet the necessary application requirements for residency as no application or case file information could be provided.
Questioned Costs: Not applicable. The Health and Human Services administers the program, but the State of Minnesota pays benefits to program participants.
Context: The State of Minnesota and the Health and Human Services split the eligibility determination process. The Health and Human Services performs the “intake function” (meeting with the social services client to determine income and categorical eligibility), while the state maintains the MAXIS system, which supports the eligibility determination process and actually pays the benefits to participants.
The sample size was based on the guidance from Chapter 11 of the AICPA Audit Guide, Government Auditing Standards and Single Audits.
Effect: The improper input or updating of information into MAXIS and the lack of verification or follow-up of eligibility-determining factors increases the risk that program participants will receive benefits when they are not eligible.
Cause: Program personnel entering case file information into MAXIS did not ensure all required information was input or updated correctly, supported, or retained.
Recommendation: We recommend Southwest Health and Human Services implement additional procedures to provide reasonable assurance that all necessary documentation to support eligibility determinations exists and is properly input or updated in MAXIS and issues are followed up in a timely manner. In addition, Southwest Health and Human Services should consider providing further training for program personnel.
View of Responsible Official: Acknowledge
2023-005 Eligibility – METS
Prior Year Finding Number: 2022-002
Repeat Finding Since: 2022
Type of Finding: Internal Control Over Compliance and Compliance
Severity of Deficiency: Material Weakness and Modified Opinion
Federal Agency: U.S. Department of Health and Human Services
Program: 93.778 Medical Assistance Program
Award Number and Year: 2305MN5ADM; 2023
Pass-Through Agency: Minnesota Department of Human Services
Criteria: Title 2 U.S. Code of Federal Regulations § 200.303 states that the auditee must establish and maintain effective internal control over the federal award that provides reasonable assurance that the auditee is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award.
Condition: DHS maintains the computer system, METS, which is used by the Health and Human Services to support the eligibility determination process. While periodic supervisory case reviews are performed to monitor compliance with grant requirements for eligibility, not all documentation was available, updated, or input correctly to support participant eligibility. In the sample of 40 case files tested, four instances were noted where the category of each case file was originally classified as auto newborn. The case files were not subsequently updated to the correct category and, therefore, not verified by either METS or manually by the Health and Human Services for both social security number or citizenship.
Questioned Costs: Not applicable. The Health and Human Services administers the program, but the State of Minnesota pays benefits to program participants.
Context: The Health and Human Services performs any “intake function” needed for this program, while the state maintains METS, which supports the eligibility determination process and actually pays the benefits to the participants.
The sample size was based on the guidance from Chapter 11 of the AICPA Audit Guide, Government Auditing Standards and Single Audits.
Effect: The improper input or updating of information into METS and the lack of verification or follow-up of eligibility-determining factors increases the risk that program participants will receive benefits when they are not eligible.
Cause: The METS verification process was incomplete; the system did not indicate verification for social security number and citizenship was required.
Recommendation: We recommend Southwest Health and Human Services implement additional procedures to provide reasonable assurance that all necessary documentation to support eligibility determinations exists and is properly input, updated, or verified in METS and issues are followed up in a timely manner. In addition, Southwest Health and Human Services should consider providing further training for program personnel.
View of Responsible Official: Acknowledge
2023-002 Activities Allowed or Unallowed and Allowable Costs/Cost Principles
Prior Year Finding Number: 2022-003
Year of Finding Origination: 2022
Type of Finding: Internal Control Over Compliance and Compliance
Severity of Deficiency: Material Weakness and Modified Opinion
Federal Agency: U.S. Department of Health and Human Services
Program: 93.563 Child Support Enforcement
Award Number and Year: 2301MNCEST and 2301MNCSES, 2023
Pass-Through Agency: Minnesota Department of Human Services
Criteria: Title 2 U.S. Code of Federal Regulations § 200.303 states that the auditee must establish and maintain effective internal control over the federal award that provides reasonable assurance that the auditee is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award.
Administrative program costs for Child Support Enforcement are submitted to the Minnesota Department of Human Services (DHS) through the DHS Income Maintenance DHS-2550 report on a quarterly basis. DHS provides reporting instructions, including information regarding eligible and ineligible costs.
Condition: The following exceptions were noted in a sample of 40 expenditures tested:
• One claim related to employee appreciation and another claim for meals at an all-staff meeting were included in the DHS-2550 report as eligible expenditures but were not eligible for federal reimbursement.
• Portions of four claims that were not direct expenditures were incorrectly allocated to Child Support Enforcement.
• For three timesheets tested, the payroll costs were incorrectly allocated among programs based on individual job duties rather than the full-time equivalent (FTE) allocation method described by DHS.
Questioned Costs: Questioned costs identified were less than $25,000.
Context: DHS relies on accurate identification and reporting of program costs to ensure grant funds paid to the Health and Human Services are for allowable federal program activities/costs and provide detailed information necessary for maintaining proper oversight over federal programs.
The sample sizes were based on the guidance from Chapter 11 of the AICPA Audit Guide, Government Auditing Standards and Single Audits.
Effect: Errors in the identification and reporting of costs on the quarterly reports can impair DHS’ ability to provide required oversight over federal programs and result in the Heath and Human Services receiving either more or less federal funds than justified based on the actual underlying activity.
Cause: The Health and Human Services’ controls over the identification of allowable activities and costs, preparation of the quarterly reports, and maintenance of payroll allocations in the accounting system were not sufficient to identify these errors.
Recommendation: We recommend the Health and Human Services implement controls to ensure activities allowed and allowable costs are appropriately identified and reported to DHS in accordance with federal program guidance and DHS instructions. We also recommend reports submitted with unallowable activities or costs or costs allocated incorrectly are corrected and resubmitted.
View of Responsible Official: Acknowledge
2023-002 Activities Allowed or Unallowed and Allowable Costs/Cost Principles
Prior Year Finding Number: 2022-003
Year of Finding Origination: 2022
Type of Finding: Internal Control Over Compliance and Compliance
Severity of Deficiency: Material Weakness and Modified Opinion
Federal Agency: U.S. Department of Health and Human Services
Program: 93.563 Child Support Enforcement
Award Number and Year: 2301MNCEST and 2301MNCSES, 2023
Pass-Through Agency: Minnesota Department of Human Services
Criteria: Title 2 U.S. Code of Federal Regulations § 200.303 states that the auditee must establish and maintain effective internal control over the federal award that provides reasonable assurance that the auditee is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award.
Administrative program costs for Child Support Enforcement are submitted to the Minnesota Department of Human Services (DHS) through the DHS Income Maintenance DHS-2550 report on a quarterly basis. DHS provides reporting instructions, including information regarding eligible and ineligible costs.
Condition: The following exceptions were noted in a sample of 40 expenditures tested:
• One claim related to employee appreciation and another claim for meals at an all-staff meeting were included in the DHS-2550 report as eligible expenditures but were not eligible for federal reimbursement.
• Portions of four claims that were not direct expenditures were incorrectly allocated to Child Support Enforcement.
• For three timesheets tested, the payroll costs were incorrectly allocated among programs based on individual job duties rather than the full-time equivalent (FTE) allocation method described by DHS.
Questioned Costs: Questioned costs identified were less than $25,000.
Context: DHS relies on accurate identification and reporting of program costs to ensure grant funds paid to the Health and Human Services are for allowable federal program activities/costs and provide detailed information necessary for maintaining proper oversight over federal programs.
The sample sizes were based on the guidance from Chapter 11 of the AICPA Audit Guide, Government Auditing Standards and Single Audits.
Effect: Errors in the identification and reporting of costs on the quarterly reports can impair DHS’ ability to provide required oversight over federal programs and result in the Heath and Human Services receiving either more or less federal funds than justified based on the actual underlying activity.
Cause: The Health and Human Services’ controls over the identification of allowable activities and costs, preparation of the quarterly reports, and maintenance of payroll allocations in the accounting system were not sufficient to identify these errors.
Recommendation: We recommend the Health and Human Services implement controls to ensure activities allowed and allowable costs are appropriately identified and reported to DHS in accordance with federal program guidance and DHS instructions. We also recommend reports submitted with unallowable activities or costs or costs allocated incorrectly are corrected and resubmitted.
View of Responsible Official: Acknowledge
2023-003 Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Reporting
Prior Year Finding Number: 2022-003
Year of Finding Origination: 2022
Type of Finding: Internal Control Over Compliance and Compliance
Severity of Deficiency: Material Weakness and Modified Opinion
Federal Agency: U.S. Department of Health and Human Services
Program: 93.778 Medical Assistance Program
Award Number and Year: 2305MN5ADM and 2305MN5MAP, 2023
Pass-Through Agency: Minnesota Department of Human Services
Criteria: Title 2 U.S. Code of Federal Regulations § 200.303 states that the auditee must establish and maintain effective internal control over the federal award that provides reasonable assurance that the auditee is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award.
Administrative program costs for the Medical Assistance Program are submitted to DHS through the DHS Income Maintenance (DHS-2550) report, the Social Service Fund Report (DHS-2556), and the Local Collaborative Time Study Cost Schedule Report (DHS-3220) on a quarterly basis. DHS provides reporting instructions, including information regarding eligible and ineligible costs.
Condition: The following exceptions were noted in the sample of 40 expenditures tested for activities allowed or unallowed and allowable costs/cost principles, which resulted in the overstatement or understatement of expenditures reported:
• One claim related to employee appreciation and another claim for meals at an all-staff meeting were included in the DHS-2550 and DHS-2556 reports as eligible expenditures but were not eligible for federal reimbursement.
• Three claims were incorrectly allocated in the DHS-2550 report, which resulted in an understatement of Income Maintenance Administrative Overhead expense.
• One claim included costs eligible for reimbursement, but the Health and Human Services did not include the costs in the DHS-2550 or DHS-2556 reports.
• For two timesheets tested, the payroll costs were incorrectly allocated among programs based on individual job duties rather than the FTE allocation method described by DHS.
In addition, the following exceptions were noted in the DHS reports tested for reporting:
• The second and fourth quarter DHS-2550 reports were submitted with expenditures reported in incorrect reporting sections, incorrect categories of expenditures (including those that distinguish between eligible and not eligible expenditures), and payroll expenditures that should have been reported in the subsequent quarterly report.
• The second and fourth quarter DHS-2556 reports were submitted with overstated revenues due to an ineligible investment revenue, expenditures reported in the incorrect category of expenditures, and expenditures that should have been reported in the previous quarterly report.
• The fourth quarter DHS-3220 report excluded direct charges that were eligible expenditures.
Questioned Costs: Questioned costs identified were less than $25,000.
Context: DHS relies on accurate identification and reporting of program costs to ensure grant funds paid to the Health and Human Services are for allowable federal program activities/costs and provide detailed information necessary for maintaining proper oversight over federal programs.
The sample sizes were based on the guidance from Chapter 11 of the AICPA Audit Guide, Government Auditing Standards and Single Audits.
Effect: Errors in the identification and reporting of costs on the quarterly reports can impair DHS’ ability to provide required oversight over federal programs and result in the Health and Human Services receiving either more or less federal funds than justified based on the actual underlying activity.
Cause: The Health and Human Services’ controls over the identification of allowable activities and costs, preparation and review of the quarterly reports, and maintenance of payroll allocations in the accounting system were not sufficient to identify these errors.
Recommendation: We recommend the Health and Human Services implement controls to ensure activities allowed and allowable costs are appropriately identified and accurately reported to DHS in accordance with federal program guidance and DHS instructions. We also recommend reports submitted with unallowable activities or costs, costs allocated incorrectly, or activity reported incorrectly are corrected and resubmitted.
View of Responsible Official: Acknowledge
2023-003 Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Reporting
Prior Year Finding Number: 2022-003
Year of Finding Origination: 2022
Type of Finding: Internal Control Over Compliance and Compliance
Severity of Deficiency: Material Weakness and Modified Opinion
Federal Agency: U.S. Department of Health and Human Services
Program: 93.778 Medical Assistance Program
Award Number and Year: 2305MN5ADM and 2305MN5MAP, 2023
Pass-Through Agency: Minnesota Department of Human Services
Criteria: Title 2 U.S. Code of Federal Regulations § 200.303 states that the auditee must establish and maintain effective internal control over the federal award that provides reasonable assurance that the auditee is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award.
Administrative program costs for the Medical Assistance Program are submitted to DHS through the DHS Income Maintenance (DHS-2550) report, the Social Service Fund Report (DHS-2556), and the Local Collaborative Time Study Cost Schedule Report (DHS-3220) on a quarterly basis. DHS provides reporting instructions, including information regarding eligible and ineligible costs.
Condition: The following exceptions were noted in the sample of 40 expenditures tested for activities allowed or unallowed and allowable costs/cost principles, which resulted in the overstatement or understatement of expenditures reported:
• One claim related to employee appreciation and another claim for meals at an all-staff meeting were included in the DHS-2550 and DHS-2556 reports as eligible expenditures but were not eligible for federal reimbursement.
• Three claims were incorrectly allocated in the DHS-2550 report, which resulted in an understatement of Income Maintenance Administrative Overhead expense.
• One claim included costs eligible for reimbursement, but the Health and Human Services did not include the costs in the DHS-2550 or DHS-2556 reports.
• For two timesheets tested, the payroll costs were incorrectly allocated among programs based on individual job duties rather than the FTE allocation method described by DHS.
In addition, the following exceptions were noted in the DHS reports tested for reporting:
• The second and fourth quarter DHS-2550 reports were submitted with expenditures reported in incorrect reporting sections, incorrect categories of expenditures (including those that distinguish between eligible and not eligible expenditures), and payroll expenditures that should have been reported in the subsequent quarterly report.
• The second and fourth quarter DHS-2556 reports were submitted with overstated revenues due to an ineligible investment revenue, expenditures reported in the incorrect category of expenditures, and expenditures that should have been reported in the previous quarterly report.
• The fourth quarter DHS-3220 report excluded direct charges that were eligible expenditures.
Questioned Costs: Questioned costs identified were less than $25,000.
Context: DHS relies on accurate identification and reporting of program costs to ensure grant funds paid to the Health and Human Services are for allowable federal program activities/costs and provide detailed information necessary for maintaining proper oversight over federal programs.
The sample sizes were based on the guidance from Chapter 11 of the AICPA Audit Guide, Government Auditing Standards and Single Audits.
Effect: Errors in the identification and reporting of costs on the quarterly reports can impair DHS’ ability to provide required oversight over federal programs and result in the Health and Human Services receiving either more or less federal funds than justified based on the actual underlying activity.
Cause: The Health and Human Services’ controls over the identification of allowable activities and costs, preparation and review of the quarterly reports, and maintenance of payroll allocations in the accounting system were not sufficient to identify these errors.
Recommendation: We recommend the Health and Human Services implement controls to ensure activities allowed and allowable costs are appropriately identified and accurately reported to DHS in accordance with federal program guidance and DHS instructions. We also recommend reports submitted with unallowable activities or costs, costs allocated incorrectly, or activity reported incorrectly are corrected and resubmitted.
View of Responsible Official: Acknowledge
2023-004 Eligibility – MAXIS
Prior Year Finding Number: 2022-002
Repeat Finding Since: 2011
Type of Finding: Internal Control Over Compliance and Compliance
Severity of Deficiency: Material Weakness and Modified Opinion
Federal Agency: U.S. Department of Health and Human Services
Program: 93.778 Medical Assistance Program
Award Number and Year: 2305MN5ADM; 2023
Pass-Through Agency: Minnesota Department of Human Services
Criteria: Title 2 U.S. Code of Federal Regulations § 200.303 states that the auditee must establish and maintain effective internal control over the federal award that provides reasonable assurance that the auditee is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award.
Condition: DHS maintains the computer system, MAXIS, which is used by the Health and Human Services to support the eligibility determination process. While periodic supervisory case reviews are performed to monitor compliance with grant requirements for eligibility, not all documentation was available, updated, or input correctly to support participant eligibility. The following exceptions were noted in the sample of 40 case files tested:
• Four case files included amounts for client accounts (assets) that were not properly updated and/or supported for the most recent application/certification prior to being automatically renewed during the COVID-19 pandemic.
• Four case files did not include support for the income listed in MAXIS.
• One case file did not meet the application requirements such as requesting and obtaining the case file information from the previous agency.
• One case file did not meet the necessary application requirements for residency as no application or case file information could be provided.
Questioned Costs: Not applicable. The Health and Human Services administers the program, but the State of Minnesota pays benefits to program participants.
Context: The State of Minnesota and the Health and Human Services split the eligibility determination process. The Health and Human Services performs the “intake function” (meeting with the social services client to determine income and categorical eligibility), while the state maintains the MAXIS system, which supports the eligibility determination process and actually pays the benefits to participants.
The sample size was based on the guidance from Chapter 11 of the AICPA Audit Guide, Government Auditing Standards and Single Audits.
Effect: The improper input or updating of information into MAXIS and the lack of verification or follow-up of eligibility-determining factors increases the risk that program participants will receive benefits when they are not eligible.
Cause: Program personnel entering case file information into MAXIS did not ensure all required information was input or updated correctly, supported, or retained.
Recommendation: We recommend Southwest Health and Human Services implement additional procedures to provide reasonable assurance that all necessary documentation to support eligibility determinations exists and is properly input or updated in MAXIS and issues are followed up in a timely manner. In addition, Southwest Health and Human Services should consider providing further training for program personnel.
View of Responsible Official: Acknowledge
2023-005 Eligibility – METS
Prior Year Finding Number: 2022-002
Repeat Finding Since: 2022
Type of Finding: Internal Control Over Compliance and Compliance
Severity of Deficiency: Material Weakness and Modified Opinion
Federal Agency: U.S. Department of Health and Human Services
Program: 93.778 Medical Assistance Program
Award Number and Year: 2305MN5ADM; 2023
Pass-Through Agency: Minnesota Department of Human Services
Criteria: Title 2 U.S. Code of Federal Regulations § 200.303 states that the auditee must establish and maintain effective internal control over the federal award that provides reasonable assurance that the auditee is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award.
Condition: DHS maintains the computer system, METS, which is used by the Health and Human Services to support the eligibility determination process. While periodic supervisory case reviews are performed to monitor compliance with grant requirements for eligibility, not all documentation was available, updated, or input correctly to support participant eligibility. In the sample of 40 case files tested, four instances were noted where the category of each case file was originally classified as auto newborn. The case files were not subsequently updated to the correct category and, therefore, not verified by either METS or manually by the Health and Human Services for both social security number or citizenship.
Questioned Costs: Not applicable. The Health and Human Services administers the program, but the State of Minnesota pays benefits to program participants.
Context: The Health and Human Services performs any “intake function” needed for this program, while the state maintains METS, which supports the eligibility determination process and actually pays the benefits to the participants.
The sample size was based on the guidance from Chapter 11 of the AICPA Audit Guide, Government Auditing Standards and Single Audits.
Effect: The improper input or updating of information into METS and the lack of verification or follow-up of eligibility-determining factors increases the risk that program participants will receive benefits when they are not eligible.
Cause: The METS verification process was incomplete; the system did not indicate verification for social security number and citizenship was required.
Recommendation: We recommend Southwest Health and Human Services implement additional procedures to provide reasonable assurance that all necessary documentation to support eligibility determinations exists and is properly input, updated, or verified in METS and issues are followed up in a timely manner. In addition, Southwest Health and Human Services should consider providing further training for program personnel.
View of Responsible Official: Acknowledge