Audit 342622

Finding 2023-02: Allowable Costs: Payroll – Significant Deficiency in Internal Control over Compliance Information on the Federal Program: Assistance Listing Number 93.778—Medical Assistance Program, Medicaid Cluster, United States Department Health and Human Services. Pass-Through Entity: California Department of Aging. Award Numbers: MS-2223-47 and MS-2223-56. Criteria: Management is responsible for the design, implementation, and maintenance of effective internal control over compliance with the requirements of laws, statutes, regulations, rules, and provisions of contracts or grant agreements applicable to the Organization’s federal programs. Condition: We identified two inconsistencies in controls related to payroll processes. Cause: The condition occurred primarily because of having either an ineffective or no monthly and year-end control activity designed and implemented to verify payroll information was properly recorded and approved. Effect: Amounts recorded in payroll may be unauthorized or inaccurate. Without a properly designed process and review controls, material misstatements due to error or fraud could occur and not be detected. Questioned Costs: None. Context: We tested one hundred percent of payroll costs for four employees. In one out of the four employees selected for testing, proper approval for employee pay raise was not documented. In addition, for another one of the four employees tested, the employee record was not timely deactivated upon employment termination. Recommendation: We recommend management implement a termination checklist that the payroll administrator completes for each terminated employee before the next payroll is processed. The deactivation of employee record in the payroll system should be one of the steps on the checklist. Additionally, we recommend that all pay raise letters have proper documented approval before being processed in the payroll system. Views of Responsible Official: See next page

Finding 2023-02: Allowable Costs: Payroll – Significant Deficiency in Internal Control over Compliance Information on the Federal Program: Assistance Listing Number 93.778—Medical Assistance Program, Medicaid Cluster, United States Department Health and Human Services. Pass-Through Entity: California Department of Aging. Award Numbers: MS-2223-47 and MS-2223-56. Criteria: Management is responsible for the design, implementation, and maintenance of effective internal control over compliance with the requirements of laws, statutes, regulations, rules, and provisions of contracts or grant agreements applicable to the Organization’s federal programs. Condition: We identified two inconsistencies in controls related to payroll processes. Cause: The condition occurred primarily because of having either an ineffective or no monthly and year-end control activity designed and implemented to verify payroll information was properly recorded and approved. Effect: Amounts recorded in payroll may be unauthorized or inaccurate. Without a properly designed process and review controls, material misstatements due to error or fraud could occur and not be detected. Questioned Costs: None. Context: We tested one hundred percent of payroll costs for four employees. In one out of the four employees selected for testing, proper approval for employee pay raise was not documented. In addition, for another one of the four employees tested, the employee record was not timely deactivated upon employment termination. Recommendation: We recommend management implement a termination checklist that the payroll administrator completes for each terminated employee before the next payroll is processed. The deactivation of employee record in the payroll system should be one of the steps on the checklist. Additionally, we recommend that all pay raise letters have proper documented approval before being processed in the payroll system. Views of Responsible Official: See next page

Finding 2023-02: Allowable Costs: Payroll – Significant Deficiency in Internal Control over Compliance Information on the Federal Program: Assistance Listing Number 93.778—Medical Assistance Program, Medicaid Cluster, United States Department Health and Human Services. Pass-Through Entity: California Department of Aging. Award Numbers: MS-2223-47 and MS-2223-56. Criteria: Management is responsible for the design, implementation, and maintenance of effective internal control over compliance with the requirements of laws, statutes, regulations, rules, and provisions of contracts or grant agreements applicable to the Organization’s federal programs. Condition: We identified two inconsistencies in controls related to payroll processes. Cause: The condition occurred primarily because of having either an ineffective or no monthly and year-end control activity designed and implemented to verify payroll information was properly recorded and approved. Effect: Amounts recorded in payroll may be unauthorized or inaccurate. Without a properly designed process and review controls, material misstatements due to error or fraud could occur and not be detected. Questioned Costs: None. Context: We tested one hundred percent of payroll costs for four employees. In one out of the four employees selected for testing, proper approval for employee pay raise was not documented. In addition, for another one of the four employees tested, the employee record was not timely deactivated upon employment termination. Recommendation: We recommend management implement a termination checklist that the payroll administrator completes for each terminated employee before the next payroll is processed. The deactivation of employee record in the payroll system should be one of the steps on the checklist. Additionally, we recommend that all pay raise letters have proper documented approval before being processed in the payroll system. Views of Responsible Official: See next page

Finding 2023-02: Allowable Costs: Payroll – Significant Deficiency in Internal Control over Compliance Information on the Federal Program: Assistance Listing Number 93.778—Medical Assistance Program, Medicaid Cluster, United States Department Health and Human Services. Pass-Through Entity: California Department of Aging. Award Numbers: MS-2223-47 and MS-2223-56. Criteria: Management is responsible for the design, implementation, and maintenance of effective internal control over compliance with the requirements of laws, statutes, regulations, rules, and provisions of contracts or grant agreements applicable to the Organization’s federal programs. Condition: We identified two inconsistencies in controls related to payroll processes. Cause: The condition occurred primarily because of having either an ineffective or no monthly and year-end control activity designed and implemented to verify payroll information was properly recorded and approved. Effect: Amounts recorded in payroll may be unauthorized or inaccurate. Without a properly designed process and review controls, material misstatements due to error or fraud could occur and not be detected. Questioned Costs: None. Context: We tested one hundred percent of payroll costs for four employees. In one out of the four employees selected for testing, proper approval for employee pay raise was not documented. In addition, for another one of the four employees tested, the employee record was not timely deactivated upon employment termination. Recommendation: We recommend management implement a termination checklist that the payroll administrator completes for each terminated employee before the next payroll is processed. The deactivation of employee record in the payroll system should be one of the steps on the checklist. Additionally, we recommend that all pay raise letters have proper documented approval before being processed in the payroll system. Views of Responsible Official: See next page