Audit 321583

FINDING 2022-002 Subject: Child Support Enforcement - Allowable Costs/Cost Principles Federal Agency: Department of Health and Human Services Federal Program: Child Support Enforcement Assistance Listings Number: 93.563 Federal Award Number and Year (or Other Identifying Number): FY2022 Pass-Through Entity: Indiana Department of Child Services Compliance Requirement: Allowable Costs/Cost Principles Audit Findings: Material Weakness, Noncompliance Condition and Context Indirect costs are expenses that are incurred by other County offices, which indirectly benefit the County Title IV-D offices. Indirect expenses are allocated to the County Title IV-D offices through an indirect Cost Allocation Plan (CAP) which is submitted to the Department of Child Services' Child Support Bureau. Indirect costs charged are based on two-year prior expenditures; therefore, indirect costs charged in 2022 were based on expenditures from 2020. A sample of 25 expenditures, totaling $27,077, from the department cost pools from the CAP were selected for testing. For 1 of the 25 expenditures examined, the County was unable to provide the contract; therefore, we were unable to verify if the correct rate for the contract payment was charged. For an additional 2 contracts requested, the contract could not be provided at the initial time of request. The contracts were provided nine months later at which time we verified the contract payment charged. In addition, the County did not have written procedures for determining the allowability of costs in accordance with Subpart E of 2 CFR 200. The lack of effective internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.403 states in part: "Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items . . . (g) Be adequately documented. . . ." 2 CFR 200.302(b) states in part: "The financial management system of each non-Federal entity must provide for the following: . . . (7) Written procedures for determining the allowability of costs in accordance with subpart E of this part and the terms and conditions of the Federal award." Cause A proper system of internal controls over child support enforcement expenditures was not designed by management of the County. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the County's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, expenses within the cost application plan could not be verified as accurate. Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of the federal award could result in the loss of future federal funding to the County. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the County establish a proper system of internal controls and develop policies and procedures to ensure that costs included within the cost allocation plan have adequate supporting documentation to support the amount paid. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report. Auditor's Response Sufficient, appropriate audit evidence in regard to supplement not supplant was determined to not have been obtained at the initial time of audit. As such, additional audit procedures were performed after the report date of September 29, 2023. The missing contracts were a part of the original report which was discussed and communicated to management on September 29, 2023. Contracts were not provided in September, nor was there a disagreement with this portion of the finding in the original corrective action plan provided by management. Documentation provided in June 2024 was unsolicited but was reviewed, and the issue noted in the finding was updated accordingly. While we agree two of the three contracts could be reviewed and verified once provided in June 2024, the third contract is still in question as noted in the finding.

FINDING 2022-002 Subject: Child Support Enforcement - Allowable Costs/Cost Principles Federal Agency: Department of Health and Human Services Federal Program: Child Support Enforcement Assistance Listings Number: 93.563 Federal Award Number and Year (or Other Identifying Number): FY2022 Pass-Through Entity: Indiana Department of Child Services Compliance Requirement: Allowable Costs/Cost Principles Audit Findings: Material Weakness, Noncompliance Condition and Context Indirect costs are expenses that are incurred by other County offices, which indirectly benefit the County Title IV-D offices. Indirect expenses are allocated to the County Title IV-D offices through an indirect Cost Allocation Plan (CAP) which is submitted to the Department of Child Services' Child Support Bureau. Indirect costs charged are based on two-year prior expenditures; therefore, indirect costs charged in 2022 were based on expenditures from 2020. A sample of 25 expenditures, totaling $27,077, from the department cost pools from the CAP were selected for testing. For 1 of the 25 expenditures examined, the County was unable to provide the contract; therefore, we were unable to verify if the correct rate for the contract payment was charged. For an additional 2 contracts requested, the contract could not be provided at the initial time of request. The contracts were provided nine months later at which time we verified the contract payment charged. In addition, the County did not have written procedures for determining the allowability of costs in accordance with Subpart E of 2 CFR 200. The lack of effective internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.403 states in part: "Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items . . . (g) Be adequately documented. . . ." 2 CFR 200.302(b) states in part: "The financial management system of each non-Federal entity must provide for the following: . . . (7) Written procedures for determining the allowability of costs in accordance with subpart E of this part and the terms and conditions of the Federal award." Cause A proper system of internal controls over child support enforcement expenditures was not designed by management of the County. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the County's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, expenses within the cost application plan could not be verified as accurate. Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of the federal award could result in the loss of future federal funding to the County. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the County establish a proper system of internal controls and develop policies and procedures to ensure that costs included within the cost allocation plan have adequate supporting documentation to support the amount paid. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report. Auditor's Response Sufficient, appropriate audit evidence in regard to supplement not supplant was determined to not have been obtained at the initial time of audit. As such, additional audit procedures were performed after the report date of September 29, 2023. The missing contracts were a part of the original report which was discussed and communicated to management on September 29, 2023. Contracts were not provided in September, nor was there a disagreement with this portion of the finding in the original corrective action plan provided by management. Documentation provided in June 2024 was unsolicited but was reviewed, and the issue noted in the finding was updated accordingly. While we agree two of the three contracts could be reviewed and verified once provided in June 2024, the third contract is still in question as noted in the finding.