Audit 323486

Finding: The Federal Funding Accountability and Transparency Act (FFATA) (Pub. L. No. 109-282), as amended by Section 6202 of Pub. L. No. 110-252, hereafter referred as the "Transparency Act" that are codified in 2 CFR Part 170, requires recipients (i.e., direct recipients) of grants or cooperative agreements are required to report first-tier subawards of $30,000 or more to the Federal Funding Accountability and Transparency Act Subaward Reporting System (FSRS). The Uniform Guidance, 2 CFR Part 200, Appendix XI Compliance Supplement, May 2023, requires the Alabama Department of Education to report applicable first-tier subawards and contracts information as required in the "Transparency Act". The Alabama Department of Education did not report applicable first-tier subawards and contractors subject to FFATA data for the monitored grants in the FSRS pursuant to Federal Regulations. The Alabama Department of Education did not have procedures in place to ensure that applicable first-tier subaward information was reported to the FSRS, resulting in a failure to provide a full disclosure to the public of all entities or organizations receiving federal funds during fiscal year 2023. Recommendation: The Alabama Department of Education should develop, maintain, and implement effective procedures to ensure compliance with the Federal Funding Accountability and Transparency Act (FFATA). Views of Responsible Officials of the Auditee: The finding reads as if the Alabama State Department of Education (ALSDE) did not report FFATA for the monitored grants. It was explained to us that this was just for 84.425. FFATA was reported for monitored grants with the exception of part of 84.425. There was discrepancy whether it should have been reported. Guidance with the United States Department of Education (USDE) indicated that if the Governor awarded GEER funds to a state agency with an agreement, then the state agency is responsible for reporting. If there is no agreement in place, then the responsibility falls to the Governor’s office. The ALSDE takes full responsibility of this finding

Finding: 45 CFR Section 261.63 requires the Alabama Department of Human Resources to submit a Work Verification Plan to the U.S. Department of Health and Human Services (HHS) for approval. The Alabama Department of Human Resources must comply with its approved Work Verification Plan to ensure accuracy in reporting work activities by work-eligible individuals on the Temporary Assistance for Needy Families (TANF) Data Report. Data for work participation activities are used in calculating work participation rates. During our testing of 25 TANF cases, we found two cases in which the hours reported for an individual participating in a work activity were inaccurate. The Department of Human Resources failed to ensure accuracy of data for work participation activities which may result in an inaccurate work participation rate. The Department of Human Resources did not have adequate procedures in place to ensure that the information included on the TANF Data Report is accurate. Recommendation: The Department of Human Resources should establish and maintain effective internal controls to ensure accuracy in reporting work activities by work-eligible individuals on the TANF Data Report. Views of Responsible Officials of the Auditee: We disagree. The finding statement declares that the Department of Human Resources failed to ensure accuracy of data for work participation activities which may result in an inaccurate work participation rate. This is a significant deficiency in internal controls. The Department of Human Resources did not have adequate procedures in place to ensure that the information included on the TANF Data Report is accurate. We do agree with the findings of two cases "in which the hours reported for an individual participating in a work activity were inaccurate." We agree that the 2 of the 25 cases selected had the incorrect frequency for the number of employment hours entered which could potentially affect the work participation rate for Alabama. Examiners’ Concluding Remarks: We have considered the reasons for the Department of Human Resources’ disagreement noted above; however, we reaffirm our finding.

Finding: The Uniform Guidance, 2 CFR Part 200, Appendix XI Compliance Supplement, dated May 2023, stipulates for a cost to be allowable under federal awards certain general criteria must be met, including costs that are adequately documented and necessary and reasonable for the performance of the federal award. The Alabama Department of Transportation (the “Department”) passed through a portion of the Formula Grants for Rural Areas and Tribal Transit Program federal award to subrecipients. One of the subrecipients requested and received reimbursement of program expenses. Subsequent to the payments of the invoices, the Department received information alleging that falsified or altered documents related to expenditures were submitted by a subrecipient. Upon receipt of these allegations, the Department initiated a review of the supporting documents which had been submitted by the subrecipient. The review consisted of obtaining documents from vendors and comparing those documents to the ones submitted by the subrecipient. The results of this comparison indicated that the amounts owed and the description of goods and services provided columns had been changed. We reviewed, recalculated, verified and reperformed the comparisons made by the Department of Transportation and did not note any differences. Nine of ten supporting documents for meeting expenses submitted for reimbursement by the subrecipient during the audit period were altered and were not true and accurate. These altered supporting documents totaled $94,123.56. The Alabama Department of Transportation reimbursed the subrecipient based on the altered documents and, therefore, improperly expended Formula Grants for Rural Areas and Tribal Transit Program federal award funds. Recommendation: The Alabama Department of Transportation should take actions to ensure that all reimbursements of expenses are adequately documented, based on true and accurate supporting documentation, and to ensure costs are allowable under the federal award. Views of Responsible Officials of the Auditee: We agree that there appears to have been falsified supporting documentation submitted by a subrecipient.

Finding: The Uniform Guidance, 2 CFR Part 200, Appendix XI Compliance Supplement, dated May 2023, stipulates for a cost to be allowable under federal awards certain general criteria must be met, including costs that are adequately documented and necessary and reasonable for the performance of the federal award. The Alabama Department of Public Health (ADPH) passed through a portion of the Immunization Cooperative Agreement federal award to subrecipients. During our audit, the ADPH’s Office of Program Integrity (OPI) notified us that based on its investigation a subrecipient was not submitting adequate supporting documentation for reimbursement requests. A total of thirteen subrecipients requested and received reimbursement of program expenses during the fiscal year. Based upon procedures performed, we noted that of the 13 subrecipients who received federal award reimbursements, six did not provide adequate detailed documentation to support their requests for reimbursement. In addition, forty-eight of the sixty-three invoices submitted for reimbursement by the subrecipients did not have adequate documentation resulting in questioned costs of $8,478,032.39 and one of the invoices included an improper payment of $2,600.00 for a total question cost of $8,480,632.39. The ADPH did not have adequate policies and procedures in place to ensure that all requests for reimbursement were supported by adequate detailed documentation to ensure all coast are allowed under the federal award. Recommendation: The Alabama Department of Public Health should take action to ensure that all reimbursements of expenses are adequately documented, based on true and accurate invoices, and to ensure costs are allowable under the federal award. Views of Responsible Officials of the Auditee: We agree with the Examiners' finding; adequate documentation did not exist at the time of the audit to substantiate payments that resulted in questioned costs and improper payments. However, we do not concur with the total amount of the questioned costs cited in the report. ADPH's Office of Program Integrity initiated its own ongoing investigation. As this process continues, we are requesting additional documentation from the subrecipients, which will affect the questioned costs of this program.

Finding According to the Uniform Guidance, 2 CFR 200.303(a), non-Federal entities receiving Federal awards must establish and maintain effective internal controls over these awards. These controls must provide reasonable assurance that the entity manages the Federal award in compliance with applicable Federal statutes, regulations, and the terms and conditions of the award. The Uniform Guidance, 2 CFR Part 200, Appendix XI Compliance Supplement, May 2023, requires the Alabama Department of Labor to operate a Worker Profiling and Reemployment Services (WPRS) or Reemployment Services and Eligibility Assessments (RESEA) program. The Alabama Department of Labor operates a RESEA program. Under the RESEA program, Alabama Department of Labor staff must be promptly and appropriately notified of any eligibility issues identified during any review of a claimant’s information. Claimants are also required to attend appointments for reemployment to maintain their eligibility status. The Alabama Department of Labor has controls in place to provide notification of claimants who failed to report to scheduled RESEA appointments, however those controls were not operating as designed. While reviewing 25 claimant’s information, we noted that 8 claimants failed to report to their scheduled appointments for reemployment. These failures to appear are reported to staff at the Alabama Department of Labor and should prompt a stop of benefit payments; however, the Alabama Department of Labor did not stop payment on these 8 claimants which resulted in overpayments totaling $8,111.00. There was also one instance where Alabama Department of Labor could not provide documentation to support staff was appropriately notified of the eligibility status for a claimant. The Alabama Department of Labor’s policies and procedures did not operate as designed to prevent payments to ineligible claimants. Because the Alabama Department of Labor’s internal controls were not operating as designed, this caused benefits to be paid to ineligible claimants. Recommendation The Alabama Department of Labor should ensure internal controls are operating as designed to help ensure payments are not made to ineligible claimants. Views of Responsible Officials of the Auditee ADOL does not agree with this finding as explained in the Request for Views CAP letter, which is shown below and is included as part of its Corrective Action Plan. The vendor (GEOSOL) software service/system (AlabamaWorks!) used by ADOL Career Centers and other State agencies to record and report various employment services provided to individuals seeking jobs, training, and/or other services throughout the state experienced a cyberattack in June 2022. Because ADOL Employment Services uses this system to also record RESEA information for qualified applicants who are receiving unemployment benefits to confirm required job search activities, the referral of claimants to the Career Centers for profiling was suspended, temporarily, when the attack first occurred. GEOSOL was unable to correct issues as they first promised. ADOL mailed letters to unemployment recipients in June for July appointments at various Career Centers. Letters were also mailed in July for August appointments. The electronic file (FTR) received from AlabamaWorks! to update unemployment claimant records in the UI Benefits system (Data Station) was unable to be received during the time of the system outage. GEOSOL was not able to get their system back up until October 2022. Disqualifications for claimants was also suspended during the system downtime from June to October 2022. Although ADOL Unemployment Division was receiving some data from the Career Centers to continue processing claims, the AlabamaWorks! created more than 1700 (seventeen hundred) erroneous disqualifications when it was brought back online on October 4, 2022 and FTR files were transmitted to ADOL Unemployment system. A manual process to retrieve the correct data was implemented on October 5, 2022 between ADOL Unemployment and Employment Services staff. However, this was a tedious process and took time to review and manually update claims. Upon review of the sampling noted by the Examiner’s Office, the headers on the documentation spreadsheet provided appear to come from AlabamaWorks! not Data Station. After reviewing Data Station which is the system of record for benefit payments, we’d like to further clarify and notate additional information relating to the claims noted in the $8,884.00 cited as possible questioned costs. • Claimant [Burt] ($1,145.00) cited for Failure to Report (FTR) on 07/20/22 with payments being made on 08/05/22 and 08/09/22 and having two payments made on 07/10/23 but no overpayment reported – The payments made in July 2023 were not related to the claim associated with the FTR noted in AlabamaWorks! for July 2022. This was a different claim, and no overpayment for claimant has occurred. Therefore, ADOL disagrees with the questioned costs for this claim. • Claimant [Walker] ($275.00) cited for FTR 01/12/23 and payment made 02/09/23 and overpayment was established – As noted, overpayment was established. Claimant was not shown on FTR file received from GEOSOL to set the issue in January 2023. A later FTR received 4/26/23 indicated the appointment issue and overpayment was established on 4/27/23. • Claimant [Lolley] ($2,200.00) cited for having payments between August 2022 and September 2022 marked and classified as overpayments on 10/07/22 but payment in December 2022 not classified as overpayment – The issue with the GEOSOL system being down, profiling and disqualifications suspended, and FTR’s being erroneously reported caused some payments to be issued for August and September in error. As noted, overpayment was established on 10/07/22 shortly after FTR file received when system was back up. However, ADOL disagrees with the questioned costs associated with December 2022 payment. The payment in December was a different claim not associated with the claim payments made in August and September 2022 and was not an overpayment. • Claimant [Delbridge] ($585.00) cited for FTR 08/04/22 and overpayments established for 9 (nine) payments on 10/09/2022 – The issue with the GEOSOL system being down, profiling and disqualifications suspended, and FTR’s being erroneously reported caused some payments to be issued in error. As noted, overpayment was established on 10/09/22 shortly after FTR file received and system was back up. • Claimant [Parks] ($1,592.00) cited for FTR 12/14/22 and payments made after failure to report with no overpayment established - Claimant was not on FTR file received from GEOSOL in December to set the issue. Additionally, claimant has never been documented on future FTR files to indicate an issue be set to cause an overpayment to be established. • Claimant [Phillips] ($960.00) cited for FTR 12/14/22 and payments made after failure to report with overpayment established 3/17/23 – Claimant was not on FTR file received from GEOSOL in December to set the issue. When reviewed manually, overpayment was noted. • Claimant [Tyus] ($1,375.00) cited for FTR 8/31/22 and overpayment established - The issue with the GEOSOL system being down, profiling and disqualifications suspended, and FTR’s being erroneously reported caused some payments to be issued in error. As noted, overpayment was established on 10/11/22 shortly after FTR file received when system was back up. • Claimant [Pitts] ($752.00) cited for FTR 08/03/22 and overpayment established - The issue with the GEOSOL system being down, profiling and disqualifications suspended, and FTR’s being erroneously reported caused some payments to be issued in error. As noted, overpayment was established on 10/05/22 shortly after FTR file received when system was back up. • Claimant [Doster] not properly documented to indicate eligibility status – Claimant has never been reported on FTR file received to set issue. Therefore, there’s nothing to document. Examiners’ Concluding Remarks We have considered the reasons for the Department of Labor’s disagreement, specifically that the issues noted were mainly the result of cyberattacks on one of its vendors and systems; however, it is the Department of Labor’s responsibility to ensure compliance with all applicable program requirements even when the processing of the requirements has been delegated to its vendors, therefore we reaffirm our finding.

Finding: According to the Uniform Guidance, 2 CFR 200.303 (a), non-Federal entities receiving Federal awards must establish and maintain effective internal controls over these awards. These controls must provide reasonable assurance that the entity manages the Federal award in compliance with applicable Federal statutes, regulations, and the terms and conditions of the award. A fundamental objective of an effective internal control system is to ensure that information is accurate and reliable, which includes a thorough review and approval process. The Uniform Guidance, 2 CFR Part 200, Appendix XI Compliance Supplement, May 2023, requires the Alabama Department of Labor to ensure an employer’s experience rating is properly applied, as the employer’s “experience” with the unemployment of former employees is the dominant factor in the computation of the employer’s annual state Unemployment Insurance tax rate. The Alabama Department of Labor was unable to provide audit documentation to support their review and approval of employer experience rated tax rates. The Alabama Department of Labor did not have policies and procedures in place to document the review and approval of the employer experience rated tax rates. As a result, the employer experience related tax rates could be incorrect, resulting in potential overpayments or underpayments of taxes. Recommendation: The Alabama Department of Labor should develop and document internal controls over employer experience rated tax rates to help ensure they are accurate and properly applied. Views of Responsible Officials of the Auditee: ADOL does not agree with this finding as explained in the Request for Views CAP letter, which is shown below and is included as part of its Corrective Action Plan. ADOL Unemployment Division does have a process in place where staff in the Experience Rating Section verify the tax rates for employers that are generated by the system before employers are notified through electronic posting or notices mailed. This section receives a sampling of approximately 500 Tax Rate Notices. The sampling is distributed and reviewed by staff within this section to determine accuracy in computation compared to applicable schedules and legibility. Communication between the staff and the supervisor is performed to discuss or notate any discrepancies. Once the verification is completed, the section supervisor notifies the appropriate person to generate the final notice through the Unemployment system and notify employers. The documentation of the samplings was not kept only the email confirmation of accuracy and to issue notices between the supervisor and UI system responsible person was kept for this review. However, procedures have been noted for support document retention and implemented for upcoming and future reviews. Examiners’ Concluding Remarks: We have considered the reasons for the Department of Labor’s disagreement; however, we reaffirm our finding..

Finding: The Federal Funding Accountability and Transparency Act (FFATA) (Pub. L. No. 109-282), as amended by Section 6202 of Pub. L. No. 110-252, hereafter referred as the "Transparency Act" that are codified in 2 CFR Part 170, requires recipients (i.e., direct recipients) of grants or cooperative agreements are required to report first-tier subawards of $30,000 or more to the Federal Funding Accountability and Transparency Act Subaward Reporting System (FSRS). The Uniform Guidance, 2 CFR Part 200, Appendix XI Compliance Supplement, May 2023, requires the Alabama Department of Education to report applicable first-tier subawards and contracts information as required in the "Transparency Act". The Alabama Department of Education did not report applicable first-tier subawards and contractors subject to FFATA data for the monitored grants in the FSRS pursuant to Federal Regulations. The Alabama Department of Education did not have procedures in place to ensure that applicable first-tier subaward information was reported to the FSRS, resulting in a failure to provide a full disclosure to the public of all entities or organizations receiving federal funds during fiscal year 2023. Recommendation: The Alabama Department of Education should develop, maintain, and implement effective procedures to ensure compliance with the Federal Funding Accountability and Transparency Act (FFATA). Views of Responsible Officials of the Auditee: The finding reads as if the Alabama State Department of Education (ALSDE) did not report FFATA for the monitored grants. It was explained to us that this was just for 84.425. FFATA was reported for monitored grants with the exception of part of 84.425. There was discrepancy whether it should have been reported. Guidance with the United States Department of Education (USDE) indicated that if the Governor awarded GEER funds to a state agency with an agreement, then the state agency is responsible for reporting. If there is no agreement in place, then the responsibility falls to the Governor’s office. The ALSDE takes full responsibility of this finding

Finding: 45 CFR Section 261.63 requires the Alabama Department of Human Resources to submit a Work Verification Plan to the U.S. Department of Health and Human Services (HHS) for approval. The Alabama Department of Human Resources must comply with its approved Work Verification Plan to ensure accuracy in reporting work activities by work-eligible individuals on the Temporary Assistance for Needy Families (TANF) Data Report. Data for work participation activities are used in calculating work participation rates. During our testing of 25 TANF cases, we found two cases in which the hours reported for an individual participating in a work activity were inaccurate. The Department of Human Resources failed to ensure accuracy of data for work participation activities which may result in an inaccurate work participation rate. The Department of Human Resources did not have adequate procedures in place to ensure that the information included on the TANF Data Report is accurate. Recommendation: The Department of Human Resources should establish and maintain effective internal controls to ensure accuracy in reporting work activities by work-eligible individuals on the TANF Data Report. Views of Responsible Officials of the Auditee: We disagree. The finding statement declares that the Department of Human Resources failed to ensure accuracy of data for work participation activities which may result in an inaccurate work participation rate. This is a significant deficiency in internal controls. The Department of Human Resources did not have adequate procedures in place to ensure that the information included on the TANF Data Report is accurate. We do agree with the findings of two cases "in which the hours reported for an individual participating in a work activity were inaccurate." We agree that the 2 of the 25 cases selected had the incorrect frequency for the number of employment hours entered which could potentially affect the work participation rate for Alabama. Examiners’ Concluding Remarks: We have considered the reasons for the Department of Human Resources’ disagreement noted above; however, we reaffirm our finding.

Finding: The Uniform Guidance, 2 CFR Part 200, Appendix XI Compliance Supplement, dated May 2023, stipulates for a cost to be allowable under federal awards certain general criteria must be met, including costs that are adequately documented and necessary and reasonable for the performance of the federal award. The Alabama Department of Transportation (the “Department”) passed through a portion of the Formula Grants for Rural Areas and Tribal Transit Program federal award to subrecipients. One of the subrecipients requested and received reimbursement of program expenses. Subsequent to the payments of the invoices, the Department received information alleging that falsified or altered documents related to expenditures were submitted by a subrecipient. Upon receipt of these allegations, the Department initiated a review of the supporting documents which had been submitted by the subrecipient. The review consisted of obtaining documents from vendors and comparing those documents to the ones submitted by the subrecipient. The results of this comparison indicated that the amounts owed and the description of goods and services provided columns had been changed. We reviewed, recalculated, verified and reperformed the comparisons made by the Department of Transportation and did not note any differences. Nine of ten supporting documents for meeting expenses submitted for reimbursement by the subrecipient during the audit period were altered and were not true and accurate. These altered supporting documents totaled $94,123.56. The Alabama Department of Transportation reimbursed the subrecipient based on the altered documents and, therefore, improperly expended Formula Grants for Rural Areas and Tribal Transit Program federal award funds. Recommendation: The Alabama Department of Transportation should take actions to ensure that all reimbursements of expenses are adequately documented, based on true and accurate supporting documentation, and to ensure costs are allowable under the federal award. Views of Responsible Officials of the Auditee: We agree that there appears to have been falsified supporting documentation submitted by a subrecipient.

Finding: The Uniform Guidance, 2 CFR Part 200, Appendix XI Compliance Supplement, dated May 2023, stipulates for a cost to be allowable under federal awards certain general criteria must be met, including costs that are adequately documented and necessary and reasonable for the performance of the federal award. The Alabama Department of Public Health (ADPH) passed through a portion of the Immunization Cooperative Agreement federal award to subrecipients. During our audit, the ADPH’s Office of Program Integrity (OPI) notified us that based on its investigation a subrecipient was not submitting adequate supporting documentation for reimbursement requests. A total of thirteen subrecipients requested and received reimbursement of program expenses during the fiscal year. Based upon procedures performed, we noted that of the 13 subrecipients who received federal award reimbursements, six did not provide adequate detailed documentation to support their requests for reimbursement. In addition, forty-eight of the sixty-three invoices submitted for reimbursement by the subrecipients did not have adequate documentation resulting in questioned costs of $8,478,032.39 and one of the invoices included an improper payment of $2,600.00 for a total question cost of $8,480,632.39. The ADPH did not have adequate policies and procedures in place to ensure that all requests for reimbursement were supported by adequate detailed documentation to ensure all coast are allowed under the federal award. Recommendation: The Alabama Department of Public Health should take action to ensure that all reimbursements of expenses are adequately documented, based on true and accurate invoices, and to ensure costs are allowable under the federal award. Views of Responsible Officials of the Auditee: We agree with the Examiners' finding; adequate documentation did not exist at the time of the audit to substantiate payments that resulted in questioned costs and improper payments. However, we do not concur with the total amount of the questioned costs cited in the report. ADPH's Office of Program Integrity initiated its own ongoing investigation. As this process continues, we are requesting additional documentation from the subrecipients, which will affect the questioned costs of this program.

Finding According to the Uniform Guidance, 2 CFR 200.303(a), non-Federal entities receiving Federal awards must establish and maintain effective internal controls over these awards. These controls must provide reasonable assurance that the entity manages the Federal award in compliance with applicable Federal statutes, regulations, and the terms and conditions of the award. The Uniform Guidance, 2 CFR Part 200, Appendix XI Compliance Supplement, May 2023, requires the Alabama Department of Labor to operate a Worker Profiling and Reemployment Services (WPRS) or Reemployment Services and Eligibility Assessments (RESEA) program. The Alabama Department of Labor operates a RESEA program. Under the RESEA program, Alabama Department of Labor staff must be promptly and appropriately notified of any eligibility issues identified during any review of a claimant’s information. Claimants are also required to attend appointments for reemployment to maintain their eligibility status. The Alabama Department of Labor has controls in place to provide notification of claimants who failed to report to scheduled RESEA appointments, however those controls were not operating as designed. While reviewing 25 claimant’s information, we noted that 8 claimants failed to report to their scheduled appointments for reemployment. These failures to appear are reported to staff at the Alabama Department of Labor and should prompt a stop of benefit payments; however, the Alabama Department of Labor did not stop payment on these 8 claimants which resulted in overpayments totaling $8,111.00. There was also one instance where Alabama Department of Labor could not provide documentation to support staff was appropriately notified of the eligibility status for a claimant. The Alabama Department of Labor’s policies and procedures did not operate as designed to prevent payments to ineligible claimants. Because the Alabama Department of Labor’s internal controls were not operating as designed, this caused benefits to be paid to ineligible claimants. Recommendation The Alabama Department of Labor should ensure internal controls are operating as designed to help ensure payments are not made to ineligible claimants. Views of Responsible Officials of the Auditee ADOL does not agree with this finding as explained in the Request for Views CAP letter, which is shown below and is included as part of its Corrective Action Plan. The vendor (GEOSOL) software service/system (AlabamaWorks!) used by ADOL Career Centers and other State agencies to record and report various employment services provided to individuals seeking jobs, training, and/or other services throughout the state experienced a cyberattack in June 2022. Because ADOL Employment Services uses this system to also record RESEA information for qualified applicants who are receiving unemployment benefits to confirm required job search activities, the referral of claimants to the Career Centers for profiling was suspended, temporarily, when the attack first occurred. GEOSOL was unable to correct issues as they first promised. ADOL mailed letters to unemployment recipients in June for July appointments at various Career Centers. Letters were also mailed in July for August appointments. The electronic file (FTR) received from AlabamaWorks! to update unemployment claimant records in the UI Benefits system (Data Station) was unable to be received during the time of the system outage. GEOSOL was not able to get their system back up until October 2022. Disqualifications for claimants was also suspended during the system downtime from June to October 2022. Although ADOL Unemployment Division was receiving some data from the Career Centers to continue processing claims, the AlabamaWorks! created more than 1700 (seventeen hundred) erroneous disqualifications when it was brought back online on October 4, 2022 and FTR files were transmitted to ADOL Unemployment system. A manual process to retrieve the correct data was implemented on October 5, 2022 between ADOL Unemployment and Employment Services staff. However, this was a tedious process and took time to review and manually update claims. Upon review of the sampling noted by the Examiner’s Office, the headers on the documentation spreadsheet provided appear to come from AlabamaWorks! not Data Station. After reviewing Data Station which is the system of record for benefit payments, we’d like to further clarify and notate additional information relating to the claims noted in the $8,884.00 cited as possible questioned costs. • Claimant [Burt] ($1,145.00) cited for Failure to Report (FTR) on 07/20/22 with payments being made on 08/05/22 and 08/09/22 and having two payments made on 07/10/23 but no overpayment reported – The payments made in July 2023 were not related to the claim associated with the FTR noted in AlabamaWorks! for July 2022. This was a different claim, and no overpayment for claimant has occurred. Therefore, ADOL disagrees with the questioned costs for this claim. • Claimant [Walker] ($275.00) cited for FTR 01/12/23 and payment made 02/09/23 and overpayment was established – As noted, overpayment was established. Claimant was not shown on FTR file received from GEOSOL to set the issue in January 2023. A later FTR received 4/26/23 indicated the appointment issue and overpayment was established on 4/27/23. • Claimant [Lolley] ($2,200.00) cited for having payments between August 2022 and September 2022 marked and classified as overpayments on 10/07/22 but payment in December 2022 not classified as overpayment – The issue with the GEOSOL system being down, profiling and disqualifications suspended, and FTR’s being erroneously reported caused some payments to be issued for August and September in error. As noted, overpayment was established on 10/07/22 shortly after FTR file received when system was back up. However, ADOL disagrees with the questioned costs associated with December 2022 payment. The payment in December was a different claim not associated with the claim payments made in August and September 2022 and was not an overpayment. • Claimant [Delbridge] ($585.00) cited for FTR 08/04/22 and overpayments established for 9 (nine) payments on 10/09/2022 – The issue with the GEOSOL system being down, profiling and disqualifications suspended, and FTR’s being erroneously reported caused some payments to be issued in error. As noted, overpayment was established on 10/09/22 shortly after FTR file received and system was back up. • Claimant [Parks] ($1,592.00) cited for FTR 12/14/22 and payments made after failure to report with no overpayment established - Claimant was not on FTR file received from GEOSOL in December to set the issue. Additionally, claimant has never been documented on future FTR files to indicate an issue be set to cause an overpayment to be established. • Claimant [Phillips] ($960.00) cited for FTR 12/14/22 and payments made after failure to report with overpayment established 3/17/23 – Claimant was not on FTR file received from GEOSOL in December to set the issue. When reviewed manually, overpayment was noted. • Claimant [Tyus] ($1,375.00) cited for FTR 8/31/22 and overpayment established - The issue with the GEOSOL system being down, profiling and disqualifications suspended, and FTR’s being erroneously reported caused some payments to be issued in error. As noted, overpayment was established on 10/11/22 shortly after FTR file received when system was back up. • Claimant [Pitts] ($752.00) cited for FTR 08/03/22 and overpayment established - The issue with the GEOSOL system being down, profiling and disqualifications suspended, and FTR’s being erroneously reported caused some payments to be issued in error. As noted, overpayment was established on 10/05/22 shortly after FTR file received when system was back up. • Claimant [Doster] not properly documented to indicate eligibility status – Claimant has never been reported on FTR file received to set issue. Therefore, there’s nothing to document. Examiners’ Concluding Remarks We have considered the reasons for the Department of Labor’s disagreement, specifically that the issues noted were mainly the result of cyberattacks on one of its vendors and systems; however, it is the Department of Labor’s responsibility to ensure compliance with all applicable program requirements even when the processing of the requirements has been delegated to its vendors, therefore we reaffirm our finding.

Finding: According to the Uniform Guidance, 2 CFR 200.303 (a), non-Federal entities receiving Federal awards must establish and maintain effective internal controls over these awards. These controls must provide reasonable assurance that the entity manages the Federal award in compliance with applicable Federal statutes, regulations, and the terms and conditions of the award. A fundamental objective of an effective internal control system is to ensure that information is accurate and reliable, which includes a thorough review and approval process. The Uniform Guidance, 2 CFR Part 200, Appendix XI Compliance Supplement, May 2023, requires the Alabama Department of Labor to ensure an employer’s experience rating is properly applied, as the employer’s “experience” with the unemployment of former employees is the dominant factor in the computation of the employer’s annual state Unemployment Insurance tax rate. The Alabama Department of Labor was unable to provide audit documentation to support their review and approval of employer experience rated tax rates. The Alabama Department of Labor did not have policies and procedures in place to document the review and approval of the employer experience rated tax rates. As a result, the employer experience related tax rates could be incorrect, resulting in potential overpayments or underpayments of taxes. Recommendation: The Alabama Department of Labor should develop and document internal controls over employer experience rated tax rates to help ensure they are accurate and properly applied. Views of Responsible Officials of the Auditee: ADOL does not agree with this finding as explained in the Request for Views CAP letter, which is shown below and is included as part of its Corrective Action Plan. ADOL Unemployment Division does have a process in place where staff in the Experience Rating Section verify the tax rates for employers that are generated by the system before employers are notified through electronic posting or notices mailed. This section receives a sampling of approximately 500 Tax Rate Notices. The sampling is distributed and reviewed by staff within this section to determine accuracy in computation compared to applicable schedules and legibility. Communication between the staff and the supervisor is performed to discuss or notate any discrepancies. Once the verification is completed, the section supervisor notifies the appropriate person to generate the final notice through the Unemployment system and notify employers. The documentation of the samplings was not kept only the email confirmation of accuracy and to issue notices between the supervisor and UI system responsible person was kept for this review. However, procedures have been noted for support document retention and implemented for upcoming and future reviews. Examiners’ Concluding Remarks: We have considered the reasons for the Department of Labor’s disagreement; however, we reaffirm our finding..