Finding Number: 2024-004
State/Educational Agency(s): Arkansas Department of Education
Pass-Through Entity: Not Applicable
AL Number(s) and Program Title(s): 10.558 – Child and Adult Care Food Program
Federal Awarding Agency: U.S. Department of Agriculture
Federal Award Number(s): 6AR300321
Federal Award Year(s): 2023 and 2024
Compliance Requirement(s) Affected: Activities Allowed or Unallowed; Allowable Costs/Cost Principles
Type of Finding: Noncompliance and Significant Deficiency
Repeat Finding:
Not applicable
Criteria:
2 CFR § 200.303(a) requires a non-federal entity to 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 award.
7 CFR § 226.11(a) states that a state agency may develop a policy under which centers are reimbursed for meals served in accordance with provisions of the Child and Adult Care Food Program in the calendar month preceding the calendar month in which the agreement is executed, or the state agency may develop a policy under which centers receive reimbursement only for meals served in approved centers on and after the effective date of the Program agreement. If the state agency's policy permits centers to earn reimbursement for meals served prior to the execution of a Program agreement, reimbursement must not be received by the center until the agreement is executed.
Condition and Context:
ALA discussion with Health and Nutrition Unit (HNU) staff indicated that applications for new and renewing applicants are completed online through the Special Nutrition Program (SNP) database. Supporting documentation is uploaded by the providers and reviewed by staff and program manager prior to application approval. The Agency allows retroactive reimbursements for new applicants after application approval only if the following requirements are met prior to the submission of a complete application:
• Proper documentation required by the Program is maintained.
• Provider attends training.
HNU staff are responsible for the notation of eligible months for reimbursement in the database. The notation triggers the edit check to allow or prevent reimbursement claims.
ALA reviewed 17 new applicants during state fiscal year 2024 to determine if all requirements were met prior to the payment of retroactive claims. This review revealed that four providers who did not meet the requirements for a retroactive claim were reimbursed a combined total of $10,823.
Statistically Valid Sample:
Not a statistically valid sample
Questioned Costs:
$10,823
Cause:
HNU staff did not ensure providers’ application reflected only eligible months for reimbursement prior to approval.
Effect:
Providers submitted claims for months in which eligibility requirements were not met.
Recommendation:
ALA staff recommend the Agency promptly develop, document, and implement procedures for internal control over compliance to ensure retroactive reimbursements are processed only for eligible program participants.
Views of Responsible Officials and Planned Corrective Action:
The Arkansas Department of Education (ADE), Division of Elementary and Secondary Education (DESE), Health and Nutrition Unit (HNU), concur with the finding. The HNU implemented a new application and payment system that began in 2024. During implementation and subsequent operations, several issues with data transfers between the old and new system were identified and now corrected. The HNU Application and Finance staff will receive training to ensure that all criteria are met prior to the retroactive payment of claims.
Anticipated Completion Date: April 1, 2025
Contact Person: Sheila Chastain
Associate Director
Arkansas Department of Education, DESE, Nutrition Services
#4 Capitol Mall, Box #12
Little Rock, AR 72201
(501) 324-9502
Sheila.Chastain@ade.arkansas.gov
Pamela Burton
Director
Arkansas Department of Education, DESE, Nutrition Services
#4 Capitol Mall, Box #19
Little Rock, AR 72201
(501) 320-8978
Pamela.Burton@ade.arkansas.gov
Finding Number: 2024-005
State/Educational Agency(s): Arkansas Department of Education
Pass-Through Entity: Not Applicable
AL Number(s) and Program Title(s): 10.558 – Child and Adult Care Food Program
Federal Awarding Agency: U.S. Department of Agriculture
Federal Award Number(s): 6AR300321
Federal Award Year(s): 2023 and 2024
Compliance Requirement(s) Affected: Cash Management
Type of Finding: Noncompliance and Significant Deficiency
Repeat Finding:
A similar issue was report in prior year finding 2023-002.
Criteria:
In accordance with 2 CFR § 200.303(c), a non-federal entity must evaluate and monitor its compliance with statutes, regulations, and the terms and conditions of federal awards.
In addition, 2 CFR § 200.400(a) and (b) state that the non-federal entity is responsible for efficient and effective administration of the federal award through the application of sound management practices and assumes responsibility for administering federal funds in a manner consistent with underlying agreements, program objectives, and the terms and conditions of the federal award.
Condition and Context:
The Agency receives the following separate grant awards for reimbursement payments to meal providers and sponsoring organizations:
1) Child Nutrition Program (CNP) Block Consolidated (ALN 10.555).
2) CNP Child and Adult Care Food Program (CACFP) Cash in Lieu (ALN 10.558).
3) CNP CACFP Sponsor Administrative (ALN 10.558).
Previous correspondence between ALA and the federal awarding agency indicated that each grant award has a designated purpose, and funds are not to be used interchangeably among the grant awards.
All expenditures are assigned a cost center and WBS element to identify the applicable federal program and cost category within AASIS, the State’s accounting system. The Agency’s Health and Nutrition Unit (HNU) staff are responsible for ensuring expenditures are properly coded in AASIS, and the federal finance staff utilize expenditure transactions in AASIS to complete cash draws for direct costs to the program. Expense corrections are completed and processed in AASIS by federal finance staff as needed.
According to the Agency, corrective action was taken to ensure the accuracy of data from August 1, 2023 through January 31, 2024.
ALA review of 10 cash draws to determine if funds were drawn from the appropriate grant revealed the following:
• Sponsor Administrative expenditures (ALN 10.558) totaling $65,173 were inappropriately drawn from the CNP Block Consolidated grant (ALN 10.555).
• As a result of expense corrections, Child Care and Development Block grant (ALN 93.575) expenditures were erroneously coded as CACFP expenditures and inappropriately drawn from the CNP Block Consolidated grant (ALN 10.555) and CNP CACFP Cash in Lieu (ALN 10.558), totaling $53,095 and $1,940, respectively.
Note: Sponsor Administrative expenditures were appropriately drawn from the CNP CACFP Sponsor Administrative grant (ALN 10.558) beginning March 12, 2024. Additionally, on October 14, 2024, after auditor inquiry, federal finance staff completed fund transfers in AASIS to correct the coding of Child Care and Development Block grant expenditures.
Statistically Valid Sample:
Not a statistically valid sample
Questioned Costs:
$120,208
Cause:
CACFP sponsor administrative and child care expenditures were not properly coded in AASIS, causing funds to be drawn from the incorrect grant award.
Effect:
Funds were drawn for unallowable expenditures (based on the purpose of each grant).
Recommendation:
ALA staff recommend the Agency establish and document procedures that specifically address the proper coding of expenditures in AASIS.
Views of Responsible Officials and Planned Corrective Action:
The Arkansas Department of Education (ADE), Division of Elementary and Secondary Education (DESE), Health and Nutrition Unit (HNU), concur with the finding. The HNU Finance staff implemented procedures for meal claim payment requests which include an initial and final review of all requests to be conducted by two (2) staff. The review process includes, but is not limited to, ensuring expenditures are assigned correct codes related to the appropriate funding source within the appropriate grant year, mitigating the Child Nutrition Program (CNP), Child and Adult Care Food Program (CACFP) Sponsor Administrative expenditure errors going forward. When the request is determined to be compliant, the Associate Director of Finance and Training approves payments before being forwarded to the ADE Finance team for payment.
Anticipated Completion Date: March 15, 2025
Contact Person: Sheila Chastain
Associate Director
Arkansas Department of Education, DESE, Nutrition Services
#4 Capitol Mall, Box #12
Little Rock, AR 72201
(501) 324-9502
Sheila.Chastain@ade.arkansas.gov
Pamela Burton
Director
Arkansas Department of Education, DESE, Nutrition Services
#4 Capitol Mall, Box #19
Little Rock, AR 72201
(501) 320-8978
Pamela.Burton@ade.arkansas.gov
Finding Number: 2024-006
State/Educational Agency(s): Arkansas Department of Commerce –
Arkansas Economic Development Commission
Pass-Through Entity: Not Applicable
AL Number(s) and Program Title(s): 21.027 – COVID 19: Coronavirus State and Local
Fiscal Recovery Funds (CSLFRF)
Federal Awarding Agency: U.S. Department of the Treasury
Federal Award Number(s): SLFRP3627
Federal Award Year(s): 2021
Compliance Requirement(s) Affected: Allowable Costs/Cost Principles
Type of Finding: Material Noncompliance and Material Weakness
Repeat Finding:
A similar issue was reported in prior-year finding 2023-006.
Criteria:
In accordance with 2 CFR § 200.403(g), costs must be adequately documented to be allowable under federal awards.
In addition, state-promulgated rules governing the Arkansas Rural Connect (ARC) Program provide that internet service providers (ISPs) must submit receipts for all reimbursable expenses.
Condition and Context:
ALA staff selected seven payments to ISPs under the ARC program to determine if sufficient, appropriate documentation was maintained to support that reimbursements were made for allowable broadband project expenses. Five of these seven payments were selected randomly, and the remaining two were selected based upon concerns communicated to ALA by the Agency. ALA review of the five payments selected randomly revealed the following:
Project 1:
• Five claims, totaling $28,366, were reimbursed without adequate supporting documentation (e.g., an invoice or receipt).
Project 2:
• One claim, totaling $367,695, was reimbursed without adequate supporting documentation (e.g., an invoice or receipt).
Project 3:
• One claim, totaling $41,363, was reimbursed without adequate supporting documentation (e.g., an invoice or receipt).
ALA review of the two payments selected based upon concerns communicated by the Agency revealed the following:
Project 4:
• 80 claims, totaling $3,861,066, were submitted by the ISP without adequate supporting documentation (e.g., an invoice and/or receipt).
Project 5:
• 16 claims, totaling $2,511,710, were submitted by the ISP without adequate supporting documentation (e.g., an invoice and/or receipt).
Statistically Valid Sample:
Not a statistically valid sample
Questioned Costs:
$6,810,200
Cause:
Discussion with management indicated the Arkansas State Broadband Office (ASBO) was understaffed during the time these agreements were executed, and it did not ensure that training included requirements of Uniform Guidance or ARC rules. Furthermore, the ISPs who received payments for projects 4 and 5 received advance payments, which inherently caused additional risk of noncompliance.
Effect:
Reimbursements were approved for expenditures that may not have been allowable or may not have been incurred. The federal awarding agency may require recoupment.
Recommendation:
ALA staff recommend the Agency strengthen controls by providing training on ARC rules and federal regulations to ensure all costs are adequately documented and all reimbursable expenses are supported by receipts. ALA staff also recommend the Agency seek recoupment of any identified overpayments, returning them to the appropriate source.
Views of Responsible Officials and Planned Corrective Action:
ASBO will work with our 3rd party program administrator to re-emphasize the importance of verifying the expenses for adequate supporting documentation and allowability. We will discuss the possibility of a repeat training with all federal grant subrecipients.
Anticipated Completion Date: August 1, 2025
Contact Person: Glen Howie, Jr.
Director, Ark State Broadband Office
Department of Commerce
1 Commerce Way
Little Rock, AR 72202
(501) 682-1123
Glen.Howie@Arkansas.gov
Finding Number: 2024-007
State/Educational Agency(s): Arkansas Department of Agriculture –
Natural Resources Division
Pass-Through Entity: Not Applicable
ALN Number(s) and Program Title(s): 21.027 – COVID 19: Coronavirus State and Local
Fiscal Recovery Funds (CSLFRF)
Federal Awarding Agency: U.S. Department of the Treasury
Federal Award Number(s): SLFRP3627
Federal Award Year(s): 2021
Compliance Requirement(s) Affected: Allowable Costs/Cost Principles
Type of Finding: Noncompliance and Material Weakness
Repeat Finding:
Not applicable
Criteria:
In accordance with 2 CFR § 200.403(g), costs must be adequately documented to be allowable under federal awards.
In addition, 2 CFR § 200.400(d) states that the accounting practices of the recipient and subrecipient must be consistent with these cost principles and support the accumulation of costs as required by these cost principles, including maintaining adequate documentation to support costs charged to the federal award.
Condition and Context:
ALA staff reviewed 14 payments to water departments to determine if sufficient, appropriate documentation was maintained to support allowability of infrastructure improvement expenses. ALA review of one of those payments included costs of $26,979 that were not adequately documented. In addition, supporting documentation did not include a complete accumulation of costs that identified amounts charged to the federal award.
Statistically Valid Sample:
Not a statistically valid sample
Questioned Costs:
$26,979
Cause:
The Agency did not have controls in place to ensure a review of documentation supporting reimbursement requests was properly performed prior to issuing payments. In addition, the Agency did not provide training on Uniform Guidance documentation requirements to staff responsible for reviewing and loading documents into its project management application.
Effect:
Reimbursements were approved for expenditures that may not have been allowable. The federal awarding agency may require recoupment.
Recommendation:
ALA staff recommend the Agency strengthen controls to ensure costs are adequately documented. Supporting documentation containing sufficient detail to determine the allowability and nature of the costs incurred by the subrecipient should be reviewed by the Agency prior to reimbursement to ensure compliance with federal regulations.
Views of Responsible Officials and Planned Corrective Action:
Moving forward the Department will require recipients to provide a list of invoices with the invoice date, period of performance, invoice amount and amount requested/disbursed from ARPA and/or other funding sources to be included with each disbursement request. Staff training will be modified to ensure staff understand allowable expenditures and period of performance restrictions.
Anticipated Completion Date: June 30, 2025
Contact Person: Debby Dickson
Water Development Division Manager
Arkansas Department of Agriculture-Natural Resources Division
1 Natural Resources Drive
Little Rock, AR 72205
(501) 225-1598
Debra.Dickson@agriculture.arkansas.gov
Finding Number: 2024-008
State/Educational Agency(s): Arkansas Department of Agriculture –
Natural Resources Division
Pass-Through Entity: Not Applicable
ALN Number(s) and Program Title(s): 21.027 – COVID 19: Coronavirus State and Local
Fiscal Recovery Funds (CSLFRF)
Federal Awarding Agency: U.S. Department of the Treasury
Federal Award Number(s): SLFRP3627
Federal Award Year(s): 2021
Compliance Requirement(s) Affected: Procurement and Suspension and Debarment
Type of Finding: Noncompliance and Material Weakness
Repeat Finding:
Not applicable
Criteria:
2 CFR § 200.214 holds entities subject to 2 CFR Part 180, which restricts awards, subawards, and contracts with certain parties that are debarred, suspended, or otherwise excluded from or ineligible for participation in federal assistance programs or activities.
Condition and Context:
The Agency is responsible for ensuring that entities receiving awards are registered in the System for Award Management (SAM) database and have not been suspended or debarred. Registration must occur prior to the issuance of a contract or grant agreement.
ALA staff reviewed 13 grant agreements to determine if the Agency was in compliance with the requirement. ALA review revealed that 3 entities, with agreements executed between April 2023 and August 2023, were not registered with SAM prior to the Agency’s issuance of subawards to them.
Statistically Valid Sample:
Not a statistically valid sample
Questioned Costs:
Unknown
Cause:
The Agency failed to establish documented control procedures and did not have adequately trained staff to ensure compliance.
Effect:
Failure to develop, document, and implement procedures for internal control over compliance increases risk for issuance of contracts and grant agreements to excluded or ineligible entities.
Recommendation:
ALA staff recommend the Agency strengthen internal controls by developing, documenting, and establishing policies to ensure contracts and grant agreements are only issued to eligible entities.
Views of Responsible Officials and Planned Corrective Action:
The Department will require all ARPA recipients provide a copy of their current/active registration with Sam.gov with each disbursement request. Moving forward, the Department will require any/all sub recipients with subrecipient monitoring under 2 CFR § 200.214 and subject to 2 CFR Part 180 to provide proof prior to execution of a grant agreement. Once implemented, we will provide staff training to understand what documentation is required prior to execution of an agreement and disbursement of funds. Independent testing of the established controls will be performed by Department Fiscal staff who have no role in the contracting process and this testing will be documented.
Anticipated Completion Date: June 30, 2025
Contact Person: Debby Dickson
Water Development Division Manager
Arkansas Department of Agriculture-Natural Resources Division
1 Natural Resources Drive
Little Rock, AR 72205
(501) 225-1598
Debra.Dickson@agriculture.arkansas.gov
Finding Number: 2024-009
State/Educational Agency(s): Arkansas Department of Commerce –
Arkansas Economic Development Commission
Pass-Through Entity: Not Applicable
ALN Number(s) and Program Title(s): 21.027 – COVID 19: Coronavirus State and Local
Fiscal Recovery Funds (CSLFRF)
Federal Awarding Agency: U.S. Department of the Treasury
Federal Award Number(s): SLFRP3627
Federal Award Year(s): 2021
Compliance Requirement(s) Affected: Subrecipient Monitoring
Type of Finding: Material Noncompliance and Material Weakness
Repeat Finding:
A similar issue was reported in prior-year finding 2023-008.
Criteria:
In accordance with 2 CFR § 200.332(a)(1), all pass-through entities must ensure that every subaward is clearly identified to the subrecipient as a subaward and includes the following information at the time of the subaward:
i. Subrecipient name (which must match the name associated with its unique entity identifier).
ii. Subrecipient's unique entity identifier.
iii. Federal Award Identification Number (FAIN).
iv. Federal award date.
v. Subaward Period of Performance start and end date.
vi. Subaward budget period start and end date.
vii. Amount of federal funds obligated to the subrecipient.
viii. Total amount of federal funds obligated to the subrecipient by the pass-through entity, including the current financial obligation.
ix. Total amount of the federal award committed to the subrecipient by the pass-through entity.
x. Federal award project description, as required by the Federal Funding Accountability and Transparency Act (FFATA).
xi. Name of federal agency, pass-through entity, and contact information for awarding official of the pass-through entity.
xii. Assistance listings title and number (ALN); the pass-through entity must identify the dollar amount made available under each federal award and the ALN at the time of disbursement.
xiii. Identification of whether the federal award is research and development.
xiv. Indirect cost rate for the federal award (including if the de minimis rate is used in accordance with § 200.414).
In addition, 2 CFR § 200.332(a)(4) requires an approved, federally recognized indirect cost rate between the subrecipient and the federal awarding agency.
Condition and Context:
ALA staff reviewed seven executed grant agreements, totaling $42,681,880, to determine if they met the Uniform Guidance criteria. Five of these grant agreements were selected randomly, and the remaining two were selected based upon concerns communicated to ALA by the Agency. The following deficiencies were noted in the two grant agreements selected based upon Agency concerns:
• The agreements, which totaled $6,549,322, did not include all required terms, specifically items ii, iii, v, xii, xiii, and xiv from the criteria noted above.
• The agreements did not include indirect cost rate agreements.
Statistically Valid Sample:
Not a statistically valid sample
Questioned Costs:
None
Cause:
The Agency did not ensure staff were trained and knowledgeable regarding Uniform Guidance requirements for subrecipients.
Effect:
Without a proper grant agreement, subrecipients may be unaware that their award is subject to federal compliance requirements, and the Agency risks noncompliance with subrecipient monitoring requirements.
Recommendation:
ALA staff recommend the Agency provide training to appropriate staff to ensure adherence to Uniform Guidance regarding subrecipient monitoring.
Views of Responsible Officials and Planned Corrective Action:
In 2023, ASBO sent out Amendment #1 for all SLFRF subgrants. This amendment was a one-page sheet providing information for all the requirements listed in 2 CFR § 200.332(a)(1). The subrecipient listed in this finding, Extreme Broadband, did not acknowledge or return their amendment. We will begin to request acknowledgement from this provider on a continuous quarterly basis.
Anticipated Completion Date: March 4, 2025
Contact Person: Glen Howie, Jr.
Director, Ark State Broadband Office
Department of Commerce
1 Commerce Way
Little Rock, AR 72202
(501) 682-1123
Glen.Howie@Arkansas.gov
Finding Number: 2024-010
State/Educational Agency(s): Arkansas Department of Agriculture –
Natural Resources Division
Pass-Through Entity: Not Applicable
ALN Number(s) and Program Title(s): 21.027 – COVID 19: Coronavirus State and Local
Fiscal Recovery Funds (CSLFRF)
Federal Awarding Agency: U.S. Department of the Treasury
Federal Award Number(s): SLFRP3627
Federal Award Year(s): 2021
Compliance Requirement(s) Affected: Subrecipient Monitoring
Type of Finding: Material Noncompliance and Material Weakness
Repeat Finding:
Not applicable
Criteria:
In accordance with 2 CFR § 200.332(a)(1), all pass-through entities must: ensure that every subaward is clearly identified to the subrecipient as a subaward and includes the following information at the time of the subaward:
i. Subrecipient name (which must match the name associated with its unique entity identifier).
ii. Subrecipient's unique entity identifier.
iii. Federal Award Identification Number (FAIN).
iv. Federal award date.
v. Subaward Period of Performance start and end date.
vi. Subaward budget period start and end date.
vii. Amount of federal funds obligated in the subaward.
viii. Total amount of federal funds obligated to the subrecipient by the pass-through entity, including the current financial obligation.
ix. Total amount of the federal award committed to the subrecipient by the pass-through entity.
x. Federal award project description, as required by the Federal Funding Accountability and Transparency Act (FFATA).
xi. Name of federal agency, pass-through entity, and contact information for awarding official of the pass-through entity.
xii. Assistance listings title and number (ALN); the pass-through entity must identify the dollar amount made available under each federal award and the ALN at the time of disbursement.
xiii. Identification of whether the federal award is research and development.
xiv. Indirect cost rate for the federal award (including if the de minimis rate is used in accordance with § 200.414).
In addition, 2 CFR § 200.332(a)(4) requires an approved, federally recognized indirect cost rate between the subrecipient and the federal awarding agency.
Condition and Context:
ALA staff reviewed 13 executed grant agreements, totaling $29,342,709, to determine if they met the Uniform Guidance criteria. The following deficiencies were noted:
• The 13 grant agreements did not include all required terms, specifically items ii, iii, v, vi, xi, xii, xiii, and xiv from the criteria noted above.
• An indirect cost rate agreement could not be provided.
Statistically Valid Sample:
Not a statistically valid sample
Questioned Costs:
None
Cause:
The Agency did not ensure staff were trained and knowledgeable regarding Uniform Guidance requirements for subrecipients.
Effect:
Without a proper grant agreement, subrecipients may be unaware that their award is subject to federal compliance requirements, and the Agency risks noncompliance with subrecipient monitoring requirements.
Recommendation:
ALA staff recommend the Agency provide training to appropriate staff to ensure adherence to Uniform Guidance regarding subrecipient monitoring.
Views of Responsible Officials and Planned Corrective Action:
The Department will execute an amendment to the grant agreements for all ARPA funding not disbursed as of 7/1/2024 to include the missing data as detailed in the finding. Staff will be trained on Uniform Guidance requirements.
Anticipated Completion Date: June 30, 2025
Contact Person: Debby Dickson
Water Development Division Manager
Arkansas Department of Agriculture-Natural Resources Division
1 Natural Resources Drive
Little Rock, AR 72205
(501) 225-1598
Debra.Dickson@agriculture.arkansas.gov
Finding Number: 2024-011
State/Educational Agency(s): Arkansas Department of Commerce –
Arkansas Economic Development Commission
Pass-Through Entity: Not Applicable
AL Number(s) and Program Title(s): 21.027 – COVID 19: Coronavirus State and Local
Fiscal Recovery Funds (CSLFRF)
Federal Awarding Agency: U.S. Department of the Treasury
Federal Award Number(s): SLFRP3627
Federal Award Year(s): 2021
Compliance Requirement(s) Affected: Subrecipient Monitoring
Type of Finding: Material Weakness
Repeat Finding:
A similar issue was reported in prior-year finding 2023-008.
Criteria:
In accordance with 2 CFR § 200.332(c), pass-through entities must evaluate each subrecipient’s fraud risk and risk of noncompliance with a subaward to determine appropriate subrecipient monitoring.
Section 8(C)(7) of the Arkansas Rural Connect (ARC) rules require applicant Internet Service Providers (ISPs) to submit financial statements for the three most recent years, including an audited financial statement for the most recent year, for grant requests exceeding $2 million.
Section 9(G) of the ARC rules state that within 45 days after grant approval, the ISP should submit the project plans to a licensed Professional Engineer (PE) for a technical adequacy confirmation. Once received, the ISP should submit the PE approval stamp to the Arkansas State Broadband Office (ASBO).
Condition and Context:
ALA staff reviewed eight executed subaward agreements, totaling $42,681,880, to determine if they met the Uniform Guidance criteria, as well as relevant ARC rules. The following deficiencies were noted:
• For six of the eight agreements tested, the ASBO did not receive and review the applicants’ financial statements for the three previous years prior to executing a grant agreement.
• Discussion with management indicated that the pass-through entity did not have documentation indicating that a PE reviewed the technical adequacy of any of the eight broadband projects ALA reviewed.
Statistically Valid Sample:
Not a statistically valid sample
Questioned Costs:
None
Cause:
Discussion with management indicated the ASBO was understaffed during the time these agreements were executed, and it did not ensure that training included requirements of Uniform Guidance or ARC rules.
Effect:
Without proper review of contractor financial statements, the Agency could award federal funds to a high-risk entity and fail to adjust the methods of monitoring accordingly. Without approval of a licensed PE, project plans may fail to meet technical adequacy required for the project.
Recommendation:
ALA staff recommend the Agency strengthen controls by providing training on established ARC rules and procedures, which include a review of the financial statements of contractors as well as the technical adequacy of projects to ensure adherence to Uniform Guidance and ARC rules regarding subrecipient monitoring.
Views of Responsible Officials and Planned Corrective Action:
Current staff believes the 3 requirements listed above were not performed in the past. For remaining active SLFRF subgrants, ASBO will establish a fraud/risk/noncompliance rating and set appropriate monitoring standards.
Should any new applications for SLFRF funding be procured, ASBO will require financial statements and a PE Stamp prior to grant agreement execution.
ASBO will provide 2 CFR 200 training and ARC rules training to our staff and contractors.
Anticipated Completion Date: April 1, 2025
Contact Person: Glen Howie, Jr.
Director, Ark State Broadband Office
Department of Commerce
1 Commerce Way
Little Rock, AR 72202
(501) 682-1123
Glen.Howie@Arkansas.gov
Finding Number: 2024-012
State/Educational Agency(s): Department of Commerce – Arkansas Rehabilitation Services
Pass-Through Entity: Not Applicable
AL Number(s) and Program Title(s): 84.126 – Rehabilitation Services Vocational Rehabilitation
Grants to States
Federal Awarding Agency: U.S. Department of Education
Federal Award Number(s): H126A230097
Federal Award Year(s): 2023
Compliance Requirement(s) Affected: Reporting
Type of Finding: Noncompliance and Significant Deficiency
Repeat Finding:
Not applicable
Criteria:
In accordance with 2 CFR § 200.303, a non-federal entity must 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 award.
In addition, Department of Education - Rehabilitation Services Administration (RSA) provided guidance in its Dear Colleague Letter DCL-20-02 for grants entered into after federal fiscal year 2021 but prior to federal fiscal year 2024. Per this guidance, all reports except for the final report must be submitted 30 calendar days after the end of the reporting period.
Condition and Context:
ALA staff performed testing of all five RSA-17 reports, submitted by Arkansas Rehabilitation Services (ARS), to confirm accuracy and completeness of the reports. ALA staff review revealed that the RSA-17 report for the quarter ending June 30, 2024, for the federal fiscal year 2023 grant award, had not been submitted by the Agency at the time of audit fieldwork. This report was subsequently submitted on January 27, 2025, six months after the reporting due date of July 29, 2024.
Statistically Valid Sample:
Not a statistically valid sample
Questioned Costs:
None
Cause:
The failure of Agency controls was caused by employee turnover in key positions and reduced oversight of reports.
Effect:
Lack of appropriate internal controls resulted in noncompliance with federal laws and regulations over reporting.
Recommendation:
ALA staff recommend the Agency strengthen controls over financial reporting compliance to ensure reports are submitted timely and in accordance with federal laws and regulations.
Views of Responsible Officials and Planned Corrective Action:
ARS Discussion
The Agency acknowledges the failure to adequately submit the RSA-17 report for the quarter ending June 30, 2024, for the federal fiscal year 2023 grant award.
ARS Action Taken
The Agency has taken the below steps to mitigate oversight of reporting deadlines and lack of internal controls.
• ARS fiscal has hired three additional staff members whose purpose will be in-part to collect, interpret, and submit data with regards to RSA17 reports.
• A RSA17 policy was submitted RSA in January 2025. This policy speaks to enhanced ARS internal controls for timeliness of collecting data, and oversight to ensure proper preparation and submission of these federal financial reports moving forward. These include multi personnel responsibility checks for collection at minimum one week prior to report submission with Manager and Deputy Commissioner to ensure data collection and submission are on-time.
Anticipated Completion Date: Complete
Contact Person: April Cooper
Deputy Director of Finance
Arkansas Department of Commerce
1 Commerce Way
Little Rock, AR 72202
(501) 682-4771
April.Cooper@Arkansas.gov
Finding Number: 2024-013
State/Educational Agency(s): Department of Commerce – Arkansas Rehabilitation Services
Pass-Through Entity: Not Applicable
AL Number(s) and Program Title(s): 84.126 – Rehabilitation Services Vocational Rehabilitation
Grants to States
Federal Awarding Agency: U.S. Department of Education
Federal Award Number(s): H126A230097; H126A240097-24C
Federal Award Year(s): 2023 and 2024
Compliance Requirement(s) Affected: Reporting
Type of Finding: Noncompliance and Significant Deficiency
Repeat Finding:
Not Applicable
Criteria:
In accordance with 2 CFR § 200.303, a non-federal entity must 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 award.
Also, per 34 CFR § 361.12, the state agency must ensure the proper and efficient administration of the plan and the carrying out of all functions for which the State is responsible under the plan and this part of 34 CFR. These methods must include procedures to ensure accurate data collection and financial accountability.
Finally, per Department of Education - Rehabilitation Services Administration (RSA) Policy Directive PD-19-03, “the use of an electronic case management system, does not remove the requirement for the agency to maintain either hard copies or scanned copies of required supporting documentation in the individual's service record.”
Condition and Context:
The Agency did not have appropriate controls in place to support the maintenance of documentation supporting the RSA-911 quarterly reports. Of the 37 cases tested by ALA, 22 included report elements that could not be verified by ALA or were incorrectly reported. Errors noted during testing were as follows:
• In 21 cases, the application date reported could not be traced to the application signed by the client.
• In 16 cases, the Agency could not provide an Individualized Plan for Employment (IPE), signed by the client, to support the date of initial IPE.
• In 2 cases, the date of eligibility determination was not supported by appropriate documentation.
• In 2 cases, the initial IPE date was incorrectly reported.
Statistically Valid Sample:
Not a statistically valid sample
Questioned Costs:
None
Cause:
Controls were not in place to ensure that client files were properly migrated from an older case management system to a newer case management system during a software conversion.
Effect:
Lack of appropriate internal controls resulted in noncompliance with federal laws and regulations over reporting.
Recommendation:
ALA staff recommend the Agency strengthen controls over reporting by performing a review of client files to ensure data elements are accurately recorded in the new case management system for the required reporting elements.
Views of Responsible Officials and Planned Corrective Action:
ARS Discussion
The Agency acknowledges the lack of adequate internal controls necessary to ensure accurate maintenance of supporting documentation during our migration to our new case management system (CMS).
ARS Action Taken
The Agency has taken the below steps to mitigate the lack of internal controls regarding supporting documentation, mainly attachments, located in our CMS in the future.
• As the transfer of data to our new CMS platform concludes, that impediment has significantly diminished. The Agency has an appropriate method of control in place to detect any case file errors that may occur because of an incomplete retrieval or an insufficient data element input. In both instances, data analyst personnel from Program, Planning, Development and Evaluation (PPD&E) employ RSA’s edit check process that identifies specific errors prior to submission of the RSA 911 report. Those errors are then methodically corrected in our CMS ensuring the RSA 911 report is error free.
• In instances where information is miscoded in the client case file, or is missing, the division’s Quality Assurance (QA) team identifies those errors and employes best practice training methods to ensure the case file complies with federal regulations.
• Finally, our new CMS data hosted on an AR DIS platform is regularly backed up on a separate server to ensure that if anything were to happen to the primary CMS, we have a back up of all case data, including supporting documentation, and attachments. This data would be able to be accessed as a backup if data in the CMS was compromised in any way.
Anticipated Completion Date: Complete
Contact Person: Robert Trevino
Associate Commissioner of PPD&E
Arkansas Rehabilitation Services
1 Commerce Way
Little Rock, AR 72202
(501) 296-1604
Robert.Trevino@Arkansas.gov
Finding Number: 2024-014
State/Educational Agency(s): Arkansas Department of Human Services
Pass-Through Entity: Not Applicable
AL Number(s) and Program Title(s): 93.558 – Temporary Assistance for Needy Families
Federal Awarding Agency: U.S. Department of Health and Human Services
Federal Award Number(s): 2301ARTANF and 2403ARTANF
Federal Award Year(s): 2023 and 2024
Compliance Requirement(s) Affected: Reporting
Type of Finding: Noncompliance and Significant Deficiency
Repeat Finding:
Not applicable
Criteria:
In accordance with 2 CFR Part 170, recipients of federal grants are required to report first-tier subawards of $30,000 or more to the Federal Funding Accountability and Transparency Act Subaward Reporting System (FSRS) no later than the end of the month following the month in which the subaward was issued.
Condition and Context:
The Agency did not file any reports in state fiscal year 2024 for subrecipients with payments at or above $30,000.
Statistically Valid Sample:
Not a statistically valid sample
Questioned Costs:
None
Cause:
The Agency did not ensure staff were trained and knowledgeable regarding the requirements of Federal Funding Accountability and Transparency Act Subaward Reporting as described in 2 CFR Part 170.
Effect:
Failure to file Federal Funding Accountability and Transparency Act Subaward reports could result in the reduction or termination of future funding.
Recommendation:
ALA staff recommend the Agency provide necessary training to ensure full compliance with Federal Funding Accountability and Transparency Act Subaward reporting as described in 2 CFR Part 170.
Views of Responsible Officials and Planned Corrective Action:
DHS concurs with this finding. As of 2/25/25, DHS has reported all subrecipients with payments at or above $30,000 for SFY24 and a documented procedure has been developed to address the reporting requirement.
Anticipated Completion Date: Completed
Contact Person: Renee Ikard
Chief Financial Officer
Department of Human Services
700 Main Street
Little Rock, AR 72201
(501) 682-8985
Renee.Ikard@dhs.arkansas.gov
Finding Number: 2024-015
State/Educational Agency(s): Arkansas Department of Human Services
Pass-Through Entity: Not Applicable
AL Number(s) and Program Title(s): 93.558 – Temporary Assistance for Needy Families
Federal Awarding Agency: U.S. Department of Health and Human Services
Federal Award Number(s): 2101ARTANF; 2201ARTANF; 2301ARTANF; 2403ARTANF
Federal Award Year(s): 2021, 2022, 2023 and 2024
Compliance Requirement(s) Affected: Reporting
Type of Finding: Noncompliance and Significant Deficiency
Repeat Finding:
Not applicable
Criteria:
In accordance with 45 CFR § 265.4, states are required to submit complete and accurate TANF financial reports within 45 days following the end of each quarter or be subject to a penalty.
Condition and Context:
ALA staff reviewed the submission dates for each of the quarterly reports submitted for the four quarters ending during the 2024 state fiscal year. Of the three reports that were required for the quarter ending September 30, 2023, all were submitted 30 days after the November 14, 2023, due date. Of the three reports that were required for the quarter ending June 30, 2024, all were submitted 120 days after the August 14, 2024, due date.
Statistically Valid Sample:
Not a statistically valid sample
Questioned Costs:
None
Cause:
The Agency did not ensure that staffing was adequate to meet the reporting requirements for this grant.
Effect:
Failure to timely report grant expenditures could result in undetected noncompliance with program requirements and in potential penalties being assessed by the awarding agency.
Recommendation:
ALA staff recommend the Agency ensure that there is adequate staff to achieve full compliance with program reporting requirements.
Views of Responsible Officials and Planned Corrective Action:
DHS concurs with this finding. The timeliness of quarterly financial reports was impacted by the transition of the TANF program to DHS. The federal awarding agency did not permit the agency to file current TANF award reports until prior year’s reports were submitted. DHS has now submitted all reports that are currently due and has one full-time staff working the TANF award and associated reports.
Anticipated Completion Date: Complete
Contact Person: Renee Ikard
Chief Financial Officer
Department of Human Services
700 Main Street
Little Rock, AR 72201
(501) 682-8985
Renee.Ikard@dhs.arkansas.gov
Finding Number: 2024-016
State/Educational Agency(s): Arkansas Department of Human Services
Pass-Through Entity: Not Applicable
AL Number(s) and Program Title(s): 93.558 – Temporary Assistance for Needy Families
Federal Awarding Agency: U.S. Department of Health and Human Services
Federal Award Number(s): 2301ARTANF and 2403ARTANF
Federal Award Year(s): 2023 and 2024
Compliance Requirement(s) Affected: Subrecipient Monitoring
Type of Finding: Noncompliance and Significant Deficiency
Repeat Finding:
Not applicable
Criteria:
In accordance with 45 CFR § 75.352(d), a pass-through entity must monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with federal statutes, regulations, and the terms and conditions of the subaward, and that the subaward performance goals are achieved.
Condition and Context:
ALA staff reviewed the program monitoring documentation related to 18 grants awarded by the agency totaling $19,770,361. Testing revealed that the pass-through entity did not have sufficient documentation necessary to ensure that the subaward performance goals were achieved for 7 of the 18 grants.
Statistically Valid Sample:
Not a statistically valid sample
Questioned Costs:
None
Cause:
The Agency did not ensure staff were trained and knowledgeable regarding Uniform Guidance requirements for subrecipients.
Effect:
Failure to monitor subrecipients could result in undetected noncompliance with program requirements.
Recommendation:
ALA staff recommend the Agency provide necessary training to multiple staff members to ensure full compliance with
subrecipient monitoring requirements.
Views of Responsible Officials and Planned Corrective Action:
DHS concurs with this finding. The agency has trained all TANF staff responsible for monitoring and has begun monitoring for all FFY2024 subgrants. Monitoring for all FFY2025 subgrants will begin after completion of monitoring for the FFY2024 subgrants.
Anticipated Completion Date: September 30, 2025
Contact Person: Mary Franklin
Director, Division of County Operations
Department of Human Services
700 Main Street
Little Rock, AR 72201
(501) 681-8377
Mary.Franklin@dhs.arkansas.gov
Finding Number: 2024-017
State/Educational Agency(s): Arkansas Department of Energy and Environment
Pass-Through Entity: Not Applicable
AL Number(s) and Program Title(s): 93.568 – Low-Income Home Energy Assistance
Federal Awarding Agency: U.S. Department of Health and Human Services
Federal Award Number(s): Various
Federal Award Year(s): 2023 and 2024
Compliance Requirement(s) Affected: Reporting
Type of Finding: Noncompliance and Significant Deficiency
Repeat Finding:
Not applicable
Criteria:
In accordance with federal laws and program guidelines, recipients of federal awards must submit various reports to the grantor agency. These include annual reports, such as the Carryover and Reallotment Report (45 CFR § 96.81(b)), the Households Assisted Report (45 CFR § 96.82(a)), and the LIHEAP Performance Data Form (OMB No 0970-0449), as well as LIHEAP Quarterly Performance and Management Reports (OMB No. 0970-0589).
Condition and Context:
ALA staff reviewed submissions of required reports and determined that reports were not filed by various due dates, and performance measures were not completed
Statistically Valid Sample:
Not applicable
Questioned Costs:
None
Cause:
The Agency did not have controls in place to ensure that reports were submitted timely.
Effect:
Required annual and quarterly reports were submitted late, which could potentially jeopardize funding.
Recommendation:
ALA staff recommend the Agency establish and implement control procedures to ensure mandatory reports are accurately completed and submitted by the required deadlines.
Views of Responsible Officials and Planned Corrective Action:
Program Year 2024 was an unusual year in that (1) key Agency staff members were on extended leave or resigned, (2) one of the program’s primary consultants took extended leave, and (3) the program experienced a major influx of stimulus funds through separate awards that required separate management, coordination, and reporting. These exceptional circumstances slowed Agency staff’s ability to follow-up with subrecipients that had not submitted timely and accurate reports; subrecipient reports are necessary to submitting accurate and fully responsive federal reports.
Views of Responsible Officials and Planned Corrective Action (Continued):
To help minimize the likelihood of future late submissions, the following control procedures will be established and implemented:
• Prepare and transmit a comprehensive schedule of reports and respective due dates to subrecipients at the beginning of each program year; this schedule will be included in the Program Operations Manual.
• Feature reporting and associated compliance requirements as a regular topic during annual training activities
• Create a shared electronic, internal Agency calendar with reminders for initial, intermediate, and final due dates for report information
• If necessary, upload report information in stages to federal reporting database to ensure submission deadlines are met.
• Assign responsibility to a staff member to oversee the data collection process, review collected data for accuracy and consistency and, if necessary, provide technical assistance to subrecipients that need help preparing accurate reporting.
Anticipated Completion Date: June 15, 2025
Contact Person: Iris Pennington
Home Utilities Assistance Manager
Arkansas Department of Energy and Environment
5301 Northshore Drive
North Little Rock, AR 72118
(501) 682-0842
Iris.Pennington@arkansas.gov
Finding Number: 2024-018
State/Educational Agency(s): Arkansas Department of Energy and Environment
Pass-Through Entity: No Applicable
AL Number(s) and Program Title(s): 93.568 – Low-Income Home Energy Assistance
Federal Awarding Agency: U.S. Department of Health and Human Services
Federal Award Number(s): Various
Federal Award Year(s): 2024
Compliance Requirement(s) Affected: Reporting
Type of Finding: Noncompliance and Significant Deficiency
Repeat Finding:
Not applicable
Criteria:
In accordance with Appendix A of 2 CFR § 170, direct recipients of grants or cooperative agreements are required to report first-tier sub-awards of $30,000 or more to the Federal Funding Accountability and Transparency Act (FFATA) Sub-award Reporting System (FSRS).
Condition and Context:
ALA staff searched information on the USASpending.gov website to determine if the Agency was reporting sub-awards as required and discovered no sub-award/contractor information was reported for LIHEAP by the Arkansas Department of Energy and Environment (ADEE).
Statistically Valid Sample:
Not applicable
Questioned Costs:
None
Cause:
The Agency did not have controls in place to guarantee that first-tier sub-awards of $30,000 or more were reported to the FSRS.
Effect:
The Agency was not in compliance with Appendix A of 2 CFR § 170 and did not report first-tier sub-awards. Failure to file Federal Funding Accountability and Transparency Act Subaward reports could result in the reduction or termination of future funding.
Recommendation:
ALA staff recommend the Agency establish and implement control procedures to ensure first-tier sub-awards are reported to FSRS, as required.
Views of Responsible Officials and Planned Corrective Action:
The Agency will create and maintain an Excel spreadsheet to keep record of subrecipient awards of $30,000 or more. The spreadsheet will be shared between the Agency’s program staff and fiscal staff and used to report first-tier sub-awards of $30,000 or more to the Federal Funding Accountability and Transparency Act (FFATA) Sub-award Reporting System (FSRS) on SAM.gov. Agency program staff will input the information into the shared spreadsheet, and Agency fiscal staff will upload and submit reportable information to SAM.gov by the end of the month following the month in which the Agency awards any sub-grant of $30,000 or more.
Anticipated Completion Date: June 15, 2025
Contact Person: Kay Joiner
Senior Programs Manager
Arkansas Department of Energy and Environment
5301 Northshore Drive
North Little Rock, AR 72118
(501) 682-7390
Kay.Joiner@arkansas.gov
Finding Number: 2024-019
State/Educational Agency(s): Arkansas Department of Energy and Environment
Pass-Through Entity: Not Applicable
AL Number(s) and Program Title(s): 93.568 – Low-Income Home Energy Assistance
Federal Awarding Agency: U.S. Department of Health and Human Services
Federal Award Number(s): Various
Federal Award Year(s): 2023 and 2024
Compliance Requirement(s) Affected: Subrecipient Monitoring
Type of Finding: Noncompliance and Significant Deficiency
Repeat Finding:
Not applicable
Criteria:
In accordance with 45 CFR § 75.352 (f) – (h), the Agency is required to verify that every subrecipient is audited, as required by 45 CFR § 75.501, and reviewed for further monitoring considerations.
Condition and Context:
ALA review of five subrecipients revealed that although the Agency maintained copies of subrecipients’ most current audit reports, the Agency could not provide documentation to support that reviews of the audits had been performed.
Statistically Valid Sample:
Not a statistically valid sample
Questioned Costs:
None
Cause:
The Agency does not have controls in place to guarantee that subrecipients’ audit reports are reviewed and considered for further monitoring actions.
Effect:
Additional reviews, necessary adjustments, or enforcement actions against noncompliant subrecipients may not have occurred.
Recommendation:
ALA staff recommend the Agency strengthen control procedures to ensure the review of subrecipients’ audit reports is documented.
Views of Responsible Officials and Planned Corrective Action:
Subrecipient audit reports are requested, annually, from each subrecipient and reviewed by Agency staff. However, in order to demonstrate that reviews have been conducted, internal control procedures to document the reviews will include the following actions:
• Create a checklist of items to review in accordance with federal auditing requirements.
• Develop a report that documents the subrecipient audit that was reviewed; the reviewer’s name; date of the review; any actions required or taken; if applicable, date by which subrecipient must submit a corrective action plan (CAP); CAP status updates; and if applicable, subrecipient financial statements.
• Establish a schedule to review audit deficiencies with underperforming subrecipients.
• All documentation will be to an internal shared drive following a naming convention established by the program.
Anticipated Completion Date: June 15, 2025
Contact Person: Tim Scott
Senior Operations Manager
Arkansas Department of Energy and Environment
5301 Northshore Drive
North Little Rock, AR 72118
(501) 682-2433
Tim.W.Scott@arkansas.gov
Finding Number: 2024-020
State/Educational Agency(s): Arkansas Department of Human Services
Pass-Through Entity: Not Applicable
AL Number(s) and Program Title(s): 93.658 – Foster Care Title IV-E
Federal Awarding Agency: U.S. Department of Health and Human Services
Federal Award Number(s): 2301ARFOST; 2401ARFOST
Federal Award Year(s): 2023 and 2024
Compliance Requirement(s) Affected: Reporting
Type of Finding: Noncompliance and Material Weakness
Repeat Finding:
Not applicable
Criteria:
In accordance with 45 CFR § 75.303, a non-federal entity must 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 statues, regulations, and the terms and conditions of the award.
The Instructions for Completion of Form CB-496 provided by the federal awarding agency state, “Expenditures are considered made on the date the payment occurs, regardless of the date of receipt of the good or performance of the service.”
Per the U.S. Department of Health and Human Services, the information reported on form CB-496, Title IV-E Programs Quarterly Financial Report, is reviewed by various components of the Administration for Children and Families (ACF) to award funds, determine the allowability of reported expenditures, and provide reports to Congress. Determinations regarding whether reported expenditures are eligible for federal funding under Title IV-E will be made in accordance with applicable federal statute, regulations, and policy.
Condition and Context:
The Agency’s Division of Managerial Accounting staff prepare the required quarterly financial reports for the Title IV-E Foster Care federal program. The Agency uses the data from the DHS Cost Allocation system to track grant expenditures and provide information for reporting. The data within cost allocation is derived from expenditures posted to AASIS. The Agency’s internal controls state that Managerial Accounting staff who are responsible for submitting the federal financial reports meet with staff from the Division receiving the grant to become familiar with the specifics of each grant award assigned and discuss and obtain approval of all financial reports prior to submission.
ALA completed a reconciliation between the CB-496 Title IV-E Foster Care Quarterly Financial Reports ended September 30, 2023, December 31, 2023, March 31, 2024, and June 30, 2024 and the data obtained from the DHS Cost Allocation system relating to the Title IV-E Foster Care Program. Testing revealed the Agency did not properly record expenditures on the CB-496 Title IV-E Foster Care Quarterly Financial Reports as follows:
• In one instance, for quarterly report ended September 30, 2023, the Agency failed to include Placement and Residential Licensing expenditures in the total administrative expenditures reported.
• In two instances, for quarterly reports ended December 31, 2023 and March 31, 2024, the Agency failed to report complete and accurate expenditures for training costs. For quarter ended December 31, 2023, no training expenditures were reported. For quarter ended March 31, 2024, the amount reported was for expenditures paid outside of the reporting period.
• In three instances, for quarterly reports ended December 31, 2023, March 31, 2024, and June 30, 2024, the Agency duplicated a portion of administrative expenditures. The expense was recorded both on lines 7 and 12a/12b of the report.
• In two instances, for quarterly reports ended March 31, 2024 and June 30, 2024, the Agency recorded a portion of administrative expenditures using data from the incorrect reporting period.
• In three instances, for quarters ended December 31, 2023 and March 31, 2024 (two report lines), the amount reported on the quarterly report did not match the Agency’s supporting documentation.
Condition and Context (Continued):
• In one instance, for quarterly report ended September 30, 2023, the current quarter claims reported on Line 7 (In-Placement Administrative Costs – Provider and Agency Management), and lines 12a/12b (Comprehensive Child Welfare Information System (CCWIS) Project Operational Costs) contained inaccurate amounts. The errors net and do not affect total costs reported for the quarter.
• In three instances, for quarterly reports ended December 31, 2024, March 31, 2024, and June 30, 2024, the Agency included non-Title IV-E Foster Care program code expenditures in the amount recorded as the CCWIS Project Operational Costs portion of administrative expenditures.
Errors noted above resulted in total understated expenditures of $2,782,062 (federal portion $2,182,579) for the quarterly reports for period ended September 30, 2023, December 31, 2023, March 31, 2024, and June 30, 2024.
ALA reviewed documentation supporting that managerial accounting staff obtained approval from the Division of Child and Family Services prior to submission of the quarterly CB-496 Title IV-E Foster Care financial reports. In one instance (quarter ended March 31, 2024), the documented review was dated after the report submission date. Additionally, the documented approval was not obtained by the proper division.
Statistically Valid Sample:
Not applicable
Questioned Costs:
None
Cause:
Per Agency written procedures, management has developed procedures for ensuring federal reports are accurate. A two-part review is required for the submitted quarterly reports. The Agency failed to properly complete the review of the quarterly reports prior to submission.
Effect:
Inaccurate data was submitted on the CB-496 Quarterly Title IV-E Foster Care Financial Report.
Recommendation:
ALA staff recommend the Agency strengthen controls over reporting to ensure that amounts reported are accurate, complete, and properly supported by the appropriate records and documentation to ensure compliance with federal laws and regulations. ALA staff also recommend the Agency continue to strengthen controls to ensure the quarterly CB-496 Title IV-E Foster Care Financial Report are properly reviewed prior to submission.
Views of Responsible Officials and Planned Corrective Action:
DHS concurs with this finding. Corrections have been made to the affected quarterly reports for SFY2024. New program codes for Placement and Residential Licensing expenditures were not included in prior reporting for Administrative Costs. Documented procedures for quarterly financial reporting will be revised to include more specific instructions for reporting expenditures and additional levels of review prior to report submission. Additional training on completion of quarterly financial reporting is being developed for DCFS Finance and Managerial Accounting-Grants Management staff.
Anticipated Completion Date: April 30, 2025
Contact Person: Tiffany Wright
Director, Division of Children and Family Services
Department of Human Services
700 Main Street
Little Rock, AR 72201
(501) 396-6477
Tiffany.Wright@dhs.arkansas.gov
Finding Number: 2024-021
State/Educational Agency(s): Arkansas Department of Human Services
Pass-Through Entity: Not Applicable
AL Number(s) and Program Title(s): 93.659 – Adoption Assistance
Federal Awarding Agency: U.S. Department of Health and Human Services
Federal Award Number(s): Various
Federal Award Year(s): Various
Compliance Requirement(s) Affected: Activities Allowed or Unallowed; Eligibility
Type of Finding: Significant Deficiency
Repeat Finding:
A similar finding reported in prior-year finding 2023-016.
Criteria:
In accordance with 42 USC § 673 (a)(4)(A) and (B), a payment may not be made to parents with respect to a child if the State determines that the parents are no longer legally responsible for the support of the child or if the State determines that the child is no longer receiving any support from the parents. Parents who have been receiving adoption assistance payments shall keep the state administering the program informed of circumstances that would make them ineligible for the payments.
In accordance with 45 CFR § 75.303, a non-federal entity must:
• 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 award. These controls should be in compliance with Green Book or COSO guidance.
• Evaluate and monitor its compliance with the award.
• Take prompt action when instances of noncompliance are identified, including noncompliance identified in audit findings.
Condition and Context:
When an adoptive parent is no longer legally responsible for the support of the child (i.e., death of parent, termination of parental rights, child no longer receiving support from parent), the Adoption Unit must be notified in order to end the adoption subsidy. However, the notifications are not always timely, and the required information entered into the Children’s Reporting and Information System (CHRIS) is delayed, resulting in payments made to parents past the subsidy end date. As a result, the Agency established internal control procedures to identify these types of payments, and the overpayment information is provided to the accounts receivable department for collection.
ALA obtained a report from Division of Children and Family Services (DCFS) staff that contained all subsidy overpayments identified by the Agency during state fiscal year (SFY) ended June 30, 2024. The report revealed subsidy overpayments for 29 clients with payments made to 23 providers. The total overpayments consisted of $76,284 paid with federal funds and $24,442 paid with state general revenue.
All overpayments identified by the Agency are unallowable uses of the federal program funds. It was noted during the prior two consecutive audits (SFY2020 and SFY2023) that the Agency did not have procedures in place to repay the federal portion of the overpayments identified to the federal awarding agency. As of the end of fieldwork for the SFY2024 audit, the Agency had not made efforts to establish procedures, nor had the Agency made efforts to repay the federal portion of the overpayments identified.
To test the operating effectiveness of controls over compliance, the auditor reperformed the application of the Agency's controls for overpayments. ALA reviewed documentation for five providers to ensure the overpayments were researched and properly submitted for collection and proper collection efforts were made by the accounts receivable department.
Reperformance of the application of the Agency’s controls over overpayments revealed the following deficiencies:
• For three providers, the subsidy overpayment was recorded in the Agency’s accounts receivable system (AROPTS) as “State Adoption” funding source category. This classification could result in the Agency applying any subsequently collected amounts to the State General Revenue account instead of the Federal Funding account when repayments are received.
• For two providers, the Notice of overpayments sent to the provider from the Accounts Receivable Unit incorrectly listed the overpayments as "Notice of Foster Care Overpayment." Additionally, the overpayment information on the Demand Notice and the Notice of Intent to Intercept State Income Tax Refund(s) did not reflect the correct balance for all subsidy payments identified as overpayments. The Agency’s prior-year corrective action plan states the Accounts Receivable Unit in the Office of Finance has implemented systems changes that ensure all claims will generate a collections notice with the correct claims data. The Agency response to the prior-year finding was provided to DFA prior to the date this notice of overpayment was issued. It appears the Agency did not implement the corrective action plan as indicated.
• Two providers submitted multiple reimbursements totaling $700 and $6,800, respectively. From these amounts, reimbursements totaling $2,500 were incorrectly coded to the Foster Care State General Revenue internal order and fund.
• Two payments for $550 each were received from one provider and deposited in the Foster Care Trust Account as child support to offset the foster care board payment. The receivable balance was not properly reduced for this provider by $1,100.
Further discussion with the Agency revealed that adjustments for these overpayments have not been made on the quarterly federal financial reports or communicated with the federal awarding agency.
Statistically Valid Sample:
Not a statistically valid sample
Questioned Costs:
$ 706 – 2001ARADPT
$ 4,437 – 2101ARADPT
$ 16,049 – 2201ARADPT
$ 37,460 – 2301ARADPT
$ 17,632 – 2401ARADPT
Cause:
The internal control process for processing and collecting overpayments by the Accounts Receivable Unit is not adequate. Additionally, the adoption unit is not notified timely of events resulting in a subsidy ending.
Effect:
The federal awarding agency may require the State to pay back the overpaid funds.
Recommendation:
ALA staff recommend the Agency immediately update its internal control procedures document regarding the overpayment processes and provide relevant training to staff. Additionally, ALA staff recommend the Agency communicate with the federal awarding agency regarding proper procedures for repaying the unallowable costs.
Views of Responsible Officials and Planned Corrective Action:
DHS concurs with this finding. The DHS Accounts Receivables Unit is developing documented procedures and controls addressing the process for entering adoption subsidy overpayments into the agency’s accounts receivable system (AROPTS) and DCFS is updating documented procedures and training on reporting of collected overpayments to the Accounts Receivable Unit. System changes are also in process for AROPTS that will pull the adjusted balance for overpayments when a notice is being created.
Anticipated Completion Date: April 30, 2025
Contact Person: Renee Ikard
Chief Financial Officer
Department of Human Services
700 Main Street
Little Rock, AR 72201
(501) 682-8985
Renee.Ikard@dhs.arkansas.gov
Finding Number: 2024-022
State/Educational Agency(s): Arkansas Department of Human Services
Pass-Through Entity: Not Applicable
AL Number(s) and Program Title(s): 93.659 – Adoption Assistance
Federal Awarding Agency: U.S. Department of Health and Human Services
Federal Award Number(s): Various
Federal Award Year(s): Various
Compliance Requirement(s) Affected: Eligibility
Type of Finding: Noncompliance and Significant Deficiency
Repeat Finding:
A similar finding was reported in prior-year finding 2023-015.
Criteria:
Federal Adoption Assistance subsidy payments may be paid on behalf of a child only if all requirements are met, including the requirements below:
• In accordance with 45 CFR § 1356.40(b)(1), the adoption assistance agreement must be signed and in effect at the time of or prior to the final decree of adoption. The adoption assistance agreement is defined at 42 § USC 675(3).
• The prospective adoptive parent(s) must satisfactorily have met a criminal records check, including a fingerprint-based check (42 USC § 671(a)(20)(A)). This involves a determination that such individual(s) have not committed any prohibited felonies in accordance with 42 USC § 671(a)(20)(A)(i) and (ii).
Additionally, per Division of Children and Family Services (DCFS) Policy, the official record of child welfare information for DCFS is maintained through the Children’s Reporting Information System (CHRIS).
Condition and Context:
ALA staff reviewed 60 client adoption files to ensure sufficient, appropriate evidence was provided to support the Agency’s determination of eligibility. The clients selected for testing had adoption legalization dates that spanned from April 2006 to May 2024. The review of the 60 client case files revealed deficiencies resulting in a total of $151,567 in questioned costs paid with federal funds. The deficiencies are summarized below:
• One client file, with an adoption legalization date of June 26, 2018, contained a subsidy agreement that was signed and dated by the adoptive parent after the final decree of adoption. The subsidy agreement was signed by both adoptive parents on June 28, 2018. The adoptive parents received monthly subsidy payments from July 2018 through the present. Federal portion of questioned costs totaled $23,976.
• One client file with an adoption legalization date of January 10, 2014 did not contain a signed subsidy agreement. The adoptive parents received monthly subsidy payments from January 2014 through the present. Federal portion of questioned costs totaled $40,474.
• One client file, with an adoption legalization date of November 18, 2020, contained a subsidy agreement that was not legible, causing the signature and date signed by the adoptive parent to be unreadable. The Agency was unable to provide a legible copy of the signed subsidy. The adoptive parents received monthly subsidy payments from November 2020 through the present. The federal portion of questioned costs totaled $16,317.
Additionally, the review of the household member compliance requirements revealed deficiencies as summarized below:
• One provider home, with an adoption legalization date of December 2, 2015, was an Interstate Compact on the Placement of Children (ICPC) placement. The Agency was unable to provide a copy of the required ICPC form provided by the state of Virginia documenting the compliance with eligibility provisions of the provider home, nor was the information maintained in CHRIS. The adoptive parents received monthly subsidy payments from December 2015 through the present. Federal portion of questioned costs totaled $70,800.
Statistically Valid Sample:
Not a statistically valid sample
Questioned Costs:
$ 2,505 – 1401AR1407
$ 3,487 – 1501ARADPT
$ 9,522 – 1601ARADPT
$ 10,788 – 1701ARADPT
$ 11,906 – 1801ARADPT
$ 14,638 – 1901ARADPT
$ 14,827 – 2001ARADPT
$ 19,791 – 2101ARADPT
$ 20,895 – 2201ARADPT
$ 21,093 – 2301ARADPT
$ 22,115 – 2401ARADPT
Cause:
DCFS did not maintain sufficient records to support the eligibility of federal adoption subsidy payments made on behalf of adopted children.
Effect:
DCFS did not have adequate documentation supporting the eligibility for federal adoption subsidy payments made on behalf of adopted children. The federal awarding agency may require recoupment.
Recommendation:
ALA staff recommend the Agency continue providing adequate communication with and training to appropriate personnel to ensure compliance with program requirements and retention of documentation.
Views of Responsible Officials and Planned Corrective Action:
DHS concurs with the finding. The agency updated its documented controls in March 2024 to require confirmation that agreements are signed by all parties before processing adoption subsidy packets and that all adoption files contain complete documentation. All findings occurred prior to the agency updating its documented controls.
Anticipated Completion Date: Complete
Contact Person: Tiffany Wright
Director, Division of Children and Family Services
Department of Human Services
700 Main Street
Little Rock, AR 72201
(501) 396-6477
Tiffany.wright@dhs.arkansas.gov
Finding Number: 2024-023
State/Educational Agency(s): Arkansas Department of Human Services
Pass-Through Entity: Not Applicable
AL Number(s) and Program Title(s): 93.659 – Adoption Assistance
Federal Awarding Agency: U.S. Department of Health and Human Services
Federal Award Number(s): 2301ARADPT
Federal Award Year(s): 2023
Compliance Requirement(s) Affected: Reporting
Type of Finding: Noncompliance and Significant Deficiency
Repeat Finding:
Not applicable
Criteria:
In accordance with 45 CFR § 75.302, the auditee must provide an accurate, current, and complete disclosure of the financial results of each federal award or program in accordance with the reporting requirements.
Additionally, in accordance with 45 CFR § 75.303, a non-federal entity must:
• 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 award. These controls should be in compliance with Green Book or COSO guidance.
• Evaluate and monitor its compliance with the award.
• Take prompt action when instances of noncompliance are identified, including noncompliance identified in audit findings.
Per the U.S. Department of Health and Human Services, the information reported on form CB-496, Title IV-E Programs Quarterly Financial Report, is reviewed by various components of the Administration for Children and Families (ACF) to award funds, determine the allowability of reported expenditures, and provide reports to Congress. Determinations regarding whether reported expenditures are eligible for federal funding under Title IV-E will be made in accordance with applicable federal statute, regulations, and policy.
Condition and Context:
Managerial Accounting prepares the required quarterly financial reports for the Adoption Assistance federal program. The Agency uses the data from the DHS Cost Allocation system to track grant expenditures. The Agency’s cost allocation system is used to provide information for reporting. The data within cost allocation is derived from expenditures posted to AASIS.
ALA completed a reconciliation between the CB-496 Adoption Assistance Quarterly Financial Reports ending September 30, 2023, December 31, 2023, March 31, 2024, and June 30, 2024 and the data pulled from the DHS Cost Allocation system relating to the Adoption Assistance Program. Testing revealed the Agency did not properly record all administrative expenditures on the CB-496 Adoption Assistance Quarterly Financial Reports as follows:
• Quarter ended September 30, 2023 – Administrative cost under reported in the amount of $113,921.
Statistically Valid Sample:
Not applicable
Questioned Costs:
None
Cause:
Per Agency written procedures, management has developed procedures for ensuring federal reports are accurate. A two-part review is required for the submitted quarterly reports. The Agency failed to properly complete the review of the quarterly reports prior to submission.
Effect:
Inaccurate data was submitted on the CB-496 Quarterly Adoption Assistance Financial Report.
Recommendation:
ALA staff recommend the Agency strengthen controls over reporting to ensure that amounts reported are accurate, complete, and properly supported by the appropriate records and documentation to ensure compliance with federal laws and regulations. ALA staff also recommend the Agency continue to strengthen controls to ensure the quarterly CB-496 Adoption Assistance Financial Report is properly reviewed prior to submission.
Views of Responsible Officials and Planned Corrective Action:
DHS concurs with this finding. Corrections have been made to the affected quarterly reports for SFY2024. New program codes for Placement and Residential Licensing expenditures were not included in prior reporting for Administrative Costs. Documented procedures for quarterly financial reporting will be revised to include more specific instructions for reporting expenditures and additional levels of review prior to report submission. Additional training on completion of quarterly financial reporting is being developed for DCFS Finance and Managerial Accounting-Grants Management staff.
Anticipated Completion Date: April 30, 2025
Contact Person: Tiffany Wright
Director, Division of Children and Family Services
Department of Human Services
700 Main Street
Little Rock, AR 72201
(501) 396-6477
Tiffany.Wright@dhs.arkansas.gov
Finding Number: 2024-024
State/Educational Agency(s): Arkansas Department of Human Services
Pass-Through Entity: N/A
AL Number(s) and Program Title(s): 93.767 – Children’s Health Insurance Program
93.778 – Medical Assistance Program
(Medicaid Cluster)
Federal Awarding Agency: U.S. Department of Health and Human Services
Federal Award Number(s): 05-2305AR3002, 05-2305AR5021, 05-2405AR5021
05-2305AR5MAP, 05-2405AR5MAP
Federal Award Year(s): 2023 and 2024
Compliance Requirement(s) Affected: Eligibility
Type of Finding: Significant Deficiency
Repeat Finding:
Not applicable.
Criteria:
In accordance with 45 CFR § 75.303, a non-federal entity must 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 award. In addition, 42 CFR § 435.1009 states that federal financial participation (FFP) is not available for payments made on behalf of individuals who are inmates in public institutions.
Condition and Context:
The Agency has established system controls to identify Medicaid and CHIP recipients who are no longer eligible for the programs due to death or incarceration.
To identify unreported deceased recipients, monthly recipient data is “matched” to Arkansas Department of Health vital records data. Results of recipients “matched” to death records are uploaded to Arkansas Integrated Eligibility System (ARIES), where an ARIES task is created to alert the Division of County Operations (DCO) that the recipient may be deceased. DCO staff are to complete the task by determining whether the recipient is, in fact, deceased; enter the date of death to the case file; and close any open aid segments.
ALA selected for review 4 months from state fiscal year 2024 to ensure the death data matches were performed, and the Agency performed the follow-up review for identified matches. Per ALA review, the matches were not completed for any of the selected months, and the Agency received the data match files for only 5 months of the state fiscal year.
To identify incarcerated recipients, recipient data is “matched” to Arkansas Department of Correction inmate data. Resulting “matches” are submitted to ARIES, where an ARIES task will be created to alert DCO staff that the recipient may be incarcerated; therefore, the State may no longer receive FFP for payments made on his/her behalf. Should DCO determine the individual is incarcerated, the recipient’s case will be suspended pending release or closed if determined the individual is no longer eligible to receive benefits. Incarcerated data matches are performed daily for state workdays only.
ALA selected 25 state workdays from state fiscal year 2024 for review to ensure the daily incarceration matches were performed, and the Agency performed the follow-up review for identified matches. Per ALA review, the daily incarceration match was not completed for 1 of the selected dates. Additionally, ALA selected up to 5 matches from the remaining selected dates, depending on the total number of matches for that date, for further review to ensure DCO completed work on the ARIES task. ALA noted the Agency failed to timely perform the follow-up review for 4 of 113 ARIES tasks created from the match results.
Statistically Valid Sample:
Not a statistically valid sample.
Questioned Costs:
Unknown
Cause:
Per DCO, match results were not uploaded to ARIES due to system issues that have since been corrected.
Effect:
Closure or suspension of cases may have been delayed for deceased and/or incarcerated individuals. This delay may have allowed improper payments, including monthly capitation payments, to be made.
Recommendation:
ALA staff recommend the Agency closely monitor data match processes to ensure the matches are being completed as designed and ARIES tasks stemming from these match results are worked in the system timely.
Views of Responsible Officials and Planned Corrective Action:
DHS concurs with this finding. DCO has implemented controls that monitor the automated matching process with the Arkansas Department of Health and Arkansas Department of Corrections. These additional controls include a pre-cycle review of the matching process prior to execution, additional checkpoints during the execution of the matching process, monitoring, validating completion of the matching jobs to check for excepted results, and additional communication and coordination among systems, business teams, and other cabinet agencies.
Anticipated Completion Date: Complete
Contact Person: Mary Franklin
Director, Division of County Operations
Department of Human Services
700 Main Street
Little Rock, AR 72201
(501) 681-8377
Mary.Franklin@dhs.arkansas.gov
Finding Number: 2024-024
State/Educational Agency(s): Arkansas Department of Human Services
Pass-Through Entity: N/A
AL Number(s) and Program Title(s): 93.767 – Children’s Health Insurance Program
93.778 – Medical Assistance Program
(Medicaid Cluster)
Federal Awarding Agency: U.S. Department of Health and Human Services
Federal Award Number(s): 05-2305AR3002, 05-2305AR5021, 05-2405AR5021
05-2305AR5MAP, 05-2405AR5MAP
Federal Award Year(s): 2023 and 2024
Compliance Requirement(s) Affected: Eligibility
Type of Finding: Significant Deficiency
Repeat Finding:
Not applicable.
Criteria:
In accordance with 45 CFR § 75.303, a non-federal entity must 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 award. In addition, 42 CFR § 435.1009 states that federal financial participation (FFP) is not available for payments made on behalf of individuals who are inmates in public institutions.
Condition and Context:
The Agency has established system controls to identify Medicaid and CHIP recipients who are no longer eligible for the programs due to death or incarceration.
To identify unreported deceased recipients, monthly recipient data is “matched” to Arkansas Department of Health vital records data. Results of recipients “matched” to death records are uploaded to Arkansas Integrated Eligibility System (ARIES), where an ARIES task is created to alert the Division of County Operations (DCO) that the recipient may be deceased. DCO staff are to complete the task by determining whether the recipient is, in fact, deceased; enter the date of death to the case file; and close any open aid segments.
ALA selected for review 4 months from state fiscal year 2024 to ensure the death data matches were performed, and the Agency performed the follow-up review for identified matches. Per ALA review, the matches were not completed for any of the selected months, and the Agency received the data match files for only 5 months of the state fiscal year.
To identify incarcerated recipients, recipient data is “matched” to Arkansas Department of Correction inmate data. Resulting “matches” are submitted to ARIES, where an ARIES task will be created to alert DCO staff that the recipient may be incarcerated; therefore, the State may no longer receive FFP for payments made on his/her behalf. Should DCO determine the individual is incarcerated, the recipient’s case will be suspended pending release or closed if determined the individual is no longer eligible to receive benefits. Incarcerated data matches are performed daily for state workdays only.
ALA selected 25 state workdays from state fiscal year 2024 for review to ensure the daily incarceration matches were performed, and the Agency performed the follow-up review for identified matches. Per ALA review, the daily incarceration match was not completed for 1 of the selected dates. Additionally, ALA selected up to 5 matches from the remaining selected dates, depending on the total number of matches for that date, for further review to ensure DCO completed work on the ARIES task. ALA noted the Agency failed to timely perform the follow-up review for 4 of 113 ARIES tasks created from the match results.
Statistically Valid Sample:
Not a statistically valid sample.
Questioned Costs:
Unknown
Cause:
Per DCO, match results were not uploaded to ARIES due to system issues that have since been corrected.
Effect:
Closure or suspension of cases may have been delayed for deceased and/or incarcerated individuals. This delay may have allowed improper payments, including monthly capitation payments, to be made.
Recommendation:
ALA staff recommend the Agency closely monitor data match processes to ensure the matches are being completed as designed and ARIES tasks stemming from these match results are worked in the system timely.
Views of Responsible Officials and Planned Corrective Action:
DHS concurs with this finding. DCO has implemented controls that monitor the automated matching process with the Arkansas Department of Health and Arkansas Department of Corrections. These additional controls include a pre-cycle review of the matching process prior to execution, additional checkpoints during the execution of the matching process, monitoring, validating completion of the matching jobs to check for excepted results, and additional communication and coordination among systems, business teams, and other cabinet agencies.
Anticipated Completion Date: Complete
Contact Person: Mary Franklin
Director, Division of County Operations
Department of Human Services
700 Main Street
Little Rock, AR 72201
(501) 681-8377
Mary.Franklin@dhs.arkansas.gov
Finding Number: 2024-025
State/Educational Agency(s): Arkansas Department of Human Services
Pass-Through Entity: Not Applicable
AL Number(s) and Program Title(s): 93.767 – Children’s Health Insurance Program
Federal Awarding Agency: U.S. Department of Health and Human Services
Federal Award Number(s): 05-2305AR3002 and 05-2305AR5021
Federal Award Year(s): 2023
Compliance Requirement(s) Affected: Special Tests and Provisions – Provider Eligibility (Fee-for-Service)
Type of Finding: Material Noncompliance and Material Weakness
Repeat Finding:
A similar issue was reported in prior-year finding 2023-026.
Criteria:
According to the Arkansas Medicaid Provider Manual section 140.000, Provider Participation, any provider of health services must be enrolled in the Arkansas Medicaid Program prior to reimbursement for any services provided to Arkansas Medicaid beneficiaries. Enrollment is considered complete when a provider has signed and submitted the following forms:
• Application.
• W-9 tax form.
• Medicaid provider contract.
• PCP agreement, if applicable.
• EPSDT agreement, if applicable.
• Change in ownership control or conviction of crime form.
• Disclosure of significant business transactions form.
• Specific license or certification base on provider type and specialty, if applicable.
• Participation in the Medicare program, if applicable.
42 CFR § 455.414 (effective March 25, 2011, with an extended deadline of September 25, 2016, for full compliance) states that the State Medicaid Agency must revalidate the enrollment of all providers at least every five years. Section 141.100 of the Arkansas Medicaid Provider Manual states that revalidation includes a new application; satisfactory completion of screening activities; and, if applicable, fee payment. In accordance with 42 CFR § 455.450, screening activities vary depending on the risk category of the provider as follows:
• The limited-risk category includes database checks.
• The moderate-risk category includes those required for limited-risk plus site visits.
• The high-risk category includes those required for moderate-risk plus fingerprint background checks.
Condition and Context:
From a population of 6,309 providers, ALA staff reviewed files of 40 providers to ensure sufficient, appropriate evidence was provided to support the determination of eligibility, including compliance with revalidation requirements. ALA review revealed deficiencies with three of the provider files as follows:
Moderate-risk category:
Sample item 32: The provider’s revalidation was due by September 25, 2016, and every five years afterwards but was not completed until April 2, 2024. As a result, any amounts paid to the provider with dates of service from September 26, 2016 through February 29, 2020, and May 12, 2023 through April 1, 2024, are considered questioned costs. Questioned costs totaled $37,430 (federal) and $8,801 (state).
In accordance with the CMS 1135 waiver, revalidations, site visits, and fingerprint background checks were paused from March 1, 2020 through May 11, 2023, as result of the Public Health Emergency (PHE). In addition, revalidations due during the PHE could be extended to November 11, 2023. However, this provider’s revalidation was due prior to March 1, 2020; therefore, the extension is not applicable. Amounts paid to the provider for dates of service during the PHE are not included in the questioned costs noted above.
Limited-risk category:
Sample item 15: The provider’s revalidation was due by June 1, 2024, but was not completed until June 21, 2024. As result, amounts paid to the provider with dates of service from June 1 through June 20, 2024, are considered questioned costs. Questioned costs totaled $3,287 (federal) and $801 (state).
Sample item 21: The provider’s revalidation was due by January 13, 2021, but was not completed until December 13, 2023. As a result, amounts paid to the provider with dates of service from November 12, 2023 through December 12, 2023, are considered questioned costs. Questioned costs totaled $10 (federal) and $2 (state).
In accordance with CMS 1135 waiver flexibilities, revalidations, site visits, and fingerprint background checks were paused from March 1, 2020 through May 11, 2023, as result of the PHE. In addition, revalidations due during the PHE, which this one was, could be extended to November 11, 2023. Amounts paid to the provider for dates of service during the PHE and extension are not included in the questioned costs noted above.
Statistically Valid Sample:
Not a statistically valid sample
Questioned Costs:
$40,727 (Federal)
$9,604 (State)
Cause:
The Agency has asserted that, effective May 31, 2019, it established and implemented new procedures to improve the following areas of provider enrollment: maintenance of provider enrollment application documents, provider revalidation, site visits, and fingerprint background requirements. Although testing results support that improvements have been made since the new procedures were implemented, deficiencies continued to exist during fiscal year 2024.
Effect:
Claims were processed and paid to providers that did not meet all the required elements and, therefore, were ineligible.
Recommendation:
ALA staff recommend the Agency review and strengthen controls to ensure that required revalidations are performed timely and that required enrollment documentation is maintained to support provider eligibility.
Views of Responsible Officials and Planned Corrective Action:
DHS concurs with the finding. For Sample Item 32, the agency’s revalidation date was set for March 27, 2024, and the provider submitted their application for revalidation prior to that date. System updates and monitoring controls have been implemented to ensure correct revalidation dates are entered in MMIS.
For Sample Item 15, the provider submitted a revalidation application prior to their scheduled termination date. Since there was an active application in the system, the provider was not terminated. The revalidation was successfully completed.
For Sample Item 21, the provider submitted their revalidation application on October 16, 2023, which was prior to the November 11, 2023 deadlines. Multiple follow-ups and requests for additional information from the provider resulted in completion of the revalidation after the deadline date.
Anticipated Completion Date: Complete
Contact Person: Elizabeth Pitman
Director, Division of Medical Services
Department of Human Services
700 Main Street
Little Rock, AR 72201
(501) 244-3944
Elizabeth.Pitman@dhs.arkansas.gov
Finding Number: 2024-026
State/Educational Agency(s): Arkansas Department of Human Services
Pass-Through Entity: Not applicable
AL Number(s) and Program Title(s): 93.778 – Medical Assistance Program
(Medicaid Cluster)
Federal Awarding Agency: U.S. Department of Health and Human Services
Federal Award Number(s): 05-2405AR5ADM
Federal Award Year(s): 2024
Compliance Requirement(s) Affected: Allowable Costs/Cost Principles
Type of Finding: Noncompliance and Significant Deficiency
Repeat Finding:
Not applicable
Criteria:
45 CFR § 75.413(a) defines direct costs as “those costs that can be identified specifically with a particular final cost objective, such as a federal award, or other internally or externally funded activity, or that can be directly assigned to such activities relatively easily with a high degree of accuracy.” Additionally, this regulation states, “costs incurred for the same purpose in like circumstances must be treated consistently as either direct or indirect Facilities and Administrative (F&A) costs.”
Condition and Context:
ALA noted the Agency utilized a contractor to perform work in the Agency’s Managerial Accounting section. Costs associated with this work were improperly recorded as a direct cost to the Medicaid program, while other costs incurred by Managerial Accounting were appropriately allocated to the various DHS divisions and programs through the Agency’s cost allocation system. Per Agency management, only 68% of Managerial Accounting costs should be allocated to the Medicaid program, not the 100% that was charged.
Costs paid for contractor’s work in the Managerial Accounting section totaled $392,000. Based on the Agency’s assertion that 68% of this cost should have been allocated to the Medicaid program, ALA determined costs totaling $125,440 were incorrectly charged to Medicaid.
Statistically Valid Sample:
Not a statistically valid sample
Questioned Costs:
Federal − $62,720
State − $62,720
Cause:
Per management, the Agency chose to assign the costs of the work performed for Managerial Accounting to the Medicaid program because Medicaid represents the largest share of funding to the Agency, which suggests a lack of internal controls over the appropriate coding of expenditures benefiting multiple programs or activities of the Agency.
Effect:
The Agency improperly used federal funds awarded through the Medical Assistance Program (MAP) grant award for expenditures benefitting other state or federal programs, resulting in noncompliance with federal laws and regulations.
Recommendation:
ALA staff recommend the Agency establish and implement additional controls to ensure that expenditures benefitting multiple state or federal programs are properly allocated across all programs or activities.
Views of Responsible Officials and Planned Corrective Action:
DHS concurs with this finding and that cost allocation is the most appropriate means for funding this work. DHS has implemented corrective action effective July 1, 2024, to change payment for Managerial Accounting services from 100% Medicaid funding to a cost allocation methodology. Future contracts and contract extensions executed by the Office of Finance will be evaluated by the DHS Chief Financial Officer to determine the nature of work performed for each contract and specify the appropriate method of allocating costs for services.
Anticipated Completion Date: Complete
Contact Person: Renee Ikard
Chief Financial Officer
Department of Human Services
700 Main Street
Little Rock, AR 72201
(501) 682-8985
Renee.Ikard@dhs.arkansas.gov
Finding Number: 2024-027
State/Educational Agency(s): Arkansas Department of Human Services
Pass-Through Entity: N/A
AL Number(s) and Program Title(s): 93.778 – Medical Assistance Program
(Medicaid Cluster)
Federal Awarding Agency: U.S. Department of Health and Human Services
Federal Award Number(s): 05-2305AR5MAP; 05-2405AR5MAP
Federal Award Year(s): 2023 and 2024
Compliance Requirement(s) Affected: Eligibility
Type of Finding: Noncompliance and Material Weakness
Repeat Finding:
A similar issue reported in prior-year finding 2023-028.
Criteria:
In accordance with 45 CFR § 75.303, a non-federal entity must 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 statues, regulations, and the terms and conditions of the award.
In addition, 42 CFR § 435.1009 states that federal financial participation (FFP) is not available for payments made on behalf of individuals who are inmates in public institutions, including eligible juveniles. To be considered an inmate of a public institution, a person must be living in an institution that is the responsibility of a governmental unit or over which a governmental unit exercises administrative control.
Finally, under section 1001 of the Substance Use Disorder Prevention that Promotes Opioid Recovery and Treatment for Patients and Communities Act (SUPPORT Act), states are (1) prohibited from terminating the Medicaid eligibility of an “eligible juvenile” who becomes an inmate of a public institution, (2) required to process applications submitted by incarcerated youth, and (3) required to re-determine the Medicaid eligibility of eligible juveniles before their release from a public institution.
An eligible juvenile is defined as a “juvenile who is an inmate of a public institution and who (A) was determined eligible for medical assistance under the State plan immediately before becoming an inmate of such a public institution; or (B) is determined eligible for such medical assistance while an inmate of a public institution.”
In compliance with this requirement, Medical Services Manual section D-380 states that coverage for children entering the custody of the Division of Youth Services (DYS) will be placed in suspension status for up to 12 months from the initial approval or most recent renewal. When a child with suspended Medicaid eligibility receives eligible medical treatment off the grounds of the juvenile detention facility (inpatient services) or is released from custody, the child’s Medicaid case will be reinstated for a fixed eligibility period from the date of hospitalization to the date of hospital discharge. Once the child returns to the DYS state-run facility, the Medicaid case is re-suspended.
Condition and Context:
ALA staff selected 60 files for incarcerated juveniles to determine whether the State is properly suspending a juvenile’s benefit coverage when the juvenile is held in a public institution and properly reinstating coverage when the juvenile is placed in non-public institutions or released from DYS custody. ALA’s review also included ensuring that benefit payments were not made for dates of service that fell within the juvenile’s incarceration period.
ALA review revealed the following deficiencies:
• The Agency failed to appropriately suspend and reinstate benefits for 16 incarcerated juveniles. As a result, payments totaling $71,536 were made for dates of service within the incarceration periods for 11 juveniles. The federal and state portions of these payments totaled $52,632 and $18,904, respectively.
• The Agency failed to appropriately suspend Medicaid benefits for 9 incarcerated juveniles in DYS custody, which resulted in payments totaling $50,307 for dates of service during the juveniles’ incarceration periods. The federal and state portions of these payments totaled $36,577 and $13,730, respectively.
• Although the Agency appropriately suspended benefits for 4 incarcerated juveniles, the Agency failed to properly reinstate benefits after their incarceration ended. Additionally, the Agency paid claims, totaling $1,164, for dates of service within the incarceration period for 2 of these juveniles. The federal and state portions of these payments totaled $902 and $262, respectively.
• Although the Agency appropriately suspended and reinstated benefits for 9 incarcerated juveniles, payments totaling $6,978 were made for dates of service within the juveniles’ incarceration periods. The federal and state portions of these payments totaled $5,293 and $1,685, respectively.
Statistically Valid Sample:
Not a statistically valid sample
Questioned Costs:
Federal – $95,404
State – $34,581
Cause:
The Agency failed to properly monitor Medicaid eligibility for juveniles in DYS custody. Suspensions of benefits were not always entered timely, were entered with incorrect effective dates, or were not entered into the system when an eligible juvenile was incarcerated.
Effect:
The Agency improperly received and used funds for payments made on behalf of incarcerated juveniles.
Recommendation:
ALA staff recommend the Agency design and implement internal controls over compliance to ensure that Medicaid benefits are properly suspended when eligible juveniles are incarcerated and properly reinstated when moved to private facilities or released from DYS custody, based on guidance set forth in the Medical Service Policy Manual and in compliance with federal regulations.
Views of Responsible Officials and Planned Corrective Action:
DHS concurs with this finding. Since June 2023, DYS has made multiple changes to improve monitoring of suspension and reinstatement of Medicaid eligibility for incarcerated juveniles. For juveniles with SSI Medicaid, the Social Security Administration (SSA) is responsible for suspending Medicaid coverage. All incarcerations for cases noted in the findings involving SSI Medicaid were reported timely to SSA by the agency. DYS closely monitors these cases and continues to send closure requests to SSA until the cases are closed out. SSI cases account for 76% of the total questioned costs noted in the finding. The Division of Medical Services (DMS) implemented an MMIS change in September 2024 that automatically updates member profiles to accurately reflect incarceration dates. This change will resolve the remaining deficiencies noted in the finding. All payments noted as questioned costs were capitated payments made for the PASSE, Dental Managed Care, and NET programs. The agency currently has a reconciliation process for all three programs that identifies payments made after the member’s incarceration date that should be recouped. Any uncollected overpayments noted in the findings will be recouped as part of the next reconciliation process.
Anticipated Completion Date: Complete
Contact Person: Elizabeth Pitman
Director, Division of Medical Services
Department of Human Services
700 Main Street
Little Rock, AR 72201
(501) 244-3944
Elizabeth.Pitman@dhs.arkansas.gov
Finding Number: 2024-028
State/Educational Agency(s): Arkansas Department of Human Services
Pass-Through Entity: N/A
AL Number(s) and Program Title(s): 93.778 – Medical Assistance Program
(Medicaid Cluster)
Federal Awarding Agency: U.S. Department of Health and Human Services
Federal Award Number(s): 05-2305AR5MAP; 05-2405AR5MAP
Federal Award Year(s): 2023 and 2024
Compliance Requirement(s) Affected: Eligibility
Type of Finding: Noncompliance and Significant Deficiency
Repeat Finding:
A similar issue was reported in prior-year finding 2023-029.
Criteria:
In accordance with 45 CFR § 75.303, a non-federal entity must 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 statues, regulations, and terms and conditions of the award.
States are required to establish eligibility requirements in accord with 42 CFR Part 435 and are required to cover some categorically eligible recipients, including individuals who are receiving SSI payment or who have lost SSI eligibility due to receiving SSA benefits as a disabled adult child and newborns whose mother was on Medicaid at the time of the child’s birth. Newborn coverage is to extend through the month of the child’s first birthday. Also, 42 CFR § 435.914 requires the State to maintain documentation supporting the eligibility determination in the beneficiary’s case record.
Condition and Context:
ALA selected 60 active Medicaid recipient identification numbers to determine if eligibility determinations and redeterminations were made in accordance with the State Plan.
ALA review revealed the following deficiencies:
• Payments were made for one recipient with a date of death of September 11, 2019. Per review, the individual’s Medicaid eligibility case was properly closed in the eligibility system, but the date of death did not cross over to the Medical Management Information System (MMIS). ALA confirmed all claims paid for dates of service after death were recouped as of December 30, 2024. No questioned costs are noted.
• The Agency was unable to provide documentation to support one recipient’s initial eligibility determination for the Newborn category, including documentation of initial application or documentation showing the recipient’s mother was eligible under Medicaid. Per review, payments totaling $73 were made on behalf of the recipient. The federal and state portions of these payments totaled $54 and $19, respectively.
• The Agency extended coverage for one recipient enrolled in the Newborn category for one month past the one-year requirement. Upon renewal determination, the Agency determined the child was no longer eligible for Medicaid under another category. Per review, payments totaling $13 were made for dates of service after the month of the child’s first birthday. The federal and state portions of these payments totaled $9 and $3, respectively
Statistically Valid Sample:
Not a statistically valid sample
Questioned Costs:
Federal − $63
State − $22
(Known questioned costs greater than $25,000 for a type of compliance requirement are required to be reported. In evaluating the effect of questioned costs on the opinion on compliance, the auditor considers the best estimate of total costs questioned [likely questioned costs], not just the questioned costs specifically identified. The auditor must also report known questioned costs when likely questioned costs are greater than $25,000 for a type of compliance requirement for a major program.)
Cause:
Date of death documented in the previous eligibility system did not properly migrate to the Medicaid Management Information System (MMIS) claims payment system. Per Division of County Operations (DCO), the cause of recipient’s death not properly migrating to MMIS is unknown at this time. For one newborn case, documentation that should have been included in the case record in the previous eligibility system was not maintained in the archival database for that system. For the remaining newborn case, Arkansas Integrated Eligibility System (ARIES) improperly allowed a coverage period that extended beyond the end of the month of the child’s first birthday.
Effect:
Failure to properly determine and end Medicaid eligibility may result in improper payments.
Recommendation:
ALA staff recommend the Agency design and implement internal controls over compliance to ensure that eligibility determinations are appropriate and dates of death are properly recorded in both the eligibility and claims payment systems.
Views of Responsible Officials and Planned Corrective Action:
DHS concurs with this finding. The first two deficiencies occurred prior to implementation of the agency’s current integrated eligibility system (ARIES). The date of death for the beneficiary did not cross over from the prior eligibility system to MMIS. The agency has implemented a process to monitor and address when eligibility updates do not cross over successfully from the ARIES system to MMIS.
For the second case, the missing documentation was likely the result of a failure to scan or appropriately index the document in the prior eligibility system. The agency will continue its practice of reviewing a sample of eligibility cases for accuracy.
For the third case, the coverage did not close properly at the end of the month due to a system defect. The correction for this defect was deployed in ARIES on 3/31/24.
Anticipated Completion Date: Complete
Contact Person: Mary Franklin
Director, Division of County Operations
Department of Human Services
700 Main Street
Little Rock, AR 72201
(501) 681-8377
Mary.Franklin@dhs.arkansas.gov
Finding Number: 2024-029
State/Educational Agency(s): Arkansas Department of Human Services
Pass-Through Entity: Not Applicable
ALN Number(s) and Program Title(s): 93.778 – Medical Assistance Program
(Medicaid Cluster)
Federal Awarding Agency: U.S. Department of Health and Human Services
Federal Award Number(s): 05-2305AR5MAP; 05-2405AR5MAP
Federal Award Year(s): 2023 and 2024
Compliance Requirement(s) Affected: Special Tests and Provisions –
Medicaid Recovery Audit Contractors (RACs)
Type of Finding: Material Noncompliance and Material Weakness
Repeat Finding:
A similar issue was reported in prior-year finding 2023-031.
Criteria:
In accordance with 45 CFR § 75.303, a non-federal entity must 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 award.
In addition, 42 CFR § 455.502 established the Medicaid Recovery Audit Contractor (RAC) program as a measure for States to promote the integrity of the Medicaid program. States must enter into contracts with one or more eligible Medicaid RACs to carry out the activities described at 42 CFR § 455.506, which includes reviewing claims submitted by providers or other individuals for which payment has been made to identify underpayments and overpayments, and recoup overpayments. Under 42 CFR § 455.516, a State may seek to be excepted from some or all Medicaid RAC contracting requirements by submitting a written justification to CMS requesting CMS review and approval through the State Plan Amendment (SPA) process.
Condition and Context:
ALA made inquiries to determine if there were any internal controls in place for which testing could be performed. It was determined that there were no internal controls in place at the Agency that pertained to the Medicaid RAC program.
In addition, ALA performed testing to determine if the State had established a Medicaid RAC with an eligible contractor that was conducting the required Medicaid RAC activities in accordance with the approved state plan, including any exceptions. The results of ALA testing revealed that, although there was no SPA in place that authorized an exception for the State to not have a Medicaid RAC in place, there were no contracts in place with any RACs for the year ended June 30, 2024.
Documentation provided to ALA indicates the Agency submitted a request to CMS on October 3, 2024, for a full exemption from the requirement that the State enter a contract with a Medicaid RAC. As of October 3, 2024, the Agency indicated that it anticipated an effective date of February 1, 2025, provided the Agency receives all required approvals by that time.
Statistically Valid Sample:
Not a statistically valid sample.
Questioned Costs:
None
Cause:
The Agency did not adequately develop internal control procedures for its staff to ensure compliance with federal regulations related to the Medicaid RAC program.
Effect:
Failure to implement appropriate procedures for internal controls led to the Agency’s noncompliance with federal regulations pertaining to the Medicaid RAC program.
Recommendation:
ALA staff recommend the Agency continue to take the necessary steps to comply with federal regulations pertaining to the Medicaid RAC program.
Views of Responsible Officials and Planned Corrective Action:
DHS concurs with this finding. CMS approved DHS’s Medicaid State Plan Amendment (SPA) requesting exemption from the RAC requirement. The waiver was approved on February 28, 2025, with an effective date of February 1, 2025. The exemption is effective for two years from the effective date of the SPA.
Anticipated Completion Date: Complete
Contact Person: Elizabeth Pitman
Director, Division of Medical Services
Department of Human Services
700 Main Street
Little Rock, AR 72201
(501) 244-3944
Elizabeth.Pitman@dhs.arkansas.gov
Finding Number: 2024-030
State/Educational Agency(s): Arkansas Department of Human Services
Pass-Through Entity: N/A
AL Number(s) and Program Title(s): 93.778 – Medical Assistance Program
(Medicaid Cluster)
Federal Awarding Agency: U.S. Department of Health and Human Services
Federal Award Number(s): 05-2305AR5MAP, 05-2405AR5MAP
Federal Award Year(s): 2023 and 2024
Compliance Requirement(s) Affected: Special Tests and Provisions – Medicaid Fraud Control Unit
Type of Finding: Noncompliance and Significant Deficiency
Repeat Finding:
Not applicable
Criteria:
42 CFR § 433, Subpart F, establishes requirements for identifying overpayments to Medicaid providers and refunding the federal portion of identified overpayments to the federal awarding agency. The provisions apply to overpayments discovered by a state, by a provider and made known to the state, or through federal review.
Also, in accordance with 42 CFR § 433.320, an agency must refund the federal share of overpayments that are subject to recovery by recording a credit on its Quarterly Statement of Expenditures (form CMS-64). An agency must credit the federal share of overpayments on the earlier of (1) the CMS-64 submission due for the quarter in which the overpayment is recovered from the provider or (2) the quarter in which the one-year period following discovery, established in accordance with 42 CFR § 433.316, ends. A credit on the CMS-64 must be made whether or not the state has recovered the overpayment from the provider.
Finally, as stated in a CMS letter to the State Health Official, SHO #08-004, in accordance with Sections 1903(d)(2)(A) and (d)(3)(A) of the Social Security Act, states are required to return “the federal share of Medicaid overpayments, damages, fines, penalties, and any other component of a legal judgment or settlement when a State recovers pursuant to legal action under its State False Claims Act (SFCA).”
Condition and Context:
ALA performed procedures to verify overpayments identified by the Medicaid Fraud Control Unit (MFCU) were properly reported on the quarterly CMS-64 report. One payment representing restitution for a criminal conviction or settlement agreement, totaling $197,427, was not reported on the CMS-64 report. The federal share that should have been reported for MFCU-related overpayments was $142,148.
Statistically Valid Sample:
Not a statistically valid sample
Questioned Costs:
Federal Portion − $142,148
State Portion − $55,279
Cause:
The Agency did not have proper internal controls over the recording and reporting of the collection of overpayments by MFCU.
Effect:
The Agency failed to report all required restitution and other judgements on its CMS-64 reports
Recommendation:
ALA staff recommend the Agency review and strengthen its accounts receivable procedures and provide adequate training to all individuals involved in recording and reporting provider overpayments identified by MFCU.
Views of Responsible Officials and Planned Corrective Action:
DHS concurs with this finding. All MFCU overpayment collections are received by DHS through an agency bank account dedicated to refunded overpayments. All transactions in that account are compiled into a monthly receivables report that is used for quarterly reporting overpayments to CMS. The overpayment that was not included in the report was wired to the Arkansas State Treasury and the funds were moved to an AASIS fund. Because the funds were not received through the dedicated refund account, the overpayment was missed in the monthly report. For all future collections completed through electronic transfer of funds, the person or entity making the refund will be provided with ACH/EFT information for dedicated refund account.
Anticipated Completion Date: Complete
Contact Person: Elizabeth Pitman
Director, Division of Medical Services
Department of Human Services
700 Main Street
Little Rock, AR 72201
(501) 244-3944
Elizabeth.Pitman@dhs.arkansas.gov
Finding Number: 2024-031
State/Educational Agency(s): Arkansas Department of Human Services
Pass-Through Entity: Not Applicable
AL Number(s) and Program Title(s): 93.778 – Medical Assistance Program
(Medicaid Cluster)
Federal Awarding Agency: U.S. Department of Health and Human Services
Federal Award Number(s): 05-2305AR5MAP; 05-2405AR5MAP
Federal Award Year(s): 2023 and 2024
Compliance Requirement(s) Affected: Special Tests and Provisions – Provider Eligibility (Fee for Service)
Type of Finding: Noncompliance and Significant Deficiency
Repeat Finding:
A similar issue was reported in prior-year finding 2023-030.
Criteria:
According to the Arkansas Medicaid Provider Manual section 140.000, Provider Participation, any provider of health services must be enrolled in the Arkansas Medicaid Program prior to reimbursement for any services provided to Arkansas Medicaid beneficiaries. Enrollment is considered complete when a provider has signed and submitted the following forms:
• Application.
• W-9 tax form.
• Medicaid provider contract.
• PCP agreement, if applicable.
• EPSDT agreement, if applicable.
• Change in ownership control or conviction of crime form.
• Disclosure of significant business transactions form.
• Specific license or certification base on provider type and specialty, if applicable.
• Participation in the Medicare program, if applicable.
42 CFR § 455.414 (effective March 25, 2011, with an extended deadline of September 25, 2016, for full compliance) states that the State Medicaid Agency must revalidate the enrollment of all providers at least every five years. Section 141.100 of the Arkansas Medicaid Provider Manual states that revalidation includes a new application; satisfactory completion of screening activities; and, if applicable, fee payment. In accordance with 42 CFR § 455.450, screening activities vary depending on the risk category of the provider as follows:
• The limited-risk category includes database checks.
• The moderate-risk category includes those required for limited-risk plus site visits.
• The high-risk category includes those required for moderate-risk plus fingerprint background checks.
Condition and Context:
From a population of 11,471, ALA staff reviewed files of 40 providers to ensure sufficient, appropriate evidence was provided to support the determination of eligibility, including compliance with revalidation requirements. ALA’s review revealed deficiencies with three of the provider files as follows:
Limited-risk category:
Sample item 15: The provider’s revalidation was due by September 25, 2016, and every five years afterwards but was not completed until October 19, 2023. As a result, any amounts paid to the provider with dates of service from September 26, 2016 through February 29, 2020, and May 12, 2023 through October 18, 2023, are considered questioned costs. Questioned costs totaled $15,393 (federal) and $5,529 (state).
Limited-risk category (Continued):
Sample item 15 (Continued):
In accordance with the CMS 1135 waiver, revalidations, site visits, and fingerprint background checks were paused from March 1, 2020 through May 11, 2023, as result of the Public Health Emergency (PHE). In addition, revalidations due during the PHE could be extended to November 11, 2023. However, this provider’s revalidation was due prior to March 1, 2020; therefore, the extension is not applicable in this case. Amounts paid to the provider for dates of service during the PHE are not included in the questioned costs noted above.
Sample item 21: The provider’s revalidation was due by September 14, 2023, but was not completed. In addition, the provider did not submit a dated W-9, and licensure expired on March 31, 2023. On October 2, 2023, the Agency terminated the provider. As a result, any amounts paid to the provider with dates of service from July 1, 2023 through June 30, 2024, are considered questioned costs. Questioned costs totaled $1,517 (federal) and $555 (state).
Sample item 40: The Agency failed to provide documentation of the provider’s certification that covered a portion of the engagement period. As a result, amounts paid to the provider with dates of service for December 7, 2023 through April 21, 2024, are considered questioned costs. Questioned costs totaled $126,761 (federal) and $49,296 (state).
Statistically Valid Sample:
Not a statistically valid sample
Questioned Costs:
$143,671 (Federal)
$55,380 (State)
Cause:
The Agency asserted that, effective May 31, 2019, it established and implemented new procedures to improve the following areas of provider enrollment: maintenance of provider enrollment application documents, provider revalidation, site visits, and fingerprint background requirements. Although testing results support that improvements have been made since the new procedures were implemented, deficiencies continued to exist during fiscal year 2024.
Effect:
Claims were processed and paid to providers that did not meet all the required elements and, therefore, were ineligible.
Recommendation:
ALA staff recommend the Agency review and strengthen controls to ensure that required revalidations are performed timely and required enrollment documentation is maintained to support provider eligibility.
Views of Responsible Officials and Planned Corrective Action:
DMS concurs with this finding. For Sample Item 15, DMS has implemented an automated process to notify providers of pending revalidations and to terminate them when revalidation is not completed within five years.
For Sample Item 21, DMS has implemented automated processes utilizing data transfers from licensing boards that will now terminate providers when their license lapses. In addition, DMS is developing a mechanism to obtain information provided on W-9’s by utilizing an electronic process through the provider portal during enrollment. This provider was terminated on 10/2/23.
For Sample Item 40, DMS has coordinated with Division of Provider Services and Quality Assurance (DPSQA) to interface with their certification tracking system and to provide additional notifications to providers when their certification period is nearing expiration. Notifications are being sent 30 days prior to the lapse of certification. DMS confirmed with DPSQA that there were no adverse events that lead to the termination of the provider’s certification.
Anticipated Completion Date: June 30, 2025
Contact Person: Elizabeth Pitman
Director, Division of Medical Services
Department of Human Services
700 Main Street
Little Rock, AR 72201
(501) 244-3944
Elizabeth.Pitman@dhs.arkansas.gov
Finding Number: 2024-032
State/Educational Agency(s): Arkansas Department of Human Services
Pass-Through Entity: Not Applicable
AL Number(s) and Program Title(s): 93.778 – Medical Assistance Program
(Medicaid Cluster)
Federal Awarding Agency: U.S. Department of Health and Human Services
Federal Award Number(s): 05-2305AR5MAP; 05-2405AR5MAP
Federal Award Year(s): 2023 and 2024
Compliance Requirement(s) Affected: Special Tests and Provisions – Provider Eligibility
(Managed Care Organizations)
Type of Finding: Noncompliance and Significant Deficiency
Repeat Finding:
Not applicable.
Criteria:
According to the Arkansas Medicaid Provider Manual section 140.000, Provider Participation, any provider of health services must be enrolled in the Arkansas Medicaid Program prior to reimbursement for any services provided to Arkansas Medicaid beneficiaries. Managed Care Network providers must also be enrolled in the Arkansas Medicaid Program. Enrollment is considered complete when a provider has signed and submitted the following forms:
• Application.
• W-9 tax form.
• Medicaid provider contract.
• PCP agreement, if applicable.
• EPSDT agreement, if applicable.
• Change in ownership control or conviction of crime form.
• Disclosure of significant business transactions form.
• Specific license or certification base on provider type and specialty, if applicable.
• Participation in the Medicare program, if applicable.
42 CFR § 455.414 (effective March 25, 2011, with an extended deadline of September 25, 2016, for full compliance) states that the State Medicaid Agency must revalidate the enrollment of all providers at least every five years. Section 141.100 of the Arkansas Medicaid Provider Manual states that revalidation includes a new application; satisfactory completion of screening activities; and, if applicable, fee payment. In accordance with 42 CFR § 455.450, screening activities vary depending on the risk category of the provider as follows:
• The limited-risk category includes database checks.
• The moderate-risk category includes those required for limited-risk plus site visits.
• The high-risk category includes those required for moderate-risk plus fingerprint background checks.
Condition and Context:
To determine if Managed Care Network providers met all necessary criteria to participate in the Medicaid program, ALA staff selected 40 provider files for review from a population of 6,186. The providers selected participated in the Dental managed care program, commonly referred to as Healthy Smiles, and the Provider-Led Arkansas Shared Savings Entity, or PASSE, managed care program. ALA review revealed deficiencies with two of the provider files as follows:
Moderate-risk category:
Sample item 17: The provider failed to revalidate timely. Revalidation was due by May 19, 2024, but was not completed until July 15, 2024. Ineligible costs totaled $2,280.
Limited-risk category:
Sample item 22: The Agency failed to provide a W-9 dated prior to February 7, 2024. Ineligible costs totaled $4,455.
Ineligible costs identified above totaled $6,735 for PASSE. There were no ineligible costs identified for Dental Managed Care.
NOTE: Because these providers are participating in the managed care portion of Medicaid, providers are reimbursed by the managed care organizations, not the Agency. The managed care organizations receive a predetermined monthly payment from the Agency in exchange for assuming the risk for the covered recipients.
These monthly payments are actuarially determined based, in part, upon historical costs data. Accordingly, the failure to remove unallowable cost data from the amounts utilized by the actuary would lead to overinflated future rates, which will be directly paid by the Agency.
In addition, because of the COVID-19 pandemic, the Center for Medicare and Medicaid Services (CMS), under section 1135(b)(1)(B) of the Social Security Act, approved Arkansas’s request to temporarily cease revalidation, including screening requirements, of providers who were located in Arkansas or otherwise directly impacted by the emergency. This was effective as of March 1, 2020, and continued through the expiration of the public health emergency (PHE), on May 11, 2023. State Agencies were given six additional months to complete revalidations that were due during the PHE.
Statistically Valid Sample:
Not a statistically valid sample
Questioned Costs:
Unknown
Cause:
The Agency asserted that, effective May 31, 2019, it established and implemented new procedures to improve the following areas of provider enrollment: maintenance of provider enrollment application documents, provider revalidation, site visits, and fingerprint background requirements. Although testing results support that improvements have been made since the new procedures were implemented, deficiencies continued to exist during fiscal year 2024.
Effect:
Claims were processed and paid to providers that did not meet all the required criteria.
Recommendation:
ALA staff recommend the Agency review and strengthen controls to ensure that required revalidations are performed timely and required enrollment documentation is maintained to support provider eligibility.
Views of Responsible Officials and Planned Corrective Action:
DHS concurs with this finding. For Sample Item 17, the screening activities associated with the revalidation were completed prior to the revalidation date through the Provider Enrollment, Chain, and Ownership System (PECOS). The provider submitted their revalidation application timely, but during the revalidation process the agency requested corrections and clarifications of administrative and tax information. This delayed the final component of the screening, the site visit, until July 15, 2024.
For Sample Item 22, DMS confirms there was no W-9 dated prior to February 7, 2024. The primary function of the W-9 form is to confirm the providers name, address, and tax information. This information was already listed in MMIS during the date in question. The W-9 submitted by the provider on April 4, 2024, confirmed the accuracy of the information in MMIS that the provider has used since its initial enrollment on July 20, 1981. DMS is developing a mechanism to obtain information provided on W-9’s by utilizing an electronic process through the provider portal during enrollment.
Anticipated Completion Date: June 30, 2025
Contact Person: Elizabeth Pitman
Director, Division of Medical Services
Department of Human Services
700 Main Street
Little Rock, AR 72201
(501) 244-3944
Elizabeth.Pitman@dhs.arkansas.gov
Finding Number: 2024-004
State/Educational Agency(s): Arkansas Department of Education
Pass-Through Entity: Not Applicable
AL Number(s) and Program Title(s): 10.558 – Child and Adult Care Food Program
Federal Awarding Agency: U.S. Department of Agriculture
Federal Award Number(s): 6AR300321
Federal Award Year(s): 2023 and 2024
Compliance Requirement(s) Affected: Activities Allowed or Unallowed; Allowable Costs/Cost Principles
Type of Finding: Noncompliance and Significant Deficiency
Repeat Finding:
Not applicable
Criteria:
2 CFR § 200.303(a) requires a non-federal entity to 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 award.
7 CFR § 226.11(a) states that a state agency may develop a policy under which centers are reimbursed for meals served in accordance with provisions of the Child and Adult Care Food Program in the calendar month preceding the calendar month in which the agreement is executed, or the state agency may develop a policy under which centers receive reimbursement only for meals served in approved centers on and after the effective date of the Program agreement. If the state agency's policy permits centers to earn reimbursement for meals served prior to the execution of a Program agreement, reimbursement must not be received by the center until the agreement is executed.
Condition and Context:
ALA discussion with Health and Nutrition Unit (HNU) staff indicated that applications for new and renewing applicants are completed online through the Special Nutrition Program (SNP) database. Supporting documentation is uploaded by the providers and reviewed by staff and program manager prior to application approval. The Agency allows retroactive reimbursements for new applicants after application approval only if the following requirements are met prior to the submission of a complete application:
• Proper documentation required by the Program is maintained.
• Provider attends training.
HNU staff are responsible for the notation of eligible months for reimbursement in the database. The notation triggers the edit check to allow or prevent reimbursement claims.
ALA reviewed 17 new applicants during state fiscal year 2024 to determine if all requirements were met prior to the payment of retroactive claims. This review revealed that four providers who did not meet the requirements for a retroactive claim were reimbursed a combined total of $10,823.
Statistically Valid Sample:
Not a statistically valid sample
Questioned Costs:
$10,823
Cause:
HNU staff did not ensure providers’ application reflected only eligible months for reimbursement prior to approval.
Effect:
Providers submitted claims for months in which eligibility requirements were not met.
Recommendation:
ALA staff recommend the Agency promptly develop, document, and implement procedures for internal control over compliance to ensure retroactive reimbursements are processed only for eligible program participants.
Views of Responsible Officials and Planned Corrective Action:
The Arkansas Department of Education (ADE), Division of Elementary and Secondary Education (DESE), Health and Nutrition Unit (HNU), concur with the finding. The HNU implemented a new application and payment system that began in 2024. During implementation and subsequent operations, several issues with data transfers between the old and new system were identified and now corrected. The HNU Application and Finance staff will receive training to ensure that all criteria are met prior to the retroactive payment of claims.
Anticipated Completion Date: April 1, 2025
Contact Person: Sheila Chastain
Associate Director
Arkansas Department of Education, DESE, Nutrition Services
#4 Capitol Mall, Box #12
Little Rock, AR 72201
(501) 324-9502
Sheila.Chastain@ade.arkansas.gov
Pamela Burton
Director
Arkansas Department of Education, DESE, Nutrition Services
#4 Capitol Mall, Box #19
Little Rock, AR 72201
(501) 320-8978
Pamela.Burton@ade.arkansas.gov
Finding Number: 2024-005
State/Educational Agency(s): Arkansas Department of Education
Pass-Through Entity: Not Applicable
AL Number(s) and Program Title(s): 10.558 – Child and Adult Care Food Program
Federal Awarding Agency: U.S. Department of Agriculture
Federal Award Number(s): 6AR300321
Federal Award Year(s): 2023 and 2024
Compliance Requirement(s) Affected: Cash Management
Type of Finding: Noncompliance and Significant Deficiency
Repeat Finding:
A similar issue was report in prior year finding 2023-002.
Criteria:
In accordance with 2 CFR § 200.303(c), a non-federal entity must evaluate and monitor its compliance with statutes, regulations, and the terms and conditions of federal awards.
In addition, 2 CFR § 200.400(a) and (b) state that the non-federal entity is responsible for efficient and effective administration of the federal award through the application of sound management practices and assumes responsibility for administering federal funds in a manner consistent with underlying agreements, program objectives, and the terms and conditions of the federal award.
Condition and Context:
The Agency receives the following separate grant awards for reimbursement payments to meal providers and sponsoring organizations:
1) Child Nutrition Program (CNP) Block Consolidated (ALN 10.555).
2) CNP Child and Adult Care Food Program (CACFP) Cash in Lieu (ALN 10.558).
3) CNP CACFP Sponsor Administrative (ALN 10.558).
Previous correspondence between ALA and the federal awarding agency indicated that each grant award has a designated purpose, and funds are not to be used interchangeably among the grant awards.
All expenditures are assigned a cost center and WBS element to identify the applicable federal program and cost category within AASIS, the State’s accounting system. The Agency’s Health and Nutrition Unit (HNU) staff are responsible for ensuring expenditures are properly coded in AASIS, and the federal finance staff utilize expenditure transactions in AASIS to complete cash draws for direct costs to the program. Expense corrections are completed and processed in AASIS by federal finance staff as needed.
According to the Agency, corrective action was taken to ensure the accuracy of data from August 1, 2023 through January 31, 2024.
ALA review of 10 cash draws to determine if funds were drawn from the appropriate grant revealed the following:
• Sponsor Administrative expenditures (ALN 10.558) totaling $65,173 were inappropriately drawn from the CNP Block Consolidated grant (ALN 10.555).
• As a result of expense corrections, Child Care and Development Block grant (ALN 93.575) expenditures were erroneously coded as CACFP expenditures and inappropriately drawn from the CNP Block Consolidated grant (ALN 10.555) and CNP CACFP Cash in Lieu (ALN 10.558), totaling $53,095 and $1,940, respectively.
Note: Sponsor Administrative expenditures were appropriately drawn from the CNP CACFP Sponsor Administrative grant (ALN 10.558) beginning March 12, 2024. Additionally, on October 14, 2024, after auditor inquiry, federal finance staff completed fund transfers in AASIS to correct the coding of Child Care and Development Block grant expenditures.
Statistically Valid Sample:
Not a statistically valid sample
Questioned Costs:
$120,208
Cause:
CACFP sponsor administrative and child care expenditures were not properly coded in AASIS, causing funds to be drawn from the incorrect grant award.
Effect:
Funds were drawn for unallowable expenditures (based on the purpose of each grant).
Recommendation:
ALA staff recommend the Agency establish and document procedures that specifically address the proper coding of expenditures in AASIS.
Views of Responsible Officials and Planned Corrective Action:
The Arkansas Department of Education (ADE), Division of Elementary and Secondary Education (DESE), Health and Nutrition Unit (HNU), concur with the finding. The HNU Finance staff implemented procedures for meal claim payment requests which include an initial and final review of all requests to be conducted by two (2) staff. The review process includes, but is not limited to, ensuring expenditures are assigned correct codes related to the appropriate funding source within the appropriate grant year, mitigating the Child Nutrition Program (CNP), Child and Adult Care Food Program (CACFP) Sponsor Administrative expenditure errors going forward. When the request is determined to be compliant, the Associate Director of Finance and Training approves payments before being forwarded to the ADE Finance team for payment.
Anticipated Completion Date: March 15, 2025
Contact Person: Sheila Chastain
Associate Director
Arkansas Department of Education, DESE, Nutrition Services
#4 Capitol Mall, Box #12
Little Rock, AR 72201
(501) 324-9502
Sheila.Chastain@ade.arkansas.gov
Pamela Burton
Director
Arkansas Department of Education, DESE, Nutrition Services
#4 Capitol Mall, Box #19
Little Rock, AR 72201
(501) 320-8978
Pamela.Burton@ade.arkansas.gov
Finding Number: 2024-006
State/Educational Agency(s): Arkansas Department of Commerce –
Arkansas Economic Development Commission
Pass-Through Entity: Not Applicable
AL Number(s) and Program Title(s): 21.027 – COVID 19: Coronavirus State and Local
Fiscal Recovery Funds (CSLFRF)
Federal Awarding Agency: U.S. Department of the Treasury
Federal Award Number(s): SLFRP3627
Federal Award Year(s): 2021
Compliance Requirement(s) Affected: Allowable Costs/Cost Principles
Type of Finding: Material Noncompliance and Material Weakness
Repeat Finding:
A similar issue was reported in prior-year finding 2023-006.
Criteria:
In accordance with 2 CFR § 200.403(g), costs must be adequately documented to be allowable under federal awards.
In addition, state-promulgated rules governing the Arkansas Rural Connect (ARC) Program provide that internet service providers (ISPs) must submit receipts for all reimbursable expenses.
Condition and Context:
ALA staff selected seven payments to ISPs under the ARC program to determine if sufficient, appropriate documentation was maintained to support that reimbursements were made for allowable broadband project expenses. Five of these seven payments were selected randomly, and the remaining two were selected based upon concerns communicated to ALA by the Agency. ALA review of the five payments selected randomly revealed the following:
Project 1:
• Five claims, totaling $28,366, were reimbursed without adequate supporting documentation (e.g., an invoice or receipt).
Project 2:
• One claim, totaling $367,695, was reimbursed without adequate supporting documentation (e.g., an invoice or receipt).
Project 3:
• One claim, totaling $41,363, was reimbursed without adequate supporting documentation (e.g., an invoice or receipt).
ALA review of the two payments selected based upon concerns communicated by the Agency revealed the following:
Project 4:
• 80 claims, totaling $3,861,066, were submitted by the ISP without adequate supporting documentation (e.g., an invoice and/or receipt).
Project 5:
• 16 claims, totaling $2,511,710, were submitted by the ISP without adequate supporting documentation (e.g., an invoice and/or receipt).
Statistically Valid Sample:
Not a statistically valid sample
Questioned Costs:
$6,810,200
Cause:
Discussion with management indicated the Arkansas State Broadband Office (ASBO) was understaffed during the time these agreements were executed, and it did not ensure that training included requirements of Uniform Guidance or ARC rules. Furthermore, the ISPs who received payments for projects 4 and 5 received advance payments, which inherently caused additional risk of noncompliance.
Effect:
Reimbursements were approved for expenditures that may not have been allowable or may not have been incurred. The federal awarding agency may require recoupment.
Recommendation:
ALA staff recommend the Agency strengthen controls by providing training on ARC rules and federal regulations to ensure all costs are adequately documented and all reimbursable expenses are supported by receipts. ALA staff also recommend the Agency seek recoupment of any identified overpayments, returning them to the appropriate source.
Views of Responsible Officials and Planned Corrective Action:
ASBO will work with our 3rd party program administrator to re-emphasize the importance of verifying the expenses for adequate supporting documentation and allowability. We will discuss the possibility of a repeat training with all federal grant subrecipients.
Anticipated Completion Date: August 1, 2025
Contact Person: Glen Howie, Jr.
Director, Ark State Broadband Office
Department of Commerce
1 Commerce Way
Little Rock, AR 72202
(501) 682-1123
Glen.Howie@Arkansas.gov
Finding Number: 2024-007
State/Educational Agency(s): Arkansas Department of Agriculture –
Natural Resources Division
Pass-Through Entity: Not Applicable
ALN Number(s) and Program Title(s): 21.027 – COVID 19: Coronavirus State and Local
Fiscal Recovery Funds (CSLFRF)
Federal Awarding Agency: U.S. Department of the Treasury
Federal Award Number(s): SLFRP3627
Federal Award Year(s): 2021
Compliance Requirement(s) Affected: Allowable Costs/Cost Principles
Type of Finding: Noncompliance and Material Weakness
Repeat Finding:
Not applicable
Criteria:
In accordance with 2 CFR § 200.403(g), costs must be adequately documented to be allowable under federal awards.
In addition, 2 CFR § 200.400(d) states that the accounting practices of the recipient and subrecipient must be consistent with these cost principles and support the accumulation of costs as required by these cost principles, including maintaining adequate documentation to support costs charged to the federal award.
Condition and Context:
ALA staff reviewed 14 payments to water departments to determine if sufficient, appropriate documentation was maintained to support allowability of infrastructure improvement expenses. ALA review of one of those payments included costs of $26,979 that were not adequately documented. In addition, supporting documentation did not include a complete accumulation of costs that identified amounts charged to the federal award.
Statistically Valid Sample:
Not a statistically valid sample
Questioned Costs:
$26,979
Cause:
The Agency did not have controls in place to ensure a review of documentation supporting reimbursement requests was properly performed prior to issuing payments. In addition, the Agency did not provide training on Uniform Guidance documentation requirements to staff responsible for reviewing and loading documents into its project management application.
Effect:
Reimbursements were approved for expenditures that may not have been allowable. The federal awarding agency may require recoupment.
Recommendation:
ALA staff recommend the Agency strengthen controls to ensure costs are adequately documented. Supporting documentation containing sufficient detail to determine the allowability and nature of the costs incurred by the subrecipient should be reviewed by the Agency prior to reimbursement to ensure compliance with federal regulations.
Views of Responsible Officials and Planned Corrective Action:
Moving forward the Department will require recipients to provide a list of invoices with the invoice date, period of performance, invoice amount and amount requested/disbursed from ARPA and/or other funding sources to be included with each disbursement request. Staff training will be modified to ensure staff understand allowable expenditures and period of performance restrictions.
Anticipated Completion Date: June 30, 2025
Contact Person: Debby Dickson
Water Development Division Manager
Arkansas Department of Agriculture-Natural Resources Division
1 Natural Resources Drive
Little Rock, AR 72205
(501) 225-1598
Debra.Dickson@agriculture.arkansas.gov
Finding Number: 2024-008
State/Educational Agency(s): Arkansas Department of Agriculture –
Natural Resources Division
Pass-Through Entity: Not Applicable
ALN Number(s) and Program Title(s): 21.027 – COVID 19: Coronavirus State and Local
Fiscal Recovery Funds (CSLFRF)
Federal Awarding Agency: U.S. Department of the Treasury
Federal Award Number(s): SLFRP3627
Federal Award Year(s): 2021
Compliance Requirement(s) Affected: Procurement and Suspension and Debarment
Type of Finding: Noncompliance and Material Weakness
Repeat Finding:
Not applicable
Criteria:
2 CFR § 200.214 holds entities subject to 2 CFR Part 180, which restricts awards, subawards, and contracts with certain parties that are debarred, suspended, or otherwise excluded from or ineligible for participation in federal assistance programs or activities.
Condition and Context:
The Agency is responsible for ensuring that entities receiving awards are registered in the System for Award Management (SAM) database and have not been suspended or debarred. Registration must occur prior to the issuance of a contract or grant agreement.
ALA staff reviewed 13 grant agreements to determine if the Agency was in compliance with the requirement. ALA review revealed that 3 entities, with agreements executed between April 2023 and August 2023, were not registered with SAM prior to the Agency’s issuance of subawards to them.
Statistically Valid Sample:
Not a statistically valid sample
Questioned Costs:
Unknown
Cause:
The Agency failed to establish documented control procedures and did not have adequately trained staff to ensure compliance.
Effect:
Failure to develop, document, and implement procedures for internal control over compliance increases risk for issuance of contracts and grant agreements to excluded or ineligible entities.
Recommendation:
ALA staff recommend the Agency strengthen internal controls by developing, documenting, and establishing policies to ensure contracts and grant agreements are only issued to eligible entities.
Views of Responsible Officials and Planned Corrective Action:
The Department will require all ARPA recipients provide a copy of their current/active registration with Sam.gov with each disbursement request. Moving forward, the Department will require any/all sub recipients with subrecipient monitoring under 2 CFR § 200.214 and subject to 2 CFR Part 180 to provide proof prior to execution of a grant agreement. Once implemented, we will provide staff training to understand what documentation is required prior to execution of an agreement and disbursement of funds. Independent testing of the established controls will be performed by Department Fiscal staff who have no role in the contracting process and this testing will be documented.
Anticipated Completion Date: June 30, 2025
Contact Person: Debby Dickson
Water Development Division Manager
Arkansas Department of Agriculture-Natural Resources Division
1 Natural Resources Drive
Little Rock, AR 72205
(501) 225-1598
Debra.Dickson@agriculture.arkansas.gov
Finding Number: 2024-009
State/Educational Agency(s): Arkansas Department of Commerce –
Arkansas Economic Development Commission
Pass-Through Entity: Not Applicable
ALN Number(s) and Program Title(s): 21.027 – COVID 19: Coronavirus State and Local
Fiscal Recovery Funds (CSLFRF)
Federal Awarding Agency: U.S. Department of the Treasury
Federal Award Number(s): SLFRP3627
Federal Award Year(s): 2021
Compliance Requirement(s) Affected: Subrecipient Monitoring
Type of Finding: Material Noncompliance and Material Weakness
Repeat Finding:
A similar issue was reported in prior-year finding 2023-008.
Criteria:
In accordance with 2 CFR § 200.332(a)(1), all pass-through entities must ensure that every subaward is clearly identified to the subrecipient as a subaward and includes the following information at the time of the subaward:
i. Subrecipient name (which must match the name associated with its unique entity identifier).
ii. Subrecipient's unique entity identifier.
iii. Federal Award Identification Number (FAIN).
iv. Federal award date.
v. Subaward Period of Performance start and end date.
vi. Subaward budget period start and end date.
vii. Amount of federal funds obligated to the subrecipient.
viii. Total amount of federal funds obligated to the subrecipient by the pass-through entity, including the current financial obligation.
ix. Total amount of the federal award committed to the subrecipient by the pass-through entity.
x. Federal award project description, as required by the Federal Funding Accountability and Transparency Act (FFATA).
xi. Name of federal agency, pass-through entity, and contact information for awarding official of the pass-through entity.
xii. Assistance listings title and number (ALN); the pass-through entity must identify the dollar amount made available under each federal award and the ALN at the time of disbursement.
xiii. Identification of whether the federal award is research and development.
xiv. Indirect cost rate for the federal award (including if the de minimis rate is used in accordance with § 200.414).
In addition, 2 CFR § 200.332(a)(4) requires an approved, federally recognized indirect cost rate between the subrecipient and the federal awarding agency.
Condition and Context:
ALA staff reviewed seven executed grant agreements, totaling $42,681,880, to determine if they met the Uniform Guidance criteria. Five of these grant agreements were selected randomly, and the remaining two were selected based upon concerns communicated to ALA by the Agency. The following deficiencies were noted in the two grant agreements selected based upon Agency concerns:
• The agreements, which totaled $6,549,322, did not include all required terms, specifically items ii, iii, v, xii, xiii, and xiv from the criteria noted above.
• The agreements did not include indirect cost rate agreements.
Statistically Valid Sample:
Not a statistically valid sample
Questioned Costs:
None
Cause:
The Agency did not ensure staff were trained and knowledgeable regarding Uniform Guidance requirements for subrecipients.
Effect:
Without a proper grant agreement, subrecipients may be unaware that their award is subject to federal compliance requirements, and the Agency risks noncompliance with subrecipient monitoring requirements.
Recommendation:
ALA staff recommend the Agency provide training to appropriate staff to ensure adherence to Uniform Guidance regarding subrecipient monitoring.
Views of Responsible Officials and Planned Corrective Action:
In 2023, ASBO sent out Amendment #1 for all SLFRF subgrants. This amendment was a one-page sheet providing information for all the requirements listed in 2 CFR § 200.332(a)(1). The subrecipient listed in this finding, Extreme Broadband, did not acknowledge or return their amendment. We will begin to request acknowledgement from this provider on a continuous quarterly basis.
Anticipated Completion Date: March 4, 2025
Contact Person: Glen Howie, Jr.
Director, Ark State Broadband Office
Department of Commerce
1 Commerce Way
Little Rock, AR 72202
(501) 682-1123
Glen.Howie@Arkansas.gov
Finding Number: 2024-010
State/Educational Agency(s): Arkansas Department of Agriculture –
Natural Resources Division
Pass-Through Entity: Not Applicable
ALN Number(s) and Program Title(s): 21.027 – COVID 19: Coronavirus State and Local
Fiscal Recovery Funds (CSLFRF)
Federal Awarding Agency: U.S. Department of the Treasury
Federal Award Number(s): SLFRP3627
Federal Award Year(s): 2021
Compliance Requirement(s) Affected: Subrecipient Monitoring
Type of Finding: Material Noncompliance and Material Weakness
Repeat Finding:
Not applicable
Criteria:
In accordance with 2 CFR § 200.332(a)(1), all pass-through entities must: ensure that every subaward is clearly identified to the subrecipient as a subaward and includes the following information at the time of the subaward:
i. Subrecipient name (which must match the name associated with its unique entity identifier).
ii. Subrecipient's unique entity identifier.
iii. Federal Award Identification Number (FAIN).
iv. Federal award date.
v. Subaward Period of Performance start and end date.
vi. Subaward budget period start and end date.
vii. Amount of federal funds obligated in the subaward.
viii. Total amount of federal funds obligated to the subrecipient by the pass-through entity, including the current financial obligation.
ix. Total amount of the federal award committed to the subrecipient by the pass-through entity.
x. Federal award project description, as required by the Federal Funding Accountability and Transparency Act (FFATA).
xi. Name of federal agency, pass-through entity, and contact information for awarding official of the pass-through entity.
xii. Assistance listings title and number (ALN); the pass-through entity must identify the dollar amount made available under each federal award and the ALN at the time of disbursement.
xiii. Identification of whether the federal award is research and development.
xiv. Indirect cost rate for the federal award (including if the de minimis rate is used in accordance with § 200.414).
In addition, 2 CFR § 200.332(a)(4) requires an approved, federally recognized indirect cost rate between the subrecipient and the federal awarding agency.
Condition and Context:
ALA staff reviewed 13 executed grant agreements, totaling $29,342,709, to determine if they met the Uniform Guidance criteria. The following deficiencies were noted:
• The 13 grant agreements did not include all required terms, specifically items ii, iii, v, vi, xi, xii, xiii, and xiv from the criteria noted above.
• An indirect cost rate agreement could not be provided.
Statistically Valid Sample:
Not a statistically valid sample
Questioned Costs:
None
Cause:
The Agency did not ensure staff were trained and knowledgeable regarding Uniform Guidance requirements for subrecipients.
Effect:
Without a proper grant agreement, subrecipients may be unaware that their award is subject to federal compliance requirements, and the Agency risks noncompliance with subrecipient monitoring requirements.
Recommendation:
ALA staff recommend the Agency provide training to appropriate staff to ensure adherence to Uniform Guidance regarding subrecipient monitoring.
Views of Responsible Officials and Planned Corrective Action:
The Department will execute an amendment to the grant agreements for all ARPA funding not disbursed as of 7/1/2024 to include the missing data as detailed in the finding. Staff will be trained on Uniform Guidance requirements.
Anticipated Completion Date: June 30, 2025
Contact Person: Debby Dickson
Water Development Division Manager
Arkansas Department of Agriculture-Natural Resources Division
1 Natural Resources Drive
Little Rock, AR 72205
(501) 225-1598
Debra.Dickson@agriculture.arkansas.gov
Finding Number: 2024-011
State/Educational Agency(s): Arkansas Department of Commerce –
Arkansas Economic Development Commission
Pass-Through Entity: Not Applicable
AL Number(s) and Program Title(s): 21.027 – COVID 19: Coronavirus State and Local
Fiscal Recovery Funds (CSLFRF)
Federal Awarding Agency: U.S. Department of the Treasury
Federal Award Number(s): SLFRP3627
Federal Award Year(s): 2021
Compliance Requirement(s) Affected: Subrecipient Monitoring
Type of Finding: Material Weakness
Repeat Finding:
A similar issue was reported in prior-year finding 2023-008.
Criteria:
In accordance with 2 CFR § 200.332(c), pass-through entities must evaluate each subrecipient’s fraud risk and risk of noncompliance with a subaward to determine appropriate subrecipient monitoring.
Section 8(C)(7) of the Arkansas Rural Connect (ARC) rules require applicant Internet Service Providers (ISPs) to submit financial statements for the three most recent years, including an audited financial statement for the most recent year, for grant requests exceeding $2 million.
Section 9(G) of the ARC rules state that within 45 days after grant approval, the ISP should submit the project plans to a licensed Professional Engineer (PE) for a technical adequacy confirmation. Once received, the ISP should submit the PE approval stamp to the Arkansas State Broadband Office (ASBO).
Condition and Context:
ALA staff reviewed eight executed subaward agreements, totaling $42,681,880, to determine if they met the Uniform Guidance criteria, as well as relevant ARC rules. The following deficiencies were noted:
• For six of the eight agreements tested, the ASBO did not receive and review the applicants’ financial statements for the three previous years prior to executing a grant agreement.
• Discussion with management indicated that the pass-through entity did not have documentation indicating that a PE reviewed the technical adequacy of any of the eight broadband projects ALA reviewed.
Statistically Valid Sample:
Not a statistically valid sample
Questioned Costs:
None
Cause:
Discussion with management indicated the ASBO was understaffed during the time these agreements were executed, and it did not ensure that training included requirements of Uniform Guidance or ARC rules.
Effect:
Without proper review of contractor financial statements, the Agency could award federal funds to a high-risk entity and fail to adjust the methods of monitoring accordingly. Without approval of a licensed PE, project plans may fail to meet technical adequacy required for the project.
Recommendation:
ALA staff recommend the Agency strengthen controls by providing training on established ARC rules and procedures, which include a review of the financial statements of contractors as well as the technical adequacy of projects to ensure adherence to Uniform Guidance and ARC rules regarding subrecipient monitoring.
Views of Responsible Officials and Planned Corrective Action:
Current staff believes the 3 requirements listed above were not performed in the past. For remaining active SLFRF subgrants, ASBO will establish a fraud/risk/noncompliance rating and set appropriate monitoring standards.
Should any new applications for SLFRF funding be procured, ASBO will require financial statements and a PE Stamp prior to grant agreement execution.
ASBO will provide 2 CFR 200 training and ARC rules training to our staff and contractors.
Anticipated Completion Date: April 1, 2025
Contact Person: Glen Howie, Jr.
Director, Ark State Broadband Office
Department of Commerce
1 Commerce Way
Little Rock, AR 72202
(501) 682-1123
Glen.Howie@Arkansas.gov
Finding Number: 2024-012
State/Educational Agency(s): Department of Commerce – Arkansas Rehabilitation Services
Pass-Through Entity: Not Applicable
AL Number(s) and Program Title(s): 84.126 – Rehabilitation Services Vocational Rehabilitation
Grants to States
Federal Awarding Agency: U.S. Department of Education
Federal Award Number(s): H126A230097
Federal Award Year(s): 2023
Compliance Requirement(s) Affected: Reporting
Type of Finding: Noncompliance and Significant Deficiency
Repeat Finding:
Not applicable
Criteria:
In accordance with 2 CFR § 200.303, a non-federal entity must 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 award.
In addition, Department of Education - Rehabilitation Services Administration (RSA) provided guidance in its Dear Colleague Letter DCL-20-02 for grants entered into after federal fiscal year 2021 but prior to federal fiscal year 2024. Per this guidance, all reports except for the final report must be submitted 30 calendar days after the end of the reporting period.
Condition and Context:
ALA staff performed testing of all five RSA-17 reports, submitted by Arkansas Rehabilitation Services (ARS), to confirm accuracy and completeness of the reports. ALA staff review revealed that the RSA-17 report for the quarter ending June 30, 2024, for the federal fiscal year 2023 grant award, had not been submitted by the Agency at the time of audit fieldwork. This report was subsequently submitted on January 27, 2025, six months after the reporting due date of July 29, 2024.
Statistically Valid Sample:
Not a statistically valid sample
Questioned Costs:
None
Cause:
The failure of Agency controls was caused by employee turnover in key positions and reduced oversight of reports.
Effect:
Lack of appropriate internal controls resulted in noncompliance with federal laws and regulations over reporting.
Recommendation:
ALA staff recommend the Agency strengthen controls over financial reporting compliance to ensure reports are submitted timely and in accordance with federal laws and regulations.
Views of Responsible Officials and Planned Corrective Action:
ARS Discussion
The Agency acknowledges the failure to adequately submit the RSA-17 report for the quarter ending June 30, 2024, for the federal fiscal year 2023 grant award.
ARS Action Taken
The Agency has taken the below steps to mitigate oversight of reporting deadlines and lack of internal controls.
• ARS fiscal has hired three additional staff members whose purpose will be in-part to collect, interpret, and submit data with regards to RSA17 reports.
• A RSA17 policy was submitted RSA in January 2025. This policy speaks to enhanced ARS internal controls for timeliness of collecting data, and oversight to ensure proper preparation and submission of these federal financial reports moving forward. These include multi personnel responsibility checks for collection at minimum one week prior to report submission with Manager and Deputy Commissioner to ensure data collection and submission are on-time.
Anticipated Completion Date: Complete
Contact Person: April Cooper
Deputy Director of Finance
Arkansas Department of Commerce
1 Commerce Way
Little Rock, AR 72202
(501) 682-4771
April.Cooper@Arkansas.gov
Finding Number: 2024-013
State/Educational Agency(s): Department of Commerce – Arkansas Rehabilitation Services
Pass-Through Entity: Not Applicable
AL Number(s) and Program Title(s): 84.126 – Rehabilitation Services Vocational Rehabilitation
Grants to States
Federal Awarding Agency: U.S. Department of Education
Federal Award Number(s): H126A230097; H126A240097-24C
Federal Award Year(s): 2023 and 2024
Compliance Requirement(s) Affected: Reporting
Type of Finding: Noncompliance and Significant Deficiency
Repeat Finding:
Not Applicable
Criteria:
In accordance with 2 CFR § 200.303, a non-federal entity must 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 award.
Also, per 34 CFR § 361.12, the state agency must ensure the proper and efficient administration of the plan and the carrying out of all functions for which the State is responsible under the plan and this part of 34 CFR. These methods must include procedures to ensure accurate data collection and financial accountability.
Finally, per Department of Education - Rehabilitation Services Administration (RSA) Policy Directive PD-19-03, “the use of an electronic case management system, does not remove the requirement for the agency to maintain either hard copies or scanned copies of required supporting documentation in the individual's service record.”
Condition and Context:
The Agency did not have appropriate controls in place to support the maintenance of documentation supporting the RSA-911 quarterly reports. Of the 37 cases tested by ALA, 22 included report elements that could not be verified by ALA or were incorrectly reported. Errors noted during testing were as follows:
• In 21 cases, the application date reported could not be traced to the application signed by the client.
• In 16 cases, the Agency could not provide an Individualized Plan for Employment (IPE), signed by the client, to support the date of initial IPE.
• In 2 cases, the date of eligibility determination was not supported by appropriate documentation.
• In 2 cases, the initial IPE date was incorrectly reported.
Statistically Valid Sample:
Not a statistically valid sample
Questioned Costs:
None
Cause:
Controls were not in place to ensure that client files were properly migrated from an older case management system to a newer case management system during a software conversion.
Effect:
Lack of appropriate internal controls resulted in noncompliance with federal laws and regulations over reporting.
Recommendation:
ALA staff recommend the Agency strengthen controls over reporting by performing a review of client files to ensure data elements are accurately recorded in the new case management system for the required reporting elements.
Views of Responsible Officials and Planned Corrective Action:
ARS Discussion
The Agency acknowledges the lack of adequate internal controls necessary to ensure accurate maintenance of supporting documentation during our migration to our new case management system (CMS).
ARS Action Taken
The Agency has taken the below steps to mitigate the lack of internal controls regarding supporting documentation, mainly attachments, located in our CMS in the future.
• As the transfer of data to our new CMS platform concludes, that impediment has significantly diminished. The Agency has an appropriate method of control in place to detect any case file errors that may occur because of an incomplete retrieval or an insufficient data element input. In both instances, data analyst personnel from Program, Planning, Development and Evaluation (PPD&E) employ RSA’s edit check process that identifies specific errors prior to submission of the RSA 911 report. Those errors are then methodically corrected in our CMS ensuring the RSA 911 report is error free.
• In instances where information is miscoded in the client case file, or is missing, the division’s Quality Assurance (QA) team identifies those errors and employes best practice training methods to ensure the case file complies with federal regulations.
• Finally, our new CMS data hosted on an AR DIS platform is regularly backed up on a separate server to ensure that if anything were to happen to the primary CMS, we have a back up of all case data, including supporting documentation, and attachments. This data would be able to be accessed as a backup if data in the CMS was compromised in any way.
Anticipated Completion Date: Complete
Contact Person: Robert Trevino
Associate Commissioner of PPD&E
Arkansas Rehabilitation Services
1 Commerce Way
Little Rock, AR 72202
(501) 296-1604
Robert.Trevino@Arkansas.gov
Finding Number: 2024-014
State/Educational Agency(s): Arkansas Department of Human Services
Pass-Through Entity: Not Applicable
AL Number(s) and Program Title(s): 93.558 – Temporary Assistance for Needy Families
Federal Awarding Agency: U.S. Department of Health and Human Services
Federal Award Number(s): 2301ARTANF and 2403ARTANF
Federal Award Year(s): 2023 and 2024
Compliance Requirement(s) Affected: Reporting
Type of Finding: Noncompliance and Significant Deficiency
Repeat Finding:
Not applicable
Criteria:
In accordance with 2 CFR Part 170, recipients of federal grants are required to report first-tier subawards of $30,000 or more to the Federal Funding Accountability and Transparency Act Subaward Reporting System (FSRS) no later than the end of the month following the month in which the subaward was issued.
Condition and Context:
The Agency did not file any reports in state fiscal year 2024 for subrecipients with payments at or above $30,000.
Statistically Valid Sample:
Not a statistically valid sample
Questioned Costs:
None
Cause:
The Agency did not ensure staff were trained and knowledgeable regarding the requirements of Federal Funding Accountability and Transparency Act Subaward Reporting as described in 2 CFR Part 170.
Effect:
Failure to file Federal Funding Accountability and Transparency Act Subaward reports could result in the reduction or termination of future funding.
Recommendation:
ALA staff recommend the Agency provide necessary training to ensure full compliance with Federal Funding Accountability and Transparency Act Subaward reporting as described in 2 CFR Part 170.
Views of Responsible Officials and Planned Corrective Action:
DHS concurs with this finding. As of 2/25/25, DHS has reported all subrecipients with payments at or above $30,000 for SFY24 and a documented procedure has been developed to address the reporting requirement.
Anticipated Completion Date: Completed
Contact Person: Renee Ikard
Chief Financial Officer
Department of Human Services
700 Main Street
Little Rock, AR 72201
(501) 682-8985
Renee.Ikard@dhs.arkansas.gov
Finding Number: 2024-015
State/Educational Agency(s): Arkansas Department of Human Services
Pass-Through Entity: Not Applicable
AL Number(s) and Program Title(s): 93.558 – Temporary Assistance for Needy Families
Federal Awarding Agency: U.S. Department of Health and Human Services
Federal Award Number(s): 2101ARTANF; 2201ARTANF; 2301ARTANF; 2403ARTANF
Federal Award Year(s): 2021, 2022, 2023 and 2024
Compliance Requirement(s) Affected: Reporting
Type of Finding: Noncompliance and Significant Deficiency
Repeat Finding:
Not applicable
Criteria:
In accordance with 45 CFR § 265.4, states are required to submit complete and accurate TANF financial reports within 45 days following the end of each quarter or be subject to a penalty.
Condition and Context:
ALA staff reviewed the submission dates for each of the quarterly reports submitted for the four quarters ending during the 2024 state fiscal year. Of the three reports that were required for the quarter ending September 30, 2023, all were submitted 30 days after the November 14, 2023, due date. Of the three reports that were required for the quarter ending June 30, 2024, all were submitted 120 days after the August 14, 2024, due date.
Statistically Valid Sample:
Not a statistically valid sample
Questioned Costs:
None
Cause:
The Agency did not ensure that staffing was adequate to meet the reporting requirements for this grant.
Effect:
Failure to timely report grant expenditures could result in undetected noncompliance with program requirements and in potential penalties being assessed by the awarding agency.
Recommendation:
ALA staff recommend the Agency ensure that there is adequate staff to achieve full compliance with program reporting requirements.
Views of Responsible Officials and Planned Corrective Action:
DHS concurs with this finding. The timeliness of quarterly financial reports was impacted by the transition of the TANF program to DHS. The federal awarding agency did not permit the agency to file current TANF award reports until prior year’s reports were submitted. DHS has now submitted all reports that are currently due and has one full-time staff working the TANF award and associated reports.
Anticipated Completion Date: Complete
Contact Person: Renee Ikard
Chief Financial Officer
Department of Human Services
700 Main Street
Little Rock, AR 72201
(501) 682-8985
Renee.Ikard@dhs.arkansas.gov
Finding Number: 2024-016
State/Educational Agency(s): Arkansas Department of Human Services
Pass-Through Entity: Not Applicable
AL Number(s) and Program Title(s): 93.558 – Temporary Assistance for Needy Families
Federal Awarding Agency: U.S. Department of Health and Human Services
Federal Award Number(s): 2301ARTANF and 2403ARTANF
Federal Award Year(s): 2023 and 2024
Compliance Requirement(s) Affected: Subrecipient Monitoring
Type of Finding: Noncompliance and Significant Deficiency
Repeat Finding:
Not applicable
Criteria:
In accordance with 45 CFR § 75.352(d), a pass-through entity must monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with federal statutes, regulations, and the terms and conditions of the subaward, and that the subaward performance goals are achieved.
Condition and Context:
ALA staff reviewed the program monitoring documentation related to 18 grants awarded by the agency totaling $19,770,361. Testing revealed that the pass-through entity did not have sufficient documentation necessary to ensure that the subaward performance goals were achieved for 7 of the 18 grants.
Statistically Valid Sample:
Not a statistically valid sample
Questioned Costs:
None
Cause:
The Agency did not ensure staff were trained and knowledgeable regarding Uniform Guidance requirements for subrecipients.
Effect:
Failure to monitor subrecipients could result in undetected noncompliance with program requirements.
Recommendation:
ALA staff recommend the Agency provide necessary training to multiple staff members to ensure full compliance with
subrecipient monitoring requirements.
Views of Responsible Officials and Planned Corrective Action:
DHS concurs with this finding. The agency has trained all TANF staff responsible for monitoring and has begun monitoring for all FFY2024 subgrants. Monitoring for all FFY2025 subgrants will begin after completion of monitoring for the FFY2024 subgrants.
Anticipated Completion Date: September 30, 2025
Contact Person: Mary Franklin
Director, Division of County Operations
Department of Human Services
700 Main Street
Little Rock, AR 72201
(501) 681-8377
Mary.Franklin@dhs.arkansas.gov
Finding Number: 2024-017
State/Educational Agency(s): Arkansas Department of Energy and Environment
Pass-Through Entity: Not Applicable
AL Number(s) and Program Title(s): 93.568 – Low-Income Home Energy Assistance
Federal Awarding Agency: U.S. Department of Health and Human Services
Federal Award Number(s): Various
Federal Award Year(s): 2023 and 2024
Compliance Requirement(s) Affected: Reporting
Type of Finding: Noncompliance and Significant Deficiency
Repeat Finding:
Not applicable
Criteria:
In accordance with federal laws and program guidelines, recipients of federal awards must submit various reports to the grantor agency. These include annual reports, such as the Carryover and Reallotment Report (45 CFR § 96.81(b)), the Households Assisted Report (45 CFR § 96.82(a)), and the LIHEAP Performance Data Form (OMB No 0970-0449), as well as LIHEAP Quarterly Performance and Management Reports (OMB No. 0970-0589).
Condition and Context:
ALA staff reviewed submissions of required reports and determined that reports were not filed by various due dates, and performance measures were not completed
Statistically Valid Sample:
Not applicable
Questioned Costs:
None
Cause:
The Agency did not have controls in place to ensure that reports were submitted timely.
Effect:
Required annual and quarterly reports were submitted late, which could potentially jeopardize funding.
Recommendation:
ALA staff recommend the Agency establish and implement control procedures to ensure mandatory reports are accurately completed and submitted by the required deadlines.
Views of Responsible Officials and Planned Corrective Action:
Program Year 2024 was an unusual year in that (1) key Agency staff members were on extended leave or resigned, (2) one of the program’s primary consultants took extended leave, and (3) the program experienced a major influx of stimulus funds through separate awards that required separate management, coordination, and reporting. These exceptional circumstances slowed Agency staff’s ability to follow-up with subrecipients that had not submitted timely and accurate reports; subrecipient reports are necessary to submitting accurate and fully responsive federal reports.
Views of Responsible Officials and Planned Corrective Action (Continued):
To help minimize the likelihood of future late submissions, the following control procedures will be established and implemented:
• Prepare and transmit a comprehensive schedule of reports and respective due dates to subrecipients at the beginning of each program year; this schedule will be included in the Program Operations Manual.
• Feature reporting and associated compliance requirements as a regular topic during annual training activities
• Create a shared electronic, internal Agency calendar with reminders for initial, intermediate, and final due dates for report information
• If necessary, upload report information in stages to federal reporting database to ensure submission deadlines are met.
• Assign responsibility to a staff member to oversee the data collection process, review collected data for accuracy and consistency and, if necessary, provide technical assistance to subrecipients that need help preparing accurate reporting.
Anticipated Completion Date: June 15, 2025
Contact Person: Iris Pennington
Home Utilities Assistance Manager
Arkansas Department of Energy and Environment
5301 Northshore Drive
North Little Rock, AR 72118
(501) 682-0842
Iris.Pennington@arkansas.gov
Finding Number: 2024-018
State/Educational Agency(s): Arkansas Department of Energy and Environment
Pass-Through Entity: No Applicable
AL Number(s) and Program Title(s): 93.568 – Low-Income Home Energy Assistance
Federal Awarding Agency: U.S. Department of Health and Human Services
Federal Award Number(s): Various
Federal Award Year(s): 2024
Compliance Requirement(s) Affected: Reporting
Type of Finding: Noncompliance and Significant Deficiency
Repeat Finding:
Not applicable
Criteria:
In accordance with Appendix A of 2 CFR § 170, direct recipients of grants or cooperative agreements are required to report first-tier sub-awards of $30,000 or more to the Federal Funding Accountability and Transparency Act (FFATA) Sub-award Reporting System (FSRS).
Condition and Context:
ALA staff searched information on the USASpending.gov website to determine if the Agency was reporting sub-awards as required and discovered no sub-award/contractor information was reported for LIHEAP by the Arkansas Department of Energy and Environment (ADEE).
Statistically Valid Sample:
Not applicable
Questioned Costs:
None
Cause:
The Agency did not have controls in place to guarantee that first-tier sub-awards of $30,000 or more were reported to the FSRS.
Effect:
The Agency was not in compliance with Appendix A of 2 CFR § 170 and did not report first-tier sub-awards. Failure to file Federal Funding Accountability and Transparency Act Subaward reports could result in the reduction or termination of future funding.
Recommendation:
ALA staff recommend the Agency establish and implement control procedures to ensure first-tier sub-awards are reported to FSRS, as required.
Views of Responsible Officials and Planned Corrective Action:
The Agency will create and maintain an Excel spreadsheet to keep record of subrecipient awards of $30,000 or more. The spreadsheet will be shared between the Agency’s program staff and fiscal staff and used to report first-tier sub-awards of $30,000 or more to the Federal Funding Accountability and Transparency Act (FFATA) Sub-award Reporting System (FSRS) on SAM.gov. Agency program staff will input the information into the shared spreadsheet, and Agency fiscal staff will upload and submit reportable information to SAM.gov by the end of the month following the month in which the Agency awards any sub-grant of $30,000 or more.
Anticipated Completion Date: June 15, 2025
Contact Person: Kay Joiner
Senior Programs Manager
Arkansas Department of Energy and Environment
5301 Northshore Drive
North Little Rock, AR 72118
(501) 682-7390
Kay.Joiner@arkansas.gov
Finding Number: 2024-019
State/Educational Agency(s): Arkansas Department of Energy and Environment
Pass-Through Entity: Not Applicable
AL Number(s) and Program Title(s): 93.568 – Low-Income Home Energy Assistance
Federal Awarding Agency: U.S. Department of Health and Human Services
Federal Award Number(s): Various
Federal Award Year(s): 2023 and 2024
Compliance Requirement(s) Affected: Subrecipient Monitoring
Type of Finding: Noncompliance and Significant Deficiency
Repeat Finding:
Not applicable
Criteria:
In accordance with 45 CFR § 75.352 (f) – (h), the Agency is required to verify that every subrecipient is audited, as required by 45 CFR § 75.501, and reviewed for further monitoring considerations.
Condition and Context:
ALA review of five subrecipients revealed that although the Agency maintained copies of subrecipients’ most current audit reports, the Agency could not provide documentation to support that reviews of the audits had been performed.
Statistically Valid Sample:
Not a statistically valid sample
Questioned Costs:
None
Cause:
The Agency does not have controls in place to guarantee that subrecipients’ audit reports are reviewed and considered for further monitoring actions.
Effect:
Additional reviews, necessary adjustments, or enforcement actions against noncompliant subrecipients may not have occurred.
Recommendation:
ALA staff recommend the Agency strengthen control procedures to ensure the review of subrecipients’ audit reports is documented.
Views of Responsible Officials and Planned Corrective Action:
Subrecipient audit reports are requested, annually, from each subrecipient and reviewed by Agency staff. However, in order to demonstrate that reviews have been conducted, internal control procedures to document the reviews will include the following actions:
• Create a checklist of items to review in accordance with federal auditing requirements.
• Develop a report that documents the subrecipient audit that was reviewed; the reviewer’s name; date of the review; any actions required or taken; if applicable, date by which subrecipient must submit a corrective action plan (CAP); CAP status updates; and if applicable, subrecipient financial statements.
• Establish a schedule to review audit deficiencies with underperforming subrecipients.
• All documentation will be to an internal shared drive following a naming convention established by the program.
Anticipated Completion Date: June 15, 2025
Contact Person: Tim Scott
Senior Operations Manager
Arkansas Department of Energy and Environment
5301 Northshore Drive
North Little Rock, AR 72118
(501) 682-2433
Tim.W.Scott@arkansas.gov
Finding Number: 2024-020
State/Educational Agency(s): Arkansas Department of Human Services
Pass-Through Entity: Not Applicable
AL Number(s) and Program Title(s): 93.658 – Foster Care Title IV-E
Federal Awarding Agency: U.S. Department of Health and Human Services
Federal Award Number(s): 2301ARFOST; 2401ARFOST
Federal Award Year(s): 2023 and 2024
Compliance Requirement(s) Affected: Reporting
Type of Finding: Noncompliance and Material Weakness
Repeat Finding:
Not applicable
Criteria:
In accordance with 45 CFR § 75.303, a non-federal entity must 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 statues, regulations, and the terms and conditions of the award.
The Instructions for Completion of Form CB-496 provided by the federal awarding agency state, “Expenditures are considered made on the date the payment occurs, regardless of the date of receipt of the good or performance of the service.”
Per the U.S. Department of Health and Human Services, the information reported on form CB-496, Title IV-E Programs Quarterly Financial Report, is reviewed by various components of the Administration for Children and Families (ACF) to award funds, determine the allowability of reported expenditures, and provide reports to Congress. Determinations regarding whether reported expenditures are eligible for federal funding under Title IV-E will be made in accordance with applicable federal statute, regulations, and policy.
Condition and Context:
The Agency’s Division of Managerial Accounting staff prepare the required quarterly financial reports for the Title IV-E Foster Care federal program. The Agency uses the data from the DHS Cost Allocation system to track grant expenditures and provide information for reporting. The data within cost allocation is derived from expenditures posted to AASIS. The Agency’s internal controls state that Managerial Accounting staff who are responsible for submitting the federal financial reports meet with staff from the Division receiving the grant to become familiar with the specifics of each grant award assigned and discuss and obtain approval of all financial reports prior to submission.
ALA completed a reconciliation between the CB-496 Title IV-E Foster Care Quarterly Financial Reports ended September 30, 2023, December 31, 2023, March 31, 2024, and June 30, 2024 and the data obtained from the DHS Cost Allocation system relating to the Title IV-E Foster Care Program. Testing revealed the Agency did not properly record expenditures on the CB-496 Title IV-E Foster Care Quarterly Financial Reports as follows:
• In one instance, for quarterly report ended September 30, 2023, the Agency failed to include Placement and Residential Licensing expenditures in the total administrative expenditures reported.
• In two instances, for quarterly reports ended December 31, 2023 and March 31, 2024, the Agency failed to report complete and accurate expenditures for training costs. For quarter ended December 31, 2023, no training expenditures were reported. For quarter ended March 31, 2024, the amount reported was for expenditures paid outside of the reporting period.
• In three instances, for quarterly reports ended December 31, 2023, March 31, 2024, and June 30, 2024, the Agency duplicated a portion of administrative expenditures. The expense was recorded both on lines 7 and 12a/12b of the report.
• In two instances, for quarterly reports ended March 31, 2024 and June 30, 2024, the Agency recorded a portion of administrative expenditures using data from the incorrect reporting period.
• In three instances, for quarters ended December 31, 2023 and March 31, 2024 (two report lines), the amount reported on the quarterly report did not match the Agency’s supporting documentation.
Condition and Context (Continued):
• In one instance, for quarterly report ended September 30, 2023, the current quarter claims reported on Line 7 (In-Placement Administrative Costs – Provider and Agency Management), and lines 12a/12b (Comprehensive Child Welfare Information System (CCWIS) Project Operational Costs) contained inaccurate amounts. The errors net and do not affect total costs reported for the quarter.
• In three instances, for quarterly reports ended December 31, 2024, March 31, 2024, and June 30, 2024, the Agency included non-Title IV-E Foster Care program code expenditures in the amount recorded as the CCWIS Project Operational Costs portion of administrative expenditures.
Errors noted above resulted in total understated expenditures of $2,782,062 (federal portion $2,182,579) for the quarterly reports for period ended September 30, 2023, December 31, 2023, March 31, 2024, and June 30, 2024.
ALA reviewed documentation supporting that managerial accounting staff obtained approval from the Division of Child and Family Services prior to submission of the quarterly CB-496 Title IV-E Foster Care financial reports. In one instance (quarter ended March 31, 2024), the documented review was dated after the report submission date. Additionally, the documented approval was not obtained by the proper division.
Statistically Valid Sample:
Not applicable
Questioned Costs:
None
Cause:
Per Agency written procedures, management has developed procedures for ensuring federal reports are accurate. A two-part review is required for the submitted quarterly reports. The Agency failed to properly complete the review of the quarterly reports prior to submission.
Effect:
Inaccurate data was submitted on the CB-496 Quarterly Title IV-E Foster Care Financial Report.
Recommendation:
ALA staff recommend the Agency strengthen controls over reporting to ensure that amounts reported are accurate, complete, and properly supported by the appropriate records and documentation to ensure compliance with federal laws and regulations. ALA staff also recommend the Agency continue to strengthen controls to ensure the quarterly CB-496 Title IV-E Foster Care Financial Report are properly reviewed prior to submission.
Views of Responsible Officials and Planned Corrective Action:
DHS concurs with this finding. Corrections have been made to the affected quarterly reports for SFY2024. New program codes for Placement and Residential Licensing expenditures were not included in prior reporting for Administrative Costs. Documented procedures for quarterly financial reporting will be revised to include more specific instructions for reporting expenditures and additional levels of review prior to report submission. Additional training on completion of quarterly financial reporting is being developed for DCFS Finance and Managerial Accounting-Grants Management staff.
Anticipated Completion Date: April 30, 2025
Contact Person: Tiffany Wright
Director, Division of Children and Family Services
Department of Human Services
700 Main Street
Little Rock, AR 72201
(501) 396-6477
Tiffany.Wright@dhs.arkansas.gov
Finding Number: 2024-021
State/Educational Agency(s): Arkansas Department of Human Services
Pass-Through Entity: Not Applicable
AL Number(s) and Program Title(s): 93.659 – Adoption Assistance
Federal Awarding Agency: U.S. Department of Health and Human Services
Federal Award Number(s): Various
Federal Award Year(s): Various
Compliance Requirement(s) Affected: Activities Allowed or Unallowed; Eligibility
Type of Finding: Significant Deficiency
Repeat Finding:
A similar finding reported in prior-year finding 2023-016.
Criteria:
In accordance with 42 USC § 673 (a)(4)(A) and (B), a payment may not be made to parents with respect to a child if the State determines that the parents are no longer legally responsible for the support of the child or if the State determines that the child is no longer receiving any support from the parents. Parents who have been receiving adoption assistance payments shall keep the state administering the program informed of circumstances that would make them ineligible for the payments.
In accordance with 45 CFR § 75.303, a non-federal entity must:
• 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 award. These controls should be in compliance with Green Book or COSO guidance.
• Evaluate and monitor its compliance with the award.
• Take prompt action when instances of noncompliance are identified, including noncompliance identified in audit findings.
Condition and Context:
When an adoptive parent is no longer legally responsible for the support of the child (i.e., death of parent, termination of parental rights, child no longer receiving support from parent), the Adoption Unit must be notified in order to end the adoption subsidy. However, the notifications are not always timely, and the required information entered into the Children’s Reporting and Information System (CHRIS) is delayed, resulting in payments made to parents past the subsidy end date. As a result, the Agency established internal control procedures to identify these types of payments, and the overpayment information is provided to the accounts receivable department for collection.
ALA obtained a report from Division of Children and Family Services (DCFS) staff that contained all subsidy overpayments identified by the Agency during state fiscal year (SFY) ended June 30, 2024. The report revealed subsidy overpayments for 29 clients with payments made to 23 providers. The total overpayments consisted of $76,284 paid with federal funds and $24,442 paid with state general revenue.
All overpayments identified by the Agency are unallowable uses of the federal program funds. It was noted during the prior two consecutive audits (SFY2020 and SFY2023) that the Agency did not have procedures in place to repay the federal portion of the overpayments identified to the federal awarding agency. As of the end of fieldwork for the SFY2024 audit, the Agency had not made efforts to establish procedures, nor had the Agency made efforts to repay the federal portion of the overpayments identified.
To test the operating effectiveness of controls over compliance, the auditor reperformed the application of the Agency's controls for overpayments. ALA reviewed documentation for five providers to ensure the overpayments were researched and properly submitted for collection and proper collection efforts were made by the accounts receivable department.
Reperformance of the application of the Agency’s controls over overpayments revealed the following deficiencies:
• For three providers, the subsidy overpayment was recorded in the Agency’s accounts receivable system (AROPTS) as “State Adoption” funding source category. This classification could result in the Agency applying any subsequently collected amounts to the State General Revenue account instead of the Federal Funding account when repayments are received.
• For two providers, the Notice of overpayments sent to the provider from the Accounts Receivable Unit incorrectly listed the overpayments as "Notice of Foster Care Overpayment." Additionally, the overpayment information on the Demand Notice and the Notice of Intent to Intercept State Income Tax Refund(s) did not reflect the correct balance for all subsidy payments identified as overpayments. The Agency’s prior-year corrective action plan states the Accounts Receivable Unit in the Office of Finance has implemented systems changes that ensure all claims will generate a collections notice with the correct claims data. The Agency response to the prior-year finding was provided to DFA prior to the date this notice of overpayment was issued. It appears the Agency did not implement the corrective action plan as indicated.
• Two providers submitted multiple reimbursements totaling $700 and $6,800, respectively. From these amounts, reimbursements totaling $2,500 were incorrectly coded to the Foster Care State General Revenue internal order and fund.
• Two payments for $550 each were received from one provider and deposited in the Foster Care Trust Account as child support to offset the foster care board payment. The receivable balance was not properly reduced for this provider by $1,100.
Further discussion with the Agency revealed that adjustments for these overpayments have not been made on the quarterly federal financial reports or communicated with the federal awarding agency.
Statistically Valid Sample:
Not a statistically valid sample
Questioned Costs:
$ 706 – 2001ARADPT
$ 4,437 – 2101ARADPT
$ 16,049 – 2201ARADPT
$ 37,460 – 2301ARADPT
$ 17,632 – 2401ARADPT
Cause:
The internal control process for processing and collecting overpayments by the Accounts Receivable Unit is not adequate. Additionally, the adoption unit is not notified timely of events resulting in a subsidy ending.
Effect:
The federal awarding agency may require the State to pay back the overpaid funds.
Recommendation:
ALA staff recommend the Agency immediately update its internal control procedures document regarding the overpayment processes and provide relevant training to staff. Additionally, ALA staff recommend the Agency communicate with the federal awarding agency regarding proper procedures for repaying the unallowable costs.
Views of Responsible Officials and Planned Corrective Action:
DHS concurs with this finding. The DHS Accounts Receivables Unit is developing documented procedures and controls addressing the process for entering adoption subsidy overpayments into the agency’s accounts receivable system (AROPTS) and DCFS is updating documented procedures and training on reporting of collected overpayments to the Accounts Receivable Unit. System changes are also in process for AROPTS that will pull the adjusted balance for overpayments when a notice is being created.
Anticipated Completion Date: April 30, 2025
Contact Person: Renee Ikard
Chief Financial Officer
Department of Human Services
700 Main Street
Little Rock, AR 72201
(501) 682-8985
Renee.Ikard@dhs.arkansas.gov
Finding Number: 2024-022
State/Educational Agency(s): Arkansas Department of Human Services
Pass-Through Entity: Not Applicable
AL Number(s) and Program Title(s): 93.659 – Adoption Assistance
Federal Awarding Agency: U.S. Department of Health and Human Services
Federal Award Number(s): Various
Federal Award Year(s): Various
Compliance Requirement(s) Affected: Eligibility
Type of Finding: Noncompliance and Significant Deficiency
Repeat Finding:
A similar finding was reported in prior-year finding 2023-015.
Criteria:
Federal Adoption Assistance subsidy payments may be paid on behalf of a child only if all requirements are met, including the requirements below:
• In accordance with 45 CFR § 1356.40(b)(1), the adoption assistance agreement must be signed and in effect at the time of or prior to the final decree of adoption. The adoption assistance agreement is defined at 42 § USC 675(3).
• The prospective adoptive parent(s) must satisfactorily have met a criminal records check, including a fingerprint-based check (42 USC § 671(a)(20)(A)). This involves a determination that such individual(s) have not committed any prohibited felonies in accordance with 42 USC § 671(a)(20)(A)(i) and (ii).
Additionally, per Division of Children and Family Services (DCFS) Policy, the official record of child welfare information for DCFS is maintained through the Children’s Reporting Information System (CHRIS).
Condition and Context:
ALA staff reviewed 60 client adoption files to ensure sufficient, appropriate evidence was provided to support the Agency’s determination of eligibility. The clients selected for testing had adoption legalization dates that spanned from April 2006 to May 2024. The review of the 60 client case files revealed deficiencies resulting in a total of $151,567 in questioned costs paid with federal funds. The deficiencies are summarized below:
• One client file, with an adoption legalization date of June 26, 2018, contained a subsidy agreement that was signed and dated by the adoptive parent after the final decree of adoption. The subsidy agreement was signed by both adoptive parents on June 28, 2018. The adoptive parents received monthly subsidy payments from July 2018 through the present. Federal portion of questioned costs totaled $23,976.
• One client file with an adoption legalization date of January 10, 2014 did not contain a signed subsidy agreement. The adoptive parents received monthly subsidy payments from January 2014 through the present. Federal portion of questioned costs totaled $40,474.
• One client file, with an adoption legalization date of November 18, 2020, contained a subsidy agreement that was not legible, causing the signature and date signed by the adoptive parent to be unreadable. The Agency was unable to provide a legible copy of the signed subsidy. The adoptive parents received monthly subsidy payments from November 2020 through the present. The federal portion of questioned costs totaled $16,317.
Additionally, the review of the household member compliance requirements revealed deficiencies as summarized below:
• One provider home, with an adoption legalization date of December 2, 2015, was an Interstate Compact on the Placement of Children (ICPC) placement. The Agency was unable to provide a copy of the required ICPC form provided by the state of Virginia documenting the compliance with eligibility provisions of the provider home, nor was the information maintained in CHRIS. The adoptive parents received monthly subsidy payments from December 2015 through the present. Federal portion of questioned costs totaled $70,800.
Statistically Valid Sample:
Not a statistically valid sample
Questioned Costs:
$ 2,505 – 1401AR1407
$ 3,487 – 1501ARADPT
$ 9,522 – 1601ARADPT
$ 10,788 – 1701ARADPT
$ 11,906 – 1801ARADPT
$ 14,638 – 1901ARADPT
$ 14,827 – 2001ARADPT
$ 19,791 – 2101ARADPT
$ 20,895 – 2201ARADPT
$ 21,093 – 2301ARADPT
$ 22,115 – 2401ARADPT
Cause:
DCFS did not maintain sufficient records to support the eligibility of federal adoption subsidy payments made on behalf of adopted children.
Effect:
DCFS did not have adequate documentation supporting the eligibility for federal adoption subsidy payments made on behalf of adopted children. The federal awarding agency may require recoupment.
Recommendation:
ALA staff recommend the Agency continue providing adequate communication with and training to appropriate personnel to ensure compliance with program requirements and retention of documentation.
Views of Responsible Officials and Planned Corrective Action:
DHS concurs with the finding. The agency updated its documented controls in March 2024 to require confirmation that agreements are signed by all parties before processing adoption subsidy packets and that all adoption files contain complete documentation. All findings occurred prior to the agency updating its documented controls.
Anticipated Completion Date: Complete
Contact Person: Tiffany Wright
Director, Division of Children and Family Services
Department of Human Services
700 Main Street
Little Rock, AR 72201
(501) 396-6477
Tiffany.wright@dhs.arkansas.gov
Finding Number: 2024-023
State/Educational Agency(s): Arkansas Department of Human Services
Pass-Through Entity: Not Applicable
AL Number(s) and Program Title(s): 93.659 – Adoption Assistance
Federal Awarding Agency: U.S. Department of Health and Human Services
Federal Award Number(s): 2301ARADPT
Federal Award Year(s): 2023
Compliance Requirement(s) Affected: Reporting
Type of Finding: Noncompliance and Significant Deficiency
Repeat Finding:
Not applicable
Criteria:
In accordance with 45 CFR § 75.302, the auditee must provide an accurate, current, and complete disclosure of the financial results of each federal award or program in accordance with the reporting requirements.
Additionally, in accordance with 45 CFR § 75.303, a non-federal entity must:
• 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 award. These controls should be in compliance with Green Book or COSO guidance.
• Evaluate and monitor its compliance with the award.
• Take prompt action when instances of noncompliance are identified, including noncompliance identified in audit findings.
Per the U.S. Department of Health and Human Services, the information reported on form CB-496, Title IV-E Programs Quarterly Financial Report, is reviewed by various components of the Administration for Children and Families (ACF) to award funds, determine the allowability of reported expenditures, and provide reports to Congress. Determinations regarding whether reported expenditures are eligible for federal funding under Title IV-E will be made in accordance with applicable federal statute, regulations, and policy.
Condition and Context:
Managerial Accounting prepares the required quarterly financial reports for the Adoption Assistance federal program. The Agency uses the data from the DHS Cost Allocation system to track grant expenditures. The Agency’s cost allocation system is used to provide information for reporting. The data within cost allocation is derived from expenditures posted to AASIS.
ALA completed a reconciliation between the CB-496 Adoption Assistance Quarterly Financial Reports ending September 30, 2023, December 31, 2023, March 31, 2024, and June 30, 2024 and the data pulled from the DHS Cost Allocation system relating to the Adoption Assistance Program. Testing revealed the Agency did not properly record all administrative expenditures on the CB-496 Adoption Assistance Quarterly Financial Reports as follows:
• Quarter ended September 30, 2023 – Administrative cost under reported in the amount of $113,921.
Statistically Valid Sample:
Not applicable
Questioned Costs:
None
Cause:
Per Agency written procedures, management has developed procedures for ensuring federal reports are accurate. A two-part review is required for the submitted quarterly reports. The Agency failed to properly complete the review of the quarterly reports prior to submission.
Effect:
Inaccurate data was submitted on the CB-496 Quarterly Adoption Assistance Financial Report.
Recommendation:
ALA staff recommend the Agency strengthen controls over reporting to ensure that amounts reported are accurate, complete, and properly supported by the appropriate records and documentation to ensure compliance with federal laws and regulations. ALA staff also recommend the Agency continue to strengthen controls to ensure the quarterly CB-496 Adoption Assistance Financial Report is properly reviewed prior to submission.
Views of Responsible Officials and Planned Corrective Action:
DHS concurs with this finding. Corrections have been made to the affected quarterly reports for SFY2024. New program codes for Placement and Residential Licensing expenditures were not included in prior reporting for Administrative Costs. Documented procedures for quarterly financial reporting will be revised to include more specific instructions for reporting expenditures and additional levels of review prior to report submission. Additional training on completion of quarterly financial reporting is being developed for DCFS Finance and Managerial Accounting-Grants Management staff.
Anticipated Completion Date: April 30, 2025
Contact Person: Tiffany Wright
Director, Division of Children and Family Services
Department of Human Services
700 Main Street
Little Rock, AR 72201
(501) 396-6477
Tiffany.Wright@dhs.arkansas.gov
Finding Number: 2024-024
State/Educational Agency(s): Arkansas Department of Human Services
Pass-Through Entity: N/A
AL Number(s) and Program Title(s): 93.767 – Children’s Health Insurance Program
93.778 – Medical Assistance Program
(Medicaid Cluster)
Federal Awarding Agency: U.S. Department of Health and Human Services
Federal Award Number(s): 05-2305AR3002, 05-2305AR5021, 05-2405AR5021
05-2305AR5MAP, 05-2405AR5MAP
Federal Award Year(s): 2023 and 2024
Compliance Requirement(s) Affected: Eligibility
Type of Finding: Significant Deficiency
Repeat Finding:
Not applicable.
Criteria:
In accordance with 45 CFR § 75.303, a non-federal entity must 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 award. In addition, 42 CFR § 435.1009 states that federal financial participation (FFP) is not available for payments made on behalf of individuals who are inmates in public institutions.
Condition and Context:
The Agency has established system controls to identify Medicaid and CHIP recipients who are no longer eligible for the programs due to death or incarceration.
To identify unreported deceased recipients, monthly recipient data is “matched” to Arkansas Department of Health vital records data. Results of recipients “matched” to death records are uploaded to Arkansas Integrated Eligibility System (ARIES), where an ARIES task is created to alert the Division of County Operations (DCO) that the recipient may be deceased. DCO staff are to complete the task by determining whether the recipient is, in fact, deceased; enter the date of death to the case file; and close any open aid segments.
ALA selected for review 4 months from state fiscal year 2024 to ensure the death data matches were performed, and the Agency performed the follow-up review for identified matches. Per ALA review, the matches were not completed for any of the selected months, and the Agency received the data match files for only 5 months of the state fiscal year.
To identify incarcerated recipients, recipient data is “matched” to Arkansas Department of Correction inmate data. Resulting “matches” are submitted to ARIES, where an ARIES task will be created to alert DCO staff that the recipient may be incarcerated; therefore, the State may no longer receive FFP for payments made on his/her behalf. Should DCO determine the individual is incarcerated, the recipient’s case will be suspended pending release or closed if determined the individual is no longer eligible to receive benefits. Incarcerated data matches are performed daily for state workdays only.
ALA selected 25 state workdays from state fiscal year 2024 for review to ensure the daily incarceration matches were performed, and the Agency performed the follow-up review for identified matches. Per ALA review, the daily incarceration match was not completed for 1 of the selected dates. Additionally, ALA selected up to 5 matches from the remaining selected dates, depending on the total number of matches for that date, for further review to ensure DCO completed work on the ARIES task. ALA noted the Agency failed to timely perform the follow-up review for 4 of 113 ARIES tasks created from the match results.
Statistically Valid Sample:
Not a statistically valid sample.
Questioned Costs:
Unknown
Cause:
Per DCO, match results were not uploaded to ARIES due to system issues that have since been corrected.
Effect:
Closure or suspension of cases may have been delayed for deceased and/or incarcerated individuals. This delay may have allowed improper payments, including monthly capitation payments, to be made.
Recommendation:
ALA staff recommend the Agency closely monitor data match processes to ensure the matches are being completed as designed and ARIES tasks stemming from these match results are worked in the system timely.
Views of Responsible Officials and Planned Corrective Action:
DHS concurs with this finding. DCO has implemented controls that monitor the automated matching process with the Arkansas Department of Health and Arkansas Department of Corrections. These additional controls include a pre-cycle review of the matching process prior to execution, additional checkpoints during the execution of the matching process, monitoring, validating completion of the matching jobs to check for excepted results, and additional communication and coordination among systems, business teams, and other cabinet agencies.
Anticipated Completion Date: Complete
Contact Person: Mary Franklin
Director, Division of County Operations
Department of Human Services
700 Main Street
Little Rock, AR 72201
(501) 681-8377
Mary.Franklin@dhs.arkansas.gov
Finding Number: 2024-024
State/Educational Agency(s): Arkansas Department of Human Services
Pass-Through Entity: N/A
AL Number(s) and Program Title(s): 93.767 – Children’s Health Insurance Program
93.778 – Medical Assistance Program
(Medicaid Cluster)
Federal Awarding Agency: U.S. Department of Health and Human Services
Federal Award Number(s): 05-2305AR3002, 05-2305AR5021, 05-2405AR5021
05-2305AR5MAP, 05-2405AR5MAP
Federal Award Year(s): 2023 and 2024
Compliance Requirement(s) Affected: Eligibility
Type of Finding: Significant Deficiency
Repeat Finding:
Not applicable.
Criteria:
In accordance with 45 CFR § 75.303, a non-federal entity must 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 award. In addition, 42 CFR § 435.1009 states that federal financial participation (FFP) is not available for payments made on behalf of individuals who are inmates in public institutions.
Condition and Context:
The Agency has established system controls to identify Medicaid and CHIP recipients who are no longer eligible for the programs due to death or incarceration.
To identify unreported deceased recipients, monthly recipient data is “matched” to Arkansas Department of Health vital records data. Results of recipients “matched” to death records are uploaded to Arkansas Integrated Eligibility System (ARIES), where an ARIES task is created to alert the Division of County Operations (DCO) that the recipient may be deceased. DCO staff are to complete the task by determining whether the recipient is, in fact, deceased; enter the date of death to the case file; and close any open aid segments.
ALA selected for review 4 months from state fiscal year 2024 to ensure the death data matches were performed, and the Agency performed the follow-up review for identified matches. Per ALA review, the matches were not completed for any of the selected months, and the Agency received the data match files for only 5 months of the state fiscal year.
To identify incarcerated recipients, recipient data is “matched” to Arkansas Department of Correction inmate data. Resulting “matches” are submitted to ARIES, where an ARIES task will be created to alert DCO staff that the recipient may be incarcerated; therefore, the State may no longer receive FFP for payments made on his/her behalf. Should DCO determine the individual is incarcerated, the recipient’s case will be suspended pending release or closed if determined the individual is no longer eligible to receive benefits. Incarcerated data matches are performed daily for state workdays only.
ALA selected 25 state workdays from state fiscal year 2024 for review to ensure the daily incarceration matches were performed, and the Agency performed the follow-up review for identified matches. Per ALA review, the daily incarceration match was not completed for 1 of the selected dates. Additionally, ALA selected up to 5 matches from the remaining selected dates, depending on the total number of matches for that date, for further review to ensure DCO completed work on the ARIES task. ALA noted the Agency failed to timely perform the follow-up review for 4 of 113 ARIES tasks created from the match results.
Statistically Valid Sample:
Not a statistically valid sample.
Questioned Costs:
Unknown
Cause:
Per DCO, match results were not uploaded to ARIES due to system issues that have since been corrected.
Effect:
Closure or suspension of cases may have been delayed for deceased and/or incarcerated individuals. This delay may have allowed improper payments, including monthly capitation payments, to be made.
Recommendation:
ALA staff recommend the Agency closely monitor data match processes to ensure the matches are being completed as designed and ARIES tasks stemming from these match results are worked in the system timely.
Views of Responsible Officials and Planned Corrective Action:
DHS concurs with this finding. DCO has implemented controls that monitor the automated matching process with the Arkansas Department of Health and Arkansas Department of Corrections. These additional controls include a pre-cycle review of the matching process prior to execution, additional checkpoints during the execution of the matching process, monitoring, validating completion of the matching jobs to check for excepted results, and additional communication and coordination among systems, business teams, and other cabinet agencies.
Anticipated Completion Date: Complete
Contact Person: Mary Franklin
Director, Division of County Operations
Department of Human Services
700 Main Street
Little Rock, AR 72201
(501) 681-8377
Mary.Franklin@dhs.arkansas.gov
Finding Number: 2024-025
State/Educational Agency(s): Arkansas Department of Human Services
Pass-Through Entity: Not Applicable
AL Number(s) and Program Title(s): 93.767 – Children’s Health Insurance Program
Federal Awarding Agency: U.S. Department of Health and Human Services
Federal Award Number(s): 05-2305AR3002 and 05-2305AR5021
Federal Award Year(s): 2023
Compliance Requirement(s) Affected: Special Tests and Provisions – Provider Eligibility (Fee-for-Service)
Type of Finding: Material Noncompliance and Material Weakness
Repeat Finding:
A similar issue was reported in prior-year finding 2023-026.
Criteria:
According to the Arkansas Medicaid Provider Manual section 140.000, Provider Participation, any provider of health services must be enrolled in the Arkansas Medicaid Program prior to reimbursement for any services provided to Arkansas Medicaid beneficiaries. Enrollment is considered complete when a provider has signed and submitted the following forms:
• Application.
• W-9 tax form.
• Medicaid provider contract.
• PCP agreement, if applicable.
• EPSDT agreement, if applicable.
• Change in ownership control or conviction of crime form.
• Disclosure of significant business transactions form.
• Specific license or certification base on provider type and specialty, if applicable.
• Participation in the Medicare program, if applicable.
42 CFR § 455.414 (effective March 25, 2011, with an extended deadline of September 25, 2016, for full compliance) states that the State Medicaid Agency must revalidate the enrollment of all providers at least every five years. Section 141.100 of the Arkansas Medicaid Provider Manual states that revalidation includes a new application; satisfactory completion of screening activities; and, if applicable, fee payment. In accordance with 42 CFR § 455.450, screening activities vary depending on the risk category of the provider as follows:
• The limited-risk category includes database checks.
• The moderate-risk category includes those required for limited-risk plus site visits.
• The high-risk category includes those required for moderate-risk plus fingerprint background checks.
Condition and Context:
From a population of 6,309 providers, ALA staff reviewed files of 40 providers to ensure sufficient, appropriate evidence was provided to support the determination of eligibility, including compliance with revalidation requirements. ALA review revealed deficiencies with three of the provider files as follows:
Moderate-risk category:
Sample item 32: The provider’s revalidation was due by September 25, 2016, and every five years afterwards but was not completed until April 2, 2024. As a result, any amounts paid to the provider with dates of service from September 26, 2016 through February 29, 2020, and May 12, 2023 through April 1, 2024, are considered questioned costs. Questioned costs totaled $37,430 (federal) and $8,801 (state).
In accordance with the CMS 1135 waiver, revalidations, site visits, and fingerprint background checks were paused from March 1, 2020 through May 11, 2023, as result of the Public Health Emergency (PHE). In addition, revalidations due during the PHE could be extended to November 11, 2023. However, this provider’s revalidation was due prior to March 1, 2020; therefore, the extension is not applicable. Amounts paid to the provider for dates of service during the PHE are not included in the questioned costs noted above.
Limited-risk category:
Sample item 15: The provider’s revalidation was due by June 1, 2024, but was not completed until June 21, 2024. As result, amounts paid to the provider with dates of service from June 1 through June 20, 2024, are considered questioned costs. Questioned costs totaled $3,287 (federal) and $801 (state).
Sample item 21: The provider’s revalidation was due by January 13, 2021, but was not completed until December 13, 2023. As a result, amounts paid to the provider with dates of service from November 12, 2023 through December 12, 2023, are considered questioned costs. Questioned costs totaled $10 (federal) and $2 (state).
In accordance with CMS 1135 waiver flexibilities, revalidations, site visits, and fingerprint background checks were paused from March 1, 2020 through May 11, 2023, as result of the PHE. In addition, revalidations due during the PHE, which this one was, could be extended to November 11, 2023. Amounts paid to the provider for dates of service during the PHE and extension are not included in the questioned costs noted above.
Statistically Valid Sample:
Not a statistically valid sample
Questioned Costs:
$40,727 (Federal)
$9,604 (State)
Cause:
The Agency has asserted that, effective May 31, 2019, it established and implemented new procedures to improve the following areas of provider enrollment: maintenance of provider enrollment application documents, provider revalidation, site visits, and fingerprint background requirements. Although testing results support that improvements have been made since the new procedures were implemented, deficiencies continued to exist during fiscal year 2024.
Effect:
Claims were processed and paid to providers that did not meet all the required elements and, therefore, were ineligible.
Recommendation:
ALA staff recommend the Agency review and strengthen controls to ensure that required revalidations are performed timely and that required enrollment documentation is maintained to support provider eligibility.
Views of Responsible Officials and Planned Corrective Action:
DHS concurs with the finding. For Sample Item 32, the agency’s revalidation date was set for March 27, 2024, and the provider submitted their application for revalidation prior to that date. System updates and monitoring controls have been implemented to ensure correct revalidation dates are entered in MMIS.
For Sample Item 15, the provider submitted a revalidation application prior to their scheduled termination date. Since there was an active application in the system, the provider was not terminated. The revalidation was successfully completed.
For Sample Item 21, the provider submitted their revalidation application on October 16, 2023, which was prior to the November 11, 2023 deadlines. Multiple follow-ups and requests for additional information from the provider resulted in completion of the revalidation after the deadline date.
Anticipated Completion Date: Complete
Contact Person: Elizabeth Pitman
Director, Division of Medical Services
Department of Human Services
700 Main Street
Little Rock, AR 72201
(501) 244-3944
Elizabeth.Pitman@dhs.arkansas.gov
Finding Number: 2024-026
State/Educational Agency(s): Arkansas Department of Human Services
Pass-Through Entity: Not applicable
AL Number(s) and Program Title(s): 93.778 – Medical Assistance Program
(Medicaid Cluster)
Federal Awarding Agency: U.S. Department of Health and Human Services
Federal Award Number(s): 05-2405AR5ADM
Federal Award Year(s): 2024
Compliance Requirement(s) Affected: Allowable Costs/Cost Principles
Type of Finding: Noncompliance and Significant Deficiency
Repeat Finding:
Not applicable
Criteria:
45 CFR § 75.413(a) defines direct costs as “those costs that can be identified specifically with a particular final cost objective, such as a federal award, or other internally or externally funded activity, or that can be directly assigned to such activities relatively easily with a high degree of accuracy.” Additionally, this regulation states, “costs incurred for the same purpose in like circumstances must be treated consistently as either direct or indirect Facilities and Administrative (F&A) costs.”
Condition and Context:
ALA noted the Agency utilized a contractor to perform work in the Agency’s Managerial Accounting section. Costs associated with this work were improperly recorded as a direct cost to the Medicaid program, while other costs incurred by Managerial Accounting were appropriately allocated to the various DHS divisions and programs through the Agency’s cost allocation system. Per Agency management, only 68% of Managerial Accounting costs should be allocated to the Medicaid program, not the 100% that was charged.
Costs paid for contractor’s work in the Managerial Accounting section totaled $392,000. Based on the Agency’s assertion that 68% of this cost should have been allocated to the Medicaid program, ALA determined costs totaling $125,440 were incorrectly charged to Medicaid.
Statistically Valid Sample:
Not a statistically valid sample
Questioned Costs:
Federal − $62,720
State − $62,720
Cause:
Per management, the Agency chose to assign the costs of the work performed for Managerial Accounting to the Medicaid program because Medicaid represents the largest share of funding to the Agency, which suggests a lack of internal controls over the appropriate coding of expenditures benefiting multiple programs or activities of the Agency.
Effect:
The Agency improperly used federal funds awarded through the Medical Assistance Program (MAP) grant award for expenditures benefitting other state or federal programs, resulting in noncompliance with federal laws and regulations.
Recommendation:
ALA staff recommend the Agency establish and implement additional controls to ensure that expenditures benefitting multiple state or federal programs are properly allocated across all programs or activities.
Views of Responsible Officials and Planned Corrective Action:
DHS concurs with this finding and that cost allocation is the most appropriate means for funding this work. DHS has implemented corrective action effective July 1, 2024, to change payment for Managerial Accounting services from 100% Medicaid funding to a cost allocation methodology. Future contracts and contract extensions executed by the Office of Finance will be evaluated by the DHS Chief Financial Officer to determine the nature of work performed for each contract and specify the appropriate method of allocating costs for services.
Anticipated Completion Date: Complete
Contact Person: Renee Ikard
Chief Financial Officer
Department of Human Services
700 Main Street
Little Rock, AR 72201
(501) 682-8985
Renee.Ikard@dhs.arkansas.gov
Finding Number: 2024-027
State/Educational Agency(s): Arkansas Department of Human Services
Pass-Through Entity: N/A
AL Number(s) and Program Title(s): 93.778 – Medical Assistance Program
(Medicaid Cluster)
Federal Awarding Agency: U.S. Department of Health and Human Services
Federal Award Number(s): 05-2305AR5MAP; 05-2405AR5MAP
Federal Award Year(s): 2023 and 2024
Compliance Requirement(s) Affected: Eligibility
Type of Finding: Noncompliance and Material Weakness
Repeat Finding:
A similar issue reported in prior-year finding 2023-028.
Criteria:
In accordance with 45 CFR § 75.303, a non-federal entity must 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 statues, regulations, and the terms and conditions of the award.
In addition, 42 CFR § 435.1009 states that federal financial participation (FFP) is not available for payments made on behalf of individuals who are inmates in public institutions, including eligible juveniles. To be considered an inmate of a public institution, a person must be living in an institution that is the responsibility of a governmental unit or over which a governmental unit exercises administrative control.
Finally, under section 1001 of the Substance Use Disorder Prevention that Promotes Opioid Recovery and Treatment for Patients and Communities Act (SUPPORT Act), states are (1) prohibited from terminating the Medicaid eligibility of an “eligible juvenile” who becomes an inmate of a public institution, (2) required to process applications submitted by incarcerated youth, and (3) required to re-determine the Medicaid eligibility of eligible juveniles before their release from a public institution.
An eligible juvenile is defined as a “juvenile who is an inmate of a public institution and who (A) was determined eligible for medical assistance under the State plan immediately before becoming an inmate of such a public institution; or (B) is determined eligible for such medical assistance while an inmate of a public institution.”
In compliance with this requirement, Medical Services Manual section D-380 states that coverage for children entering the custody of the Division of Youth Services (DYS) will be placed in suspension status for up to 12 months from the initial approval or most recent renewal. When a child with suspended Medicaid eligibility receives eligible medical treatment off the grounds of the juvenile detention facility (inpatient services) or is released from custody, the child’s Medicaid case will be reinstated for a fixed eligibility period from the date of hospitalization to the date of hospital discharge. Once the child returns to the DYS state-run facility, the Medicaid case is re-suspended.
Condition and Context:
ALA staff selected 60 files for incarcerated juveniles to determine whether the State is properly suspending a juvenile’s benefit coverage when the juvenile is held in a public institution and properly reinstating coverage when the juvenile is placed in non-public institutions or released from DYS custody. ALA’s review also included ensuring that benefit payments were not made for dates of service that fell within the juvenile’s incarceration period.
ALA review revealed the following deficiencies:
• The Agency failed to appropriately suspend and reinstate benefits for 16 incarcerated juveniles. As a result, payments totaling $71,536 were made for dates of service within the incarceration periods for 11 juveniles. The federal and state portions of these payments totaled $52,632 and $18,904, respectively.
• The Agency failed to appropriately suspend Medicaid benefits for 9 incarcerated juveniles in DYS custody, which resulted in payments totaling $50,307 for dates of service during the juveniles’ incarceration periods. The federal and state portions of these payments totaled $36,577 and $13,730, respectively.
• Although the Agency appropriately suspended benefits for 4 incarcerated juveniles, the Agency failed to properly reinstate benefits after their incarceration ended. Additionally, the Agency paid claims, totaling $1,164, for dates of service within the incarceration period for 2 of these juveniles. The federal and state portions of these payments totaled $902 and $262, respectively.
• Although the Agency appropriately suspended and reinstated benefits for 9 incarcerated juveniles, payments totaling $6,978 were made for dates of service within the juveniles’ incarceration periods. The federal and state portions of these payments totaled $5,293 and $1,685, respectively.
Statistically Valid Sample:
Not a statistically valid sample
Questioned Costs:
Federal – $95,404
State – $34,581
Cause:
The Agency failed to properly monitor Medicaid eligibility for juveniles in DYS custody. Suspensions of benefits were not always entered timely, were entered with incorrect effective dates, or were not entered into the system when an eligible juvenile was incarcerated.
Effect:
The Agency improperly received and used funds for payments made on behalf of incarcerated juveniles.
Recommendation:
ALA staff recommend the Agency design and implement internal controls over compliance to ensure that Medicaid benefits are properly suspended when eligible juveniles are incarcerated and properly reinstated when moved to private facilities or released from DYS custody, based on guidance set forth in the Medical Service Policy Manual and in compliance with federal regulations.
Views of Responsible Officials and Planned Corrective Action:
DHS concurs with this finding. Since June 2023, DYS has made multiple changes to improve monitoring of suspension and reinstatement of Medicaid eligibility for incarcerated juveniles. For juveniles with SSI Medicaid, the Social Security Administration (SSA) is responsible for suspending Medicaid coverage. All incarcerations for cases noted in the findings involving SSI Medicaid were reported timely to SSA by the agency. DYS closely monitors these cases and continues to send closure requests to SSA until the cases are closed out. SSI cases account for 76% of the total questioned costs noted in the finding. The Division of Medical Services (DMS) implemented an MMIS change in September 2024 that automatically updates member profiles to accurately reflect incarceration dates. This change will resolve the remaining deficiencies noted in the finding. All payments noted as questioned costs were capitated payments made for the PASSE, Dental Managed Care, and NET programs. The agency currently has a reconciliation process for all three programs that identifies payments made after the member’s incarceration date that should be recouped. Any uncollected overpayments noted in the findings will be recouped as part of the next reconciliation process.
Anticipated Completion Date: Complete
Contact Person: Elizabeth Pitman
Director, Division of Medical Services
Department of Human Services
700 Main Street
Little Rock, AR 72201
(501) 244-3944
Elizabeth.Pitman@dhs.arkansas.gov
Finding Number: 2024-028
State/Educational Agency(s): Arkansas Department of Human Services
Pass-Through Entity: N/A
AL Number(s) and Program Title(s): 93.778 – Medical Assistance Program
(Medicaid Cluster)
Federal Awarding Agency: U.S. Department of Health and Human Services
Federal Award Number(s): 05-2305AR5MAP; 05-2405AR5MAP
Federal Award Year(s): 2023 and 2024
Compliance Requirement(s) Affected: Eligibility
Type of Finding: Noncompliance and Significant Deficiency
Repeat Finding:
A similar issue was reported in prior-year finding 2023-029.
Criteria:
In accordance with 45 CFR § 75.303, a non-federal entity must 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 statues, regulations, and terms and conditions of the award.
States are required to establish eligibility requirements in accord with 42 CFR Part 435 and are required to cover some categorically eligible recipients, including individuals who are receiving SSI payment or who have lost SSI eligibility due to receiving SSA benefits as a disabled adult child and newborns whose mother was on Medicaid at the time of the child’s birth. Newborn coverage is to extend through the month of the child’s first birthday. Also, 42 CFR § 435.914 requires the State to maintain documentation supporting the eligibility determination in the beneficiary’s case record.
Condition and Context:
ALA selected 60 active Medicaid recipient identification numbers to determine if eligibility determinations and redeterminations were made in accordance with the State Plan.
ALA review revealed the following deficiencies:
• Payments were made for one recipient with a date of death of September 11, 2019. Per review, the individual’s Medicaid eligibility case was properly closed in the eligibility system, but the date of death did not cross over to the Medical Management Information System (MMIS). ALA confirmed all claims paid for dates of service after death were recouped as of December 30, 2024. No questioned costs are noted.
• The Agency was unable to provide documentation to support one recipient’s initial eligibility determination for the Newborn category, including documentation of initial application or documentation showing the recipient’s mother was eligible under Medicaid. Per review, payments totaling $73 were made on behalf of the recipient. The federal and state portions of these payments totaled $54 and $19, respectively.
• The Agency extended coverage for one recipient enrolled in the Newborn category for one month past the one-year requirement. Upon renewal determination, the Agency determined the child was no longer eligible for Medicaid under another category. Per review, payments totaling $13 were made for dates of service after the month of the child’s first birthday. The federal and state portions of these payments totaled $9 and $3, respectively
Statistically Valid Sample:
Not a statistically valid sample
Questioned Costs:
Federal − $63
State − $22
(Known questioned costs greater than $25,000 for a type of compliance requirement are required to be reported. In evaluating the effect of questioned costs on the opinion on compliance, the auditor considers the best estimate of total costs questioned [likely questioned costs], not just the questioned costs specifically identified. The auditor must also report known questioned costs when likely questioned costs are greater than $25,000 for a type of compliance requirement for a major program.)
Cause:
Date of death documented in the previous eligibility system did not properly migrate to the Medicaid Management Information System (MMIS) claims payment system. Per Division of County Operations (DCO), the cause of recipient’s death not properly migrating to MMIS is unknown at this time. For one newborn case, documentation that should have been included in the case record in the previous eligibility system was not maintained in the archival database for that system. For the remaining newborn case, Arkansas Integrated Eligibility System (ARIES) improperly allowed a coverage period that extended beyond the end of the month of the child’s first birthday.
Effect:
Failure to properly determine and end Medicaid eligibility may result in improper payments.
Recommendation:
ALA staff recommend the Agency design and implement internal controls over compliance to ensure that eligibility determinations are appropriate and dates of death are properly recorded in both the eligibility and claims payment systems.
Views of Responsible Officials and Planned Corrective Action:
DHS concurs with this finding. The first two deficiencies occurred prior to implementation of the agency’s current integrated eligibility system (ARIES). The date of death for the beneficiary did not cross over from the prior eligibility system to MMIS. The agency has implemented a process to monitor and address when eligibility updates do not cross over successfully from the ARIES system to MMIS.
For the second case, the missing documentation was likely the result of a failure to scan or appropriately index the document in the prior eligibility system. The agency will continue its practice of reviewing a sample of eligibility cases for accuracy.
For the third case, the coverage did not close properly at the end of the month due to a system defect. The correction for this defect was deployed in ARIES on 3/31/24.
Anticipated Completion Date: Complete
Contact Person: Mary Franklin
Director, Division of County Operations
Department of Human Services
700 Main Street
Little Rock, AR 72201
(501) 681-8377
Mary.Franklin@dhs.arkansas.gov
Finding Number: 2024-029
State/Educational Agency(s): Arkansas Department of Human Services
Pass-Through Entity: Not Applicable
ALN Number(s) and Program Title(s): 93.778 – Medical Assistance Program
(Medicaid Cluster)
Federal Awarding Agency: U.S. Department of Health and Human Services
Federal Award Number(s): 05-2305AR5MAP; 05-2405AR5MAP
Federal Award Year(s): 2023 and 2024
Compliance Requirement(s) Affected: Special Tests and Provisions –
Medicaid Recovery Audit Contractors (RACs)
Type of Finding: Material Noncompliance and Material Weakness
Repeat Finding:
A similar issue was reported in prior-year finding 2023-031.
Criteria:
In accordance with 45 CFR § 75.303, a non-federal entity must 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 award.
In addition, 42 CFR § 455.502 established the Medicaid Recovery Audit Contractor (RAC) program as a measure for States to promote the integrity of the Medicaid program. States must enter into contracts with one or more eligible Medicaid RACs to carry out the activities described at 42 CFR § 455.506, which includes reviewing claims submitted by providers or other individuals for which payment has been made to identify underpayments and overpayments, and recoup overpayments. Under 42 CFR § 455.516, a State may seek to be excepted from some or all Medicaid RAC contracting requirements by submitting a written justification to CMS requesting CMS review and approval through the State Plan Amendment (SPA) process.
Condition and Context:
ALA made inquiries to determine if there were any internal controls in place for which testing could be performed. It was determined that there were no internal controls in place at the Agency that pertained to the Medicaid RAC program.
In addition, ALA performed testing to determine if the State had established a Medicaid RAC with an eligible contractor that was conducting the required Medicaid RAC activities in accordance with the approved state plan, including any exceptions. The results of ALA testing revealed that, although there was no SPA in place that authorized an exception for the State to not have a Medicaid RAC in place, there were no contracts in place with any RACs for the year ended June 30, 2024.
Documentation provided to ALA indicates the Agency submitted a request to CMS on October 3, 2024, for a full exemption from the requirement that the State enter a contract with a Medicaid RAC. As of October 3, 2024, the Agency indicated that it anticipated an effective date of February 1, 2025, provided the Agency receives all required approvals by that time.
Statistically Valid Sample:
Not a statistically valid sample.
Questioned Costs:
None
Cause:
The Agency did not adequately develop internal control procedures for its staff to ensure compliance with federal regulations related to the Medicaid RAC program.
Effect:
Failure to implement appropriate procedures for internal controls led to the Agency’s noncompliance with federal regulations pertaining to the Medicaid RAC program.
Recommendation:
ALA staff recommend the Agency continue to take the necessary steps to comply with federal regulations pertaining to the Medicaid RAC program.
Views of Responsible Officials and Planned Corrective Action:
DHS concurs with this finding. CMS approved DHS’s Medicaid State Plan Amendment (SPA) requesting exemption from the RAC requirement. The waiver was approved on February 28, 2025, with an effective date of February 1, 2025. The exemption is effective for two years from the effective date of the SPA.
Anticipated Completion Date: Complete
Contact Person: Elizabeth Pitman
Director, Division of Medical Services
Department of Human Services
700 Main Street
Little Rock, AR 72201
(501) 244-3944
Elizabeth.Pitman@dhs.arkansas.gov
Finding Number: 2024-030
State/Educational Agency(s): Arkansas Department of Human Services
Pass-Through Entity: N/A
AL Number(s) and Program Title(s): 93.778 – Medical Assistance Program
(Medicaid Cluster)
Federal Awarding Agency: U.S. Department of Health and Human Services
Federal Award Number(s): 05-2305AR5MAP, 05-2405AR5MAP
Federal Award Year(s): 2023 and 2024
Compliance Requirement(s) Affected: Special Tests and Provisions – Medicaid Fraud Control Unit
Type of Finding: Noncompliance and Significant Deficiency
Repeat Finding:
Not applicable
Criteria:
42 CFR § 433, Subpart F, establishes requirements for identifying overpayments to Medicaid providers and refunding the federal portion of identified overpayments to the federal awarding agency. The provisions apply to overpayments discovered by a state, by a provider and made known to the state, or through federal review.
Also, in accordance with 42 CFR § 433.320, an agency must refund the federal share of overpayments that are subject to recovery by recording a credit on its Quarterly Statement of Expenditures (form CMS-64). An agency must credit the federal share of overpayments on the earlier of (1) the CMS-64 submission due for the quarter in which the overpayment is recovered from the provider or (2) the quarter in which the one-year period following discovery, established in accordance with 42 CFR § 433.316, ends. A credit on the CMS-64 must be made whether or not the state has recovered the overpayment from the provider.
Finally, as stated in a CMS letter to the State Health Official, SHO #08-004, in accordance with Sections 1903(d)(2)(A) and (d)(3)(A) of the Social Security Act, states are required to return “the federal share of Medicaid overpayments, damages, fines, penalties, and any other component of a legal judgment or settlement when a State recovers pursuant to legal action under its State False Claims Act (SFCA).”
Condition and Context:
ALA performed procedures to verify overpayments identified by the Medicaid Fraud Control Unit (MFCU) were properly reported on the quarterly CMS-64 report. One payment representing restitution for a criminal conviction or settlement agreement, totaling $197,427, was not reported on the CMS-64 report. The federal share that should have been reported for MFCU-related overpayments was $142,148.
Statistically Valid Sample:
Not a statistically valid sample
Questioned Costs:
Federal Portion − $142,148
State Portion − $55,279
Cause:
The Agency did not have proper internal controls over the recording and reporting of the collection of overpayments by MFCU.
Effect:
The Agency failed to report all required restitution and other judgements on its CMS-64 reports
Recommendation:
ALA staff recommend the Agency review and strengthen its accounts receivable procedures and provide adequate training to all individuals involved in recording and reporting provider overpayments identified by MFCU.
Views of Responsible Officials and Planned Corrective Action:
DHS concurs with this finding. All MFCU overpayment collections are received by DHS through an agency bank account dedicated to refunded overpayments. All transactions in that account are compiled into a monthly receivables report that is used for quarterly reporting overpayments to CMS. The overpayment that was not included in the report was wired to the Arkansas State Treasury and the funds were moved to an AASIS fund. Because the funds were not received through the dedicated refund account, the overpayment was missed in the monthly report. For all future collections completed through electronic transfer of funds, the person or entity making the refund will be provided with ACH/EFT information for dedicated refund account.
Anticipated Completion Date: Complete
Contact Person: Elizabeth Pitman
Director, Division of Medical Services
Department of Human Services
700 Main Street
Little Rock, AR 72201
(501) 244-3944
Elizabeth.Pitman@dhs.arkansas.gov
Finding Number: 2024-031
State/Educational Agency(s): Arkansas Department of Human Services
Pass-Through Entity: Not Applicable
AL Number(s) and Program Title(s): 93.778 – Medical Assistance Program
(Medicaid Cluster)
Federal Awarding Agency: U.S. Department of Health and Human Services
Federal Award Number(s): 05-2305AR5MAP; 05-2405AR5MAP
Federal Award Year(s): 2023 and 2024
Compliance Requirement(s) Affected: Special Tests and Provisions – Provider Eligibility (Fee for Service)
Type of Finding: Noncompliance and Significant Deficiency
Repeat Finding:
A similar issue was reported in prior-year finding 2023-030.
Criteria:
According to the Arkansas Medicaid Provider Manual section 140.000, Provider Participation, any provider of health services must be enrolled in the Arkansas Medicaid Program prior to reimbursement for any services provided to Arkansas Medicaid beneficiaries. Enrollment is considered complete when a provider has signed and submitted the following forms:
• Application.
• W-9 tax form.
• Medicaid provider contract.
• PCP agreement, if applicable.
• EPSDT agreement, if applicable.
• Change in ownership control or conviction of crime form.
• Disclosure of significant business transactions form.
• Specific license or certification base on provider type and specialty, if applicable.
• Participation in the Medicare program, if applicable.
42 CFR § 455.414 (effective March 25, 2011, with an extended deadline of September 25, 2016, for full compliance) states that the State Medicaid Agency must revalidate the enrollment of all providers at least every five years. Section 141.100 of the Arkansas Medicaid Provider Manual states that revalidation includes a new application; satisfactory completion of screening activities; and, if applicable, fee payment. In accordance with 42 CFR § 455.450, screening activities vary depending on the risk category of the provider as follows:
• The limited-risk category includes database checks.
• The moderate-risk category includes those required for limited-risk plus site visits.
• The high-risk category includes those required for moderate-risk plus fingerprint background checks.
Condition and Context:
From a population of 11,471, ALA staff reviewed files of 40 providers to ensure sufficient, appropriate evidence was provided to support the determination of eligibility, including compliance with revalidation requirements. ALA’s review revealed deficiencies with three of the provider files as follows:
Limited-risk category:
Sample item 15: The provider’s revalidation was due by September 25, 2016, and every five years afterwards but was not completed until October 19, 2023. As a result, any amounts paid to the provider with dates of service from September 26, 2016 through February 29, 2020, and May 12, 2023 through October 18, 2023, are considered questioned costs. Questioned costs totaled $15,393 (federal) and $5,529 (state).
Limited-risk category (Continued):
Sample item 15 (Continued):
In accordance with the CMS 1135 waiver, revalidations, site visits, and fingerprint background checks were paused from March 1, 2020 through May 11, 2023, as result of the Public Health Emergency (PHE). In addition, revalidations due during the PHE could be extended to November 11, 2023. However, this provider’s revalidation was due prior to March 1, 2020; therefore, the extension is not applicable in this case. Amounts paid to the provider for dates of service during the PHE are not included in the questioned costs noted above.
Sample item 21: The provider’s revalidation was due by September 14, 2023, but was not completed. In addition, the provider did not submit a dated W-9, and licensure expired on March 31, 2023. On October 2, 2023, the Agency terminated the provider. As a result, any amounts paid to the provider with dates of service from July 1, 2023 through June 30, 2024, are considered questioned costs. Questioned costs totaled $1,517 (federal) and $555 (state).
Sample item 40: The Agency failed to provide documentation of the provider’s certification that covered a portion of the engagement period. As a result, amounts paid to the provider with dates of service for December 7, 2023 through April 21, 2024, are considered questioned costs. Questioned costs totaled $126,761 (federal) and $49,296 (state).
Statistically Valid Sample:
Not a statistically valid sample
Questioned Costs:
$143,671 (Federal)
$55,380 (State)
Cause:
The Agency asserted that, effective May 31, 2019, it established and implemented new procedures to improve the following areas of provider enrollment: maintenance of provider enrollment application documents, provider revalidation, site visits, and fingerprint background requirements. Although testing results support that improvements have been made since the new procedures were implemented, deficiencies continued to exist during fiscal year 2024.
Effect:
Claims were processed and paid to providers that did not meet all the required elements and, therefore, were ineligible.
Recommendation:
ALA staff recommend the Agency review and strengthen controls to ensure that required revalidations are performed timely and required enrollment documentation is maintained to support provider eligibility.
Views of Responsible Officials and Planned Corrective Action:
DMS concurs with this finding. For Sample Item 15, DMS has implemented an automated process to notify providers of pending revalidations and to terminate them when revalidation is not completed within five years.
For Sample Item 21, DMS has implemented automated processes utilizing data transfers from licensing boards that will now terminate providers when their license lapses. In addition, DMS is developing a mechanism to obtain information provided on W-9’s by utilizing an electronic process through the provider portal during enrollment. This provider was terminated on 10/2/23.
For Sample Item 40, DMS has coordinated with Division of Provider Services and Quality Assurance (DPSQA) to interface with their certification tracking system and to provide additional notifications to providers when their certification period is nearing expiration. Notifications are being sent 30 days prior to the lapse of certification. DMS confirmed with DPSQA that there were no adverse events that lead to the termination of the provider’s certification.
Anticipated Completion Date: June 30, 2025
Contact Person: Elizabeth Pitman
Director, Division of Medical Services
Department of Human Services
700 Main Street
Little Rock, AR 72201
(501) 244-3944
Elizabeth.Pitman@dhs.arkansas.gov
Finding Number: 2024-032
State/Educational Agency(s): Arkansas Department of Human Services
Pass-Through Entity: Not Applicable
AL Number(s) and Program Title(s): 93.778 – Medical Assistance Program
(Medicaid Cluster)
Federal Awarding Agency: U.S. Department of Health and Human Services
Federal Award Number(s): 05-2305AR5MAP; 05-2405AR5MAP
Federal Award Year(s): 2023 and 2024
Compliance Requirement(s) Affected: Special Tests and Provisions – Provider Eligibility
(Managed Care Organizations)
Type of Finding: Noncompliance and Significant Deficiency
Repeat Finding:
Not applicable.
Criteria:
According to the Arkansas Medicaid Provider Manual section 140.000, Provider Participation, any provider of health services must be enrolled in the Arkansas Medicaid Program prior to reimbursement for any services provided to Arkansas Medicaid beneficiaries. Managed Care Network providers must also be enrolled in the Arkansas Medicaid Program. Enrollment is considered complete when a provider has signed and submitted the following forms:
• Application.
• W-9 tax form.
• Medicaid provider contract.
• PCP agreement, if applicable.
• EPSDT agreement, if applicable.
• Change in ownership control or conviction of crime form.
• Disclosure of significant business transactions form.
• Specific license or certification base on provider type and specialty, if applicable.
• Participation in the Medicare program, if applicable.
42 CFR § 455.414 (effective March 25, 2011, with an extended deadline of September 25, 2016, for full compliance) states that the State Medicaid Agency must revalidate the enrollment of all providers at least every five years. Section 141.100 of the Arkansas Medicaid Provider Manual states that revalidation includes a new application; satisfactory completion of screening activities; and, if applicable, fee payment. In accordance with 42 CFR § 455.450, screening activities vary depending on the risk category of the provider as follows:
• The limited-risk category includes database checks.
• The moderate-risk category includes those required for limited-risk plus site visits.
• The high-risk category includes those required for moderate-risk plus fingerprint background checks.
Condition and Context:
To determine if Managed Care Network providers met all necessary criteria to participate in the Medicaid program, ALA staff selected 40 provider files for review from a population of 6,186. The providers selected participated in the Dental managed care program, commonly referred to as Healthy Smiles, and the Provider-Led Arkansas Shared Savings Entity, or PASSE, managed care program. ALA review revealed deficiencies with two of the provider files as follows:
Moderate-risk category:
Sample item 17: The provider failed to revalidate timely. Revalidation was due by May 19, 2024, but was not completed until July 15, 2024. Ineligible costs totaled $2,280.
Limited-risk category:
Sample item 22: The Agency failed to provide a W-9 dated prior to February 7, 2024. Ineligible costs totaled $4,455.
Ineligible costs identified above totaled $6,735 for PASSE. There were no ineligible costs identified for Dental Managed Care.
NOTE: Because these providers are participating in the managed care portion of Medicaid, providers are reimbursed by the managed care organizations, not the Agency. The managed care organizations receive a predetermined monthly payment from the Agency in exchange for assuming the risk for the covered recipients.
These monthly payments are actuarially determined based, in part, upon historical costs data. Accordingly, the failure to remove unallowable cost data from the amounts utilized by the actuary would lead to overinflated future rates, which will be directly paid by the Agency.
In addition, because of the COVID-19 pandemic, the Center for Medicare and Medicaid Services (CMS), under section 1135(b)(1)(B) of the Social Security Act, approved Arkansas’s request to temporarily cease revalidation, including screening requirements, of providers who were located in Arkansas or otherwise directly impacted by the emergency. This was effective as of March 1, 2020, and continued through the expiration of the public health emergency (PHE), on May 11, 2023. State Agencies were given six additional months to complete revalidations that were due during the PHE.
Statistically Valid Sample:
Not a statistically valid sample
Questioned Costs:
Unknown
Cause:
The Agency asserted that, effective May 31, 2019, it established and implemented new procedures to improve the following areas of provider enrollment: maintenance of provider enrollment application documents, provider revalidation, site visits, and fingerprint background requirements. Although testing results support that improvements have been made since the new procedures were implemented, deficiencies continued to exist during fiscal year 2024.
Effect:
Claims were processed and paid to providers that did not meet all the required criteria.
Recommendation:
ALA staff recommend the Agency review and strengthen controls to ensure that required revalidations are performed timely and required enrollment documentation is maintained to support provider eligibility.
Views of Responsible Officials and Planned Corrective Action:
DHS concurs with this finding. For Sample Item 17, the screening activities associated with the revalidation were completed prior to the revalidation date through the Provider Enrollment, Chain, and Ownership System (PECOS). The provider submitted their revalidation application timely, but during the revalidation process the agency requested corrections and clarifications of administrative and tax information. This delayed the final component of the screening, the site visit, until July 15, 2024.
For Sample Item 22, DMS confirms there was no W-9 dated prior to February 7, 2024. The primary function of the W-9 form is to confirm the providers name, address, and tax information. This information was already listed in MMIS during the date in question. The W-9 submitted by the provider on April 4, 2024, confirmed the accuracy of the information in MMIS that the provider has used since its initial enrollment on July 20, 1981. DMS is developing a mechanism to obtain information provided on W-9’s by utilizing an electronic process through the provider portal during enrollment.
Anticipated Completion Date: June 30, 2025
Contact Person: Elizabeth Pitman
Director, Division of Medical Services
Department of Human Services
700 Main Street
Little Rock, AR 72201
(501) 244-3944
Elizabeth.Pitman@dhs.arkansas.gov